N-CSRS/A 1 dncsrsa.txt AMENDED SEMI-ANNUAL REPORTS FOR THE PERIOD ENDING 10/31/03 -------------------------- 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: 1-800-474-2737 --------------------- Date of fiscal year end: 04/30/2004 ----------------------- Date of reporting period: 05/01/03-10/31/03 ----------------------- Form N-CSRS 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-CSRS in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSRS, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSRS 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. ITEM 1. Report to Stockholders iSHARES(R) 2003 SEMI-ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 2003 [GRAPHIC APPEARS HERE] INDUSTRIAL STRENGTH INVESTMENT TOOLS iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR INDEX FUND iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR INDEX FUND iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND iSHARES DOW JONES U.S. REAL ESTATE INDEX FUND iSHARES COHEN & STEERS REALTY MAJORS INDEX FUND TABLE OF CONTENTS Shareholder Letter........................................................... 1 Managers' Discussion & Analysis.............................................. 4 Schedules of Investments..................................................... 12 iShares Dow Jones U.S. Basic Materials Sector Index Fund................... 12 iShares Dow Jones U.S. Consumer Cyclical Sector Index Fund................. 15 iShares Dow Jones U.S. Consumer Non-Cyclical Sector Index Fund............. 20 iShares Dow Jones U.S. Financial Sector Index Fund......................... 23 iShares Dow Jones U.S. Industrial Sector Index Fund........................ 29 iShares Dow Jones U.S. Financial Services Index Fund....................... 34 iShares Dow Jones U.S. Real Estate Index Fund.............................. 38 iShares Cohen & Steers Realty Majors Index Fund............................ 41 Financial Statements......................................................... 43 Financial Highlights......................................................... 50 Notes to the Financial Statements............................................ 58 iShares Family of Funds...................................................... 66 TO OUR SHAREHOLDERS For many investors, the last few years have been difficult and challenging. The collapse of the stock market bubble, a tepid economy, corporate accounting scandals, lackluster company earnings and the geopolitical situation all contributed to a three-year bear market. Stock market gains during the first half of 2003 give some hope that the markets have turned a corner, but there is no guarantee that challenging market conditions will not return. 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, the iShares family of funds recently launched the iShares Dow Jones Transportation Average and iShares Dow Jones Select Dividend Index Funds and in April of this year, iShares launched an emerging markets exchange traded fund based on the MSCI Emerging Markets Free Index. Last year, iShares launched the first fixed income exchange traded funds, which BUSINESS WEEK named one of the best new products of 2002./1/ iShares have added a Lehman Aggregate Bond Fund to their fixed income menu, enabling investors to track one of the most well known U.S. fixed income market indexes. iShares have also added the iShares Lehman TIPS Bond Fund, which provides the opportunity to gain exposure to inflation protected government securities. With the addition of these iShares, 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 market segments such as capitalization, sectors, value and growth, international and fixed income. 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 the iShares family of funds continue to grow, and as of October 31, 2003, had reached $48.3 billion. 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 Dow Jones & Company Inc., or 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 THIS PAGE INTENTIONALLY LEFT BLANK. 3 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- --------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ --------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 26.05% 26.12% 26.84% 5.23% 5.24% 5.76% 18.85% 18.91% 20.90%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/19/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) DU PONT (E.I.) DE NEMOURS AND CO. 14.48% DOW CHEMICAL CO. (THE) 12.38% ALCOA INC. 9.61% INTERNATIONAL PAPER CO. 6.80% NEWMONT MINING CORP. 5.75% WEYERHAEUSER CO. 4.76% PRAXAIR INC. 4.08% PPG INDUSTRIES INC. 3.52% AIR PRODUCTS & CHEMICALS INC. 3.49% GEORGIA-PACIFIC CORP. 2.12% The iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Basic Materials Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period") the Fund returned 18.31%, while the Index returned 18.71%. Equity markets reversed course during the reporting period. Responding positively to encouraging economic news, stocks generally gained ground throughout the reporting period. Gross Domestic Product ("GDP") growth figures for the second quarter were revised upward several times, ultimately showing an annual growth rate of 3.3%. Initial reports of third quarter GDP were an even more encouraging 7.2% annual growth rate, although this estimate includes some non-recurring items such as a mortgage-refinancing boom as a result of historically low interest rates. Corporate earnings growth also was strong and consistent, in some cases reaching double-digit growth rates and exceeding analyst expectations during the reporting period. Importantly, corporate earnings strength was broad-based, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. Basic materials shares generally rebounded during the reporting period. As economic conditions improved, demand increased for commodities products such as paper, forest products, and metals. Those companies that depend on oil and natural gas, however, were hindered by volatile energy prices during the reporting period. Among the Index's ten largest weightings, performance was mostly positive during the reporting period. The strongest gains came from Newmont Mining Corp. (5.51% of the Index as of October 31, 2003), which returned 62.03%. Alcoa Inc. (9.22% of the Index as of October 31, 2003) rose 37.68%, and Weyerhaeuser Co. (4.56% of the Index as of October 31, 2003) climbed 21.46%. Praxair Inc. (3.91% of the Index as of October 31, 2003) returned 19.80%. The only negative performer among the ten largest weightings was E.I. Du Pont de Nemours and Co., the largest weighting at 13.88% of the Index as of October 31, 2003, which declined 5.01% over the reporting period. 4 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- --------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ --------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 24.49% 24.62% 25.22% (2.50)% (2.48)% (1.99)% (8.24)% (8.17)% (6.58)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/20/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) WAL-MART STORES INC. 9.97% HOME DEPOT INC. 5.48% TIME WARNER INC. 4.15% VIACOM INC. CLASS B 3.78% WALT DISNEY CO. (THE) 2.89% COMCAST CORP. CLASS A 2.66% LOWE'S COMPANIES INC. 2.60% WALGREEN CO. 2.23% TARGET CORP. 2.04% MCDONALD'S CORP. 1.98% The iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Consumer Cyclical Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 19.23%, while the Index returned 19.60%. Equity markets rebounded during the reporting period. As the economic outlook began to offer investors signs of encouragement, stock prices climbed. Second quarter Gross Domestic Product ("GDP") figures were revised several times, ultimately revealing a 3.3% annual growth rate. In October, initial third quarter GDP reports reflected a healthy 7.2% annual growth rate, the highest rate since 1984. Corporate earnings also contributed to the optimism. Announcements increasingly showed higher earnings levels and stabilizing earnings expectations. Third quarter earnings were consistently strong across sectors, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. Further, across all sectors, more than 50% of companies reported earnings that were equal to, or better than, most analyst expectations. Because consumer cyclical stocks generally perform in tandem with economic cycles, the sector experienced sound performance during the reporting period. Improving economic conditions generally translated into increased demand for the types of consumer goods and services, such as home improvement and entertainment, which tend to be sensitive to the state of the economy. The sector performed well over the reporting period, with many of its individual constituents rebounding from previous reporting periods. Among the Index's ten largest constituents, the strongest gains came from McDonald's Corp. (1.72% of the Index as of October 31, 2003), which returned 46.20% during the reporting period. Lowe's Companies Inc. (2.48% of the Index as of October 31, 2003) rose 34.27%, and Home Depot Inc. (4.75% of the Index as of October 31, 2003) climbed 31.78%. The Walt Disney Co. (2.50% of the Index as of October 31, 2003) returned 21.33%. The only negative performer among the ten largest constituents was Viacom Inc., Class B shares (3.50% of the Index as of October 31, 2003), which declined 8.15% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 5 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- -------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ -------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 11.25% 11.46% 11.95% 4.76% 4.76% 5.49% 17.05% 17.05% 19.87%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/16/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) PROCTER & GAMBLE CO. 13.76% COCA-COLA CO. (THE) 11.38% ALTRIA GROUP INC. 10.20% PEPSICO INC. 8.90% ANHEUSER-BUSCH COMPANIES INC. 4.45% GILLETTE CO. (THE) 3.21% KIMBERLY-CLARK CORP. 2.91% COLGATE-PALMOLIVE CO. 2.88% EBAY INC. 2.60% SYSCO CORP. 2.38% The iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Consumer Non-Cyclical Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 15.56%, while the Index returned 15.92%. Equity markets staged a rebound during the reporting period. Buoyed by the official conclusion to the war in Iraq and the release of encouraging economic news, stocks generally moved upward throughout the reporting period. Gross Domestic Product ("GDP") figures for the second quarter were revised upward several times, ultimately showing an annual growth rate of 3.3%. For the third quarter, initial reports revealed an even stronger 7.2% annual growth rate. Corporate earnings announcements also were encouraging, showing both higher earnings levels and stabilizing earnings expectations. In addition, earnings expectations became more accurate than in previous reporting periods. Earnings growth became strong across sectors, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. The broad-based uptrend in equities translated into positive returns for all industry sectors during the reporting period. Consumer non-cyclical stocks participated in the rebound, delivering healthy gains. In particular, some of the individual constituents of the sector's beverage, tobacco, and household products industries, which had suffered the steepest declines in the previous reporting period, experienced some of the strongest gains during the reporting period. Among the Index's ten largest constituents, performance was mostly positive over the reporting period. Altria Group Inc., formerly known as Philip Morris Companies Inc. (9.31% of the Index as of October 31, 2003), gained 51.17%. InterActiveCorp. (2.40% of the Index as of October 31, 2003), returned 22.90%, and eBay Inc. (3.55% of the Index as of October 31, 2003) climbed 20.40%. The Coca-Cola Co. (11.31% of the Index as of October 31, 2003) rose 14.85%. On the negative side, Colgate-Palmolive Co. (2.83% of the Index as of October 31, 2003) declined 6.96%, and Anheuser-Busch Companies Inc. (4.07% of the Index as of October 31, 2003) fell 1.24%. 6 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- --------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ --------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 24.18% 24.06% 24.95% 6.91% 6.93% 7.58% 25.90% 25.96% 28.58%
"Total returns for the period since inception" are calculated from the inception date of the Fund (5/22/00). "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 is 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 (5/31/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) CITIGROUP INC. 10.48% AMERICAN INTERNATIONAL GROUP INC. 5.99% BANK OF AMERICA CORP. 4.87% WELLS FARGO & COMPANY 4.06% JP MORGAN CHASE & CO. 3.13% FANNIE MAE 2.72% WACHOVIA CORP. 2.62% MORGAN STANLEY 2.34% AMERICAN EXPRESS CO. 2.30% U.S. BANCORP 2.24% The iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Financial Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 18.20%, while the Index returned 18.58%. The official close to the war in Iraq and improving economic conditions lifted equity markets during the reporting period. In June, the Federal Reserve Board cut interest rates to 1.00%, the lowest level in 45 years, in an effort to stimulate the economy. Gross Domestic Product ("GDP") growth for the second quarter, originally estimated at 1.5%, ultimately revealed a 3.3% annual growth rate. Initial third quarter GDP annual growth was reported at 7.2%. Although some of this growth was the result of nonrecurring items, such as a mortgaging refinancing boom due to historically low rates, markets responded positively. Corporate earnings announcements provided additional encouragement in the form of increased earnings levels and stabilizing earnings expectations. Financial stocks benefited from the improving economic environment. Investment banks were buoyed by increased investor activity and valuation levels, while the refinancing boom caused by historically low interest rates generally benefited banks. Among the Index's ten largest weightings, performance was largely positive over the reporting period. Merrill Lynch & Co. Inc. (2.20% of the Index as of October 31, 2003) was the strongest performer, returning 44.21% during the reporting period. American Express Co. (2.43% of the Index as of October 31, 2003) gained 23.96%. Morgan Stanley and JP Morgan Chase & Co. (respectively 2.39% and 2.93% of the Index as of October 31, 2003) rose 22.61% and 22.32%. Citigroup Inc., the largest weighting at 9.79% of the Index as of October 31, 2003, gained 20.76%. The only negative performer among the ten largest weightings was Fannie Mae (2.82% of the Index as of October 31, 2003), which fell 0.97% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 7 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- --------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ --------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 24.48% 24.52% 25.29% (6.55)% (6.52)% (7.08)% (20.52)% (20.43)% (22.04)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/20/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) GENERAL ELECTRIC CO. 21.62% 3M CO. 5.29% UNITED TECHNOLOGIES CORP. 3.53% TYCO INTERNATIONAL LTD. 3.50% BOEING CO. (THE) 2.56% UNITED PARCEL SERVICE INC. CLASS B 2.44% FIRST DATA CORP. 2.34% CATERPILLAR INC. 2.18% HONEYWELL INTERNATIONAL INC. 2.13% EMERSON ELECTRIC CO. 2.12% The iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Industrial Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period") the Fund returned 16.88%, while the Index returned 16.80%. Equity markets rebounded during the reporting period. As the economic outlook began to offer investors signs of encouragement, stock prices climbed. Second quarter Gross Domestic Product ("GDP") figures were revised several times, ultimately revealing a 3.3% annual growth rate. In October, initial third quarter GDP annual growth was reported at a healthy 7.2%. Corporate earnings also provided cause for optimism. Announcements increasingly showed higher earnings levels and stabilizing earnings expectations. Third quarter earnings were consistently strong across sectors, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. Further, across all sectors, more than 50% of companies reported earnings that were equal to, or better than, most analyst expectations Improving economic conditions in the U.S. were echoed around the globe. Increased economic activity worldwide meant higher demand for industrial production, and the types of companies that are involved in construction, manufacturing, transportation, and other areas that are typically in higher demand during economic recovery tended to benefit from the improved climate. Performance over the reporting period was largely positive among the Index's ten largest weightings. The strongest performer during the reporting period was The Boeing Co. (2.34% of the Index as of October 31, 2003), which gained 41.09%. Caterpillar Inc. (1.92% of the Index as of October 31, 2003) returned 39.32%, and United Technologies Corp. (3.01% of the Index as of October 31, 2003) climbed 37.02%. Tyco International Ltd. (3.17% of the Index as of October 31, 2003) rose 33.85%. The only two negative performers among the ten largest weightings were First Data Corp. (2.01% of the Index as of October 31, 2003) and General Electric Co. (21.95% of the Index as of October 31, 2003), which declined 9.00% and 1.49%, respectively, over the reporting period. 8 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- --------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ --------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 27.78% 27.85% 28.61% 6.38% 6.40% 7.03% 23.30% 23.40% 25.91%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/19/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) CITIGROUP INC. 14.39% BANK OF AMERICA CORP. 6.69% WELLS FARGO & COMPANY 5.57% JP MORGAN CHASE & CO. 4.30% FANNIE MAE 3.74% WACHOVIA CORP. 3.60% MORGAN STANLEY 3.21% AMERICAN EXPRESS CO. 3.16% U.S. BANCORP 3.08% MERRILL LYNCH & CO. INC. 2.98% The iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Financial Services Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period") the Fund returned 20.73%, while the Index returned 21.13%. Investors finally found cause for optimism during the reporting period. Following an official conclusion to the war in Iraq, markets reversed course and headed upward throughout the period. Economic news and corporate earnings announcements improved during the reporting period, contributing to the market advance. Second quarter Gross Domestic Product ("GDP") annual growth rates were 3.3%, and initial third quarter GDP annual growth was reported at 7.2%. As corporate second quarter announcements were released, positive surprises outnumbered negative surprises by almost five to one. Third quarter corporate earnings reports came in about 6% above most analyst expectations, in contrast to the past several years, when earnings generally fell short of most analyst estimates. Financial stocks benefited from the changing environment. Investment banks in general were buoyed by improving valuation levels during the reporting period, as well as increased activity levels as investors began to show renewed interest in equity markets. Among the Index's ten largest constituents, Merrill Lynch & Co. Inc. (3.07% of the Index as of October 31, 2003) was the strongest performer, returning 44.21% during the reporting period. American Express Co. (3.38% of the Index as of October 31, 2003) gained 23.96%, and U.S. Bancorp (2.92% of the Index as of October 31, 2003) climbed 22.89%. Morgan Stanley and JP Morgan Chase & Co. (respectively 3.33% and 4.08% of the Index as of October 31, 2003) rose 22.61% and 22.32%. The sole negative performer among the ten largest constituents was Fannie Mae (3.93% of the Index as of October 31, 2003), which declined 0.97% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 9 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. REAL ESTATE INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- --------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ --------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 32.40% 32.25% 33.50% 15.59% 15.52% 16.20% 63.38% 63.08% 66.38%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/19/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) EQUITY OFFICE PROPERTIES TRUST 6.71% EQUITY RESIDENTIAL 4.71% SIMON PROPERTY GROUP INC. 4.47% GENERAL GROWTH PROPERTIES INC. 3.25% PROLOGIS 2.94% VORNADO REALTY TRUST 2.92% PLUM CREEK TIMBER CO. INC. 2.87% ARCHSTONE-SMITH TRUST 2.82% BOSTON PROPERTIES INC. 2.56% ISTAR FINANCIAL INC. 2.28% The iSHARES DOW JONES U.S. REAL ESTATE INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Real Estate Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 20.38%, while the Index gained 20.93%. Equity markets rebounded during the reporting period, buoyed by an improving economic climate. In late June, the Federal Reserve Board cut short-term interest rates by 0.25% to the lowest level in 45 years. As the reporting period progressed, Gross Domestic Product ("GDP") growth figures increasingly reflected signs of economic recovery. Second quarter GDP figures were revised several times, ultimately revealing a 3.3% annual growth rate. In October, initial third quarter GDP annual growth was reported at a healthy 7.2%. Corporate earnings also provided cause for optimism. Announcements increasingly showed higher earnings levels and stabilizing earnings expectations. Third quarter earnings were consistently strong across sectors, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. The real estate sector benefited from the historically low interest rates, which drove a real estate boom. In addition, those companies that operate properties such as shopping centers and public storage units tended to benefit from the improving economic conditions. For the reporting period, the real estate sector was one of the better-performing sectors. Among the Index's ten largest constituents, all had positive performance during the reporting period. General Growth Properties Inc. (3.06% of the Index as of October 31, 2003) gained 37.54%, and Vornado Realty Trust (3.19% of the Index as of October 31, 2003) returned 33.03%. Public Storage Inc. and Simon Property Group Inc. (respectively 2.81% and 4.77% of the Index as of October 31, 2003) climbed 24.42% and 22.77%. Archstone-Smith Trust (2.81% of the Index as of October 31, 2003) gained 17.11%. The largest constituent at 6.31% of the Index as of October 31, 2003, Equity Office Properties Trust was the weakest performer among the ten largest constituents with a 7.86% gain over the reporting period. 10 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS MANAGERS' DISCUSSION & ANALYSIS iSHARES COHEN & STEERS REALTY MAJORS INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------------- --------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------------- ------------------------------ --------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 34.31% 34.09% 35.00% 14.77% 14.74% 15.20% 46.17% 46.06% 47.57%
"Total returns for the period since inception" are calculated from the inception date of the Fund (1/29/01). "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 is 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 (2/2/01), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) SIMON PROPERTY GROUP INC. 7.84% EQUITY OFFICE PROPERTIES TRUST 7.64% EQUITY RESIDENTIAL 7.46% VORNADO REALTY TRUST 5.28% GENERAL GROWTH PROPERTIES INC. 5.10% PROLOGIS 4.95% PUBLIC STORAGE INC. 4.69% ARCHSTONE-SMITH TRUST 4.55% KIMCO REALTY CORP. 4.18% BOSTON PROPERTIES INC. 4.02% The iSHARES COHEN & STEERS REALTY MAJORS INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Cohen & Steers Realty Majors Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 21.11%, while the Index returned 21.45%. Equity markets staged a rebound during the reporting period. Early in the reporting period, the Federal Reserve Board cut short-term interest rates to 1.00%, their lowest level in 45 years, in a continued effort to stimulate the economy. Increasingly, signs indicated that the economy was finally recovering. Gross Domestic Product ("GDP") growth figures for the second quarter were revised upward several times, ultimately showing an annual growth rate of 3.3%. For the third quarter, initial reports revealed an even stronger 7.2% annual GDP growth rate. Corporate earnings announcements were also encouraging, showing both higher earnings levels and stabilizing earnings expectations. Real estate shares, which had already benefited from lower interest rates in recent reporting periods, continued to perform well as rates dipped lower during the reporting period. In addition, the improving economic conditions translated into increased business for shopping malls, public storage facilities, and other areas that benefited individual constituents of the Index. All of the Index's ten largest constituents delivered positive returns during the reporting period. General Growth Properties Inc. (5.11% of the Index as of October 31, 2003) was the best performer, gaining 37.54%. Vornado Realty Trust (5.29% of the Index as of October 31, 2003) rose 33.03%. Public Storage Inc. (4.70% of the Index as of October 31, 2003) returned 24.42%. The largest constituent at 7.85% of the Index as of October 31, 2003, Simon Property Group Inc. gained 22.77%. Reflecting the strength of the Index during the reporting period, the weakest performer within the ten largest constituents of the Index was Equity Office Properties Trust (7.65% of the Index as of October 31, 2003), which returned 7.86%. MANAGERS' DISCUSSION & ANALYSIS 11 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 99.96% Du Pont (E.I.) de Nemours and Co. 839,067 $ 33,898,307 Dow Chemical Co. (The) 769,299 28,994,879 Alcoa Inc. 713,091 22,512,283 International Paper Co. 404,431 15,914,360 Newmont Mining Corp. 307,514 13,462,963 Weyerhaeuser Co. 184,925 11,138,033 Praxair Inc. 137,223 9,547,976 PPG Industries Inc. 143,054 8,247,063 Air Products & Chemicals Inc. 179,840 8,166,534 Georgia-Pacific Corp. 189,063 4,968,576 Rohm & Haas Co. 121,513 4,775,461 Phelps Dodge Corp./1/ 74,927 4,625,993 Freeport-McMoRan Copper & Gold Inc. 117,674 4,559,867 MeadWestvaco Corp. 169,076 4,382,450 Avery Dennison Corp. 82,048 4,314,084 Ecolab Inc. 157,481 4,234,664 Nucor Corp. 59,538 3,264,469 Engelhard Corp. 106,335 3,039,054 Sigma-Aldrich Corp. 51,288 2,690,056 International Flavors & Fragrances Inc. 67,761 2,242,889 Eastman Chemical Co. 65,002 2,109,965 United States Steel Corp. 87,120 2,060,388 Lyondell Chemical Co. 135,471 1,937,235 Bowater Inc. 46,509 1,898,962 Valspar Corp. (The) 39,262 1,872,797 Louisiana-Pacific Corp./1/ 82,560 1,570,291 Rayonier Inc. 35,122 1,476,880 Cabot Corp. 51,889 1,447,703 RPM International Inc. 96,773 1,398,370 Boise Cascade Corp. 49,039 1,375,544 Lubrizol Corp. 43,306 1,312,172 Cabot Microelectronics Corp./1/ 20,748 1,182,636 Meridian Gold Inc./1/ 83,649 1,065,688 Cytec Industries Inc./1/ 30,417 1,061,857 Airgas Inc. 53,544 1,025,368 Minerals Technologies Inc. 16,974 930,175 Hercules Inc./1/ 84,538 883,422 Olin Corp. 49,082 854,518 Worthington Industries Inc. 58,529 853,353 Great Lakes Chemical Corp. 36,826 791,759 FMC Corp./1/ 27,965 783,300 Potlatch Corp. 24,211 756,836 Albemarle Corp. 27,932 749,136 Georgia Gulf Corp. 27,218 732,164 Ferro Corp. 34,181 701,736 IMC Global Inc. 87,621 612,471 Fuller (H.B.) Co. 23,880 591,746 MacDermid Inc. 19,425 580,419 Millennium Chemicals Inc. 53,678 537,854 Wausau-Mosinee Paper Corp. 40,827 504,622 Crompton Corp. 94,013 503,910 Cambrex Corp. 20,516 484,998 Schulman (A.) Inc. 24,886 472,585 Allegheny Technologies Inc. 56,872 435,071 WD-40 Co. 13,319 432,202 Carpenter Technology Corp. 16,712 432,005 OM Group Inc./1/ 23,939 428,508 Tredegar Corp. 19,117 297,843 Cleveland-Cliffs Inc./1/ 8,796 263,880 Stillwater Mining Co./1/ 36,542 255,429 Solutia Inc. 87,896 234,682 Caraustar Industries Inc./1/ 23,761 228,343 Wellman Inc. 26,696 220,242 RTI International Metals Inc./1/ 17,653 212,013 AK Steel Holding Corp./1/ 85,871 206,090 Pope & Talbot Inc. 12,338 176,804 Ryerson Tull Inc. 19,407 156,420 TOTAL COMMON STOCKS (Cost: $219,707,564) 234,080,353 SHORT TERM INVESTMENTS - 19.93% MONEY MARKET FUNDS - 11.47% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 18,207,234 18,207,234 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 6,664,456 6,664,456 12 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- BlackRock Temp Cash Money Market Fund/2/ 286,620 $ 286,620 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 1,714,120 1,714,120 26,872,430 FLOATING RATE NOTES - 4.77% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 302,930 302,905 1.08%, 09/15/04/2/ 605,860 605,807 1.08%, 10/12/04/2/ 302,930 302,902 1.17%, 08/23/04/2/ 302,930 303,139 CC USA Inc. 1.06%, 05/24/04/2/ 605,860 605,826 1.08%, 04/19/04/2/ 266,578 266,572 1.12%, 07/15/04/2/ 302,930 303,006 Dorada Finance Inc. 1.08%, 05/20/04/2/ 605,860 605,810 1.24%, 08/09/04/2/ 151,465 151,448 Five Finance Inc. 1.09%, 04/15/04/2/ 302,930 302,930 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 605,860 605,860 Holmes Financing PLC 1.08%, 04/15/04/2/ 121,172 121,172 K2 USA LLC 1.08%, 08/16/04/2/ 151,465 151,447 1.08%, 09/27/04/2/ 654,328 654,240 1.09%, 04/13/04/2/ 302,930 302,923 1.09%, 05/17/04/2/ 302,930 302,922 Links Finance LLC 1.08%, 06/28/04/2/ 302,930 302,891 1.09%, 03/29/04/2/ 302,930 302,930 1.09%, 05/04/04/2/ 302,930 302,922 1.10%, 07/20/04/2/ 242,344 242,309 Nationwide Building Society 1.14%, 07/23/04/2/ 454,395 454,395 Sigma Finance Inc. 1.05%, 11/21/03/2/ 302,930 302,771 1.08%, 07/01/04/2/ 302,930 302,880 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- 1.09%, 10/07/04/2/ $ 605,860 $ 605,747 1.11%, 07/20/04/2/ 302,930 302,887 1.24%, 08/06/04/2/ 151,465 151,454 Tango Finance Corp. 1.09%, 07/15/04/2/ 181,758 181,716 1.10%, 07/06/04/2/ 181,758 181,745 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 302,930 302,877 White Pine Finance LLC 1.08%, 05/17/04/2/ 363,516 363,516 1.08%, 07/06/04/2/ 363,516 363,492 1.08%, 08/26/04/2/ 302,930 302,892 1.09%, 04/20/04/2/ 302,930 302,930 11,159,263 TIME DEPOSITS - 1.81% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 605,860 605,860 1.40%, 10/25/04/2/ 605,860 605,771 Bank of New York 1.39%, 11/01/04/2/ 605,860 605,800 Bank of Nova Scotia 1.24%, 10/07/04/2/ 454,395 454,352 1.42%, 10/29/04/2/ 454,395 454,428 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 454,395 454,331 1.40%, 10/29/04/2/ 605,860 605,845 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 454,395 454,349 4,240,736 COMMERCIAL PAPER - 1.25% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 318,682 318,598 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 302,930 302,832 1.06%, 11/17/03/2/ 302,930 302,805 Delaware Funding Corp. 1.04%, 11/20/03/2/ 348,357 348,186 SCHEDULES OF INVESTMENTS 13 SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE -------------------------------------------------------------------------------- Edison Asset Securitization 1.05%, 11/14/03/2/ $ 302,930 $ 302,833 Falcon Asset Securitization 1.06%, 11/14/03/2/ 266,578 266,492 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 302,930 302,797 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 151,465 151,385 1.06%, 11/20/03/2/ 151,465 151,389 Prudential Funding LLC 1.06%, 11/20/03/2/ 302,930 302,778 Windmill Funding Corp. 1.05%, 11/19/03/2/ 181,758 181,673 2,931,768 U.S. GOVERNMENT AGENCY NOTES - 0.63% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 454,395 451,622 1.28%, 08/19/04/2/ 242,344 239,846 Federal National Mortgage Association 1.28%, 08/20/04/2/ 787,617 779,468 1,470,936 TOTAL SHORT TERM INVESTMENTS (Cost: $46,675,133) 46,675,133 TOTAL INVESTMENTS IN SECURITIES - 119.89% (Cost $266,382,697) 280,755,486 OTHER ASSETS, LESS LIABILITIES - (19.89%) (46,578,236) --------------- NET ASSETS - 100.00% $ 234,177,250 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 14 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 100.02% Wal-Mart Stores Inc. 252,422 $ 14,880,277 Home Depot Inc. 220,640 8,179,125 Time Warner Inc./1/ 404,659 6,187,236 Viacom Inc. Class B 141,587 5,645,074 Walt Disney Co. (The) 190,249 4,307,237 Comcast Corp. Class A/1/ 116,946 3,966,808 Lowe's Companies Inc. 65,729 3,873,410 Walgreen Co. 95,505 3,325,484 Target Corp. 76,630 3,045,276 McDonald's Corp. 118,215 2,956,557 Comcast Corp. Special Class A/1/ 82,314 2,685,083 Cardinal Health Inc. 41,576 2,467,120 Liberty Media Corp. Class A/1/ 230,326 2,323,989 Clear Channel Communications Inc. 51,986 2,122,069 Gannett Co. Inc. 25,149 2,115,282 Ford Motor Company 163,187 1,979,458 General Motors Corp. 42,778 1,825,337 Kohls Corp./1/ 27,978 1,568,726 Costco Wholesale Corp./1/ 42,367 1,498,521 Amazon.com Inc./1/ 26,953 1,466,782 Best Buy Co. Inc./1/ 24,380 1,421,598 Omnicom Group Inc. 17,727 1,414,615 Electronic Arts Inc./1/ 13,733 1,360,116 Harley-Davidson Inc. 28,165 1,335,303 Sears, Roebuck and Co. 24,466 1,287,646 CVS Corp. 36,532 1,285,196 Southwest Airlines Co. 65,712 1,274,813 Carnival Corp. 35,737 1,247,579 Staples Inc./1/ 45,421 1,218,191 McGraw-Hill Companies Inc. (The) 17,760 1,189,032 General Motors Corp. Class H/1/ 72,168 1,185,720 Bed Bath & Beyond Inc./1/ 27,550 1,163,712 Gap Inc. (The) 59,960 1,144,037 Starbucks Corp./1/ 36,126 1,141,582 International Game Technology Inc. 31,711 1,038,535 TJX Companies Inc. 47,239 991,547 Nike Inc. Class B 15,497 990,258 Tribune Co. 19,314 947,352 Yum! Brands Inc./1/ 27,301 932,056 Johnson Controls Inc. 8,299 892,391 EchoStar Communications Corp./1/ 22,639 867,526 Federated Department Stores Inc. 17,281 821,712 Mattel Inc. 40,534 784,738 McKesson Corp. 25,573 774,095 May Department Stores Co. (The) 26,916 752,571 Marriott International Inc. Class A 17,360 749,952 Limited Brands Inc. 41,542 731,139 New York Times Co. Class A 14,002 665,515 Family Dollar Stores Inc. 15,089 658,031 Univision Communications Inc. Class A/1/ 19,156 650,346 Eastman Kodak Co. 26,615 650,204 Tiffany & Co. 13,472 639,246 Cox Communications Inc. Class A/1/ 18,689 636,734 Dollar General Corp. 28,173 633,047 Starwood Hotels & Resorts Worldwide Inc. 18,765 632,943 Penney (J.C.) Co. Inc. (Holding Co.) 25,338 599,244 Coach Inc./1/ 16,722 593,129 AmerisourceBergen Corp. 10,441 592,736 AutoZone Inc./1/ 5,974 574,101 Centex Corp. 5,818 567,255 Hilton Hotels Corp. 34,975 554,004 Knight Ridder Inc. 7,498 549,753 Interpublic Group of Companies Inc. 36,174 538,269 Genuine Parts Co. 16,240 516,757 D.R. Horton Inc. 12,879 512,584 Lennar Corp. Class A 5,338 490,295 RadioShack Corp. 15,458 463,585 Harrah's Entertainment Inc. 10,253 446,006 Office Depot Inc./1/ 28,479 425,191 Pulte Homes Inc. 4,750 410,923 Jones Apparel Group Inc. 11,891 410,240 Delphi Corp. 45,853 408,092 Dollar Tree Stores Inc./1/ 10,679 407,724 Whirlpool Corp. 5,550 391,109 Harman International Industries Inc. 2,988 383,062 Leggett & Platt Inc. 18,004 376,104 Liz Claiborne Inc. 10,122 373,401 Wendy's International Inc. 10,013 370,982 Mohawk Industries Inc./1/ 4,964 367,932 Lear Corp./1/ 6,276 364,573 SCHEDULES OF INVESTMENTS 15 SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Ross Stores Inc. 7,165 $ 358,322 AutoNation Inc./1/ 18,856 352,607 Cablevision Systems Corp./1/ 17,328 350,026 Scripps (E.W.) Co. Class A 3,682 342,095 VF Corp. 7,978 338,666 PETsMART Inc. 13,161 337,053 CDW Corp. 5,566 334,238 Hasbro Inc. 14,334 312,481 Williams-Sonoma Inc./1/ 8,785 310,374 JetBlue Airways Corp./1/ 5,297 305,531 CarMax Inc./1/ 9,556 301,110 Chico's FAS Inc./1/ 8,021 301,108 Darden Restaurants Inc. 14,088 295,144 Michaels Stores Inc. 6,215 295,026 Nordstrom Inc. 9,409 286,880 Brinker International Inc./1/ 8,973 285,611 Gentex Corp. 7,039 274,873 Fastenal Co. 6,094 271,000 Royal Caribbean Cruises Ltd. 9,034 268,400 NVR Inc./1/ 546 267,212 Outback Steakhouse Inc. 6,320 265,440 Abercrombie & Fitch Co. Class A/1/ 9,035 257,497 Toys R Us Inc./1/ 19,673 255,749 NTL Inc./1/ 4,117 254,142 Henry Schein Inc./1/ 4,056 251,675 Belo (A.H.) Corp. 8,962 244,304 GTECH Holdings Corp. 5,435 242,836 KB Home 3,532 241,907 Rite Aid Corp./1/ 41,535 237,996 Brunswick Corp. 8,015 237,805 Foot Locker Inc. 13,212 236,495 Park Place Entertainment Corp./1/ 24,431 234,538 Lamar Advertising Co./1/ 7,682 232,765 Dana Corp. 13,746 223,785 Westwood One Inc./1/ 7,390 221,183 Krispy Kreme Doughnuts Inc./1/ 5,094 220,672 ARAMARK Corp. Class B/1/ 8,174 218,409 Sirius Satellite Radio Inc./1/ 92,710 217,869 XM Satellite Radio Holdings Inc. Class A/1/ 10,659 215,951 O'Reilly Automotive Inc./1/ 4,951 214,329 MGM Grand Inc./1/ 5,995 212,823 Ryland Group Inc. 2,346 208,559 Advance Auto Parts Inc./1/ 2,639 206,423 BorgWarner Inc. 2,493 198,418 AMR Corp./1/ 14,753 195,920 Applebee's International Inc. 5,221 195,840 Dow Jones & Co. Inc. 3,756 195,199 Pier 1 Imports Inc. 8,400 194,040 Mandalay Resort Group 4,932 193,581 HON Industries Inc. 4,437 181,917 M.D.C. Holdings Inc. 2,689 181,023 Meredith Corp. 3,688 178,942 Cheesecake Factory (The)/1/ 4,402 175,816 CBRL Group Inc. 4,496 174,220 Maytag Corp. 6,836 173,634 Polaris Industries Inc. 2,024 173,254 Entercom Communications Corp./1/ 3,689 168,993 Reebok International Ltd. 4,297 167,368 Circuit City Stores Inc. 17,495 166,902 Ruby Tuesday Inc. 6,098 166,780 BJ's Wholesale Club Inc./1/ 6,433 165,264 Borders Group Inc./1/ 7,270 164,665 Saks Inc./1/ 11,696 162,574 Big Lots Inc./1/ 10,726 160,997 Toll Brothers Inc./1/ 4,357 160,512 Washington Post Company (The) Class B 217 160,018 Pacific Sunwear of California Inc./1/ 6,910 159,552 Take-Two Interactive Software Inc./1/ 4,012 158,675 Viacom Inc. Class A 3,979 158,523 Herman Miller Inc. 6,712 154,175 Zale Corp./1/ 2,960 153,210 Pixar Inc./1/ 2,221 152,827 AnnTaylor Stores Corp./1/ 4,130 147,854 Claire's Stores Inc. 3,734 144,506 Barnes & Noble Inc./1/ 4,791 142,772 Avid Technology Inc./1/ 2,757 142,647 Lee Enterprises Inc. 3,295 138,917 99 Cents Only Stores/1/ 4,656 138,609 Delta Air Lines Inc. 10,447 136,020 Readers Digest Association Inc. (The) 9,218 135,781 Fox Entertainment Group Inc. Class A/1/ 4,876 135,065 16 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Cooper Tire & Rubber Co. 6,767 $ 133,039 Standard-Pacific Corp. 2,714 129,865 Polo Ralph Lauren Corp. 4,250 129,200 Valassis Communications Inc./1/ 4,880 126,392 Media General Inc. Class A 1,906 125,891 Activision Inc./1/ 8,309 125,383 Hot Topic Inc./1/ 4,366 125,348 Beazer Homes USA Inc./1/ 1,257 125,071 Donnelley (R.H.) Corp./1/ 2,873 123,223 Neiman-Marcus Group Inc. Class A/1/ 2,588 123,059 Tommy Hilfiger Corp./1/ 8,341 122,529 Linens `N Things Inc./1/ 4,136 122,095 American Greetings Corp. Class A/1/ 5,702 121,624 Hovnanian Enterprises Inc. Class A/1/ 1,482 120,457 American Axle & Manufacturing Holdings Inc./1/ 3,480 120,408 Ethan Allen Interiors Inc. 3,263 120,078 Tractor Supply Co./1/ 2,858 119,779 McClatchy Co. (The) Class A 1,815 117,431 Furniture Brands International Inc. 4,837 117,346 CEC Entertainment Inc./1/ 2,367 115,746 Continental Airlines Inc. Class B/1/ 6,042 115,402 OfficeMax Inc./1/ 11,864 113,657 Fred's Inc. 2,981 112,324 Radio One Inc. Class D/1/ 7,061 112,270 Airtran Holdings Inc./1/ 6,917 112,125 Goodyear Tire & Rubber Co. (The) 16,273 111,633 International Speedway Corp. Class A 2,592 110,264 P.F. Chang's China Bistro Inc./1/ 