UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

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)

c/o: Investors Bank & Trust Company

200 Clarendon Street; Boston, MA 02116

(Address of principal executive offices)(Zip code)

The Corporation Trust Company

1209 Orange Street; Wilmington, 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: February 28, 2007

Date of reporting period: February 28, 2007

Item 1. Reports to Stockholders.

Table of Contents

Management’s Discussions of Fund Performance	1
Shareholder Expenses (Unaudited)	8
Schedules of Investments	10
iShares Lehman Short Treasury Bond Fund	10
iShares Lehman 1-3 Year Treasury Bond Fund	16
iShares Lehman 3-7 Year Treasury Bond Fund	22
iShares Lehman 7-10 Year Treasury Bond Fund	27
iShares Lehman 10-20 Year Treasury Bond Fund	33
iShares Lehman 20+ Year Treasury Bond Fund	38
iShares Lehman TIPS Bond Fund	44
Financial Statements	50
Financial Highlights	57
Notes to Financial Statements	64
Report of Independent Registered Public Accounting Firm	72
Tax Information (Unaudited)	73
Supplemental Information (Unaudited)	74
Trustee and Officer Information (Unaudited)	76
iShares Family of Funds	82

Management’s Discussion of Fund Performance

iSHARES^® LEHMAN TREASURY BOND FUNDS

Performance as of February 28, 2007

	Average Annual Total Returns						Cumulative Total Returns
	Year Ended 2/28/07			Inception to 2/28/07			Inception to 2/28/07
iSHARES BOND FUND	NAV	MARKET	INDEX	NAV	MARKET	INDEX	NAV	MARKET	INDEX
Lehman Short Treasury	–	–	–	–	–	–	0.72%	0.78%	0.73%
Lehman 1-3 Year Treasury	4.69%	4.63%	4.75%	2.42%	2.43%	2.56%	11.67%	11.68%	12.33%
Lehman 3-7 Year Treasury	–	–	–	–	–	–	1.17%	1.16%	1.18%
Lehman 7-10 Year Treasury	5.14%	5.14%	5.17%	4.37%	4.37%	4.33%	21.79%	21.79%	21.57%
Lehman 10-20 Year Treasury	–	–	–	–	–	–	1.41%	1.38%	1.42%
Lehman 20+ Year Treasury	3.37%	3.41%	3.42%	6.83%	6.82%	6.91%	35.61%	35.52%	36.08%
Lehman TIPS	2.56%	2.51%	2.74%	4.34%	4.33%	4.54%	14.76%	14.73%	15.47%

Total returns for the periods since inception are calculated from the inception date of each Fund (7/22/02 for the iShares Lehman 1-3 Year Treasury, iShares Lehman 7-10 Year Treasury and iShares Lehman 20+ Year Treasury Bond Funds; 1/5/07 for the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds; and 12/4/03 for the iShares Lehman TIPS Bond Fund). “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.

Each Fund’s per share net asset value or ”NAV” is the value of one share of such Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of each Fund and the market return is based on the market price per share of each 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 stock exchange on which the shares of the Funds are listed for trading, as of the time that the Funds’ NAV is calculated. Since shares of each Fund did not trade in the secondary market until several days after each Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (7/26/02 for the iShares Lehman 1-3 Year Treasury, iShares Lehman 7-10 Year Treasury and iShares Lehman 20+ Year Treasury Bond Funds; 1/11/07 for the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds; and 12/5/03 for the iShares Lehman TIPS Bond Fund), the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in each Fund at Market Price and NAV, respectively.

An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each 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 tables 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 each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund’s past performance is no guarantee of future results.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 1

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN TREASURY BOND FUNDS

2 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN TREASURY BOND FUNDS

Performance figures assume reinvestment of all dividends and capital gain distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Each Fund’s past performance is no guarantee of future results.

As of the fiscal year ended 2/28/07, the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds did not have six months of performance and therefore line graphs are not presented.

The iShares Lehman Short Treasury Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the short-term sector of the United States Treasury market as defined by the Lehman Brothers Short U.S. Treasury Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007, the Fund returned 0.72%, while the Index returned 0.73%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	99.15	%
Short-Term and Other Net Assets	0.85
TOTAL	100.00	%

FIVE LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Notes, 4.38%, 05/15/07	22.89	%
U.S. Treasury Bills, 5.04%, 06/28/07	13.35
U.S. Treasury Bills, 5.06%, 05/03/07	10.55
U.S. Treasury Bills, 4.99%, 04/05/07	10.04
U.S. Treasury Notes, 3.75%, 03/31/07	5.50
TOTAL	62.33	%

The iShares Lehman 1-3 Year Treasury Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the short-term sector of the United States Treasury market as defined by the Lehman Brothers 1-3 Year U.S. Treasury Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 3

Management’s Discussion of Fund Performance (continued)

iSHARES^® LEHMAN TREASURY BOND FUNDS

investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended February 28, 2007, the Fund returned 4.69%, while the Index returned 4.75%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	98.85	%
Short-Term and Other Net Assets	1.15
TOTAL	100.00	%

FIVE LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Notes, 3.75%, 05/15/08	11.55	%
U.S. Treasury Notes, 4.88%, 08/15/09	7.01
U.S. Treasury Notes, 4.13%, 08/15/08	6.19
U.S. Treasury Notes, 4.75%, 02/15/10	5.01
U.S. Treasury Notes, 2.63%, 05/15/08	4.75
TOTAL	34.51	%

The iShares Lehman 3-7 Year Treasury Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the intermediate-term sector of the United States Treasury market as defined by the Lehman Brothers 3-7 Year U.S. Treasury Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007, the Fund returned 1.17%, while the Index returned 1.18%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	98.19	%
Short-Term and Other Net Assets	1.81
TOTAL	100.00	%

FIVE LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Notes, 4.88%, 04/30/11	20.17	%
U.S. Treasury Notes, 4.00%, 03/15/10	18.14
U.S. Treasury Notes, 4.88%, 02/15/12	16.11
U.S. Treasury Notes, 3.63%, 05/15/13	13.78
U.S. Treasury Notes, 4.13%, 08/15/10	11.93
TOTAL	80.13	%

The iShares Lehman 7-10 Year Treasury Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the intermediate-term sector of the United States Treasury market as defined by the Lehman Brothers 7-10 Year U.S. Treasury Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended February 28, 2007, the Fund returned 5.14%, while the Index returned 5.17%.

4 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN TREASURY BOND FUNDS

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	98.84	%
Short-Term and Other Net Assets	1.16
TOTAL	100.00	%

FIVE LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Bonds, 11.25%, 02/15/15	21.83	%
U.S. Treasury Notes, 4.13%, 05/15/15	16.92
U.S. Treasury Notes, 4.88%, 08/15/16	10.82
U.S. Treasury Notes, 4.63%, 11/15/16	7.84
U.S. Treasury Bonds, 9.25%, 02/15/16	6.42
TOTAL	63.83	%

The iShares Lehman 10-20 Year Treasury Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the long-term sector of the United States Treasury market as defined by the Lehman Brothers 10-20 Year U.S. Treasury Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007, the Fund returned 1.41%, while the Index returned 1.42%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	97.30	%
Short-Term and Other Net Assets	2.70
TOTAL	100.00	%

FIVE LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Bonds, 8.88%, 02/15/19	19.65	%
U.S. Treasury Bonds, 7.88%, 02/15/21	18.86
U.S. Treasury Bonds, 8.88%, 08/15/17	14.41
U.S. Treasury Bonds, 7.50%, 11/15/24	12.99
U.S. Treasury Bonds, 6.00%, 02/15/26	11.30
TOTAL	77.21	%

The iShares Lehman 20+ Year Treasury Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the long-term sector of the United States Treasury market as defined by the Lehman Brothers 20+ Year U.S. Treasury Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended February 28, 2007, the Fund returned 3.37%, while the Index returned 3.42%.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 5

Management’s Discussion of Fund Performance (continued)

iSHARES^® LEHMAN TREASURY BOND FUNDS

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	98.94	%
Short-Term and Other Net Assets	1.06
TOTAL	100.00	%

FIVE LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Bonds, 4.50%, 02/15/36	16.23	%
U.S. Treasury Bonds, 6.13%, 11/15/27	13.84
U.S. Treasury Bonds, 6.25%, 05/15/30	13.12
U.S. Treasury Bonds, 5.38%, 02/15/31	11.44
U.S. Treasury Bonds, 5.25%, 02/15/29	9.90
TOTAL	64.53	%

The iShares Lehman TIPS Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the inflation-protected sector of the United States Treasury market as defined by the Lehman Brothers U.S. Treasury TIPS Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended February 28, 2007, the Fund returned 2.56%, while the Index returned 2.74%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	99.18	%
Short-Term and Other Net Assets	0.82
TOTAL	100.00	%

FIVE LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Inflation Index Bonds,
3.88%, 04/15/29	7.49	%
U.S. Treasury Inflation Index Bonds,
2.38%, 01/15/25	7.25
U.S. Treasury Inflation Index Bonds,
0.88%, 04/15/10	7.07
U.S. Treasury Inflation Index Bonds,
3.00%, 07/15/12	6.45
U.S. Treasury Inflation Index Bonds,
3.63%, 04/15/28	6.24
TOTAL	34.50	%

Moderate economic growth and declining inflation helped U.S. bonds post solid gains for the twelve-month period ended February 28, 2007 (the “reporting period”). Although the U.S. economy grew by 3.3% in 2006 – slightly ahead of the 3.2% growth rate in 2005 – economic activity slowed markedly as the year progressed. After growing at a robust 5.6% annualized rate in the first quarter of 2006, the economy slowed to a 2.6% annualized growth rate in the second quarter and a 2.1% annualized growth rate over the last six months of the year. One of the largest drags on the economy was a substantial slump in the housing market. According to government reports, existing home sales declined by 8.4% in 2006 from 2005, while new home sales fell by 17.3% and new residential construction was down 14.9%.

Inflation also eased during the reporting period. The consumer price index rose by 2.4% over the past year, down significantly from a 3.6% increase for the previous 12 months. The key factors behind the lower inflation rate included a 1% decrease in energy prices – including a 10% drop in the last six months – and a 0.6% decline in transportation costs.

6 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN TREASURY BOND FUNDS

With both economic growth and inflation appearing to be on the wane, the Federal Reserve (the “Fed”) ended its series of short-term interest rate increases during the second half of the reporting period. The Fed raised its federal funds rate three times between February and June 2006 – for a total of 17 rate hikes since June 2004 – and then held steady for the remainder of the reporting period.

Despite the generally favorable economic environment, the bond market experienced an increase in volatility during the reporting period. Bonds fell early in the period in response to a spike in energy prices and the Fed’s additional rate hikes. The bond market started to rebound in the second half of 2006 as the economy appeared to show signs of slower, more controlled growth, but strong economic data at the end of the year sparked another decline amid fears of potential inflation. Bonds regained their footing again in February 2007, rallying sharply in response to lower economic growth figures reported for the fourth quarter of 2006 and further evidence of weakness in the housing market.

For the reporting period as a whole, however, Treasury bond yields changed little from their levels at the beginning of the period. The two-year Treasury note yield fell from 4.69% to 4.65% during the reporting period, while the 10-year Treasury bond yield edged up from 4.55% to 4.56%. The longest-term Treasuries (maturing in 20 years or more) saw their yields rise during the reporting period, causing them to under-perform short- and intermediate-term Treasury securities.

Treasury inflation-protected securities (“TIPS”) also posted positive results, but lagged the nominal Treasury market. In part, the underperformance of TIPS reflected the lower inflation rate, which reduced the inflation adjustments to the principal value of the bonds. In addition, demand for the inflation protection provided by TIPS declined as the Fed provided reassurances that the long-term prospects for inflation remained well contained.

For the two-month period ended February 28, 2007, U.S. bonds posted positive returns despite some notable volatility. The bond market lost ground in January 2007 as strong economic data led to concerns about the possibility of more short-term interest rate hikes by the Fed. In particular, the initial estimate of U.S. economic growth in the fourth quarter of 2006 came in at a robust 3.5% annualized rate. In February 2007, however, the bond market reversed course, enjoying its best month of performance since August 2004. The catalysts for the bond market rally appeared to include a slumping stock market, a sharp downward revision to fourth-quarter economic growth (to a 2.2% annualized rate), and further weakness in the housing market, including the biggest monthly drop-off in new home sales since 1994.

Treasury bonds rallied during the two-month period ended February 28, 2007, as yields fell equally across the maturity spectrum. For example, the two-year Treasury note yield fell from 4.76% to 4.65%, while the 10-year Treasury bond yield dipped from 4.65% to 4.56%. Longer-term bonds generally performed better than short- and intermediate-term bonds thanks to their greater interest rate sensitivity, which produced more price appreciation as bond yields declined.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 7

Shareholder Expenses (Unaudited)

iSHARES^® TRUST

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of fund shares and (2) ongoing costs, including management fees and other fund expenses. The following Example is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of investing in other funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2006 to February 28, 2007.

