-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HJ53Nd6FJmopbvQ4QVh53PJg8cc6dhlXufon4IutQuRg1FEAXwA1Qj1LxYXSjLtI hAz4qRq+UXHEVXDJ50ZZUQ== 0001193125-03-074367.txt : 20031106 0001193125-03-074367.hdr.sgml : 20031106 20031106160313 ACCESSION NUMBER: 0001193125-03-074367 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031106 EFFECTIVENESS DATE: 20031106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISHARES TRUST CENTRAL INDEX KEY: 0001100663 IRS NUMBER: 943351276 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-09729 FILM NUMBER: 03982435 BUSINESS ADDRESS: STREET 1: 45 FREMONT STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 N-CSRS 1 dncsrs.txt SEMI-ANNUAL REPORT FOR ISHARES TRUST ------------------------ UNITED STATES OMB APPROVAL SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 ------------------------
FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-09729 iShares Trust (Exact name of registrant as specified in charter) 45 Fremont Street, San Francisco, CA 94105 (Address of principal executive offices) (Zip code) CT Corporation 1209 Orange Street, Wilmington, New Castle County, Delaware 19801 (Name and address of agent for service) Registrant's telephone number, including area code: (415) 597-2000 Date of fiscal year end: 02/28/2004 Date of reporting period: 03/01/2003-08/31/2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. iShares(R) Item 1. Reports to Stockholders 2003 SEMI-ANNUAL REPORT TO SHAREHOLDERS AUGUST 31, 2003 [GRAPHIC APPEARS HERE] INDUSTRIAL STRENGTH INVESTMENT TOOLS iSHARES BOND FUNDS Table of Contents Shareholder Letter................................................ 1 Managers' Discussion & Analysis................................... 4 Schedules of Investments.......................................... 7 iShares Lehman 1-3 Year Treasury Bond Fund...................... 7 iShares Lehman 7-10 Year Treasury Bond Fund..................... 9 iShares Lehman 20+ Year Treasury Bond Fund...................... 11 iShares GS $ InvesTop(TM) Corporate Bond Fund................... 13 Financial Statements.............................................. 18 Financial Highlights.............................................. 22 Notes to the Financial Statements................................. 24 iShares Family of Funds........................................... 30 To Our Shareholders Last year, iShares launched the first fixed income exchange traded funds, a response to the demand among investors for convenient, low-cost exposure to the credit markets. With the challenging market conditions of the last few years, investors were seeking more diversification and exposure to less volatile asset classes. We've been very pleased with the response: BUSINESS WEEK named the fixed income iShares one of the best new products of 2002/1/ and assets under management were $4.3 billion as of August 31, 2003 for the fixed income iShares funds. iShares have continued to innovate and expand, offering more tools that help investors tailor their portfolios to achieve diversity and address volatility in a complex market environment. For example, we have added a Lehman Aggregate Bond Fund to our fixed income menu, enabling investors to track one of the most well-known U.S. fixed income market indexes. We also continue to add more equity iShares funds: in April of this year, iShares launched an exchange traded fund based on the MSCI's Emerging Market Free Index. With the addition of these new iShares Funds, investors can achieve even more diversity in their portfolios -- and at lower cost, since iShares fees are, on average, about half those of actively managed funds./2/ With over 80 different iShares to choose from, investors have the ability to build a diverse portfolio that covers a wide swath of the market, including both corporate and Treasury fixed income, as well as equity segments such as capitalization, sectors, value and growth, and international. That is important because market segments do not tend to move in tandem, particularly in volatile markets. Economic conditions such as inflation, interest rate levels, currency valuations or the price of oil, as well as the normal pace of the economic cycle, all may result in one market segment outperforming another. We encourage you to talk with your financial advisor about what blend of investments or asset allocation can best help you meet your financial goals. Throughout the coming year we will continue to work closely with the financial advisor community to introduce innovative strategies and structures for their client's portfolios. To learn more about iShares, we encourage you to visit our web site, www.iShares.com. At times like these, the importance of sound, disciplined investing is greater than ever. Such investing should be grounded in two key concepts: keeping the costs associated with investing as low as possible, and maintaining a diversified portfolio. That is why we believe iShares are an indispensable tool for investors in the current market. And that is also why more and more investors have recognized the benefits of iShares. Assets under management for iShares continue to grow, and had reached $43.0 billion as of August 31, 2003. On behalf of the iShares family of funds and our colleagues at Barclays Global Investors, we thank you for making iShares a part of your portfolio. We look forward to meeting your investment needs in the year ahead. /s/ Lee T. Kranefuss Lee T. Kranefuss PRESIDENT AND CHAIRMAN OF THE BOARD OF TRUSTEES FOR iSHARES TRUST iShares are distributed by SEI Investments Distribution Co. (SEI). Barclays Global Fund Advisors (BGFA) serves as an advisor to iShares. Barclays Global Investors Services (BGIS) assists in the marketing of iShares. BGFA and BGIS are subsidiaries of Barclays Global Investors, N.A., none of which is affiliated with SEI. - ---------- /1/ BUSINESS WEEK, 12/16/02. /2/ Morningstar Principia, BGI analysis 5/03. SHAREHOLDER LETTER 1 FOR COMPLETE INFORMATION, INCLUDING CHARGES AND EXPENSES, REQUEST A PROSPECTUS BY CALLING 1 800 iSHARES (1 800 474 2737). READ IT CAREFULLY BEFORE YOU INVEST. THERE ARE RISKS INVOLVED WITH INVESTING, INCLUDING POSSIBLE LOSS OF PRINCIPAL. Diversification may not protect against market risk. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The annual management fees of iShares may be substantially less than those of most mutual funds. iShares transactions will result in brokerage commissions, but the savings from lower annual fees can help offset these costs. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. iShares are not sponsored, endorsed, or issued by Lehman Brothers, nor are they sponsored, endorsed, issued, sold or promoted by Morgan Stanley Capital International. None of these companies make any representation regarding the advisability of investing in iShares. Neither SEI nor BGI, nor any of their affiliates, are affiliated with the companies listed above. This advertising section does not constitute part of the 2003 Semi-Annual Report. 2 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Managers' Discussion & Analysis iSHARES LEHMAN TREASURY BOND FUNDS Performance as of 8/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS --------------------------------------------- ------------------------- YEAR ENDED 8/31/03 INCEPTION TO 8/31/03 INCEPTION TO 8/31/03 --------------------- --------------------- ------------------------- iSHARES BOND FUND NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX Lehman 1-3 Year Treasury 2.39% 2.28% 2.54% 2.70% 2.72% 2.90% 3.01% 3.03% 3.21% Lehman 7-10 Year Treasury 2.84% 2.46% 2.85% 5.14% 5.01% 5.02% 5.74% 5.58% 5.55% Lehman 20+ Year Treasury 1.64% 1.12% 2.22% 6.07% 5.85% 6.26% 6.77% 6.53% 6.93%
"Total returns for the period since inception" are calculated from the inception date of the Fund (7/22/02). "Average annual total returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative total returns" represent the total change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of the Fund, and the market return in based on the market price per share of the Fund. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the Exchange on which the iShares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated. Since Fund shares typically do not trade in the secondary market until several days after Fund inception, for the period from inception to the first day of secondary market trading in Fund shares (7/26/02), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. 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 or sale 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. Each Fund's past performance is no guarantee of future results. The iSHARES LEHMAN 1-3 YEAR TREASURY BOND FUND seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the short-term sector of the United States Treasury market, as defined by the Lehman Brothers 1-3 Year Treasury Index. For the six-month period ended August 31, 2003 (the "reporting period"), the Fund returned 0.33%, while the Index returned 0.38%. The iSHARES LEHMAN 7-10 YEAR TREASURY BOND FUND seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the intermediate-term sector of the United States Treasury market, as defined by the Lehman Brothers 7-10 Year Treasury Index. For the reporting period, the Fund returned -2.66%, while the Index also returned -2.66%. The iSHARES LEHMAN 20+ YEAR TREASURY BOND FUND seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the long-term sector of the United States Treasury market, as defined by the Lehman Brothers 20+ Year Treasury Index. For the reporting period, the Fund returned -4.94%, while the Index returned -4.86%. Treasury bonds generally declined in value during the reporting period as interest rates rose. Bonds began the period on a positive note, benefiting from uncertainty about the conflict in Iraq and a sluggish economy. In the first quarter of 2003, the U.S. economy (as measured by gross domestic product, or GDP) grew at an annual rate of just 1.4%, matching the anemic growth rate from the previous quarter. Treasury bond yields, already historically low, continued to fall, bottoming in mid-June at their lowest levels since 1958. In late June, the Federal Reserve Board (the "Fed") cut its short-term interest rate target for the 13th time since the beginning of 2001, lowering the federal funds rate to a 45-year low of 1%. Citing the possibility of deflation, or falling prices, Fed Chairman Alan Greenspan indicated to Congress in July that the Fed would likely maintain its accommodative interest rate policy for an extended period of time, even if economic growth accelerates. 