2,205 107,472 ArvinMeritor Inc. 6,388 107,255 Extended Stay America Inc./1/ 7,165 105,326 Dillards Inc. Class A 6,389 103,310 Panera Bread Co. Class A/1/ 2,548 102,506 Charter Communications Inc. Class A/1/ 23,914 102,113 La-Z-Boy Inc. 5,020 101,404 Christopher & Banks Corp. 3,465 101,178 Metro-Goldwyn-Mayer Inc./1/ 6,336 101,123 Emmis Communications Corp./1/ 4,558 101,096 Callaway Golf Co. 6,162 100,132 Sonic Corp./1/ 3,554 98,837 SkyWest Inc. 5,343 98,792 DoubleClick Inc./1/ 11,837 98,602 Harte-Hanks Inc. 4,879 96,946 Wiley (John) & Sons Inc. Class A 3,720 96,720 Men's Wearhouse Inc. (The)/1/ 3,282 96,688 Scholastic Corp./1/ 3,115 96,347 Bob Evans Farms Inc. 3,179 93,971 Timberland Co. Class A/1/ 1,807 93,874 Kellwood Co. 2,473 92,416 Gemstar-TV Guide International Inc./1/ 19,563 91,750 Pep Boys-Manny, Moe & Jack Inc. 4,728 90,919 Cost Plus Inc./1/ 1,981 90,868 FactSet Research Systems Inc. 2,051 89,506 Station Casinos Inc. 2,990 88,953 Quiksilver Inc./1/ 5,152 88,460 Payless ShoeSource Inc./1/ 6,332 83,772 ADVO Inc. 1,817 81,456 Superior Industries International Inc. 1,910 81,175 Hollywood Entertainment Corp./1/ 5,298 80,530 Cox Radio Inc. Class A/1/ 3,591 79,433 Catalina Marketing Corp./1/ 4,381 77,325 American Eagle Outfitters Inc./1/ 4,765 76,192 Hollinger International Inc. 5,646 75,826 Wolverine World Wide Inc. 3,640 73,528 Modine Manufacturing Co. 2,873 73,520 Visteon Corp. 11,345 73,289 Priority Healthcare Corp. Class B/1/ 3,375 73,001 IHOP Corp. 1,960 72,716 Children's Place Retail Stores Inc. (The)/1/ 2,413 72,631 Alaska Air Group Inc./1/ 2,516 72,436 Northwest Airlines Corp./1/ 5,291 72,434 Talbots Inc. (The) 2,190 71,985 Winnebago Industries Inc. 1,221 71,184 Charming Shoppes Inc./1/ 10,744 70,373 Guitar Center Inc./1/ 2,132 69,397 Aztar Corp./1/ 3,293 68,758 UnitedGlobalCom Inc. Class A/1/ 9,556 67,656 THQ Inc./1/ 3,632 64,432 Owens & Minor Inc. 3,143 63,929 Fossil Inc./1/ 2,348 63,396 Longs Drug Stores Corp. 2,824 63,258 Jack in the Box Inc./1/ 3,348 60,900 SCHEDULES OF INVESTMENTS 17 SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Hearst-Argyle Television Inc./1/ 12,485 $ 60,162 PSS World Medical Inc./1/ 6,088 56,740 Interactive Data Corp./1/ 3,200 55,040 Ryan's Family Steak Houses Inc./1/ 3,944 54,979 Six Flags Inc./1/ 8,630 51,090 Russell Corp. 2,676 48,917 Lennar Corp. Class B 542 47,073 Sinclair Broadcast Group Inc. Class A/1/ 4,032 46,932 Nautilus Group Inc. (The) 2,933 45,784 Steelcase Inc. Class A 3,743 43,980 WMS Industries Inc./1/ 1,872 43,299 Stride Rite Corp. 3,521 42,428 ShopKo Stores Inc./1/ 2,740 42,415 Atlantic Coast Airlines Holdings Inc./1/ 3,831 42,409 Insight Communications Co. Inc./1/ 4,121 39,932 Lone Star Steakhouse & Saloon Inc. 1,768 38,666 Champion Enterprises Inc./1/ 5,409 38,404 ValueVision Media Inc. Class A/1/ 2,360 38,350 Phillips-Van Heusen Corp. 2,218 38,017 Cato Corp. Class A 1,771 37,368 Prime Hospitality Corp./1/ 3,903 35,517 Genesco Inc./1/ 2,080 35,048 Fleetwood Enterprises Inc./1/ 3,229 32,548 Papa John's International Inc./1/ 1,208 31,782 Young Broadcasting Inc. Class A/1/ 1,574 31,622 Duane Reade Inc./1/ 2,142 29,452 Jakks Pacific Inc./1/ 2,258 29,354 Dress Barn Inc./1/ 2,092 29,288 Kenneth Cole Productions Class A 917 27,143 Oakley Inc. 2,494 27,060 Triarc Companies Inc. Class B 2,492 26,565 Unifi Inc./1/ 5,060 25,249 Interface Inc. Class A/1/ 4,294 23,832 Bally Total Fitness Holding Corp./1/ 3,090 20,579 Tower Automotive Inc./1/ 5,001 19,904 Pinnacle Entertainment Inc./1/ 2,182 19,093 Stein Mart Inc./1/ 2,529 18,184 Triarc Companies Inc. 1,249 13,015 TOTAL COMMON STOCKS (Cost: $156,920,089) 149,240,854 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- SHORT TERM INVESTMENTS - 6.49% MONEY MARKET FUNDS - 3.74% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 3,781,033 $ 3,781,033 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 1,382,930 1,382,930 BlackRock Temp Cash Money Market Fund/2/ 59,476 59,476 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 355,694 355,694 5,579,133 FLOATING RATE NOTES - 1.55% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 62,860 62,855 1.08%, 09/15/04/2/ 125,721 125,710 1.08%, 10/12/04/2/ 62,860 62,855 1.17%, 08/23/04/2/ 62,860 62,904 CC USA Inc. 1.06%, 05/24/04/2/ 125,721 125,714 1.08%, 04/19/04/2/ 55,317 55,316 1.12%, 07/15/04/2/ 62,860 62,876 Dorada Finance Inc. 1.08%, 05/20/04/2/ 125,721 125,711 1.24%, 08/09/04/2/ 31,430 31,427 Five Finance Inc. 1.09%, 04/15/04/2/ 62,860 62,860 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 125,721 125,721 Holmes Financing PLC 1.08%, 04/15/04/2/ 25,144 25,144 K2 USA LLC 1.08%, 08/16/04/2/ 31,430 31,427 1.08%, 09/27/04/2/ 135,779 135,760 1.09%, 04/13/04/2/ 62,860 62,859 1.09%, 05/17/04/2/ 62,860 62,859 Links Finance LLC 1.08%, 06/28/04/2/ 62,860 62,852 18 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- 1.09%, 03/29/04/2/ $ 62,860 $ 62,860 1.09%, 05/04/04/2/ 62,860 62,859 1.10%, 07/20/04/2/ 50,288 50,281 Nationwide Building Society 1.14%, 07/23/04/2/ 94,291 94,291 Sigma Finance Inc. 1.05%, 11/21/03/2/ 62,860 62,827 1.08%, 07/01/04/2/ 62,860 62,850 1.09%, 10/07/04/2/ 125,721 125,698 1.11%, 07/20/04/2/ 62,860 62,851 1.24%, 08/06/04/2/ 31,430 31,428 Tango Finance Corp. 1.09%, 07/15/04/2/ 37,716 37,708 1.10%, 07/06/04/2/ 37,716 37,714 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 62,860 62,850 White Pine Finance LLC 1.08%, 05/17/04/2/ 75,433 75,433 1.08%, 07/06/04/2/ 75,433 75,428 1.08%, 08/26/04/2/ 62,860 62,853 1.09%, 04/20/04/2/ 62,860 62,860 2,315,641 TIME DEPOSITS - 0.59% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 125,721 125,721 1.40%, 10/25/04/2/ 125,721 125,702 Bank of New York 1.39%, 11/01/04/2/ 125,721 125,708 Bank of Nova Scotia 1.24%, 10/07/04/2/ 94,291 94,282 1.42%, 10/29/04/2/ 94,291 94,298 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 94,291 94,278 1.40%, 10/29/04/2/ 125,721 125,718 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 94,291 94,281 879,988 COMMERCIAL PAPER - 0.41% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 66,129 66,112 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 62,860 62,840 1.06%, 11/17/03/2/ 62,860 62,835 Delaware Funding Corp. 1.04%, 11/20/03/2/ 72,287 72,252 Edison Asset Securitization 1.05%, 11/14/03/2/ 62,860 62,840 Falcon Asset Securitization 1.06%, 11/14/03/2/ 55,317 55,299 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 62,860 62,833 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 31,430 31,414 1.06%, 11/20/03/2/ 31,430 31,414 Prudential Funding LLC 1.06%, 11/20/03/2/ 62,860 62,829 Windmill Funding Corp. 1.05%, 11/19/03/2/ 37,716 37,699 608,367 U.S. GOVERNMENT AGENCY NOTES - 0.20% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 94,291 93,715 1.28%, 08/19/04/2/ 50,288 49,770 Federal National Mortgage Association 1.28%, 08/20/04/2/ 163,437 161,747 305,232 TOTAL SHORT TERM INVESTMENTS (Cost: $9,688,361) 9,688,361 TOTAL INVESTMENTS IN SECURITIES - 106.51% (Cost $166,608,450) 158,929,215 OTHER ASSETS, LESS LIABILITIES - (6.51%) (9,711,462) --------------- NET ASSETS - 100.00% $ 149,217,753 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 19 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 99.91% Procter & Gamble Co. 189,152 $ 18,591,750 Coca-Cola Co. (The) 331,370 15,375,568 Altria Group Inc. 296,241 13,775,206 PepsiCo Inc. 251,368 12,020,418 Anheuser-Busch Companies Inc. 122,082 6,013,759 Gillette Co. (The) 135,832 4,333,041 Kimberly-Clark Corp. 74,446 3,931,493 Colgate-Palmolive Co. 73,151 3,890,902 eBay Inc./1/ 62,787 3,512,305 Sysco Corp. 95,442 3,212,578 Cendant Corp./1/ 149,070 3,045,500 InterActiveCorp/1/ 72,313 2,654,610 Avon Products Inc. 34,320 2,332,387 Sara Lee Corp. 107,474 2,141,957 General Mills Inc. 42,420 1,902,537 ConAgra Foods Inc. 78,610 1,874,062 Heinz (H.J.) Co. 51,376 1,815,114 Kroger Co./1/ 100,730 1,761,768 Fortune Brands Inc. 21,229 1,383,069 Safeway Inc./1/ 64,584 1,362,722 Apollo Group Inc. Class A/1/ 20,525 1,303,953 Archer-Daniels-Midland Co. 86,088 1,235,363 Kraft Foods Inc. 40,748 1,185,767 Kellogg Co. 34,244 1,134,504 Block (H & R) Inc. 23,902 1,125,545 Wrigley (William Jr.) Co. 19,764 1,114,690 Clorox Co. 23,221 1,051,911 Hershey Foods Corp. 12,976 1,000,450 Campbell Soup Co. 37,203 964,302 Albertson's Inc. 46,788 949,329 Newell Rubbermaid Inc. 40,154 915,511 UST Inc. 24,497 833,388 Coca-Cola Enterprises Inc. 34,765 700,862 Career Education Corp./1/ 12,868 689,081 Dean Foods Co./1/ 22,687 686,282 Estee Lauder Companies Inc. Class A 16,507 617,197 R.J. Reynolds Tobacco Holdings Inc. 12,293 590,433 Black & Decker Corp. 11,319 541,161 Pepsi Bottling Group Inc. 24,151 538,326 Whole Foods Market Inc./1/ 8,670 513,611 ServiceMaster Co. (The) 42,992 493,118 SUPERVALU Inc. 19,514 492,143 Tyson Foods Inc. Class A 34,040 485,751 Energizer Holdings Inc./1/ 12,229 450,027 Constellation Brands Inc./1/ 13,438 421,550 Stanley Works (The) 12,457 415,316 Rent-A-Center Inc./1/ 12,878 402,566 Bunge Ltd. 14,465 392,001 Corinthian Colleges Inc./1/ 6,325 391,644 McCormick & Co. Inc. 11,742 348,033 Dial Corp. (The) 14,059 337,416 ITT Educational Services Inc./1/ 6,539 325,642 Smucker (J.M.) Co. (The) 7,201 315,188 Hormel Foods Corp. 10,838 267,590 Education Management Corp./1/ 4,232 267,378 Smithfield Foods Inc./1/ 12,519 266,154 Del Monte Foods Co./1/ 27,007 256,837 Performance Food Group Co./1/ 6,657 247,973 Alberto-Culver Co. Class A 3,879 245,890 Brown-Forman Corp. Class B 2,900 244,702 Regis Corp. 6,356 241,655 NBTY Inc./1/ 8,827 240,536 Alberto-Culver Co. Class B 3,644 231,030 Snap-On Inc. 7,728 226,740 Weight Watchers International Inc./1/ 6,098 225,016 Church & Dwight Co. Inc. 5,914 220,415 Dreyer's Grand Ice Cream Holdings Inc. 2,825 218,655 DeVry Inc./1/ 8,899 215,979 Service Corp. International/1/ 44,002 213,410 Coors (Adolf) Company Class B 3,730 209,066 Scotts Co. (The) Class A/1/ 3,120 180,180 PepsiAmericas Inc. 11,601 173,783 Corn Products International Inc. 5,023 170,229 Lancaster Colony Corp. 4,180 165,988 United Rentals Inc./1/ 9,417 164,044 Sylvan Learning Systems Inc./1/ 5,770 163,291 Flowers Foods Inc. 6,536 155,099 Universal Corp. 3,371 146,908 Blyth Inc. 4,949 138,473 Loews Corporation - Carolina Group 5,452 136,573 Sensient Technologies Corp. 6,497 124,742 20 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Ralcorp Holdings Inc./1/ 4,257 $ 117,068 Tupperware Corp. 7,612 114,561 Tootsie Roll Industries Inc. 3,305 109,032 Casey's General Store Inc. 6,859 106,314 American Italian Pasta Co. Class A/1/ 2,646 101,183 Winn-Dixie Stores Inc. 12,231 98,949 Interstate Bakeries Corp. 6,544 96,066 Hain Celestial Group Inc./1/ 4,088 86,257 Priceline.com Inc./1/ 3,054 85,695 Sotheby's Holdings Inc. Class A/1/ 6,633 70,641 International Multifoods Corp./1/ 2,597 57,939 Stewart Enterprises Inc. Class A/1/ 13,023 53,134 Robert Mondavi Corp. (The) Class A/1/ 1,456 51,033 Pre-Paid Legal Services Inc./1/ 1,752 47,584 Roto-Rooter Inc. 1,199 42,325 Wild Oats Markets Inc./1/ 3,966 41,167 Stamps.com Inc./1/ 5,531 32,965 Learning Tree International Inc./1/ 1,186 21,348 TOTAL COMMON STOCKS (Cost: $138,157,649) 134,984,404 SHORT TERM INVESTMENTS - 6.03% MONEY MARKET FUNDS - 3.47% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 3,179,706 3,179,706 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 1,164,573 1,164,573 BlackRock Temp Cash Money Market Fund/2/ 50,085 50,085 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 299,532 299,532 4,693,896 FLOATING RATE NOTES - 1.44% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 52,935 52,931 1.08%, 09/15/04/2/ 105,870 105,861 1.08%, 10/12/04/2/ 52,935 52,930 1.17%, 08/23/04/2/ 52,935 52,972 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- CC USA Inc. 1.06%, 05/24/04/2/ $ 105,870 $ 105,864 1.08%, 04/19/04/2/ 46,583 46,582 1.12%, 07/15/04/2/ 52,935 52,948 Dorada Finance Inc. 1.08%, 05/20/04/2/ 105,870 105,862 1.24%, 08/09/04/2/ 26,468 26,465 Five Finance Inc. 1.09%, 04/15/04/2/ 52,935 52,935 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 105,870 105,870 Holmes Financing PLC 1.08%, 04/15/04/2/ 21,174 21,174 K2 USA LLC 1.08%, 08/16/04/2/ 26,468 26,464 1.08%, 09/27/04/2/ 114,340 114,325 1.09%, 04/13/04/2/ 52,935 52,935 1.09%, 05/17/04/2/ 52,935 52,934 Links Finance LLC 1.08%, 06/28/04/2/ 52,935 52,928 1.09%, 03/29/04/2/ 52,935 52,935 1.09%, 05/04/04/2/ 52,935 52,934 1.10%, 07/20/04/2/ 42,348 42,342 Nationwide Building Society 1.14%, 07/23/04/2/ 79,403 79,403 Sigma Finance Inc. 1.05%, 11/21/03/2/ 52,935 52,907 1.08%, 07/01/04/2/ 52,935 52,926 1.09%, 10/07/04/2/ 105,870 105,851 1.11%, 07/20/04/2/ 52,935 52,928 1.24%, 08/06/04/2/ 26,468 26,466 Tango Finance Corp. 1.09%, 07/15/04/2/ 31,761 31,754 1.10%, 07/06/04/2/ 31,761 31,759 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 52,935 52,926 White Pine Finance LLC 1.08%, 05/17/04/2/ 63,522 63,522 1.08%, 07/06/04/2/ 63,522 63,518 1.08%, 08/26/04/2/ 52,935 52,929 1.09%, 04/20/04/2/ 52,935 52,935 1,950,015 SCHEDULES OF INVESTMENTS 21 SCHEDULE OF INVESTMENTS (Unaudited)(Continued) iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- TIME DEPOSITS - 0.55% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ $ 105,870 $ 105,870 1.40%, 10/25/04/2/ 105,870 105,855 Bank of New York 1.39%, 11/01/04/2/ 105,870 105,860 Bank of Nova Scotia 1.24%, 10/07/04/2/ 79,403 79,395 1.42%, 10/29/04/2/ 79,403 79,409 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 79,403 79,392 1.40%, 10/29/04/2/ 105,870 105,868 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 79,403 79,395 741,044 COMMERCIAL PAPER - 0.38% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 55,688 55,673 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 52,935 52,919 1.06%, 11/17/03/2/ 52,935 52,913 Delaware Funding Corp. 1.04%, 11/20/03/2/ 60,873 60,844 Edison Asset Securitization 1.05%, 11/14/03/2/ 52,935 52,918 Falcon Asset Securitization 1.06%, 11/14/03/2/ 46,583 46,568 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 52,935 52,912 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 26,468 26,454 1.06%, 11/20/03/2/ 26,468 26,454 Prudential Funding LLC 1.06%, 11/20/03/2/ 52,935 52,909 Windmill Funding Corp. 1.05%, 11/19/03/2/ 31,761 31,746 512,310 U.S. GOVERNMENT AGENCY NOTES - 0.19% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 79,403 78,918 1.28%, 08/19/04/2/ 42,348 41,911 Federal National Mortgage Association 1.28%, 08/20/04/2/ 137,631 136,207 257,036 TOTAL SHORT TERM INVESTMENTS (Cost: $8,154,301) 8,154,301 TOTAL INVESTMENTS IN SECURITIES - 105.94% (Cost $146,311,950) 143,138,705 OTHER ASSETS, LESS LIABILITIES - (5.94%) (8,027,650) --------------- NET ASSETS - 100.00% $ 135,111,055 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 22 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 99.81% Citigroup Inc. 449,382 $ 21,300,707 American International Group Inc. 200,304 12,184,492 Bank of America Corp. 130,849 9,909,195 Wells Fargo & Company 146,455 8,248,346 JP Morgan Chase & Co. 177,481 6,371,568 Fannie Mae 77,200 5,534,468 Wachovia Corp. 116,080 5,324,590 Morgan Stanley 86,521 4,747,407 American Express Co. 99,682 4,678,076 U.S. Bancorp 167,301 4,553,933 Merrill Lynch & Co. Inc. 74,467 4,408,446 Bank One Corp. 98,478 4,180,391 FleetBoston Financial Corp. 91,640 3,701,340 Washington Mutual Inc. 80,993 3,543,444 Freddie Mac 60,688 3,406,417 Fifth Third Bancorp 42,399 2,457,446 Goldman Sachs Group Inc. (The) 26,113 2,452,011 MBNA Corp. 98,918 2,448,221 Allstate Corp. (The) 61,454 2,427,433 Bank of New York Co. Inc. (The) 67,549 2,106,853 Marsh & McLennan Companies Inc. 44,294 1,893,569 Prudential Financial Inc. 48,010 1,855,106 BB&T Corp. 47,864 1,850,901 National City Corp. 53,375 1,743,228 AFLAC Inc. 44,835 1,635,581 SLM Corp. 39,386 1,542,356 Lehman Brothers Holdings Inc. 21,186 1,525,392 State Street Corp. 29,025 1,519,749 SunTrust Banks Inc. 21,093 1,414,708 Hartford Financial Services Group Inc. 24,704 1,356,250 PNC Financial Services Group 24,478 1,311,286 Countrywide Financial Corp. 11,903 1,251,243 Progressive Corp. (The) 16,655 1,229,139 Schwab (Charles) Corp. (The) 89,522 1,213,918 Capital One Financial Corp. 19,739 1,200,131 Golden West Financial Corp. 11,386 1,143,496 Mellon Financial Corp. 37,605 1,123,261 Chubb Corp. 16,404 1,095,951 KeyCorp 36,962 1,044,177 Equity Office Properties Trust 35,204 986,064 SouthTrust Corp. 29,748 947,474 Hancock (John) Financial Services Inc. 25,187 890,360 Principal Financial Group Inc. 28,334 888,271 MetLife Inc. 28,054 880,896 ACE Ltd. 24,363 877,068 Northern Trust Corp. 18,083 839,955 XL Capital Ltd. Class A 11,963 831,429 M&T Bank Corp. 8,096 760,214 St. Paul Companies Inc. 19,796 754,821 MBIA Inc. 12,601 751,146 Comerica Inc. 14,155 728,699 AmSouth Bancorp 30,667 724,355 Travelers Property Casualty Corp. Class A 44,118 719,123 Travelers Property Casualty Corp. Class B 43,791 716,859 Regions Financial Corp. 19,371 711,884 Equity Residential 23,719 693,781 Bear Stearns Companies Inc. (The) 8,685 662,231 Ambac Financial Group Inc. 9,341 660,782 Marshall & Ilsley Corp. 18,423 659,912 Simon Property Group Inc. 14,587 657,582 Charter One Financial Inc. 19,665 628,493 CIT Group Inc. 18,445 620,121 Lincoln National Corp. 15,454 617,078 Synovus Financial Corp. 22,160 611,616 Jefferson-Pilot Corp. 12,417 592,788 Franklin Resources Inc. 12,441 589,952 Union Planters Corp. 17,161 570,946 Sovereign Bancorp Inc. 25,641 533,589 AON Corp. 23,807 521,373 North Fork Bancorp Inc. 13,332 519,681 Cincinnati Financial Corp. 12,351 505,403 First Tennessee National Corp. 10,947 496,556 National Commerce Financial Corp. 17,860 490,614 Zions Bancorporation 7,879 482,904 General Growth Properties Inc. 6,275 480,038 Legg Mason Inc. 5,761 479,603 Popular Inc. 10,605 477,225 Loews Corp. 10,980 472,140 Banknorth Group Inc. 14,270 446,936 SCHEDULES OF INVESTMENTS 23 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- SAFECO Corp. 12,142 $ 445,611 MGIC Investment Corp. 8,656 444,139 T. Rowe Price Group Inc. 10,791 444,050 Torchmark Corp. 10,010 439,239 ProLogis 14,693 434,031 Radian Group Inc. 8,154 431,347 Vornado Realty Trust 8,499 429,624 Plum Creek Timber Co. Inc. 15,946 420,177 Compass Bancshares Inc. 11,059 417,809 Archstone-Smith Trust 15,441 412,275 Huntington Bancshares Inc. 18,815 407,533 Everest Re Group Ltd. 4,874 404,298 New York Community Bancorp Inc. 10,996 398,055 UNUMProvident Corp. 23,140 378,802 Boston Properties Inc. 8,459 374,311 Old Republic International Corp. 9,899 355,770 Ameritrade Holding Corp./1/ 25,205 343,796 Fidelity National Financial Inc. 10,966 339,069 iStar Financial Inc. 8,818 335,613 Kimco Realty Corp. 7,927 330,239 E*TRADE Financial Corp./1/ 31,523 324,687 Duke Realty Corp. 11,059 323,808 GreenPoint Financial Corp. 10,379 323,306 Commerce Bancorp Inc. 6,501 314,258 Hibernia Corp. Class A 13,688 309,212 Rouse Co. (The) 7,131 306,633 TCF Financial Corp. 5,868 306,192 Mercantile Bankshares Corp. 7,177 304,089 Public Storage Inc. 7,506 300,240 Janus Capital Group Inc. 21,008 297,053 PMI Group Inc. (The) 7,732 295,594 Apartment Investment & Management Co. Class A 7,022 287,200 White Mountains Insurance Group Ltd. 677 287,048 Providian Financial Corp./1/ 25,350 281,639 Edwards (A.G.) Inc. 6,938 280,989 AvalonBay Communities Inc. 6,105 278,815 Doral Financial Corp. 5,439 274,669 RenaissanceRe Holdings Ltd. 5,824 261,964 Commerce Bancshares Inc. 5,437 260,324 Health Care Property Investors Inc. 5,512 257,025 PartnerRe Ltd. 4,635 251,541 Associated Bancorp 5,995 246,754 Friedman, Billings, Ramsey Group, Inc. Class A 12,095 240,932 Valley National Bancorp 8,132 237,861 Liberty Property Trust 6,530 237,561 UnionBanCal Corp. 4,379 237,210 Federated Investors Inc. Class B 8,487 234,666 Gallagher (Arthur J.) & Co. 7,933 231,564 Astoria Financial Corp. 6,438 223,012 Neuberger Berman Inc. 5,105 221,302 City National Corp. 3,597 216,575 Berkley (W.R.) Corp. 6,315 216,541 Host Marriott Corp./1/ 20,624 215,521 AMB Property Corp. 7,014 210,350 Hudson City Bancorp Inc. 6,053 209,071 Bank of Hawaii Corp. 5,141 202,555 Developers Diversified Realty Corp. 7,004 202,416 Fulton Financial Corp. 9,637 199,004 Investors Financial Services Corp. 5,613 198,307 New Plan Excel Realty Trust 8,543 193,926 Wilmington Trust Corp. 5,755 193,828 Sky Financial Group Inc. 7,870 191,635 Markel Corp./1/ 756 190,807 SEI Investment Co. 6,520 189,862 Eaton Vance Corp. 5,385 187,829 Mack-Cali Realty Corp. 4,975 187,508 Hospitality Properties Trust 5,105 187,200 AmeriCredit Corp./1/ 13,839 185,443 Weingarten Realty Investors 4,251 183,941 Chelsea Property Group Inc. 3,727 183,368 Macerich Co. (The) 4,557 183,191 Protective Life Corp. 5,556 180,403 United Dominion Realty Trust Inc. 10,231 178,531 People's Bank 5,391 176,501 Webster Financial Corp. 3,943 176,252 Cullen/Frost Bankers Inc. 4,515 175,001 First American Corp. 6,062 173,676 Colonial BancGroup Inc. (The) 10,691 167,635 Nationwide Financial Services Inc. 4,908 166,725 Regency Centers Corp. 4,496 166,712 24 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Roslyn Bancorp Inc. 6,161 $ 165,977 StanCorp Financial Group Inc. 2,574 162,291 Independence Community Bank Corp. 4,387 161,222 Federal Realty Investment Trust 4,240 160,908 FirstMerit Corp. 6,209 160,068 Waddell & Reed Financial Inc. Class A 7,212 159,962 Arden Realty Inc. 5,699 159,401 Washington Federal Inc. 6,002 158,093 Catellus Development Corp. 7,008 156,068 Thornburg Mortgage Inc. 5,709 155,570 Pan Pacific Retail Properties Inc. 3,485 154,560 HCC Insurance Holdings Inc. 5,289 154,121 BancorpSouth Inc. 6,507 152,980 BISYS Group Inc. (The)/1/ 10,380 148,434 Brown & Brown Inc. 4,771 145,277 IndyMac Bancorp Inc. 4,887 143,678 Westamerica Bancorp 2,860 143,172 Raymond James Financial Inc. 3,472 141,623 Leucadia National Corp. 3,366 141,372 American Financial Realty Trust 9,294 141,269 Unitrin Inc. 3,803 140,711 Shurgard Storage Centers Inc. Class A 3,881 140,492 Transatlantic Holdings Inc. 1,822 139,747 Hudson United Bancorp 3,837 139,245 CBL & Associates Properties Inc. 2,605 138,846 UCBH Holdings Inc. 3,875 138,376 CenterPoint Properties Corp. 1,997 135,696 Annaly Mortgage Management Inc. 8,252 134,838 CarrAmerica Realty Corp. 4,472 134,473 Whitney Holding Corp. 3,473 131,870 FNB Corp. (Florida) 3,988 131,803 Affiliated Managers Group Inc./1/ 1,813 131,442 AmerUs Group Co. 3,465 130,804 MONY Group Inc. (The) 4,078 130,537 Jefferies Group Inc. 4,201 130,231 St. Joe Company (The) 3,932 129,913 Ventas Inc. 6,943 129,834 Trustmark Corp. 4,516 128,571 Mills Corp. 3,134 127,867 Knight Trading Group Inc./1/ 9,114 126,138 First Midwest Bancorp Inc. 4,028 124,465 Healthcare Realty Trust Inc. 3,682 124,268 BRE Properties Inc. Class A 3,828 123,836 Camden Property Trust 3,103 122,879 Crescent Real Estate Equities Co. 7,994 122,708 Greater Bay Bancorp 4,544 122,506 Allmerica Financial Corp./1/ 4,585 122,099 Realty Income Corp. 3,077 121,234 Old National Bancorp 5,449 120,968 Health Care REIT Inc. 3,641 120,699 IPC Holdings Ltd. 3,217 120,477 HRPT Properties Trust 12,244 114,604 Highwoods Properties Inc. 4,597 114,006 Park National Corp. 962 112,506 New Century Financial Corp. 3,010 111,611 First Industrial Realty Trust Inc. 3,379 109,142 Mercury General Corp. 2,294 109,034 First Bancorp 3,255 108,392 Silicon Valley Bancshares/1/ 3,066 107,617 Trizec Properties Inc. 7,958 106,239 W Holding Co. Inc. 4,553 106,039 Provident Financial Services Inc. 5,405 105,938 United Bancshares Inc. 3,501 105,905 SL Green Realty Corp. 2,925 105,739 Erie Indemnity Co. Class A 2,628 105,067 East West Bancorp Inc. 2,128 104,464 South Financial Group Inc. (The) 3,994 104,363 American National Insurance Co. 1,255 104,254 Chittenden Corp. 3,171 102,043 Essex Property Trust Inc. 1,684 100,838 Southwest Bancorp of Texas Inc. 2,788 100,117 Washington Real Estate Investment Trust 3,377 99,959 Commerce Group Inc. 2,492 99,057 Commercial Federal Corp. 3,796 97,709 Fremont General Corp. 5,804 96,521 Citizens Banking Corp. 3,294 96,317 Cousins Properties Inc. 3,320 95,450 Pacific Capital Bancorp 2,801 95,402 Reckson Associates Realty Corp. 4,272 94,924 Nationwide Health Properties Inc. 5,044 92,305 MAF Bancorp Inc. 2,160 90,547 Home Properties Inc. 2,339 90,052 SCHEDULES OF INVESTMENTS 25 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Community First Bankshares Inc. 3,309 $ 89,839 Montpelier Re Holdings Ltd/1/ 2,686 88,960 Total System Services Inc. 3,221 88,835 Prentiss Properties Trust 2,917 88,210 Post Properties Inc. 3,326 87,806 Staten Island Bancorp Inc. 4,312 85,938 Susquehanna Bancshares Inc. 3,415 85,546 Texas Regional Bancshares Inc. Class A 2,346 85,043 TrustCo Bank Corp. NY 6,362 83,024 Downey Financial Corp. 1,772 81,335 First Niagara Financial Group Inc. 5,666 80,967 Brandywine Realty Trust 3,179 80,556 Hilb, Rogal & Hamilton Co. 2,681 80,484 Investment Technology Group Inc./1/ 4,044 80,314 Capital Automotive 2,542 79,082 Provident Financial Group Inc. 2,681 78,955 Ohio Casualty Corp./1/ 5,089 77,862 La Quinta Corp./1/ 12,509 77,181 Chicago Mercantile Exchange Holdings Inc. 1,134 77,055 Republic Bancorp Inc. 5,033 73,079 LNR Property Corp. 1,741 71,207 Reinsurance Group of America Inc. 1,776 70,951 Kilroy Realty Corp. 2,428 70,169 Selective Insurance Group Inc. 2,283 70,088 Colonial Properties Trust 1,891 69,967 Platinum Underwriters Holdings Ltd. 2,430 69,838 American Financial Group Inc. 3,120 69,482 Manufactured Home Communities Inc. 1,770 67,260 Provident Bankshares Corp. 2,076 64,418 FirstFed Financial Corp./1/ 1,401 63,045 Net.B@nk Inc. 4,323 59,268 Pacific Northwest Bancorp 1,521 59,076 AMCORE Financial Inc. 2,055 55,485 Dime Community Bancshares 1,974 55,035 CNA Financial Corp./1/ 2,546 54,943 Anchor BanCorp Wisconsin Inc. 1,997 49,725 Harbor Florida Bancshares Inc. 1,833 49,344 Glenborough Realty Trust Inc. 2,460 47,970 Horace Mann Educators Corp. 3,598 47,674 W.P. Stewart & Co. Ltd. 2,126 45,603 Sterling Bancshares Inc. 3,876 44,574 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- PFF Bancorp Inc. 1,154 $ 43,044 FelCor Lodging Trust Inc. 4,224 43,043 Safeguard Scientifics Inc./1/ 10,497 39,994 First Sentinel Bancorp Inc. 2,144 39,986 Koger Equity Inc. 1,901 36,822 Bay View Capital Corp./1/ 5,322 32,358 Equity Inns Inc. 3,797 32,085 Presidential Life Corp. 1,985 30,490 LaBranche & Co. Inc. 2,551 27,015 Meristar Hospitality Corp./1/ 3,924 26,801 BSB Bancorp Inc. 862 26,627 SWS Group Inc. 1,180 25,606 OceanFirst Financial Corp. 828 21,644 TOTAL COMMON STOCKS (Cost: $185,378,119) 202,927,926 SHORT TERM INVESTMENTS - 4.50% MONEY MARKET FUNDS - 2.61% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 3,634,675 3,634,675 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 1,291,977 1,291,977 BlackRock Temp Cash Money Market Fund/2/ 55,564 55,564 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 332,301 332,301 5,314,517 FLOATING RATE NOTES - 1.06% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 58,726 58,721 1.08%, 09/15/04/2/ 117,452 117,442 1.08%, 10/12/04/2/ 58,726 58,721 1.17%, 08/23/04/2/ 58,726 58,767 CC USA Inc. 1.06%, 05/24/04/2/ 117,452 117,446 1.08%, 04/19/04/2/ 51,679 51,678 1.12%, 07/15/04/2/ 58,726 58,741 26 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Dorada Finance Inc. 1.08%, 05/20/04/2/ $ 117,452 $ 117,443 1.24%, 08/09/04/2/ 29,363 29,360 Five Finance Inc. 1.09%, 04/15/04/2/ 58,726 58,726 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 117,452 117,452 Holmes Financing PLC 1.08%, 04/15/04/2/ 23,490 23,490 K2 USA LLC 1.08%, 08/16/04/2/ 29,363 29,360 1.08%, 09/27/04/2/ 126,849 126,832 1.09%, 04/13/04/2/ 58,726 58,725 1.09%, 05/17/04/2/ 58,726 58,725 Links Finance LLC 1.08%, 06/28/04/2/ 58,726 58,719 1.09%, 03/29/04/2/ 58,726 58,726 1.09%, 05/04/04/2/ 58,726 58,725 1.10%, 07/20/04/2/ 46,981 46,975 Nationwide Building Society 1.14%, 07/23/04/2/ 88,089 88,089 Sigma Finance Inc. 1.05%, 11/21/03/2/ 58,726 58,695 1.08%, 07/01/04/2/ 58,726 58,717 1.09%, 10/07/04/2/ 117,452 117,431 1.11%, 07/20/04/2/ 58,726 58,718 1.24%, 08/06/04/2/ 29,363 29,361 Tango Finance Corp. 1.09%, 07/15/04/2/ 35,236 35,228 1.10%, 07/06/04/2/ 35,236 35,233 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 58,726 58,716 White Pine Finance LLC 1.08%, 05/17/04/2/ 70,471 70,471 1.08%, 07/06/04/2/ 70,471 70,467 1.08%, 08/26/04/2/ 58,726 58,719 1.09%, 04/20/04/2/ 58,726 58,726 2,163,345 TIME DEPOSITS - 0.41% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 117,452 117,452 1.40%, 10/25/04/2/ 117,452 117,435 Bank of New York 1.39%, 11/01/04/2/ 117,452 117,441 Bank of Nova Scotia 1.24%, 10/07/04/2/ 88,089 88,081 1.42%, 10/29/04/2/ 88,089 88,096 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 88,089 88,077 1.40%, 10/29/04/2/ 117,452 117,450 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 88,089 88,081 822,113 COMMERCIAL PAPER - 0.28% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 61,780 61,764 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 58,726 58,707 1.06%, 11/17/03/2/ 58,726 58,702 Delaware Funding Corp. 1.04%, 11/20/03/2/ 67,533 67,500 Edison Asset Securitization 1.05%, 11/14/03/2/ 58,726 58,708 Falcon Asset Securitization 1.06%, 11/14/03/2/ 51,679 51,662 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 58,726 58,701 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 29,363 29,348 1.06%, 11/20/03/2/ 29,363 29,348 Prudential Funding LLC 1.06%, 11/20/03/2/ 58,726 58,697 Windmill Funding Corp. 1.05%, 11/19/03/2/ 35,236 35,220 568,357 SCHEDULES OF INVESTMENTS 27 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY NOTES - 0.14% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ $ 88,089 $ 87,552 1.28%, 08/19/04/2/ 46,981 46,497 Federal National Mortgage Association 1.28%, 08/20/04/2/ 152,688 151,108 285,157 TOTAL SHORT TERM INVESTMENTS (Cost: $9,153,489) 9,153,489 TOTAL INVESTMENTS IN SECURITIES - 104.31% (Cost $194,531,608) 212,081,415 OTHER ASSETS, LESS LIABILITIES - (4.31%) (8,767,708) --------------- NET ASSETS - 100.00% $ 203,313,707 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 28 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 100.01% General Electric Co. 1,089,805 $ 31,615,243 3M Co. 97,996 7,728,945 United Technologies Corp. 61,018 5,167,614 Tyco International Ltd. 245,305 5,121,968 Boeing Co. (The) 97,181 3,740,497 United Parcel Service Inc. Class B 49,269 3,572,988 First Data Corp. 95,924 3,424,487 Caterpillar Inc. 43,498 3,187,533 Honeywell International Inc. 101,607 3,110,190 Emerson Electric Co. 54,736 3,106,268 Automatic Data Processing Inc. 79,220 2,989,763 Illinois Tool Works Inc. 38,545 2,834,985 FedEx Corp. 33,363 2,527,581 Lockheed Martin Corp. 44,126 2,045,681 Waste Management Inc. 75,649 1,960,822 General Dynamics Corp. 22,352 1,870,862 Union Pacific Corp. 29,819 1,866,669 Deere & Co. 28,521 1,728,943 Northrop Grumman Corp. 19,237 1,719,788 Masco Corp. 58,621 1,612,077 Paychex Inc. 40,427 1,573,419 Burlington Northern Santa Fe Corp. 47,390 1,371,467 Agilent Technologies Inc./1/ 50,964 1,270,023 Raytheon Co. 47,596 1,260,342 Ingersoll-Rand Co. Class A 20,152 1,217,181 Danaher Corp. 13,343 1,105,468 PACCAR Inc. 12,823 1,012,504 Dover Corp. 24,487 955,483 Norfolk Southern Corp. 46,037 927,646 Moody's Corp. 15,738 910,129 Textron Inc. 16,908 840,159 Eaton Corp. 8,329 834,899 CSX Corp. 25,627 815,451 Fiserv Inc./1/ 22,881 808,157 ITT Industries Inc. 10,840 737,012 Parker Hannifin Corp. 14,037 715,466 Concord EFS Inc./1/ 65,326 698,335 American Standard Companies Inc./1/ 7,162 685,403 Rockwell Automation Inc. 21,832 677,884 Sanmina-SCI Corp./1/ 62,867 663,247 Cintas Corp. 14,829 632,605 Cooper Industries Ltd. 11,162 590,470 Solectron Corp./1/ 98,856 547,662 Jabil Circuit Inc./1/ 19,354 539,009 Sealed Air Corp./1/ 10,016 533,152 Sherwin-Williams Co. (The) 15,618 523,828 Accenture Ltd./1/ 21,966 514,004 L-3 Communications Holdings Inc./1/ 10,647 497,641 Robert Half International Inc./1/ 20,931 494,181 Diebold Inc. 8,634 492,656 Waters Corp./1/ 15,663 492,288 Vulcan Materials Co. 10,873 481,783 SPX Corp./1/ 9,878 475,329 Expeditors International Washington Inc. 12,427 466,510 Republic Services Inc. 19,833 461,117 Thermo Electron Corp./1/ 20,661 454,129 American Power Conversion Corp. 21,236 429,604 Equifax Inc. 17,410 425,500 Manpower Inc. 9,087 421,637 Pactiv Corp./1/ 18,973 418,355 Grainger (W.W.) Inc. 9,046 414,126 Ball Corp. 6,839 384,352 Dun & Bradstreet Corp./1/ 8,185 381,012 Iron Mountain Inc./1/ 9,957 380,756 Sabre Holdings Corp. 17,368 380,533 Ceridian Corp./1/ 17,544 368,424 CH Robinson Worldwide Inc. 9,377 367,391 Fluor Corp. 9,568 354,781 ChoicePoint Inc./1/ 10,062 352,572 Donnelley (R.R.) & Sons Co. 13,531 351,806 Pall Corp. 14,807 346,484 Symbol Technologies Inc. 27,363 341,764 Convergys Corp./1/ 20,406 327,720 DST Systems Inc./1/ 8,638 326,689 Vishay Intertechnology Inc./1/ 17,343 325,181 Temple-Inland Inc. 5,995 323,910 Smurfit-Stone Container Corp. 20,532 318,246 Deluxe Corp. 7,653 308,952 Goodrich (B.F.) Co. 11,044 305,035 Bemis Co. 6,369 294,503 SCHEDULES OF INVESTMENTS 29 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Navistar International Corp./1/ 7,156 $ 289,317 Tektronix Inc. 11,042 283,448 Avnet Inc./1/ 14,309 277,595 PerkinElmer Inc. 15,352 276,490 Donaldson Co. Inc. 4,807 275,057 Allied Waste Industries Inc./1/ 24,306 274,172 Garmin Ltd./1/ 5,470 273,664 ALLETE Inc. 8,982 271,346 Viad Corp. 10,608 264,988 Jacobs Engineering Group Inc./1/ 5,716 264,765 Certegy Inc. 7,722 259,923 Millipore Corp./1/ 5,837 255,952 Monster Worldwide Inc./1/ 10,020 255,209 Arrow Electronics Inc./1/ 11,905 254,172 Hubbell Inc. Class B 5,908 253,099 Packaging Corporation of America/1/ 12,620 248,614 Precision Castparts Corp. 5,916 243,325 Sonoco Products Co. 11,429 243,095 Fair Isaac Corp. 3,782 241,216 Pentair Inc. 5,863 240,383 Martin Marietta Materials Inc. 5,857 239,961 Alliant Techsystems Inc./1/ 4,609 238,562 Molex Inc. Class A 8,780 232,758 Corporate Executive Board Co. (The)/1/ 4,497 229,392 Integrated Circuit Systems Inc./1/ 6,770 227,269 Getty Images Inc./1/ 5,072 226,718 CheckFree Corp./1/ 8,005 220,378 Owens-Illinois Inc./1/ 17,604 216,529 Tech Data Corp./1/ 6,360 209,371 Ryder System Inc. 6,952 208,560 Graco Inc. 5,470 208,407 Molex Inc. 6,555 205,761 CNF Inc. 5,861 205,252 Stericycle Inc./1/ 4,286 197,927 Titan Corp. (The)/1/ 9,298 196,374 Teleflex Inc. 4,149 190,895 Carlisle Companies Inc. 3,328 190,861 Cummins Inc. 4,018 190,453 York International Corp. 4,752 188,844 Harsco Corp. 4,822 184,731 AMETEK Inc. 3,900 183,495 Roper Industries Inc. 3,694 182,557 Ingram Micro Inc. Class A/1/ 12,100 179,080 Crane Co. 6,318 177,536 National Instruments Corp. 3,960 168,617 Acxiom Corp./1/ 10,452 166,187 Briggs & Stratton Corp. 2,526 164,215 AGCO Corp./1/ 9,022 162,396 Swift Transportation Co. Inc./1/ 7,202 161,541 AptarGroup Inc. 4,169 149,250 United Stationers Inc./1/ 3,971 147,761 Tetra Tech Inc./1/ 6,374 143,288 Alexander & Baldwin Inc. 4,604 142,770 KEMET Corp./1/ 10,590 140,317 Varian Inc./1/ 3,911 140,053 Benchmark Electronics Inc./1/ 2,850 138,852 Landstar System Inc./1/ 1,884 137,607 Hunt (J.B.) Transport Services Inc./1/ 5,356 135,935 Flowserve Corp./1/ 6,641 135,875 Arbitron Inc./1/ 3,439 135,840 Trinity Industries Inc. 5,322 135,445 Kennametal Inc. 3,646 134,464 Brink's Co. (The) 6,562 131,568 Global Payments Inc. 3,131 130,406 Dycom Industries Inc./1/ 5,841 126,224 Cognex Corp. 4,670 125,389 Mueller Industries Inc./1/ 3,966 125,167 Thomas & Betts Corp./1/ 7,020 124,956 Werner Enterprises Inc. 6,922 124,873 Lafarge North America Inc. 3,435 124,003 Terex Corp./1/ 5,398 121,779 Crown Holdings Inc./1/ 15,286 120,759 Macrovision Corp./1/ 5,385 118,308 Yellow Corp./1/ 3,434 112,807 MPS Group Inc./1/ 11,777 112,470 Acuity Brands Inc. 5,124 110,166 Banta Corp. 2,870 109,806 Copart Inc./1/ 8,765 109,300 NDCHealth Corp. 4,106 108,357 Dionex Corp./1/ 2,533 107,754 MSC Industrial Direct Co. Inc. Class A 4,549 107,584 Timken Co. (The) 6,373 106,939 30 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Waste Connections Inc./1/ 2,936 $ 101,820 USF Corp. 3,180 101,506 Hughes Supply Inc. 2,600 100,490 Technitrol Inc./1/ 4,491 97,904 AVX Corp. 6,487 95,359 Albany International Corp. Class A 3,065 94,708 GATX Corp. 4,150 93,333 eFunds Corp./1/ 5,772 92,410 Kansas City Southern Industries Inc./1/ 6,825 90,295 Plexus Corp./1/ 5,143 88,922 Orbotech Ltd./1/ 3,718 88,303 Nordson Corp. 3,132 86,788 Kaydon Corp. 3,520 83,670 Granite Construction Inc. 4,036 80,680 Electro Scientific Industries Inc./1/ 3,263 80,139 Overseas Shipholding Group Inc. 2,913 79,408 Photon Dynamics Inc./1/ 2,027 76,661 Coherent Inc./1/ 3,328 76,544 Monaco Coach Corp./1/ 3,114 75,016 G&K Services Inc. Class A 2,268 74,844 Veeco Instruments Inc./1/ 2,924 74,094 Roadway Corp. 1,442 73,903 EGL Inc./1/ 4,492 73,265 Mykrolis Corp./1/ 4,930 72,717 Newport Corp./1/ 4,611 72,669 Checkpoint Systems Inc./1/ 3,758 70,801 Littelfuse Inc./1/ 2,653 70,570 CSG Systems International Inc./1/ 6,122 70,342 GrafTech International Ltd./1/ 6,769 70,330 Power-One Inc./1/ 7,607 68,919 FuelCell Energy Inc./1/ 4,482 68,395 Aeroflex Inc./1/ 7,271 67,475 NCO Group Inc./1/ 2,798 66,592 EMCOR Group Inc./1/ 1,744 65,731 Texas Industries Inc. 2,410 65,480 Jacuzzi Brands Inc./1/ 9,104 64,183 Shaw Group Inc. (The)/1/ 4,673 63,786 C&D Technologies Inc. 3,133 62,441 Manitowoc Co. Inc. (The) 2,870 62,279 Regal-Beloit Corp. 2,923 59,483 Spherion Corp./1/ 6,488 56,446 Helix Technology Corp. 3,116 55,932 Bowne & Co. Inc. 3,711 55,665 Arkansas Best Corp. 1,678 55,559 Esterline Technologies Corp./1/ 2,462 54,533 Stewart & Stevenson Services Inc. 3,172 53,036 Ionics Inc./1/ 1,832 52,194 Quanta Services Inc./1/ 6,293 51,477 Park Electrochemical Corp. 2,024 49,588 Navigant Consulting Co./1/ 2,788 45,807 CTS Corp. 3,964 43,881 Insituform Technologies Inc. Class A/1/ 3,044 43,529 Wabash National Corp./1/ 1,880 43,372 ElkCorp 1,703 43,256 Methode Electronics Inc. Class A 3,303 39,339 Agilysys Inc. 3,763 38,684 Artesyn Technologies Inc./1/ 4,673 38,459 TeleTech Holdings Inc./1/ 4,758 31,308 Forrester Research Inc./1/ 1,812 30,895 FreeMarkets Inc./1/ 4,746 29,710 Anaren Inc./1/ 2,067 29,248 SCS Transportation Inc./1/ 1,700 25,517 AAR Corp./1/ 2,134 23,261 PRG-Schultz International Inc./1/ 4,872 23,142 MedQuist Inc./1/ 1,366 22,771 Hudson Highland Group Inc./1/ 761 16,765 Presstek Inc./1/ 1,938 14,942 TOTAL COMMON STOCKS (Cost: $152,409,710) 146,225,376 SHORT TERM INVESTMENTS - 5.51% MONEY MARKET FUNDS - 3.17% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 3,134,887 $ 3,134,887 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 1,151,177 1,151,177 BlackRock Temp Cash Money Market Fund/2/ 49,509 49,509 SCHEDULES OF INVESTMENTS 31 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 296,087 $ 296,087 4,631,660 FLOATING RATE NOTES - 1.32% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 52,326 52,322 1.08%, 09/15/04/2/ 104,652 104,643 1.08%, 10/12/04/2/ 52,326 52,321 1.17%, 08/23/04/2/ 52,326 52,362 CC USA Inc. 1.06%, 05/24/04/2/ 104,652 104,647 1.08%, 04/19/04/2/ 46,047 46,046 1.12%, 07/15/04/2/ 52,326 52,339 Dorada Finance Inc. 1.08%, 05/20/04/2/ 104,652 104,644 1.24%, 08/09/04/2/ 26,163 26,160 Five Finance Inc. 1.09%, 04/15/04/2/ 52,326 52,326 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 104,652 104,652 Holmes Financing PLC 1.08%, 04/15/04/2/ 20,930 20,930 K2 USA LLC 1.08%, 08/16/04/2/ 26,163 26,160 1.08%, 09/27/04/2/ 113,025 113,009 1.09%, 04/13/04/2/ 52,326 52,325 1.09%, 05/17/04/2/ 52,326 52,325 Links Finance LLC 1.08%, 06/28/04/2/ 52,326 52,319 1.09%, 03/29/04/2/ 