ACTUAL EXPENSES

The first line under each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your Fund under the heading entitled “Expenses Paid During Period ”to estimate the expenses you paid on your account during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line under each Fund in the table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. Therefore, the second line under each Fund in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

iShares Bond Fund	Beginning Account Value (9/1/06)a	Ending Account Value (2/28/07)a	Annualized Expense Ratio		Expenses Paid During Periodb (9/1/06 to 2/28/07)
Lehman Short Treasury
Actual	$1,000.00	$1,007.20	0.15	%	$0.22
Hypothetical (5% return before expenses)	1,000.00	1,007.20	0.15		0.22
Lehman 1-3 Year Treasury
Actual	1,000.00	1,024.20	0.15		0.75
Hypothetical (5% return before expenses)	1,000.00	1,024.10	0.15		0.75
Lehman 3-7 Year Treasury
Actual	1,000.00	1,011.70	0.15		0.22
Hypothetical (5% return before expenses)	1,000.00	1,007.20	0.15		0.22
Lehman 7-10 Year Treasury
Actual	1,000.00	1,034.50	0.15		0.76
Hypothetical (5% return before expenses)	1,000.00	1,024.10	0.15		0.75

8 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Shareholder Expenses (Unaudited) (Continued)

iSHARES^® TRUST

iShares Bond Fund	Beginning Account Value (9/1/06)a	Ending Account Value (2/28/07)a	Annualized Expense Ratio		Expenses Paid During Periodb (9/1/06 to 2/28/07)
Lehman 10-20 Year Treasury
Actual	$1,000.00	$1,014.10	0.15	%	$0.22
Hypothetical (5% return before expenses)	1,000.00	1,007.20	0.15		0.22
Lehman 20+ Year Treasury
Actual	1,000.00	1,047.90	0.15		0.76
Hypothetical (5% return before expenses)	1,000.00	1,024.10	0.15		0.75
Lehman TIPS
Actual	1,000.00	1,010.30	0.20		1.00
Hypothetical (5% return before expenses)	1,000.00	1,023.80	0.20		1.00

^a Account values are based on a start date of January 5, 2007 (commencement of operations) for the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds.

^b Except for the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds, expenses are calculated using each Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (181 days) and divided by the number of days in the year (365 days). Expenses for the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds, which commenced operations on January 5, 2007, are calculated using each Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (54 days) and divided by the number of days in the year (365 days).

SHAREHOLDER EXPENSES 9

Schedule of Investments (Unaudited)

iSHARES^® LEHMAN SHORT TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT OBLIGATIONS – 99.15%
U.S. Treasury Bills
4.99%, 04/05/07	$	6,600,000	$	6,567,564
5.04%, 06/28/07		8,880,000		8,735,289
5.06%, 05/03/07		6,960,000		6,898,856
U.S. Treasury Notes
3.00%, 11/15/07		3,600,000		3,550,212
3.50%, 05/31/07a		2,988,000		2,975,988
3.63%, 04/30/07		3,072,000		3,064,197
3.63%, 06/30/07a		2,832,000		2,818,293
3.75%, 03/31/07a		3,600,000		3,595,212
3.88%, 07/31/07		2,700,000		2,686,932
4.00%, 08/31/07a		3,600,000		3,581,856
4.00%, 09/30/07		2,760,000		2,743,385
4.25%, 10/31/07a		2,682,000		2,668,805
4.38%, 05/15/07		15,000,000		14,975,999
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost: $64,852,011)				64,862,588
SHORT-TERM INVESTMENTS – 12.41%
CERTIFICATES OF DEPOSITb– 0.58%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		87,655		87,655
Deutsche Bank AG
5.35%, 08/08/07		146,091		146,091
Washington Mutual Bank
5.33%, 03/19/07		146,091		146,091
				379,837
COMMERCIAL PAPERb – 2.79%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07c		55,580		55,204
BNP Paribas Finance Inc.
5.12%, 06/06/07		20,453		20,171
Bryant Park Funding LLC
5.27%, 03/06/07c		14,401		14,391
Cantabric Finance LLC
5.25%, 03/06/07c		46,749		46,715
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07c		43,827		43,513

Security	Principal		Value
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07c	$	29,783	$	29,705
Crown Point Capital Co. LLC
5.20%, 07/18/07c		67,503		66,148
Edison Asset Securitization LLC
5.21%, 04/11/07c		24,218		24,074
Five Finance Inc.
5.22%, 04/20/07c		26,881		26,686
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07c		102,264		100,508
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07c		95,836		95,721
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07c		113,951		112,536
Harrier Finance Funding LLC
5.12%, 06/06/07c		58,436		57,631
Irish Permanent Treasury PLC
5.18%, 07/10/07		29,218		28,667
KKR Pacific Funding Trust
5.29%, 03/13/07c		73,046		72,917
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07c		73,833		72,577
Liberty Street Funding Corp.
5.27%, 03/06/07c		7,012		7,007
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07c		131,830		130,578
Nationwide Building Society
5.21%, 04/13/07c		55,515		55,169
Nestle Capital Corp.
5.19%, 08/09/07		35,062		34,248
Sedna Finance Inc.
5.22%, 04/17/07c		33,309		33,082
Simba Funding Corp.
5.20%, 07/23/07c		58,436		57,221
Societe Generale
5.18%, 05/16/07		146,091		144,494

10 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN SHORT TREASURY BOND FUND

February 28, 2007

Security	Shares or Principal		Value
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07c	$	222,617	$	222,403
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07c		42,776		42,706
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07c		30,678		30,654
Tulip Funding Corp.
5.29%, 03/15/07c		112,175		111,945
Westpac Banking Corp.
5.20%, 07/12/07c		52,593		51,582
Zela Finance Inc.
5.20%, 07/16/07c		35,062		34,368
				1,822,621
MEDIUM-TERM NOTESb – 0.26%
Bank of America N.A.
5.28%, 04/20/07		14,609		14,609
Cullinan Finance Corp.
5.71%, 06/28/07c		43,827		43,827
K2 USA LLC
5.39%, 06/04/07c		43,827		43,827
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07c		68,371		68,371
				170,634
MONEY MARKET FUNDS – 0.07%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%d,e		48,318		48,318
				48,318
REPURCHASE AGREEMENTSb – 1.70%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $116,890 (collateralized by non-U.S. Government debt securities, value $120,474, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	116,873		116,873

Security	Principal		Value
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $87,668 (collateralized by non-U.S. Government debt securities, value $96,496, 0.00% to 9.20%, 10/17/18 to 11/25/52).	$	87,655	$	87,655
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $5,845 (collateralized by non-U.S. Government debt securities, value $6,141, 5.43%, 3/15/08).		5,844		5,844
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $116,890 (collateralized by non-U.S. Government debt securities, value $122,814, 4.91% to 6.31%, 10/25/33 to 8/25/46).		116,873		116,873
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $87,668 (collateralized by non-U.S. Government debt securities, value $94,451, 0.00% to 10.00%, 5/27/33 to 8/25/46).		87,655		87,655
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $64,290 (collateralized by non-U.S. Government debt securities, value $69,270, 0.00% to 10.00%, 5/27/33 to 8/25/46).		64,280		64,280

SCHEDULES OF INVESTMENTS 11

Schedule of Investments (Continued)

iSHARES^® LEHMAN SHORT TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $35,067 (collateralized by non-U.S. Government debt securities, value $39,060, 0.00% to 10.00%, 5/27/33 to 2/28/37).	$	35,062	$	35,062
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $21,687 (collateralized by non-U.S. Government debt securities, value $22,786, 4.52% to 6.89%, 1/15/09 to 10/25/36).		21,684		21,684
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $245,470 (collateralized by non-U.S. Government debt securities, value $270,614, 0.00% to 10.00%, 4/1/07 to 12/31/49).		245,433		245,433
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $29,222 (collateralized by non-U.S. Government debt securities, value $30,705, 3.72% to 5.99%, 12/15/36 to 6/1/46).		29,218		29,218
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $14,611 (collateralized by non-U.S. Government debt securities, value $15,354, 6.25% to 9.56%, 5/15/11 to 2/1/30).		14,609		14,609

Security	Principal		Value
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $58,445 (collateralized by non-U.S. Government debt securities, value $61,407, 1.63% to 14.50%, 5/1/07 to 9/18/37).	$	58,436	$	58,436
Morgan Stanley 5.36%, due 3/1/07, maturity value $58,445 (collateralized by non-U.S. Government debt securities, value $61,420, 0.00% to 10.00%, 3/1/07 to 2/28/37).		58,436		58,436
Morgan Stanley 5.51%, due 2/4/08, maturity value $42,997 (collateralized by non-U.S. Government debt securities, value $48,511, 0.00% to 10.00%, 3/1/07 to 2/28/37).f		40,906		40,906
Wachovia Capital 5.38%, due 3/1/07, maturity value $128,579 (collateralized by non-U.S. Government debt securities, value $135,095, 0.00% to 8.32%, 2/15/08 to 3/15/49).		128,560		128,560
				1,111,524
TIME DEPOSITSb – 0.52%
Bank of Nova Scotia
5.30%, 03/02/07		24,506		24,506
Chase Bank USA N.A.
5.38%, 03/01/07		87,655		87,655
Citibank N.A.
5.47%, 03/01/07		87,655		87,655
Deutsche Bank AG
5.38%, 03/01/07		137,250		137,250
				337,066

12 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN SHORT TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
VARIABLE & FLOATING RATE NOTES b – 6.49%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08c	$	149,597	$	149,612
American Express Centurion Bank
5.41%, 07/19/07		64,280		64,309
American Express Credit Corp.
5.42%, 03/05/08		17,531		17,539
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		2,663		2,663
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07c		43,827		43,827
ASIF Global Financing
5.40%, 05/03/07c		5,844		5,844
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08c		37,984		37,984
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08c		84,733		84,736
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07c		149,013		149,016
BMW US Capital LLC
5.32%, 01/15/08c		58,436		58,436
BNP Paribas
5.33%, 11/19/07c		108,107		108,107
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07c		56,099		56,094
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07c		42,659		42,659
CC USA Inc.
5.36%, 07/30/07c		29,218		29,220
Commodore CDO Ltd.
5.44%, 12/12/07c		14,609		14,609
Credit Agricole SA
5.33%, 11/23/07		58,436		58,436
Credit Suisse First Boston NY
5.36%, 04/24/07		29,218		29,218

Security	Principal		Value
Cullinan Finance Corp.
5.36%, 04/25/07c	$	14,609	$	14,609
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07c		4,483		4,483
DEPFA Bank PLC
5.40%, 12/14/07c		58,436		58,436
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07c		67,202		67,203
Eli Lilly Services Inc.
5.31%, 03/01/07c		39,006		39,006
Fifth Third Bancorp
5.32%, 02/22/08c		116,873		116,873
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07c		37,984		37,982
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08c		61,358		61,364
Granite Master Issuer PLC
5.29%, 08/20/07c		204,528		204,528
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07c		75,967		75,968
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		87,655		87,660
HBOS Treasury Services PLC
5.46%, 01/24/08c		58,436		58,436
Holmes Financing PLC
5.29%, 07/16/07c		102,264		102,264
JP Morgan Securities Inc.
5.40%, 11/16/07		116,873		116,873
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08f		160,700		160,700
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07c		43,827		43,827

SCHEDULES OF INVESTMENTS 13

Schedule of Investments (Continued)

iSHARES^® LEHMAN SHORT TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Kestrel Funding LLC
5.30%, 07/11/07c	$	23,375	$	23,374
Kommunalkredit Austria AG
5.32%, 02/08/08c		35,062		35,062
Leafs LLC
5.32%, 01/22/08c		56,617		56,617
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07c		64,280		64,279
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07c		20,602		20,602
Marshall & Ilsley Bank
5.32%, 02/15/08		32,140		32,140
Master Funding LLC
5.35%, 04/25/07 - 05/25/07c		105,754		105,754
Merrill Lynch & Co. Inc.
5.46%, 05/30/07f		64,280		64,280
Metropolitan Life Global Funding I
5.33%, 03/06/08c		87,655		87,655
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07c,f		5,844		5,844
Mound Financing PLC
5.29%, 05/08/07c		54,930		54,930
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08c		93,498		93,497
National City Bank of Indiana
5.34%, 05/21/07		29,218		29,219
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08c		192,840		192,862
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08c		58,583		58,575
Northern Rock PLC
5.38%, 02/01/08c		70,124		70,125
Northlake CDO I
5.42%, 09/06/07c		17,531		17,531
Pricoa Global Funding I
5.31%, 02/27/08c		78,889		78,889

Security	Principal		Value
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07c	$	84,733	$	84,732
Skandinaviska Enskilda Banken
5.32%, 02/15/08c		58,436		58,436
Strips III LLC
5.37%, 07/24/07c		11,891		11,891
SunTrust Bank
5.29%, 05/01/07		58,436		58,437
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07c		142,585		142,581
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07c		96,420		96,420
Wachovia Asset Securitization Inc.
5.31%, 03/25/07c		65,964		65,964
Wachovia Bank N.A.
5.36%, 05/22/07		116,873		116,873
Wal-Mart Stores Inc.
5.50%, 07/16/07c		43,827		43,838
Wells Fargo & Co.
5.33%, 11/15/07c		29,218		29,219
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07c		43,827		43,828
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07c		175,309		175,293
Wind Master Trust
5.31%, 07/25/07c		23,375		23,375
				4,244,643
TOTAL SHORT-TERM INVESTMENTS (Cost: $8,114,643)				8,114,643
TOTAL INVESTMENTS IN SECURITIES – 111.56% (Cost: $72,966,654)				72,977,231
Other Assets, Less Liabilities – (11.56)%				(7,560,711	)
NET ASSETS – 100.00%			$	65,416,520

14 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN SHORT TREASURY BOND FUND

February 28, 2007

^a All or a portion of this security represents a security on loan. See Note 5.