4 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS A Fed rate cut and low inflation are generally positive factors for bonds, but the bond market reacted negatively by pricing in a greater chance of an economic rebound in the coming quarters. Indeed, the economy grew at a surprisingly strong 3% annual rate in the second quarter, and although the nation continued to shed jobs, the housing market remained strong, retail sales surged, and manufacturing activity picked up. Other factors weighing on the bond market included a projected federal budget deficit of $400 billion for the 2003 fiscal year, which led to increased issuance of Treasury bonds. In addition, a strong rally in the stock market -- the S&P 500 rose 20.88% during the reporting period -- attracted investors away from bonds. As a result, Treasury bond prices declined as yields rose sharply from mid-June through the end of August. Short-term Treasury bonds held up the best, posting flat to slightly positive returns for the reporting period. The yields of intermediate-term bonds increased the most, while longer-term bonds, which have the most significant price volatility, suffered the largest declines. MANAGERS' DISCUSSION & ANALYSIS 5 Managers' Discussion & Analysis iSHARES GS $ INVESTOP(TM) CORPORATE BOND FUND Performance as of 8/31/03 AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS - -------------------------------------------------- ------------------------- YEAR ENDED 8/31/03 INCEPTION TO 8/31/03 INCEPTION TO 8/31/03 - ------------------------- ----------------------- ------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 8.56% 7.74% 8.48% 9.37% 9.46% 9.67% 10.47% 10.57% 10.75% "Total returns for the period since inception" are calculated from the inception date of the Fund (7/22/02). "Average annual total returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative total returns" represent the total change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of the Fund, and the market return in based on the market price per share of the Fund. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the Exchange on which the iShares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated. Since Fund shares typically do not trade in the secondary market until several days after Fund inception, for the period from inception to the first day of secondary market trading in Fund shares (7/26/02), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. 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 or sale 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 Fund's past performance is no guarantee of future results. TOP 10 INDEX CONSTITUENTS [CHART APPEARS HERE] AT&T BROADBAND CORP., 9.46%, 11/15/22 1.25% BRITISH TELECOM PLC, 8.88%, 12/15/30 1.19% AT&T BROADBAND CORP., 8.38%, 03/15/13 1.15% ALLTEL CORP., 7.88%, 07/01/32 1.13% BRITISH TELECOM PLC, 8.38%, 12/15/10 1.13% DEVON ENERGY CORP., 7.95%, 04/15/32 1.12% SPRINT CAPITAL CORP., 8.75%, 03/15/32 1.11% CIT GROUP INC., 7.75%, 04/02/12 1.10% SPRINT CAPITAL CORP., 8.38%, 03/15/12 1.10% VERIZON GLOBAL FUNDING CORP., 7.75%, 12/01/30 1.09% The iSHARES GS $ INVESTOP(TM) CORPORATE BOND FUND seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of a segment of the U.S. investment-grade corporate bond market, as defined by the GS $ InvesTop(TM) Index. For the six-month period ended August 31, 2003 (the "reporting period"), the Fund returned 0.24%, while the Index returned 0.19%. Bonds faced a challenging environment during the reporting period. Initially, the bond market rallied amid weak economic conditions and investor anxiety about the war in Iraq. The U.S. economy (as measured by gross domestic product, or GDP) grew at a sluggish pace in the first quarter, expanding at an annual rate of just 1.4%. In response, the Federal Reserve Board (the "Fed") lowered its short-term interest rate target to a 45-year low of 1% -- the 13th rate cut since the beginning of 2001. The Fed also indicated that, given the possibility of a further decline in the inflation rate, this accommodative policy could be maintained for a considerable period of time. At the same time, the economic environment began to show signs of improvement. The economy grew at a stronger-than-expected 3% annual rate in the second quarter, and subsequent reports revealed a rebound in the manufacturing sector, a sharp rise in retail sales, and continued strength in the housing market. As a result, bonds declined in value as yields rose sharply from mid-June through the end of the reporting period. July was a particularly difficult month -- the corporate bond market suffered its biggest monthly loss since 1984. Nonetheless, corporate bonds posted modest gains overall during the reporting period and remained the top performers in the general U.S. bond market. Demand for corporate bonds continued to increase as investors looked for higher yields in a relatively low interest rate environment. In addition, improving economic conditions were a positive development for the financial health of corporations that issue bonds. 6 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Schedule of Investments (Unaudited) iSHARES LEHMAN 1-3 YEAR TREASURY BOND FUND August 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS - 98.88% U.S. Treasury Notes 1.50%, 02/28/05 $ 146,952,000 $ 146,740,393 1.50%, 07/31/05 94,185,000 93,509,691 1.75%, 12/31/04 80,379,000 80,654,702 2.00%, 05/15/06 150,462,000 149,326,016 2.13%, 10/31/04 78,507,000 79,192,373 5.75%, 11/15/05 130,572,000 140,900,250 5.88%, 11/15/04 95,121,000 100,133,867 6.75%, 05/15/05 146,250,000 158,498,438 TOTAL U.S. GOVERNMENT OBLIGATIONS (COST: $951,620,892) 948,955,730 SHORT TERM INVESTMENTS - 31.56% MONEY MARKET FUNDS - 20.46% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares /1/,/2/ 128,282,336 128,282,336 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares /1/,/2/ 49,539,374 49,539,374 BlackRock Temp Cash Money Market Fund /1/ 2,606,672 2,606,672 Short Term Investment Co. - Liquid Assets Money Market Portfolio /1/ 4,503,579 4,503,579 Short Term Investment Co. - Prime Money Market Portfolio, Institutional Shares /1/ 11,452,964 11,452,964 196,384,925 FLOATING RATE NOTES - 7.69% Beta Finance Inc. 1.07%, 05/20/04 /1/ $ 2,251,790 2,251,549 1.16%, 08/23/04 /1/ 2,251,790 2,253,671 Canadian Imperial Bank of Commerce 1.07%, 10/30/03 /1/ 1,801,432 1,801,431 1.37%, 08/26/04 /1/ 4,503,580 4,503,579 CC USA Inc. 1.06%, 05/24/04 /1/ 4,503,580 4,503,255 1.07%, 04/19/04 /1/ 1,981,575 1,981,513 1.11%, 07/15/04 /1/ 2,251,790 2,252,493 Dorada Finance Inc. 1.07%, 05/20/04 /1/ 4,503,580 4,503,098 1.24%, 08/09/04 /1/ 1,125,895 1,125,737 Five Finance Inc. 1.08%, 04/15/04 /1/ 2,251,790 2,251,790 HBOS Treasury Services PLC 1.27%, 06/24/04 /1/ 4,503,580 4,503,579 Holmes Financing PLC 1.07%, 04/15/04 /1/ 900,716 900,716 K2 USA LLC 1.07%, 08/16/04 /1/ 1,125,895 1,125,734 1.08%, 04/13/04 /1/ 2,251,790 2,251,722 1.08%, 05/17/04 /1/ 2,251,790 2,251,711 Links Finance LLC 1.05%, 07/20/04 /1/ 1,801,432 1,801,114 1.07%, 05/04/04 /1/ 2,251,790 2,251,715 1.07%, 06/28/04 /1/ 2,251,790 2,251,422 1.08%, 03/29/04 /1/ 2,251,790 2,251,790 Nationwide Building Society 1.08%, 07/23/04 /1/ 3,377,685 3,377,685 Sigma Finance Inc. 1.05%, 07/20/04 /1/ 2,251,790 2,251,392 1.06%, 10/15/03 /1/ 4,503,580 4,503,526 1.06%, 07/01/04 /1/ 2,251,790 2,251,324 1.24%, 08/06/04 /1/ 1,125,895 1,125,790 Tango Finance Corp. 1.05%, 07/15/04 /1/ 1,351,074 1,350,686 1.06%, 07/06/04 /1/ 1,351,074 1,350,957 Toronto Dominion 1.33%, 08/23/04 /1/ 2,927,327 2,925,892 White Pine Finance LLC 1.06%, 07/06/04 /1/ 2,702,148 2,701,929 1.07%, 05/17/04 /1/ 2,702,148 2,702,148 1.08%, 04/20/04 /1/ 2,251,790 2,251,790 73,810,738 SCHEDULES OF INVESTMENTS 7 Schedule of Investments (Unaudited) (Continued) iSHARES LEHMAN 1-3 YEAR TREASURY BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------ COMMERCIAL PAPER - 2.94% Corporate Asset Funding Corp. 1.06%, 09/24/03 /1/ $ 1,351,074 $ 1,350,199 CRC Funding LLC 1.05%, 09/25/03 /1/ 2,251,790 2,250,279 1.06%, 09/16/03 /1/ 900,716 900,345 Edison Asset Securitization 1.06%, 09/05/03 /1/ 2,251,790 2,251,591 1.06%, 09/15/03 /1/ 1,351,074 1,350,557 1.07%, 10/23/03 /1/ 4,233,365 4,226,948 Eureka Securitization Inc. 1.05%, 09/18/03 /1/ 2,251,790 2,250,739 Jupiter Securitization Corp. 1.07%, 09/02/03 /1/ 1,125,895 1,125,895 Park Avenue Receivables Corp. 1.06%, 09/16/03 /1/ 1,125,895 1,125,431 Preferred Receivables Funding Corp. 1.06%, 09/08/03 /1/ 1,125,895 1,125,696 Quincy Capital Corp. 1.06%, 09/17/03 /1/ 4,666,069 4,664,008 Receivables Capital Corp. 1.06%, 09/17/03 /1/ 3,287,613 3,286,168 UBS Finance (Delaware) Inc. 1.09%, 09/02/03 /1/ 2,251,790 2,251,790 28,159,646 TIME DEPOSITS - 0.47% SunTrust Banks Inc. 1.00%, 09/02/03 /1/ 4,503,580 4,503,579 4,503,579 TOTAL SHORT TERM INVESTMENTS (COST: $302,858,888) 302,858,888 REPURCHASE