52,326 52,326 1.09%, 05/04/04/2/ 52,326 52,325 1.10%, 07/20/04/2/ 41,861 41,855 Nationwide Building Society 1.14%, 07/23/04/2/ 78,489 78,489 Sigma Finance Inc. 1.05%, 11/21/03/2/ 52,326 52,299 1.08%, 07/01/04/2/ 52,326 52,318 1.09%, 10/07/04/2/ 104,652 104,633 1.11%, 07/20/04/2/ 52,326 52,319 1.24%, 08/06/04/2/ 26,163 26,161 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Tango Finance Corp. 1.09%, 07/15/04/2/ $ 31,396 $ 31,388 1.10%, 07/06/04/2/ 31,396 31,394 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 52,326 52,317 White Pine Finance LLC 1.08%, 05/17/04/2/ 62,791 62,791 1.08%, 07/06/04/2/ 62,791 62,787 1.08%, 08/26/04/2/ 52,326 52,320 1.09%, 04/20/04/2/ 52,326 52,326 1,927,578 TIME DEPOSITS - 0.50% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 104,652 104,652 1.40%, 10/25/04/2/ 104,652 104,637 Bank of New York 1.39%, 11/01/04/2/ 104,652 104,642 Bank of Nova Scotia 1.24%, 10/07/04/2/ 78,489 78,482 1.42%, 10/29/04/2/ 78,489 78,495 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 78,489 78,478 1.40%, 10/29/04/2/ 104,652 104,650 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 78,489 78,482 732,518 COMMERCIAL PAPER - 0.35% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 55,047 55,033 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 52,326 52,309 1.06%, 11/17/03/2/ 52,326 52,305 Delaware Funding Corp. 1.04%, 11/20/03/2/ 60,173 60,144 Edison Asset Securitization 1.05%, 11/14/03/2/ 52,326 52,309 Falcon Asset Securitization 1.06%, 11/14/03/2/ 46,047 46,032 32 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ $ 52,326 $ 52,303 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 26,163 26,149 1.06%, 11/20/03/2/ 26,163 26,150 Prudential Funding LLC 1.06%, 11/20/03/2/ 52,326 52,300 Windmill Funding Corp. 1.05%, 11/19/03/2/ 31,396 31,381 506,415 U.S. GOVERNMENT AGENCY NOTES - 0.17% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 78,489 78,010 1.28%, 08/19/04/2/ 41,861 41,429 Federal National Mortgage Association 1.28%, 08/20/04/2/ 136,048 134,640 254,079 TOTAL SHORT TERM INVESTMENTS (Cost: $8,052,250) 8,052,250 TOTAL INVESTMENTS IN SECURITIES - 105.52% (Cost $160,461,960) 154,277,626 OTHER ASSETS, LESS LIABILITIES - (5.52%) (8,074,385) --------------- NET ASSETS - 100.00% $ 146,203,241 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 33 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 99.82% Citigroup Inc. 272,539 $ 12,918,349 Bank of America Corp. 79,355 6,009,554 Wells Fargo & Company 88,817 5,002,173 JP Morgan Chase & Co. 107,632 3,863,989 Fannie Mae 46,848 3,358,533 Wachovia Corp. 70,395 3,229,019 Morgan Stanley 52,503 2,880,840 American Express Co. 60,450 2,836,918 U.S. Bancorp 101,521 2,763,402 Merrill Lynch & Co. Inc. 45,189 2,675,189 Bank One Corp. 59,757 2,536,685 FleetBoston Financial Corp. 55,564 2,244,230 Washington Mutual Inc. 49,112 2,148,650 Freddie Mac 36,801 2,065,640 Fifth Third Bancorp 25,691 1,489,050 Goldman Sachs Group Inc. (The) 15,822 1,485,686 MBNA Corp. 59,940 1,483,515 Bank of New York Co. Inc. (The) 40,928 1,276,544 BB&T Corp. 29,055 1,123,557 National City Corp. 32,421 1,058,870 SLM Corp. 23,908 936,237 Lehman Brothers Holdings Inc. 12,839 924,408 State Street Corp. 17,599 921,484 SunTrust Banks Inc. 12,792 857,959 PNC Financial Services Group 14,856 795,836 Countrywide Financial Corp. 7,214 758,336 Schwab (Charles) Corp. (The) 54,153 734,315 Capital One Financial Corp. 11,977 728,202 Golden West Financial Corp. 6,899 692,867 Mellon Financial Corp. 22,819 681,604 KeyCorp 22,395 632,659 SouthTrust Corp. 18,052 574,956 Hancock (John) Financial Services Inc. 15,258 539,370 Principal Financial Group Inc. 17,174 538,405 Northern Trust Corp. 10,959 509,046 M&T Bank Corp. 4,915 461,518 Comerica Inc. 8,594 442,419 AmSouth Bancorp 18,562 438,434 Regions Financial Corp. 11,720 430,710 Bear Stearns Companies Inc. (The) 5,251 400,389 Marshall & Ilsley Corp. 11,145 399,214 Charter One Financial Inc. 11,947 381,826 CIT Group Inc. 11,218 377,149 Synovus Financial Corp. 13,452 371,275 Franklin Resources Inc. 7,525 356,835 Union Planters Corp. 10,410 346,341 Sovereign Bancorp Inc. 15,520 322,971 North Fork Bancorp Inc. 8,037 313,282 First Tennessee National Corp. 6,656 301,916 National Commerce Financial Corp. 10,850 298,049 Zions Bancorporation 4,782 293,089 Popular Inc. 6,437 289,665 Legg Mason Inc. 3,471 288,961 Banknorth Group Inc. 8,649 270,887 T. Rowe Price Group Inc. 6,551 269,574 Compass Bancshares Inc. 6,684 252,521 Huntington Bancshares Inc. 11,448 247,964 New York Community Bancorp Inc. 6,622 239,716 Ameritrade Holding Corp./1/ 15,151 206,660 E*TRADE Financial Corp./1/ 19,247 198,244 GreenPoint Financial Corp. 6,306 196,432 Commerce Bancorp Inc. 3,985 192,635 Hibernia Corp. Class A 8,361 188,875 TCF Financial Corp. 3,598 187,744 Mercantile Bankshares Corp. 4,371 185,199 Janus Capital Group Inc. 12,626 178,532 Edwards (A.G.) Inc. 4,237 171,598 Providian Financial Corp./1/ 15,280 169,761 Doral Financial Corp. 3,286 165,943 Commerce Bancshares Inc. 3,269 156,520 Associated Bancorp 3,621 149,040 Valley National Bancorp 4,928 144,144 UnionBanCal Corp. 2,645 143,280 Federated Investors Inc. Class B 5,115 141,430 Neuberger Berman Inc. 3,133 135,816 Astoria Financial Corp. 3,842 133,087 City National Corp. 2,183 131,438 Hudson City Bancorp Inc. 3,705 127,971 Bank of Hawaii Corp. 3,107 122,416 Investors Financial Services Corp. 3,404 120,263 Fulton Financial Corp. 5,787 119,502 34 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- Sky Financial Group Inc. 4,814 $ 117,221 Wilmington Trust Corp. 3,442 115,927 SEI Investment Co. 3,909 113,830 Eaton Vance Corp. 3,238 112,941 AmeriCredit Corp./1/ 8,331 111,635 Webster Financial Corp. 2,392 106,922 People's Bank 3,246 106,274 Cullen/Frost Bankers Inc. 2,719 105,388 Colonial BancGroup Inc. (The) 6,558 102,829 Roslyn Bancorp Inc. 3,688 99,355 FirstMerit Corp. 3,822 98,531 Independence Community Bank Corp. 2,645 97,204 Waddell & Reed Financial Inc. Class A 4,336 96,172 Washington Federal Inc. 3,640 95,878 BancorpSouth Inc. 3,929 92,371 BISYS Group Inc. (The)/1/ 6,303 90,133 Westamerica Bancorp 1,765 88,356 Hudson United Bancorp 2,382 86,443 IndyMac Bancorp Inc. 2,924 85,966 UCBH Holdings Inc. 2,399 85,668 Raymond James Financial Inc. 2,063 84,150 FNB Corp. (Florida) 2,439 80,609 Whitney Holding Corp. 2,122 80,572 Affiliated Managers Group Inc./1/ 1,100 79,750 Trustmark Corp. 2,789 79,403 Jefferies Group Inc. 2,546 78,926 Knight Trading Group Inc./1/ 5,676 78,556 First Midwest Bancorp Inc. 2,491 76,972 Greater Bay Bancorp 2,785 75,084 Old National Bancorp 3,364 74,681 Park National Corp. 594 69,468 New Century Financial Corp. 1,869 69,303 South Financial Group Inc. (The) 2,495 65,194 First Bancorp 1,956 65,135 Silicon Valley Bancshares/1/ 1,854 65,075 W Holding Co. Inc. 2,742 63,861 Provident Financial Services Inc. 3,247 63,641 East West Bancorp Inc. 1,282 62,933 Chittenden Corp. 1,954 62,880 United Bancshares Inc. 2,065 62,466 Commercial Federal Corp. 2,373 61,081 Southwest Bancorp of Texas Inc. 1,694 60,832 Pacific Capital Bancorp 1,747 59,503 Citizens Banking Corp. 1,937 56,638 Fremont General Corp. 3,377 56,159 Total System Services Inc. 2,023 55,794 MAF Bancorp Inc. 1,301 54,538 Community First Bankshares Inc. 2,000 54,300 Susquehanna Bancshares Inc. 2,072 51,904 Texas Regional Bancshares Inc. Class A 1,418 51,402 Staten Island Bancorp Inc. 2,539 50,602 Downey Financial Corp. 1,099 50,444 TrustCo Bank Corp. NY 3,859 50,360 Investment Technology Group Inc./1/ 2,483 49,312 First Niagara Financial Group Inc. 3,438 49,129 Provident Financial Group Inc. 1,646 48,475 Chicago Mercantile Exchange Holdings Inc. 679 46,138 Republic Bancorp Inc. 3,100 45,012 Provident Bankshares Corp. 1,318 40,898 FirstFed Financial Corp./1/ 829 37,305 Net.B@nk Inc. 2,589 35,495 Pacific Northwest Bancorp 904 35,111 Dime Community Bancshares 1,184 33,010 Harbor Florida Bancshares Inc. 1,188 31,981 AMCORE Financial Inc. 1,180 31,860 Anchor BanCorp Wisconsin Inc. 1,197 29,805 W.P. Stewart & Co. Ltd. 1,367 29,322 Sterling Bancshares Inc. 2,384 27,416 First Sentinel Bancorp Inc. 1,411 26,315 PFF Bancorp Inc. 690 25,737 Safeguard Scientifics Inc./1/ 6,527 24,868 Bay View Capital Corp./1/ 3,235 19,669 LaBranche & Co. Inc. 1,459 15,451 SWS Group Inc. 685 14,864 BSB Bancorp Inc. 471 14,549 OceanFirst Financial Corp. 508 13,279 TOTAL COMMON STOCKS (Cost: $79,835,891) 89,623,573 SCHEDULES OF INVESTMENTS 35 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- SHORT TERM INVESTMENTS - 5.09% MONEY MARKET FUNDS - 2.97% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 1,829,947 $ 1,829,947 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 640,941 640,941 BlackRock Temp Cash Money Market Fund/2/ 27,565 27,565 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 164,852 164,852 2,663,305 FLOATING RATE NOTES - 1.20% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 29,134 29,131 1.08%, 09/15/04/2/ 58,267 58,262 1.08%, 10/12/04/2/ 29,134 29,131 1.17%, 08/23/04/2/ 29,134 29,154 CC USA Inc. 1.06%, 05/24/04/2/ 58,267 58,264 1.08%, 04/19/04/2/ 25,638 25,637 1.12%, 07/15/04/2/ 29,134 29,141 Dorada Finance Inc. 1.08%, 05/20/04/2/ 58,267 58,263 1.24%, 08/09/04/2/ 14,567 14,565 Five Finance Inc. 1.09%, 04/15/04/2/ 29,134 29,134 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 58,267 58,267 Holmes Financing PLC 1.08%, 04/15/04/2/ 11,653 11,653 K2 USA LLC 1.08%, 08/16/04/2/ 14,567 14,565 1.08%, 09/27/04/2/ 62,929 62,920 1.09%, 04/13/04/2/ 29,134 29,133 1.09%, 05/17/04/2/ 29,134 29,133 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Links Finance LLC 1.08%, 06/28/04/2/ $ 29,134 $ 29,130 1.09%, 03/29/04/2/ 29,134 29,134 1.09%, 05/04/04/2/ 29,134 29,133 1.10%, 07/20/04/2/ 23,307 23,304 Nationwide Building Society 1.14%, 07/23/04/2/ 43,700 43,700 Sigma Finance Inc. 1.05%, 11/21/03/2/ 29,134 29,118 1.08%, 07/01/04/2/ 29,134 29,129 1.09%, 10/07/04/2/ 58,267 58,257 1.11%, 07/20/04/2/ 29,134 29,130 1.24%, 08/06/04/2/ 14,567 14,566 Tango Finance Corp. 1.09%, 07/15/04/2/ 17,480 17,476 1.10%, 07/06/04/2/ 17,480 17,479 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 29,134 29,129 White Pine Finance LLC 1.08%, 05/17/04/2/ 34,960 34,960 1.08%, 07/06/04/2/ 34,960 34,958 1.08%, 08/26/04/2/ 29,134 29,130 1.09%, 04/20/04/2/ 29,134 29,134 1,073,220 TIME DEPOSITS - 0.45% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 58,267 58,267 1.40%, 10/25/04/2/ 58,267 58,259 Bank of New York 1.39%, 11/01/04/2/ 58,267 58,262 Bank of Nova Scotia 1.24%, 10/07/04/2/ 43,700 43,696 1.42%, 10/29/04/2/ 43,700 43,704 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 43,700 43,695 1.40%, 10/29/04/2/ 58,267 58,266 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 43,700 43,696 407,845 36 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- COMMERCIAL PAPER - 0.31% Alpine Securitization Corp. 1.06%, 11/12/03/2/ $ 30,649 $ 30,640 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 29,134 29,124 1.06%, 11/17/03/2/ 29,134 29,122 Delaware Funding Corp. 1.04%, 11/20/03/2/ 33,503 33,486 Edison Asset Securitization 1.05%, 11/14/03/2/ 29,134 29,124 Falcon Asset Securitization 1.06%, 11/14/03/2/ 25,638 25,629 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 29,134 29,121 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 14,567 14,559 1.06%, 11/20/03/2/ 14,567 14,560 Prudential Funding LLC 1.06%, 11/20/03/2/ 29,134 29,119 Windmill Funding Corp. 1.05%, 11/19/03/2/ 17,480 17,472 281,956 U.S. GOVERNMENT AGENCY NOTES - 0.16% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 43,700 43,434 1.28%, 08/19/04/2/ 23,307 23,067 Federal National Mortgage Association 1.28%, 08/20/04/2/ 75,748 74,964 141,465 TOTAL SHORT TERM INVESTMENTS (Cost: $4,567,791) 4,567,791 TOTAL INVESTMENTS IN SECURITIES - 104.91% (Cost $84,403,682) 94,191,364 OTHER ASSETS, LESS LIABILITIES - (4.91%) (4,404,619) --------------- NET ASSETS - 100.00% $ 89,786,745 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 37 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. REAL ESTATE INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 99.56% Equity Office Properties Trust 793,073 $ 22,213,975 Equity Residential 533,348 15,600,429 Simon Property Group Inc. 327,903 14,781,867 General Growth Properties Inc. 140,790 10,770,435 ProLogis 329,697 9,739,249 Vornado Realty Trust 190,986 9,654,342 Plum Creek Timber Co. Inc. 360,390 9,496,277 Archstone-Smith Trust 349,225 9,324,308 Boston Properties Inc. 191,724 8,483,787 iStar Financial Inc. 197,966 7,534,586 Kimco Realty Corp. 179,780 7,489,635 Duke Realty Corp. 250,620 7,338,154 Rouse Co. (The) 159,651 6,864,993 Public Storage Inc. 168,523 6,740,920 Apartment Investment & Management Co. Class A 159,406 6,519,706 AvalonBay Communities Inc. 138,545 6,327,350 Health Care Property Investors Inc. 124,801 5,819,471 Friedman, Billings, Ramsey Group, Inc. Class A 269,760 5,373,619 Liberty Property Trust 146,744 5,338,547 Host Marriott Corp./1/ 460,844 4,815,820 AMB Property Corp. 159,300 4,777,407 Developers Diversified Realty Corp. 159,057 4,596,747 New Plan Excel Realty Trust 190,619 4,327,051 Mack-Cali Realty Corp. 113,058 4,261,156 Hospitality Properties Trust 114,306 4,191,601 Chelsea Property Group Inc. 84,748 4,169,602 Macerich Co. (The) 103,497 4,160,579 Weingarten Realty Investors 94,811 4,102,472 United Dominion Realty Trust Inc. 228,338 3,984,498 Regency Centers Corp. 102,305 3,793,469 Federal Realty Investment Trust 96,522 3,663,010 Arden Realty Inc. 127,689 3,571,461 Catellus Development Corp. 159,549 3,553,156 Thornburg Mortgage Inc. 129,993 3,542,309 Pan Pacific Retail Properties Inc. 79,044 3,505,601 American Financial Realty Trust 212,126 3,224,315 Shurgard Storage Centers Inc. Class A 88,483 3,203,085 CBL & Associates Properties Inc. 59,414 3,166,766 CenterPoint Properties Corp. 45,377 3,083,367 CarrAmerica Realty Corp. 101,814 3,061,547 Annaly Mortgage Management Inc. 184,974 3,022,475 St. Joe Company (The) 88,796 2,933,820 Ventas Inc. 155,580 2,909,346 Mills Corp. 69,527 2,836,702 Crescent Real Estate Equities Co. 182,480 2,801,068 Healthcare Realty Trust Inc. 82,684 2,790,585 BRE Properties Inc. Class A 85,488 2,765,537 Health Care REIT Inc. 83,367 2,763,616 Camden Property Trust 68,872 2,727,331 Realty Income Corp. 68,625 2,703,825 HRPT Properties Trust 280,340 2,623,982 Highwoods Properties Inc. 105,253 2,610,274 First Industrial Realty Trust Inc. 77,378 2,499,309 SL Green Realty Corp. 66,019 2,386,587 Trizec Properties Inc. 177,544 2,370,212 Washington Real Estate Investment Trust 77,319 2,288,642 Essex Property Trust Inc. 37,838 2,265,740 Cousins Properties Inc. 76,178 2,190,118 Nationwide Health Properties Inc. 115,726 2,117,786 Reckson Associates Realty Corp. 94,673 2,103,634 Home Properties Inc. 53,620 2,064,370 Prentiss Properties Trust 66,504 2,011,081 Post Properties Inc. 74,522 1,967,381 Brandywine Realty Trust 73,286 1,857,067 Capital Automotive 56,070 1,744,338 La Quinta Corp./1/ 274,272 1,692,258 Colonial Properties Trust 43,613 1,613,681 LNR Property Corp. 39,080 1,598,372 Kilroy Realty Corp. 54,064 1,562,450 Manufactured Home Communities Inc. 40,398 1,535,124 Glenborough Realty Trust Inc. 54,569 1,064,096 FelCor Lodging Trust Inc. 91,367 931,030 Koger Equity Inc. 41,757 808,833 Equity Inns Inc. 79,907 675,214 Meristar Hospitality Corp./1/ 83,304 568,966 TOTAL COMMON STOCKS (Cost: $300,632,617) 329,571,519 38 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. REAL ESTATE INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- SHORT TERM INVESTMENTS - 11.85% MONEY MARKET FUNDS - 6.86% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 15,497,795 $ 15,497,795 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 5,560,312 5,560,312 BlackRock Temp Cash Money Market Fund/2/ 239,133 239,133 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 1,430,131 1,430,131 22,727,371 FLOATING RATE NOTES - 2.81% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 252,741 252,721 1.08%, 09/15/04/2/ 505,483 505,439 1.08%, 10/12/04/2/ 252,741 252,718 1.17%, 08/23/04/2/ 252,741 252,916 CC USA Inc. 1.06%, 05/24/04/2/ 505,483 505,455 1.08%, 04/19/04/2/ 222,412 222,407 1.12%, 07/15/04/2/ 252,741 252,805 Dorada Finance Inc. 1.08%, 05/20/04/2/ 505,483 505,442 1.24%, 08/09/04/2/ 126,371 126,356 Five Finance Inc. 1.09%, 04/15/04/2/ 252,741 252,741 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 505,483 505,483 Holmes Financing PLC 1.08%, 04/15/04/2/ 101,097 101,097 K2 USA LLC 1.08%, 08/16/04/2/ 126,371 126,356 1.08%, 09/27/04/2/ 545,922 545,848 1.09%, 04/13/04/2/ 252,741 252,736 1.09%, 05/17/04/2/ 252,741 252,735 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Links Finance LLC 1.08%, 06/28/04/2/ $ 252,741 $ 252,709 1.09%, 03/29/04/2/ 252,741 252,741 1.09%, 05/04/04/2/ 252,741 252,735 1.10%, 07/20/04/2/ 202,193 202,164 Nationwide Building Society 1.14%, 07/23/04/2/ 379,112 379,112 Sigma Finance Inc. 1.05%, 11/21/03/2/ 252,741 252,609 1.08%, 07/01/04/2/ 252,741 252,700 1.09%, 10/07/04/2/ 505,483 505,389 1.11%, 07/20/04/2/ 252,741 252,705 1.24%, 08/06/04/2/ 126,371 126,361 Tango Finance Corp. 1.09%, 07/15/04/2/ 151,645 151,610 1.10%, 07/06/04/2/ 151,645 151,634 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 252,741 252,698 White Pine Finance LLC 1.08%, 05/17/04/2/ 303,290 303,290 1.08%, 07/06/04/2/ 303,290 303,270 1.08%, 08/26/04/2/ 252,741 252,710 1.09%, 04/20/04/2/ 252,741 252,741 9,310,433 TIME DEPOSITS - 1.07% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 505,483 505,483 1.40%, 10/25/04/2/ 505,483 505,409 Bank of New York 1.39%, 11/01/04/2/ 505,483 505,433 Bank of Nova Scotia 1.24%, 10/07/04/2/ 379,112 379,077 1.42%, 10/29/04/2/ 379,112 379,140 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 379,112 379,059 1.40%, 10/29/04/2/ 505,483 505,470 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 379,112 379,074 3,538,145 SCHEDULES OF INVESTMENTS 39 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. REAL ESTATE INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- COMMERCIAL PAPER - 0.74% Alpine Securitization Corp. 1.06%, 11/12/03/2/ $ 265,884 $ 265,814 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 252,741 252,660 1.06%, 11/17/03/2/ 252,741 252,637 Delaware Funding Corp. 1.04%, 11/20/03/2/ 290,643 290,500 Edison Asset Securitization 1.05%, 11/14/03/2/ 252,741 252,660 Falcon Asset Securitization 1.06%, 11/14/03/2/ 222,412 222,340 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 252,741 252,631 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 126,371 126,304 1.06%, 11/20/03/2/ 126,371 126,307 Prudential Funding LLC 1.06%, 11/20/03/2/ 252,741 252,615 Windmill Funding Corp. 1.05%, 11/19/03/2/ 151,645 151,574 2,446,042 U.S. GOVERNMENT AGENCY NOTES - 0.37% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ $ 379,112 $ 376,799 1.28%, 08/19/04/2/ 202,193 200,108 Federal National Mortgage Association 1.28%, 08/20/04/2/ 657,128 650,329 1,227,236 TOTAL SHORT TERM INVESTMENTS (Cost: $39,249,227) 39,249,227 TOTAL INVESTMENTS IN SECURITIES - 111.41% (Cost $339,881,844) 368,820,746 OTHER ASSETS, LESS LIABILITIES - (11.41%) (37,784,754) --------------- NET ASSETS - 100.00% $ 331,035,992 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 40 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) iSHARES COHEN & STEERS REALTY MAJORS INDEX FUND October 31, 2003 SECURITY SHARES VALUE ----------------------------------------------------------------------------- COMMON STOCKS - 99.86% Simon Property Group Inc. 843,186 $ 38,010,825 Equity Office Properties Trust 1,322,735 37,049,807 Equity Residential 1,236,846 36,177,746 Vornado Realty Trust 506,429 25,599,986 General Growth Properties Inc. 323,470 24,745,455 ProLogis 812,324 23,996,051 Public Storage Inc. 568,542 22,741,680 Archstone-Smith Trust 826,592 22,070,006 Kimco Realty Corp. 486,944 20,286,087 Boston Properties Inc. 440,339 19,485,001 Duke Realty Corp. 614,190 17,983,483 Apartment Investment & Management Co. Class A 425,825 17,416,243 Rouse Co. (The) 399,179 17,164,697 Host Marriott Corp./1/ 1,431,942 14,963,794 AvalonBay Communities Inc. 318,976 14,567,634 Health Care Property Investors Inc. 286,068 13,339,351 Liberty Property Trust 355,739 12,941,785 Developers Diversified Realty Corp. 386,686 11,175,225 AMB Property Corp. 367,407 11,018,535 Weingarten Realty Investors 236,540 10,235,086 Macerich Co. (The) 238,218 9,576,364 Chelsea Property Group Inc. 190,007 9,348,344 Arden Realty Inc. 286,794 8,021,628 Pan Pacific Retail Properties Inc. 176,372 7,822,098 CenterPoint Properties Corp. 105,417 7,163,085 CarrAmerica Realty Corp. 235,431 7,079,410 Cousins Properties Inc. 219,453 6,309,274 Highwoods Properties Inc. 242,719 6,019,431 SL Green Realty Corp. 162,795 5,885,039 Reckson Associates Realty Corp. 262,834 5,840,172 TOTAL COMMON STOCKS (Cost: $434,275,327) 484,033,322 SHORT TERM INVESTMENTS - 8.20% MONEY MARKET FUNDS - 4.75% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/,/3/ 15,692,991 15,692,991 SHARES OR SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2/,/3/ 5,633,823 $ 5,633,823 BlackRock Temp Cash Money Market Fund/2/ 242,295 242,295 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 1,449,038 1,449,038 23,018,147 FLOATING RATE NOTES - 1.94% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 256,083 256,062 1.08%, 09/15/04/2/ 512,166 512,121 1.08%, 10/12/04/2/ 256,083 256,059 1.17%, 08/23/04/2/ 256,083 256,260 CC USA Inc. 1.06%, 05/24/04/2/ 512,166 512,137 1.08%, 04/19/04/2/ 225,353 225,348 1.12%, 07/15/04/2/ 256,083 256,147 Dorada Finance Inc. 1.08%, 05/20/04/2/ 512,166 512,124 1.24%, 08/09/04/2/ 128,041 128,027 Five Finance Inc. 1.09%, 04/15/04/2/ 256,083 256,083 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 512,166 512,166 Holmes Financing PLC 1.08%, 04/15/04/2/ 102,433 102,433 K2 USA LLC 1.08%, 08/16/04/2/ 128,041 128,026 1.08%, 09/27/04/2/ 553,139 553,065 1.09%, 04/13/04/2/ 256,083 256,077 1.09%, 05/17/04/2/ 256,083 256,076 Links Finance LLC 1.08%, 06/28/04/2/ 256,083 256,050 1.09%, 03/29/04/2/ 256,083 256,083 1.09%, 05/04/04/2/ 256,083 256,077 1.10%, 07/20/04/2/ 204,866 204,837 Nationwide Building Society 1.14%, 07/23/04/2/ 384,124 384,125 SCHEDULES OF INVESTMENTS 41 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES COHEN & STEERS REALTY MAJORS INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE ----------------------------------------------------------------------------- Sigma Finance Inc. 1.05%, 11/21/03/2/ $ 256,083 $ 255,948 1.08%, 07/01/04/2/ 256,083 256,041 1.09%, 10/07/04/2/ 512,166 512,071 1.11%, 07/20/04/2/ 256,083 256,046 1.24%, 08/06/04/2/ 128,041 128,032 Tango Finance Corp. 1.09%, 07/15/04/2/ 153,650 153,614 1.10%, 07/06/04/2/ 153,650 153,639 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 256,083 256,039 White Pine Finance LLC 1.08%, 05/17/04/2/ 307,299 307,299 1.08%, 07/06/04/2/ 307,299 307,280 1.08%, 08/26/04/2/ 256,083 256,051 1.09%, 04/20/04/2/ 256,083 256,083 9,433,526 TIME DEPOSITS - 0.74% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 512,166 512,166 1.40%, 10/25/04/2/ 512,166 512,091 Bank of New York 1.39%, 11/01/04/2/ 512,166 512,115 Bank of Nova Scotia 1.24%, 10/07/04/2/ 384,124 384,089 1.42%, 10/29/04/2/ 384,124 384,153 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 384,124 384,071 1.40%, 10/29/04/2/ 512,166 512,153 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 384,124 384,086 3,584,924 COMMERCIAL PAPER - 0.51% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 269,399 269,328 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 256,083 256,000 1.06%, 11/17/03/2/ 256,083 255,978 Delaware Funding Corp. 1.04%, 11/20/03/2/ 294,485 294,340 Edison Asset Securitization 1.05%, 11/14/03/2/ 256,083 256,001 Falcon Asset Securitization 1.06%, 11/14/03/2/ 225,353 225,280 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 256,083 255,971 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 128,041 127,974 1.06%, 11/20/03/2/ 128,041 127,977 Prudential Funding LLC 1.06%, 11/20/03/2/ 256,083 255,955 Windmill Funding Corp. 1.05%, 11/19/03/2/ 153,650 153,578 2,478,382 U.S. GOVERNMENT AGENCY NOTES - 0.26% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 384,124 381,781 1.28%, 08/19/04/2/ 204,866 202,754 Federal National Mortgage Association 1.28%, 08/20/04/2/ 665,815 658,927 1,243,462 TOTAL SHORT TERM INVESTMENTS (Cost: $39,758,441) 39,758,441 TOTAL INVESTMENTS IN SECURITIES - 108.06% (Cost $474,033,768) 523,791,763 OTHER ASSETS, LESS LIABILITIES - (8.06%) (39,058,368) --------------- NET ASSETS - 100.00% $ 484,733,395 =============== /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 42 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) iSHARES TRUST October 31, 2003
iSHARES DOW JONES U.S. ----------------------------------------------------------------- BASIC CONSUMER CONSUMER MATERIALS CYCLICAL NON-CYCLICAL FINANCIAL SECTOR SECTOR SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND INDEX FUND ----------------------------------------------------------------------------------------------------------------- ASSETS Investments at cost $ 266,382,697 $ 166,608,450 $ 146,311,950 $ 194,531,608 -------------- -------------- -------------- -------------- Investments in securities, at value (including securities on loan/1/) (Note 1) $ 280,755,486 $ 158,929,215 $ 143,138,705 $ 212,081,415 Receivables: Dividends and interest 160,413 36,210 187,902 396,822 iShares sold - - - 7,222 -------------- -------------- -------------- -------------- Total Assets 280,915,899 158,965,425 143,326,607 212,485,459 -------------- -------------- -------------- -------------- LIABILITIES Payables: Investment securities purchased 191,336 - - - Collateral for securities on loan (Note 5) 46,331,380 9,614,146 8,096,128 8,981,844 Advisory fees (Note 2) 215,933 133,526 119,424 189,908 -------------- -------------- -------------- -------------- Total Liabilities 46,738,649 9,747,672 8,215,552 9,171,752 -------------- -------------- -------------- -------------- NET ASSETS $ 234,177,250 $ 149,217,753 $ 135,111,055 $ 203,313,707 ============== ============== ============== ============== NET ASSETS CONSIST OF: Paid-in capital $ 220,994,468 $ 158,705,991 $ 139,762,757 $ 188,701,377 Undistributed (distributions in excess of) net investment income 336,534 (13,085) 365,099 673,171 Accumulated net realized loss (1,526,541) (1,795,918) (1,843,556) (3,610,648) Net unrealized appreciation (depreciation) 14,372,789 (7,679,235) (3,173,245) 17,549,807 -------------- -------------- -------------- -------------- NET ASSETS $ 234,177,250 $ 149,217,753 $ 135,111,055 $ 203,313,707 ============== ============== ============== ============== iShares outstanding 5,800,000 2,750,000 2,950,000 2,400,000 ============== ============== ============== ============== Net asset value per iShare $ 40.38 $ 54.26 $ 45.80 $ 84.71 ============== ============== ============== ==============
/1/ Securities on loan with market values of $44,971,488, $9,319,059, $7,824,353 and $8,678,415, respectively. See Note 5. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 43 STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) (Continued) iSHARES TRUST October 31, 2003
iSHARES DOW JONES U.S. iSHARES COHEN & STEERS ------------------------------------------------ ---------------------- INDUSTRIAL FINANCIAL REAL REALTY SECTOR SERVICES ESTATE MAJORS INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------------------------------------------------------------------------------------------------------------------- ASSETS Investments at cost $ 160,461,960 $ 84,403,682 $ 339,881,844 $ 474,033,768 -------------- -------------- -------------- -------------- Investments in securities, at value (including securities on loan/1/) (Note 1) $ 154,277,626 $ 94,191,364 $ 368,820,746 $ 523,791,763 Receivables: Dividends and interest 70,806 198,941 1,171,753 371,966 iShares sold - - - 4,860 -------------- -------------- -------------- -------------- Total Assets 154,348,432 94,390,305 369,992,499 524,168,589 -------------- -------------- -------------- -------------- LIABILITIES Payables: Investment securities purchased - 61,866 - - Collateral for securities on loan (Note 5) 8,002,996 4,455,828 38,655,361 39,166,410 Advisory fees (Note 2) 142,195 85,866 301,146 268,784 -------------- -------------- -------------- -------------- Total Liabilities 8,145,191 4,603,560 38,956,507 39,435,194 -------------- -------------- -------------- -------------- NET ASSETS $ 146,203,241 $ 89,786,745 $ 331,035,992 $ 484,733,395 ============== ============== ============== ============== NET ASSETS CONSIST OF: Paid-in capital $ 158,477,964 $ 77,352,154 $ 301,470,258 $ 434,146,637 Undistributed (distributions in excess of) net investment income 177,874 260,605 1,390,149 (38,171) Undistributed net realized gain (accumulated net realized loss) (6,268,263) 2,386,304 (763,317) 866,934 Net unrealized appreciation (depreciation) (6,184,334) 9,787,682 28,938,902 49,757,995 -------------- -------------- -------------- -------------- NET ASSETS $ 146,203,241 $ 89,786,745 $ 331,035,992 $ 484,733,395 ============== ============== ============== ============== iShares outstanding 3,250,000 900,000 3,550,000 4,850,000 ============== ============== ============== ============== Net asset value per iShare $ 44.99 $ 99.76 $ 93.25 $ 99.95 ============== ============== ============== ==============
/1/ Securities on loan with market values of $7,755,392, $4,326,851, $37,629,914 and $38,091,013, respectively. See Note 5. SEE NOTES TO FINANCIAL STATEMENTS. 44 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS STATEMENTS OF OPERATIONS (Unaudited) iSHARES TRUST For the six months ended October 31, 2003
iSHARES DOW JONES U.S. ----------------------------------------------------------------- BASIC CONSUMER CONSUMER MATERIALS CYCLICAL NON-CYCLICAL FINANCIAL SECTOR SECTOR SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND INDEX FUND ----------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME Dividends/1/ $ 1,793,550 $ 425,839 $ 1,150,126 $ 2,381,478 Interest 584 248 335 793 Securities lending income 4,407 4,081 3,168 4,830 -------------- -------------- -------------- -------------- Total investment income 1,798,541 430,168 1,153,629 2,387,101 -------------- -------------- -------------- -------------- EXPENSES (Note 2) Advisory fees 464,616 374,567 314,938 521,147 -------------- -------------- -------------- -------------- Total expenses 464,616 374,567 314,938 521,147 -------------- -------------- -------------- -------------- Net investment income 1,333,925 55,601 838,691 1,865,954 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments (1,034,909) (550,949) (520,177) (1,007,601) In-kind redemptions 446,808 1,298,578 636,782 1,018,029 -------------- -------------- -------------- -------------- Net realized gain (loss) (588,101) 747,629 116,605 10,428 -------------- -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on investments 24,833,908 22,901,823 13,859,059 26,732,582 -------------- -------------- -------------- -------------- Net realized and unrealized gain 24,245,807 23,649,452 13,975,664 26,743,010 -------------- -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 25,579,732 $ 23,705,053 $ 14,814,355 $ 28,608,964 ============== ============== ============== ==============
/1/ Net of foreign withholding tax of $-, $-, $- and $764, respectively. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 45 STATEMENTS OF OPERATIONS (Unaudited) (Continued) iSHARES TRUST For the six months ended October 31, 2003
iSHARES DOW JONES U.S. iSHARES COHEN & STEERS ------------------------------------------------ ---------------------- INDUSTRIAL FINANCIAL REAL REALTY SECTOR SERVICES ESTATE MAJORS INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME Dividends/1/ $ 811,494 $ 1,209,047 $ 8,499,118 $ 11,503,411 Interest 296 599 1,998 3,156 Securities lending income 2,234 2,802 8,429 12,544 -------------- -------------- -------------- -------------- Total investment income 814,024 1,212,448 8,509,545 11,519,111 -------------- -------------- -------------- -------------- EXPENSES (Note 2) Advisory fees 320,120 263,764 760,422 660,833 -------------- -------------- -------------- -------------- Total expenses 320,120 263,764 760,422 660,833 -------------- -------------- -------------- -------------- Net investment income 493,904 948,684 7,749,123 10,858,278 -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments (182,204) (1,203,989) (2,123,723) (1,225,546) In-kind redemptions 1,687,246 5,175,266 5,018,831 3,872,594 -------------- -------------- -------------- -------------- Net realized gain 1,505,042 3,971,277 2,895,108 2,647,048 -------------- -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on investments 13,215,446 10,851,977 33,007,337 52,877,473 -------------- -------------- -------------- -------------- Net realized and unrealized gain 14,720,488 14,823,254 35,902,445 55,524,521 -------------- -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 15,214,392 $ 15,771,938 $ 43,651,568 $ 66,382,799 ============== ============== ============== ==============
/1/ Net of foreign withholding tax of $-, $524, $- and $-, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 46 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS STATEMENTS OF CHANGES IN NET ASSETS iSHARES TRUST
iSHARES DOW JONES U.S. iSHARES DOW JONES U.S. iSHARES DOW JONES U.S. BASIC MATERIALS CONSUMER CYCLICAL CONSUMER NON-CYCLICAL SECTOR INDEX FUND SECTOR INDEX FUND SECTOR INDEX FUND -------------------------------- -------------------------------- -------------------------------- FOR THE SIX FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE MONTHS ENDED FOR THE OCTOBER 31, 2003 YEAR ENDED OCTOBER 31,2003 YEAR ENDED OCTOBER 31,2003 YEAR ENDED (Unaudited) APRIL 30, 2003 (Unaudited) APRIL 30, 2003 (Unaudited) APRIL 30, 2003 ----------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 1,333,925 $ 1,483,664 $ 55,601 $ 159,650 $ 838,691 $ 1,765,404 Net realized gain (loss) (588,101) 47,637 747,629 (12,645,323) 116,605 (2,264,332) Net change in unrealized appreciation (depreciation) 24,833,908 (9,234,438) 22,901,823 (28,561,389) 13,859,059 (22,809,651) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 25,579,732 (7,703,137) 23,705,053 (41,047,062) 14,814,355 (23,308,579) ------------- ------------- ------------- ------------- ------------- ------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (1,219,993) (1,321,199) (68,686) (159,650) (816,970) (1,581,472) Return of capital - - - (17,563) - - ------------- ------------- ------------- ------------- ------------- ------------- Total distributions to iShareholders (1,219,993) (1,321,199) (68,686) (177,213) (816,970) (1,581,472) ------------- ------------- ------------- ------------- ------------- ------------- iSHARES TRANSACTIONS: iShares sold 113,693,187 124,678,747 61,071,430 257,549,911 39,781,974 67,215,486 iShares redeemed (3,654,980) (73,863,854) (65,265,886) (215,911,491) (6,586,545) (69,380,963) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from iShares transactions 110,038,207 50,814,893 (4,194,456) 41,638,420 33,195,429 (2,165,477) ------------- ------------- ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS 134,397,946 41,790,557 19,441,911 414,145 47,192,814 (27,055,528) NET ASSETS: Beginning of period 99,779,304 57,988,747 129,775,842 129,361,697 87,918,241 114,973,769 ------------- ------------- ------------- ------------- ------------- ------------- End of period $ 234,177,250 $ 99,779,304 $ 149,217,753 $ 129,775,842 $ 135,111,055 $ 87,918,241 ============= ============= ============= ============= ============= ============= Undistributed (distributions in excess of) net investment income included in net assets at end of period $ 336,534 $ 222,602 $ (13,085) $ - $ 365,099 $ 343,378 ============= ============= ============= ============= ============= ============= iSHARES ISSUED AND REDEEMED: iShares sold 3,000,000 3,550,000 1,200,000 5,350,000 900,000 1,500,000 iShares redeemed (100,000) (2,100,000) (1,300,000) (4,850,000) (150,000) (1,700,000) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in iShares outstanding 2,900,000 1,450,000 (100,000) 500,000 750,000 (200,000) ============= ============= ============= ============= ============= =============
SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 47 STATEMENTS OF CHANGES IN NET ASSETS (Continued) iSHARES TRUST
iSHARES DOW JONES U.S. iSHARES DOW JONES U.S. iSHARES DOW JONES U.S. FINANCIAL SECTOR INDUSTRIAL SECTOR FINANCIAL SERVICES INDEX FUND INDEX FUND INDEX FUND -------------------------------- -------------------------------- -------------------------------- FOR THE SIX FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE MONTHS ENDED FOR THE OCTOBER 31, 2003 YEAR ENDED OCTOBER 31, 2003 YEAR ENDED OCTOBER 31, 2003 YEAR ENDED (Unaudited) APRIL 30, 2003 (Unaudited) APRIL 30, 2003 (Unaudited) APRIL 30, 2003 ----------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 1,865,954 $ 2,499,345 $ 493,904 $ 730,706 $ 948,684 $ 1,059,977 Net realized gain (loss) 10,428 393,557 1,505,042 (2,021,984) 3,971,277 (964,721) Net change in unrealized appreciation (depreciation) 26,732,582 (12,735,690) 13,215,446 (9,582,522) 10,851,977 (291,999) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 28,608,964 (9,842,788) 15,214,392 (10,873,800) 15,771,938 (196,743) ------------- ------------- ------------- ------------- ------------- ------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (1,513,616) (2,355,203) (322,238) (724,498) (910,058) (945,070) ------------- ------------- ------------- ------------- ------------- ------------- Total distributions to iShareholders (1,513,616) (2,355,203) (322,238) (724,498) (910,058) (945,070) ------------- ------------- ------------- ------------- ------------- ------------- iSHARES TRANSACTIONS: iShares sold 32,084,979 59,776,259 62,587,881 34,729,899 - 75,007,718 iShares redeemed (4,069,289) (21,171,250) (12,327,320) (26,715,462) (42,032,560) (17,000,726) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from iSHARES transactions 28,015,690 38,605,009 50,260,561 8,014,437 (42,032,560) 58,006,992 ------------- ------------- ------------- ------------- ------------- ------------- INCREASE (DECREASE) IN NET ASSETS 55,111,038 26,407,018 65,152,715 (3,583,861) (27,170,680) 56,865,179 NET ASSETS: Beginning of period 148,202,669 121,795,651 81,050,526 84,634,387 116,957,425 60,092,246 ------------- ------------- ------------- ------------- ------------- ------------- End of period $ 203,313,707 $ 148,202,669 $ 146,203,241 $ 81,050,526 $ 89,786,745 $ 116,957,425 ============= ============= ============= ============= ============= ============= Undistributed net investment income included in net assets at end of period $ 673,171 $ 320,833 $ 177,874 $ 6,208 $ 260,605 $ 221,979 ============= ============= ============= ============= ============= ============= iSHARES ISSUED AND REDEEMED: iShares sold 400,000 850,000 1,450,000 900,000 - 950,000 iShares redeemed (50,000) (300,000) (300,000) (650,000) (500,000) (200,000) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in iShares outstanding 350,000 550,000 1,150,000 250,000 (500,000) 750,000 ============= ============= ============= ============= ============= =============
SEE NOTES TO FINANCIAL STATEMENTS. 48 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS STATEMENTS OF CHANGES IN NET ASSETS (Continued) iSHARES TRUST