^b All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^c This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^d Affiliated issuer. See Note 2.

^e The rate quoted is the annualized seven-day yield of the fund at period end.

^f The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 15

Schedule of Investments

iSHARES^® LEHMAN 1-3 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT OBLIGATIONS – 98.85%
U.S. Treasury Notes
2.63%, 05/15/08a	$	270,088,000	$	263,281,791
2.63%, 03/15/09a		242,528,000		233,280,398
3.13%, 09/15/08a		157,092,000		153,400,341
3.13%, 10/15/08a		144,690,000		141,188,505
3.25%, 08/15/08a		104,728,000		102,567,457
3.25%, 01/15/09a		245,284,000		239,183,787
3.38%, 12/15/08a		151,580,000		148,298,292
3.38%, 09/15/09a		62,010,000		60,230,931
3.38%, 10/15/09a		67,522,000		65,543,605
3.50%, 08/15/09a		74,412,000		72,555,418
3.50%, 12/15/09a		68,900,000		67,001,807
3.63%, 07/15/09a		125,398,000		122,698,181
3.63%, 01/15/10a		127,465,000		124,305,148
3.75%, 05/15/08a		647,660,000		639,816,844
4.00%, 06/15/09a		190,164,000		187,729,903
4.13%, 08/15/08a		345,878,000		343,065,998
4.38%, 11/15/08a		117,130,000		116,558,407
4.50%, 02/15/09a		216,346,000		215,770,522
4.63%, 03/31/08		134,355,000		133,992,245
4.63%, 09/30/08a		68,900,000		68,802,163
4.63%, 11/15/09a		206,700,000		206,979,049
4.75%, 11/15/08a		241,839,000		242,134,048
4.75%, 12/31/08		103,350,000		103,503,994
4.75%, 02/15/10		276,000,000		277,551,109
4.88%, 04/30/08		103,350,000		103,386,177
4.88%, 05/31/08a		82,680,000		82,764,331
4.88%, 10/31/08a		79,235,000		79,449,724
4.88%, 05/15/09a		241,150,000		242,488,382
4.88%, 08/15/09		385,840,000		388,363,363
5.13%, 06/30/08a		103,350,000		103,818,187
6.50%, 02/15/10		137,310,000		144,676,688
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost: $5,477,087,424)				5,474,386,795
SHORT-TERM INVESTMENTS – 45.45%
CERTIFICATES OF DEPOSITb – 2.11%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		26,994,321		26,994,321

Security	Principal		Value
Deutsche Bank AG
5.35%, 08/08/07	$	44,990,536	$	44,990,536
Washington Mutual Bank
5.33%, 03/19/07		44,990,536		44,990,536
				116,975,393
COMMERCIAL PAPERb – 10.14%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07c		17,116,379		17,000,653
BNP Paribas Finance Inc.
5.12%, 06/06/07		6,298,675		6,211,866
Bryant Park Funding LLC
5.27%, 03/06/07c		4,434,987		4,431,741
Cantabric Finance LLC
5.25%, 03/06/07c		14,396,971		14,386,474
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07c		13,497,161		13,400,241
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07c		9,172,131		9,147,870
Crown Point Capital Co. LLC
5.20%, 07/18/07c		20,788,327		20,370,944
Edison Asset Securitization LLC
5.21%, 04/11/07c		7,458,171		7,413,917
Five Finance Inc.
5.22%, 04/20/07c		8,278,259		8,218,241
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07c		31,493,375		30,952,467
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07c		29,513,791		29,478,204
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07c		35,092,618		34,656,771
Harrier Finance Funding LLC
5.12%, 06/06/07c		17,996,214		17,748,189
Irish Permanent Treasury PLC
5.18%, 07/10/07		8,998,107		8,828,498

16 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 1-3 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
KKR Pacific Funding Trust
5.29%, 03/13/07c	$	22,495,268	$	22,455,601
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07c		22,737,857		22,350,835
Liberty Street Funding Corp.
5.27%, 03/06/07c		2,159,546		2,157,965
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07c		40,598,740		40,213,100
Nationwide Building Society
5.21%, 04/13/07c		17,096,404		16,990,012
Nestle Capital Corp.
5.19%, 08/09/07		10,797,729		10,547,104
Sedna Finance Inc.
5.22%, 04/17/07c		10,257,842		10,187,935
Simba Funding Corp.
5.20%, 07/23/07c		17,996,214		17,621,893
Societe Generale
5.18%, 05/16/07		44,990,536		44,498,539
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07c		68,557,658		68,491,362
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07c		13,173,229		13,151,976
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07c		9,447,653		9,440,213
Tulip Funding Corp.
5.29%, 03/15/07c		34,545,713		34,474,645
Westpac Banking Corp.
5.20%, 07/12/07c		16,196,593		15,885,438
Zela Finance Inc.
5.20%, 07/16/07c		10,797,729		10,584,054
				561,296,748
MEDIUM-TERM NOTESb – 0.95%
Bank of America N.A.
5.28%, 04/20/07		4,499,054		4,499,054

Security	Shares or Principal		Value
Cullinan Finance Corp.
5.71%, 06/28/07c	$	13,497,161	$	13,497,161
K2 USA LLC
5.39%, 06/04/07c		13,497,161		13,497,161
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07c		21,055,571		21,055,571
				52,548,947
MONEY MARKET FUNDS – 0.60%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%d,e		33,217,315		33,217,315
				33,217,315
REPURCHASE AGREEMENTSb – 6.18%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $35,997,788 (collateralized by non-U.S. Government debt securities, value $37,101,474, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	35,992,429		35,992,429
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $26,998,348 (collateralized by non-U.S. Government debt securities, value $29,717,200, 0.00% to 9.20%, 10/17/18 to 11/25/52).		26,994,321		26,994,321
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $1,799,889 (collateralized by non-U.S. Government debt securities, value $1,891,095, 5.43%, 3/15/08).		1,799,621		1,799,621

SCHEDULES OF INVESTMENTS 17

Schedule of Investments (Continued)

iSHARES^® LEHMAN 1-3 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $26,998,340 (collateralized by non-U.S. Government debt securities, value $29,087,168, 0.00% to 10.00%, 5/27/33 to 8/25/46).	$	26,994,321	$	26,994,321
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $35,997,788 (collateralized by non-U.S. Government debt securities, value $37,821,891, 4.91% to 6.31%, 10/25/33 to 8/25/46).		35,992,429		35,992,429
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $19,798,816 (collateralized by non-U.S. Government debt securities, value $21,332,607, 0.00% to 10.00%, 5/27/33 to 8/25/46).		19,795,836		19,795,836
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $10,799,367 (collateralized by non-U.S. Government debt securities, value $12,029,103, 0.00% to 10.00%, 5/27/33 to 2/28/37).		10,797,729		10,797,729
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $6,678,849 (collateralized by non-U.S. Government debt securities, value $7,017,284, 4.52% to 6.89%, 1/15/09 to 10/25/36).		6,677,855		6,677,855

Security	Principal		Value
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $75,595,564 (collateralized by non-U.S. Government debt securities, value $83,338,838, 0.00% to 10.00%, 4/1/07 to 12/31/49).	$	75,584,100	$	75,584,100
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $8,999,447 (collateralized by non-U.S. Government debt securities, value $9,456,078, 3.72% to 5.99%, 12/15/36 to 6/1/46).		8,998,107		8,998,107
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $4,499,730 (collateralized by non-U.S. Government debt securities, value $4,728,302, 6.25% to 9.56%, 5/15/11 to 2/1/30).		4,499,054		4,499,054
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $17,998,893 (collateralized by non-U.S. Government debt securities, value $18,911,038, 1.63% to 14.50%, 5/1/07 to 9/18/37).		17,996,214		17,996,214
Morgan Stanley 5.36%, due 3/1/07, maturity value $17,998,893 (collateralized by non-U.S. Government debt securities, value $18,915,110, 0.00% to 10.00%, 3/1/07 to 2/28/37).		17,996,214		17,996,214

18 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 1-3 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Morgan Stanley 5.51%, due 2/4/08, maturity value $13,241,334 (collateralized by non-U.S. Government debt securities, value $14,939,391, 0.00% to 10.00%, 3/1/07 to 2/28/37). f	$	12,597,350	$	12,597,350
Wachovia Capital 5.38%, due 3/1/07, maturity value $39,597,588 (collateralized by non-U.S. Government debt securities, value $41,604,080, 0.00% to 8.32%, 2/15/08 to 3/15/49).		39,591,671		39,591,671
				342,307,251
TIME DEPOSITSb – 1.87%
Bank of Nova Scotia
5.30%, 03/02/07		7,546,892		7,546,892
Chase Bank USA N.A.
5.38%, 03/01/07		26,994,321		26,994,321
Citibank N.A.
5.47%, 03/01/07		26,994,321		26,994,321
Deutsche Bank AG
5.38%, 03/01/07		42,267,889		42,267,889
				103,803,423
VARIABLE & FLOATING RATE NOTESb – 23.60%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08c		46,070,309		46,074,891
American Express Centurion Bank
5.41%, 07/19/07		19,795,836		19,804,753
American Express Credit Corp.
5.42%, 03/05/08		5,398,864		5,401,493
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		820,173		820,173

Security	Principal		Value
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07c	$	13,497,161	$	13,497,161
ASIF Global Financing
5.40%, 05/03/07c		1,799,621		1,799,786
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08c		11,697,539		11,697,539
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08c		26,094,511		26,095,258
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07c		45,890,346		45,891,183
BMW US Capital LLC
5.32%, 01/15/08c		17,996,214		17,996,214
BNP Paribas
5.33%, 11/19/07c		33,292,996		33,292,996
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07c		17,276,366		17,274,750
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07c		13,137,236		13,137,236
CC USA Inc.
5.36%, 07/30/07c		8,998,107		8,998,603
Commodore CDO Ltd.
5.44%, 12/12/07c		4,499,054		4,499,054
Credit Agricole SA
5.33%, 11/23/07		17,996,214		17,996,214
Credit Suisse First Boston NY
5.36%, 04/24/07		8,998,107		8,998,166
Cullinan Finance Corp.
5.36%, 04/25/07c		4,499,054		4,499,054
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07c		1,380,459		1,380,459
DEPFA Bank PLC
5.40%, 12/14/07c		17,996,214		17,996,214
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07c		20,695,646		20,695,994

SCHEDULES OF INVESTMENTS 19

Schedule of Investments (Continued)

iSHARES^® LEHMAN 1-3 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Eli Lilly Services Inc.
5.31%, 03/01/07c	$	12,012,473	$	12,012,473
Fifth Third Bancorp
5.32%, 02/22/08c		35,992,429		35,992,429
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07c		11,697,539		11,696,949
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08c		18,896,025		18,897,883
Granite Master Issuer PLC
5.29%, 08/20/07c		62,986,750		62,986,750
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07c		23,395,079		23,395,206
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		26,994,321		26,996,054
HBOS Treasury Services PLC
5.46%, 01/24/08c		17,996,214		17,996,214
Holmes Financing PLC
5.29%, 07/16/07c		31,493,375		31,493,375
JP Morgan Securities Inc.
5.40%, 11/16/07		35,992,429		35,992,429
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08f		49,489,589		49,489,590
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07c		13,497,161		13,496,926
Kestrel Funding LLC
5.30%, 07/11/07c		7,198,486		7,198,208
Kommunalkredit Austria AG
5.32%, 02/08/08c		10,797,729		10,797,729
Leafs LLC
5.32%, 01/22/08c		17,435,992		17,435,992
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07c		19,795,836		19,795,438

Security	Principal		Value
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07c	$	6,344,596	$	6,344,596
Marshall & Ilsley Bank
5.32%, 02/15/08		9,897,918		9,897,918
Master Funding LLC
5.35%, 04/25/07 - 05/25/07c		32,568,289		32,568,289
Merrill Lynch & Co. Inc.
5.46%, 05/30/07f		19,795,836		19,795,836
Metropolitan Life Global Funding I
5.33%, 03/06/08c		26,994,321		26,994,321
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07c,f		1,799,621		1,799,621
Mound Financing PLC
5.29%, 05/08/07c		16,916,441		16,916,441
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08c		28,793,943		28,793,616
National City Bank of Indiana
5.34%, 05/21/07		8,998,107		8,998,276
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08c		59,387,507		59,394,192
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08c		18,041,205		18,038,815
Northern Rock PLC
5.38%, 02/01/08c		21,595,457		21,595,865
Northlake CDO I
5.42%, 09/06/07c		5,398,864		5,398,864
Pricoa Global Funding I
5.31%, 02/27/08c		24,294,889		24,294,889
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07c		26,094,511		26,094,322
Skandinaviska Enskilda Banken
5.32%, 02/15/08c		17,996,214		17,996,214

20 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 1-3 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Strips III LLC
5.37%, 07/24/07c	$	3,661,918	$	3,661,918
SunTrust Bank
5.29%, 05/01/07		17,996,214		17,996,372
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07c		43,910,763		43,909,310
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07c		29,693,754		29,693,754
Wachovia Asset Securitization Inc.
5.31%, 03/25/07c		20,314,473		20,314,473
Wachovia Bank N.A.
5.36%, 05/22/07		35,992,429		35,992,429
Wal-Mart Stores Inc.
5.50%, 07/16/07c		13,497,161		13,500,576
Wells Fargo & Co.
5.33%, 11/15/07c		8,998,107		8,998,465
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07c		13,497,161		13,497,214
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07c		53,988,643		53,983,802
Wind Master Trust
5.31%, 07/25/07c		7,198,486		7,198,486
				1,307,189,710
TOTAL SHORT-TERM INVESTMENTS (Cost: $2,517,338,787)				2,517,338,787
TOTAL INVESTMENTS IN SECURITIES - 144.30% (Cost: $7,994,426,211)				7,991,725,582

Security	Principal		Value
SHORT POSITIONSg – (0.01)%
U.S. GOVERNMENT OBLIGATIONS – (0.01)%
U.S. Treasury Notes
3.00%, 02/15/08	$	190,000	$	(189,601	)
4.63%, 02/29/08		409,000		(402,326	)
				(591,927	)
TOTAL SHORT POSITIONS (Proceeds: $592,045)				(591,927	)
Other Assets, Less Liabilities – (44.29)%				(2,452,743,024	)
NET ASSETS - 100.00%			$	5,538,390,631

^a All or a portion of this security represents a security on loan. See Note 5.