AGREEMENT - 0.36% Investors Bank & Trust Tri-Party Repurchase Agreement, dated 08/29/03, due 09/02/03, with a maturity value of $3,521,180 and an effective yield of 0.73%. $ 3,520,894 $ 3,520,894 TOTAL REPURCHASE AGREEMENT (COST: $3,520,894) 3,520,894 TOTAL INVESTMENTS IN SECURITIES - 130.80% (COST $1,258,000,674) 1,255,335,512 OTHER ASSETS, LESS LIABILITIES - (30.80%) (295,630,096) --------------- NET ASSETS - 100.00% $ 959,705,416 =============== /1/ All or a portion of this security represents investments of securities lending collateral. /2/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 8 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Schedule of Investments (Unaudited) iSHARES LEHMAN 7-10 YEAR TREASURY BOND FUND August 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS - 98.99% U.S. Treasury Notes 3.63%, 05/15/13 $ 46,228,000 $ 43,477,898 4.38%, 08/15/12 20,332,000 20,344,199 4.88%, 02/15/12 26,988,000 28,077,506 5.00%, 02/15/11 199,680,000 210,868,048 5.00%, 08/15/11 119,600,000 125,932,827 TOTAL U.S. GOVERNMENT OBLIGATIONS (COST: $439,981,363) 428,700,478 SHORT TERM INVESTMENTS - 44.96% MONEY MARKET FUNDS - 29.15% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares /1/,/2/ 82,461,798 82,461,798 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares /1/,/2/ 31,844,648 31,844,648 BlackRock Temp Cash Money Market Fund /1/ 1,675,607 1,675,607 Short Term Investment Co. - Liquid Assets Money Market Portfolio /1/ 2,894,968 2,894,968 Short Term Investment Co. - Prime Money Market Portfolio, Institutional Shares /1/ 7,362,136 7,362,136 126,239,157 FLOATING RATE NOTES - 10.96% Beta Finance Inc. 1.07%, 05/20/04 /1/ $ 1,447,484 1,447,329 1.16%, 08/23/04 /1/ 1,447,484 1,448,694 Canadian Imperial Bank of Commerce 1.07%, 10/30/03 /1/ 1,157,987 1,157,987 1.37%, 08/26/04 /1/ 2,894,968 2,894,968 CC USA Inc. 1.06%, 05/24/04 /1/ 2,894,968 2,894,760 1.07%, 04/19/04 /1/ 1,273,786 1,273,746 1.11%, 07/15/04 /1/ 1,447,484 1,447,936 Dorada Finance Inc. 1.07%, 05/20/04 /1/ 2,894,968 2,894,658 1.24%, 08/09/04 /1/ 723,742 723,641 Five Finance Inc. 1.08%, 04/15/04 /1/ 1,447,484 1,447,484 HBOS Treasury Services PLC 1.27%, 06/24/04 /1/ 2,894,968 2,894,968 Holmes Financing PLC 1.07%, 04/15/04 /1/ 578,994 578,994 K2 USA LLC 1.07%, 08/16/04 /1/ 723,742 723,639 1.08%, 04/13/04 /1/ 1,447,484 1,447,441 1.08%, 05/17/04 /1/ 1,447,484 1,447,433 Links Finance LLC 1.05%, 07/20/04 /1/ 1,157,987 1,157,783 1.07%, 05/04/04 /1/ 1,447,484 1,447,436 1.07%, 06/28/04 /1/ 1,447,484 1,447,247 1.08%, 03/29/04 /1/ 1,447,484 1,447,484 Nationwide Building Society 1.08%, 07/23/04 /1/ 2,171,226 2,171,226 Sigma Finance Inc. 1.05%, 07/20/04 /1/ 1,447,484 1,447,229 1.06%, 10/15/03 /1/ 2,894,968 2,894,934 1.06%, 07/01/04 /1/ 1,447,484 1,447,184 1.24%, 08/06/04 /1/ 723,742 723,675 Tango Finance Corp. 1.05%, 07/15/04 /1/ 868,490 868,241 1.06%, 07/06/04 /1/ 868,490 868,415 Toronto Dominion 1.33%, 08/23/04 /1/ 1,881,729 1,880,807 White Pine Finance LLC 1.06%, 07/06/04 /1/ 1,736,981 1,736,840 1.07%, 05/17/04 /1/ 1,736,981 1,736,981 1.08%, 04/20/04 /1/ 1,447,484 1,447,484 47,446,644 COMMERCIAL PAPER - 4.18% Corporate Asset Funding Corp. 1.06%, 09/24/03 /1/ 868,490 867,928 SCHEDULES OF INVESTMENTS 9 Schedule of Investments (Unaudited) (Continued) iSHARES LEHMAN 7-10 YEAR TREASURY BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------ CRC Funding LLC 1.05%, 09/25/03 /1/ $ 1,447,484 $ 1,446,513 1.06%, 09/16/03 /1/ 578,994 578,755 Edison Asset Securitization 1.06%, 09/05/03 /1/ 1,447,484 1,447,356 1.06%, 09/15/03 /1/ 868,490 868,158 1.07%, 10/23/03 /1/ 2,721,270 2,717,145 Eureka Securitization Inc. 1.05%, 09/18/03 /1/ 1,447,484 1,446,808 Jupiter Securitization Corp. 1.07%, 09/02/03 /1/ 723,742 723,742 Park Avenue Receivables Corp. 1.06%, 09/16/03 /1/ 723,742 723,444 Preferred Receivables Funding Corp. 1.06%, 09/08/03 /1/ 723,742 723,614 Quincy Capital Corp. 1.06%, 09/17/03 /1/ 2,999,419 2,998,094 Receivables Capital Corp. 1.06%, 09/17/03 /1/ 2,113,327 2,112,398 UBS Finance (Delaware) Inc. 1.09%, 09/02/03 /1/ 1,447,484 1,447,484 18,101,439 TIME DEPOSITS - 0.67% SunTrust Banks Inc. 1.00%, 09/02/03 /1/ 2,894,968 2,894,968 2,894,968 TOTAL SHORT TERM INVESTMENTS (COST: $194,682,208) 194,682,208 REPURCHASE AGREEMENT - 2.02% Investors Bank & Trust Tri-Party Repurchase Agreement, dated 08/29/03, due 09/02/03, with a maturity value of $8,743,734 and an effective yield of 0.73%. $ 8,743,025 $ 8,743,025 TOTAL REPURCHASE AGREEMENT (COST: $8,743,025) 8,743,025 TOTAL INVESTMENTS IN SECURITIES - 145.97% (COST $643,406,596) 632,125,711 OTHER ASSETS, LESS LIABILITIES - (45.97%) (199,069,885) --------------- NET ASSETS - 100.00% $ 433,055,826 =============== /1/ All or a portion of this security represents investments of securities lending collateral. /2/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 10 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Schedule of Investments (Unaudited) iSHARES LEHMAN 20+ YEAR TREASURY BOND FUND August 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS - 98.63% U.S. Treasury Bonds 5.25%, 11/15/28 $ 34,977,000 $ 34,429,260 5.25%, 02/15/29 52,065,000 51,305,892 5.38%, 02/15/31 72,001,000 73,666,386 5.50%, 08/15/28 35,066,000 35,724,539 6.00%, 02/15/26 40,050,000 43,375,752 6.13%, 11/15/27 84,995,000 93,678,935 6.13%, 08/15/29 34,977,000 38,784,597 6.25%, 05/15/30 64,614,000 73,068,741 6.38%, 08/15/27 25,009,000 28,411,975 6.50%, 11/15/26 46,992,000 54,056,306 6.63%, 02/15/27 38,626,000 45,141,432 6.75%, 08/15/26 25,009,000 29,599,151 6.88%, 08/15/25 48,861,000 58,420,171 7.50%, 11/15/24 29,993,000 38,244,974 7.63%, 02/15/25 29,904,000 38,651,819 TOTAL U.S. GOVERNMENT OBLIGATIONS (COST: $763,779,319) 736,559,930 SHORT TERM INVESTMENTS - 28.50% MONEY MARKET FUNDS - 18.48% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares /1/,/2/ 90,161,159 90,161,159 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares /1/,/2/ 34,817,946 34,817,946 BlackRock Temp Cash Money Market Fund /1/ 1,832,057 1,832,057 Short Term Investment Co. - Liquid Assets Money Market Portfolio /1/ 3,165,268 3,165,268 Short Term Investment Co. - Prime Money Market Portfolio, Institutional Shares /1/ 8,049,530 8,049,530 138,025,960 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------ FLOATING RATE NOTES - 6.95% Beta Finance Inc. 1.07%, 05/20/04 /1/ $ 1,582,634 $ 1,582,465 1.16%, 08/23/04 /1/ 1,582,634 1,583,956 Canadian Imperial Bank of Commerce 1.07%, 10/30/03 /1/ 1,266,107 1,266,107 1.37%, 08/26/04 /1/ 3,165,268 3,165,268 CC USA Inc. 1.06%, 05/24/04 /1/ 3,165,268 3,165,040 1.07%, 04/19/04 /1/ 1,392,718 1,392,674 1.11%, 07/15/04 /1/ 1,582,634 1,583,128 Dorada Finance Inc. 1.07%, 05/20/04 /1/ 3,165,268 3,164,929 1.24%, 08/09/04 /1/ 791,317 791,206 Five Finance Inc. 1.08%, 04/15/04 /1/ 1,582,634 1,582,634 HBOS Treasury Services PLC 1.27%, 06/24/04 /1/ 3,165,268 3,165,268 Holmes Financing PLC 1.07%, 04/15/04 /1/ 633,054 633,054 K2 USA LLC 1.07%, 08/16/04 /1/ 791,317 791,204 1.08%, 04/13/04 /1/ 1,582,634 1,582,587 1.08%, 05/17/04 /1/ 1,582,634 1,582,578 Links Finance LLC 1.05%, 07/20/04 /1/ 1,266,107 1,265,884 1.07%, 05/04/04 /1/ 1,582,634 1,582,581 1.07%, 06/28/04 /1/ 1,582,634 1,582,375 1.08%, 03/29/04 /1/ 1,582,634 1,582,634 Nationwide Building Society 1.08%, 07/23/04 /1/ 2,373,951 2,373,951 Sigma Finance Inc. 1.05%, 07/20/04 /1/ 1,582,634 1,582,355 1.06%, 10/15/03 /1/ 3,165,268 3,165,231 1.06%, 07/01/04 /1/ 1,582,634 1,582,306 1.24%, 08/06/04 /1/ 791,317 791,243 Tango Finance Corp. 1.05%, 07/15/04 /1/ 949,580 949,307 1.06%, 07/06/04 /1/ 949,580 949,498 Toronto Dominion 1.33%, 08/23/04 /1/ 2,057,424 2,056,416 SCHEDULES OF INVESTMENTS 11 Schedule of Investments (Unaudited) (Continued) iSHARES LEHMAN 20+ YEAR TREASURY BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------- White Pine Finance LLC 1.06%, 07/06/04 /1/ $ 1,899,161 $ 1,899,007 1.07%, 05/17/04 /1/ 1,899,161 1,899,161 1.08%, 04/20/04 /1/ 1,582,634 1,582,634 51,876,681 COMMERCIAL PAPER - 2.65% Corporate Asset Funding Corp. 1.06%, 09/24/03 /1/ 949,580 948,965 CRC Funding LLC 1.05%, 09/25/03 /1/ 1,582,634 1,581,572 1.06%, 09/16/03 /1/ 633,054 632,793 Edison Asset Securitization 1.06%, 09/05/03 /1/ 1,582,634 1,582,494 1.06%, 09/15/03 /1/ 949,580 949,217 1.07%, 10/23/03 /1/ 2,975,352 2,970,842 Eureka Securitization Inc. 1.05%, 09/18/03 /1/ 1,582,634 1,581,895 Jupiter Securitization Corp. 1.07%, 09/02/03 /1/ 791,317 791,317 Park Avenue Receivables Corp. 1.06%, 09/16/03 /1/ 791,317 790,991 Preferred Receivables Funding Corp. 1.06%, 09/08/03 /1/ 791,317 791,177 Quincy Capital Corp. 1.06%, 09/17/03 /1/ 3,279,471 3,278,022 Receivables Capital Corp. 1.06%, 09/17/03 /1/ 2,310,646 2,309,630 UBS Finance (Delaware) Inc. 1.09%, 09/02/03 /1/ 1,582,634 1,582,634 19,791,549 TIME DEPOSITS - 0.42% SunTrust Banks Inc. 1.00%, 09/02/03 /1/ 3,165,268 3,165,268 3,165,268 TOTAL SHORT TERM INVESTMENTS (COST: $212,859,458) 212,859,458 REPURCHASE AGREEMENT - 1.91% Investors Bank & Trust Tri-Party Repurchase Agreement, dated 08/29/03, due 09/02/03, with a maturity value of $14,262,078 and an effective yield of 0.73%. $ 14,260,921 $ 14,260,921 TOTAL REPURCHASE AGREEMENT (COST: $14,260,921) 14,260,921 TOTAL INVESTMENTS IN SECURITIES - 129.04% (COST $990,899,698) 963,680,309 OTHER ASSETS, LESS LIABILITIES - (29.04%) (216,868,766) --------------- NET ASSETS - 100.00% $ 746,811,543 =============== /1/ All or a portion of this security represents investments of securities lending collateral. /2/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 12 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Schedule of Investments (Unaudited) iSHARES GS $ INVESTOP(TM) CORPORATE BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------- CORPORATE BONDS & NOTES - 98.01% AUTO MANUFACTURERS - 