iSHARES DOW JONES U.S. iSHARES COHEN & STEERS REAL ESTATE REALTY MAJORS INDEX FUND INDEX FUND ----------------------------------- ---------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE OCTOBER 31, 2003 YEAR ENDED OCTOBER 31, 2003 YEAR ENDED (Unaudited) APRIL 30, 2003 (Unaudited) APRIL 30, 2003 ------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 7,749,123 $ 9,086,000 $ 10,858,278 $ 10,744,683 Net realized gain (loss) 2,895,108 (5,335,054) 2,647,048 334,129 Net change in unrealized appreciation (depreciation) 33,007,337 (6,654,575) 52,877,473 (2,468,883) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations 43,651,568 (2,903,629) 66,382,799 8,609,929 --------------- --------------- --------------- --------------- Undistributed net investment income included in the price of capital shares issued or redeemed (966,000) 378,000 (1,790,000) 2,950,500 --------------- --------------- --------------- --------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (7,013,566) (7,002,627) (11,339,129) (8,993,012) Return of capital - (1,573,981) - (2,864,361) --------------- --------------- --------------- --------------- Total distributions to iShareholders (7,013,566) (8,576,608) (11,339,129) (11,857,373) --------------- --------------- --------------- --------------- iSHARES TRANSACTIONS: iShares sold 127,670,768 247,295,083 182,121,937 313,456,287 iShares redeemed (27,509,523) (147,895,080) (18,374,067) (135,111,372) --------------- --------------- --------------- --------------- Net increase in net assets from iShares transactions 100,161,245 99,400,003 163,747,870 178,344,915 --------------- --------------- --------------- --------------- INCREASE IN NET ASSETS 135,833,247 88,297,766 217,001,540 178,047,971 NET ASSETS: Beginning of period 195,202,745 106,904,979 267,731,855 89,683,884 --------------- --------------- --------------- --------------- End of period $ 331,035,992 $ 195,202,745 $ 484,733,395 $ 267,731,855 =============== =============== =============== =============== Undistributed (distributions in excess of) net investment income included in net assets at end of period $ 1,390,149 $ 654,592 $ (38,171) $ 442,680 =============== =============== =============== =============== iSHARES ISSUED AND REDEEMED: iShares sold 1,400,000 3,100,000 1,900,000 3,800,000 iShares redeemed (300,000) (1,900,000) (200,000) (1,650,000) --------------- --------------- --------------- --------------- Net increase in iShares outstanding 1,100,000 1,200,000 1,700,000 2,150,000 =============== =============== =============== ===============
SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 49 FINANCIAL HIGHLIGHTS iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. BASIC MATERIALS SECTOR INDEX FUND ----------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 34.41 $ 39.99 $ 39.24 $ 36.04 --------------- --------------- --------------- --------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.29 0.70 0.55 0.55 Net realized and unrealized gain (loss) 5.99 (5.62) 0.73 3.25 --------------- --------------- --------------- --------------- Total from investment operations 6.28 (4.92) 1.28 3.80 --------------- --------------- --------------- --------------- LESS DISTRIBUTIONS FROM: Net investment income (0.31) (0.66) (0.53) (0.53) Net realized gain - - - (0.07) --------------- --------------- --------------- --------------- Total distributions (0.31) (0.66) (0.53) (0.60) --------------- --------------- --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 40.38 $ 34.41 $ 39.99 $ 39.24 =============== =============== =============== =============== TOTAL RETURN 18.31%/2/ (12.30)% 3.38% 10.80%/2/ =============== =============== =============== =============== RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 234,177 $ 99,779 $ 57,989 $ 9,811 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 1.72% 2.10% 1.42% 1.77% Portfolio turnover rate/4/ 4% 6% 9% 16%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. 50 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. CONSUMER CYCLICAL SECTOR INDEX FUND ------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 45.54 $ 55.05 $ 59.88 $ 59.63 ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.05 0.02 0.09 Net realized and unrealized gain (loss) 8.72 (9.50) (4.80) 0.45 ------------ ------------ ------------ ------------ Total from investment operations 8.75 (9.45) (4.78) 0.54 ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS FROM: Net investment income (0.03) (0.05) - (0.10) Net realized gain - - - (0.19) Return of capital - (0.01) (0.05) - ------------ ------------ ------------ ------------ Total distributions (0.03) (0.06) (0.05) (0.29) ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 54.26 $ 45.54 $ 55.05 $ 59.88 ============ ============ ============ ============ TOTAL RETURN 19.23%/2/ (17.17)% (7.98)% 0.98%/2/ ============ ============ ============ ============ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 149,218 $ 129,776 $ 129,362 $ 29,940 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets/3/ 0.09% 0.11% (0.05)% 0.16% Portfolio turnover rate/4/ 3% 8% 4% 25%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 51 FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. CONSUMER NON-CYCLICAL SECTOR INDEX FUND ------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 39.96 $ 47.91 $ 40.55 $ 40.83 ------------- ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.33 0.69 0.49 0.42 Net realized and unrealized gain (loss) 5.87 (8.04) 7.41 (0.39) ------------- ------------ ------------ ------------ Total from investment operations 6.20 (7.35) 7.90 0.03 ------------- ------------ ------------ ------------ LESS DISTRIBUTIONS FROM: Net investment income (0.36) (0.60) (0.54) (0.31) ------------- ------------ ------------ ------------ Total distributions (0.36) (0.60) (0.54) (0.31) ------------- ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 45.80 $ 39.96 $ 47.91 $ 40.55 ============= ============ ============ ============ TOTAL RETURN 15.56%/2/ (15.40)% 19.65% 0.06%/2/ ============= ============ ============ ============ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 135,111 $ 87,918 $ 114,974 $ 14,192 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 1.60% 1.57% 1.46% 1.21% Portfolio turnover rate/4/ 3% 7% 8% 38%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. 52 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. FINANCIAL SECTOR INDEX FUND ------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED MAY 22, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 72.29 $ 81.20 $ 81.78 $ 71.80 ------------- ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.80 1.31 1.11 1.77 Net realized and unrealized gain (loss) 12.30 (8.94) (0.61) 10.17 ------------- ------------ ------------ ------------ Total from investment operations 13.10 (7.63) 0.50 11.94 ------------- ------------ ------------ ------------ LESS DISTRIBUTIONS FROM: Net investment income (0.68) (1.28) (1.08) (1.57) Net realized gain - - - (0.39) ------------- ------------ ------------ ------------ Total distributions (0.68) (1.28) (1.08) (1.96) ------------- ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 84.71 $ 72.29 $ 81.20 $ 81.78 ============= ============ ============ ============ TOTAL RETURN 18.20%/2/ (9.33)% 0.66% 16.69%/2/ ============= ============ ============ ============ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 203,314 $ 148,203 $ 121,796 $ 57,249 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 2.15% 1.94% 1.49% 1.46% Portfolio turnover rate/4/ 4% 7% 4% 11%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 53 FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. INDUSTRIAL SECTOR INDEX FUND ------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 38.60 $ 45.75 $ 53.99 $ 58.11 ------------- ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.17 0.38 0.29 0.22 Net realized and unrealized gain (loss) 6.34 (7.15) (8.23) (3.98) ------------- ------------ ------------ ------------ Total from investment operations 6.51 (6.77) (7.94) (3.76) ------------- ------------ ------------ ------------ LESS DISTRIBUTIONS FROM: Net investment income (0.12) (0.38) (0.30) (0.23) Net realized gain - - - (0.13) ------------- ------------ ------------ ------------ Total distributions (0.12) (0.38) (0.30) (0.36) ------------- ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 44.99 $ 38.60 $ 45.75 $ 53.99 ============= ============ ============ ============ TOTAL RETURN 16.88%/2/ (14.75)% (14.72)% (6.46)%/2/ ============= ============ ============ ============ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 146,203 $ 81,051 $ 84,634 $ 45,891 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 0.93% 1.03% 0.56% 0.44% Portfolio turnover rate/4/ 1% 12% 27% 23%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. 54 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. FINANCIAL SERVICES INDEX FUND ------------------------------------------------------------------------ SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 83.54 $ 92.45 $ 93.67 $ 85.58 ------------- ------------- ------------- ------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 1.14 1.41 1.22 1.29 Net realized and unrealized gain (loss) 16.09 (8.90) (1.26) 8.10 ------------- ------------- ------------- ------------- Total from investment operations 17.23 (7.49) (0.04) 9.39 ------------- ------------- ------------- ------------- LESS DISTRIBUTIONS FROM: Net investment income (1.01) (1.42) (1.18) (1.17) Net realized gain - - - (0.13) ------------- ------------- ------------- ------------- Total distributions (1.01) (1.42) (1.18) (1.30) ------------- ------------- ------------- ------------- NET ASSET VALUE, END OF PERIOD $ 99.76 $ 83.54 $ 92.45 $ 93.67 ============= ============= ============= ============= TOTAL RETURN 20.73%/2/ (8.02)% 0.00%/5/ 11.03%/2/ ============= ============= ============= ============= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 89,787 $ 116,957 $ 60,092 $ 37,467 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 2.16% 1.90% 1.46% 1.33% Portfolio turnover rate/4/ 4% 8% 3% 5%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. /5/ Rounds to less than 0.01%. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 55 FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. REAL ESTATE INDEX FUND ------------------------------------------------------------------------ SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ----------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 79.67 $ 85.52 $ 77.21 $ 68.97 --------------- ------------- ------------- --------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 2.58 5.04 4.56 3.51 Net realized and unrealized gain (loss) 13.46 (6.01) 8.71 7.51 --------------- ------------- ------------- --------------- Total from investment operations 16.04 (0.97) 13.27 11.02 --------------- ------------- ------------- --------------- LESS DISTRIBUTIONS FROM: Net investment income (2.46) (3.98) (4.54) (2.64) Net realized gain - - - (0.14) Return of capital - (0.90) (0.42) - --------------- ------------- ------------- --------------- Total distributions (2.46) (4.88) (4.96) (2.78) --------------- ------------- ------------- --------------- NET ASSET VALUE, END OF PERIOD $ 93.25 $ 79.67 $ 85.52 $ 77.21 =============== ============= ============= =============== TOTAL RETURN 20.38%/2/ (0.98)% 17.83% 16.32%/2/ =============== ============= ============= =============== RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 331,036 $ 195,203 $ 106,905 $ 54,049 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 6.11% 6.40% 5.97% 6.37% Portfolio turnover rate/4/ 12% 21% 10% 30%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. 56 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES COHEN & STEERS REALTY MAJORS INDEX FUND ------------------------------------------------------------------------ SIX MONTHS PERIOD FROM ENDED JAN. 29, 2001/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (Unaudited) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 84.99 $ 89.68 $ 80.09 $ 79.86 ------------- ------------- ------------- ------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 2.62 4.59 4.79 1.11 Net realized and unrealized gain (loss) 15.11 (4.32) 9.98 (0.39) ------------- ------------- ------------- ------------- Total from investment operations 17.73 0.27 14.77 0.72 ------------- ------------- ------------- ------------- LESS DISTRIBUTIONS FROM: Net investment income (2.77) (3.76) (4.77) (0.49) Return of capital - (1.20) (0.41) - ------------- ------------- ------------- ------------- Total distributions (2.77) (4.96) (5.18) (0.49) ------------- ------------- ------------- ------------- NET ASSET VALUE, END OF PERIOD $ 99.95 $ 84.99 $ 89.68 $ 80.09 ============= ============= ============= ============= TOTAL RETURN 21.11%/2/ 0.46% 19.05% 0.91%/2/ ============= ============= ============= ============= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 484,733 $ 267,732 $ 89,684 $ 40,047 Ratio of expenses to average net assets/3/ 0.35% 0.35%/5/ 0.35% 0.35% Ratio of net investment income to average net assets/3/ 5.75% 6.17%/5/ 5.80% 6.01% Portfolio turnover rate/4/ 5% 13% 15% 2%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. /5/ Includes voluntary reimbursement from the advisor. If such reimbursement had not been made, the ratios of expenses to average net assets and net investment income to average net assets would have been 0.36% and 6.16%, respectively. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 57 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 October 31, 2003, the Trust offered 58 investment portfolios or funds. These financial statements relate only to the iShares Dow Jones U.S. Basic Materials Sector, iShares Dow Jones U.S. Consumer Cyclical Sector, iShares Dow Jones U.S. Consumer Non-Cyclical Sector, iShares Dow Jones U.S. Financial Sector, iShares Dow Jones U.S. Industrial Sector, iShares Dow Jones U.S. Financial Services, iShares Dow Jones U.S. Real Estate and the iShares Cohen & Steers Realty Majors Index Funds (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 non-diversified fund under the 1940 Act. Non-diversified funds generally hold stocks of fewer companies than diversified funds and may be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence. Under the Funds' organizational documents, their officers and trustees 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 Equity securities are valued at the last sales price on the primary securities exchange or national securities market on which such securities are traded. Securities for which the primary market is the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ") are valued at the NASDAQ Official Closing Price. Securities not listed on an exchange or national securities market, or securities for which there were no sales prices, are valued at the latest quoted bid prices. U.S. Government obligations are valued at the latest quoted bid price. 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. Dividend income is recognized on the ex-dividend date, and interest income is accrued daily. Realized gains and losses on investment transactions are determined using the specific identification method. EQUALIZATION The iShares Dow Jones U.S. Real Estate Index Fund and the iShares Cohen & Steers Realty Majors Index Fund 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 58 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST of the proceeds from sales and costs of repurchases of capital stock is applied to 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 annually by each Fund. Distributions of net realized capital gains, if any, generally are declared and distributed once a year. Distributions are determined on a tax basis and may differ from net investment income and net realized capital gains for financial reporting purposes. At April 30, 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 INDEX FUND ORDINARY INCOME LONG-TERM GAIN EARNINGS -------------------------------------------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector $ 222,602 $ - $ 222,602 Dow Jones U.S. Consumer Non-Cyclical Sector 343,378 - 343,378 Dow Jones U.S. Financial Sector 247,989 - 247,989 Dow Jones U.S. Industrial Sector 6,208 - 6,208 Dow Jones U.S. Financial Services 221,979 - 221,979
For the year ended April 30, 2003, the tax characterization of distributions paid for each Fund was equal to the book characterization of distributions paid. The total distributions and distributions per share are disclosed in the accompanying Statements of Changes in Net Assets and the Financial Highlights for all Funds. 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 October 31, 2003. From November 1, 2002 to April 30, 2003, the Funds incurred net realized capital losses. As permitted by tax regulations, these Funds have elected to defer these losses and treat them as arising in the year ending April 30, 2004, as follows: DEFERRED NET REALIZED iSHARES INDEX FUND CAPITAL LOSSES -------------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector $ 3,235 Dow Jones U.S. Consumer Cyclical Sector 689,951 Dow Jones U.S. Consumer Non-Cyclical Sector 450,412 Dow Jones U.S. Financial Sector 1,073,866 Dow Jones U.S. Industrial Sector 208,357 Dow Jones U.S. Financial Services 533,948 Dow Jones U.S. Real Estate 546,829 NOTES TO THE FINANCIAL STATEMENTS 59 NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST The Funds had tax basis net capital loss carryforwards at April 30, 2003, the tax year-end of the Funds, as follows:
EXPIRING EXPIRING EXPIRING iSHARES INDEX FUND 2009 2010 2011 TOTAL -------------------------------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector $ - $ 67,181 $ 474,468 $ 541,649 Dow Jones U.S. Consumer Cyclical Sector - 214,348 640,467 854,815 Dow Jones U.S. Consumer Non-Cyclical Sector 12,169 410,794 786,981 1,209,944 Dow Jones U.S. Financial Sector - 146,667 1,198,744 1,345,411 Dow Jones U.S. Industrial Sector - 4,102,570 1,969,601 6,072,171 Dow Jones U.S. Financial Services - 138,646 506,488 645,134 Dow Jones U.S. Real Estate - - 818,229 818,229
Net capital loss carryforwards may be applied against any net realized taxable gains in each succeeding year, or until their respective expiration dates, whichever occurs first. For the six months ended October 31, 2003, the Funds realized net capital gains or losses resulting from in-kind redemptions of large blocks of 50,000 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 reclassified 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 October 31, 2003 are disclosed in the 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 Funds did not enter into any repurchase agreements at October 31, 2003. 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. 60 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST For its investment management services to each Fund, BGFA is entitled to an annual advisory fee based on the average daily net assets of each Fund as follows: ADVISORY iSHARES INDEX FUND FEE -------------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector 0.60% Dow Jones U.S. Consumer Cyclical Sector 0.60 Dow Jones U.S. Consumer Non-Cyclical Sector 0.60 Dow Jones U.S. Financial Sector 0.60 Dow Jones U.S. Industrial Sector 0.60 Dow Jones U.S. Financial Services 0.60 Dow Jones U.S. Real Estate 0.60 Cohen & Steers Realty Majors 0.35 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. Barclays Global Investors, N.A. ("BGI") serves as securities lending agent for the Trust. BGI is an affiliate of BGFA, the Funds' investment advisor. 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 October 31, 2003, BGI earned securities lending agent fees as follows: SECURITIES LENDING iSHARES INDEX FUND AGENT FEES -------------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector $ 4,571 Dow Jones U.S. Consumer Cyclical Sector 4,154 Dow Jones U.S. Consumer Non-Cyclical Sector 3,228 Dow Jones U.S. Financial Sector 4,881 Dow Jones U.S. Industrial Sector 2,292 Dow Jones U.S. Financial Services 2,826 Dow Jones U.S. Real Estate 8,695 Cohen & Steers Realty Majors 12,842 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. Barclays Global Investors Services ("BGIS"), a subsidiary of BGI, may serve as a broker-dealer for the Funds. For the six months ended October 31, 2003, BGIS did not receive any brokerage commissions from the Funds. Pursuant to an exemptive order issued by the Securities and Exchange Commission, 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. NOTES TO THE FINANCIAL STATEMENTS 61 NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST Pursuant to Rule 17a-7 of the 1940 Act, certain Funds executed cross trades for the six months ended October 31, 2003. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment advisor. The Board has concluded that all transactions executed in the five months ended September 30, 2003 were in compliance with the requirements and restrictions set forth by Rule 17a-7. The Board is scheduled at its next meeting to review all such transactions executed during the month of October 2003. As of October 31, 2003, certain trustees and officers of the Trust are also employees of BGFA and its affiliates or employees of Investors Bank. 3. INVESTMENT PORTFOLIO TRANSACTIONS Purchases and sales of investments (excluding in-kind transactions and short-term securities) for the six months ended October 31, 2003, were as follows: iSHARES INDEX FUND PURCHASES SALES ----------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector $ 6,483,342 $ 6,221,948 Dow Jones U.S. Consumer Cyclical Sector 3,739,525 3,695,653 Dow Jones U.S. Consumer Non-Cyclical Sector 3,650,536 3,613,904 Dow Jones U.S. Financial Sector 6,314,463 6,145,680 Dow Jones U.S. Industrial Sector 862,673 552,905 Dow Jones U.S. Financial Services 3,870,345 3,890,839 Dow Jones U.S. Real Estate 31,470,079 31,724,586 Cohen & Steers Realty Majors 17,432,821 18,317,939 In-kind transactions for the six months ended October 31, 2003, were as follows: IN-KIND IN-KIND iSHARES INDEX FUND PURCHASES SALES ------------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector $ 113,561,652 $ 3,655,257 Dow Jones U.S. Consumer Cyclical Sector 61,017,724 65,225,777 Dow Jones U.S. Consumer Non-Cyclical Sector 39,999,595 6,837,846 Dow Jones U.S. Financial Sector 32,047,119 4,066,855 Dow Jones U.S. Industrial Sector 62,542,181 12,327,892 Dow Jones U.S. Financial Services - 41,978,412 Dow Jones U.S. Real Estate 126,258,545 27,370,681 Cohen & Steers Realty Majors 189,968,811 28,373,710 62 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST At October 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 INDEX FUND COST APPRECIATION DEPRECIATION (DEPRECIATION) ----------------------------------------------------------------------------------------------------------------- Dow Jones U.S. Basic Materials Sector $ 267,540,094 $ 18,914,338 $ (5,698,946) $ 13,215,392 Dow Jones U.S. Consumer Cyclical Sector 167,539,358 8,095,059 (16,705,202) (8,610,143) Dow Jones U.S. Consumer Non-Cyclical Sector 146,864,940 5,258,681 (8,984,916) (3,726,235) Dow Jones U.S. Financial Sector 195,694,667 21,547,099 (5,160,351) 16,386,748 Dow Jones U.S. Industrial Sector 162,020,999 7,058,724 (14,802,097) (7,743,373) Dow Jones U.S. Financial Services 85,473,017 10,068,188 (1,349,841) 8,718,347 Dow Jones U.S. Real Estate 343,148,981 26,284,039 (612,274) 25,671,765 Cohen & Steers Realty Majors 476,174,198 47,617,565 - 47,617,565
4. iSHARES TRANSACTIONS At October 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 Statements 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 equity securities constituting a substantial replication, or a portfolio sampling representation, of the stocks involved in the relevant Fund's underlying index, and an amount of cash. A purchase transaction fee and a redemption transaction fee are charged to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units of iShares. 5. LOANS OF PORTFOLIO SECURITIES Each Fund may lend its investment securities to approved borrowers such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received is required to have a value of at least 102% of the market value of the loaned securities for securities denominated in U.S. dollars and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The risks to a Fund of securities lending are that the borrower may not provide additional collateral when required, or return the securities when due. As of October 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, including money market funds managed by BGFA. 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 October 31, 2003 and the value of the related collateral are disclosed in Statements of Assets and Liabilities. NOTES TO THE FINANCIAL STATEMENTS 63 NOTES: 64 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS NOTES: NOTES 65 THE iSHARES FAMILY OF FUNDS The following is a list of iShares Funds being offered as of December 31, 2003, 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 Transportation Average Index Fund (IYT) 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) SPECIALTY iShares Dow Jones Select Dividend Index Fund (DVY) FIXED INCOME iShares GS $ InvesTop(TM) Corporate Bond Fund (LQD) 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 Lehman TIPS Bond Fund (TIP) 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. 66 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. iShares are not sponsored, endorsed, sold or promoted by Dow Jones & Company, Inc. or Cohen & Steers Capital Management. Inc., nor do these companies make any representation regarding the advisability of investing in iShares. 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 2737) WWW.iSHARES.COM BARCLAYS iSHARES(R) 2003 SEMI-ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 2003 [GRAPHIC APPEARS HERE] INDUSTRIAL STRENGTH INVESTMENT TOOLS iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND iSHARES DOW JONES U.S. ENERGY SECTOR INDEX FUND iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND iSHARES DOW JONES U.S. TELECOMMUNICATIONS SECTOR INDEX FUND iSHARES DOW JONES U.S. UTILITIES SECTOR INDEX FUND iSHARES DOW JONES TRANSPORTATION AVERAGE INDEX FUND TABLE OF CONTENTS Shareholder Letter ........................................................ 1 Managers' Discussion & Analysis ........................................... 4 Schedules of Investments .................................................. 18 iShares Dow Jones U.S. Total Market Index Fund .......................... 18 iShares Dow Jones U.S. Energy Sector Index Fund ......................... 40 iShares Dow Jones U.S. Healthcare Sector Index Fund ..................... 43 iShares Dow Jones U.S. Technology Sector Index Fund ..................... 47 iShares Dow Jones U.S. Telecommunications Sector Index Fund ............. 52 iShares Dow Jones U.S. Utilities Sector Index Fund ...................... 54 iShares Dow Jones Transportation Average Index Fund ..................... 57 Financial Statements ...................................................... 58 Financial Highlights ...................................................... 65 Notes to the Financial Statements ......................................... 72 iShares Family of Funds ................................................... 78
TO OUR SHAREHOLDERS For many investors, the last few years have been difficult and challenging. The collapse of the stock market bubble, a tepid economy, corporate accounting scandals, lackluster company earnings and the geopolitical situation all contributed to a three-year bear market. Stock market gains during the first half of 2003 give some hope that the markets have turned a corner, but there is no guarantee that challenging market conditions will not return. 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, the iShares family of funds recently launched the iShares Dow Jones Transportation Average and iShares Dow Jones Select Dividend Index Funds and in April of this year, iShares launched an emerging markets exchange traded fund based on the MSCI Emerging Markets Free Index. Last year, iShares launched the first fixed income exchange traded funds, which BUSINESS WEEK named one of the best new products of 2002./1/ iShares have added a Lehman Aggregate Bond Fund to their fixed income menu, enabling investors to track one of the most well known U.S. fixed income market indexes. iShares have also added the iShares Lehman TIPS Bond Fund, which provides the opportunity to gain exposure to inflation protected government securities. With the addition of these iShares, 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 market segments such as capitalization, sectors, value and growth, international and fixed income. 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 the iShares family of funds continue to grow, and as of October 31, 2003, had reached $48.3 billion. 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 Dow Jones & Company Inc., or 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 THIS PAGE INTENTIONALLY LEFT BLANK. 3 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ---------------------------------------------------------- ------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 ------------------------- --------------------------- ------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 22.95% 23.23% 23.22% (7.35)% (7.36)% (7.18)% (22.81)% (22.83)% (22.31)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/16/00), 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. [CHART APPEARS HERE] TOP 10 FUND SECTORS (% of Net Assets) FINANCIAL 21.31% TECHNOLOGY 16.47% CONSUMER CYCLICAL 14.69% HEALTHCARE 13.21% INDUSTRIAL 11.49% CONSUMER NON-CYCLICAL 8.48% ENERGY 5.67% TELECOMMUNICATIONS 3.03% UTILITIES 2.94% BASIC MATERIALS 2.54% The iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Total Market Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period") the Fund returned 17.27%, while the Index returned 17.42%. Equity markets rebounded during the reporting period. As the economic outlook began to offer some signs of encouragement, stocks climbed. In late June, the Federal Reserve Board cut short-term interest rates by 0.25% to the lowest level in 45 years, in an effort to stimulate the economy. Second quarter Gross Domestic Product ("GDP") figures revealed renewed signs of growth. After several revisions, third quarter GDP growth was ultimately reported to be a 3.3% annual rate. In October, initial third quarter GDP annual growth was reported at an even more encouraging 7.2%. However, this number did include some non-recurring items such as a refinancing boom spurred by the historically low interest rates. Corporate earnings also provided cause for optimism. As corporate second quarter announcements were released, positive surprises outnumbered negative surprises by almost five to one. Third quarter earnings reports came in about 6% above most analyst expectations, in contrast to the past several years, when earnings generally fell short of most analyst estimates. Throughout the reporting period, 4 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS announcements increasingly showed higher earnings levels and stabilizing earnings expectations. Third quarter earnings were consistently strong across sectors, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. Among the Index's ten largest weightings, performance was largely positive during the reporting period. Intel Corp. (1.85% of the Index as of October 31, 2003) returned 79.37%, and Citigroup Inc. (2.09% of the Index as of October 31, 2003) gained 20.76%. International Business Machines Corp. (1.33% of the Index as of October 31, 2003) rose 5.39%. American International Group Inc. and Wal-Mart Stores Inc. (respectively 1.36% and 2.22% of the Index as of October 31, 2003) gained 4.97% and 4.67%. On the negative side, Johnson & Johnson (1.28% of the Index as of October 31, 2003) declined 10.70%, and General Electric Co., the largest weighting at 2.48% of the Index as of October 31, 2003, fell 1.49% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 5 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. ENERGY SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ---------------------------------------------------------- ------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 ------------------------- --------------------------- ------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 14.99% 14.97% 14.81% (3.21)% (3.20)% (2.64)% (10.47)% (10.44)% (8.68)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/16/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) EXXON MOBIL CORP. 23.47% CHEVRONTEXACO CORP. 22.64% SCHLUMBERGER LTD. 4.87% CONOCOPHILLIPS 4.84% OCCIDENTAL PETROLEUM CORP. 4.22% BURLINGTON RESOURCES INC. 2.62% APACHE CORP. 2.43% BAKER HUGHES INC. 2.39% ANADARKO PETROLEUM CORP. 2.34% MURPHY OIL CORP. 2.34% The iSHARES DOW JONES U.S. ENERGY SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Energy Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 11.67%, while the Index returned 9.70%. Portfolio management constraints can restrict the investment advisor's ability to hold a given index component at its benchmark weight, resulting in differences between the Fund's holdings and the securities in the Index. One such constraint, the "Single Issuer Rule", generally prohibits a fund from investing more than 25% of the value of a fund's total assets in the securities of a single issuer. To comply with this Rule, the Fund was obligated to underweight its investment in the Index's largest constituent, Exxon Mobil Corp., and to overweight its investment in ChevronTexaco Corp., which outperformed the benchmark during the reporting period. This had a positive impact on the Fund's performance relative to the Index's, and was a major factor in the Fund's outperformance of the Index by 1.97 percentage points. Equity markets reversed course during the reporting period. Responding positively to encouraging economic news, stocks generally led an upward march throughout the reporting period. Gross Domestic Product ("GDP") growth for the second quarter was revised upward several times, ultimately showing an annual growth rate of 3.3%. Initial third quarter GDP growth was reported at an even more encouraging 7.2% 6 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS annual rate, although the figure includes some non-recurring items such as a mortgage-refinancing boom. Corporate earnings growth also was strong and consistent, in some cases reaching double-digit growth rates and exceeding most analyst expectations during the reporting period. Oil prices experienced a volatile period. The war in Iraq elevated oil prices as it created instability in the region. After the official end of the war, oil prices drifted downward as a result of resumed production in Iraq and higher inventories in the U.S. and Europe, as well as increased production in Russia. In August alone, the price of crude oil dropped 13%, to just over $25 per barrel. Fearing further price erosion and rising inventories, the Organization of Petroleum Exporting Countries (OPEC) decided to cut production by 3%-5%, effective November 1, 2003. Among the Index's ten largest constituents, performance was mostly positive during the reporting period. The best performer was Apache Corp. (1.79% of the Index as of October 31, 2003), which gained 21.78%. The three largest constituents, diversified oil companies Exxon Mobil Corp. (38.84% of the Index as of October 31, 2003), ChevronTexaco Corp. (12.61% of the Index as of October 31, 2003), and ConocoPhillips (6.14% of the Index as of October 31, 2003), returned 3.92%, 18.29%, and 13.62%, respectively. Occidental Petroleum Corp. (2.15% of the Index as of October 31, 2003) climbed 18.12%. The only negative performer among the ten largest constituents was Anadarko Petroleum Corp. (1.72% of the Index as of October 31, 2003), which declined 1.76% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 7 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------- ------------------------------ YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------- ------------------------------ ------------------------------ NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 9.54% 9.56% 10.19% (2.69)% (2.69)% (2.08)% (8.83)% (8.84)% (6.87)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/16/00), 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. [CHART APPERS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) PFIZER INC. 17.09% JOHNSON & JOHNSON 10.38% MERCK & CO. INC. 6.89% AMGEN INC. 5.48% ABBOTT LABORATORIES 4.62% LILLY (ELI) & CO. 4.44% WYETH 4.06% MEDTRONIC INC. 3.85% BRISTOL-MYERS SQUIBB CO. 3.41% UNITEDHEALTH GROUP INC. 2.11% The iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Healthcare Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period") the Fund returned 5.22%, while the Index returned 5.53%. Stocks were lifted by an official end to the war in Iraq and improving economic conditions during the reporting period. In particular, second quarter Gross Domestic Product ("GDP") figures revealed an economy growing at an annual rate of 3.3%, well above the 1.5% originally predicted. Initial third quarter GDP reports, released in October, reflected an even more robust 7.2% annual growth rate. Corporate earnings growth was also encouraging. Third quarter earnings were about 6% ahead of most analyst expectations, compared to the last several years, when earnings generally fell short of most analyst estimates. On the negative side, jobless claims remained high throughout the reporting period. Healthcare companies posted mixed results for the reporting period. Biotechnology and medical technology companies generally performed well, continuing to benefit from renewed investor interest in growth-related stocks. Pharmaceutical company shares were mixed, as the proposed Medicare legislation generated mixed implications for the industry. On the one hand, many may benefit from federal subsidies to 8 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS help Medicare patients pay for prescription drugs. On the other hand, the threat of generic drugs may increase, as pharmaceutical companies' ability to block this competition may be limited. Among the Index's ten largest constituents, performance was mixed over the reporting period. The strongest performer was biotech company Genentech Inc. (2.79% of the Index as of October 31, 2003), which gained 115.77%. Abbott Laboratories and Eli Lilly and Co. (respectively 4.38% and 4.92% of the Index as of October 31, 2003) returned 4.90% and 4.39%. The largest constituent at 16.18% of the Index as of October 31, 2003, Pfizer Inc. climbed 2.76%. On the downside, Merck & Co. Inc. (6.53% of the Index as of October 31, 2003) declined 19.64%, and Johnson & Johnson (9.83% of the Index as of October 31, 2003) fell 10.70% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 9 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------- ------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------- ------------------------------ ------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 46.35% 46.37% 