^b All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^c This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^d Affiliated issuer. See Note 2.

^e The rate quoted is the annualized seven-day yield of the fund at period end.

^f The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

^g See Note 4.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 21

Schedule of Investments

iSHARES^® LEHMAN 3-7 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT OBLIGATIONS – 98.19%
U.S. Treasury Notes
3.63%, 05/15/13a	$	2,920,000	$	2,784,015
4.00%, 03/15/10		3,720,000		3,664,609
4.13%, 08/15/10		2,440,000		2,410,159
4.25%, 01/15/11		1,600,000		1,585,168
4.25%, 11/15/13		260,000		255,957
4.63%, 08/31/11		1,800,000		1,808,838
4.88%, 04/30/11a		4,020,000		4,074,793
4.88%, 02/15/12a		3,200,000		3,256,128
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost: $19,737,678)				19,839,667
SHORT-TERM INVESTMENTS – 42.27%
CERTIFICATES OF DEPOSITb – 1.95%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		90,837		90,837
Deutsche Bank AG
5.35%, 08/08/07		151,394		151,394
Washington Mutual Bank
5.33%, 03/19/07		151,394		151,394
				393,625
COMMERCIAL PAPERb – 9.35%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07c		57,597		57,208
BNP Paribas Finance Inc.
5.12%, 06/06/07		21,195		20,903
Bryant Park Funding LLC
5.27%, 03/06/07c		14,924		14,913
Cantabric Finance LLC
5.25%, 03/06/07c		48,446		48,411
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07c		45,418		45,092
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07c		30,864		30,783
Crown Point Capital Co. LLC
5.20%, 07/18/07c		69,953		68,549
Edison Asset Securitization LLC
5.21%, 04/11/07c		25,097		24,948

Security	Principal		Value
Five Finance Inc.
5.22%, 04/20/07c	$	27,857	$	27,655
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07c		105,976		104,156
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07c		99,315		99,195
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07c		118,088		116,621
Harrier Finance Funding LLC
5.12%, 06/06/07c		60,558		59,723
Irish Permanent Treasury PLC
5.18%, 07/10/07		30,279		29,708
KKR Pacific Funding Trust
5.29%, 03/13/07c		75,697		75,564
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07c		76,514		75,211
Liberty Street Funding Corp.
5.27%, 03/06/07c		7,267		7,262
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07c		136,616		135,318
Nationwide Building Society
5.21%, 04/13/07c		57,530		57,172
Nestle Capital Corp.
5.19%, 08/09/07		36,335		35,491
Sedna Finance Inc.
5.22%, 04/17/07c		34,518		34,283
Simba Funding Corp.
5.20%, 07/23/07c		60,558		59,298
Societe Generale
5.18%, 05/16/07		151,394		149,739
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07c		230,698		230,475
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07c		44,328		44,257
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07c		31,792		31,767

22 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 3-7 YEAR TREASURY BOND FUND

February 28, 2007

Security	Shares or Principal		Value
Tulip Funding Corp.
5.29%, 03/15/07c	$	116,247	$	116,009
Westpac Banking Corp.
5.20%, 07/12/07c		54,502		53,455
Zela Finance Inc.
5.20%, 07/16/07c		36,335		35,616
				1,888,782
MEDIUM-TERM NOTESb – 0.87%
Bank of America N.A.
5.28%, 04/20/07		15,139		15,139
Cullinan Finance Corp.
5.71%, 06/28/07c		45,418		45,418
K2 USA LLC
5.39%, 06/04/07c		45,418		45,418
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07c		70,852		70,852
				176,827
MONEY MARKET FUNDS – 0.90%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%d,e		181,087		181,087
				181,087
REPURCHASE AGREEMENTSb – 5.70%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $121,134 (collateralized by non-U.S. Government debt securities, value $124,847, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	121,116		121,116
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $90,851 (collateralized by non-U.S. Government debt securities, value $99,999, 0.00% to 9.20%, 10/17/18 to 11/25/52).		90,837		90,837

Security	Principal		Value
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $6,057 (collateralized by non-U.S. Government debt securities, value $6,364, 5.43%, 3/15/08).	$	6,056	$	6,056
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $121,134 (collateralized by non-U.S. Government debt securities, value $127,272, 4.91% to 6.31%, 10/25/33 to 8/25/46).		121,116		121,116
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $90,851 (collateralized by non-U.S. Government debt securities, value $97,879, 0.00% to 10.00%, 5/27/33 to 8/25/46).		90,837		90,837
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $66,624 (collateralized by non-U.S. Government debt securities, value $71,785, 0.00% to 10.00%, 5/27/33 to 8/25/46).		66,614		66,614
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $36,341 (collateralized by non-U.S. Government debt securities, value $40,478, 0.00% to 10.00%, 5/27/33 to 2/28/37).		36,335		36,335
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $22,474 (collateralized by non-U.S. Government debt securities, value $23,613, 4.52% to 6.89%, 1/15/09 to 10/25/36).		22,471		22,471

SCHEDULES OF INVESTMENTS 23

Schedule of Investments (Continued)

iSHARES^® LEHMAN 3-7 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $254,382 (collateralized by non-U.S. Government debt securities, value $280,437, 0.00% to 10.00%, 4/1/07 to 12/31/49).	$	254,343	$	254,343
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $30,284 (collateralized by non-U.S. Government debt securities, value $31,820, 3.72% to 5.99%, 12/15/36 to 6/1/46).		30,279		30,279
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $15,141 (collateralized by non-U.S. Government debt securities, value $15,911, 6.25% to 9.56%, 5/15/11 to 2/1/30).		15,139		15,139
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $60,567 (collateralized by non-U.S. Government debt securities, value $63,636, 1.63% to 14.50%, 5/1/07 to 9/18/37).		60,558		60,558
Morgan Stanley 5.36%, due 3/1/07, maturity value $60,567 (collateralized by non-U.S. Government debt securities, value $63,650, 0.00% to 10.00%, 3/1/07 to 2/28/37).		60,558		60,558

Security	Principal		Value
Morgan Stanley 5.51%, due 2/4/08, maturity value $44,557 (collateralized by non-U.S. Government debt securities, value $50,271, 0.00% to 10.00%, 3/1/07 to 2/28/37).f	$	42,390	$	42,390
Wachovia Capital 5.38%, due 3/1/07, maturity value $133,247 (collateralized by non-U.S. Government debt securities, value $139,999, 0.00% to 8.32%, 2/15/08 to 3/15/49).		133,227		133,227
				1,151,876
TIME DEPOSITSb – 1.73%
Bank of Nova Scotia
5.30%, 03/02/07		25,396		25,396
Chase Bank USA N.A.
5.38%, 03/01/07		90,837		90,837
Citibank N.A.
5.47%, 03/01/07		90,837		90,837
Deutsche Bank AG
5.38%, 03/01/07		142,233		142,233
				349,303
VARIABLE & FLOATING RATE NOTES b – 21.77%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08c		155,023		155,037
American Express Centurion Bank
5.41%, 07/19/07		66,614		66,644
American Express Credit Corp.
5.42%, 03/05/08		18,167		18,176
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		2,760		2,760
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07c		45,418		45,418
ASIF Global Financing
5.40%, 05/03/07c		6,056		6,056

24 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 3-7 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08c	$	39,363	$	39,363
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08c		87,809		87,811
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07c		154,422		154,425
BMW US Capital LLC
5.32%, 01/15/08c		60,558		60,558
BNP Paribas
5.33%, 11/19/07c		112,032		112,032
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07c		58,135		58,130
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07c		44,207		44,208
CC USA Inc.
5.36%, 07/30/07c		30,279		30,281
Commodore CDO Ltd.
5.44%, 12/12/07c		15,139		15,139
Credit Agricole SA
5.33%, 11/23/07		60,558		60,558
Credit Suisse First Boston NY
5.36%, 04/24/07		30,279		30,279
Cullinan Finance Corp.
5.36%, 04/25/07c		15,139		15,139
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07c		4,645		4,645
DEPFA Bank PLC
5.40%, 12/14/07c		60,558		60,558
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07c		69,641		69,643
Eli Lilly Services Inc.
5.31%, 03/01/07c		40,422		40,422
Fifth Third Bancorp
5.32%, 02/22/08c		121,116		121,116
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07c		39,363		39,361

Security	Principal		Value
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08c	$	63,586	$	63,592
Granite Master Issuer PLC
5.29%, 08/20/07c		211,952		211,952
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07c		78,725		78,725
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		90,837		90,843
HBOS Treasury Services PLC
5.46%, 01/24/08c		60,558		60,558
Holmes Financing PLC
5.29%, 07/16/07c		105,976		105,976
JP Morgan Securities Inc.
5.40%, 11/16/07		121,116		121,116
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08f		166,534		166,534
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07c		45,418		45,417
Kestrel Funding LLC
5.30%, 07/11/07c		24,223		24,222
Kommunalkredit Austria AG
5.32%, 02/08/08c		36,335		36,335
Leafs LLC
5.32%, 01/22/08c		58,673		58,673
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07c		66,614		66,612
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07c		21,350		21,350
Marshall & Ilsley Bank
5.32%, 02/15/08		33,307		33,307
Master Funding LLC
5.35%, 04/25/07 - 05/25/07c		109,593		109,593
Merrill Lynch & Co. Inc.
5.46%, 05/30/07f		66,614		66,614

SCHEDULES OF INVESTMENTS 25

Schedule of Investments (Continued)

iSHARES^® LEHMAN 3-7 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Metropolitan Life Global Funding I
5.33%, 03/06/08c	$	90,837	$	90,837
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07c,f		6,056		6,056
Mound Financing PLC
5.29%, 05/08/07c		56,924		56,924
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08c		96,892		96,891
National City Bank of Indiana
5.34%, 05/21/07		30,279		30,279
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08c		199,841		199,863
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08c		60,709		60,701
Northern Rock PLC
5.38%, 02/01/08c		72,669		72,671
Northlake CDO I
5.42%, 09/06/07c		18,167		18,167
Pricoa Global Funding I
5.31%, 02/27/08c		81,753		81,753
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07c		87,809		87,808
Skandinaviska Enskilda Banken
5.32%, 02/15/08c		60,558		60,558
Strips III LLC
5.37%, 07/24/07c		12,322		12,322
SunTrust Bank
5.29%, 05/01/07		60,558		60,558
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07c		147,761		147,756
Union Hamilton Special
Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07c		99,920		99,920
Wachovia Asset Securitization Inc.
5.31%, 03/25/07c		68,359		68,359

Security	Principal		Value
Wachovia Bank N.A.
5.36%, 05/22/07	$	121,116	$	121,116
Wal-Mart Stores Inc.
5.50%, 07/16/07c		45,418		45,430
Wells Fargo & Co.
5.33%, 11/15/07c		30,279		30,280
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07c		45,418		45,418
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07c		181,673		181,657
Wind Master Trust
5.31%, 07/25/07c		24,223		24,223
				4,398,725
TOTAL SHORT-TERM INVESTMENTS (Cost: $8,540,225)
				8,540,225
TOTAL INVESTMENTS IN SECURITIES – 140.46% (Cost: $28,277,903)				28,379,892
Other Assets, Less Liabilities – (40.46)%				(8,174,226	)
NET ASSETS – 100.00%			$	20,205,666

^a All or a portion of this security represents a security on loan. See Note 5.

^b All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^c This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^d Affiliated issuer. See Note 2.

^e The rate quoted is the annualized seven-day yield of the fund at period end.