1.92% DaimlerChrysler NA Holding Corp. 4.75%, 01/15/08 $ 20,200,000 $ 20,078,396 7.30%, 01/15/12 20,200,000 21,885,993 41,964,389 BANKS - 7.45% Bank of America Corp. 3.25%, 08/15/08 20,200,000 19,499,969 4.88%, 01/15/13 20,200,000 19,747,722 Bank One Corp. 2.63%, 06/30/08 20,200,000 18,976,385 Credit Suisse First Boston 5.75%, 04/15/07 20,200,000 21,705,708 6.13%, 11/15/11 20,200,000 21,295,850 Washington Mutual Bank Inc. 5.50%, 01/15/13 20,200,000 20,347,056 Wells Fargo & Company 5.00%, 11/15/14 20,200,000 19,643,490 5.13%, 02/15/07 20,200,000 21,311,606 162,527,786 BUILDING MATERIALS - 1.02% CRH America Inc. 6.95%, 03/15/12 20,200,000 22,210,203 22,210,203 COMMERCIAL SERVICES - 2.01% Cendant Corp. 6.25%, 01/15/08 20,200,000 21,574,105 7.38%, 01/15/13 20,200,000 22,312,213 43,886,318 COMPUTERS - 2.78% International Business Machines Corp. 4.75%, 11/29/12 20,200,000 19,786,203 4.88%, 10/01/06 20,200,000 21,350,289 5.88%, 11/29/32 20,200,000 19,553,600 60,690,092 COSMETICS / PERSONAL CARE - 1.02% Procter & Gamble Co. 4.75%, 06/15/07 21,210,000 22,264,031 22,264,031 DIVERSIFIED FINANCIAL SERVICES - 37.88% American Express Co. 4.88%, 07/15/13 20,200,000 19,798,222 American Express Credit Corp. 3.00%, 05/16/08 20,200,000 19,351,196 Bear Stearns Companies Inc. 2.88%, 07/02/08 20,200,000 19,075,668 5.70%, 11/15/14 20,200,000 20,551,177 Boeing Capital Corp. 4.75%, 08/25/08 20,200,000 20,473,609 5.80%, 01/15/13 20,200,000 20,337,663 ChevronTexaco Capital Co. 3.50%, 09/17/07 21,210,000 21,234,710 CIT Group Inc. 7.38%, 04/02/07 20,200,000 22,616,223 7.75%, 04/02/12 20,200,000 23,178,490 Citigroup Inc. 3.50%, 02/01/08 20,200,000 19,940,733 6.00%, 02/21/12 20,200,000 21,566,833 6.63%, 06/15/32 20,200,000 21,370,287 Deutsche Telekom International Finance AG 3.88%, 07/22/08 21,210,000 20,730,548 5.25%, 07/22/13 20,200,000 19,454,216 Devon Financing Corp. ULC 6.88%, 09/30/11 20,200,000 22,351,704 Diageo Capital PLC 3.50%, 11/19/07 20,200,000 20,028,805 General Electric Capital Corp. 3.50%, 05/01/08 20,200,000 19,834,077 5.00%, 02/01/13 20,200,000 19,947,298 6.75%, 03/15/32 20,200,000 21,647,936 General Motors Acceptance Corp. 6.13%, 09/15/06 20,200,000 21,096,981 6.88%, 09/15/11 20,200,000 20,299,384 8.38%, 07/15/33 21,210,000 21,054,106 SCHEDULES OF INVESTMENTS 13 Schedule of Investments (Unaudited) (Continued) iSHARES GS $ INVESTOP(TM) CORPORATE BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------- Household Finance Corp. 4.63%, 01/15/08 $ 20,200,000 $ 20,685,002 6.38%, 11/27/12 20,200,000 21,563,500 International Lease Finance Corp. 5.63%, 06/01/07 20,200,000 21,448,966 John Deere Capital Corp. 3.90%, 01/15/08 20,200,000 20,240,703 7.00%, 03/15/12 20,200,000 22,784,590 JP Morgan Chase & Co. 5.25%, 05/30/07 20,200,000 21,399,678 5.75%, 01/02/13 21,210,000 21,810,879 Lehman Brothers Holdings Inc. 6.63%, 01/18/12 20,200,000 22,227,373 Lehman Brothers Inc. 4.00%, 01/22/08 20,200,000 20,200,505 Morgan Stanley Dean Witter & Co. 5.30%, 03/01/13 20,200,000 20,038,198 5.80%, 04/01/07 20,200,000 21,734,897 Sears Roebuck Acceptance Corp. 7.00%, 06/01/32 20,200,000 21,084,154 Sprint Capital Corp. 8.38%, 03/15/12 20,200,000 23,173,036 8.75%, 03/15/32 20,200,000 23,113,446 Verizon Global Funding Corp. 6.13%, 06/15/07 20,200,000 21,976,489 7.75%, 12/01/30 21,210,000 24,435,299 Washington Mutual Inc. 5.63%, 01/15/07 21,210,000 22,614,738 826,471,319 ELECTRIC - 2.76% Duke Energy Corp. 6.25%, 01/15/12 20,200,000 21,308,576 FirstEnergy Corp. Series B 6.45%, 11/15/11 20,200,000 19,815,796 FirstEnergy Corp. Series C 7.38%, 11/15/31 20,200,000 19,167,780 60,292,152 FOOD - 3.92% General Mills Inc. 5.13%, 02/15/07 20,200,000 21,257,773 6.00%, 02/15/12 21,210,000 22,462,981 Kraft Foods Inc. 4.63%, 11/01/06 20,200,000 20,763,782 6.25%, 06/01/12 20,200,000 21,118,595 85,603,131 FOREST PRODUCTS & PAPER - 2.97% Weyerhaeuser Co. 6.13%, 03/15/07 20,200,000 21,773,378 6.75%, 03/15/12 20,200,000 21,604,102 7.38%, 03/15/32 20,200,000 21,414,424 64,791,904 HOUSEHOLD PRODUCTS / WARES - 0.91% Unilever Capital Corp. 5.90%, 11/15/32 20,200,000 19,797,818 19,797,818 MEDIA - 4.98% AOL Time Warner Inc. 6.15%, 05/01/07 20,200,000 21,717,626 6.88%, 05/01/20 20,200,000 21,983,862 7.70%, 05/01/20 20,200,000 22,271,106 Comcast Corp. 5.85%, 01/15/10 20,200,000 21,078,902 Viacom Inc. 5.63%, 05/01/07 20,200,000 21,676,418 108,727,914 MINING - 1.93% Alcoa Inc. 4.25%, 08/15/07 20,200,000 20,702,374 6.00%, 01/15/12 20,200,000 21,383,013 42,085,387 OIL & GAS PRODUCERS - 5.14% Conoco Funding Co. 5.45%, 10/15/06 20,200,000 21,663,591 6.35%, 10/15/11 21,210,000 23,086,024 14 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Schedule of Investments (Unaudited) (Continued) iSHARES GS $ INVESTOP(TM) CORPORATE BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------- Devon Energy Corp. 7.95%, 04/15/32 $ 20,200,000 $ 23,683,995 Valero Energy Corp. 6.88%, 04/15/12 20,200,000 21,962,652 7.50%, 04/15/32 20,200,000 21,768,025 112,164,287 PHARMACEUTICALS - 2.86% Bristol-Myers Squibb Co. 4.75%, 10/01/06 20,200,000 21,182,326 5.75%, 10/01/11 20,200,000 21,149,198 Wyeth 5.25%, 03/15/13 20,200,000 20,014,665 62,346,189 RETAIL - 4.76% Target Corp. 5.38%, 06/15/09 20,200,000 21,276,458 5.88%, 03/01/12 20,200,000 21,498,456 6.35%, 11/01/32 20,200,000 20,562,388 Wal-Mart Stores Inc. 4.38%, 07/12/07 20,200,000 20,958,308 4.55%, 05/01/13 20,200,000 19,540,773 103,836,383 TELECOMMUNICATIONS - 6.44% Alltel Corp. 7.00%, 07/01/12 20,200,000 22,938,413 7.88%, 07/01/32 20,200,000 24,262,624 British Telecom PLC 8.38%, 12/15/10 20,200,000 23,984,470 8.88%, 12/15/30 20,200,000 25,439,981 Cox Communications Inc. 7.13%, 10/01/12 20,200,000 22,589,963 SBC Communications Inc. 5.88%, 02/01/12 20,200,000 21,295,446 140,510,897 TELEPHONE - 7.26% AT&T Broadband Corp. 8.38%, 03/15/13 20,200,000 24,074,966 SHARES OR SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------- 9.46%, 11/15/22 $ 20,200,000 $ 26,487,957 AT&T Corp. 7.00%, 11/15/06 20,200,000 22,367,662 7.80%, 11/15/11 20,200,000 22,418,364 8.50%, 11/15/31 20,200,000 22,549,664 Bellsouth Corp. 5.00%, 10/15/06 20,200,000 21,450,683 Verizon Virginia Inc. 4.63%, 03/15/13 20,200,000 19,155,054 158,504,350 TOTAL CORPORATE BONDS & NOTES (COST: $2,119,549,937) 2,138,674,550 SHORT TERM INVESTMENTS - 15.44% MONEY MARKET FUNDS - 10.01% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares /1/,/2/ 142,724,238 142,724,238 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares /1/,/2/ 55,116,470 55,116,470 BlackRock Temp Cash Money Market Fund /1/ 2,900,128 2,900,128 Short Term Investment Co. - Liquid Assets Money Market Portfolio /1/ 5,010,588 5,010,588 Short Term Investment Co. - Prime Money Market Portfolio, Institutional Shares /1/ 12,742,327 12,742,327 218,493,751 FLOATING RATE NOTES - 3.76% Beta Finance Inc. 1.07%, 05/20/04 /1/ $ 2,505,294 2,505,026 1.16%, 08/23/04 /1/ 2,505,294 2,507,388 SCHEDULES OF INVESTMENTS 15 Schedule of Investments (Unaudited) (Continued) iSHARES GS $ INVESTOP(TM) CORPORATE BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------- Canadian Imperial Bank of Commerce 1.07%, 10/30/03 /1/ $ 2,004,235 $ 2,004,235 1.37%, 08/26/04 /1/ 5,010,588 5,010,588 CC USA Inc. 1.06%, 05/24/04 /1/ 5,010,588 5,010,227 1.07%, 04/19/04 /1/ 2,204,659 2,204,590 1.11%, 07/15/04 /1/ 2,505,294 2,506,076 Dorada Finance Inc. 1.07%, 05/20/04 /1/ 5,010,588 5,010,052 1.24%, 08/09/04 /1/ 1,252,647 1,252,472 Five Finance Inc. 1.08%, 04/15/04 /1/ 2,505,294 2,505,294 HBOS Treasury Services PLC 1.27%, 06/24/04 /1/ 5,010,588 5,010,588 Holmes Financing PLC 1.07%, 04/15/04 /1/ 1,002,118 1,002,118 K2 USA LLC 1.07%, 08/16/04 /1/ 1,252,647 1,252,468 1.08%, 04/13/04 /1/ 2,505,294 2,505,219 1.08%, 05/17/04 /1/ 2,505,294 2,505,206 Links Finance LLC 1.05%, 07/20/04 /1/ 2,004,235 2,003,882 1.07%, 05/04/04 /1/ 2,505,294 2,505,211 1.07%, 06/28/04 /1/ 2,505,294 2,504,884 1.08%, 03/29/04 /1/ 2,505,294 2,505,294 Nationwide Building Society 1.08%, 07/23/04 /1/ 3,757,941 3,757,941 Sigma Finance Inc. 1.05%, 07/20/04 /1/ 2,505,294 2,504,852 1.06%, 10/15/03 /1/ 5,010,588 5,010,529 1.06%, 07/01/04 /1/ 2,505,294 2,504,776 1.24%, 08/06/04 /1/ 1,252,647 1,252,531 Tango Finance Corp. 1.05%, 07/15/04 /1/ 1,503,176 1,502,745 1.06%, 07/06/04 /1/ 1,503,176 1,503,047 Toronto Dominion 1.33%, 08/23/04 /1/ 3,256,882 3,255,286 White Pine Finance LLC 1.06%, 07/06/04 /1/ 3,006,353 3,006,110 1.07%, 05/17/04 /1/ 3,006,353 3,006,353 1.08%, 04/20/04 /1/ 2,505,294 2,505,294 82,120,282 COMMERCIAL PAPER - 1.44% Corporate Asset Funding Corp. 1.06%, 09/24/03 /1/ 1,503,176 1,502,203 CRC Funding LLC 1.05%, 09/25/03 /1/ 2,505,294 2,503,613 1.06%, 09/16/03 /1/ 1,002,118 1,001,705 Edison Asset Securitization 1.06%, 09/05/03 /1/ 2,505,294 2,505,073 1.06%, 09/15/03 /1/ 1,503,176 1,502,601 1.07%, 10/23/03 /1/ 4,709,953 4,702,813 Eureka Securitization Inc. 1.05%, 09/18/03 /1/ 2,505,294 2,504,125 Jupiter Securitization Corp. 1.07%, 09/02/03 /1/ 1,252,647 1,252,647 Park Avenue Receivables Corp. 1.06%, 09/16/03 /1/ 1,252,647 1,252,131 Preferred Receivables Funding Corp. 1.06%, 09/08/03 /1/ 1,252,647 1,252,426 Quincy Capital Corp. 1.06%, 09/17/03 /1/ 5,191,370 5,189,077 Receivables Capital Corp. 1.06%, 09/17/03 /1/ 3,657,729 3,656,121 UBS Finance (Delaware) Inc. 1.09%, 09/02/03 /1/ 2,505,294 2,505,294 31,329,829 TIME DEPOSITS - 0.23% SunTrust Banks Inc. 1.00%, 09/02/03 /1/ 5,010,588 5,010,588 5,010,588 TOTAL SHORT TERM INVESTMENTS (COST: $336,954,450) 336,954,450 16 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Schedule of Investments (Unaudited) (Continued) iSHARES GS $ INVESTOP(TM) CORPORATE BOND FUND August 31, 2003 SECURITY PRINCIPAL VALUE - ------------------------------------------------------------------------------- REPURCHASE AGREEMENT - 0.20% Investors Bank & Trust Tri-Party Repurchase Agreement, dated 08/29/03, due 09/02/03, with a maturity value of $4,325,163 and an effective yield of 0.73% $ 4,324,812 $ 4,324,812 TOTAL REPURCHASE AGREEMENT (COST: $4,324,812) 4,324,812 TOTAL INVESTMENTS IN SECURITIES - 113.65% (COST $2,460,829,199) 2,479,953,812 OTHER ASSETS, LESS LIABILITIES - (13.65%) (297,833,471) --------------- NET ASSETS - 100.00% $ 2,182,120,341 =============== /1/ All or a portion of this security represents investments of securities lending collateral. /2/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 17 Statements of Assets and Liabilities (Unaudited) iSHARES TRUST August 31, 2003