47.25% (22.97)% (22.99)% (22.53)% (59.53)% (59.57)% (58.65)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (5/15/00). "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 is 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 (5/19/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) MICROSOFT CORP. 14.68% INTEL CORP. 12.02% INTERNATIONAL BUSINESS MACHINES CORP. 8.61% CISCO SYSTEMS INC. 8.20% DELL INC. 4.55% HEWLETT-PACKARD CO. 3.40% TEXAS INSTRUMENTS INC. 2.78% ORACLE CORP. 2.66% APPLIED MATERIALS INC. 2.14% QUALCOMM INC. 2.10% The iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Technology Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 33.48%, while the Index returned 33.87%. Equity markets rebounded during the reporting period, as the war in Iraq came to an official close and economic conditions appeared to improve. In June, the Federal Reserve Board cut interest rates to 1.00%, the lowest level in 45 years, in an effort to stimulate the economy. Gross Domestic Product ("GDP") growth for the second quarter, originally estimated at 1.5%, ultimately revealed a 3.3% annual rate. Initial third quarter GDP annual growth was reported at 7.2%. Although some of this growth was the result of nonrecurring items, such as a mortgaging refinancing boom due to historically low rates, markets responded positively. Corporate earnings announcements provided additional encouragement in the form of increased earnings levels and stabilizing earnings expectations. After being the market laggards in recent reporting periods, information technology stocks rebounded to be among the market's best performers during the reporting period. Both global PC sales and global chip sales levels climbed throughout the reporting period, contributing 10 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS to a rally in the technology sector. For the third quarter, PC sales in the U.S. jumped 16.1% as compared with the third quarter of 2002, led by notebook PC sales, which have a higher profit margin than desktop computers. Reflecting the strength of the rebound in technology shares, all of the Index's ten largest weightings logged gains during the reporting period. Intel Corp. (11.43% of the Index as of October 31, 2003) led the way with a 79.37% gain. Applied Materials Inc. (2.04% of the Index as of October 31, 2003) climbed 59.58%, and Texas Instruments Inc. (2.65% of the Index as of October 31, 2003) returned 56.41%. QUALCOMM Inc. (2.00% of the Index as of October 31, 2003) rose 48.96%. The weakest performance among the ten largest weightings came from Oracle Corp. (3.32% of the Index as of October 31, 2003), which returned 0.76% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 11 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. TELECOMMUNICATIONS SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------- ------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------- ------------------------------ ------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 11.70% 11.13% 3.34% (24.79)% (24.76)% (21.95)% (62.54)% (62.48)% (57.37)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (5/22/00). "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 is 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 (5/26/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) VERIZON COMMUNICATIONS INC. 21.70% SBC COMMUNICATIONS INC. 18.93% BELLSOUTH CORP. 7.27% CITIZENS COMMUNICATIONS CO. 4.74% NEXTEL COMMUNICATIONS INC. CLASS A 4.71% TELEPHONE & DATA SYSTEMS INC. 4.70% CENTURYTEL INC. 4.63% ALLTEL CORP. 4.49% AT&T CORP. 4.40% AT&T WIRELESS SERVICES INC. 4.28% The iSHARES DOW JONES U.S. TELECOMMUNICATIONS SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Telecommunications Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period"), the Fund returned 10.14%, while the Index returned 6.54%. Portfolio management constraints can restrict the investment advisor's ability to hold a given index component at its benchmark weight, resulting in differences between the Fund's holdings and the securities in the Index. One such constraint, the "5/50 Rule", precludes the sum of all the securities weighted over 5% in a fund's portfolio from exceeding 50% of a fund's total assets. To comply with the 5/50 Rule, the Fund was obligated to underweight the Index's three largest constituents, which underperformed the benchmark during the reporting period. This had a positive impact on the Fund's performance relative to the Index's and was a major factor in the Fund's ability to outperform the Index by 3.60 percentage points during the reporting period. Investors finally found cause for optimism during the reporting period. Following an official conclusion to the war in Iraq, markets reversed course and headed upward throughout the period. Economic news and corporate earnings announcements also provided cause for encouragement. Second quarter GDP annual growth rates were 3.3%, and initial third quarter GDP annual growth was reported at 7.2%. As 12 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS corporate second quarter announcements were released, positive surprises outnumbered negative surprises by almost five to one. Third quarter earnings reports came in about 6% above most analyst expectations, in contrast to the past several years, when earnings generally fell short of most analyst estimates. Telecommunications shares generally rebounded from lows reached in previous reporting periods. The renewed interest in growth shares and improving earnings levels contributed to the sector's performance. In addition, many telecommunications companies that had suffered from overcapacity issues following the bursting of the technology bubble benefited from renewed demand during the reporting period. Among the Index's ten largest constituents, performance was largely positive over the reporting period. Nextel Communications Inc. Class A shares (7.08% of the Index as of October 31, 2003) was the best performer, logging a 63.35% gain. Sprint Corp. (FON Group) (4.26% of the Index as of October 31, 2003) returned 39.01%, and CenturyTel Inc. (1.50% of the Index as of October 31, 2003) climbed 21.39%. AT&T Wireless Services Inc. (5.79% of the Index as of October 31, 2003) gained 12.23%. Verizon Communications Inc., the largest constituent at 27.30% of the Index as of October 31, 2003, had the worst performance among the ten largest constituents with a 10.11% decline. Qwest Communications International Inc. (1.76% of the Index as of October 31, 2003) fell 6.37% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 13 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES U.S. UTILITIES SECTOR INDEX FUND Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS ----------------------------------------------------------- ------------------------------- YEAR ENDED 10/31/03 INCEPTION TO 10/31/03 INCEPTION TO 10/31/03 -------------------------- ------------------------------ ------------------------------- NAV MARKET INDEX NAV MARKET INDEX NAV MARKET INDEX 22.53% 22.43% 23.32% (4.13)% (4.14)% (3.66)% (13.33)% (13.36)% (11.87)%
"Total returns for the period since inception" are calculated from the inception date of the Fund (6/12/00). "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 is 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 (6/19/00), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) SOUTHERN COMPANY 6.69% EXELON CORP. 6.37% DOMINION RESOURCES INC. 6.15% DUKE ENERGY CORP. 5.09% ENTERGY CORP. 3.79% FIRSTENERGY CORP. 3.48% AMERICAN ELECTRIC POWER CO. INC. 3.46% FPL GROUP INC. 3.32% PROGRESS ENERGY INC. 3.26% PG&E CORP. 2.92% The iSHARES DOW JONES U.S. UTILITIES SECTOR INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Utilities Sector Index (the "Index"). For the six-month period ended October 31, 2003 (the "reporting period") the Fund returned 12.48%, while the Index returned 12.83%. Equity markets staged a rebound during the reporting period. In response to the official conclusion to the war in Iraq and the release of encouraging economic news, stocks generally trended upward throughout the reporting period. Gross Domestic Product ("GDP") growth for the second quarter was revised upward several times, ultimately showing an annual growth rate of 3.3%. For the third quarter, initial reports revealed an even stronger 7.2% annual growth rate. Corporate earnings announcements were also encouraging, showing both higher earnings levels and stabilizing earnings expectations. In addition, earnings expectations have become more accurate than in previous reporting periods. Third quarter earnings were consistently strong across sectors, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. 14 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS The utilities sector generally performed well during the reporting period, responding largely to the signs of economic recovery. As economic conditions improved, so did the demand for industrial production, which in turn meant higher demand for power. The sector in general also began to recover from the scandals that had surrounded utilities companies in previous reporting periods. Reflecting the improved environment, the best performer among the Index's ten largest constituents was PG&E Corp. (3.05% of the Index as of October 31, 2003), which gained 63.22% during the reporting period. Exelon Corp. (6.24% of the Index as of October 31, 2003) returned 19.63%, and Entergy Corp. (3.70% of the Index as of October 31, 2003) climbed 15.64%. American Electric Power Co. Inc. (3.39% of the Index as of October 31, 2003) rose 6.86%, FPL Group Inc. (3.53% of the Index as of October 31, 2003) gained 4.71%, and Dominion Resources Inc. (6.01% of the Index as of October 31, 2003) returned 4.09% over the reporting period. MANAGERS' DISCUSSION & ANALYSIS 15 MANAGERS' DISCUSSION & ANALYSIS iSHARES DOW JONES TRANSPORTATION AVERAGE INDEX FUND Performance as of 10/31/03 TOTAL RETURNS ----------------------------- INCEPTION TO 10/31/03 ----------------------------- NAV MARKET INDEX 4.22% 4.30% 4.16% "Total returns" represent the total change in value of an investment over the period indicated and is calculated from the inception date of the Fund (10/6/03). 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 is 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 (10/10/03), 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. [CHART APPEARS HERE] TOP 10 FUND HOLDINGS (% of Net Assets) FEDEX CORP. 12.12% UNITED PARCEL SERVICE INC. CLASS B 11.84% UNION PACIFIC CORP. 9.62% ROADWAY CORP. 7.96% CSX CORP. 4.68% BURLINGTON NORTHERN SANTA FE CORP. 4.52% RYDER SYSTEM INC. 4.47% CNF INC. 4.44% EXPEDITORS INTERNATIONAL WASHINGTON INC. 4.41% YELLOW CORP. 4.40% The iSHARES DOW JONES TRANSPORTATION AVERAGE INDEX FUND (the "Fund") seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones Transportation Average Index (the "Index"). For the period from the Fund's inception on October 6, 2003 through October 31, 2003 (the "reporting period"), the Fund returned 4.22%, while the Index returned 4.16%. The Fund's inception came at a time when equities generally were trending upward, and this pattern continued through the end of October. During the month encouraging news on both the economic front and from corporate America offered cause for optimism. Initial third quarter Gross Domestic Product ("GDP") annual growth was reported at 7.2%, considerably higher than recent quarters and exceeding most analyst expectations. Corporate earnings growth was also strong and consistent, almost 6% ahead of most analyst estimates. Third quarter earnings were consistently strong across sectors, which may be indicative of a more sustainable earnings recovery than in previous reporting periods. Further, across all sectors, the number of companies that reported earnings that were equal to, or better than, most analyst expectations exceeded 50%. The improving economic landscape generally translated into increased demand for transportation-related companies. In particular, airfreight and express shipping companies benefited from higher business activity levels. 16 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS Among the Index's ten largest constituents, performance was mostly positive during the reporting period. The largest constituent at 11.35% of the Index as of October 31, 2003, FedEx Corp. was also the best performer, gaining 11.74%. United Parcel Service Inc. Class B (10.86% of the Index as of October 31, 2003) climbed 11.40%. CNF Inc. (5.24% of the Index as of October 31, 2003) rose 7.92%. CSX Corp. (4.77% of the Index as of October 31, 2003) returned 6.81%, and Union Pacific Corp. (9.37% of the Index as of October 31, 2003) gained 6.39%. Among the ten largest constituents, the sole negative performer was USF Corp. (4.78% of the Index as of October 31, 2003), which declined 6.42% during the reporting period. MANAGERS' DISCUSSION & ANALYSIS 17 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS - 99.85% General Electric Co. 255,279 $ 7,405,644 Microsoft Corp. 258,718 6,765,476 Pfizer Inc. 199,654 6,309,066 Exxon Mobil Corp. 171,268 6,264,983 Citigroup Inc. 131,907 6,252,392 Intel Corp. 167,563 5,537,957 Wal-Mart Stores Inc. 69,467 4,095,080 International Business Machines Corp. 44,322 3,965,933 Johnson & Johnson 76,148 3,832,529 Cisco Systems Inc./1/ 180,019 3,776,799 American International Group Inc. 58,773 3,575,162 Procter & Gamble Co. 33,166 3,259,886 Bank of America Corp. 38,397 2,907,805 Coca-Cola Co. (The) 58,116 2,696,582 Merck & Co. Inc. 57,527 2,545,570 Wells Fargo & Company 42,989 2,421,140 Altria Group Inc. 51,959 2,416,093 Verizon Communications Inc. 70,630 2,373,168 Home Depot Inc. 60,788 2,253,411 PepsiCo Inc. 44,098 2,108,766 Dell Inc./1/ 58,089 2,098,175 SBC Communications Inc. 85,216 2,043,480 ChevronTexaco Corp. 27,415 2,036,934 Amgen Inc./1/ 32,820 2,026,963 JP Morgan Chase & Co. 52,102 1,870,462 Abbott Laboratories 40,093 1,708,764 Time Warner Inc./1/ 111,396 1,703,245 Lilly (Eli) & Co. 24,647 1,641,983 Fannie Mae 22,688 1,626,503 Hewlett-Packard Co. 70,364 1,569,821 Wachovia Corp. 34,117 1,564,947 Viacom Inc. Class B 38,995 1,554,731 Wyeth 34,023 1,501,775 3M Co. 18,370 1,448,842 Medtronic Inc. 31,198 1,421,693 Morgan Stanley 25,428 1,395,234 American Express Co. 29,301 1,375,096 U.S. Bancorp 49,179 1,338,652 Merrill Lynch & Co. Inc. 21,885 1,295,592 Texas Instruments Inc. 44,437 1,285,118 Bristol-Myers Squibb Co. 49,748 1,262,107 BellSouth Corp. 47,446 1,248,304 Oracle Corp./1/ 102,796 1,229,440 Bank One Corp. 28,957 1,229,225 Walt Disney Co. (The) 52,441 1,187,264 Comcast Corp. Class A/1/ 32,242 1,093,649 FleetBoston Financial Corp. 26,948 1,088,430 Tyco International Ltd. 51,271 1,070,538 Lowe's Companies Inc. 18,125 1,068,106 Anheuser-Busch Companies Inc. 21,433 1,055,790 Washington Mutual Inc. 23,811 1,041,731 Du Pont (E.I.) de Nemours and Co. 25,524 1,031,170 United Technologies Corp. 12,022 1,018,143 Freddie Mac 17,793 998,721 Applied Materials Inc./1/ 42,144 984,905 United Parcel Service Inc. Class B 13,553 982,864 QUALCOMM Inc. 20,361 967,148 Walgreen Co. 26,338 917,089 ConocoPhillips 15,827 904,513 Dow Chemical Co. (The) 23,422 882,775 Target Corp. 21,139 840,064 McDonald's Corp. 32,612 815,626 EMC Corp./1/ 58,772 813,399 Motorola Inc. 59,695 807,673 UnitedHealth Group Inc. 15,335 780,245 Gillette Co. (The) 23,872 761,517 Comcast Corp. Special Class A/1/ 22,708 740,735 MBNA Corp. 29,042 718,790 Fifth Third Bancorp 12,394 718,356 Goldman Sachs Group Inc. (The) 7,632 716,645 Allstate Corp. (The) 18,090 714,555 Boeing Co. (The) 18,352 706,368 Schlumberger Ltd. 14,847 697,364 Kimberly-Clark Corp. 13,074 690,438 Alcoa Inc. 21,681 684,469 Colgate-Palmolive Co. 12,863 684,183 Cardinal Health Inc. 11,462 680,155 First Data Corp. 19,039 679,692 Caterpillar Inc. 8,808 645,450 Liberty Media Corp. Class A/1/ 63,196 637,648 Yahoo! Inc./1/ 14,205 620,759 18 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Honeywell International Inc. 20,201 $ 618,353 Nextel Communications Inc. Class A/1/ 25,524 617,681 eBay Inc./1/ 11,016 616,235 Bank of New York Co. Inc. (The) 19,733 615,472 Emerson Electric Co. 10,799 612,843 Clear Channel Communications Inc. 14,332 585,032 Gannett Co. Inc. 6,930 582,882 Automatic Data Processing Inc. 15,308 577,724 Schering-Plough Corp. 37,640 574,763 Sysco Corp. 16,665 560,944 Marsh & McLennan Companies Inc. 13,060 558,315 Southern Company 18,573 553,475 BB&T Corp. 14,118 545,943 Prudential Financial Inc. 14,101 544,863 Ford Motor Company 44,870 544,273 FedEx Corp. 7,096 537,593 Cendant Corp./1/ 26,114 533,509 Exelon Corp. 8,251 523,526 National City Corp. 15,699 512,729 Boston Scientific Corp./1/ 7,537 510,406 Dominion Resources Inc. 8,251 508,262 General Motors Corp. 11,838 505,127 Illinois Tool Works Inc. 6,718 494,109 International Paper Co. 12,221 480,896 AFLAC Inc. 13,120 478,618 Forest Laboratories Inc./1/ 9,308 465,493 InterActiveCorp/1/ 12,608 462,840 HCA Inc. 11,989 458,579 SLM Corp. 11,627 455,313 Genentech Inc./1/ 5,516 452,147 Lehman Brothers Holdings Inc. 6,252 450,144 State Street Corp. 8,527 446,474 Kohls Corp./1/ 7,662 429,608 Lockheed Martin Corp. 9,179 425,538 Duke Energy Corp. 23,235 421,715 AT&T Wireless Services Inc./1/ 57,483 416,752 Maxim Integrated Products Inc. 8,365 415,824 SunTrust Banks Inc. 6,176 414,224 Analog Devices Inc./1/ 9,294 412,003 Costco Wholesale Corp./1/ 11,603 410,398 Union Pacific Corp. 6,522 408,277 Avon Products Inc. 6,002 407,896 Newmont Mining Corp. 9,303 407,285 Guidant Corp. 7,976 406,856 Baxter International Inc. 15,131 402,182 Amazon.com Inc./1/ 7,364 400,749 Hartford Financial Services Group Inc. 7,198 395,170 Veritas Software Corp./1/ 10,902 394,107 Northrop Grumman Corp. 4,403 393,628 Waste Management Inc. 15,128 392,118 Best Buy Co. Inc./1/ 6,708 391,143 Zimmer Holdings Inc./1/ 6,098 389,113 Omnicom Group Inc. 4,851 387,110 PNC Financial Services Group 7,197 385,543 Sara Lee Corp. 18,958 377,833 Alltel Corp. 7,931 374,898 Deere & Co. 6,160 373,419 Electronic Arts Inc./1/ 3,760 372,390 Corning Inc./1/ 33,906 372,288 Sprint Corp. (FON Group) 23,199 371,184 AT&T Corp. 19,952 370,908 Harley-Davidson Inc. 7,719 365,958 Countrywide Financial Corp. 3,460 363,715 Progressive Corp. (The) 4,892 361,030 Schwab (Charles) Corp. (The) 26,399 357,970 General Dynamics Corp. 4,259 356,478 Sears, Roebuck and Co. 6,721 353,726 Southwest Airlines Co. 18,160 352,304 CVS Corp. 10,010 352,152 Capital One Financial Corp. 5,757 350,026 Occidental Petroleum Corp. 9,872 348,087 WellPoint Health Networks Inc./1/ 3,892 345,999 Linear Technology Corp. 8,045 342,797 Carnival Corp. 9,782 341,490 Lucent Technologies Inc./1/ 105,910 338,912 Weyerhaeuser Co. 5,595 336,987 General Mills Inc. 7,486 335,747 Staples Inc./1/ 12,497 335,170 Paychex Inc. 8,591 334,362 Masco Corp. 12,144 333,960 Golden West Financial Corp. 3,321 333,528 General Motors Corp. Class H/1/ 20,038 329,224 SCHEDULES OF INVESTMENTS 19 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Mellon Financial Corp. 10,978 $ 327,913 Sun Microsystems Inc./1/ 82,634 327,231 ConAgra Foods Inc. 13,655 325,535 McGraw-Hill Companies Inc. (The) 4,854 324,975 Heinz (H.J.) Co. 9,073 320,549 Chubb Corp. 4,777 319,151 Bed Bath & Beyond Inc./1/ 7,541 318,532 Gap Inc. (The) 16,498 314,782 Entergy Corp. 5,802 312,728 Starbucks Corp./1/ 9,862 311,639 KeyCorp 10,938 308,999 Kroger Co./1/ 17,549 306,932 Praxair Inc. 4,157 289,244 Equity Office Properties Trust 10,259 287,355 Apache Corp. 4,114 286,828 American Electric Power Co. Inc. 10,119 285,255 FirstEnergy Corp. 8,281 284,784 International Game Technology Inc. 8,668 283,877 Stryker Corp. 3,485 282,668 Raytheon Co. 10,613 281,032 Gilead Sciences Inc./1/ 5,134 280,214 Agilent Technologies Inc./1/ 11,223 279,677 Anadarko Petroleum Corp. 6,409 279,561 KLA-Tencor Corp./1/ 4,857 278,452 FPL Group Inc. 4,339 276,568 Computer Associates International Inc. 11,750 276,360 Xilinx Inc./1/ 8,717 276,329 SouthTrust Corp. 8,653 275,598 TJX Companies Inc. 13,090 274,759 Burlington Northern Santa Fe Corp. 9,477 274,264 Nike Inc. Class B 4,280 273,492 St. Jude Medical Inc./1/ 4,660 271,026 Devon Energy Corp. 5,568 270,048 Progress Energy Inc. 6,192 266,875 Halliburton Co. 11,086 264,734 Electronic Data Systems Corp. 12,324 264,350 Ingersoll-Rand Co. Class A 4,362 263,465 Genzyme Corp. - General Division/1/ 5,715 262,318 Allergan Inc. 3,444 260,435 Tribune Co. 5,294 259,671 Hancock (John) Financial Services Inc. 7,324 258,903 Adobe Systems Inc. 5,902 258,744 Principal Financial Group Inc. 8,237 258,230 Symantec Corp./1/ 3,853 256,802 MetLife Inc. 8,143 255,690 ACE Ltd. 7,070 254,520 Yum! Brands Inc./1/ 7,428 253,592 Burlington Resources Inc. 5,180 251,955 PPG Industries Inc. 4,367 251,758 Pitney Bowes Inc. 6,063 249,189 Fortune Brands Inc. 3,775 245,941 Air Products & Chemicals Inc. 5,413 245,804 Johnson Controls Inc. 2,285 245,706 PG&E Corp./1/ 9,971 243,791 Northern Trust Corp. 5,246 243,677 XL Capital Ltd. Class A 3,499 243,181 Lexmark International Inc./1/ 3,281 241,514 Baker Hughes Inc. 8,545 241,482 Safeway Inc./1/ 11,409 240,730 Anthem Inc./1/ 3,511 240,258 Intuit Inc./1/ 4,806 240,204 Danaher Corp. 2,890 239,436 PACCAR Inc. 3,006 237,354 EchoStar Communications Corp./1/ 6,191 237,239 Becton, Dickinson & Co. 6,473 236,653 Biomet Inc. 6,545 234,704 Public Service Enterprise Group Inc. 5,725 233,981 Medco Health Solutions Inc./1/ 7,012 232,798 Marathon Oil Corp. 7,856 232,302 Consolidated Edison Inc. 5,715 231,286 Aetna Inc. 3,984 228,721 Federated Department Stores Inc. 4,786 227,574 Apollo Group Inc. Class A/1/ 3,565 226,484 M&T Bank Corp. 2,398 225,172 St. Paul Companies Inc. 5,829 222,260 Mattel Inc. 11,281 218,400 Network Appliance Inc./1/ 8,822 217,727 MBIA Inc. 3,649 217,517 Comerica Inc. 4,208 216,628 AmSouth Bancorp 9,106 215,084 McKesson Corp. 7,103 215,008 Archer-Daniels-Midland Co. 14,911 213,973 20 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Xerox Corp./1/ 20,066 $ 210,693 Regions Financial Corp. 5,722 210,284 Travelers Property Casualty Corp. Class A 12,865 209,700 Kraft Foods Inc. 7,199 209,491 Unocal Corp. 6,561 207,852 May Department Stores Co. (The) 7,429 207,715 Travelers Property Casualty Corp. Class B 12,683 207,621 Micron Technology Inc./1/ 14,309 205,191 CIGNA Corp. 3,593 204,981 SunGard Data Systems Inc./1/ 7,279 204,176 Marriott International Inc. Class A 4,709 203,429 Norfolk Southern Corp. 10,061 202,729 Equity Residential 6,857 200,567 Kellogg Co. 6,040 200,105 Dover Corp. 5,120 199,782 Apple Computer Inc./1/ 8,717 199,532 Block (H & R) Inc. 4,236 199,473 Limited Brands Inc. 11,308 199,021 Wrigley (William Jr.) Co. 3,504 197,626 Altera Corp./1/ 9,714 196,514 Ambac Financial Group Inc. 2,760 195,242 Marshall & Ilsley Corp. 5,408 193,715 Eaton Corp. 1,932 193,664 Bear Stearns Companies Inc. (The) 2,536 193,370 National Semiconductor Corp./1/ 4,740 192,586 Accenture Ltd./1/ 8,230 192,582 Simon Property Group Inc. 4,223 190,373 Moody's Corp. 3,278 189,567 TXU Corp. 8,278 188,904 Computer Sciences Corp./1/ 4,744 187,957 Clorox Co. 4,128 186,998 Ameren Corp. 4,164 185,923 Charter One Financial Inc. 5,800 185,368 Broadcom Corp. Class A/1/ 5,737 183,297 Synovus Financial Corp. 6,594 181,994 Univision Communications Inc. Class A/1/ 5,329 180,920 CIT Group Inc. 5,372 180,607 New York Times Co. Class A 3,793 180,281 Family Dollar Stores Inc. 4,109 179,193 Lincoln National Corp. 4,481 178,926 PPL Corp. 4,469 178,402 Eastman Kodak Co. 7,260 177,362 PeopleSoft Inc./1/ 8,513 176,730 Jefferson-Pilot Corp. 3,698 176,543 Hershey Foods Corp. 2,289 176,482 Cox Communications Inc. Class A/1/ 5,152 175,529 Tiffany & Co. 3,664 173,857 Fiserv Inc./1/ 4,921 173,810 Starwood Hotels & Resorts Worldwide Inc. 5,151 173,743 CSX Corp. 5,392 171,573 Campbell Soup Co. 6,609 171,305 Dollar General Corp. 7,618 171,176 Franklin Resources Inc. 3,593 170,380 MedImmune Inc./1/ 6,375 169,958 Caremark Rx Inc./1/ 6,745 168,962 Microchip Technology Inc. 5,150 168,457 Monsanto Co. 6,724 168,436 Union Planters Corp. 5,005 166,516 Mylan Laboratories Inc. 6,878 166,092 Coach Inc./1/ 4,672 165,716 Xcel Energy Inc. 10,072 165,181 Penney (J.C.) Co. Inc. (Holding Co.) 6,946 164,273 Albertson's Inc. 8,088 164,106 Tenet Healthcare Corp./1/ 11,855 163,599 SanDisk Corp./1/ 2,027 163,376 Edison International/1/ 8,219 161,996 AmerisourceBergen Corp. 2,838 161,113 AutoZone Inc./1/ 1,671 160,583 ITT Industries Inc. 2,359 160,388 DTE Energy Co. 4,340 160,059 Newell Rubbermaid Inc. 6,988 159,326 Transocean Inc./1/ 8,291 159,104 Novellus Systems Inc./1/ 3,835 158,347 Affiliated Computer Services Inc. Class A/1/ 3,231 158,093 AON Corp. 7,088 155,227 Constellation Energy Group Inc. 4,260 154,936 Biogen Inc./1/ 3,826 154,838 Parker Hannifin Corp. 3,021 153,980 Centex Corp. 1,576 153,660 SCHEDULES OF INVESTMENTS 21 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Chiron Corp./1/ 2,811 $ 153,565 Sovereign Bancorp Inc. 7,377 153,515 North Fork Bancorp Inc. 3,933 153,308 Juniper Networks Inc./1/ 8,432 151,692 Hilton Hotels Corp. 9,566 151,525 Cinergy Corp. 4,170 151,413 Knight Ridder Inc. 2,058 150,893 American Standard Companies Inc./1/ 1,564 149,675 Interpublic Group of Companies Inc. 10,051 149,559 Georgia-Pacific Corp. 5,650 148,482 UST Inc. 4,355 148,157 Rohm & Haas Co. 3,764 147,925 Cintas Corp. 3,455 147,390 First Tennessee National Corp. 3,238 146,876 Cincinnati Financial Corp. 3,578 146,412 Textron Inc. 2,942 146,188 IMS Health Inc. 6,147 144,639 Zions Bancorporation 2,350 144,032 Siebel Systems Inc./1/ 11,383 143,312 Genuine Parts Co. 4,480 142,554 Popular Inc. 3,151 141,795 National Commerce Financial Corp. 5,161 141,773 IDEC Pharmaceuticals Corp./1/ 4,013 140,977 D.R. Horton Inc. 3,542 140,972 Loews Corp. 3,273 140,739 KeySpan Corp. 4,020 140,579 Freeport-McMoRan Copper & Gold Inc. 3,614 140,042 Nabors Industries Ltd./1/ 3,678 139,028 NiSource Inc. 6,709 138,943 Quest Diagnostics Inc./1/ 2,041 138,074 Phelps Dodge Corp./1/ 2,233 137,865 General Growth Properties Inc. 1,802 137,853 Legg Mason Inc. 1,654 137,696 BEA Systems Inc./1/ 9,866 137,137 Williams Companies Inc. 13,444 137,129 Sanmina-SCI Corp./1/ 12,877 135,852 Avaya Inc./1/ 10,486 135,689 Concord EFS Inc./1/ 12,661 135,346 Rockwell Automation Inc. 4,339 134,726 Advanced Micro Devices Inc./1/ 8,863 134,718 AES Corp. (The)/1/ 15,374 134,523 QLogic Corp./1/ 2,393 134,128 MeadWestvaco Corp. 5,149 133,462 Health Management Associates Inc. Class A 6,019 133,321 Lennar Corp. Class A 1,445 132,723 Sempra Energy 4,771 132,634 Kinder Morgan Inc. 2,475 132,536 BJ Services Co./1/ 4,035 132,388 MGIC Investment Corp. 2,577 132,226 SAFECO Corp. 3,595 131,937 Murphy Oil Corp. 2,220 130,936 Avery Dennison Corp. 2,456 129,136 T. Rowe Price Group Inc. 3,138 129,129 Banknorth Group Inc. 4,110 128,725 Vornado Realty Trust 2,541 128,448 Laboratory Corp. of America Holdings/1/ 3,623 128,435 RadioShack Corp. 4,266 127,937 Torchmark Corp. 2,902 127,340 Unisys Corp./1/ 8,274 127,089 Ecolab Inc. 4,695 126,249 Applera Corp. - Applied Biosystems Group 5,457 125,948 ProLogis 4,223 124,747 Plum Creek Timber Co. Inc. 4,713 124,188 CenturyTel Inc. 3,467 123,945 Radian Group Inc. 2,343 123,945 Coca-Cola Enterprises Inc. 6,142 123,823 Cooper Industries Ltd. 2,333 123,416 Valero Energy Corp. 2,889 123,360 Harrah's Entertainment Inc. 2,835 123,323 Qwest Communications International Inc./1/ 34,912 123,239 Huntington Bancshares Inc. 5,644 122,249 EOG Resources Inc. 2,901 122,248 Compass Bancshares Inc. 3,223 121,765 Career Education Corp./1/ 2,272 121,666 Synopsys Inc./1/ 3,826 121,361 JDS Uniphase Corp./1/ 34,144 121,211 Archstone-Smith Trust 4,463 119,162 Noble Corp./1/ 3,469 119,091 Office Depot Inc./1/ 7,965 118,917 22 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Dean Foods Co./1/ 3,901 $ 118,005 Solectron Corp./1/ 21,244 117,692 Everest Re Group Ltd. 1,414 117,291 Rockwell Collins Inc. 4,259 116,910 New York Community Bancorp Inc. 3,217 116,455 Pulte Homes Inc. 1,340 115,923 Jabil Circuit Inc./1/ 4,148 115,522 Weatherford International Ltd./1/ 3,313 115,127 Barr Laboratories Inc./1/ 1,496 114,848 Jones Apparel Group Inc. 3,328 114,816 Sealed Air Corp./1/ 2,146 114,232 Varian Medical Systems Inc./1/ 1,784 114,069 El Paso Corp. 15,411 113,117 L-3 Communications Holdings Inc./1/ 2,401 112,223 Millennium Pharmaceuticals Inc./1/ 7,016 111,695 UNUMProvident Corp. 6,804 111,381 Dollar Tree Stores Inc./1/ 2,915 111,295 GlobalSantaFe Corp. 4,929 110,952 Scientific-Atlanta Inc. 3,746 110,882 Delphi Corp. 12,390 110,271 Citrix Systems Inc./1/ 4,358 110,170 Whirlpool Corp. 1,562 110,074 Estee Lauder Companies Inc. Class A 2,933 109,665 XTO Energy Inc. 4,632 109,639 Watson Pharmaceuticals Inc./1/ 2,787 109,445 Amerada Hess Corp. 2,119 109,383 Boston Properties Inc. 2,449 108,368 Teradyne Inc./1/ 4,738 107,932 Kerr-McGee Corp. 2,593 107,610 Sherwin-Williams Co. (The) 3,205 107,496 Bard (C.R.) Inc. 1,335 106,867 Alcon Inc. 1,937 106,748 R.J. Reynolds Tobacco Holdings Inc. 2,197 105,522 Cadence Design Systems Inc./1/ 6,855 105,498 Robert Half International Inc./1/ 4,464 105,395 DST Systems Inc./1/ 2,765 104,572 Old Republic International Corp. 2,904 104,370 Wendy's International Inc. 2,792 103,444 Mercury Interactive Corp./1/ 2,221 103,143 BMC Software Inc./1/ 5,934 103,133 Diebold Inc. 1,806 103,050 Lear Corp./1/ 1,771 102,877 Harman International Industries Inc. 799 102,432 AdvancePCS/1/ 1,985 102,168 Leggett & Platt Inc. 4,859 101,505 Waters Corp./1/ 3,229 101,487 Expeditors International Washington Inc. 2,694 101,133 American Power Conversion Corp. 4,996 101,069 Liz Claiborne Inc. 2,728 100,636 VeriSign Inc./1/ 6,307 100,092 ENSCO International Inc. 3,787 99,787 Fidelity National Financial Inc. 3,222 99,624 Nucor Corp. 1,814 99,462 Kimco Realty Corp. 2,380 99,151 Wisconsin Energy Corp. 3,024 99,036 Mohawk Industries Inc./1/ 1,336 99,024 Cablevision Systems Corp./1/ 4,896 98,899 Omnicare Inc. 2,565 98,342 Ameritrade Holding Corp./1/ 7,198 98,181 Marvell Technology Group Ltd./1/ 2,237 98,137 AutoNation Inc./1/ 5,246 98,100 iStar Financial Inc. 2,575 98,005 Republic Services Inc. 4,215 97,999 Amdocs Ltd./1/ 4,563 97,922 Patterson Dental Co./1/ 1,529 97,825 Ross Stores Inc. 1,941 97,069 Lincare Holdings Inc./1/ 2,487 96,844 Smith International Inc./1/ 2,594 96,575 VF Corp. 2,257 95,810 E*TRADE Financial Corp./1/ 9,297 95,759 Smurfit-Stone Container Corp. 6,157 95,434 Duke Realty Corp. 3,258 95,394 PETsMART Inc. 3,714 95,116 GreenPoint Financial Corp. 3,045 94,852 Grainger (W.W.) Inc. 2,058 94,215 Hibernia Corp. Class A 4,149 93,726 Lam Research Corp./1/ 3,252 93,462 Manpower Inc. 2,014 93,450 Scripps (E.W.) Co. Class A 999 92,817 Health Net Inc./1/ 2,935 92,717 SPX Corp./1/ 1,926 92,679 TCF Financial Corp. 1,772 92,463 SCHEDULES OF INVESTMENTS 23 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Engelhard Corp. 3,228 $ 92,256 Whole Foods Market Inc./1/ 1,557 92,237 Black & Decker Corp. 1,927 92,130 Rouse Co. (The) 2,142 92,106 Citizens Communications Co./1/ 7,386 91,956 Pepsi Bottling Group Inc. 4,125 91,946 NCR Corp./1/ 2,537 91,180 Pactiv Corp./1/ 4,117 90,780 Commerce Bancorp Inc. 1,876 90,686 CDW Corp. 1,505 90,375 Intersil Corp. Class A 3,489 89,981 Vulcan Materials Co. 2,028 89,861 Thermo Electron Corp./1/ 4,069 89,437 Seagate Technology 3,888 89,346 Sprint Corp. (PCS Group)/1/ 20,516 89,245 PMI Group Inc. (The) 2,322 88,770 SCANA Corp. 2,586 88,674 Dun & Bradstreet Corp./1/ 1,900 88,445 Celgene Corp./1/ 2,112 88,049 LSI Logic Corp./1/ 9,509 87,863 SUPERVALU Inc. 3,471 87,539 Equifax Inc. 3,573 87,324 Mercantile Bankshares Corp. 2,056 87,113 Apartment Investment & Management Co. Class A 2,129 87,076 Hasbro Inc. 3,994 87,069 Express Scripts Inc./1/ 1,584 86,993 Tyson Foods Inc. Class A 6,057 86,433 Hillenbrand Industries Inc. 1,448 86,199 Pinnacle West Capital Corp. 2,353 86,026 ServiceMaster Co. (The) 7,485 85,853 White Mountains Insurance Group Ltd. 202 85,648 Comverse Technology Inc./1/ 4,742 85,546 Public Storage Inc. 2,134 85,360 CarMax Inc./1/ 2,704 85,203 Janus Capital Group Inc. 5,967 84,373 Sunoco Inc. 1,920 84,019 Humana Inc./1/ 4,140 84,001 Williams-Sonoma Inc./1/ 2,372 83,803 Chico's FAS Inc./1/ 2,232 83,789 Darden Restaurants Inc. 3,989 83,570 Energy East Corp. 3,710 83,289 Providian Financial Corp./1/ 7,495 83,269 Goodrich (B.F.) Co. 3,000 82,860 JetBlue Airways Corp./1/ 1,430 82,482 Edwards (A.G.) Inc. 2,031 82,255 IVAX Corp./1/ 4,270 82,240 Pioneer Natural Resources Co./1/ 3,108 82,207 Maxtor Corp./1/ 5,966 81,555 Telephone & Data Systems Inc. 1,302 81,505 Ceridian Corp./1/ 3,880 81,480 Energizer Holdings Inc./1/ 2,214 81,475 Sigma-Aldrich Corp. 1,553 81,455 Oxford Health Plans Inc./1/ 2,007 81,284 Brinker International Inc./1/ 2,549 81,135 King Pharmaceuticals Inc./1/ 6,054 81,124 AvalonBay Communities Inc. 1,762 80,471 Sabre Holdings Corp. 3,666 80,322 Level 3 Communications Inc./1/ 14,865 80,122 Michaels Stores Inc. 1,686 80,034 Fair Isaac Corp. 1,253 79,916 DENTSPLY International Inc. 1,798 79,454 Agere Systems Inc. Class B/1/ 23,427 79,418 Pepco Holdings Inc. 4,493 79,077 Invitrogen Corp./1/ 1,239 78,788 Nordstrom Inc. 2,577 78,573 Beckman Coulter Inc. 1,579 78,397 Fluor Corp. 2,114 78,387 Doral Financial Corp. 1,550 78,275 Iron Mountain Inc./1/ 2,043 78,124 Manor Care Inc. 2,346 78,075 CH Robinson Worldwide Inc. 1,992 78,047 ChoicePoint Inc./1/ 2,213 77,544 PMC-Sierra Inc./1/ 4,267 77,531 Garmin Ltd./1/ 1,544 77,246 Check Point Software Technologies Ltd./1/ 4,505 76,540 Royal Caribbean Cruises Ltd. 2,570 76,355 International Rectifier Corp./1/ 1,587 75,748 Pall Corp. 3,233 75,652 Fastenal Co. 1,700 75,599 CIENA Corp./1/ 11,786 75,548 Cognizant Technology Solutions Corp./1/ 1,656 75,166 24 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- RenaissanceRe Holdings Ltd. 1,671 $ 75,162 Commerce Bancshares Inc. 1,564 74,884 Outback Steakhouse Inc. 1,781 74,802 Stanley Works (The) 2,241 74,715 Donnelley (R.R.) & Sons Co. 2,865 74,490 Health Care Property Investors Inc. 1,597 74,468 Gentex Corp. 1,905 74,390 Symbol Technologies Inc. 5,944 74,241 Ball Corp. 1,316 73,959 Associated Bancorp 1,789 73,635 Tellabs Inc./1/ 9,729 73,259 Friedman, Billings, Ramsey Group, Inc. Class A 3,644 72,588 Mid Atlantic Medical Services Inc./1/ 1,241 72,474 PartnerRe Ltd. 1,330 72,179 Valley National Bancorp 2,464 72,072 Constellation Brands Inc./1/ 2,281 71,555 NVR Inc./1/ 146 71,452 Bunge Ltd. 2,596 70,352 Corinthian Colleges Inc./1/ 1,135 70,279 NTL Inc./1/ 1,136 70,125 International Flavors & Fragrances Inc. 2,117 70,073 Toys R Us Inc./1/ 5,382 69,966 Henry Schein Inc./1/ 1,121 69,558 Vishay Intertechnology Inc./1/ 3,704 69,450 Abercrombie & Fitch Co. Class A/1/ 2,429 69,226 GTECH Holdings Corp. 1,548 69,165 NVIDIA Corp./1/ 3,912 69,164 Liberty Property Trust 1,898 69,049 Western Digital Corp./1/ 5,108 68,703 Gallagher (Arthur J.) & Co. 2,353 68,684 Rent-A-Center Inc./1/ 2,191 68,491 ICOS Corp./1/ 1,462 68,305 CenterPoint Energy Inc. 6,950 68,179 Temple-Inland Inc. 1,258 67,970 Equitable Resources Inc. 1,643 67,692 Monster Worldwide Inc./1/ 2,657 67,674 Ashland Inc. 1,814 67,553 Coventry Health Care Inc./1/ 1,232 67,452 Astoria Financial Corp. 1,946 67,409 Questar Corp. 2,121 67,342 Zebra Technologies Corp. Class A/1/ 1,182 67,315 KB Home 981 67,189 UnionBanCal Corp. 1,240 67,171 Belo (A.H.) Corp. 2,462 67,114 Brunswick Corp. 2,258 66,995 Agere Systems Inc. Class A/1/ 19,242 66,962 Chesapeake Energy Corp. 5,580 66,569 Park Place Entertainment Corp./1/ 6,909 66,326 Federated Investors Inc. Class B 2,394 66,194 Foundry Networks Inc./1/ 2,819 65,570 Host Marriott Corp./1/ 6,271 65,532 Alliant Energy Corp. 2,721 65,467 3Com Corp./1/ 9,077 65,354 Storage Technology Corp./1/ 2,708 65,263 Neuberger Berman Inc. 1,502 65,112 Cypress Semiconductor Corp./1/ 3,014 64,680 Crown Castle International Corp./1/ 5,084 64,363 Foot Locker Inc. 3,588 64,225 Navistar International Corp./1/ 1,587 64,162 AMB Property Corp. 2,139 64,149 Atmel Corp./1/ 11,309 63,783 Harris Corp. 1,710 63,646 Cephalon Inc./1/ 1,353 63,537 Pogo Producing Co. 1,519 63,509 Lamar Advertising Co./1/ 2,090 63,327 Rite Aid Corp./1/ 11,043 63,276 MDU Resources Group Inc. 2,796 63,274 McCormick & Co. Inc. 2,128 63,074 ARAMARK Corp. Class B/1/ 2,355 62,926 Bausch & Lomb Inc. 1,306 62,897 American Tower Corp. Class A/1/ 5,415 62,814 NSTAR 1,345 62,812 UTStarcom Inc./1/ 1,994 62,811 Westwood One Inc./1/ 2,098 62,793 Universal Health Services Inc. Class B/1/ 1,334 62,765 Pharmaceutical Resources Inc./1/ 868 62,739 Northeast Utilities 3,330 62,737 Eastman Chemical Co. 1,920 62,323 Dana Corp. 3,810 62,027 City National Corp. 1,029 61,956 Jacobs Engineering Group Inc./1/ 1,336 61,884 SCHEDULES OF INVESTMENTS 25 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Hudson City Bancorp Inc. 1,789 $ 61,792 Allied Waste Industries Inc./1/ 5,477 61,781 TECO Energy Inc. 4,696 61,658 WebMD Corp./1/ 7,913 61,642 DaVita Inc./1/ 1,754 61,565 Triad Hospitals Inc./1/ 2,003 61,552 Berkley (W.R.) Corp. 1,787 61,276 Rambus Inc./1/ 2,461 60,934 United States Steel Corp. 2,576 60,922 Bemis Co. 1,316 60,852 ALLETE Inc. 2,009 60,692 First Health Group Corp./1/ 2,473 60,366 Emulex Corp./1/ 2,129 60,293 Fairchild Semiconductor International Inc. Class A/1/ 2,667 60,274 Cooper Cameron Corp./1/ 1,407 60,248 ITT Educational Services Inc./1/ 1,208 60,158 Lyondell Chemical Co. 4,175 59,703 Developers Diversified Realty Corp. 2,060 59,534 Sepracor Inc./1/ 2,232 59,438 Bowater Inc. 1,453 59,326 Ryland Group Inc. 666 59,207 Sirius Satellite Radio Inc./1/ 25,182 59,178 Rowan Companies Inc./1/ 2,468 59,109 Bank of Hawaii Corp. 1,499 59,061 MGM Grand Inc./1/ 1,658 58,859 Krispy Kreme Doughnuts Inc./1/ 1,356 58,742 New Plan Excel Realty Trust 2,580 58,566 Viad Corp. 2,339 58,428 PacifiCare Health Systems Inc./1/ 978 58,191 Network Associates Inc./1/ 4,168 58,060 RF Micro Devices Inc./1/ 4,955 58,023 Certegy Inc. 1,720 57,895 Convergys Corp./1/ 3,601 57,832 Autodesk Inc. 2,999 57,731 Deluxe Corp. 1,428 57,648 Sky Financial Group Inc. 2,367 57,636 O'Reilly Automotive Inc./1/ 1,328 57,489 Integrated Circuit Systems Inc./1/ 1,711 57,438 Wilmington Trust Corp. 1,700 57,256 Macerich Co. (The) 1,421 57,124 XM Satellite Radio Holdings Inc. Class A/1/ 2,811 56,951 Hospitality Properties Trust 1,553 56,949 Patterson-UTI Energy Inc./1/ 1,980 56,608 SEI Investment Co. 1,939 56,464 Avnet Inc./1/ 2,909 56,435 PerkinElmer Inc. 3,133 56,425 Donaldson Co. Inc. 984 56,304 Dial Corp. (The) 2,343 56,232 Fulton Financial Corp. 2,723 56,230 Investors Financial Services Corp. 1,586 56,033 Smucker (J.M.) Co. (The) 1,277 55,894 Novell Inc./1/ 9,509 55,818 Amylin Pharmaceuticals Inc./1/ 2,032 55,535 Chelsea Property Group Inc. 1,128 55,498 Webster Financial Corp. 1,235 55,205 Mack-Cali Realty Corp. 1,458 54,952 Arrow Electronics Inc./1/ 2,559 54,635 Advance Auto Parts Inc./1/ 697 54,519 Great Plains Energy Inc. 1,710 54,515 Valspar Corp. (The) 1,139 54,330 ImClone Systems Inc./1/ 1,563 54,314 Fisher Scientific International Inc./1/ 1,344 54,096 Protective Life Corp. 1,665 54,063 Markel Corp./1/ 214 54,011 United Dominion Realty Trust Inc. 3,093 53,973 Applebee's International Inc. 1,438 53,939 Tektronix Inc. 2,101 53,933 Millipore Corp./1/ 1,229 53,892 BorgWarner Inc. 677 53,882 Puget Energy Inc. 2,362 53,688 SICOR Inc./1/ 2,003 53,680 Noble Energy Inc. 1,345 53,423 Precision Castparts Corp. 1,297 53,346 Hubbell Inc. Class B 1,242 53,207 Dow Jones & Co. Inc. 1,020 53,009 Molex Inc. Class A 1,993 52,834 Pier 1 Imports Inc. 