^f The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

26 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® LEHMAN 7-10 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT OBLIGATIONS – 98.84%
U.S. Treasury Bonds
7.25%, 05/15/16	$	56,563,000	$	67,762,480
9.25%, 02/15/16a		91,600,000		122,783,387
9.88%, 11/15/15a		18,320,000		25,244,776
11.25%, 02/15/15a		289,456,000		417,401,330
U.S. Treasury Notes
4.13%, 05/15/15a		332,966,000		323,406,539
4.25%, 08/15/14a		99,615,000		97,794,035
4.25%, 11/15/14a		92,974,000		91,239,108
4.50%, 11/15/15a		30,228,000		30,107,692
4.50%, 02/15/16a		93,890,000		93,536,036
4.63%, 11/15/16a		149,308,000		149,972,421
4.63%, 02/15/17		65,494,000		65,883,030
4.75%, 05/15/14a		117,477,000		119,013,598
4.88%, 08/15/16a		202,207,000		206,902,228
5.13%, 05/15/16a		75,570,000		78,694,066
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost: $1,880,727,834)
				1,889,740,726
SHORT-TERM INVESTMENTS – 47.51%
CERTIFICATES OF DEPOSITb – 2.16%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		9,519,229		9,519,229
Deutsche Bank AG
5.35%, 08/08/07		15,865,381		15,865,381
Washington Mutual Bank
5.33%, 03/19/07		15,865,381		15,865,381
				41,249,991
COMMERCIAL PAPERb – 10.35%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07c		6,035,889		5,995,075
BNP Paribas Finance Inc.
5.12%, 06/06/07		2,221,153		2,190,541
Bryant Park Funding LLC
5.27%, 03/06/07c		1,563,946		1,562,801
Cantabric Finance LLC
5.25%, 03/06/07c		5,076,922		5,073,220

Security	Principal		Value
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07c	$	4,759,614	$	4,725,437
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07c		3,234,444		3,225,888
Crown Point Capital Co. LLC
5.20%, 07/18/07c		7,330,758		7,183,573
Edison Asset Securitization LLC
5.21%, 04/11/07c		2,630,036		2,614,430
Five Finance Inc.
5.22%, 04/20/07c		2,919,230		2,898,066
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07c		11,105,767		10,915,023
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07c		10,407,690		10,395,140
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07c		12,374,997		12,221,301
Harrier Finance Funding LLC
5.12%, 06/06/07c		6,346,153		6,258,689
Irish Permanent Treasury PLC
5.18%, 07/10/07		3,173,076		3,113,266
KKR Pacific Funding Trust
5.29%, 03/13/07c		7,932,691		7,918,703
Lexington Parker
Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07c		8,018,237		7,881,758
Liberty Street Funding Corp.
5.27%, 03/06/07c		761,538		760,981
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07c		14,316,666		14,180,676
Nationwide Building Society
5.21%, 04/13/07c		6,028,845		5,991,327
Nestle Capital Corp.
5.19%, 08/09/07		3,807,692		3,719,312

SCHEDULES OF INVESTMENTS 27

Schedule of Investments (Continued)

iSHARES^® LEHMAN 7-10 YEAR TREASURY BOND FUND

February 28, 2007

Security	Shares or Principal		Value
Sedna Finance Inc.
5.22%, 04/17/07c	$	3,617,307	$	3,592,655
Simba Funding Corp.
5.20%, 07/23/07c		6,346,153		6,214,153
Societe Generale
5.18%, 05/16/07		15,865,381		15,691,885
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07c		24,176,049		24,152,671
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07c		4,645,384		4,637,889
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07c		3,331,603		3,328,979
Tulip Funding Corp.
5.29%, 03/15/07c		12,182,138		12,157,076
Westpac Banking Corp.
5.20%, 07/12/07c		5,711,537		5,601,812
Zela Finance Inc.
5.20%, 07/16/07c		3,807,692		3,732,342
				197,934,669
MEDIUM-TERM NOTESb – 0.97%
Bank of America N.A.
5.28%, 04/20/07		1,586,538		1,586,538
Cullinan Finance Corp.
5.71%, 06/28/07c		4,759,614		4,759,614
K2 USA LLC
5.39%, 06/04/07c		4,759,614		4,759,614
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07c		7,424,998		7,424,998
				18,530,764
MONEY MARKET FUNDS – 1.69%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%d,e		32,222,271		32,222,271
				32,222,271

Security	Principal		Value
REPURCHASE AGREEMENTSb – 6.31%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $12,694,195 ( collateralized by non-U.S.Government debt securities, value $13,083,397, 5. 50% to 7.70%, 9/15/09 to 5/1/19).	$	12,692,305	$	12,692,305
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $9,520,649 (collateralized by non-U.S. Government debt securities, value $10,479,420, 0. 00% to 9.20%, 10/17/18 to 11/25/52).		9,519,229		9,519,229
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $634,709 (collateralized by non-U.S. Government debt securities, value $666,872, 5.43%, 3/15/08).		634,615		634,615
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $12,694,195 (collateralized by non-U.S. Government debt securities, value $13,337,443, 4.91% to 6.31%, 10/25/33 to 8/25/46).		12,692,305		12,692,305
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $9,520,646 (collateralized by non-U.S. Government debt securities, value $10,257,246, 0. 00% to 10.00%, 5/27/33 to 8/25/46).		9,519,229		9,519,229

28 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 7-10 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $6,981,819 (collateralized by non-U.S. Government debt securities, value $7,522,692, 0.00% to 10.00%, 5/27/33 to 8/25/46).	$	6,980,768	$	6,980,768
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $3,808,269 (collateralized by non-U.S. Government debt securities, value $4,241,921, 0.00% to 10.00%, 5/27/33 to 2/28/37).		3,807,692		3,807,692
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $2,355,218 (collateralized by non-U.S. Government debt securities, value $2,474,563 4.52% to 6.89%, 1/15/09 to 10/25/36).		2,354,867		2,354,867
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $26,657,883 (collateralized by non-U.S. Government debt securities, value $29,388,457, 0.00% to 10.00%, 4/1/07 to 12/31/49).		26,653,841		26,653,841
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $3,173,548 (collateralized by non-U.S. Government debt securities, value $3,334,574, 3.72% to 5.99%, 12/15/36 to 6/1/46).		3,173,076		3,173,076

Security	Principal		Value
JPMorgan Securities Inc. 5.41%, due 3/1/07, maturity value $1,586,776 (collateralized by non-U.S. Government debt securities, value $1,667,380, 6.25% to 9.56%, 5/15/11 to 2/1/30).	$	1,586,538	$	1,586,538
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $6,347,098 (collateralized by non-U.S. Government debt securities, value $6,668,754, 1.63% to 14.50%, 5/1/07 to 9/18/37).		6,346,153		6,346,153
Morgan Stanley 5.36%, due 3/1/07, maturity value $6,347,098 (collateralized by non-U.S. Government debt securities, value $6,670,190, 0.00% to 10.00%, 3/1/07 to 2/28/37).		6,346,153		6,346,153
Morgan Stanley 5.51%, due 2/4/08, maturity value $4,669,400 (collateralized by non-U.S. Government debt securities, value $5,268,200, 0.00% to 10.00%, 3/1/07 to 2/28/37).f		4,442,307		4,442,307
Wachovia Capital 5.38%, due 3/1/07, maturity value $13,963,622 (collateralized by non-U.S. Government debt securities, value $14,671,188, 0.00% to 8.32%, 2/15/08 to 3/15/49).		13,961,536		13,961,536
				120,710,614

SCHEDULES OF INVESTMENTS 29

Schedule of Investments (Continued)

iSHARES^® LEHMAN 7-10 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
TIME DEPOSITSb – 1.92%
Bank of Nova Scotia
5.30%, 03/02/07	$	2,661,323	$	2,661,323
Chase Bank USA N.A.
5.38%, 03/01/07		9,519,229		9,519,229
Citibank N.A.
5.47%, 03/01/07		9,519,229		9,519,229
Deutsche Bank AG
5.38%, 03/01/07		14,905,272		14,905,272
				36,605,053
VARIABLE & FLOATING RATE NOTESb – 24.11%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08c		16,246,150		16,247,765
American Express Centurion Bank
5.41%, 07/19/07		6,980,768		6,983,912
American Express Credit Corp.
5.42%, 03/05/08		1,903,846		1,904,773
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		289,224		289,224
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07c		4,759,614		4,759,614
ASIF Global Financing
5.40%, 05/03/07c		634,615		634,673
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08c		4,124,999		4,124,999
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08c		9,201,921		9,202,185
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07c		16,182,689		16,182,984
BMW US Capital LLC
5.32%, 01/15/08c		6,346,153		6,346,153

Security	Principal		Value
BNP Paribas
5.33%, 11/19/07c	$	11,740,382	$	11,740,382
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07c		6,092,306		6,091,737
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07c		4,632,691		4,632,691
CC USA Inc.
5.36%, 07/30/07c		3,173,076		3,173,251
Commodore CDO Ltd.
5.44%, 12/12/07c		1,586,538		1,586,538
Credit Agricole SA
5.33%, 11/23/07		6,346,153		6,346,153
Credit Suisse First Boston NY
5.36%, 04/24/07		3,173,076		3,173,097
Cullinan Finance Corp.
5.36%, 04/25/07c		1,586,538		1,586,538
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07c		486,803		486,803
DEPFA Bank PLC
5.40%, 12/14/07c		6,346,153		6,346,153
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07c		7,298,075		7,298,198
Eli Lilly Services Inc.
5.31%, 03/01/07c		4,236,057		4,236,057
Fifth Third Bancorp
5.32%, 02/22/08c		12,692,305		12,692,305
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07c		4,124,999		4,124,791
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08c		6,663,460		6,664,116
Granite Master Issuer PLC
5.29%, 08/20/07c		22,211,534		22,211,534
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07c		8,249,998		8,250,043

30 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 7-10 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08	$	9,519,229	$	9,519,840
HBOS Treasury Services PLC
5.46%, 01/24/08c		6,346,153		6,346,153
Holmes Financing PLC
5.29%, 07/16/07c		11,105,767		11,105,767
JP Morgan Securities Inc.
5.40%, 11/16/07		12,692,305		12,692,305
JP Morgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08f		17,451,919		17,451,919
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07c		4,759,614		4,759,531
Kestrel Funding LLC
5.30%, 07/11/07c		2,538,461		2,538,363
Kommunalkredit Austria AG
5.32%, 02/08/08c		3,807,692		3,807,692
Leafs LLC
5.32%, 01/22/08c		6,148,597		6,148,597
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07c		6,980,768		6,980,627
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07c		2,237,347		2,237,347
Marshall & Ilsley Bank
5.32%, 02/15/08		3,490,384		3,490,384
Master Funding LLC
5.35%, 04/25/07 - 05/25/07c		11,484,823		11,484,822
Merrill Lynch & Co. Inc.
5.46%, 05/30/07f		6,980,768		6,980,768
Metropolitan Life Global Funding I
5.33%, 03/06/08c		9,519,229		9,519,229
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07c,f		634,615		634,615

Security	Principal		Value
Mound Financing PLC
5.29%, 05/08/07c	$	5,965,383	$	5,965,383
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08c		10,153,844		10,153,728
National City Bank of Indiana
5.34%, 05/21/07		3,173,076		3,173,136
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08c		20,942,303		20,944,662
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08c		6,362,018		6,361,175
Northern Rock PLC
5.38%, 02/01/08c		7,615,383		7,615,527
Northlake CDO I
5.42%, 09/06/07c		1,903,846		1,903,846
Pricoa Global Funding I
5.31%, 02/27/08c		8,567,306		8,567,306
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07c		9,201,921		9,201,855
Skandinaviska Enskilda Banken
5.32%, 02/15/08c		6,346,153		6,346,153
Strips III LLC
5.37%, 07/24/07c		1,291,332		1,291,332
SunTrust Bank
5.29%, 05/01/07		6,346,153		6,346,208
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07c		15,484,612		15,484,100
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07c		10,471,152		10,471,152
Wachovia Asset Securitization Inc.
5.31%, 03/25/07c		7,163,659		7,163,659
Wachovia Bank N.A.
5.36%, 05/22/07		12,692,305		12,692,305

SCHEDULES OF INVESTMENTS 31

Schedule of Investments (Continued)

iSHARES^® LEHMAN 7-10 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Wal-Mart Stores Inc.
5.50%, 07/16/07c	$	4,759,614	$	4,760,819
Wells Fargo & Co.
5.33%, 11/15/07c		3,173,076		3,173,202
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07c		4,759,614		4,759,633
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07c		19,038,458		19,036,751
Wind Master Trust
5.31%, 07/25/07c		2,538,461		2,538,461
				460,965,021
TOTAL SHORT-TERM INVESTMENTS (Cost: $908,218,383)				908,218,383
TOTAL INVESTMENTS IN SECURITIES - 146.35% (Cost: $2,788,946,217)				2,797,959,109
Other Assets, Less Liabilities - (46.35)%				(886,108,791	)
NET ASSETS – 100.00%			$	1,911,850,318

^a All or a portion of this security represents a security on loan. See Note 5.

^b All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^c This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^d Affiliated issuer. See Note 2.

^e The rate quoted is the annualized seven-day yield of the fund at period end.