iSHARES LEHMAN iSHARES GS ----------------------------------------------------- --------------- 1-3 Year 7-10 Year 20+ Year $ InvesTop(TM) Treasury Treasury Treasury Corporate Bond Fund Bond Fund Bond Fund Bond Fund - ------------------------------------------------------------------------------------------------------------------------ ASSETS Investments at cost $ 1,258,000,674 $ 643,406,596 $ 990,899,698 $ 2,460,829,199 --------------- --------------- --------------- --------------- Investments in securities, at value (including securities on loan /1/) (Note 1) $ 1,255,335,512 $ 632,125,711 $ 963,680,309 $ 2,479,953,812 Receivables: Investment securities sold 41,897,622 129,609,881 83,874,011 7,105,626 Dividends and interest 9,771,298 1,370,571 6,009,840 34,290,814 iShares sold 526,438 - - - iShares redeemed 29,790 - - - --------------- --------------- --------------- --------------- Total Assets 1,307,560,660 763,106,163 1,053,564,160 2,521,350,252 --------------- --------------- --------------- --------------- LIABILITIES Payables: Investment securities purchased 44,766,146 135,277,715 93,299,463 - Collateral for securities on loan (Note 5) 302,858,888 194,682,208 212,859,458 336,954,450 iShares redeemed - - 453,700 1,654,153 iShares sold - - - 26,599 Advisory fees (Note 2) 230,210 90,414 139,996 594,709 --------------- --------------- --------------- --------------- Total Liabilities 347,855,244 330,050,337 306,752,617 339,229,911 --------------- --------------- --------------- --------------- NET ASSETS $ 959,705,416 $ 433,055,826 $ 746,811,543 $ 2,182,120,341 =============== =============== =============== =============== NET ASSETS CONSIST OF: Paid-in capital $ 957,292,523 $ 439,528,487 $ 739,324,420 $ 2,116,850,523 Undistributed net investment income 1,299,472 1,442,726 2,443,036 10,046,172 Undistributed net realized gain 3,778,583 3,365,498 32,263,476 36,099,033 Net unrealized appreciation (depreciation) (2,665,162) (11,280,885) (27,219,389) 19,124,613 --------------- --------------- --------------- --------------- NET ASSETS $ 959,705,416 $ 433,055,826 $ 746,811,543 $ 2,182,120,341 =============== =============== =============== =============== iShares outstanding 11,700,000 5,200,000 8,900,000 20,200,000 =============== =============== =============== =============== Net asset value per iShare $ 82.03 $ 83.28 $ 83.91 $ 108.03 =============== =============== =============== ===============
/1/ Securities on loan with market values of $296,445,023, $190,838,762, $209,951,356 and $328,060,364, respectively. See Note 5. SEE NOTES TO FINANCIAL STATEMENTS. 18 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Statements of Operations (Unaudited) iSHARES TRUST For the six months ended August 31, 2003
iSHARES LEHMAN iSHARES GS -------------------------------------------------- -------------- 1-3 Year 7-10 Year 20+ Year $ InvesTop(TM) Treasury Treasury Treasury Corporate Bond Fund Bond Fund Bond Fund Bond Fund - -------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME Interest $ 7,277,590 $ 6,319,410 $ 7,291,639 $ 56,829,533 Securities lending income 180,211 70,340 25,870 67,673 -------------- -------------- -------------- -------------- Total investment income 7,457,801 6,389,750 7,317,509 56,897,206 -------------- -------------- -------------- -------------- EXPENSES (NOTE 2) Advisory fees 644,129 261,877 220,598 1,709,012 -------------- -------------- -------------- -------------- Total expenses 644,129 261,877 220,598 1,709,012 -------------- -------------- -------------- -------------- Net investment income 6,813,672 6,127,873 7,096,911 55,188,194 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments (46,451) (4,475,497) (3,814,260) (204,661) In-kind redemptions 3,825,034 8,285,181 36,077,736 35,928,709 -------------- -------------- -------------- -------------- Net realized gain 3,778,583 3,809,684 32,263,476 35,724,048 -------------- -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on investments (8,920,583) (21,836,449) (51,643,374) (98,996,134) -------------- -------------- -------------- -------------- Net realized and unrealized loss (5,142,000) (18,026,765) (19,379,898) (63,272,086) -------------- -------------- -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,671,672 $ (11,898,892) $ (12,282,987) $ (8,083,892) ============== ============== ============== ==============
SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 19 Statements of Changes in Net Assets iSHARES TRUST
iSHARES LEHMAN iSHARES LEHMAN 1-3 YEAR 7-10 YEAR TREASURY TREASURY BOND FUND BOND FUND ------------------------------------ ------------------------------------ For the six For the period For the six For the period months ended July 22, 2002 /1/ months ended July 22, 2002 /1/ August 31, 2003 to August 31, 2003 to (Unaudited) February 28, 2003 (Unaudited) February 28, 2003 - ---------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 6,813,672 $ 8,561,210 $ 6,127,873 $ 14,273,826 Net realized gain 3,778,583 3,089,322 3,809,684 19,314,033 Net change in unrealized appreciation (depreciation) (8,920,583) 6,255,421 (21,836,449) 10,555,564 --------------- ----------------- --------------- ----------------- Net increase (decrease) in net assets resulting from operations 1,671,672 17,905,953 (11,898,892) 44,143,423 --------------- ----------------- --------------- ----------------- Undistributed net investment income included in the price of capital shares issued or redeemed (39,000) 444,000 107,000 (329,000) --------------- ----------------- --------------- ----------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (6,760,011) (7,759,399) (6,287,606) (12,668,686) From net realized gain /2/ - - - (2,824,176) --------------- ----------------- --------------- ----------------- Total distributions to iShareholders (6,760,011) (7,759,399) (6,287,606) (15,492,862) --------------- ----------------- --------------- ----------------- iSHARES TRANSACTIONS: iShares sold 650,297,423 1,305,849,750 395,017,942 962,404,619 iShares redeemed (608,373,086) (393,531,886) (388,076,829) (546,531,969) --------------- ----------------- --------------- ----------------- Net increase in net assets from iShares transactions 41,924,337 912,317,864 6,941,113 415,872,650 --------------- ----------------- --------------- ----------------- INCREASE (DECREASE) IN NET ASSETS 36,796,998 922,908,418 (11,138,385) 444,194,211 NET ASSETS: Beginning of period 922,908,418 - 444,194,211 - --------------- ----------------- --------------- ----------------- End of period $ 959,705,416 $ 922,908,418 $ 433,055,826 $ 444,194,211 =============== ================= =============== ================= Undistributed net investment income included in net assets at end of period $ 1,299,472 $ 1,245,811 $ 1,442,726 $ 1,602,459 =============== ================= =============== ================= iSHARES ISSUED AND REDEEMED: iShares sold 4,900,000 14,400,000 4,300,000 10,000,000 iShares redeemed (4,400,000) (3,200,000) (4,200,000) (4,900,000) --------------- ----------------- --------------- ----------------- Net increase in iShares outstanding 500,000 11,200,000 100,000 5,100,000 =============== ================= =============== =================
/1/ Commencement of operations. /2/ Represents all short-term gain distributions. Short-term gain distributions are treated as ordinary income dividends for tax purposes. SEE NOTES TO FINANCIAL STATEMENTS. 20 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Statements of Changes in Net Assets (Continued) iSHARES TRUST
iSHARES LEHMAN iSHARES GS 20+ YEAR $ INVESTOP(TM) TREASURY CORPORATE BOND FUND BOND FUND ------------------------------------ ------------------------------------ For the six For the period For the six For the period months ended July 22, 2002 /1/ months ended July 22, 2002 /1/ August 31, 2003 to August 31, 2003 to (Unaudited) February 28, 2003 (Unaudited) February 28, 2003 - ---------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 7,096,911 $ 16,869,888 $ 55,188,194 $ 54,060,786 Net realized gain 32,263,476 27,418,840 35,724,048 25,632,818 Net change in unrealized appreciation (depreciation) (51,643,374) 24,423,985 (98,996,134) 118,120,747 --------------- ----------------- --------------- ----------------- Net increase (decrease) in net assets resulting from operations (12,282,987) 68,712,713 (8,083,892) 197,814,351 --------------- ----------------- --------------- ----------------- Undistributed net investment income included in the price of capital shares issued or redeemed 1,704,000 (821,000) (279,000) 3,108,000 --------------- ----------------- --------------- ----------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (6,722,460) (14,793,864) (54,100,894) (48,190,288) From net realized gain /2/ - (320,847) (1,194,145) - --------------- ----------------- --------------- ----------------- Total distributions to iShareholders (6,722,460) (15,114,711) (55,295,039) (48,190,288) --------------- ----------------- --------------- ----------------- iSHARES TRANSACTIONS: iShares sold 1,390,199,420 711,173,599 926,738,177 2,377,127,411 iShares redeemed (942,914,035) (447,122,996) (757,539,057) (453,280,322) --------------- ----------------- --------------- ----------------- Net increase in net assets from iShares transactions 447,285,385 264,050,603 169,199,120 1,923,847,089 --------------- ----------------- --------------- ----------------- INCREASE IN NET ASSETS 429,983,938 316,827,605 105,541,189 2,076,579,152 NET ASSETS: Beginning of period 316,827,605 - 2,076,579,152 - --------------- ----------------- --------------- ----------------- End of period $ 746,811,543 $ 316,827,605 $ 2,182,120,341 $ 2,076,579,152 =============== ================= =============== ================= Undistributed net investment income included in net assets at end of period $ 2,443,036 $ 2,068,585 $ 10,046,172 $ 8,958,872 =============== ================= =============== ================= ISHARES ISSUED AND REDEEMED: iShares sold 16,100,000 8,600,000 4,000,000 20,300,000 iShares redeemed (10,700,000) (5,100,000) (2,600,000) (1,500,000) --------------- ----------------- --------------- ----------------- Net increase in iShares outstanding 5,400,000 3,500,000 1,400,000 18,800,000 =============== ================= =============== =================