2,275 52,553 Eaton Vance Corp. 1,504 52,460 AMR Corp./1/ 3,931 52,204 Weingarten Realty Investors 1,204 52,097 Mandalay Resort Group 1,327 52,085 26 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Corporate Executive Board Co. (The)/1/ 1,021 $ 52,081 Sonoco Products Co. 2,448 52,069 ADC Telecommunications Inc./1/ 20,402 52,025 INAMED Corp./1/ 601 51,908 Stericycle Inc./1/ 1,124 51,906 HON Industries Inc. 1,260 51,660 M.D.C. Holdings Inc. 763 51,365 Getty Images Inc./1/ 1,148 51,316 Advanced Fibre Communications Inc./1/ 2,128 51,221 Cullen/Frost Bankers Inc. 1,321 51,202 AmeriCredit Corp./1/ 3,818 51,161 People's Bank 1,562 51,140 Pentair Inc. 1,246 51,086 Polycom Inc./1/ 2,548 51,036 Alliant Techsystems Inc./1/ 985 50,984 Apogent Technologies Inc./1/ 2,322 50,968 Martin Marietta Materials Inc. 1,233 50,516 Nationwide Financial Services Inc. 1,478 50,208 Red Hat Inc./1/ 3,338 50,204 First American Corp. 1,749 50,109 Roslyn Bancorp Inc. 1,859 50,081 NetScreen Technologies Inc./1/ 1,862 49,566 FirstMerit Corp. 1,922 49,549 Pride International Inc./1/ 3,014 49,369 StanCorp Financial Group Inc. 783 49,368 Polaris Industries Inc. 576 49,306 Maytag Corp. 1,941 49,301 Washington Federal Inc. 1,866 49,150 Newfield Exploration Co./1/ 1,232 48,947 Colonial BancGroup Inc. (The) 3,116 48,859 Federal Realty Investment Trust 1,277 48,462 Cheesecake Factory (The)/1/ 1,209 48,287 Smithfield Foods Inc./1/ 2,270 48,260 Reebok International Ltd. 1,238 48,220 Education Management Corp./1/ 759 47,954 Ryder System Inc. 1,593 47,790 Thornburg Mortgage Inc. 1,753 47,769 Amphenol Corp. Class A/1/ 813 47,764 HCC Insurance Holdings Inc. 1,630 47,498 Meredith Corp. 978 47,453 Vectren Corp. 2,008 47,389 Compuware Corp./1/ 8,430 47,377 Entercom Communications Corp./1/ 1,034 47,368 Catellus Development Corp. 2,125 47,324 Tech Data Corp./1/ 1,437 47,306 DPL Inc. 2,595 47,281 Hormel Foods Corp. 1,915 47,281 CheckFree Corp./1/ 1,714 47,186 Regency Centers Corp. 1,271 47,129 Neurocrine Biosciences Inc./1/ 996 46,643 Independence Community Bank Corp. 1,264 46,452 OGE Energy Corp. 2,031 46,327 Renal Care Group Inc./1/ 1,235 46,325 Pacific Sunwear of California Inc./1/ 2,004 46,272 CBRL Group Inc. 1,194 46,267 Louisiana-Pacific Corp./1/ 2,424 46,104 Brown-Forman Corp. Class B 546 46,071 Ruby Tuesday Inc. 1,681 45,975 Borders Group Inc./1/ 2,029 45,957 Andrew Corp./1/ 3,510 45,911 Washington Post Company (The) Class B 62 45,719 Applied Micro Circuits Corp./1/ 7,830 45,571 Philadelphia Suburban Corp. 1,928 45,539 Sybase Inc./1/ 2,542 45,502 Circuit City Stores Inc. 4,769 45,496 Human Genome Sciences Inc./1/ 3,263 45,388 Sonus Networks Inc./1/ 5,514 45,270 Edwards Lifesciences Corp./1/ 1,561 45,269 Westamerica Bancorp 904 45,254 Molex Inc. 1,441 45,233 Viacom Inc. Class A 1,135 45,218 Varco International Inc./1/ 2,568 45,171 Big Lots Inc./1/ 3,008 45,150 National Fuel Gas Co. 2,018 45,102 Reynolds & Reynolds Co. (The) Class A 1,645 44,678 Titan Corp. (The)/1/ 2,112 44,605 Carlisle Companies Inc. 776 44,504 Waddell & Reed Financial Inc. Class A 2,003 44,427 Alberto-Culver Co. Class A 696 44,119 Arden Realty Inc. 1,573 43,997 Crane Co. 1,563 43,920 Calpine Corp./1/ 9,514 43,860 SCHEDULES OF INVESTMENTS 27 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Brown & Brown Inc. 1,440 $ 43,848 BancorpSouth Inc. 1,859 43,705 Toll Brothers Inc./1/ 1,186 43,692 Graco Inc. 1,146 43,663 Covance Inc./1/ 1,670 43,470 Pan Pacific Retail Properties Inc. 980 43,463 BISYS Group Inc. (The)/1/ 3,035 43,400 Brocade Communications Systems Inc./1/ 6,623 43,381 Regis Corp. 1,140 43,343 Ingram Micro Inc. Class A/1/ 2,928 43,334 Saks Inc./1/ 3,117 43,326 CNF Inc. 1,237 43,320 Del Monte Foods Co./1/ 4,543 43,204 Cabot Corp. 1,546 43,133 BJ's Wholesale Club Inc./1/ 1,675 43,031 Take-Two Interactive Software Inc./1/ 1,081 42,754 Varian Semiconductor Equipment Associates Inc./1/ 884 42,741 Alberto-Culver Co. Class B 674 42,732 Rayonier Inc. 1,015 42,681 Taro Pharmaceutical Industries Ltd./1/ 664 42,662 Cummins Inc. 897 42,518 Medicis Pharmaceutical Corp. Class A 671 42,508 Integrated Device Technology Inc./1/ 2,703 42,437 Performance Food Group Co./1/ 1,138 42,391 RPM International Inc. 2,924 42,252 Transatlantic Holdings Inc. 550 42,185 IDEXX Laboratories Inc./1/ 890 42,097 Leucadia National Corp. 1,001 42,042 Avocent Corp./1/ 1,112 42,034 Silicon Laboratories Inc./1/ 776 41,888 AMETEK Inc. 888 41,780 Hawaiian Electric Industries Inc. 912 41,742 Shurgard Storage Centers Inc. Class A 1,153 41,739 Unitrin Inc. 1,128 41,736 Affiliated Managers Group Inc./1/ 574 41,615 Raymond James Financial Inc. 1,015 41,402 AGL Resources Inc. 1,469 41,352 Weight Watchers International Inc./1/ 1,120 41,328 Boise Cascade Corp. 1,471 41,262 Oshkosh Truck Corp. 896 41,064 ICN Pharmaceuticals Inc. 2,124 41,014 Cymer Inc./1/ 897 40,957 Hudson United Bancorp 1,127 40,899 Semtech Corp./1/ 1,833 40,693 Herman Miller Inc. 1,771 40,680 AnnTaylor Stores Corp./1/ 1,136 40,669 Barnes & Noble Inc./1/ 1,362 40,588 National-Oilwell Inc./1/ 2,125 40,524 Amkor Technology Inc./1/ 2,144 40,414 Avid Technology Inc./1/ 781 40,409 Teleflex Inc. 877 40,351 Pixar Inc./1/ 584 40,185 American Financial Realty Trust 2,640 40,128 Accredo Health Inc./1/ 1,255 40,110 CarrAmerica Realty Corp. 1,327 39,903 Zale Corp./1/ 769 39,803 CBL & Associates Properties Inc. 746 39,762 MONY Group Inc. (The) 1,242 39,756 York International Corp. 999 39,700 Peabody Energy Corp. 1,191 39,696 Lubrizol Corp. 1,304 39,511 Apria Healthcare Group Inc./1/ 1,356 39,324 FNB Corp. (Florida) 1,188 39,263 NBTY Inc./1/ 1,440 39,240 Documentum Inc./1/ 1,316 39,151 Tidewater Inc. 1,427 39,114 CenterPoint Properties Corp. 575 39,071 Jefferies Group Inc. 1,260 39,060 Greater Bay Bancorp 1,448 39,037 CACI International Inc. Class A/1/ 785 38,881 Harsco Corp. 1,014 38,846 IndyMac Bancorp Inc. 1,321 38,837 Claire's Stores Inc. 1,003 38,816 Snap-On Inc. 1,322 38,787 TECHNE Corp./1/ 1,112 38,731 UCBH Holdings Inc. 1,084 38,710 BRE Properties Inc. Class A 1,194 38,626 Roper Industries Inc. 780 38,548 Conexant Systems Inc./1/ 6,602 38,490 Respironics Inc./1/ 920 38,355 Hunt (J.B.) Transport Services Inc./1/ 1,506 38,222 28 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Nicor Inc. 1,115 $ 38,211 Standard-Pacific Corp. 798 38,184 First Midwest Bancorp Inc. 1,234 38,131 Annaly Mortgage Management Inc. 2,332 38,105 ADTRAN Inc. 560 38,097 Coors (Adolf) Company Class B 679 38,058 Whitney Holding Corp. 1,000 37,970 Cabot Microelectronics Corp./1/ 666 37,962 Trustmark Corp. 1,333 37,951 Henry (Jack) & Associates Inc. 1,893 37,822 Patina Oil & Gas Corp. 896 37,793 Knight Trading Group Inc./1/ 2,727 37,742 DeVry Inc./1/ 1,555 37,740 Cooper Companies Inc. 866 37,628 Cooper Tire & Rubber Co. 1,913 37,610 Church & Dwight Co. Inc. 1,009 37,605 Lee Enterprises Inc. 890 37,522 Steris Corp./1/ 1,797 37,414 St. Joe Company (The) 1,131 37,368 99 Cents Only Stores/1/ 1,254 37,332 Andrx Group/1/ 1,874 37,293 Pharmaceutical Product Development Inc./1/ 1,240 37,287 Crescent Real Estate Equities Co. 2,425 37,224 Premcor Inc./1/ 1,577 37,217 Owens-Illinois Inc./1/ 3,025 37,208 Acxiom Corp./1/ 2,337 37,158 Affymetrix Inc./1/ 1,441 36,933 Florida Rock Industries Inc. 645 36,926 Mills Corp. 902 36,802 OmniVision Technologies Inc./1/ 646 36,693 National Instruments Corp. 857 36,491 Media General Inc. Class A 552 36,460 Electronics For Imaging Inc./1/ 1,345 36,449 Charles River Laboratories International Inc./1/ 1,130 36,431 Delta Air Lines Inc. 2,798 36,430 Service Corp. International/1/ 7,506 36,404 Linens 'N Things Inc./1/ 1,230 36,310 Peoples Energy Corp. 897 36,284 Briggs & Stratton Corp. 558 36,276 Fox Entertainment Group Inc. Class A/1/ 1,307 36,204 EarthLink Inc./1/ 3,954 36,179 Vitesse Semiconductor Corp./1/ 5,136 36,157 Realty Income Corp. 916 36,090 Allmerica Financial Corp./1/ 1,347 35,871 Dreyer's Grand Ice Cream Holdings Inc. 463 35,836 Hovnanian Enterprises Inc. Class A/1/ 440 35,763 American Axle & Manufacturing Holdings Inc./1/ 1,030 35,638 Old National Bancorp 1,601 35,542 New Century Financial Corp. 957 35,486 BearingPoint Inc./1/ 3,769 35,429 Westar Energy Inc. 1,771 35,385 Ventas Inc. 1,892 35,380 Crown Holdings Inc./1/ 4,452 35,171 AmerUs Group Co. 924 34,881 Cytyc Corp./1/ 2,684 34,704 Healthcare Realty Trust Inc. 1,027 34,661 WPS Resources Corp. 780 34,577 Kennametal Inc. 933 34,409 ResMed Inc./1/ 823 34,377 Allegheny Energy Inc./1/ 3,249 34,374 AGCO Corp./1/ 1,906 34,308 IPC Holdings Ltd. 916 34,304 FMC Technologies Inc./1/ 1,704 34,216 Forest Oil Corp./1/ 1,455 34,120 WGL Holdings Inc. 1,228 33,954 Meridian Gold Inc./1/ 2,665 33,952 Activision Inc./1/ 2,248 33,922 Park National Corp. 290 33,916 Cree Inc./1/ 1,906 33,851 First Industrial Realty Trust Inc. 1,045 33,753 Camden Property Trust 850 33,660 Donnelley (R.H.) Corp./1/ 784 33,626 SL Green Realty Corp. 930 33,620 American Greetings Corp. Class A/1/ 1,573 33,552 Highwoods Properties Inc. 1,350 33,480 Tetra Tech Inc./1/ 1,489 33,473 Health Care REIT Inc. 1,009 33,448 Ethan Allen Interiors Inc. 907 33,378 Arch Coal Inc. 1,362 33,369 SCHEDULES OF INVESTMENTS 29 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- CEC Entertainment Inc./1/ 682 $ 33,350 Reliant Resources Inc./1/ 6,720 33,264 Protein Design Labs Inc./1/ 2,457 33,120 United Stationers Inc./1/ 890 33,117 Polo Ralph Lauren Corp. 1,088 33,075 Ascential Software Corp./1/ 1,490 33,063 Kronos Inc./1/ 550 33,000 Erie Indemnity Co. Class A 821 32,824 Swift Transportation Co. Inc./1/ 1,460 32,748 IKON Office Solutions Inc. 3,891 32,684 Trizec Properties Inc. 2,444 32,627 Silicon Valley Bancshares/1/ 924 32,432 Furniture Brands International Inc. 1,336 32,411 Community Health Systems Inc./1/ 1,348 32,379 Select Medical Corp./1/ 964 32,361 AptarGroup Inc. 903 32,327 Hot Topic Inc./1/ 1,125 32,299 Radio One Inc. Class D/1/ 2,027 32,229 Benchmark Electronics Inc./1/ 661 32,204 Duquesne Light Holdings Inc. 2,001 32,156 Airgas Inc. 1,679 32,153 Valassis Communications Inc./1/ 1,239 32,090 Mercury General Corp. 674 32,035 Global Payments Inc. 769 32,029 Metro-Goldwyn-Mayer Inc./1/ 2,006 32,016 Varian Inc./1/ 893 31,978 OfficeMax Inc./1/ 3,335 31,949 W Holding Co. Inc. 1,370 31,907 Intergraph Corp./1/ 1,223 31,871 Invacare Corp. 776 31,832 Commercial Federal Corp. 1,235 31,789 ONEOK Inc. 1,598 31,784 Plantronics Inc./1/ 1,142 31,759 Piedmont Natural Gas Co. 799 31,744 HRPT Properties Trust 3,386 31,693 UGI Corp. 1,027 31,632 Martek Biosciences Corp./1/ 653 31,612 IGEN International Inc./1/ 544 31,525 Readers Digest Association Inc. (The) 2,135 31,449 Tommy Hilfiger Corp./1/ 2,138 31,407 Commerce Group Inc. 787 31,283 Alexander & Baldwin Inc. 1,008 31,258 Grant Prideco Inc./1/ 2,756 31,253 Beazer Homes USA Inc./1/ 314 31,243 United Rentals Inc./1/ 1,792 31,217 Neiman-Marcus Group Inc. Class A/1/ 656 31,193 Imation Corp. 916 31,190 Gen-Probe Inc./1/ 1,162 31,107 Sylvan Learning Systems Inc./1/ 1,099 31,102 Lancaster Colony Corp. 783 31,093 Tractor Supply Co./1/ 737 30,888 Diamond Offshore Drilling Inc. 1,673 30,867 Packaging Corporation of America/1/ 1,566 30,850 Arbitron Inc./1/ 779 30,770 Cytec Industries Inc./1/ 881 30,756 Airtran Holdings Inc./1/ 1,892 30,669 Scotts Co. (The) Class A/1/ 531 30,665 Pacific Capital Bancorp 896 30,518 United Bancshares Inc. 1,006 30,432 Timken Co. (The) 1,811 30,389 PepsiAmericas Inc. 2,011 30,125 Helmerich & Payne Inc. 1,136 30,115 Atmos Energy Corp. 1,226 30,037 Corn Products International Inc. 886 30,027 McClatchy Co. (The) Class A 463 29,956 Evergreen Resources Inc./1/ 1,089 29,860 Continental Airlines Inc. Class B/1/ 1,562 29,834 Macromedia Inc./1/ 1,559 29,792 KEMET Corp./1/ 2,248 29,786 Citizens Banking Corp. 1,017 29,737 Skyworks Solutions Inc./1/ 3,457 29,661 Western Wireless Corp. Class A/1/ 1,519 29,469 Hyperion Solutions Corp./1/ 879 29,438 Men's Wearhouse Inc. (The)/1/ 997 29,372 Micrel Inc./1/ 1,780 29,370 CMS Energy Corp. 3,611 29,321 Medicines Co. (The)/1/ 1,100 29,315 South Financial Group Inc. (The) 1,121 29,292 Pediatrix Medical Group Inc./1/ 546 29,184 Goodyear Tire & Rubber Co. (The) 4,249 29,148 Cousins Properties Inc. 1,012 29,095 First Bancorp 873 29,071 30 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- American National Insurance Co. 349 $ 28,992 Energen Corp. 785 28,943 MGI Pharma Inc./1/ 770 28,921 Fred's Inc. 767 28,901 Cerner Corp./1/ 682 28,896 Timberland Co. Class A/1/ 555 28,832 Toro Co. 580 28,826 Panera Bread Co. Class A/1/ 714 28,724 Terex Corp./1/ 1,272 28,696 Callaway Golf Co. 1,763 28,649 Nationwide Health Properties Inc. 1,558 28,511 ArvinMeritor Inc. 1,698 28,509 Provident Financial Services Inc. 1,454 28,498 SkyWest Inc. 1,538 28,438 PNM Resources Inc. 1,003 28,365 Kellwood Co. 757 28,289 Post Properties Inc. 1,070 28,248 Mentor Graphics Corp./1/ 1,683 28,190 Gateway Inc./1/ 5,591 28,179 Sonic Corp./1/ 1,012 28,144 Southwest Bancorp of Texas Inc. 783 28,118 Chittenden Corp. 872 28,061 International Speedway Corp. Class A 659 28,034 Lafarge North America Inc. 776 28,014 Dynegy Inc. Class A/1/ 6,978 27,982 DoubleClick Inc./1/ 3,344 27,856 Scholastic Corp./1/ 900 27,837 Fremont General Corp. 1,672 27,805 Idex Corp. 745 27,699 Flowserve Corp./1/ 1,352 27,662 East West Bancorp Inc. 563 27,638 Alkermes Inc./1/ 2,127 27,587 Washington Real Estate Investment Trust 932 27,587 Total System Services Inc. 1,000 27,580 Flowers Foods Inc. 1,162 27,574 P.F. Chang's China Bistro Inc./1/ 565 27,538 Home Properties Inc. 715 27,528 Worthington Industries Inc. 1,888 27,527 Cincinnati Bell Inc./1/ 5,385 27,517 VISX Inc./1/ 1,131 27,438 Harte-Hanks Inc. 1,377 27,361 Charter Communications Inc. Class A/1/ 6,407 27,358 Werner Enterprises Inc. 1,516 27,349 Olin Corp. 1,569 27,316 Texas Regional Bancshares Inc. Class A 753 27,296 IDACORP Inc. 1,004 27,259 Key Energy Services Inc./1/ 3,122 27,255 Brink's Co. (The) 1,356 27,188 Prentiss Properties Trust 899 27,186 Axcelis Technologies Inc./1/ 2,568 27,169 Emmis Communications Corp./1/ 1,220 27,060 Cognex Corp. 1,007 27,038 OSI Pharmaceuticals Inc./1/ 964 26,992 Essex Property Trust Inc. 450 26,946 Hercules Inc./1/ 2,577 26,930 Community First Bankshares Inc. 991 26,906 Gemstar-TV Guide International Inc./1/ 5,717 26,813 Bob Evans Farms Inc. 907 26,811 Station Casinos Inc. 900 26,775 Power Integrations Inc./1/ 768 26,742 Dycom Industries Inc./1/ 1,236 26,710 La-Z-Boy Inc. 1,314 26,543 Massey Energy Co. 1,907 26,507 Dillards Inc. Class A 1,633 26,406 Extended Stay America Inc./1/ 1,786 26,254 Landstar System Inc./1/ 357 26,075 Mueller Industries Inc./1/ 825 26,037 NPS Pharmaceuticals Inc./1/ 986 25,961 Thomas & Betts Corp./1/ 1,457 25,935 Christopher & Banks Corp. 887 25,900 Extreme Networks Inc./1/ 3,010 25,886 Reckson Associates Realty Corp. 1,161 25,797 Advanced Digital Information Corp./1/ 1,583 25,724 Downey Financial Corp. 558 25,612 LifePoint Hospitals Inc./1/ 996 25,607 Pep Boys-Manny, Moe & Jack Inc. 1,330 25,576 Banta Corp. 666 25,481 Minerals Technologies Inc. 464 25,427 Loews Corporation - Carolina Group 1,015 25,426 CNET Networks Inc./1/ 3,123 25,421 Credence Systems Corp./1/ 1,557 25,395 Cost Plus Inc./1/ 550 25,228 SCHEDULES OF INVESTMENTS 31 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Black Hills Corp. 780 $ 25,093 Trinity Industries Inc. 983 25,017 Vertex Pharmaceuticals Inc./1/ 1,906 25,007 Wiley (John) & Sons Inc. Class A 957 24,882 Diagnostic Products Corp. 609 24,859 Investment Technology Group Inc./1/ 1,251 24,845 United Defense Industries Inc./1/ 766 24,818 Blyth Inc. 886 24,790 Tekelec/1/ 1,538 24,746 MPS Group Inc./1/ 2,587 24,706 Tom Brown Inc./1/ 914 24,696 ADVO Inc. 550 24,656 Sycamore Networks Inc./1/ 4,930 24,650 Montpelier Re Holdings Ltd/1/ 742 24,575 Macrovision Corp./1/ 1,118 24,562 Children's Place Retail Stores Inc. (The)/1/ 808 24,321 New Jersey Resources Corp. 640 24,224 Potlatch Corp. 774 24,195 Stone Energy Corp./1/ 669 24,178 FileNET Corp./1/ 904 24,155 Universal Corp. 553 24,100 MAF Bancorp Inc. 574 24,062 Albemarle Corp. 896 24,031 United Online Inc./1/ 832 23,953 CLARCOR Inc. 589 23,943 Odyssey Healthcare Inc./1/ 863 23,940 Copart Inc./1/ 1,915 23,880 Western Gas Resources Inc. 561 23,843 Republic Bancorp Inc. 1,642 23,842 Applera Corp. - Celera Genomics Group/1/ 1,779 23,785 Staten Island Bancorp Inc. 1,193 23,776 Silicon Storage Technology Inc./1/ 2,125 23,758 Georgia Gulf Corp. 880 23,672 US Oncology Inc./1/ 2,155 23,576 La Quinta Corp./1/ 3,812 23,520 Susquehanna Bancshares Inc. 938 23,497 Abgenix Inc./1/ 1,913 23,434 MSC Industrial Direct Co. Inc. Class A 990 23,414 NDCHealth Corp. 886 23,382 American Eagle Outfitters Inc./1/ 1,462 23,377 Superior Industries International Inc. 548 23,290 Sybron Dental Specialties Inc./1/ 1,012 23,276 Brandywine Realty Trust 918 23,262 Provident Financial Group Inc. 788 23,207 Colonial Properties Trust 624 23,088 Waste Connections Inc./1/ 665 23,062 FactSet Research Systems Inc. 528 23,042 Adaptec Inc./1/ 2,703 23,003 InterDigital Communications Corp./1/ 1,347 22,886 TrustCo Bank Corp. NY 1,749 22,824 Yellow Corp./1/ 692 22,732 Mentor Corp. 1,116 22,599 Trimble Navigation Ltd./1/ 814 22,507 LNR Property Corp. 550 22,495 TriQuint Semiconductor Inc./1/ 3,131 22,449 Payless ShoeSource Inc./1/ 1,695 22,425 Ferro Corp. 1,092 22,419 Brooks Automation Inc./1/ 898 22,405 Hutchinson Technology Inc./1/ 668 22,385 Quanta Services Inc./1/ 2,735 22,372 Reinsurance Group of America Inc. 559 22,332 First Niagara Financial Group Inc. 1,562 22,321 Ohio Casualty Corp./1/ 1,456 22,277 Hilb, Rogal & Hamilton Co. 742 22,275 Hughes Supply Inc. 576 22,262 Digital River Inc./1/ 810 22,178 FMC Corp./1/ 788 22,072 McDATA Corp. Class A/1/ 2,131 22,013 Kansas City Southern Industries Inc./1/ 1,660 21,962 FTI Consulting Inc./1/ 1,103 21,950 Hollywood Entertainment Corp./1/ 1,432 21,766 Visteon Corp. 3,369 21,764 USF Corp. 681 21,738 Southern Union Co./1/ 1,234 21,731 Platinum Underwriters Holdings Ltd. 755 21,699 Acuity Brands Inc. 1,009 21,693 Parametric Technology Corp./1/ 6,940 21,583 Ralcorp Holdings Inc./1/ 782 21,505 Sensient Technologies Corp. 1,120 21,504 Quiksilver Inc./1/ 1,252 21,497 Great Lakes Chemical Corp. 999 21,478 AVX Corp. 1,453 21,359 32 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Perrigo Co. 1,579 $ 21,238 Avista Corp. 1,241 21,097 CommScope Inc./1/ 1,360 21,066 Actuant Corp. Class A/1/ 650 20,956 GrafTech International Ltd./1/ 1,988 20,655 Provident Bankshares Corp. 664 20,604 Chicago Mercantile Exchange Holdings Inc. 302 20,521 Capital Automotive 659 20,501 Selective Insurance Group Inc. 666 20,446 Cleco Corp. 1,220 20,435 Delta & Pine Land Co. 892 20,391 Tupperware Corp. 1,352 20,348 Alpharma Inc. Class A 1,116 20,311 PolyMedica Corp. 688 20,296 Hanover Compressor Co./1/ 1,914 20,288 IHOP Corp. 545 20,220 Albany International Corp. Class A 654 20,209 GATX Corp. 897 20,174 MacDermid Inc. 675 20,169 Dionex Corp./1/ 473 20,121 Cabot Oil & Gas Corp. 787 20,108 Lattice Semiconductor Corp./1/ 2,577 20,101 American Financial Group Inc. 899 20,021 Internet Security Systems Inc./1/ 1,219 20,004 Ligand Pharmaceuticals Inc. Class B/1/ 1,448 19,953 Black Box Corp. 463 19,937 Wolverine World Wide Inc. 985 19,897 Quest Software Inc./1/ 1,331 19,832 FirstFed Financial Corp./1/ 439 19,755 Ultratech Inc./1/ 631 19,694 Ariba Inc./1/ 6,052 19,669 eFunds Corp./1/ 1,227 19,644 Cox Radio Inc. Class A/1/ 887 19,620 Bio-Rad Laboratories Inc. Class A/1/ 375 19,594 Unit Corp./1/ 1,010 19,584 Informatica Corp./1/ 1,796 19,576 Modine Manufacturing Co. 765 19,576 Technitrol Inc./1/ 897 19,555 Northwest Natural Gas Co. 674 19,546 Northwest Airlines Corp./1/ 1,424 19,495 Hollinger International Inc. 1,440 19,339 Alaska Air Group Inc./1/ 670 19,289 Priority Healthcare Corp. Class B/1/ 889 19,229 Catalina Marketing Corp./1/ 1,089 19,221 Plexus Corp./1/ 1,109 19,175 Casey's General Store Inc. 1,236 19,158 Keane Inc./1/ 1,458 19,158 Guitar Center Inc./1/ 587 19,107 Longs Drug Stores Corp. 851 19,062 Tootsie Roll Industries Inc. 574 18,936 Perot Systems Corp. Class A/1/ 1,783 18,935 Insight Enterprises Inc./1/ 1,122 18,872 IMC Global Inc. 2,696 18,845 IDT Corp. Class B/1/ 985 18,833 Monaco Coach Corp./1/ 780 18,790 Orbotech Ltd./1/ 789 18,739 Arkansas Best Corp. 565 18,707 RealNetworks Inc./1/ 2,810 18,687 RSA Security Inc./1/ 1,438 18,651 Kaydon Corp. 784 18,636 MICROS Systems Inc./1/ 457 18,504 Winnebago Industries Inc. 317 18,481 Charming Shoppes Inc./1/ 2,817 18,451 Kilroy Realty Corp. 638 18,438 Fossil Inc./1/ 682 18,414 Jack in the Box Inc./1/ 1,011 18,390 Nordson Corp. 662 18,344 Aztar Corp./1/ 876 18,291 AMCORE Financial Inc. 674 18,198 Owens & Minor Inc. 893 18,164 Granite Construction Inc. 906 18,111 Cimarex Energy Co./1/ 885 18,098 Aquila Inc./1/ 4,569 18,048 G&K Services Inc. Class A 545 17,985 Borland Software Corp./1/ 2,022 17,955 GlobeSpanVirata Inc./1/ 2,914 17,950 Kulicke & Soffa Industries Inc./1/ 1,221 17,924 ATMI Inc./1/ 779 17,909 Coherent Inc./1/ 778 17,894 THQ Inc./1/ 1,007 17,864 Actel Corp./1/ 660 17,807 SCHEDULES OF INVESTMENTS 33 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Manufactured Home Communities Inc. 467 $ 17,746 Tesoro Petroleum Corp./1/ 1,555 17,727 F5 Networks Inc./1/ 708 17,707 Talbots Inc. (The) 538 17,684 Nektar Therapeutics/1/ 1,344 17,660 LTX Corp./1/ 1,230 17,577 REMEC Inc./1/ 1,588 17,516 UnitedGlobalCom Inc. Class A/1/ 2,470 17,488 Wireless Facilities Inc./1/ 1,014 17,421 American Italian Pasta Co. Class A/1/ 455 17,399 Roadway Corp. 336 17,220 Maverick Tube Corp./1/ 1,016 17,160 Ryan's Family Steak Houses Inc./1/ 1,230 17,146 UniSource Energy Corp. 888 17,138 Fuller (H.B.) Co. 688 17,049 Asyst Technologies Inc./1/ 914 17,046 Veeco Instruments Inc./1/ 672 17,028 Photon Dynamics Inc./1/ 448 16,943 Pacific Northwest Bancorp 434 16,857 Net.B@nk Inc. 1,229 16,850 Navigant Consulting Co./1/ 1,025 16,841 Electro Scientific Industries Inc./1/ 682 16,750 Checkpoint Systems Inc./1/ 885 16,673 PSS World Medical Inc./1/ 1,787 16,655 Winn-Dixie Stores Inc. 2,051 16,593 Interstate Bakeries Corp. 1,129 16,574 CNA Financial Corp./1/ 768 16,573 Zoran Corp./1/ 992 16,527 American Management Systems Inc./1/ 1,110 16,428 NetIQ Corp./1/ 1,353 16,425 El Paso Electric Co./1/ 1,345 16,328 United States Cellular Corp./1/ 482 16,321 Vignette Corp./1/ 6,495 16,302 Exar Corp./1/ 1,011 16,267 Power-One Inc./1/ 1,793 16,245 Hain Celestial Group Inc./1/ 768 16,205 EMCOR Group Inc./1/ 429 16,169 Crompton Corp. 3,015 16,160 DSP Group Inc./1/ 673 16,071 Sierra Pacific Resources/1/ 2,670 15,940 Hearst-Argyle Television Inc./1/ 653 15,809 Newport Corp./1/ 1,003 15,807 SEACOR SMIT Inc./1/ 410 15,711 Millennium Chemicals Inc. 1,566 15,691 Cambrex Corp. 663 15,673 Beverly Enterprises Inc./1/ 2,580 15,661 Advanced Medical Optics Inc./1/ 776 15,652 InterMune Inc./1/ 780 15,600 Province Healthcare Co./1/ 1,214 15,588 Cirrus Logic Inc./1/ 1,906 15,553 Wabash National Corp./1/ 673 15,526 Haemonetics Corp./1/ 672 15,496 Interactive Data Corp./1/ 898 15,446 Grey Wolf Inc./1/ 4,803 15,418 Schulman (A.) Inc. 811 15,401 Overseas Shipholding Group Inc. 564 15,375 Vintage Petroleum Inc. 1,331 15,373 CSG Systems International Inc./1/ 1,331 15,293 Nextel Partners Inc. Class A/1/ 1,268 15,241 M-Systems Flash Disk Pioneers Ltd./1/ 768 15,206 Mykrolis Corp./1/ 1,027 15,148 Texas Industries Inc. 555 15,079 Dendrite International Inc./1/ 995 15,024 Dime Community Bancshares 537 14,972 Superior Energy Services Inc./1/ 1,668 14,912 Glenborough Realty Trust Inc. 763 14,878 EGL Inc./1/ 906 14,777 Littelfuse Inc./1/ 554 14,736 Photronics Inc./1/ 682 14,690 First Sentinel Bancorp Inc. 787 14,678 Priceline.com Inc./1/ 523 14,675 Harbor Florida Bancshares Inc. 544 14,644 W.P. Stewart & Co. Ltd. 682 14,629 ArthroCare Corp./1/ 653 14,595 Aeroflex Inc./1/ 1,567 14,542 Six Flags Inc./1/ 2,456 14,540 Advent Software Inc./1/ 792 14,502 Manitowoc Co. Inc. (The) 664 14,409 Micromuse Inc./1/ 1,769 14,240 WD-40 Co. 434 14,083 Jacuzzi Brands Inc./1/ 1,993 14,051 Steelcase Inc. Class A 1,191 13,994 34 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Anchor BanCorp Wisconsin Inc. 558 $ 13,894 Nautilus Group Inc. (The) 890 13,893 Allegheny Technologies Inc. 1,791 13,701 Stride Rite Corp. 1,135 13,677 Packeteer Inc./1/ 781 13,652 Inter-Tel Inc. 541 13,628 FuelCell Energy Inc./1/ 892 13,612 C&D Technologies Inc. 680 13,552 Bowne & Co. Inc. 903 13,545 S1 Corp./1/ 1,673 13,518 XOMA Ltd./1/ 1,801 13,489 Wausau-Mosinee Paper Corp. 1,081 13,361 Horace Mann Educators Corp. 1,007 13,343 CIBER Inc./1/ 1,442 13,295 NCO Group Inc./1/ 558 13,280 E.piphany Inc./1/ 1,901 13,193 Oceaneering International Inc./1/ 565 13,029 Sterling Bancshares Inc. 1,132 13,018 Insight Communications Co. Inc./1/ 1,336 12,946 Ionics Inc./1/ 454 12,934 Sunrise Senior Living Inc./1/ 447 12,918 TIBCO Software Inc./1/ 2,001 12,886 Quantum Corp./1/ 4,138 12,869 Medarex Inc./1/ 1,783 12,748 Koger Equity Inc. 656 12,707 Offshore Logistics Inc./1/ 581 12,666 Spherion Corp./1/ 1,446 12,580 Retek Inc./1/ 1,250 12,538 Verity Inc./1/ 892 12,533 Tularik Inc./1/ 993 12,482 Esterline Technologies Corp./1/ 562 12,448 Cyberonics Inc./1/ 455 12,444 ValueVision Media Inc. Class A/1/ 764 12,415 Kopin Corp./1/ 1,692 12,402 Enzon Pharmaceuticals Inc./1/ 1,111 12,399 Agile Software Corp./1/ 1,126 12,352 JDA Software Group Inc./1/ 576 12,332 Helix Technology Corp. 685 12,296 OM Group Inc./1/ 683 12,226 Viasys Healthcare Inc./1/ 675 12,184 IDX Systems Corp./1/ 465 12,183 Core Laboratories NV/1/ 794 12,156 CV Therapeutics Inc./1/ 689 12,147 Prime Hospitality Corp./1/ 1,332 12,121 Regeneron Pharmaceuticals Inc./1/ 875 12,110 Wind River Systems Inc./1/ 1,806 12,100 Harmonic Inc./1/ 1,557 12,082 Carpenter Technology Corp. 467 12,072 Russell Corp. 656 11,992 Sotheby's Holdings Inc. Class A/1/ 1,119 11,917 Mercury Computer Systems Inc./1/ 553 11,895 Sinclair Broadcast Group Inc. Class A/1/ 1,019 11,861 Silicon Image Inc./1/ 1,665 11,705 Echelon Corp./1/ 900 11,682 Systems & Computer Technology Corp./1/ 793 11,657 McDermott International Inc./1/ 1,574 11,648 USG Corp./1/ 691 11,574 Cell Genesys Inc./1/ 899 11,543 Finisar Corp./1/ 3,698 11,464 Datascope Corp. 344 11,452 PFF Bancorp Inc. 306 11,414 ElkCorp 449 11,405 Imagistics International Inc./1/ 353 11,349 PAREXEL International Corp./1/ 678 11,336 Stewart & Stevenson Services Inc. 677 11,319 PanAmSat Corp./1/ 546 11,302 Mindspeed Technologies Inc./1/ 2,206 11,295 Phillips-Van Heusen Corp. 658 11,278 FelCor Lodging Trust Inc. 1,104 11,250 Atlantic Coast Airlines Holdings Inc./1/ 1,006 11,136 Safeguard Scientifics Inc./1/ 2,919 11,121 Nabi Biopharmaceuticals/1/ 1,004 11,074 Enzo Biochem Inc./1/ 596 11,026 Shaw Group Inc. (The)/1/ 807 11,016 Park Electrochemical Corp. 449 11,001 SonicWALL Inc./1/ 1,355 10,976 Cable Design Technologies Corp./1/ 1,138 10,970 Methode Electronics Inc. Class A 917 10,921 Powerwave Technologies Inc./1/ 1,676 10,911 Transmeta Corp./1/ 2,681 10,858 Regal-Beloit Corp. 532 10,826 Trimeris Inc./1/ 421 10,778 SCHEDULES OF INVESTMENTS 35 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- webMethods Inc./1/ 1,239 $ 10,755 ESS Technology Inc./1/ 771 10,701 Manugistics Group Inc./1/ 1,473 10,694 Lennar Corp. Class B 122 10,596 ShopKo Stores Inc./1/ 675 10,449 Tredegar Corp. 667 10,392 Texas Genco Holdings Inc. 343 10,256 Interwoven Inc./1/ 2,703 10,244 Transkaryotic Therapies Inc./1/ 771 10,108 Praecis Pharmaceuticals Inc./1/ 1,454 10,076 Lone Star Steakhouse & Saloon Inc. 458 10,016 Pre-Paid Legal Services Inc./1/ 364 9,886 Orthodontic Centers of America Inc./1/ 1,114 9,848 SWS Group Inc. 451 9,787 International Multifoods Corp./1/ 434 9,683 WMS Industries Inc./1/ 416 9,622 Stewart Enterprises Inc. Class A/1/ 2,357 9,617 Insituform Technologies Inc. Class A/1/ 671 9,595 SERENA Software Inc./1/ 551 9,505 United Therapeutics Inc./1/ 466 9,381 Lone Star Technologies Inc./1/ 672 9,354 Cato Corp. Class A 442 9,326 Genesco Inc./1/ 548 9,234 LaBranche & Co. Inc. 871 9,224 Agilysys Inc. 881 9,057 Fleetwood Enterprises Inc./1/ 895 9,022 Cohu Inc. 447 8,971 Incyte Corp./1/ 1,680 8,870 Young Broadcasting Inc. Class A/1/ 439 8,820 OceanFirst Financial Corp. 337 8,809 Biosite Inc./1/ 340 8,772 Bay View Capital Corp./1/ 1,441 8,761 Savient Pharmaceuticals Inc./1/ 1,446 8,748 Immunomedics Inc./1/ 1,019 8,662 CTS Corp. 779 8,624 Presidential Life Corp. 561 8,617 AAR Corp./1/ 781 8,513 RadiSys Corp./1/ 434 8,485 Equity Inns Inc. 1,002 8,467 Alexion Pharmaceuticals Inc./1/ 454 8,399 Artesyn Technologies Inc./1/ 1,013 8,337 Curtiss-Wright Corp. 113 8,300 Albany Molecular Research Inc./1/ 559 8,217 Chesapeake Corp. 336 8,198 Anaren Inc./1/ 577 8,165 DuPont Photomasks Inc./1/ 351 8,136 Arris Group Inc./1/ 1,354 8,124 Champion Enterprises Inc./1/ 1,130 8,023 Cell Therapeutics Inc./1/ 770 8,008 C-COR.net Corp./1/ 793 7,993 Molecular Devices Corp./1/ 446 7,921 Cubist Pharmaceuticals Inc./1/ 677 7,867 Roto-Rooter Inc. 222 7,837 Robert Mondavi Corp. (The) Class A/1/ 222 7,781 Global Industries Ltd./1/ 1,680 7,762 Computer Network Technology Corp./1/ 777 7,692 Meristar Hospitality Corp./1/ 1,125 7,684 Keynote Systems Inc./1/ 664 7,536 Caraustar Industries Inc./1/ 784 7,534 General Cable Corp./1/ 791 7,507 Triarc Companies Inc. Class B 702 7,483 PRG-Schultz International Inc./1/ 1,572 7,467 Jakks Pacific Inc./1/ 568 7,384 Maxygen Inc./1/ 773 7,344 Wellman Inc. 890 7,343 Unifi Inc./1/ 1,467 7,320 Forrester Research Inc./1/ 429 7,314 Casella Waste Systems Inc. Class A/1/ 579 7,290 Newpark Resources Inc./1/ 1,800 7,236 Oakley Inc. 666 7,226 Solutia Inc. 2,706 7,225 Concurrent Computer Corp./1/ 1,551 7,212 Myriad Genetics Inc./1/ 559 7,077 Stillwater Mining Co./1/ 1,012 7,074 New Focus Inc./1/ 1,350 7,007 Veritas DGC Inc./1/ 788 6,982 Kaman Corp. Class A 570 6,954 Pharmacopeia Inc./1/ 556 6,939 Interface Inc. Class A/1/ 1,239 6,876 BSB Bancorp Inc. 222 6,858 Stamps.com Inc./1/ 1,148 6,842 Kenneth Cole Productions Class A 229 6,778 36 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Cleveland-Cliffs Inc./1/ 225 $ 6,750 Iomega Corp. 1,221 6,728 InFocus Corp./1/ 1,006 6,630 MRV Communications Inc./1/ 2,119 6,527 Papa John's International Inc./1/ 246 6,472 AK Steel Holding Corp./1/ 2,695 6,468 Stratex Networks Inc./1/ 2,012 6,438 Duane Reade Inc./1/ 460 6,325 Kadant Inc./1/ 346 6,314 FreeMarkets Inc./1/ 1,000 6,260 Tower Automotive Inc./1/ 1,568 6,241 MatrixOne Inc./1/ 1,119 6,199 Presstek Inc./1/ 801 6,176 IDT Corp./1/ 332 6,159 CuraGen Corp./1/ 1,006 6,116 Dress Barn Inc./1/ 436 6,104 Atwood Oceanics Inc./1/ 235 6,084 Learning Tree International Inc./1/ 338 6,084 TeleTech Holdings Inc./1/ 913 6,008 Siliconix Inc./1/ 116 5,888 Entrust Inc./1/ 1,248 5,878 Wild Oats Markets Inc./1/ 566 5,875 Noven Pharmaceuticals Inc./1/ 574 5,792 Parker Drilling Co./1/ 2,574 5,792 MRO Software Inc./1/ 447 5,655 NUI Corp. 328 5,599 Actuate Corp./1/ 1,565 5,571 McDATA Corp. Class B/1/ 543 5,549 MedQuist Inc./1/ 332 5,534 Ryerson Tull Inc. 678 5,465 RTI International Metals Inc./1/ 447 5,368 Audiovox Corp. Class A/1/ 447 5,364 Tollgrade Communications Inc./1/ 337 5,281 Bally Total Fitness Holding Corp./1/ 791 5,268 Silicon Graphics Inc./1/ 4,606 5,205 SCS Transportation Inc./1/ 346 5,193 Input/Output Inc./1/ 1,239 5,092 Pinnacle Entertainment Inc./1/ 558 4,883 Stein Mart Inc./1/ 679 4,882 Pope & Talbot Inc. 328 4,700 PC-Tel Inc./1/ 447 4,528 SHARES OR SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- Hudson Highland Group Inc./1/ 202 $ 4,450 Astec Industries Inc./1/ 336 4,274 Lexicon Genetics Inc./1/ 669 3,746 Triarc Companies Inc. 351 3,657 Theragenics Corp./1/ 798 3,551 Gene Logic Inc./1/ 676 3,360 WatchGuard Technologies Inc./1/ 568 3,266 Three-Five Systems Inc./1/ 545 2,529 TOTAL COMMON STOCKS (Cost: $268,390,892) 278,945,753 SHORT TERM INVESTMENTS - 4.58% MONEY MARKET FUNDS - 2.65% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2//3/ 5,036,066 5,036,066 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2//3/ 1,818,904 1,818,904 BlackRock Temp Cash Money Market Fund/2/ 78,226 78,226 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 467,828 467,828 7,401,024 FLOATING RATE NOTES - 1.09% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 82,677 82,671 1.08%, 09/15/04/2/ 165,355 165,341 1.08%, 10/12/04/2/ 82,677 82,670 1.17%, 08/23/04/2/ 82,677 82,734 CC USA Inc. 1.06%, 05/24/04/2/ 165,355 165,346 1.08%, 04/19/04/2/ 72,756 72,754 1.12%, 07/15/04/2/ 82,677 82,698 Dorada Finance Inc. 1.08%, 05/20/04/2/ 165,355 165,341 1.24%, 08/09/04/2/ 41,339 41,334 Five Finance Inc. 1.09%, 04/15/04/2/ 82,677 82,677 SCHEDULES OF INVESTMENTS 37 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- HBOS Treasury Services PLC 1.13%, 10/22/04/2/ $ 165,355 $ 165,355 Holmes Financing PLC 1.08%, 04/15/04/2/ 33,071 33,071 K2 USA LLC 1.08%, 08/16/04/2/ 41,339 41,334 1.08%, 09/27/04/2/ 178,583 178,559 1.09%, 04/13/04/2/ 82,677 82,676 1.09%, 05/17/04/2/ 82,677 82,675 Links Finance LLC 1.08%, 06/28/04/2/ 82,677 82,667 1.09%, 03/29/04/2/ 82,677 82,677 1.09%, 05/04/04/2/ 82,677 82,675 1.10%, 07/20/04/2/ 66,142 66,133 Nationwide Building Society 1.14%, 07/23/04/2/ 124,016 124,016 Sigma Finance Inc. 1.05%, 11/21/03/2/ 82,677 82,634 1.08%, 07/01/04/2/ 82,677 82,664 1.09%, 10/07/04/2/ 165,355 165,324 1.11%, 07/20/04/2/ 82,677 82,666 1.24%, 08/06/04/2/ 41,339 41,336 Tango Finance Corp. 1.09%, 07/15/04/2/ 49,606 49,595 1.10%, 07/06/04/2/ 49,606 49,603 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 82,677 82,663 White Pine Finance LLC 1.08%, 05/17/04/2/ 99,213 99,213 1.08%, 07/06/04/2/ 99,213 99,207 1.08%, 08/26/04/2/ 82,677 82,667 1.09%, 04/20/04/2/ 82,677 82,677 3,045,653 TIME DEPOSITS - 0.41% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 165,355 165,355 1.40%, 10/25/04/2/ 165,355 165,331 Bank of New York 1.39%, 11/01/04/2/ 165,355 165,338 Bank of Nova Scotia 1.24%, 10/07/04/2/ 124,016 124,005 1.42%, 10/29/04/2/ 124,016 124,025 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 124,016 123,999 1.40%, 10/29/04/2/ 165,355 165,351 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 124,016 124,004 1,157,408 COMMERCIAL PAPER - 0.29% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 86,977 86,954 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 82,677 82,651 1.06%, 11/17/03/2/ 82,677 82,643 Delaware Funding Corp. 1.04%, 11/20/03/2/ 95,076 95,029 Edison Asset Securitization 1.05%, 11/14/03/2/ 82,677 82,651 Falcon Asset Securitization 1.06%, 11/14/03/2/ 72,756 72,733 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 82,677 82,641 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 41,339 41,317 1.06%, 11/20/03/2/ 41,339 41,318 Prudential Funding LLC 1.06%, 11/20/03/2/ 82,677 82,636 Windmill Funding Corp. 1.05%, 11/19/03/2/ 49,606 49,583 800,156 U.S. GOVERNMENT AGENCY NOTES - 0.14% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 124,016 123,260 1.28%, 08/19/04/2/ 66,142 65,460 Federal National Mortgage Association 1.28%, 08/20/04/2/ 214,962 212,737 401,457 38 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- TOTAL SHORT TERM INVESTMENTS (Cost: $12,805,698) $ 12,805,698 TOTAL INVESTMENTS IN SECURITIES - 104.43% (Cost $281,196,590) 291,751,451 Other Assets, Less Liabilities - (4.43%) (12,375,388) ------------- NET ASSETS - 100.00% $ 279,376,063 ============= /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 39 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. ENERGY SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS - 99.96% Exxon Mobil Corp. 1,002,218 $ 36,661,134 ChevronTexaco Corp. 475,821 35,353,500 Schlumberger Ltd. 162,020 7,610,079 ConocoPhillips 132,333 7,562,831 Occidental Petroleum Corp. 186,746 6,584,664 Burlington Resources Inc. 83,999 4,085,711 Apache Corp. 54,401 3,792,838 Baker Hughes Inc. 131,850 3,726,081 Anadarko Petroleum Corp. 83,938 3,661,376 Murphy Oil Corp. 61,869 3,649,034 Unocal Corp. 111,622 3,536,185 Devon Energy Corp. 72,366 3,509,751 Marathon Oil Corp. 99,136 2,931,452 Halliburton Co. 117,636 2,809,148 Kinder Morgan Inc. 39,726 2,127,327 Kerr-McGee Corp. 46,416 1,926,264 EOG Resources Inc. 45,407 1,913,451 Transocean Inc./1/ 92,523 1,775,516 Williams Companies Inc. 173,565 1,770,363 Nabors Industries Ltd./1/ 46,492 1,757,398 Amerada Hess Corp. 32,042 1,654,008 BJ Services Co./1/ 45,446 1,491,083 Noble Corp./1/ 36,298 1,246,110 GlobalSantaFe Corp. 44,122 993,186 Weatherford International Ltd./1/ 28,508 990,653 Valero Energy Corp. 22,460 959,042 Smith International Inc./1/ 25,487 948,881 Noble Energy Inc. 22,416 890,364 Pioneer Natural Resources Co./1/ 33,277 880,177 Sunoco Inc. 19,369 847,587 ENSCO International Inc. 30,366 800,144 XTO Energy Inc. 31,691 750,126 Newfield Exploration Co./1/ 16,353 649,705 Cooper Cameron Corp./1/ 12,223 523,389 Helmerich & Payne Inc. 18,526 491,124 Diamond Offshore Drilling Inc. 26,221 483,777 Massey Energy Co. 27,870 387,393 Tom Brown Inc./1/ 13,384 361,636 Evergreen Resources Inc./1/ 13,021 357,036 El Paso Corp. 47,785 350,742 SHARES OR SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- National-Oilwell Inc./1/ 17,226 $ 328,500 Tidewater Inc. 11,463 314,201 Cabot Oil & Gas Corp. 11,868 303,227 Grant Prideco Inc./1/ 24,162 273,997 Stone Energy Corp./1/ 7,427 268,412 Varco International Inc./1/ 12,658 222,654 Key Energy Services Inc./1/ 24,980 218,075 Cimarex Energy Co./1/ 9,856 201,555 Chesapeake Energy Corp. 16,064 191,643 Arch Coal Inc. 7,180 175,910 Hanover Compressor Co./1/ 16,496 174,858 Vintage Petroleum Inc. 12,837 148,267 Forest Oil Corp./1/ 6,108 143,233 Lone Star Technologies Inc./1/ 7,428 103,398 SEACOR SMIT Inc./1/ 2,232 85,530 Veritas DGC Inc./1/ 6,782 60,089 Rowan Companies Inc./1/ 1,888 45,218 Peabody Energy Corp. 1,140 37,996 Patterson-UTI Energy Inc./1/ 947 27,075 TOTAL COMMON STOCKS (Cost: $163,153,966) 156,124,104 SHORT TERM INVESTMENTS - 5.90% MONEY MARKET FUNDS - 3.40% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2//3/ 3,605,653 3,605,653 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2//3/ 1,311,228 1,311,228 BlackRock Temp Cash Money Market Fund/2/ 56,392 56,392 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 337,252 337,252 5,310,525 FLOATING RATE NOTES - 1.41% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 59,601 59,596 1.08%, 09/15/04/2/ 119,203 119,192 40 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. ENERGY SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- 1.08%, 10/12/04/2/ $ 59,601 $ 59,596 1.17%, 08/23/04/2/ 59,601 59,642 CC USA Inc. 1.06%, 05/24/04/2/ 119,203 119,196 1.08%, 04/19/04/2/ 52,449 52,448 1.12%, 07/15/04/2/ 59,601 59,616 Dorada Finance Inc. 1.08%, 05/20/04/2/ 119,203 119,193 1.24%, 08/09/04/2/ 29,801 29,797 Five Finance Inc. 1.09%, 04/15/04/2/ 59,601 59,601 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 119,203 119,203 Holmes Financing PLC 1.08%, 04/15/04/2/ 23,841 23,841 K2 USA LLC 1.08%, 08/16/04/2/ 29,801 29,797 1.08%, 09/27/04/2/ 128,739 128,721 1.09%, 04/13/04/2/ 59,601 59,600 1.09%, 05/17/04/2/ 59,601 59,600 Links Finance LLC 1.08%, 06/28/04/2/ 59,601 59,594 1.09%, 03/29/04/2/ 59,601 59,601 1.09%, 05/04/04/2/ 59,601 59,600 1.10%, 07/20/04/2/ 47,681 47,674 Nationwide Building Society 1.14%, 07/23/04/2/ 89,402 89,402 Sigma Finance Inc. 1.05%, 11/21/03/2/ 59,601 59,570 1.08%, 07/01/04/2/ 59,601 59,591 1.09%, 10/07/04/2/ 119,203 119,180 1.11%, 07/20/04/2/ 59,601 59,593 1.24%, 08/06/04/2/ 29,801 29,798 Tango Finance Corp. 1.09%, 07/15/04/2/ 35,761 35,752 1.10%, 07/06/04/2/ 35,761 35,758 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 59,601 