^f The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

32 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® LEHMAN 10-20 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT OBLIGATIONS – 97.30%
U.S. Treasury Bonds
6.00%, 02/15/26	$	3,000,000	$	3,454,560
6.50%, 11/15/26a		2,400,000		2,925,504
7.50%, 11/15/24a		3,000,000		3,971,250
7.88%, 02/15/21		4,380,000		5,767,102
8.00%, 11/15/21a		2,400,000		3,217,656
8.88%, 08/15/17a		3,267,000		4,407,118
8.88%, 02/15/19a		4,350,000		6,006,698
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost: $29,461,787)				29,749,888
SHORT-TERM INVESTMENTS – 64.16%
CERTIFICATES OF DEPOSITb – 2.90%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		204,298		204,298
Deutsche Bank AG
5.35%, 08/08/07		340,497		340,497
Washington Mutual Bank
5.33%, 03/19/07		340,497		340,497
				885,292
COMMERCIAL PAPERb – 13.89%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07c		129,540		128,672
BNP Paribas Finance Inc.
5.12%, 06/06/07		47,670		47,013
Bryant Park Funding LLC
5.27%, 03/06/07c		33,565		33,540
Cantabric Finance LLC
5.25%, 03/06/07c		108,959		108,880
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07c		102,149		101,416
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07c		69,417		69,233
Crown Point Capital Co. LLC
5.20%, 07/18/07c		157,330		154,171

Security	Principal		Value
Edison Asset Securitization LLC
5.21%, 04/11/07c	$	56,445	$	56,110
Five Finance Inc.
5.22%, 04/20/07c		62,652		62,197
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07c		238,348		234,254
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07c		223,366		223,096
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07c		265,588		262,290
Harrier Finance Funding LLC
5.12%, 06/06/07c		136,199		134,322
Irish Permanent Treasury PLC
5.18%, 07/10/07		68,099		66,816
KKR Pacific Funding Trust
5.29%, 03/13/07c		170,249		169,949
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07c		172,085		169,156
Liberty Street Funding Corp.
5.27%, 03/06/07c		16,344		16,332
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07c		307,259		304,341
Nationwide Building Society
5.21%, 04/13/07c		129,389		128,584
Nestle Capital Corp.
5.19%, 08/09/07		81,719		79,823
Sedna Finance Inc.
5.22%, 04/17/07c		77,633		77,104
Simba Funding Corp.
5.20%, 07/23/07c		136,199		133,366
Societe Generale
5.18%, 05/16/07		340,497		336,774
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07c		518,858		518,356
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07c		99,698		99,537

SCHEDULES OF INVESTMENTS 33

Schedule of Investments (Continued)

iSHARES^® LEHMAN 10-20 YEAR TREASURY BOND FUND

February 28, 2007

Security	Shares or Principal		Value
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07c	$	71,502	$	71,445
Tulip Funding Corp.
5.29%, 03/15/07c		261,449		260,911
Westpac Banking Corp.
5.20%, 07/12/07c		122,579		120,224
Zela Finance Inc.
5.20%, 07/16/07c		81,719		80,102
				4,248,014
MEDIUM-TERM NOTESb – 1.30%
Bank of America N.A.
5.28%, 04/20/07		34,050		34,050
Cullinan Finance Corp.
5.71%, 06/28/07c		102,149		102,149
K2 USA LLC
5.39%, 06/04/07c		102,149		102,149
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07c		159,353		159,353
				397,701
MONEY MARKET FUNDS – 2.67%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%d,e		817,520		817,520
				817,520
REPURCHASE AGREEMENTSb – 8.47%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $272,439 (collateralized by non-U.S. Government debt securities, value $280,791, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	272,398		272,398
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $204,328 (collateralized by non-U.S. Government debt securities, value $224,906, 0.00% to 9.20%, 10/17/18 to 11/25/52).		204,298		204,298

Security	Principal		Value
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $13,622 (collateralized by non-U.S. Government debt securities, value $14,312, 5.43%, 3/15/08).	$	13,620	$	13,620
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $204,328 (collateralized by non-U.S. Government debt securities, value $220,138, 0.00% to 10.00%, 5/27/33 to 8/25/46).		204,298		204,298
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $272,439 (collateralized by non-U.S. Government debt securities, value $286,244, 4.91% to 6.31%, 10/25/33 to 8/25/46).		272,398		272,398
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $149,842 (collateralized by non-U.S. Government debt securities, value $161,449, 0.00% to 10.00%, 5/27/33 to 8/25/46).		149,819		149,819
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $81,731 (collateralized by non-U.S. Government debt securities, value $91,039, 0.00% to 10.00%, 5/27/33 to 2/28/37).		81,719		81,719
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $50,547 (collateralized by non-U.S. Government debt securities, value $53,108, 4.52% to 6.89%, 1/15/09 to 10/25/36).		50,539		50,539

34 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 10-20 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $572,123 (collateralized by non-U.S. Government debt securities, value $630,725, 0.00% to 10.00%, 4/1/07 to 12/31/49).	$	572,036	$	572,036
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $68,109 (collateralized by non-U.S. Government debt securities, value $71,566, 3.72% to 5.99%, 12/15/36 to 6/1/46).		68,099		68,099
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $34,055 (collateralized by non-U.S. Government debt securities, value $35,785, 6.25% to 9.56%, 5/15/11 to 2/1/30).		34,050		34,050
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $136,219 (collateralized by non-U.S. Government debt securities, value $143,123, 1.63% to 14.50%, 5/1/07 to 9/18/37).		136,199		136,199
Morgan Stanley 5.36%, due 3/1/07, maturity value $136,219 (collateralized by non-U.S. Government debt securities, value $143,153, 0.00% to 10.00%, 3/1/07 to 2/28/37).		136,199		136,199
Morgan Stanley 5.51%, due 2/4/08, maturity value $100,213 (collateralized by non-U.S. Government debt securities, value $113,064, 0.00% to 10.00%, 3/1/07 to 2/28/37).f		95,339		95,339

Security	Principal		Value
Wachovia Capital 5.38%, due 3/1/07, maturity value $299,683 (collateralized by non-U.S. Government debt securities, value $314,868, 0.00% to 8.32%, 2/15/08 to 3/15/49).	$	299,638	$	299,638
				2,590,649
TIME DEPOSITSb – 2.57%
Bank of Nova Scotia
5.30%, 03/02/07		57,116		57,116
Chase Bank USA N.A.
5.38%, 03/01/07		204,298		204,298
Citibank N.A.
5.47%, 03/01/07		204,298		204,298
Deutsche Bank AG
5.38%, 03/01/07		319,892		319,892
				785,604
VARIABLE & FLOATING RATE NOTES b – 32.36%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08c		348,669		348,705
American Express Centurion Bank
5.41%, 07/19/07		149,819		149,886
American Express Credit Corp.
5.42%, 03/05/08		40,860		40,880
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		6,207		6,207
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07c		102,149		102,149
ASIF Global Financing
5.40%, 05/03/07c		13,620		13,621
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08c		88,529		88,529
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08c		197,489		197,494

SCHEDULES OF INVESTMENTS 35

Schedule of Investments (Continued)

iSHARES^® LEHMAN 10-20 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07c	$	347,307	$	347,314
BMW US Capital LLC
5.32%, 01/15/08c		136,199		136,199
BNP Paribas
5.33%, 11/19/07c		251,968		251,968
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07c		130,751		130,739
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07c		99,425		99,425
CC USA Inc.
5.36%, 07/30/07c		68,099		68,103
Commodore CDO Ltd.
5.44%, 12/12/07c		34,050		34,050
Credit Agricole SA
5.33%, 11/23/07		136,199		136,199
Credit Suisse First Boston NY
5.36%, 04/24/07		68,099		68,100
Cullinan Finance Corp.
5.36%, 04/25/07c		34,050		34,050
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07c		10,448		10,448
DEPFA Bank PLC
5.40%, 12/14/07c		136,199		136,199
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07c		156,629		156,632
Eli Lilly Services Inc.
5.31%, 03/01/07c		90,913		90,913
Fifth Third Bancorp
5.32%, 02/22/08c		272,398		272,398
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07c		88,529		88,525
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08c		143,009		143,023
Granite Master Issuer PLC
5.29%, 08/20/07c		476,696		476,696

Security	Principal		Value
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07c	$	177,059	$	177,060
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		204,298		204,312
HBOS Treasury Services PLC
5.46%, 01/24/08c		136,199		136,199
Holmes Financing PLC
5.29%, 07/16/07c		238,348		238,348
JP Morgan Securities Inc.
5.40%, 11/16/07		272,398		272,398
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08f		374,547		374,547
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07c		102,149		102,148
Kestrel Funding LLC
5.30%, 07/11/07c		54,480		54,477
Kommunalkredit Austria AG
5.32%, 02/08/08c		81,719		81,719
Leafs LLC
5.32%, 01/22/08c		131,959		131,959
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07c		149,819		149,816
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07c		48,017		48,017
Marshall & Ilsley Bank
5.32%, 02/15/08		74,909		74,909
Master Funding LLC
5.35%, 04/25/07 - 05/25/07c		246,483		246,483
Merrill Lynch & Co. Inc.
5.46%, 05/30/07f		149,819		149,819
Metropolitan Life Global Funding I
5.33%, 03/06/08c		204,298		204,298
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07c,f		13,620		13,620

36 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 10-20 YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Mound Financing PLC
5.29%, 05/08/07c	$	128,027	$	128,027
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08c		217,918		217,915
National City Bank of Indiana
5.34%, 05/21/07		68,099		68,101
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08c		449,457		449,507
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08c		136,539		136,521
Northern Rock PLC
5.38%, 02/01/08c		163,439		163,442
Northlake CDO I
5.42%, 09/06/07c		40,860		40,860
Pricoa Global Funding I
5.31%, 02/27/08c		183,869		183,869
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07c		197,489		197,487
Skandinaviska Enskilda Banken
5.32%, 02/15/08c		136,199		136,199
Strips III LLC
5.37%, 07/24/07c		27,714		27,714
SunTrust Bank
5.29%, 05/01/07		136,199		136,200
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07c		332,326		332,314
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07c		224,728		224,729
Wachovia Asset Securitization Inc.
5.31%, 03/25/07c		153,744		153,744
Wachovia Bank N.A.
5.36%, 05/22/07		272,398		272,398
Wal-Mart Stores Inc.
5.50%, 07/16/07c		102,149		102,175

Security	Principal		Value
Wells Fargo & Co.	$	68,099	$	68,102
5.33%, 11/15/07c
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07c		102,149		102,149
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07c		408,597		408,560
Wind Master Trust
5.31%, 07/25/07c		54,480		54,480
				9,893,074
TOTAL SHORT-TERM INVESTMENTS (Cost: $19,617,854)				19,617,854
TOTAL INVESTMENTS IN SECURITIES – 161.46% (Cost: $49,079,641)				49,367,742
Other Assets, Less Liabilities – (61.46)%				(18,791,915	)
NET ASSETS – 100.00%			$	30,575,827

^a All or a portion of this security represents a security on loan. See Note 5.

^b All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^c This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^d Affiliated issuer. See Note 2.

^e The rate quoted is the annualized seven-day yield of the fund at period end.

^f The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 37

Schedule of Investments

iSHARES^® LEHMAN 20+ YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT OBLIGATIONS – 98.94%
U.S. Treasury Bonds
4.50%, 02/15/36a	$	232,386,000	$	225,546,878
4.75%, 02/15/37		87,80,000		88,959,765
5.25%, 11/15/28a		65,450,000		69,774,932
5.25%, 02/15/29a		128,898,000		137,507,099
5.38%, 02/15/31a		145,684,000		158,963,082
5.50%, 08/15/28a		101,024,000		110,955,670
6.13%, 11/15/27a		163,240,000		192,360,392
6.13%, 08/15/29		94,710,000		112,526,849
6.25%, 05/15/30a		150,458,000		182,234,734
6.38%, 08/15/27a		79,310,000		95,820,750
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost: $1,400,120,273)				1,374,650,151
SHORT-TERM INVESTMENTS – 40.86%
CERTIFICATES OF DEPOSITb – 1.84%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		5,902,940		5,902,940
Deutsche Bank AG
5.35%, 08/08/07		9,838,233		9,838,233
Washington Mutual Bank
5.33%, 03/19/07		9,838,233		9,838,233
				25,579,406
COMMERCIAL PAPERb – 8.83%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07c		3,742,897		3,717,588
BNP Paribas Finance Inc.
5.12%, 06/06/07		1,377,353		1,358,370
Bryant Park Funding LLC
5.27%, 03/06/07c		969,814		969,104
Cantabric Finance LLC
5.25%, 03/06/07c		3,148,234		3,145,939
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07c		2,951,470		2,930,276
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07c		2,005,701		2,000,396

Security	Principal		Value
Crown Point Capital Co. LLC
5.20%, 07/18/07c	$	4,545,854	$	4,454,583
Edison Asset Securitization LLC
5.21%, 04/11/07c		1,630,904		1,621,226
Five Finance Inc.
5.22%, 04/20/07c		1,810,235		1,797,111
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07c		6,886,763		6,768,481
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07c		6,453,881		6,446,098
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07c		7,673,822		7,578,514
Harrier Finance Funding LLC
5.12%, 06/06/07c		3,935,293		3,881,057
Irish Permanent Treasury PLC
5.18%, 07/10/07		1,967,647		1,930,557
KKR Pacific Funding Trust
5.29%, 03/13/07c		4,919,116		4,910,442
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07c		4,972,164		4,887,533
Liberty Street Funding Corp.
5.27%, 03/06/07c		472,235		471,890
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07c		8,877,864		8,793,534
Nationwide Building Society
5.21%, 04/13/07c		3,738,528		3,715,263
Nestle Capital Corp.
5.19%, 08/09/07		2,361,176		2,306,371
Sedna Finance Inc.
5.22%, 04/17/07c		2,243,117		2,227,830
Simba Funding Corp.
5.20%, 07/23/07c		3,935,293		3,853,439
Societe Generale
5.18%, 05/16/07		9,838,233		9,730,646

38 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 20+ YEAR TREASURY BOND FUND