/1/ Commencement of operations. /2/ Represents all short-term gain distributions. Short-term gain distributions are treated as ordinary income dividends for tax purposes. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 21 Financial Highlights iSHARES TRUST (For a share outstanding throughout each period)
iSHARES LEHMAN iSHARES LEHMAN 1-3 YEAR 7-10 YEAR TREASURY TREASURY BOND FUND BOND FUND --------------------------------------- --------------------------------------- Six months Period from Six months Period from ended Jul. 22, 2002 /1/ ended Jul. 22, 2002 /1/ Aug. 31, 2003 to Aug. 31, 2003 to (Unaudited) Feb. 28, 2003 (Unaudited) Feb. 28, 2003 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 82.40 $ 81.01 $ 87.10 $ 82.13 ----------------- ----------------- ----------------- ----------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.66 0.84 1.52 1.99 Net realized and unrealized gain (loss) (0.37) 1.32 (3.77) 5.04 ----------------- ----------------- ----------------- ----------------- Total from investment operations 0.29 2.16 (2.25) 7.03 ----------------- ----------------- ----------------- ----------------- LESS DISTRIBUTIONS FROM: Net investment income (0.66) (0.77) (1.57) (1.68) Net realized gain /4/ - - - (0.38) ----------------- ----------------- ----------------- ----------------- Total distributions (0.66) (0.77) (1.57) (2.06) ----------------- ----------------- ----------------- ----------------- NET ASSET VALUE, END OF PERIOD $ 82.03 $ 82.40 $ 83.28 $ 87.10 ================= ================= ================= ================= TOTAL RETURN (NOT ANNUALIZED) 0.33% 2.66% (2.66)% 8.64% ================= ================= ================= ================= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 959,705 $ 922,908 $ 433,056 $ 444,194 Ratio of expenses to average net assets /2/ 0.15% 0.15% 0.15% 0.15% Ratio of net investment income to average net assets /2/ 1.59% 1.80% 3.51% 3.79% Portfolio turnover rate /3/ 9% 44% 39% 54%
/1/ Commencement of operations. /2/ Annualized for periods of less than one year. /3/ Excludes securities received or delivered as a result of processing capital share transactions in Creation Units. /4/ Represents all short-term gain distributions. Short-term gain distributions are treated as ordinary income dividends for tax purposes. SEE NOTES TO FINANCIAL STATEMENTS. 22 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Financial Highlights (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES LEHMAN iSHARES GS 20+ YEAR $ INVESTOP(TM) TREASURY CORPORATE BOND FUND BOND FUND ------------------------------------ ------------------------------------ Six months Period from Six months Period from ended Jul. 22, 2002 /1/ ended Jul. 22, 2002 /1/ Aug. 31, 2003 to Aug. 31, 2003 to (Unaudited) Feb. 28, 2003 (Unaudited) Feb. 28, 2003 - ----------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 90.52 $ 82.69 $ 110.46 $ 103.03 -------------- ----------------- -------------- ----------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 2.10 2.79 2.71 3.24 Net realized and unrealized gain (loss) (6.39) 7.29 (2.38) 7.12 -------------- ----------------- -------------- ----------------- Total from investment operations (4.29) 10.08 0.33 10.36 -------------- ----------------- -------------- ----------------- LESS DISTRIBUTIONS FROM: Net investment income (2.32) (2.20) (2.70) (2.93) Net realized gain /4/ - (0.05) (0.06) - -------------- ----------------- -------------- ----------------- Total distributions (2.32) (2.25) (2.76) (2.93) -------------- ----------------- -------------- ----------------- NET ASSET VALUE, END OF PERIOD $ 83.91 $ 90.52 $ 108.03 $ 110.46 ============== ================= ============== ================= TOTAL RETURN (NOT ANNUALIZED) (4.94)% 12.31% 0.24% 10.22% ============== ================= ============== ================= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 746,812 $ 316,828 $ 2,182,120 $ 2,076,579 Ratio of expenses to average net assets /2/ 0.15% 0.15% 0.15% 0.15% Ratio of net investment income to average net assets /2/ 4.83% 4.92% 4.84% 5.38% Portfolio turnover rate /3/ 28% 7% 0% 20%
/1/ Commencement of operations. /2/ Annualized for periods of less than one year. /3/ Excludes securities received or delivered as a result of processing capital share transactions in Creation Units. /4/ Represents all short-term gain distributions. Short-term gain distributions are treated as ordinary income dividends for tax purposes. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 23 Notes to the Financial Statements (Unaudited) iSHARES TRUST 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 statutory trust pursuant to an Agreement and Declaration of Trust dated December 16, 1999. As of August 31, 2003, the Trust offered 56 investment portfolios or funds. These financial statements relate only to the iShares Lehman 1-3 Year Treasury Bond Fund, iShares Lehman 7-10 Year Treasury Bond Fund, iShares Lehman 20+ Year Treasury Bond Fund and the iShares GS $ InvesTop-TM- Corporate Bond Fund (each a "Fund", collectively the "Funds"). 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 achieve each Fund's investment objective. Each of the Funds is classified as a diversified fund under the 1940 Act, except for the iShares GS $ InvesTop-TM- Corporate Bond Fund, which is classified as a non-diversified fund. Non-diversified funds generally hold securities 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. Under the Funds' organizational documents, their officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 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 Fixed income securities are valued using the latest quoted bid price or using valuations provided by third party pricing services. Short-term investments 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, or for which a significant event has occurred since the time of the most recent market quotation, are valued in accordance with fair value pricing policies approved by the Board of Trustees of the Trust. SECURITY TRANSACTIONS AND INCOME RECOGNITION Security transactions are accounted for on trade date. Interest income is accrued daily. Realized gains and losses on investment transactions are determined using the specific identification method. The Funds amortize premium and accrete discount on debt securities purchased, using a constant yield to maturity method. EQUALIZATION The Funds use the accounting practice of equalization. This accounting method is used to keep the continuing shareholders' per share equity in undistributed net investment income from being affected by the continuous sales and redemptions of capital stock. Equalization is calculated on a per share basis whereby a portion of the proceeds from sales and costs of repurchases of capital stock is applied to 24 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Notes to the Financial Statements (Unaudited) (Continued) iSHARES TRUST undistributed net investment income. The amounts of equalization are disclosed in the Statements of Changes in Net Assets as undistributed net investment income included in the price of capital shares issued or redeemed. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders from net investment income, if any, are declared and distributed at least monthly by each Fund. Distributions of net realized capital gains, if any, generally are declared and distributed at least 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. At February 28, 2003, the tax year-end of the Funds, the components of distributable earnings on a tax basis were as follows:
------------------------------------------------------------------------------------- UNDISTRIBUTED UNDISTRIBUTED TOTAL DISTRIBUTABLE iSHARES BOND FUND ORDINARY INCOME LONG-TERM GAIN EARNINGS ------------------------------------------------------------------------------------- Lehman 1-3 Year Treasury $ 1,245,811 $ - $ 1,245,811 Lehman 7-10 Year Treasury 1,595,620 - 1,595,620 Lehman 20+ Year Treasury 2,060,106 - 2,060,106 GS $ InvesTop(TM) Corporate 10,674,970 - 10,674,970 -------------------------------------------------------------------------------------