59,591 White Pine Finance LLC 1.08%, 05/17/04/2/ 71,522 71,522 1.08%, 07/06/04/2/ 71,522 71,517 1.08%, 08/26/04/2/ 59,601 59,594 1.09%, 04/20/04/2/ 59,601 59,601 2,195,577 TIME DEPOSITS - 0.53% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 119,203 119,203 1.40%, 10/25/04/2/ 119,203 119,186 Bank of New York 1.39%, 11/01/04/2/ 119,203 119,191 Bank of Nova Scotia 1.24%, 10/07/04/2/ 89,402 89,394 1.42%, 10/29/04/2/ 89,402 89,409 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 89,402 89,389 1.40%, 10/29/04/2/ 119,203 119,200 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 89,402 89,393 834,365 COMMERCIAL PAPER - 0.37% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 62,701 62,684 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 59,601 59,582 1.06%, 11/17/03/2/ 59,601 59,577 Delaware Funding Corp. 1.04%, 11/20/03/2/ 68,539 68,505 Edison Asset Securitization 1.05%, 11/14/03/2/ 59,601 59,582 Falcon Asset Securitization 1.06%, 11/14/03/2/ 52,449 52,432 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 59,601 59,575 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 29,801 29,785 1.06%, 11/20/03/2/ 29,801 29,786 Prudential Funding LLC 1.06%, 11/20/03/2/ 59,601 59,571 Windmill Funding Corp. 1.05%, 11/19/03/2/ 35,761 35,744 576,823 SCHEDULES OF INVESTMENTS 41 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. ENERGY SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY NOTES - 0.19% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ $ 89,402 $ 88,856 1.28%, 08/19/04/2/ 47,681 47,189 Federal National Mortgage Association 1.28%, 08/20/04/2/ 154,964 153,360 289,405 TOTAL SHORT TERM INVESTMENTS (Cost: $9,206,695) 9,206,695 TOTAL INVESTMENTS IN SECURITIES - 105.86% (Cost $172,360,661) 165,330,799 Other Assets, Less Liabilities - (5.86%) (9,144,783) ------------- NET ASSETS - 100.00% $ 156,186,016 ============= /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 42 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS - 100.01% Pfizer Inc. 2,275,179 $ 71,895,656 Johnson & Johnson 867,514 43,661,980 Merck & Co. Inc. 655,229 28,993,883 Amgen Inc./1/ 373,498 23,067,236 Abbott Laboratories 456,138 19,440,602 Lilly (Eli) & Co. 280,505 18,687,243 Wyeth 387,224 17,092,067 Medtronic Inc. 355,010 16,177,806 Bristol-Myers Squibb Co. 566,042 14,360,486 UnitedHealth Group Inc. 174,236 8,865,128 Schering-Plough Corp. 428,539 6,543,791 Boston Scientific Corp./1/ 86,156 5,834,484 Forest Laboratories Inc./1/ 106,662 5,334,167 HCA Inc. 135,914 5,198,710 Genentech Inc./1/ 62,895 5,155,503 Guidant Corp. 90,293 4,605,846 Baxter International Inc. 171,523 4,559,081 Zimmer Holdings Inc./1/ 69,766 4,451,768 WellPoint Health Networks Inc./1/ 44,020 3,913,378 Stryker Corp. 40,026 3,246,509 Gilead Sciences Inc./1/ 58,444 3,189,874 St. Jude Medical Inc./1/ 52,578 3,057,936 Genzyme Corp. - General Division/1/ 64,906 2,979,185 Allergan Inc. 39,226 2,966,270 Anthem Inc./1/ 40,402 2,764,709 Becton, Dickinson & Co. 74,427 2,721,051 Biomet Inc. 75,413 2,704,310 Medco Health Solutions Inc./1/ 79,048 2,624,394 Aetna Inc. 44,952 2,580,694 CIGNA Corp. 40,746 2,324,559 MedImmune Inc./1/ 73,317 1,954,631 Caremark Rx Inc./1/ 77,720 1,946,886 Monsanto Co. 76,415 1,914,196 Mylan Laboratories Inc. 78,357 1,892,322 Tenet Healthcare Corp./1/ 136,388 1,882,154 Biogen Inc./1/ 43,401 1,756,438 Chiron Corp./1/ 31,736 1,733,738 IMS Health Inc. 69,905 1,644,865 Quest Diagnostics Inc./1/ 23,713 1,604,184 IDEC Pharmaceuticals Corp./1/ 45,140 1,585,768 Health Management Associates Inc. Class A 69,693 1,543,700 Laboratory Corp. of America Holdings/1/ 42,365 1,501,839 Applera Corp. - Applied Biosystems Group 61,118 1,410,603 Barr Laboratories Inc./1/ 16,772 1,287,586 Millennium Pharmaceuticals Inc./1/ 80,507 1,281,671 Varian Medical Systems Inc./1/ 19,931 1,274,388 Alcon Inc. 22,590 1,244,935 Watson Pharmaceuticals Inc./1/ 31,458 1,235,356 Bard (C.R.) Inc. 15,105 1,209,155 AdvancePCS/1/ 23,150 1,191,530 Omnicare Inc. 29,655 1,136,973 Lincare Holdings Inc./1/ 28,803 1,121,589 Patterson Dental Co./1/ 16,897 1,081,070 Health Net Inc./1/ 33,867 1,069,859 Hillenbrand Industries Inc. 16,928 1,007,724 Express Scripts Inc./1/ 18,050 991,306 Celgene Corp./1/ 23,634 985,301 Humana Inc./1/ 47,285 959,413 King Pharmaceuticals Inc./1/ 70,429 943,749 Invitrogen Corp./1/ 14,641 931,021 Oxford Health Plans Inc./1/ 22,961 929,921 IVAX Corp./1/ 47,786 920,358 DENTSPLY International Inc. 20,319 897,897 Beckman Coulter Inc. 17,851 886,302 Manor Care Inc. 26,084 868,076 Mid Atlantic Medical Services Inc./1/ 14,120 824,608 Coventry Health Care Inc./1/ 14,503 794,039 ICOS Corp./1/ 16,589 775,038 Cephalon Inc./1/ 16,110 756,526 Bausch & Lomb Inc. 15,572 749,948 Pharmaceutical Resources Inc./1/ 9,840 711,235 Universal Health Services Inc. Class B/1/ 14,654 689,471 DaVita Inc./1/ 19,457 682,941 First Health Group Corp./1/ 27,927 681,698 Triad Hospitals Inc./1/ 21,969 675,107 Sepracor Inc./1/ 24,576 654,459 PacifiCare Health Systems Inc./1/ 10,984 653,548 Amylin Pharmaceuticals Inc./1/ 23,877 652,558 Fisher Scientific International Inc./1/ 16,001 644,040 SCHEDULES OF INVESTMENTS 43 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- SICOR Inc./1/ 23,542 $ 630,926 ImClone Systems Inc./1/ 17,576 610,766 Apogent Technologies Inc./1/ 26,952 591,596 INAMED Corp./1/ 6,772 584,898 Renal Care Group Inc./1/ 14,337 537,781 Edwards Lifesciences Corp./1/ 18,135 525,915 Human Genome Sciences Inc./1/ 37,435 520,721 Neurocrine Biosciences Inc./1/ 11,113 520,422 Taro Pharmaceutical Industries Ltd./1/ 7,914 508,475 Medicis Pharmaceutical Corp. Class A 7,921 501,795 IDEXX Laboratories Inc./1/ 9,973 471,723 ICN Pharmaceuticals Inc. 24,385 470,874 Apria Healthcare Group Inc./1/ 16,147 468,263 Covance Inc./1/ 17,963 467,577 Accredo Health Inc./1/ 13,999 447,408 Pharmaceutical Product Development Inc./1/ 14,418 433,549 Affymetrix Inc./1/ 16,867 432,301 Charles River Laboratories International Inc./1/ 13,340 430,082 Steris Corp./1/ 20,297 422,584 Cytyc Corp./1/ 32,167 415,919 TECHNE Corp./1/ 11,917 415,069 Andrx Group/1/ 20,648 410,895 Respironics Inc./1/ 9,854 410,813 ResMed Inc./1/ 9,778 408,427 Cooper Companies Inc. 9,138 397,046 Select Medical Corp./1/ 11,729 393,743 Martek Biosciences Corp./1/ 7,869 380,938 Gen-Probe Inc./1/ 13,884 371,675 Protein Design Labs Inc./1/ 27,285 367,802 Community Health Systems Inc./1/ 15,284 367,122 Pediatrix Medical Group Inc./1/ 6,748 360,681 Invacare Corp. 8,761 359,376 Medicines Co. (The)/1/ 12,786 340,747 Alkermes Inc./1/ 26,037 337,700 IGEN International Inc./1/ 5,708 330,779 MGI Pharma Inc./1/ 8,730 327,899 OSI Pharmaceuticals Inc./1/ 11,321 316,988 VISX Inc./1/ 12,591 305,458 Vertex Pharmaceuticals Inc./1/ 22,180 291,002 Odyssey Healthcare Inc./1/ 10,352 287,164 Applera Corp. - Celera Genomics Group1 21,020 281,037 NPS Pharmaceuticals Inc./1/ 10,602 279,151 Abgenix Inc./1/ 22,438 274,865 LifePoint Hospitals Inc./1/ 10,622 273,092 US Oncology Inc./1/ 24,530 268,358 Diagnostic Products Corp. 6,404 261,411 Sybron Dental Specialties Inc./1/ 11,032 253,736 Bio-Rad Laboratories Inc. Class A/1/ 4,676 244,321 Mentor Corp. 11,848 239,922 Perrigo Co. 17,741 238,616 Delta & Pine Land Co. 10,394 237,607 Nektar Therapeutics/1/ 16,273 213,827 Alpharma Inc. Class A 11,631 211,684 Ligand Pharmaceuticals Inc. Class B/1/ 15,345 211,454 PolyMedica Corp. 7,056 208,152 Beverly Enterprises Inc./1/ 31,197 189,366 InterMune Inc./1/ 9,035 180,700 XOMA Ltd./1/ 23,782 178,127 Tularik Inc./1/ 13,724 172,511 Advanced Medical Optics Inc./1/ 8,407 169,569 Province Healthcare Co./1/ 12,712 163,222 Medarex Inc./1/ 22,582 161,461 Haemonetics Corp./1/ 6,994 161,282 Sunrise Senior Living Inc./1/ 5,405 156,205 Enzo Biochem Inc./1/ 8,048 148,888 Cyberonics Inc./1/ 5,288 144,627 CV Therapeutics Inc./1/ 8,096 142,732 Regeneron Pharmaceuticals Inc./1/ 10,155 140,545 Viasys Healthcare Inc./1/ 7,673 138,498 Nabi Biopharmaceuticals/1/ 12,533 138,239 ArthroCare Corp./1/ 6,177 138,056 Enzon Pharmaceuticals Inc./1/ 12,317 137,458 Cell Genesys Inc./1/ 10,545 135,398 PAREXEL International Corp./1/ 7,417 124,012 Datascope Corp. 3,666 122,041 United Therapeutics Inc./1/ 6,021 121,203 Trimeris Inc./1/ 4,695 120,192 Biosite Inc./1/ 4,492 115,894 Incyte Corp./1/ 20,983 110,790 44 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- Orthodontic Centers of America Inc./1/ 12,347 $ 109,147 Albany Molecular Research Inc./1/ 7,284 107,075 Immunomedics Inc./1/ 12,362 105,077 Praecis Pharmaceuticals Inc./1/ 15,044 104,255 Transkaryotic Therapies Inc./1/ 7,905 103,635 Cubist Pharmaceuticals Inc./1/ 8,852 102,860 Savient Pharmaceuticals Inc./1/ 16,921 102,372 Myriad Genetics Inc./1/ 7,898 99,989 Alexion Pharmaceuticals Inc./1/ 5,357 99,104 Cell Therapeutics Inc./1/ 8,884 92,394 Pharmacopeia Inc./1/ 7,071 88,246 Molecular Devices Corp./1/ 4,323 76,776 Maxygen Inc./1/ 8,066 76,627 CuraGen Corp./1/ 11,732 71,331 Lexicon Genetics Inc./1/ 12,554 70,302 Noven Pharmaceuticals Inc./1/ 6,651 67,109 Gene Logic Inc./1/ 8,952 44,491 Theragenics Corp./1/ 8,731 38,853 TOTAL COMMON STOCKS (Cost: $452,102,855) 420,712,817 SHORT TERM INVESTMENTS - 7.93% MONEY MARKET FUNDS - 4.55% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2//3/ 12,928,322 12,928,322 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2//3/ 4,786,509 4,786,509 BlackRock Temp Cash Money Market Fund/2/ 205,854 205,854 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 1,231,106 1,231,106 19,151,791 FLOATING RATE NOTES 1.91% Beta Finance Inc 1.08%, 05/20/04/2/ $ 217,569 217,551 1.08%, 09/15/04/2/ 435,137 435,100 1.08%, 10/12/04/2/ 217,569 217,548 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- 1.17%, 08/23/04/2/ $ 217,569 $ 217,719 CC USA Inc. 1.06%, 05/24/04/2/ 435,137 435,113 1.08%, 04/19/04/2/ 191,460 191,456 1.12%, 07/15/04/2/ 217,569 217,623 Dorada Finance Inc. 1.08%, 05/20/04/2/ 435,137 435,102 1.24%, 08/09/04/2/ 108,784 108,772 Five Finance Inc. 1.09%, 04/15/04/2/ 217,569 217,569 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 435,137 435,137 Holmes Financing PLC 1.08%, 04/15/04/2/ 87,027 87,027 K2 USA LLC 1.08%, 08/16/04/2/ 108,784 108,772 1.08%, 09/27/04/2/ 469,948 469,885 1.09%, 04/13/04/2/ 217,569 217,564 1.09%, 05/17/04/2/ 217,569 217,563 Links Finance LLC 1.08%, 06/28/04/2/ 217,569 217,540 1.09%, 03/29/04/2/ 217,569 217,569 1.09%, 05/04/04/2/ 217,569 217,563 1.10%, 07/20/04/2/ 174,055 174,030 Nationwide Building Society 1.14%, 07/23/04/2/ 326,353 326,353 Sigma Finance Inc. 1.05%, 11/21/03/2/ 217,569 217,454 1.08%, 07/01/04/2/ 217,569 217,533 1.09%, 10/07/04/2/ 435,137 435,057 1.11%, 07/20/04/2/ 217,569 217,538 1.24%, 08/06/04/2/ 108,784 108,776 Tango Finance Corp. 1.09%, 07/15/04/2/ 130,541 130,511 1.10%, 07/06/04/2/ 130,541 130,532 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 217,569 217,531 White Pine Finance LLC 1.08%, 05/17/04/2/ 261,082 261,082 1.08%, 07/06/04/2/ 261,082 261,065 1.08%, 08/26/04/2/ 217,569 217,541 SCHEDULES OF INVESTMENTS 45 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- 1.09%, 04/20/04/2/ $ 217,569 $ 217,569 8,014,745 TIME DEPOSITS - 0.72% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 435,137 435,137 1.40%, 10/25/04/2/ 435,137 435,076 Bank of New York 1.39%, 11/01/04/2/ 435,137 435,094 Bank of Nova Scotia 1.24%, 10/07/04/2/ 326,353 326,323 1.42%, 10/29/04/2/ 326,353 326,377 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 326,353 326,307 1.40%, 10/29/04/2/ 435,137 435,126 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 326,353 326,320 3,045,760 COMMERCIAL PAPER - 0.50% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 228,882 228,822 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 217,569 217,498 1.06%, 11/17/03/2/ 217,569 217,479 Delaware Funding Corp. 1.04%, 11/20/03/2/ 250,195 250,072 Edison Asset Securitization 1.05%, 11/14/03/2/ 217,569 217,499 Falcon Asset Securitization 1.06%, 11/14/03/2/ 191,460 191,398 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 217,569 217,473 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 108,784 108,727 1.06%, 11/20/03/2/ 108,784 108,730 Prudential Funding LLC 1.06%, 11/20/03/2/ 217,569 217,460 Windmill Funding Corp. 1.05%, 11/19/03/2/ 130,541 130,480 2,105,638 U.S. GOVERNMENT AGENCY NOTES - 0.25% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 326,353 324,362 1.28%, 08/19/04/2/ 174,055 172,260 Federal National Mortgage Association 1.28%, 08/20/04/2/ 565,680 559,825 1,056,447 TOTAL SHORT TERM INVESTMENTS (Cost: $33,374,381) 33,374,381 TOTAL INVESTMENTS IN SECURITIES - 107.94% (Cost $485,477,236) 454,087,198 Other Assets, Less Liabilities - (7.94%) (33,418,873) ------------- NET ASSETS 100.00% $ 420,668,325 ============= /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 46 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS - 99.95% Microsoft Corp. 1,853,715 $ 48,474,647 Intel Corp. 1,201,173 39,698,768 International Business Machines Corp. 317,664 28,424,575 Cisco Systems Inc./1/ 1,290,275 27,069,970 Dell Inc./1/ 416,012 15,026,353 Hewlett-Packard Co. 503,677 11,237,034 Texas Instruments Inc. 317,848 9,192,164 Oracle Corp./1/ 735,593 8,797,692 Applied Materials Inc./1/ 302,343 7,065,756 QUALCOMM Inc. 145,877 6,929,158 EMC Corp./1/ 420,421 5,818,627 Motorola Inc. 427,711 5,786,930 Yahoo! Inc./1/ 101,108 4,418,420 Analog Devices Inc./1/ 66,915 2,966,342 Maxim Integrated Products Inc. 59,645 2,964,953 Veritas Software Corp./1/ 78,278 2,829,750 Corning Inc./1/ 244,668 2,686,455 Lucent Technologies Inc./1/ 764,127 2,445,206 Linear Technology Corp. 57,316 2,442,235 Sun Microsystems Inc./1/ 594,473 2,354,113 KLA-Tencor Corp./1/ 34,647 1,986,313 Xilinx Inc./1/ 62,607 1,984,642 Computer Associates International Inc. 84,187 1,980,078 Electronic Data Systems Corp. 87,495 1,876,768 Adobe Systems Inc. 42,442 1,860,657 Symantec Corp./1/ 27,886 1,858,602 Pitney Bowes Inc. 43,020 1,768,122 Intuit Inc./1/ 34,568 1,727,709 Lexmark International Inc./1/ 23,416 1,723,652 Network Appliance Inc./1/ 62,969 1,554,075 Xerox Corp./1/ 145,237 1,524,989 SunGard Data Systems Inc./1/ 52,147 1,462,723 Micron Technology Inc./1/ 101,556 1,456,313 Apple Computer Inc./1/ 63,389 1,450,974 Altera Corp./1/ 70,256 1,421,279 National Semiconductor Corp./1/ 34,010 1,381,826 Computer Sciences Corp./1/ 34,372 1,361,819 Broadcom Corp. Class A/1/ 41,653 1,330,813 PeopleSoft Inc./1/ 60,882 1,263,910 Microchip Technology Inc. 37,421 1,224,041 Novellus Systems Inc./1/ 27,895 1,151,785 SanDisk Corp./1/ 14,256 1,149,034 Affiliated Computer Services Inc. Class A/1/ 23,068 1,128,717 Juniper Networks Inc./1/ 60,881 1,095,249 Siebel Systems Inc./1/ 80,839 1,017,763 Avaya Inc./1/ 76,374 988,280 BEA Systems Inc./1/ 71,001 986,914 QLogic Corp./1/ 17,229 965,685 Advanced Micro Devices Inc./1/ 63,486 964,987 Unisys Corp./1/ 60,415 927,974 JDS Uniphase Corp./1/ 248,004 880,414 Synopsys Inc./1/ 27,291 865,671 Scientific-Atlanta Inc. 27,455 812,668 Teradyne Inc./1/ 34,580 787,732 Citrix Systems Inc./1/ 30,471 770,307 Cadence Design Systems Inc./1/ 50,051 770,285 Mercury Interactive Corp./1/ 15,890 737,932 BMC Software Inc./1/ 41,971 729,456 VeriSign Inc./1/ 44,336 703,612 Amdocs Ltd./1/ 32,392 695,132 Marvell Technology Group Ltd./1/ 15,753 691,084 Lam Research Corp./1/ 23,384 672,056 Intersil Corp. Class A 25,045 645,911 LSI Logic Corp./1/ 69,797 644,924 Seagate Technology 27,687 636,247 NCR Corp./1/ 17,447 627,045 Comverse Technology Inc./1/ 34,345 619,584 Maxtor Corp./1/ 43,813 598,924 Level 3 Communications Inc./1/ 108,991 587,462 Agere Systems Inc. Class B/1/ 167,450 567,656 PMC-Sierra Inc./1/ 31,169 566,341 International Rectifier Corp./1/ 11,828 564,550 Check Point Software Technologies Ltd./1/ 33,054 561,587 CIENA Corp./1/ 86,253 552,882 Cognizant Technology Solutions Corp./1/ 11,584 525,798 Tellabs Inc./1/ 68,600 516,558 SCHEDULES OF INVESTMENTS 47 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Agere Systems Inc. Class A/1/ 141,654 $ 492,956 Zebra Technologies Corp. Class A/1/ 8,633 491,649 Western Digital Corp./1/ 36,547 491,557 NVIDIA Corp./1/ 27,741 490,461 3Com Corp./1/ 67,548 486,346 Storage Technology Corp./1/ 20,071 483,711 Foundry Networks Inc./1/ 20,346 473,248 Crown Castle International Corp./1/ 36,864 466,698 Cypress Semiconductor Corp./1/ 21,659 464,802 UTStarcom Inc./1/ 14,621 460,562 Harris Corp. 12,160 452,595 Atmel Corp./1/ 79,772 449,914 American Tower Corp. Class A/1/ 38,202 443,143 WebMD Corp./1/ 56,057 436,684 Emulex Corp./1/ 15,073 426,867 Rambus Inc./1/ 16,854 417,305 Fairchild Semiconductor International Inc. Class A/1/ 18,106 409,196 Network Associates Inc./1/ 28,868 402,131 Autodesk Inc. 20,771 399,842 Novell Inc./1/ 67,975 399,013 RF Micro Devices Inc./1/ 33,802 395,821 Red Hat Inc./1/ 25,127 377,910 Advanced Fibre Communications Inc./1/ 15,699 377,875 ADC Telecommunications Inc./1/ 147,980 377,349 Polycom Inc./1/ 18,002 360,580 Compuware Corp./1/ 63,143 354,864 Andrew Corp./1/ 26,353 344,697 Sonus Networks Inc./1/ 41,051 337,029 NetScreen Technologies Inc./1/ 12,584 334,986 Reynolds & Reynolds Co. (The) Class A 12,202 331,406 Amphenol Corp. Class A/1/ 5,559 326,591 Applied Micro Circuits Corp./1/ 55,795 324,727 Avocent Corp./1/ 8,498 321,224 Silicon Laboratories Inc./1/ 5,944 320,857 Sybase Inc./1/ 17,429 311,979 Brocade Communications Systems Inc./1/ 46,888 307,116 Varian Semiconductor Equipment Associates Inc./1/ 6,299 304,557 Semtech Corp./1/ 13,639 302,786 Amkor Technology Inc./1/ 15,873 299,206 Integrated Device Technology Inc./1/ 18,988 298,112 Cymer Inc./1/ 6,409 292,635 Conexant Systems Inc./1/ 49,877 290,783 OmniVision Technologies Inc./1/ 4,868 276,502 Henry (Jack) & Associates Inc. 13,756 274,845 Documentum Inc./1/ 9,201 273,730 Vitesse Semiconductor Corp./1/ 38,824 273,321 ADTRAN Inc. 3,892 264,773 CACI International Inc. Class A/1/ 5,293 262,162 BearingPoint Inc./1/ 27,878 262,053 Electronics For Imaging Inc./1/ 9,657 261,705 EarthLink Inc./1/ 27,025 247,279 Cree Inc./1/ 13,444 238,765 Ascential Software Corp./1/ 10,752 238,587 IKON Office Solutions Inc. 27,209 228,556 Macromedia Inc./1/ 11,829 226,052 Plantronics Inc./1/ 8,067 224,343 Imation Corp. 6,588 224,321 Hyperion Solutions Corp./1/ 6,685 223,881 Kronos Inc./1/ 3,722 223,320 Skyworks Solutions Inc./1/ 25,890 222,136 Cerner Corp./1/ 5,187 219,773 Intergraph Corp./1/ 8,356 217,757 Mentor Graphics Corp./1/ 12,719 213,043 Micrel Inc./1/ 12,438 205,227 Gateway Inc./1/ 39,569 199,428 Axcelis Technologies Inc./1/ 18,365 194,302 CNET Networks Inc./1/ 23,859 194,212 Power Integrations Inc./1/ 5,498 191,440 Credence Systems Corp./1/ 11,630 189,685 Advanced Digital Information Corp./1/ 11,375 184,844 United Online Inc./1/ 6,313 181,751 FileNET Corp./1/ 6,719 179,532 Tekelec/1/ 11,097 178,551 InterDigital Communications Corp./1/ 10,466 177,817 Extreme Networks Inc./1/ 20,323 174,778 Sycamore Networks Inc./1/ 33,917 169,585 48 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- Brooks Automation Inc./1/ 6,786 $ 169,311 Silicon Storage Technology Inc./1/ 15,144 169,310 Adaptec Inc./1/ 19,620 166,966 Trimble Navigation Ltd./1/ 5,942 164,296 TriQuint Semiconductor Inc./1/ 22,855 163,870 Hutchinson Technology Inc./1/ 4,775 160,010 Informatica Corp./1/ 14,628 159,445 McDATA Corp. Class A/1/ 14,975 154,692 Lattice Semiconductor Corp./1/ 19,581 152,732 Parametric Technology Corp./1/ 48,957 152,256 Ariba Inc./1/ 45,619 148,262 Black Box Corp. 3,372 145,198 Perot Systems Corp. Class A/1/ 13,539 143,784 CommScope Inc./1/ 9,262 143,468 Digital River Inc./1/ 5,216 142,814 RSA Security Inc./1/ 10,748 139,402 Kulicke & Soffa Industries Inc./1/ 9,255 135,863 Keane Inc./1/ 10,198 134,002 RealNetworks Inc./1/ 20,147 133,978 GlobeSpanVirata Inc./1/ 21,698 133,660 Internet Security Systems Inc./1/ 8,088 132,724 MICROS Systems Inc./1/ 3,207 129,851 ATMI Inc./1/ 5,616 129,112 Borland Software Corp./1/ 14,480 128,582 Cirrus Logic Inc./1/ 15,524 126,676 NetIQ Corp./1/ 10,390 126,135 Zoran Corp./1/ 7,488 124,750 DSP Group Inc./1/ 5,213 124,486 Actel Corp./1/ 4,606 124,270 Asyst Technologies Inc./1/ 6,644 123,911 Ultratech Inc./1/ 3,908 121,969 Quest Software Inc./1/ 8,139 121,271 LTX Corp./1/ 8,407 120,136 Exar Corp./1/ 7,407 119,179 Vignette Corp./1/ 46,926 117,784 American Management Systems Inc./1/ 7,898 116,890 Micromuse Inc./1/ 14,198 114,294 Photronics Inc./1/ 5,113 110,134 REMEC Inc./1/ 9,852 108,668 TIBCO Software Inc./1/ 16,856 108,553 JDA Software Group Inc./1/ 5,046 108,035 Dendrite International Inc./1/ 6,872 103,767 F5 Networks Inc./1/ 4,148 103,741 Advent Software Inc./1/ 5,618 102,866 Imagistics International Inc./1/ 3,149 101,240 S1 Corp./1/ 12,410 100,273 Packeteer Inc./1/ 5,631 98,430 Retek Inc./1/ 9,810 98,394 M-Systems Flash Disk Pioneers Ltd./1/ 4,862 96,268 Verity Inc./1/ 6,839 96,088 IDX Systems Corp./1/ 3,665 96,023 Kopin Corp./1/ 13,025 95,473 E.piphany Inc./1/ 13,662 94,814 CIBER Inc./1/ 10,107 93,187 Agile Software Corp./1/ 8,453 92,729 Transmeta Corp./1/ 22,626 91,635 Inter-Tel Inc. 3,614 91,037 Systems & Computer Technology Corp./1/ 6,143 90,302 Quantum Corp./1/ 28,579 88,881 Wind River Systems Inc./1/ 13,019 87,227 Silicon Image Inc./1/ 12,317 86,589 Mindspeed Technologies Inc./1/ 16,864 86,344 Mercury Computer Systems Inc./1/ 3,943 84,814 SonicWALL Inc./1/ 10,097 81,786 Manugistics Group Inc./1/ 10,875 78,953 webMethods Inc./1/ 9,049 78,545 Harmonic Inc./1/ 10,120 78,531 Echelon Corp./1/ 5,946 77,179 ESS Technology Inc./1/ 5,528 76,729 Cable Design Technologies Corp./1/ 7,816 75,346 Finisar Corp./1/ 23,341 72,357 Cohu Inc. 3,581 71,871 SERENA Software Inc./1/ 4,152 71,622 PanAmSat Corp./1/ 3,323 68,786 Powerwave Technologies Inc./1/ 10,550 68,681 C-COR.net Corp./1/ 6,756 68,100 Interwoven Inc./1/ 17,185 65,131 RadiSys Corp./1/ 3,219 62,931 DuPont Photomasks Inc./1/ 2,642 61,242 MRV Communications Inc./1/ 18,630 57,380 General Cable Corp./1/ 6,046 57,377 SCHEDULES OF INVESTMENTS 49 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- Siliconix Inc./1/ 1,123 $ 57,003 New Focus Inc./1/ 10,832 56,218 Arris Group Inc./1/ 9,301 55,806 Concurrent Computer Corp./1/ 11,455 53,266 MatrixOne Inc./1/ 8,649 47,915 Computer Network Technology Corp./1/ 4,833 47,847 Entrust Inc./1/ 10,144 47,778 MRO Software Inc./1/ 3,634 45,970 McDATA Corp. Class B/1/ 4,486 45,847 Iomega Corp. 8,278 45,612 InFocus Corp./1/ 6,531 43,039 Silicon Graphics Inc./1/ 34,825 39,352 Stratex Networks Inc./1/ 12,272 39,270 PC-Tel Inc./1/ 3,749 37,977 Actuate Corp./1/ 10,508 37,408 Keynote Systems Inc./1/ 3,271 37,126 WatchGuard Technologies Inc./1/ 5,184 29,808 TOTAL COMMON STOCKS (Cost: $342,879,516) 330,057,125 SHORT TERM INVESTMENTS - 7.43% MONEY MARKET FUNDS - 4.28% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2//3/ 9,568,942 9,568,942 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2//3/ 3,502,161 3,502,161 BlackRock Temp Cash Money Market Fund/2/ 150,618 150,618 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 900,768 900,768 14,122,489 FLOATING RATE NOTES - 1.78% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 159,189 159,176 1.08%, 09/15/04/2/ 318,378 318,351 1.08%, 10/12/04/2/ 159,189 159,174 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- 1.17%, 08/23/04/2/ $ 159,189 $ 159,299 CC USA Inc. 1.06%, 05/24/04/2/ 318,378 318,361 1.08%, 04/19/04/2/ 140,086 140,083 1.12%, 07/15/04/2/ 159,189 159,229 Dorada Finance Inc. 1.08%, 05/20/04/2/ 318,378 318,352 1.24%, 08/09/04/2/ 79,595 79,585 Five Finance Inc. 1.09%, 04/15/04/2/ 159,189 159,189 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 318,378 318,378 Holmes Financing PLC 1.08%, 04/15/04/2/ 63,676 63,676 K2 USA LLC 1.08%, 08/16/04/2/ 79,595 79,585 1.08%, 09/27/04/2/ 343,849 343,802 1.09%, 04/13/04/2/ 159,189 159,186 1.09%, 05/17/04/2/ 159,189 159,185 Links Finance LLC 1.08%, 06/28/04/2/ 159,189 159,169 1.09%, 03/29/04/2/ 159,189 159,189 1.09%, 05/04/04/2/ 159,189 159,185 1.10%, 07/20/04/2/ 127,351 127,333 Nationwide Building Society 1.14%, 07/23/04/2/ 238,784 238,784 Sigma Finance Inc. 1.05%, 11/21/03/2/ 159,189 159,106 1.08%, 07/01/04/2/ 159,189 159,163 1.09%, 10/07/04/2/ 318,378 318,319 1.11%, 07/20/04/2/ 159,189 159,167 1.24%, 08/06/04/2/ 79,595 79,589 Tango Finance Corp. 1.09%, 07/15/04/2/ 95,514 95,491 1.10%, 07/06/04/2/ 95,514 95,507 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 159,189 159,162 White Pine Finance LLC 1.08%, 05/17/04/2/ 191,027 191,027 1.08%, 07/06/04/2/ 191,027 191,015 1.08%, 08/26/04/2/ 159,189 159,169 50 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- 1.09%, 04/20/04/2/ $ 159,189 $ 159,189 5,864,175 TIME DEPOSITS - 0.67% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 318,378 318,378 1.40%, 10/25/04/2/ 318,378 318,332 Bank of New York 1.39%, 11/01/04/2/ 318,378 318,347 Bank of Nova Scotia 1.24%, 10/07/04/2/ 238,784 238,762 1.42%, 10/29/04/2/ 238,784 238,801 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 238,784 238,750 1.40%, 10/29/04/2/ 318,378 318,371 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 238,784 238,760 2,228,501 COMMERCIAL PAPER - 0.47% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 167,467 167,423 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 159,189 159,138 1.06%, 11/17/03/2/ 159,189 159,124 Delaware Funding Corp. 1.04%, 11/20/03/2/ 183,061 182,971 Edison Asset Securitization 1.05%, 11/14/03/2/ 159,189 159,138 Falcon Asset Securitization 1.06%, 11/14/03/2/ 140,086 140,041 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 159,189 159,120 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 79,595 79,553 1.06%, 11/20/03/2/ 79,595 79,555 Prudential Funding LLC 1.06%, 11/20/03/2/ 159,189 159,110 Windmill Funding Corp. 1.05%, 11/19/03/2/ 95,514 95,469 1,540,642 U.S. GOVERNMENT AGENCY NOTES - 0.23% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 238,784 237,327 1.28%, 08/19/04/2/ 127,352 126,038 Federal National Mortgage Association 1.28%, 08/20/04/2/ 413,893 409,609 772,974 TOTAL SHORT TERM INVESTMENTS (Cost: $24,528,781) 24,528,781 TOTAL INVESTMENTS IN SECURITIES - 107.38% (Cost $367,408,297) 354,585,906 Other Assets, Less Liabilities (7.38%) (24,369,182) ------------- NET ASSETS 100.00% $ 330,216,724 ============= /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 51 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. TELECOMMUNICATIONS SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS - 99.97% Verizon Communications Inc. 712,640 $ 23,944,704 SBC Communications Inc. 871,248 20,892,527 BellSouth Corp. 304,905 8,022,051 Citizens Communications Co./1/ 420,466 5,234,802 Nextel Communications Inc. Class A/1/ 214,873 5,199,927 Telephone & Data Systems Inc. 82,942 5,192,169 CenturyTel Inc. 142,858 5,107,174 Alltel Corp. 104,927 4,959,899 AT&T Corp. 261,285 4,857,288 AT&T Wireless Services Inc./1/ 651,317 4,722,048 Sprint Corp. (FON Group) 276,665 4,426,640 BCE Inc. 154,820 3,500,480 Vodafone Group PLC ADR 147,990 3,129,989 Cincinnati Bell Inc./1/ 540,517 2,762,042 Comcast Corp. Class A/1/ 71,317 2,419,073 Qwest Communications International Inc./1/ 577,093 2,037,138 United States Cellular Corp./1/ 53,176 1,800,539 Sprint Corp. (PCS Group)/1/ 191,001 830,854 Western Wireless Corp. Class A/1/ 23,656 458,926 IDT Corp. Class B/1/ 18,711 357,754 Nextel Partners Inc. Class A/1/ 15,785 189,736 Wireless Facilities Inc./1/ 10,012 172,006 IDT Corp./1/ 6,094 113,044 TOTAL COMMON STOCKS (Cost: $124,682,796) 110,330,810 SHORT TERM INVESTMENTS - 11.17% MONEY MARKET FUNDS - 6.63% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2//3/ 5,116,444 5,116,444 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2//3/ 1,687,153 1,687,153 BlackRock Temp Cash Money Market Fund/2/ 72,560 72,560 SHARES OR SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 433,941 $ 433,941 7,310,098 FLOATING RATE NOTES - 2.56% Beta Finance Inc. 1.08%, 05/20/04/2/ $ 76,689 76,683 1.08%, 09/15/04/2/ 153,378 153,364 1.08%, 10/12/04/2/ 76,689 76,682 1.17%, 08/23/04/2/ 76,689 76,742 CC USA Inc. 1.06%, 05/24/04/2/ 153,378 153,369 1.08%, 04/19/04/2/ 67,486 67,485 1.12%, 07/15/04/2/ 76,689 76,708 Dorada Finance Inc. 1.08%, 05/20/04/2/ 153,378 153,365 1.24%, 08/09/04/2/ 38,344 38,340 Five Finance Inc. 1.09%, 04/15/04/2/ 76,689 76,689 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 153,378 153,378 Holmes Financing PLC 1.08%, 04/15/04/2/ 30,676 30,676 K2 USA LLC 1.08%, 08/16/04/2/ 38,344 38,340 1.08%, 09/27/04/2/ 165,648 165,626 1.09%, 04/13/04/2/ 76,689 76,687 1.09%, 05/17/04/2/ 76,689 76,687 Links Finance LLC 1.08%, 06/28/04/2/ 76,689 76,679 1.09%, 03/29/04/2/ 76,689 76,689 1.09%, 05/04/04/2/ 76,689 76,687 1.10%, 07/20/04/2/ 61,351 61,342 Nationwide Building Society 1.14%, 07/23/04/2/ 115,033 115,033 Sigma Finance Inc. 1.05%, 11/21/03/2/ 76,689 76,649 1.08%, 07/01/04/2/ 76,689 76,676 1.09%, 10/07/04/2/ 153,378 153,349 52 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. TELECOMMUNICATIONS SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- 1.11%, 07/20/04/2/ $ 76,689 $ 76,678 1.24%, 08/06/04/2/ 38,344 38,341 Tango Finance Corp. 1.09%, 07/15/04/2/ 46,013 46,003 1.10%, 07/06/04/2/ 46,013 46,010 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 76,689 76,676 White Pine Finance LLC 1.08%, 05/17/04/2/ 92,027 92,027 1.08%, 07/06/04/2/ 92,027 92,021 1.08%, 08/26/04/2/ 76,689 76,679 1.09%, 04/20/04/2/ 76,689 76,689 2,825,049 TIME DEPOSITS - 0.97% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 153,378 153,378 1.40%, 10/25/04/2/ 153,378 153,355 Bank of New York 1.39%, 11/01/04/2/ 153,378 153,362 Bank of Nova Scotia 1.24%, 10/07/04/2/ 115,033 115,022 1.42%, 10/29/04/2/ 115,033 115,042 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 115,033 115,017 1.40%, 10/29/04/2/ 153,378 153,374 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 115,033 115,022 1,073,572 COMMERCIAL PAPER - 0.67% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 80,677 80,655 Amsterdam Funding Corp. 1.06%, 11/14/03/2/ 76,689 76,664 1.06%, 11/17/03/2/ 76,689 76,657 Delaware Funding Corp. 1.04%, 11/20/03/2/ 88,189 88,146 Edison Asset Securitization 1.05%, 11/14/03/2/ 76,689 76,664 Falcon Asset Securitization 1.06%, 11/14/03/2/ 67,486 67,464 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 76,689 76,655 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 38,344 38,324 1.06%, 11/20/03/2/ 38,344 38,326 Prudential Funding LLC 1.06%, 11/20/03/2/ 76,689 76,650 Windmill Funding Corp. 1.05%, 11/19/03/2/ 46,013 45,992 742,197 U.S. GOVERNMENT AGENCY NOTES - 0.34% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 115,033 114,331 1.28%, 08/19/04/2/ 61,351 60,718 Federal National Mortgage Association 1.28%, 08/20/04/2/ 199,391 197,329 372,378 TOTAL SHORT TERM INVESTMENTS (Cost: $12,323,294) 12,323,294 TOTAL INVESTMENTS IN SECURITIES - 111.14% (Cost $137,006,090) 122,654,104 Other Assets, Less Liabilities (11.14%) (12,295,189) ------------- NET ASSETS - 100.00% $ 110,358,915 ============= /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 53 SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES U.S. UTILITIES SECTOR INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS - 99.82% Southern Company 986,033 $ 29,383,783 Exelon Corp. 441,110 27,988,430 Dominion Resources Inc. 438,283 26,998,233 Duke Energy Corp. 1,231,160 22,345,554 Entergy Corp. 308,483 16,627,234 FirstEnergy Corp. 444,905 15,300,283 American Electric Power Co. Inc. 539,659 15,212,987 FPL Group Inc. 228,829 14,585,560 Progress Energy Inc. 332,599 14,335,017 PG&E Corp./1/ 525,300 12,843,585 Public Service Enterprise Group Inc. 307,859 12,582,197 Consolidated Edison Inc. 307,354 12,438,616 TXU Corp. 440,062 10,042,215 Ameren Corp. 220,278 9,835,413 PPL Corp. 239,192 9,548,545 Xcel Energy Inc. 544,784 8,934,458 Edison International/1/ 445,170 8,774,301 DTE Energy Co. 228,820 8,438,882 Constellation Energy Group Inc. 228,035 8,293,633 Cinergy Corp. 224,243 8,142,263 KeySpan Corp. 214,960 7,517,151 NiSource Inc. 358,765 7,430,023 AES Corp. (The)/1/ 802,182 7,019,092 Sempra Energy 249,240 6,928,872 Wisconsin Energy Corp. 160,077 5,242,522 SCANA Corp. 136,876 4,693,478 Pinnacle West Capital Corp. 124,716 4,559,617 Energy East Corp. 198,842 4,464,003 Pepco Holdings Inc. 232,914 4,099,286 Alliant Energy Corp. 150,375 3,618,022 CenterPoint Energy Inc. 366,123 3,591,667 Questar Corp. 112,960 3,586,480 Equitable Resources Inc. 85,345 3,516,214 NSTAR 72,494 3,385,470 TECO Energy Inc. 256,201 3,363,919 Northeast Utilities 173,067 3,260,582 MDU Resources Group Inc. 143,127 3,238,964 Great Plains Energy Inc. 94,565 3,014,732 Puget Energy Inc. 128,218 2,914,395 OGE Energy Corp. 110,054 2,510,332 Vectren Corp. 102,533 2,419,779 Calpine Corp./1/ 522,958 2,410,836 Philadelphia Suburban Corp. 100,751 2,379,739 DPL Inc. 129,614 2,361,567 National Fuel Gas Co. 105,101 2,349,007 Hawaiian Electric Industries Inc. 50,658 2,318,617 AGL Resources Inc. 79,360 2,233,984 Nicor Inc. 60,056 2,058,119 Peoples Energy Corp. 50,062 2,025,008 Westar Energy Inc. 98,621 1,970,448 WPS Resources Corp. 43,961 1,948,791 Reliant Resources Inc./1/ 378,850 1,875,308 WGL Holdings Inc. 66,293 1,833,001 Allegheny Energy Inc./1/ 172,787 1,828,086 UGI Corp. 57,460 1,769,768 ONEOK Inc. 88,620 1,762,652 Piedmont Natural Gas Co. 42,681 1,695,716 Energen Corp. 44,303 1,633,452 Duquesne Light Holdings Inc. 101,066 1,624,131 Atmos Energy Corp. 66,215 1,622,267 CMS Energy Corp. 196,463 1,595,280 PNM Resources Inc. 54,947 1,553,901 Dynegy Inc. Class A/1/ 376,576 1,510,070 Black Hills Corp. 43,786 1,408,596 New Jersey Resources Corp. 37,147 1,406,014 IDACORP Inc. 51,663 1,402,650 Cleco Corp. 64,438 1,079,336 Aquila Inc./1/ 265,547 1,048,911 Avista Corp. 61,442 1,044,514 Southern Union Co./1/ 59,206 1,042,618 Northwest Natural Gas Co. 34,813 1,009,577 Sierra Pacific Resources/1/ 160,096 955,773 UniSource Energy Corp. 42,829 826,600 El Paso Electric Co./1/ 65,860 799,540 Texas Genco Holdings Inc. 20,766 620,903 NUI Corp. 21,900 373,833 TOTAL COMMON STOCKS (Cost: $428,671,503) 438,404,402 54 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. UTILITIES SECTOR INDEX FUND October 31, 2003 SHARES OR SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- SHORT TERM INVESTMENTS - 10.17% MONEY MARKET FUNDS - 5.83% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2//3/ $ 17,254,996 $ 17,254,996 Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares/2//3/ 6,412,555 6,412,555 BlackRock Temp Cash Money Market Fund/2/ 275,786 275,786 Short Term Investment Co. - Liquid Assets Money Market Portfolio/2/ 1,649,330 1,649,330 25,592,667 FLOATING RATE NOTES - 2.45% Beta Finance Inc. 1.08%, 05/20/04/2/ 291,480 291,456 1.08%, 09/15/04/2/ 582,960 582,909 1.08%, 10/12/04/2/ 291,480 291,453 1.17%, 08/23/04/2/ 291,480 291,681 CC USA Inc. 1.06%, 05/24/04/2/ 582,960 582,927 1.08%, 04/19/04/2/ 256,502 256,496 1.12%, 07/15/04/2/ 291,480 291,553 Dorada Finance Inc. 1.08%, 05/20/04/2/ 582,960 582,912 1.24%, 08/09/04/2/ 145,740 145,723 Five Finance Inc. 1.09%, 04/15/04/2/ 291,480 291,480 HBOS Treasury Services PLC 1.13%, 10/22/04/2/ 582,960 582,960 Holmes Financing PLC 1.08%, 04/15/04/2/ 116,592 116,592 K2 USA LLC 1.08%, 08/16/04/2/ 145,740 145,723 1.08%, 09/27/04/2/ 629,596 629,512 1.09%, 04/13/04/2/ 291,480 291,473 1.09%, 05/17/04/2/ 291,480 291,472 Links Finance LLC 1.08%, 06/28/04/2/ 291,480 291,442 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- 1.09%, 03/29/04/2/ $ 291,480 $ 291,480 1.09%, 05/04/04/2/ 291,480 291,473 1.10%, 07/20/04/2/ 233,184 233,151 Nationwide Building Society 1.14%, 07/23/04/2/ 437,220 437,220 Sigma Finance Inc. 1.05%, 11/21/03/2/ 291,480 291,327 1.08%, 07/01/04/2/ 291,480 291,432 1.09%, 10/07/04/2/ 582,960 582,852 1.11%, 07/20/04/2/ 291,480 291,438 1.24%, 08/06/04/2/ 145,740 145,729 Tango Finance Corp. 1.09%, 07/15/04/2/ 174,888 174,847 1.10%, 07/06/04/2/ 174,888 174,876 WhistleJacket Capital LLC 1.08%, 09/15/04/2/ 291,480 291,430 White Pine Finance LLC 1.08%, 05/17/04/2/ 349,776 349,776 1.08%, 07/06/04/2/ 349,776 349,753 1.08%, 08/26/04/2/ 291,480 291,444 1.09%, 04/20/04/2/ 291,480 291,480 10,737,472 TIME DEPOSITS - 0.93% Abbey National Treasury Services PLC 1.06%, 11/03/03/2/ 582,960 582,960 1.40%, 10/25/04/2/ 582,960 582,875 Bank of New York 1.39%, 11/01/04/2/ 582,960 582,901 Bank of Nova Scotia 1.24%, 10/07/04/2/ 437,220 437,179 1.42%, 10/29/04/2/ 437,220 437,253 Canadian Imperial Bank of Commerce 1.24%, 10/07/04/2/ 437,220 437,159 1.40%, 10/29/04/2/ 582,960 582,945 Toronto-Dominion Bank 1.41%, 11/01/04/2/ 437,220 437,176 4,080,448 COMMERCIAL PAPER - 0.64% Alpine Securitization Corp. 1.06%, 11/12/03/2/ 306,637 306,555 SCHEDULES OF INVESTMENTS 55 SCHEDULE OF INVESTMENTS (Unaudited) (Continued) iSHARES DOW JONES U.S. UTILITIES SECTOR INDEX FUND October 31, 2003 SECURITY PRINCIPAL VALUE --------------------------------------------------------------------------- Amsterdam Funding Corp. 1.06%, 11/14/03/2/ $ 291,480 $ 291,385 1.06%, 11/17/03/2/ 291,480 291,360 Delaware Funding Corp. 1.04%, 11/20/03/2/ 335,190 335,025 Edison Asset Securitization 1.05%, 11/14/03/2/ 291,480 291,386 Falcon Asset Securitization 1.06%, 11/14/03/2/ 256,502 256,419 Ford Credit Auto Receivables Owner Trust 1.05%, 11/18/03/2/ 291,480 291,352 Park Avenue Receivables Corp. 1.05%, 11/21/03/2/ 145,740 145,663 1.06%, 11/20/03/2/ 145,740 145,667 Prudential Funding LLC 1.06%, 11/20/03/2/ 291,480 291,334 Windmill Funding Corp. 1.05%, 11/19/03/2/ 174,888 174,806 2,820,952 U.S. GOVERNMENT AGENCY NOTES - 0.32% Federal Home Loan Mortgage Corporation 1.15%, 05/12/04/2/ 437,220 434,552 1.28%, 08/19/04/2/ 233,184 230,779 Federal National Mortgage Association 1.28%, 08/20/04/2/ 757,847 750,007 1,415,338 TOTAL SHORT TERM INVESTMENTS (Cost: $44,646,877) 44,646,877 TOTAL INVESTMENTS IN SECURITIES - 109.99% (Cost $473,318,380) 483,051,279 Other Assets, Less Liabilities (9.99%) (43,868,197) ------------- NET ASSETS - 100.00% $ 439,183,082 ============= /1/ Non-income earning securities. /2/ All or a portion of this security represents investments of securities lending collateral. /3/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. 56 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS SCHEDULE OF INVESTMENTS (Unaudited) iSHARES DOW JONES TRANSPORTATION AVERAGE INDEX FUND October 31, 2003 SECURITY SHARES VALUE --------------------------------------------------------------------------- COMMON STOCKS - 99.97% FedEx Corp. 37,666 $ 2,853,576 United Parcel Service Inc. Class B 38,439 2,787,596 Union Pacific Corp. 36,207 2,266,558 Roadway Corp. 36,594 1,875,443 CSX Corp. 34,621 1,101,640 Burlington Northern Santa Fe Corp. 36,823 1,065,658 Ryder System Inc. 35,129 1,053,870 CNF Inc. 29,863 1,045,802 Expeditors International Washington Inc. 27,661 1,038,394 Yellow Corp./1/ 31,581 1,037,436 Alexander & Baldwin Inc. 33,403 1,035,827 Hunt (J.B.) Transport Services Inc./1/ 39,068 991,546 USF Corp. 30,573 975,890 GATX Corp. 36,955 831,118 Norfolk Southern Corp. 37,645 758,547 Continental Airlines Inc. Class B/1/ 36,224 691,878 Southwest Airlines Co. 35,100 680,940 Northwest Airlines Corp./1/ 36,255 496,331 AMR Corp./1/ 36,098 479,382 Delta Air Lines Inc. 36,714 478,016 TOTAL COMMON STOCKS (Cost: $22,696,309) 23,545,448 SHORT TERM INVESTMENTS - 0.08% MONEY MARKET FUNDS - 0.08% Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares/2/ 20,000 20,000 20,000 TOTAL SHORT TERM INVESTMENTS (Cost: $20,000) 20,000 TOTAL INVESTMENTS IN SECURITIES - 100.05% (Cost $22,716,309) 23,565,448 Other Assets, Less Liabilities - (0.05%) (12,453) ------------- NET ASSETS - 100.00% $ 23,552,995 ============= /1/ Non-income earning securities. /2/ Issuer is an affiliate of the Fund's investment advisor. See Note 2. SEE NOTES TO FINANCIAL STATEMENTS. SCHEDULES OF INVESTMENTS 57 STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) iSHARES TRUST October 31, 2003