February 28, 2007

Security	Shares or Principal		Value
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07c	$	14,991,735	$	14,977,238
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07c		2,880,635		2,875,987
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07c		2,065,950		2,064,323
Tulip Funding Corp.
5.29%, 03/15/07c		7,554,228		7,538,687
Westpac Banking Corp.
5.20%, 07/12/07c		3,541,764		3,473,723
Zela Finance Inc.
5.20%, 07/16/07c		2,361,176		2,314,451
				122,740,657
MEDIUM-TERM NOTESb – 0.83%
Bank of America N.A.
5.28%, 04/20/07		983,823		983,823
Cullinan Finance Corp.
5.71%, 06/28/07c		2,951,470		2,951,470
K2 USA LLC
5.39%, 06/04/07c		2,951,470		2,951,470
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07c		4,604,293		4,604,293
				11,491,056
MONEY MARKET FUNDS – 1.76%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%d,e		24,390,923		24,390,923
				24,390,923
REPURCHASE AGREEMENTSb – 5.39%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $7,871,758 (collateralized by non-U.S. Government debt securities, value $8,113,105, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	7,870,586		7,870,586

Security	Principal		Value
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $5,903,821 (collateralized by non-U.S. Government debt securities, value $6,498,361, 0.00% to 9.20%, 10/17/18 to 11/25/52).	$	5,902,940	$	5,902,940
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $393,588 (collateralized by non-U.S. Government debt securities, value $413,532, 5.43%, 3/15/08).		393,529		393,529
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $5,903,819 (collateralized by non-U.S. Government debt securities, value $6,360,589, 0.00% to 10.00%, 5/27/33 to 8/25/46).		5,902,940		5,902,940
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $7,871,758 (collateralized by non-U.S. Government debt securities, value $8,270,641, 4.91% to 6.31%, 10/25/33 to 8/25/46).		7,870,586		7,870,586
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $4,329,474 (collateralized by non-U.S. Government debt securities, value $4,664,873, 0.00% to 10.00%, 5/27/33 to 8/25/46).		4,328,822		4,328,822

SCHEDULES OF INVESTMENTS 39

Schedule of Investments (Continued)

iSHARES^® LEHMAN 20+ YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $2,361,534 (collateralized by non-U.S. Government debt securities, value $2,630,445, 0.00% to 10.00%, 5/27/33 to 2/28/37).	$	2,361,176	$	2,361,176
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $1,460,486 (collateralized by non-U.S. Government debt securities, value $1,534,493, 4.52% to 6.89%, 1/15/09 to 10/25/36).		1,460,269		1,460,269
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $16,530,738 (collateralized by non-U.S. Government debt securities, value $18,223,986, 0.00% to 10.00%, 4/1/07 to 12/31/49).		16,528,231		16,528,231
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $1,967,940 (collateralized by non-U.S. Government debt securities, value $2,067,793, 3.72% to 5.99%, 12/15/36 to 6/1/46).		1,967,647		1,967,647
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $983,971 (collateralized by non-U.S. Government debt securities, value $1,033,954, 6.25% to 9.56%, 5/15/11 to 2/1/30).		983,823		983,823

Security	Principal		Value
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $3,935,879 (collateralized by non-U.S. Government debt securities, value $4,135,341, 1.63% to 14.50%, 5/1/07 to 9/18/37).	$	3,935,293	$	3,935,293
Morgan Stanley 5.36%, due 3/1/07, maturity value $3,935,879 (collateralized by non-U.S. Government debt securities, value $4,136,231, 0.00% to 10.00%, 3/1/07 to 2/28/37).		3,935,293		3,935,293
Morgan Stanley 5.51%, due 2/4/08, maturity value $2,895,527 (collateralized by non-U.S. Government debt securities, value $3,266,847, 0.00% to 10.00%, 3/1/07 to 2/28/37).f		2,754,705		2,754,705
Wachovia Capital 5.38%, due 3/1/07, maturity value $8,658,939 (collateralized by non-U.S. Government debt securities, value $9,097,705, 0.00% to 8.32%, 2/15/08 to 3/15/49).		8,657,645		8,657,645
				74,853,485
TIME DEPOSITSb – 1.63%
Bank of Nova Scotia
5.30%, 03/02/07		1,650,305		1,650,305
Chase Bank USA N.A.
5.38%, 03/01/07		5,902,940		5,902,940
Citibank N.A.
5.47%, 03/01/07		5,902,940		5,902,940
Deutsche Bank AG
5.38%, 03/01/07		9,242,862		9,242,862
				22,699,047

40 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 20+ YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
VARIABLE & FLOATING RATE NOTESb – 20.58%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08c	$	10,074,350	$	10,075,353
American Express Centurion Bank
5.41%, 07/19/07		4,328,822		4,330,772
American Express Credit Corp.
5.42%, 03/05/08		1,180,588		1,181,163
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		179,350		179,350
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07c		2,951,470		2,951,470
ASIF Global Financing
5.40%, 05/03/07c		393,529		393,565
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08c		2,557,941		2,557,941
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08c		5,706,175		5,706,338
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07c		10,034,997		10,035,180
BMW US Capital LLC
5.32%, 01/15/08c		3,935,293		3,935,293
BNP Paribas
5.33%, 11/19/07c		7,280,292		7,280,292
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07c		3,777,881		3,777,528
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07c		2,872,764		2,872,763
CC USA Inc.
5.36%, 07/30/07c		1,967,647		1,967,755
Commodore CDO Ltd.
5.44%, 12/12/07c		983,823		983,823

Security	Principal		Value
Credit Agricole SA
5.33%, 11/23/07	$	3,935,293	$	3,935,293
Credit Suisse First Boston NY
5.36%, 04/24/07		1,967,647		1,967,659
Cullinan Finance Corp.
5.36%, 04/25/07c		983,823		983,823
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07c		301,870		301,870
DEPFA Bank PLC
5.40%, 12/14/07c		3,935,293		3,935,293
Dorada Finance Inc.
5.33% - 5.41%,
06/27/07 - 07/17/07c		4,525,587		4,525,663
Eli Lilly Services Inc.
5.31%, 03/01/07c		2,626,808		2,626,808
Fifth Third Bancorp
5.32%, 02/22/08c		7,870,586		7,870,586
Five Finance Inc.
5.31% - 5.37%,
06/29/07 - 07/13/07c		2,557,941		2,557,812
General Electric Capital Corp.
5.28% - 5.45%,
07/09/07 - 02/22/08c		4,132,058		4,132,464
Granite Master Issuer PLC
5.29%, 08/20/07c		13,773,526		13,773,526
Harrier Finance Funding LLC
5.29% - 5.36%,
07/25/07 - 08/15/07c		5,115,881		5,115,909
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		5,902,940		5,903,319
HBOS Treasury Services PLC
5.46%, 01/24/08c		3,935,293		3,935,293
Holmes Financing PLC
5.29%, 07/16/07c		6,886,763		6,886,763
JP Morgan Securities Inc.
5.40%, 11/16/07		7,870,586		7,870,586
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08f		10,822,056		10,822,056

SCHEDULES OF INVESTMENTS 41

Schedule of Investments (Continued)

iSHARES^® LEHMAN 20+ YEAR TREASURY BOND FUND

February 28, 2007

Security	Principal		Value
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07c	$	2,951,470	$	2,951,419
Kestrel Funding LLC
5.30%, 07/11/07c		1,574,117		1,574,056
Kommunalkredit Austria AG
5.32%, 02/08/08c		2,361,176		2,361,176
Leafs LLC
5.32%, 01/22/08c		3,812,787		3,812,787
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07c		4,328,822		4,328,735
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07c		1,387,394		1,387,394
Marshall & Ilsley Bank
5.32%, 02/15/08		2,164,411		2,164,411
Master Funding LLC
5.35%, 04/25/07 - 05/25/07c		7,121,818		7,121,818
Merrill Lynch & Co. Inc.
5.46%, 05/30/07f		4,328,822		4,328,822
Metropolitan Life Global Funding I
5.33%, 03/06/08c		5,902,940		5,902,940
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07c,f		393,529		393,529
Mound Financing PLC
5.29%, 05/08/07c		3,699,176		3,699,176
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08c		6,296,469		6,296,398
National City Bank of Indiana
5.34%, 05/21/07		1,967,647		1,967,684
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08c		12,986,467		12,987,929
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08c		3,945,131		3,944,609

Security	Principal		Value
Northern Rock PLC
5.38%, 02/01/08c	$	4,722,352	$	4,722,441
Northlake CDO I
5.42%, 09/06/07c		1,180,588		1,180,588
Pricoa Global Funding I
5.31%, 02/27/08c		5,312,646		5,312,646
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07c		5,706,175		5,706,134
Skandinaviska Enskilda Banken
5.32%, 02/15/08c		3,935,293		3,935,293
Strips III LLC
5.37%, 07/24/07c		800,764		800,764
SunTrust Bank
5.29%, 05/01/07		3,935,293		3,935,327
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07c		9,602,115		9,601,798
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07c		6,493,234		6,493,233
Wachovia Asset Securitization Inc.
5.31%, 03/25/07c		4,442,235		4,442,235
Wachovia Bank N.A.
5.36%, 05/22/07		7,870,586		7,870,586
Wal-Mart Stores Inc.
5.50%, 07/16/07c		2,951,470		2,952,217
Wells Fargo & Co.
5.33%, 11/15/07c		1,967,647		1,967,725
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07c		2,951,470		2,951,482
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07c		11,805,879		11,804,822
Wind Master Trust
5.31%, 07/25/07c		1,574,117		1,574,117
				285,847,600

42 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 20+ YEAR TREASURY BOND FUND

February 28, 2007

	Value
TOTAL SHORT-TERM INVESTMENTS (Cost: $567,602,174)
	$	567,602,174
TOTAL INVESTMENTS IN SECURITIES – 139.80% (Cost: $1,967,722,447)
		1,942,252,325
Other Assets, Less Liabilities – (39.80)%		(552,931,964	)
NET ASSETS – 100.00%	$	1,389,320,361

^a All or a portion of this security represents a security on loan. See Note 5.

^b All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^c This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^d Affiliated issuer. See Note 2.

^e The rate quoted is the annualized seven-day yield of the fund at period end.

^f The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 43

Schedule of Investments

iSHARES^® LEHMAN TIPS BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT OBLIGATIONS - 99.18%
U.S. Treasury Inflation Index Bonds
0.88%, 04/15/10a	$	303,212,706	$	291,796,748
1.63%, 01/15/15		218,706,918		209,873,345
1.88%, 07/15/13a		246,249,346		242,535,906
1.88%, 07/15/15a		192,211,918		187,977,490
2.00%, 01/15/14		240,305,668		237,602,229
2.00%, 07/15/14		222,861,924		220,403,757
2.00%, 01/15/16a		167,993,789		165,618,357
2.00%, 01/15/26a		172,567,877		166,531,453
2.38%, 04/15/11a		195,428,707		197,381,040
2.38%, 01/15/17a		153,470,093		156,108,243
2.38%, 01/15/25a		293,354,596		299,268,624
2.38%, 01/15/27		89,217,280		91,363,848
2.50%, 07/15/16		132,818,660		136,596,023
3.00%, 07/15/12a		254,756,489		266,462,549
3.38%, 01/15/12a		87,382,376		92,516,964
3.38%, 04/15/32a		53,936,237		67,095,600
3.50%, 01/15/11a		159,330,760		167,842,209
3.63%, 04/15/28a		208,192,845		257,703,185
3.88%, 01/15/09a		160,030,886		165,494,340
3.88%, 04/15/29		239,472,756		309,276,669
4.25%, 01/15/10a		155,993,762		165,596,738
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost: $4,122,385,302)
				4,095,045,317
SHORT-TERM INVESTMENTS – 42.08%
CERTIFICATES OF DEPOSITb – 1.98%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		18,866,737		18,866,737
Deutsche Bank AG
5.35%, 08/08/07		31,444,562		31,444,562
Washington Mutual Bank
5.33%, 03/19/07		31,444,562		31,444,562
				81,755,861
COMMERCIAL PAPERb – 9.50%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07c		11,962,895		11,882,009
BNP Paribas Finance Inc.
5.12%, 06/06/07		4,402,239		4,341,567

Security	Principal		Value
Bryant Park Funding LLC
5.27%, 03/06/07c	$	3,099,679	$	3,097,410
Cantabric Finance LLC
5.25%, 03/06/07c		10,062,260		10,054,923
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07c		9,433,369		9,365,630
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07c		6,410,540		6,393,584
Crown Point Capital Co. LLC
5.20%, 07/18/07c		14,529,274		14,237,559
Edison Asset Securitization LLC
5.21%, 04/11/07c		5,212,628		5,181,698
Five Finance Inc.
5.22%, 04/20/07c		5,785,799		5,743,852
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07c		22,011,194		21,633,145
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07c		20,627,633		20,602,760
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07c		24,526,759		24,222,139
Harrier Finance Funding LLC
5.12%, 06/06/07c		12,577,825		12,404,476
Irish Permanent Treasury PLC
5.18%, 07/10/07		6,288,912		6,170,370
KKR Pacific Funding Trust
5.29%, 03/13/07c		15,722,281		15,694,557
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07c		15,891,830		15,621,334
Liberty Street Funding Corp.
5.27%, 03/06/07c		1,509,339		1,508,234
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07c		28,375,070		28,105,541
Nationwide Building Society
5.21%, 04/13/07c		11,948,934		11,874,575
Nestle Capital Corp.
5.19%, 08/09/07		7,546,695		7,371,530