The tax character of distributions paid during the period ended February 28, 2003 was as follows: -------------------------------------------------------------- iSHARES BOND FUND AMOUNT -------------------------------------------------------------- Lehman 1-3 Year Treasury Distributions paid from: Ordinary Income $ 8,168,879 ------------ Total Distributions $ 8,168,879 ============ Lehman 7-10 Year Treasury Distributions paid from: Ordinary Income $ 16,985,541 ------------ Total Distributions $ 16,985,541 ============ Lehman 20+ Year Treasury Distributions paid from: Ordinary Income $ 16,273,971 ------------ Total Distributions $ 16,273,971 ============ GS $ InvesTop(TM) Corporate Distributions paid from: Ordinary Income $ 49,259,044 ------------ Total Distributions $ 49,259,044 ============ NOTES TO THE FINANCIAL STATEMENTS 25 Notes to the Financial Statements (Unaudited) (Continued) iSHARES TRUST 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 six months ended August 31, 2003. For the period ended August 31, 2003, certain Funds realized net capital gains or losses resulting from in-kind redemptions of large blocks of 100,000 or more iShares or multiples thereof ("Creation Units"). Because such gains or losses are not taxable to the Funds, and are not distributed to existing Fund shareholders, the gains or losses are reclassed from accumulated net realized gains or losses to paid-in-capital at the end of the Funds' tax year. These reclassifications have no effect on net assets or net asset values per share. The in-kind gains or losses for the six months ended August 31, 2003 are disclosed in the Funds' Statements of Operations. 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 August 31, 2003 were fully collateralized by U.S. Government obligations with an interest rate of 6.375%, a maturity date of August 15, 2007 and aggregate market values as follows: -------------------------------------------------------------- AGGREGATE MARKET iSHARES BOND FUND VALUE -------------------------------------------------------------- Lehman 1-3 Year Treasury $ 3,602,983 Lehman 7-10 Year Treasury 8,936,308 Lehman 20+ Year Treasury 14,599,765 GS $ InvesTop(TM) Corporate 4,416,927 -------------------------------------------------------------- 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 the Investment Advisory 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. BGFA is entitled to an annual advisory fee of 0.15% based on the average daily net assets of each Fund, as compensation for investment management services. 26 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Notes to the Financial Statements (Unaudited) (Continued) iSHARES TRUST Investors Bank & Trust Company ("Investors Bank") serves as administrator, custodian and transfer agent for the Trust. 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. Prior to February 24, 2003, Investors Bank served as securities lending agent for the Trust. Effective February 24, 2003, Barclays Global Investors, N.A. ("BGI") began serving as securities lending agent for the Trust. BGI is an affiliate of BGFA, the Funds' investment advisor. The Board of Trustees has approved the selection of BGI as securities lending agent subject to the conditions of the exemptive order that was issued by the Securities and Exchange Commission ("SEC"). As securities lending agent, BGI receives a fee based on a share of the income earned on investment of the cash collateral received for the loan of securities. For the six months ended August 31, 2003, BGI earned securities lending agent fees as follows: -------------------------------------------------------- SECURITIES LENDING iSHARES BOND FUND AGENT FEES -------------------------------------------------------- Lehman 1-3 Year Treasury $ 174,475 Lehman 7-10 Year Treasury 64,867 Lehman 20+ Year Treasury 18,705 GS $ InvesTop(TM) Corporate 55,806 -------------------------------------------------------- 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. Pursuant to an exemptive order issued by the SEC, each Fund may invest in the Institutional Shares of the Institutional Money Market Fund ("IMMF") and Prime Money Market Fund ("PMMF") of Barclays Global Investors Funds. The IMMF and PMMF are feeder funds in a master/feeder fund structure that invests substantially all of its assets in the Money Market Master Portfolio and Prime Money Market Master Portfolio, respectively, which are managed by BGFA, the Funds' investment advisor. The IMMF and PMMF are open-end money market funds available only to institutional investors, including other investment companies managed by BGFA. The IMMF and PMMF seek a high level of income consistent with liquidity and the preservation of capital. While the IMMF and PMMF do not directly charge an advisory fee, the master portfolios in which they invest do charge an advisory fee. Income distributions from the IMMF and PMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Funds from temporary cash investments or from investment of securities lending collateral are recorded as either interest income or securities lending income, respectively, in the accompanying Statements of Operations. As of August 31, 2003, certain trustees and officers of the Trust are also employees of BGFA and its affiliates or employees of Investors Bank. NOTES TO THE FINANCIAL STATEMENTS 27 Notes to the Financial Statements (Unaudited) (Continued) iSHARES TRUST 3. INVESTMENT PORTFOLIO TRANSACTIONS Purchases and sales of investments (excluding in-kind transactions and short-term securities) for the six months ended August 31, 2003, were as follows:
- ------------------------------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS OTHER SECURITIES ---------------------------- ---------------------- iSHARES BOND FUND PURCHASES SALES PURCHASES SALES - ------------------------------------------------------------------------------------ Lehman 1-3 Year Treasury $ 82,282,794 $ 73,269,460 $ - $ - Lehman 7-10 Year Treasury 143,196,312 140,570,020 - - Lehman 20+ Year Treasury 92,942,391 88,192,343 - - GS $ InvesTop(TM) Corporate - - - 10,198,807 - ------------------------------------------------------------------------------------
In-kind transactions for the six months ended August 31, 2003, were as follows: - ----------------------------------------------------------------------- IN-KIND IN-KIND iSHARES BOND FUND PURCHASES SALES - ----------------------------------------------------------------------- Lehman 1-3 Year Treasury $ 641,579,903 $ 598,753,051 Lehman 7-10 Year Treasury 388,383,173 383,781,731 Lehman 20+ Year Treasury 1,368,094,250 929,883,519 GS $ InvesTop(TM) Corporate 899,647,078 720,372,576 - ----------------------------------------------------------------------- At August 31, 2003, the aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:
- ----------------------------------------------------------------------------------------- NET UNREALIZED TAX UNREALIZED UNREALIZED APPRECIATION iSHARES BOND FUND COST APPRECIATION DEPRECIATION (DEPRECIATION) - ----------------------------------------------------------------------------------------- Lehman 1-3 Year Treasury $ 1,258,000,674 $ 303,586 $ (2,968,748) $ (2,665,162) Lehman 7-10 Year Treasury 643,415,735 - (11,290,024) (11,290,024) Lehman 20+ Year Treasury 990,899,698 - (27,219,389) (27,219,389) GS $ InvesTop(TM) Corporate 2,460,927,119 38,743,921 (19,717,228) 19,026,693 - -----------------------------------------------------------------------------------------
4. iSHARES TRANSACTIONS At August 31, 2003, 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 Statement of Changes in Net Assets. The consideration for the purchase of Creation Units of a Fund generally consists of the in-kind contribution of a designated portfolio of securities constituting a substantial replication, or a portfolio sampling representation, of the securities involved in the relevant Fund's 28 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Notes to the Financial Statements (Unaudited) (Continued) iSHARES TRUST 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 for the iShares GS $ InvesTop(TM) Corporate Bond Fund. 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 of at least 102% of the market value of the loaned securities plus the interest accrued on such securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan plus accrued interest. 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 August 31, 2003, the Funds had loaned securities which were collateralized by cash. The cash collateral received was invested in a joint account which invests in securities with remaining maturities of 397 days or less and money market mutual funds. Income from the joint account is allocated daily to each Fund, based on each Fund's portion of the total cash collateral received. The market value of the securities on loan at August 31, 2003 and the value of the related collateral are disclosed in the Statements of Assets and Liabilities. 