iSHARES DOW JONES U.S. -------------------------------------------------------------------- TOTAL ENERGY HEALTHCARE TECHNOLOGY MARKET SECTOR SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments at cost $ 281,196,590 $ 172,360,661 $ 485,477,236 $ 367,408,297 -------------- -------------- -------------- -------------- Investments in securities, at value (including securities on loan /1/)(Note 1) $ 291,751,451 $ 165,330,799 $ 454,087,198 $ 354,585,906 Receivables: Dividends and interest 357,496 119,521 279,135 341,320 -------------- -------------- -------------- -------------- Total Assets 292,108,947 165,450,320 454,366,333 354,927,226 -------------- -------------- -------------- -------------- LIABILITIES Payables: Collateral for securities on loan (Note 5) 12,645,043 9,115,673 33,275,874 24,347,076 iShares redeemed - - - 12,399 Advisory fees (Note 2) 87,841 148,631 422,134 351,027 -------------- -------------- -------------- -------------- Total Liabilities 12,732,884 9,264,304 33,698,008 24,710,502 -------------- -------------- -------------- -------------- NET ASSETS $ 279,376,063 $ 156,186,016 $ 420,668,325 $ 330,216,724 ============== ============== ============== ============== NET ASSETS CONSIST OF: Paid-in capital $ 279,563,953 $ 170,085,603 $ 456,074,719 $ 370,886,308 Undistributed (distributions in excess of) net investment income (accumulated net investment loss) 570,316 15,460 (21,958) (142,418) Accumulated net realized loss (11,313,067) (6,885,185) (3,994,398) (27,704,775) Net unrealized appreciation (depreciation) 10,554,861 (7,029,862) (31,390,038) (12,822,391) -------------- -------------- -------------- -------------- NET ASSETS $ 279,376,063 $ 156,186,016 $ 420,668,325 $ 330,216,724 ============== ============== ============== ============== iShares outstanding 5,600,000 3,600,000 7,900,000 7,000,000 ============== ============== ============== ============== Net asset value per iShare $ 49.89 $ 43.39 $ 53.25 $ 47.17 ============== ============== ============== ==============
/1/ Securities on loan with market values of $12,211,163, $8,828,146, $32,279,358 and $23,346,446, respectively. See Note 5. SEE NOTES TO FINANCIAL STATEMENTS. 58 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) (Continued) iSHARES TRUST October 31, 2003
iSHARES DOW JONES U.S. iSHARES DOW JONES --------------------------------------- ----------------- TELECOMMUNICATIONS UTILITIES TRANSPORTATION SECTOR SECTOR AVERAGE INDEX FUND INDEX FUND INDEX FUND ------------------------------------------------------------------------------------------------------------------ ASSETS Investments at cost $ 137,006,090 $ 473,318,380 $ 22,716,309 -------------------- --------------- ----------------- Investments in securities, at value (including securities on loan/1/) (Note 1) $ 122,654,104 $ 483,051,279 $ 23,565,448 Receivables: Investment securities sold 449,153 - - Dividends and interest 870,823 1,144,757 13 -------------------- --------------- ----------------- Total Assets 123,974,080 484,196,036 23,565,461 -------------------- --------------- ----------------- LIABILITIES Payables: Investment securities purchased 1,752,476 - - Collateral for securities on loan (Note 5) 11,729,112 44,580,167 - iShares redeemed 4,093 - - iShares sold - - 4,091 Advisory fees (Note 2) 129,484 432,787 8,375 -------------------- --------------- ----------------- Total Liabilities 13,615,165 45,012,954 12,466 -------------------- --------------- ----------------- NET ASSETS $ 110,358,915 $ 439,183,082 $ 23,552,995 ==================== =============== ================= NET ASSETS CONSIST OF: Paid-in capital $ 149,685,613 $ 446,307,637 $ 22,712,218 Undistributed net investment income (accumulated net investment loss) 821,722 237,525 (8,362) Accumulated net realized loss (25,796,434) (17,094,979) - Net unrealized appreciation (depreciation) (14,351,986) 9,732,899 849,139 -------------------- --------------- ----------------- NET ASSETS $ 110,358,915 $ 439,183,082 $ 23,552,995 ==================== =============== ================= iShares outstanding 5,500,000 8,100,000 450,000 ==================== =============== ================= Net asset value per iShare $ 20.07 $ 54.22 $ 52.34 ==================== =============== =================
/1/ Securities on loan with market values of $11,240,044, $42,754,974 and $-, respectively. See Note 5. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 59 STATEMENTS OF OPERATIONS (Unaudited) iSHARES TRUST For the six months ended October 31, 2003
iSHARES DOW JONES U.S. -------------------------------------------------------------------- TOTAL ENERGY HEALTHCARE TECHNOLOGY MARKET SECTOR SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME Dividends/1/ $ 2,056,468 $ 1,525,118 $ 2,799,765 $ 797,867 Interest 1,064 553 1,057 382 Securities lending income 5,882 2,955 13,011 10,017 -------------- -------------- -------------- -------------- Total investment income 2,063,414 1,528,626 2,813,833 808,266 -------------- -------------- -------------- -------------- EXPENSES (Note 2) Advisory fees 234,430 399,637 1,270,950 950,684 -------------- -------------- -------------- -------------- Total expenses 234,430 399,637 1,270,950 950,684 -------------- -------------- -------------- -------------- Net investment income (loss) 1,828,984 1,128,989 1,542,883 (142,418) -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments (2,522,035) (328,607) (4,209,987) (14,624,852) In-kind redemptions - - 8,120,390 17,879,127 -------------- -------------- -------------- -------------- Net realized gain (loss) (2,522,035) (328,607) 3,910,403 3,254,275 -------------- -------------- -------------- -------------- Net change in unrealized appreciation (depreciation) on investments 37,043,611 12,210,507 15,094,824 84,552,677 -------------- -------------- -------------- -------------- Net realized and unrealized gain 34,521,576 11,881,900 19,005,227 87,806,952 -------------- -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 36,350,560 $ 13,010,889 $ 20,548,110 $ 87,664,534 ============== ============== ============== ==============
/1/ Net of foreign withholding tax of $295, $-, $1,127 and $-, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 60 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS STATEMENTS OF OPERATIONS (Unaudited) (Continued) iSHARES TRUST For the six months ended October 31, 2003
iSHARES DOW JONES U.S. iSHARES DOW JONES -------------------------------------- ----------------- TELECOMMUNICATIONS UTILITIES TRANSPORTATION SECTOR SECTOR AVERAGE INDEX FUND INDEX FUND INDEX FUND/1/ ----------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME Dividends/2/ $ 2,068,714 $ 8,470,276 $ - Interest 579 2,276 13 Securities lending income 4,241 39,041 - -------------------- --------------- ----------------- Total investment income 2,073,534 8,511,593 13 -------------------- --------------- ----------------- EXPENSES (Note 2) Advisory fees 407,183 1,233,337 8,375 -------------------- --------------- ----------------- Total expenses 407,183 1,233,337 8,375 -------------------- --------------- ----------------- Net investment income (loss) 1,666,351 7,278,256 (8,362) -------------------- --------------- ----------------- NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments 72,542 (8,565,977) - In-kind redemptions 2,716,253 11,435,532 - -------------------- --------------- ----------------- Net realized gain 2,788,795 2,869,555 - -------------------- --------------- ----------------- Net change in unrealized appreciation (depreciation) on investments 8,026,221 32,423,402 849,139 -------------------- --------------- ----------------- Net realized and unrealized gain 10,815,016 35,292,957 849,139 -------------------- --------------- ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 12,481,367 $ 42,571,213 $ 840,777 ==================== =============== =================
/1/ For the period from October 6, 2003 (commencement of operations) to October 31, 2003. /2/ Net of foreign withholding tax of $14,340, $- and $-, respectively. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 61 STATEMENTS OF CHANGES IN NET ASSETS iSHARES TRUST
iSHARES DOW JONES U.S. iSHARES DOW JONES U.S. TOTAL MARKET ENERGY SECTOR INDEX FUND INDEX FUND ---------------------------------- ---------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE OCTOBER 31, 2003 YEAR ENDED OCTOBER 31,2003 YEAR ENDED (UNAUDITED) APRIL 30, 2003 (UNAUDITED) APRIL 30, 2003 --------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 1,828,984 $ 2,033,117 $ 1,128,989 $ 1,730,881 Net realized gain (loss) (2,522,035) (4,764,162) (328,607) (4,347,194) Net change in unrealized appreciation (depreciation) 37,043,611 (11,117,659) 12,210,507 (14,935,932) ---------------- -------------- ---------------- -------------- Net increase (decrease) in net assets resulting from operations 36,350,560 (13,848,704) 13,010,889 (17,552,245) ---------------- -------------- ---------------- -------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (1,549,862) (1,865,031) (1,145,758) (1,698,652) ---------------- -------------- ---------------- -------------- Total distributions to iShareholders (1,549,862) (1,865,031) (1,145,758) (1,698,652 ---------------- -------------- ---------------- -------------- iSHARES TRANSACTIONS: iShares sold 68,978,930 70,170,247 32,637,187 47,945,821 iShares redeemed - - - (21,808,012) ---------------- -------------- ---------------- -------------- Net increase in net assets from iShares transactions 68,978,930 70,170,247 32,637,187 26,137,809 ---------------- -------------- ---------------- -------------- INCREASE IN NET ASSETS 103,779,628 54,456,512 44,502,318 6,886,912 NET ASSETS: Beginning of period 175,596,435 121,139,923 111,683,698 104,796,786 ---------------- -------------- ---------------- -------------- End of period $ 279,376,063 $ 175,596,435 $ 156,186,016 $ 111,683,698 ================ ============== ================ ============== Undistributed (distributions in excess of) net investment income included in net assets at end of period $ 570,316 $ 291,194 $ 15,460 $ 32,229 ================ ============== ================ ============== iSHARES ISSUED AND REDEEMED: iShares sold 1,500,000 1,700,000 750,000 1,200,000 iShares redeemed - - - (500,000) ---------------- -------------- ---------------- -------------- Net increase in iShares outstanding 1,500,000 1,700,000 750,000 700,000 ================ ============== ================ ============== iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND ---------------------------------- FOR THE SIX MONTHS ENDED FOR THE OCTOBER 31, 2003 YEAR ENDED (UNAUDITED) APRIL 30, 2003 ------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 1,542,883 $ 2,446,357 Net realized gain (loss) 3,910,403 49,388 Net change in unrealized appreciation (depreciation) 15,094,824 (23,178,321) ---------------- -------------- Net increase (decrease) in net assets resulting from operations 20,548,110 (20,682,576) ---------------- -------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (1,623,946) (2,387,252) ---------------- -------------- Total distributions to iShareholders (1,623,946) (2,387,252) ---------------- -------------- iSHARES TRANSACTIONS: iShares sold 63,714,959 215,725,164 iShares redeemed (40,459,457) (50,399,249) ---------------- -------------- Net increase in net assets from iShares transactions 23,255,502 165,325,915 ---------------- -------------- INCREASE IN NET ASSETS 42,179,666 142,256,087 NET ASSETS: Beginning of period 378,488,659 236,232,572 ---------------- -------------- End of period $ 420,668,325 $ 378,488,659 ================ ============== Undistributed (distributions in excess of) net investment income included in net assets at end of period $ (21,958) $ 59,105 ================ ============== iSHARES ISSUED AND REDEEMED: iShares sold 1,200,000 4,350,000 iShares redeemed (750,000) (1,050,000) ---------------- -------------- Net increase in iShares outstanding 450,000 3,300,000 ================ ==============
SEE NOTES TO FINANCIAL STATEMENTS. 62 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS STATEMENTS OF CHANGES IN NET ASSETS (Continued) iSHARES TRUST
iSHARES DOW JONES U.S. iSHARES DOW JONES U.S. TECHNOLOGY SECTOR TELECOMMUNICATIONS INDEX FUND SECTOR INDEX FUND ---------------------------------- ---------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE OCTOBER 31, 2003 YEAR ENDED OCTOBER 31, 2003 YEAR ENDED (UNAUDITED) APRIL 30, 2003 (UNAUDITED) APRIL 30, 2003 --------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income (loss) $ (142,418) $ (316,297) $ 1,666,351 $ 1,790,331 Net realized gain (loss) 3,254,275 (14,351,281) 2,788,795 (14,273,766) Net change in unrealized appreciation (depreciation) 84,552,677 (7,135,685) 8,026,221 (130,475) ---------------- -------------- ---------------- -------------- Net increase (decrease) in net assets resulting from operations 87,664,534 (21,803,263) 12,481,367 (12,613,910) ---------------- -------------- ---------------- -------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income - - (1,583,828) (1,239,523) ---------------- -------------- ---------------- -------------- Total distributions to iShareholders - - (1,583,828) (1,239,523) ---------------- -------------- ---------------- -------------- iSHARES TRANSACTIONS: iShares sold 67,040,227 138,437,600 2,020,324 178,652,909 iShares redeemed (55,989,376) (26,205,874) (28,803,813) (90,017,741) ---------------- -------------- ---------------- -------------- Net increase (decrease) in net assets from iShares transactions 11,050,851 112,231,726 (26,783,489) 88,635,168 ---------------- -------------- ---------------- -------------- INCREASE (DECREASE) IN NET ASSETS 98,715,385 90,428,463 (15,885,950) 74,781,735 NET ASSETS: Beginning of period 231,501,339 141,072,876 126,244,865 51,463,130 ---------------- -------------- ---------------- -------------- End of period $ 330,216,724 $ 231,501,339 $ 110,358,915 $ 126,244,865 ================ ============== ================ ============== Undistributed net investment income (accumulated net investment loss) included in net assets at end of period $ (142,418) $ - $ 821,722 $ 739,199 ================ ============== ================ ============== iSHARES ISSUED AND REDEEMED: iShares sold 1,700,000 4,100,000 100,000 9,300,000 iShares redeemed (1,250,000) (800,000) (1,450,000) (4,750,000) ---------------- -------------- ---------------- -------------- Net increase (decrease) in iShares outstanding 450,000 3,300,000 (1,350,000) 4,550,000 ================ ============== ================ ==============
SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL STATEMENTS 63 STATEMENTS OF CHANGES IN NET ASSETS (Continued) iSHARES TRUST
iSHARES DOW JONES U.S. iSHARES DOW JONES UTILITIES SECTOR TRANSPORTATION AVERAGE INDEX FUND INDEX FUND ---------------------------------- ---------------------- FOR THE SIX FOR THE PERIOD MONTHS ENDED FOR THE OCTOBER 6, 2003/1/ OCTOBER 31, 2003 YEAR ENDED TO OCTOBER 31, 2003 (UNAUDITED) APRIL 30, 2003 (UNAUDITED) --------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income (loss) $ 7,278,256 $ 8,839,492 $ (8,362) Net realized gain (loss) 2,869,555 (11,474,209) - Net change in unrealized appreciation (depreciation) 32,423,402 (21,418,153) 849,139 ---------------- -------------- ---------------------- Net increase (decrease) in net assets resulting from operations 42,571,213 (24,052,870) 840,777 ---------------- -------------- ---------------------- Undistributed net investment income included in the price of capital shares issued or redeemed (381,000) 341,000 - ---------------- -------------- ---------------------- DISTRIBUTIONS TO iSHAREHOLDERS: From net investment income (7,764,880) (8,496,398) - ---------------- -------------- ---------------------- Total distributions to iShareholders (7,764,880) (8,496,398) - ---------------- -------------- ---------------------- iSHARES TRANSACTIONS: iShares sold 135,997,803 285,349,753 22,712,218 iShares redeemed (60,295,153) (104,904,252) - ---------------- -------------- ---------------------- Net increase in net assets from iShares transactions 75,702,650 180,445,501 22,712,218 ---------------- -------------- ---------------------- INCREASE IN NET ASSETS 110,127,983 148,237,233 23,552,995 NET ASSETS: Beginning of period 329,055,099 180,817,866 - ---------------- -------------- ---------------------- End of period $ 439,183,082 $ 329,055,099 $ 23,552,995 ================ ============== ====================== Undistributed net investment income (accumulated net investment loss) included in net assets at end of period $ 237,525 $ 724,149 $ (8,362) ================ ============== ====================== iSHARES ISSUED AND REDEEMED: iShares sold 2,550,000 5,950,000 450,000 iShares redeemed (1,150,000) (2,000,000) - ---------------- -------------- ---------------------- Net increase in iShares outstanding 1,400,000 3,950,000 450,000 ================ ============== ======================
/1/ Commencement of operations. SEE NOTES TO FINANCIAL STATEMENTS. 64 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. TOTAL MARKET INDEX FUND ------------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (UNAUDITED) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 42.83 $ 50.47 $ 57.93 $ 67.15 ------------- ------------- ------------- ---------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.35 0.63 0.57 0.42 Net realized and unrealized gain (loss) 7.03 (7.66) (7.46) (9.27) ------------- ------------- ------------- ---------------- Total from investment operations 7.38 (7.03) (6.89) (8.85) ------------- ------------- ------------- ---------------- LESS DISTRIBUTIONS FROM: Net investment income (0.32) (0.61) (0.57) (0.36) Net realized gain - - - (0.01) ------------- ------------- ------------- ---------------- Total distributions (0.32) (0.61) (0.57) (0.37) ------------- ------------- ------------- ---------------- NET ASSET VALUE, END OF PERIOD $ 49.89 $ 42.83 $ 50.47 $ 57.93 ============= ============= ============= ================ TOTAL RETURN 17.27%/2/ (13.89)% (11.93)% (13.20)%/2/ ============= ============= ============= ================ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 279,376 $ 175,596 $ 121,140 $ 66,625 Ratio of expenses to average net assets/3/ 0.20% 0.20% 0.20% 0.20% Ratio of net investment income to average net assets/3/ 1.56% 1.57% 1.15% 0.98% Portfolio turnover rate/4/ 3% 4% 5% 5%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 65 FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. ENERGY SECTOR INDEX FUND ------------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (UNAUDITED) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 39.19 $ 48.74 $ 57.01 $ 50.79 ------------- ------------- ------------- ---------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.37 0.71 0.63 0.40 Net realized and unrealized gain (loss) 4.21 (9.56) (8.26) 6.24 ------------- ------------- ------------- ---------------- Total from investment operations 4.58 (8.85) (7.63) 6.64 ------------- ------------- ------------- ---------------- LESS DISTRIBUTIONS FROM: Net investment income (0.38) (0.70) (0.64) (0.42) ------------- ------------- ------------- ---------------- Total distributions (0.38) (0.70) (0.64) (0.42) ------------- ------------- ------------- ---------------- NET ASSET VALUE, END OF PERIOD $ 43.39 $ 39.19 $ 48.74 $ 57.01 ============= ============= ============= ================ TOTAL RETURN 11.67%/2/ (18.22)% (13.34)% 13.13%/2/ ============= ============= ============= ================ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 156,186 $ 111,684 $ 104,797 $ 54,156 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 1.70% 1.79% 1.32% 0.94% Portfolio turnover rate/4/ 1% 9% 18% 20%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transations in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. 66 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. HEALTHCARE SECTOR INDEX FUND ------------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (UNAUDITED) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 50.80 $ 56.92 $ 61.87 $ 59.53 ------------- ------------- ------------- ---------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.20 0.39 0.26 0.13 Net realized and unrealized gain (loss) 2.46 (6.13) (4.94) 2.44 ------------- ------------- ------------- ---------------- Total from investment operations 2.66 (5.74) (4.68) 2.57 ------------- ------------- ------------- ---------------- LESS DISTRIBUTIONS FROM: Net investment income (0.21) (0.38) (0.27) (0.14) Net realized gain - - - (0.09) ------------- ------------- ------------- ---------------- Total distributions (0.21) (0.38) (0.27) (0.23) ------------- ------------- ------------- ---------------- NET ASSET VALUE, END OF PERIOD $ 53.25 $ 50.80 $ 56.92 $ 61.87 ============= ============= ============= ================ TOTAL RETURN 5.22%/2/ (10.06)% (7.60)% 4.29%/2/ ============= ============= ============= ================ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 420,668 $ 378,489 $ 236,233 $ 108,269 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 0.73% 0.80% 0.45% 0.29% Portfolio turnover rate/4/ 3% 3% 3% 5%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 67 FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. TECHNOLOGY SECTOR INDEX FUND ------------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (UNAUDITED) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 35.34 $ 43.41 $ 63.42 $ 116.57 ------------- ------------- ------------- ---------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.02) (0.05) (0.16) (0.29) Net realized and unrealized gain (loss) 11.85 (8.02) (19.85) 52.86) ------------- ------------- ------------- ---------------- Total from investment operations 11.83 (8.07) (20.01) (53.15) ------------- ------------- ------------- ---------------- NET ASSET VALUE, END OF PERIOD $ 47.17 $ 35.34 $ 43.41 $ 63.42 ============= ============= ============= ================ TOTAL RETURN 33.48%/2/ (18.59)% (31.55)% (45.60)%/2/ ============= ============= ============= ================ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 330,217 $ 231,501 $ 141,073 $ 110,990 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment loss to average net assets/3/ (0.09)% (0.22)% (0.41)% (0.47)% Portfolio turnover rate/4/ 4% 5% 8% 11%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. 68 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. TELECOMMUNICATIONS SECTOR INDEX FUND ------------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED MAY 22, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (UNAUDITED) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 18.43 $ 22.38 $ 38.35 $ 56.81 ------------- ------------- ------------- ---------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.27 0.34 0.29 0.35 Net realized and unrealized gain (loss) 1.60 (3.98) (15.98) (17.95) ------------- ------------- ------------- ---------------- Total from investment operations 1.87 (3.64) (15.69) (17.60) ------------- ------------- ------------- ---------------- LESS DISTRIBUTIONS FROM: Net investment income (0.23) (0.31) (0.28) (0.27) Net realized gain - - - (0.59) ------------- ------------- ------------- ---------------- Total distributions (0.23) (0.31) (0.28) (0.86) ------------- ------------- ------------- ---------------- NET ASSET VALUE, END OF PERIOD $ 20.07 $ 18.43 $ 22.38 $ 38.35 ============= ============= ============= ================ TOTAL RETURN 10.14%/2/ (16.22)% (41.12)% (31.06)%/2/ ============= ============= ============= ================ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 110,359 $ 126,245 $ 51,463 $ 55,603 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 2.46% 2.27% 1.05% 0.80% Portfolio turnover rate/4/ 7% 23% 43% 43%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 69 FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES U.S. UTILITIES SECTOR INDEX FUND ------------------------------------------------------------------------- SIX MONTHS PERIOD FROM ENDED JUN. 12, 2000/1/ OCT. 31, 2003 YEAR ENDED YEAR ENDED TO (UNAUDITED) APR. 30, 2003 APR. 30, 2002 APR. 30, 2001 ------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 49.11 $ 65.75 $ 85.95 $ 69.81 ------------- ------------- ------------- ---------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.92 2.04 1.89 1.82 Net realized and unrealized gain (loss) 5.19 (16.61) (20.25) 16.19 ------------- ------------- ------------- ---------------- TOTAL FROM INVESTMENT OPERATIONS 6.11 (14.57) (18.36) 18.01 ------------- ------------- ------------- ---------------- LESS DISTRIBUTIONS FROM: Net investment income (1.00) (2.07) (1.84) (1.73) Net realized gain - - - (0.14) ------------- ------------- ------------- ---------------- Total distributions (1.00) (2.07) (1.84) (1.87) ------------- ------------- ------------- ---------------- NET ASSET VALUE, END OF PERIOD $ 54.22 $ 49.11 $ 65.75 $ 85.95 ============= ============= ============= ================ TOTAL RETURN 12.48%/2/ (22.16)% (21.38)% 25.90%/2/ ============= ============= ============= ================ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 439,183 $ 329,055 $ 180,818 $ 42,976 Ratio of expenses to average net assets/3/ 0.60% 0.60% 0.60% 0.60% Ratio of net investment income to average net assets/3/ 3.54% 4.15% 2.89% 2.59% Portfolio turnover rate/4/ 4% 12% 8% 11%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. 70 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS FINANCIAL HIGHLIGHTS (Continued) iSHARES TRUST (For a share outstanding throughout each period)
iSHARES DOW JONES TRANSPORTATION AVERAGE INDEX FUND --------------------------------- PERIOD FROM OCT. 6, 2003/1/ TO OCT. 31, 2003 (UNAUDITED) --------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 50.22 ------------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss (0.02) Net realized and unrealized gain 2.14 ------------- Total from investment operations 2.12 ------------- NET ASSET VALUE, END OF PERIOD $ 52.34 ============= TOTAL RETURN 4.22%/2/ ============= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s) $ 23,553 Ratio of expenses to average net assets/3/ 0.60% Ratio of net investment loss to average net assets/3/ (0.60)% Portfolio turnover rate/4/ 0%
/1/ Commencement of operations. /2/ Not annualized. /3/ Annualized for periods of less than one year. /4/ Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS 71 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 October 31, 2003, the Trust offered 58 investment portfolios or funds. These financial statements relate only to the iShares Dow Jones U.S. Total Market, iShares Dow Jones U.S. Energy Sector, iShares Dow Jones U.S. Healthcare Sector, iShares Dow Jones U.S. Technology Sector, iShares Dow Jones U.S. Telecommunications Sector, iShares Dow Jones U.S. Utilities Sector, and the iShares Dow Jones Transportation Average Index Funds (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 non-diversified fund under the 1940 Act, except for the iShares Dow Jones U.S. Total Market Index Fund, which is classified as a diversified fund. Non-diversified funds generally hold stocks of fewer companies than diversified funds and may be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence. Under the Funds' organizational documents, their officers and trustees 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 Equity securities are valued at the last sales price on the primary securities exchange or national securities market on which such securities are traded. Securities for which the primary market is the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ") are valued at the NASDAQ Official Closing Price. Securities not listed on an exchange or national securities market, or securities for which there were no sales prices, are valued at the latest quoted bid prices. U.S. Government obligations are valued at the latest quoted bid price. 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. Dividend income is recognized on the ex-dividend date, and interest income is accrued daily. Realized gains and losses on investment transactions are determined using the specific identification method. 72 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST EQUALIZATION The iShares Dow Jones U.S. Utilities Sector Index Fund uses 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 undistributed net investment income. The amount of equalization is 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 annually by each Fund. Distributions of net realized capital gains, if any, generally are declared and distributed once a year. Distributions are determined on a tax basis and may differ from net investment income and net realized capital gains for financial reporting purposes. At April 30, 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 INDEX FUND ORDINARY INCOME LONG-TERM GAIN EARNINGS ----------------------------------------------------------------------------------------------------------- Dow Jones U.S. Total Market $ 272,734 $ - $ 272,734 Dow Jones U.S. Energy Sector 32,229 - 32,229 Dow Jones U.S. Healthcare Sector 59,105 - 59,105 Dow Jones U.S. Telecommunications Sector 739,199 - 739,199 Dow Jones U.S. Utilities Sector 690,189 - 690,189
For the year ended April 30, 2003, the tax characterization of distributions paid was equal to the book characterization of distributions paid for all of the Funds. The total distributions and distributions per share are disclosed in the accompanying Statements of Changes in Net Assets and the Financial Highlights for all Funds. 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 October 31, 2003. From November 1, 2002 to April 30 2003, the Funds incurred net realized capital losses. As permitted by tax regulations, these Funds have elected to defer these losses and treat them as arising in the year ending April 30, 2004, as follows: DEFERRED NET REALIZED iSHARES INDEX FUND CAPITAL LOSSES -------------------------------------------------------- Dow Jones U.S. Total Market $ 469,769 Dow Jones U.S. Energy Sector 294,282 Dow Jones U.S. Healthcare Sector 2,294,524 Dow Jones U.S. Technology Sector 791,393 Dow Jones U.S. Telecommunications Sector 1,355,059 Dow Jones U.S. Utilities Sector 5,118,450 NOTES TO THE FINANCIAL STATEMENTS 73 NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST The Funds had tax basis net capital loss carryforwards at April 30, 2003, the tax year-end of the Funds, as follows:
EXPIRING EXPIRING EXPIRING iSHARES INDEX FUND 2009 2010 2011 TOTAL --------------------------------------------------------------------------------------------- Dow Jones U.S. Total Market $ - $ 2,220,191 $ 2,507,100 $ 4,727,291 Dow Jones U.S. Energy Sector 369 643,271 4,517,083 5,160,723 Dow Jones U.S. Healthcare Sector - 154,330 1,118,085 1,272,415 Dow Jones U.S. Technology Sector - 3,803,426 10,610,555 14,413,981 Dow Jones U.S. Telecommunications Sector - 10,282,380 12,349,430 22,631,810 Dow Jones U.S. Utilities Sector - 173,950 5,246,921 5,420,871
Net capital loss carry forwards may be applied against any net realized taxable gains in each succeeding year, or until their respective expiration dates, whichever occurs first. For the six months ended October 31, 2003, certain Funds realized net capital gains or losses resulting from in-kind redemptions of large blocks of 50,000 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 reclassified 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 October 31, 2003 are disclosed in the 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 Funds did not enter into any repurchase agreements at October 31, 2003. 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. 74 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST For its investment management services to each Fund, BGFA is entitled to an annual advisory fee based on the average daily net assets of each Fund as follows: ADVISORY iSHARES INDEX FUND FEE ----------------------------------------------------------- Dow Jones U.S. Total Market 0.20% Dow Jones U.S. Energy Sector 0.60 Dow Jones U.S. Healthcare Sector 0.60 Dow Jones U.S. Technology Sector 0.60 Dow Jones U.S. Telecommunications Sector 0.60 Dow Jones U.S. Utilities Sector 0.60 Dow Jones Transportation Average 0.60 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. Barclays Global Investors, N.A. ("BGI") serves as securities lending agent for the Trust. BGI is an affiliate of BGFA, the Funds' investment advisor. 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 October 31, 2003, BGI earned securities lending agent fees as follows: SECURITIES LENDING iSHARES INDEX FUND AGENT FEES -------------------------------------------------------------- Dow Jones U.S. Total Market $ 5,970 Dow Jones U.S. Energy Sector 3,023 Dow Jones U.S. Healthcare Sector 13,161 Dow Jones U.S. Technology Sector 10,161 Dow Jones U.S. Telecommunications Sector 4,303 Dow Jones U.S. Utilities Sector 39,527 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. Barclays Global Investors Services ("BGIS"), a subsidiary of BGI, may serve as a broker-dealer for the Funds. For the six months ended October 31, 2003, BGIS did not receive any brokerage commissions from the Funds. Pursuant to an exemptive order issued by the Securities and Exchange Commission, 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. NOTES TO THE FINANCIAL STATEMENTS 75 NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST Pursuant to Rule 17a-7 of the 1940 Act, certain Funds executed cross trades for the six months ended October 31, 2003. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment advisor. The Board has concluded that all transactions executed in the five months ended September 30, 2003 were in compliance with the requirements and restrictions set forth by Rule 17a-7. The Board is scheduled at its next meeting to review all such transactions executed during the month of October 2003. As of October 31, 2003, certain trustees and officers of the Trust are also employees of BGFA and its affiliates or employees of Investors Bank. 3. INVESTMENT PORTFOLIO TRANSACTIONS Purchases and sales of investments (excluding in-kind transactions and short-term securities) for the six months ended October 31, 2003, were as follows:
iSHARES INDEX FUND PURCHASES SALES ----------------------------------------------------------------------------------- Dow Jones U.S. Total Market $ 7,197,204 $ 7,109,485 Dow Jones U.S. Energy Sector 1,134,452 1,069,243 Dow Jones U.S. Healthcare Sector 11,313,028 11,069,161 Dow Jones U.S. Technology Sector 12,016,694 12,396,801 Dow Jones U.S. Telecommunications Sector 9,212,921 9,227,054 Dow Jones U.S. Utilities Sector 17,729,594 18,516,891
In-kind transactions for the six months ended October 31, 2003, were as follows:
IN-KIND IN-KIND iSHARES INDEX FUND PURCHASES SALES ----------------------------------------------------------------------------------- Dow Jones U.S. Total Market $ 68,915,566 $ - Dow Jones U.S. Energy Sector 32,575,563 - Dow Jones U.S. Healthcare Sector 63,681,601 40,429,837 Dow Jones U.S. Technology Sector 67,059,232 55,978,925 Dow Jones U.S. Telecommunications Sector 2,019,535 28,754,755 Dow Jones U.S. Utilities Sector 135,114,513 59,993,547 Dow Jones Transportation Average 22,696,309 -
76 2003 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (Continued) iSHARES TRUST At October 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 INDEX FUND COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------------------------------------------------------------------------------------------------------------ Dow Jones U.S. Total Market $ 287,035,018 $ 22,843,510 $ (18,127,077) $ 4,716,433 Dow Jones U.S. Energy Sector 173,866,729 4,061,099 (12,597,029) (8,535,930) Dow Jones U.S. Healthcare Sector 496,950,411 18,054,078 (60,917,291) (42,863,213) Dow Jones U.S. Technology Sector 394,867,936 - (40,282,030) (40,282,030) Dow Jones U.S. Telecommunications Sector 140,781,592 3,041,227 (21,168,715) (18,127,488) Dow Jones U.S. Utilities Sector 485,041,105 18,717,318 (20,707,144) (1,989,826) Dow Jones Transportation Average 22,716,309 1,062,767 (213,628) 849,139
4. iSHARES TRANSACTIONS At October 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 Statements 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 equity securities constituting a substantial replication, or a portfolio sampling representation, of the stocks involved in the relevant Fund's underlying index, and an amount of cash. A purchase transaction fee and a redemption transaction fee are charged to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units of iShares. 5. LOANS OF PORTFOLIO SECURITIES Each Fund may lend its investment securities to approved borrowers such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received is required to have a value of at least 102% of the market value of the loaned securities for securities denominated in U.S. dollars and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The risks to a Fund of securities lending are that the borrower may not provide additional collateral when required, or return the securities when due. As of October 31, 2003, certain 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, including money market funds managed by BGFA. 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 October 31, 2003 and the value of the related collateral are disclosed in Statements of Assets and Liabilities. NOTES TO THE FINANCIAL STATEMENTS 77 The iShares Family of Funds The following is a list of iShares Funds being offered as of December 31, 2003, 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 Transportation Average Index Fund (IYT) 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) SPECIALTY iShares Dow Jones Select Dividend Index Fund (DVY) FIXED INCOME iShares GS $InvesTop(TM) Corporate Bond Fund (LQD) 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 Lehman TIPS Bond Fund (TIP) 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 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. 78 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. iShares are not sponsored, endorsed, sold or promoted by Dow Jones & Company, Inc., nor does this company make any representation regarding the advisability of investing in iShares. 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 I 800 iSHARES (I 800 474 2737) WWW.iSHARES.COM BARCLAYS Proxy Voting Policies and Procedures of iShares Trust A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds' website at www.iShares.com; and on the Securities and Exchange Commission's website at http://www.sec.gov. Item 2. Code of Ethics. Not applicable to this semi-annual filing. Item 3. Audit Committee Financial Expert. Not applicable to this semi-annual 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) (1) Not applicable to this filing. (a) (2) Certification letters are attached. (b) 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: January 7, 2004 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: January 7, 2004 By: /s/ Michael A. Latham ------------------------------------- Michael A. Latham, Principal Financial Officer Date: January 7, 2004