6. LEGAL PROCEEDINGS The Trust has reached a settlement in an action in the U.S. District Court for the Northern District of Illinois. In the action, a company named Mopex, Inc. and a company named Realtimemutualfunds.com alleged that the actions of the Trust and others infringed a patent held by Mopex, and that the parties engaged in a "conspiracy" amongst themselves to infringe the patent. The patent itself was found to be invalid in a related action to which the Trust was not a party. In the settlement, the plaintiffs' claims and allegations are dismissed with prejudice, and neither the Trust nor any other defendant will pay any compensation to the plaintiffs. NOTES TO THE FINANCIAL STATEMENTS 29 The iShares Family of Funds The following is a list of iShares Funds being offered, along with their respective exchange trading symbols. Please call iShares at 1-800-iSHARES (1-800-474-2737) to obtain a prospectus for any iShares fund. The prospectus contains more complete information, including charges and expenses. BROAD MARKET iShares Dow Jones U.S. Total Market Index Fund (IYY) iShares Russell 3000 Index Fund (IWV) iShares Russell 3000 Growth Index Fund (IWZ) iShares Russell 3000 Value Index Fund (IWW) LARGE CAP iShares Russell 1000 Index Fund (IWB) iShares Russell 1000 Growth Index Fund (IWF) iShares Russell 1000 Value Index Fund (IWD) iShares S&P 100 Index Fund (OEF) iShares S&P 500 Index Fund (IVV) iShares S&P 500/BARRA Growth Index Fund (IVW) iShares S&P 500/BARRA Value Index Fund (IVE) MID CAP iShares Russell Midcap Index Fund (IWR) iShares Russell Midcap Growth Index Fund (IWP) iShares Russell Midcap Value Index Fund (IWS) iShares S&P MidCap 400 Index Fund (IJH) iShares S&P MidCap 400/BARRA Growth Index Fund (IJK) iShares S&P MidCap 400/BARRA Value Index Fund (IJJ) SMALL CAP iShares Russell 2000 Index Fund (IWM) iShares Russell 2000 Growth Index Fund (IWO) iShares Russell 2000 Value Index Fund (IWN) iShares S&P SmallCap 600 Index Fund (IJR) iShares S&P SmallCap 600/BARRA Growth Index Fund (IJT) iShares S&P SmallCap 600/BARRA Value Index Fund (IJS) SECTOR & INDUSTRY iShares Cohen & Steers Realty Majors Index Fund (ICF) iShares Dow Jones U.S. Basic Materials Sector Index Fund (IYM) iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund (IYC) iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund (IYK) iShares Dow Jones U.S. Energy Sector Index Fund (IYE) iShares Dow Jones U.S. Financial Sector Index Fund (IYF) iShares Dow Jones U.S. Financial Services Index Fund (IYG) iShares Dow Jones U.S. Healthcare Sector Index Fund (IYH) iShares Dow Jones U.S. Industrial Sector Index Fund (IYJ) iShares Dow Jones U.S. Real Estate Index Fund (IYR) iShares Dow Jones U.S. Technology Sector Index Fund (IYW) iShares Dow Jones U.S. Telecommunications Sector Index Fund (IYZ) iShares Dow Jones U.S. Utilities Sector Index Fund (IDU) iShares Goldman Sachs Natural Resources Index Fund (IGE) iShares Goldman Sachs Networking Index Fund (IGN) iShares Goldman Sachs Semiconductor Index Fund (IGW) iShares Goldman Sachs Software Index Fund (IGV) iShares Goldman Sachs Technology Index Fund (IGM) iShares Nasdaq Biotechnology Index Fund (IBB) FIXED INCOME iShares Lehman 1-3 Year Treasury Bond Fund (SHY) iShares Lehman 7-10 Year Treasury Bond Fund (IEF) iShares Lehman 20+ Year Treasury Bond Fund (TLT) iShares Lehman Aggregate Bond Fund (AGG) iShares GS $ InvesTop(TM) Corporate Bond Fund (LQD) GLOBAL SECTOR iShares S&P Global Energy Sector Index Fund (IXC) iShares S&P Global Financials Sector Index Fund (IXG) iShares S&P Global Healthcare Sector Index Fund (IXJ) iShares S&P Global Technology Sector Index Fund (IXN) iShares S&P Global Telecommunications Sector Index Fund (IXP) INTERNATIONAL/BROAD MARKET iShares MSCI EAFE Index Fund (EFA) iShares MSCI Emerging Markets Index Fund (EEM) INTERNATIONAL/REGIONAL iShares MSCI EMU Index Fund (EZU) iShares MSCI Pacific ex-Japan Index Fund (EPP) iShares S&P Europe 350 Index Fund (IEV) INTERNATIONAL/DEVELOPED COUNTRY iShares MSCI Australia Index Fund (EWA) iShares MSCI Austria Index Fund (EWO) iShares MSCI Belgium Index Fund (EWK) iShares MSCI Canada Index Fund (EWC) iShares MSCI France Index Fund (EWQ) iShares MSCI Germany Index Fund (EWG) iShares MSCI Hong Kong Index Fund (EWH) iShares MSCI Italy Index Fund (EWI) iShares MSCI Japan Index Fund (EWJ) iShares MSCI Netherlands Index Fund (EWN) iShares MSCI Singapore Index Fund (EWS) iShares MSCI Spain Index Fund (EWP) iShares MSCI Sweden Index Fund (EWD) iShares MSCI Switzerland Index Fund (EWL) iShares MSCI United Kingdom Index Fund (EWU) iShares S&P/TOPIX 150 Index Fund (ITF) INTERNATIONAL/EMERGING COUNTRY iShares MSCI Brazil Index Fund (EWZ) iShares MSCI Malaysia Index Fund (EWM) iShares MSCI Mexico Index Fund (EWW) iShares MSCI South Africa Index Fund (EZA) iShares MSCI South Korea Index Fund (EWY) iShares MSCI Taiwan Index Fund (EWT) iShares S&P Latin America 40 Index Fund (ILF) GLOBAL/BROAD MARKET iShares S&P Global 100 Index Fund (IOO) This advertising section does not constitute part of the 2003 Semi-Annual Report. iShares are not sponsored or endorsed by Goldman, Sachs & Co. or Lehman Brothers, nor are they sponsored, endorsed, sold or promoted by Cohen & Steers Capital Management, Inc., Dow Jones & Company, Inc., Morgan Stanley Capital International, The Nasdaq Stock Market, Inc., Frank Russell Company, or Standard & Poor's. None of these companies make any representation regarding the advisability of investing in iShares. Neither SEI nor BGI, nor any of their affiliates, are affiliated with Goldman, Sachs & Co. or Lehman Brothers. "GS $ InvesTop(TM)" and "Goldman Sachs(R)" are trademarks of Goldman, Sachs & Co. 30 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS iShares are distributed by SEI Investments Distribution Co. (SEI). Barclays Global Fund Advisors (BGFA) serves as an advisor to iShares. Barclays Global Investors Services (BGIS) assists in the marketing of iShares. BGFA and BGIS are subsidiaries of Barclays Global Investors, N.A., a wholly owned subsidiary of Barclays Bank PLC, none of which is affiliated with SEI. "$ InvesTop(TM)", "$ InvesTop(TM) Index", "GS $ InvesTop(TM)" and "Goldman Sachs(R)" are trademarks of Goldman, Sachs & Co. The methodology of the GS $ InvesTop(TM) Index is owned by Goldman, Sachs & Co., may be covered by one or more patents or pending patent applications and is provided under license from Goldman, Sachs & Co. iShares are not sponsored or endorsed by Goldman, Sachs & Co. or Lehman Brothers, nor do these companies make any representation regarding the advisability of investing in iShares. Neither SEI nor BGI, nor any of their affiliates, are affiliated with Goldman, Sachs & Co. or Lehman Brothers. INVESTING INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. (C)2003 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. THIS REPORT IS INTENDED FOR THE FUNDS' SHAREHOLDERS. IT MAY NOT BE DISTRIBUTED TO PROSPECTIVE INVESTORS UNLESS IT IS PRECEDED OR ACCOMPANIED BY THE CURRENT PROSPECTUS. iShares(R) INDUSTRIAL STRENGTH INVESTMENT TOOLS FROM BARCLAYS GLOBAL INVESTORS 1 800 iSHARES (1 800 474 7237) WWW.iSHARES.COM [LOGO OF BARCLAYS] BGI-F-019-09003 Item 2. Code of Ethics. Not applicable to this filing. Item 3. Audit Committee Financial Expert. Not applicable to this filing. Item 4. Principal Accountant Fees and Services. Not applicable to this filing. Item 5. Listed Company Audit Committees. Not applicable to this filing. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable to this registrant. Item 8. [Reserved] Item 9. Controls and Procedures. (a) The President and Principal Financial Officer have concluded that, based on their evaluation as of a date within 90 days of the filing date of this report, the disclosure controls and procedures of iShares Trust are reasonably designed to achieve the purposes described in the attached certification, Section 4 (a). (b) There were no significant changes in the iShares Trust's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Item 10. Exhibits. (a) Not applicable to this filing. (b) Certification letters are attached. (c) Section 906 Certifications are attached. Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. iShares Trust By: /s/ Lee T. Kranefuss ------------------------------- Lee T. Kranefuss, President Date: November 3, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Lee T. Kranefuss ------------------------------- Lee T. Kranefuss, President Date: November 3, 2003 By: /s/ Michael A. Latham ------------------------------- Michael A. Latham, Principal Financial Officer Date: November 3, 2003 EX-99.CERT 3 dex99cert.txt CERTIFICATION LETTERS N-CSRS Exhibit for Item 10(b): SECTION 302 CERTIFICATIONS EX-99.CERT I, Lee T. Kranefuss, certify that: 1. I have reviewed this report on Form N-CSRS of iShares Trust for the following four series of iShares Trust: iShares Lehman 1-3 Year Treasury Bond Fund, iShares Lehman 7-10 Year Treasury Bond Fund, iShares Lehman 20+ Treasury Bond Fund and iShares GS $ InvesTop Corporate Bond Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 /s/ Lee T. Kranefuss President -------------------------------------------- Lee T. Kranefuss [Title] [Signature] N-CSRS Exhibit for Item 10(b): SECTION 302 CERTIFICATIONS EX-99.CERT I, Michael A. Latham, certify that: 1. I have reviewed this report on Form N-CSRS of iShares Trust for the following four series of iShares Trust: iShares Lehman 1-3 Year Treasury Bond Fund, iShares Lehman 7-10 Year Treasury Bond Fund, iShares Lehman 20+ Treasury Bond Fund and iShares GS $ InvesTop Corporate Bond Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): d) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and e) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 /s/ Michael A. Latham Principal Financial Officer ------------------- ---------------------------------------------------- Michael A. Latham [Title] [Signature] EX-99.906CERT 4 dex99906cert.txt SECTION 906 CERTIFICATIONS N-CSRS Exhibit for Item 10(c): SECTION 906 CERTIFICATIONS Ex.99.906 CERT Lee T. Kranefuss, President, and Michael A. Latham, Principal Financial Officer, of iShares Trust (the "Registrant"), each certify that: 1. The Registrant's periodic report on Form N-CSRS for the period ended August 31, 2003 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSRS fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 3, 2003 /s/ Lee T. Kranefuss President ------------------ ------------------------ ---------------- Lee T. Kranefuss [Title] [Signature] Date: November 3, 2003 /s/ Michael A. Latham Principal Financial Officer ------------------ ------------------------ ---------------------------- Michael A. Latham [Title] [Signature] A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C Section 1350 and is not being filed as part of the Form N-CSRS with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----