44 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN TIPS BOND FUND

February 28, 2007

Security	Shares or Principal		Value
Sedna Finance Inc.
5.22%, 04/17/07c	$	7,169,360	$	7,120,501
Simba Funding Corp.
5.20%, 07/23/07c		12,577,825		12,316,206
Societe Generale
5.18%, 05/16/07		31,444,562		31,100,698
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07c		47,915,979		47,869,643
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07c		9,206,968		9,192,114
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07c		6,603,107		6,597,907
Tulip Funding Corp.
5.29%, 03/15/07c		24,144,518		24,094,848
Westpac Banking Corp.
5.20%, 07/12/07c		11,320,042		11,102,572
Zela Finance Inc.
5.20%, 07/16/07c		7,546,695		7,397,354
				392,298,736
MEDIUM-TERM NOTESb – 0.89%
Bank of America N.A.
5.28%, 04/20/07		3,144,456		3,144,456
Cullinan Finance Corp.
5.71%, 06/28/07c		9,433,369		9,433,369
K2 USA LLC
5.39%, 06/04/07c		9,433,369		9,433,369
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07c		14,716,055		14,716,055
				36,727,249
MONEY MARKET FUNDS – 0.03%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%d,e		1,393,586		1,393,586
				1,393,586

Security	Principal		Value
REPURCHASE AGREEMENTSb – 5.79%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $25,159,395 (collateralized by non-U.S. Government debt securities, value $25,930,778, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	25,155,650	$	25,155,650
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $18,869,551 (collateralized by non-U.S. Government debt securities, value $20,769,798, 0.00% to 9.20%, 10/17/18 to 11/25/52).		18,866,737		18,866,737
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $1,257,969 (collateralized by non-U.S. Government debt securities, value $1,321,715, 5.43%, 3/15/08).		1,257,782		1,257,782
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $18,869,546 (collateralized by non-U.S. Government debt securities, value $20,329,459, 0.00% to 10.00%, 5/27/33 to 8/25/46).		18,866,737		18,866,737
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $25,159,395 (collateralized by non-U.S. Government debt securities, value $26,434,288, 4.91% to 6.31%, 10/25/33 to 8/25/46).		25,155,650		25,155,650

SCHEDULES OF INVESTMENTS 45

Schedule of Investments (Continued)

iSHARES^® LEHMAN TIPS BOND FUND

February 28, 2007

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $13,837,690 (collateralized by non-U.S. Government debt securities, value $14,909,680, 0.00% to 10.00%, 5/27/33 to 8/25/46).	$	13,835,607	$	13,835,607
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $7,547,840 (collateralized by non-U.S. Government debt securities, value $8,407,321, 0.00% to 10.00%, 5/27/33 to 2/28/37).		7,546,695		7,546,695
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $4,667,948 (collateralized by non-U.S. Government debt securities, value $4,904,486, 4.52% to 6.89%, 1/15/09 to 10/25/36).		4,667,253		4,667,253
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $52,834,877 (collateralized by non-U.S. Government debt securities, value $58,246,768, 0.00% to 10.00%, 4/1/07 to 12/31/49).		52,826,865		52,826,865
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $6,289,848 (collateralized by non-U.S. Government debt securities, value $6,608,995, 3.72% to 5.99%, 12/15/36 to 6/1/46).		6,288,912		6,288,912

Security	Principal		Value
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $3,144,929 (collateralized by non-U.S. Government debt securities, value $3,304,681, 6.25% to 9.56%, 5/15/11 to 2/1/30).	$	3,144,456	$	3,144,456
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $12,579,698 (collateralized by non-U.S. Government debt securities, value $13,217,209, 1.63% to 14.50%, 5/1/07 to 9/18/37).		12,577,825		12,577,825
Morgan Stanley 5.36%, due 3/1/07, maturity value $12,579,698 (collateralized by non-U.S. Government debt securities, value $13,220,055, 0.00% to 10.00%, 3/1/07 to 2/28/37).		12,577,825		12,577,825
Morgan Stanley 5.51%, due 2/4/08, maturity value $9,254,567 (collateralized by non-U.S. Government debt securities, value $10,441,365, 0.00% to 10.00%, 3/1/07 to 2/28/37).f		8,804,477		8,804,477
Wachovia Capital 5.38%, due 3/1/07, maturity value $27,675,350 (collateralized by non-U.S. Government debt securities, value $29,077,717, 0.00% to 8.32%, 2/15/08 to 3/15/49).		27,671,215		27,671,215
				239,243,686

46 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN TIPS BOND FUND

February 28, 2007

Security	Principal		Value
TIME DEPOSITSb – 1.76%
Bank of Nova Scotia
5.30%, 03/02/07	$	5,274,637	$	5,274,637
Chase Bank USA N.A.
5.38%, 03/01/07		18,866,737		18,866,737
Citibank N.A.
5.47%, 03/01/07		18,866,737		18,866,737
Deutsche Bank AG
5.38%, 03/01/07		29,541,663		29,541,663
				72,549,774
VARIABLE & FLOATING RATE NOTESb – 22.13%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08c		32,199,232		32,202,434
American Express Centurion Bank
5.41%, 07/19/07		13,835,607		13,841,840
American Express Credit Corp.
5.42%, 03/05/08		3,773,347		3,775,185
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		573,231		573,231
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07c		9,433,369		9,433,369
ASIF Global Financing
5.40%, 05/03/07c		1,257,782		1,257,898
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08c		8,175,586		8,175,586
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08c		18,237,846		18,238,368
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07c		32,073,453		32,074,039
BMW US Capital LLC
5.32%, 01/15/08c		12,577,825		12,577,825
BNP Paribas
5.33%, 11/19/07c		23,268,976		23,268,976
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07c		12,074,712		12,073,583

Security	Principal		Value
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07c	$	9,181,812	$	9,181,812
CC USA Inc.
5.36%, 07/30/07c		6,288,912		6,289,259
Commodore CDO Ltd.
5.44%, 12/12/07c		3,144,456		3,144,456
Credit Agricole SA
5.33%, 11/23/07		12,577,825		12,577,825
Credit Suisse First Boston NY
5.36%, 04/24/07		6,288,912		6,288,954
Cullinan Finance Corp.
5.36%, 04/25/07c		3,144,456		3,144,456
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07c		964,824		964,824
DEPFA Bank PLC
5.40%, 12/14/07c		12,577,825		12,577,825
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07c		14,464,499		14,464,742
Eli Lilly Services Inc.
5.31%, 03/01/07c		8,395,698		8,395,698
Fifth Third Bancorp
5.32%, 02/22/08c		25,155,650		25,155,650
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07c		8,175,586		8,175,174
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08c		13,206,716		13,208,015
Granite Master Issuer PLC
5.29%, 08/20/07c		44,022,387		44,022,387
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07c		16,351,172		16,351,262
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		18,866,737		18,867,949
HBOS Treasury Services PLC
5.46%, 01/24/08c		12,577,825		12,577,825

SCHEDULES OF INVESTMENTS 47

Schedule of Investments (Continued)

iSHARES^® LEHMAN TIPS BOND FUND

February 28, 2007

Security	Principal		Value
Holmes Financing PLC
5.29%, 07/16/07c	$	22,011,194	$	22,011,194
JP Morgan Securities Inc.
5.40%, 11/16/07		25,155,650		25,155,650
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08f		34,589,018		34,589,019
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07c		9,433,369		9,433,205
Kestrel Funding LLC
5.30%, 07/11/07c		5,031,130		5,030,936
Kommunalkredit Austria AG
5.32%, 02/08/08c		7,546,695		7,546,695
Leafs LLC
5.32%, 01/22/08c		12,186,277		12,186,277
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07c		13,835,607		13,835,329
Lothian Mortgages Master
Issuer PLC 5.29%, 04/24/07c		4,434,334		4,434,334
Marshall & Ilsley Bank
5.32%, 02/15/08		6,917,804		6,917,804
Master Funding LLC
5.35%, 04/25/07 - 05/25/07c		22,762,467		22,762,467
Merrill Lynch & Co. Inc.
5.46%, 05/30/07f		13,835,607		13,835,607
Metropolitan Life Global Funding I
5.33%, 03/06/08c		18,866,737		18,866,737
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07c,f		1,257,782		1,257,782
Mound Financing PLC
5.29%, 05/08/07c		11,823,155		11,823,155
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08c		20,124,520		20,124,291
National City Bank of Indiana
5.34%, 05/21/07		6,288,912		6,289,031
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08c		41,506,822		41,511,494

Security	Principal		Value
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08c	$	12,609,269	$	12,607,599
Northern Rock PLC
5.38%, 02/01/08c		15,093,390		15,093,675
Northlake CDO I
5.42%, 09/06/07c		3,773,347		3,773,347
Pricoa Global Funding I
5.31%, 02/27/08c		16,980,064		16,980,064
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07c		18,237,846		18,237,714
Skandinaviska Enskilda Banken
5.32%, 02/15/08c		12,577,825		12,577,825
Strips III LLC
5.37%, 07/24/07c		2,559,369		2,559,369
SunTrust Bank
5.29%, 05/01/07		12,577,825		12,577,935
Tango Finance Corp.
5.27% - 5.34%,
04/25/07 - 07/16/07c		30,689,893		30,688,878
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07c		20,753,411		20,753,411
Wachovia Asset Securitization Inc.
5.31%, 03/25/07c		14,198,091		14,198,091
Wachovia Bank N.A.
5.36%, 05/22/07		25,155,650		25,155,650
Wal-Mart Stores Inc.
5.50%, 07/16/07c		9,433,369		9,435,756
Wells Fargo & Co.
5.33%, 11/15/07c		6,288,912		6,289,162
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07c		9,433,369		9,433,407
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07c		37,733,475		37,730,091
Wind Master Trust
5.31%, 07/25/07c		5,031,130		5,031,130
				913,614,558

48 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN TIPS BOND FUND

February 28, 2007

	Value
TOTAL SHORT-TERM INVESTMENTS (Cost: $1,737,583,450)	$	1,737,583,450
TOTAL INVESTMENTS IN SECURITIES - 141.26% (Cost: $5,859,968,752)		5,832,628,767
Other Assets, Less Liabilities – (41.26)%		(1,703,548,590	)
NET ASSETS – 100.00%	$	4,129,080,177

^a All or a portion of this security represents a security on loan. See Note 5.

^b All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^c This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^d Affiliated issuer. See Note 2.

^e The rate quoted is the annualized seven-day yield of the fund at period end.

^f The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 49

Statements of Assets and Liabilities

iSHARES^® TRUST

February 28, 2007

	iShares Lehman
	Short Treasury Bond Fund		1-3 Year Treasury Bond Fund			3-7 Year Treasury Bond Fund
ASSETS
Investments, at cost:
Unaffiliated issuers	$	72,918,336	$	7,961,208,896		$	28,096,816
Affiliated issuers (Note 2)		48,318		33,217,315			181,087
Total cost of investments	$	72,966,654	$	7,994,426,211		$	28,277,903
Investments in securities, at value (including securities on loana ) (Note 1):
Unaffiliated issuers	$	72,928,913	$	7,958,508,267		$	28,198,805
Affiliated issuers (Note 2)		48,318		33,217,315			181,087
Total value of investments		72,977,231		7,991,725,582			28,379,892
Receivables:
Investment securities sold		–		408,510,942			–
Interest		459,173		46,982,444			188,282
Capital shares sold		50,331		–			–
Total Assets		73,486,735		8,447,218,968			28,568,174
LIABILITIES
Payables:
Investment securities purchased		–		423,241,875			–
Collateral for securities on loan (Note 5)		8,066,325		2,484,121,472			8,359,138
Capital shares redeemed		–		229,497			–
Short positions, at value (Proceeds: $–, $592,045 and $–, respectively) (Note 4)		–		591,927			–
Investment advisory fees (Note 2)		3,890		643,566			3,370
Total Liabilities		8,070,215		2,908,828,337			8,362,508
NET ASSETS	$	65,416,520	$	5,538,390,631		$	20,205,666
Net assets consist of:
Paid-in capital	$	65,282,662	$	5,588,192,662		$	20,003,306
Undistributed net investment income		122,357		19,158,233			101,161
Undistributed net realized gain (accumulated net realized loss)		924		(66,259,753	)		(790	)
Net unrealized appreciation (depreciation)		10,577		(2,700,511	)		101,989
NET ASSETS	$	65,416,520	$	5,538,390,631		$	20,205,666
Shares outstanding		600,000		68,900,000			200,000
Net asset value per share	$	109.03	$	80.38		$	101.03

^a Securities on loan with market values of $7,814,103, $2,416,778,411 and $8,177,764, respectively. See Note 5.

See notes to financial statements.

50 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Assets and Liabilities (Continued)

iSHARES^® TRUST

February 28, 2007

	iShares Lehman
	7-10 Year Treasury Bond Fund			10-20 Year Treasury Bond Fund			20+ Year Treasury Bond Fund			TIPS Bond Fund
ASSETS
Investments, at cost:
Unaffiliated issuers	$	2,756,723,946		$	48,262,121		$	1,943,331,524		$	5,858,575,166
Affiliated issuers (Note 2)		32,222,271			817,520			24,390,923			1,393,586
Total cost of investments	$	2,788,946,217		$	49,079,641		$	1,967,722,447		$	5,859,968,752
Investments in securities, at value (including securities on loana) (Note 1):
Unaffiliated issuers	$	2,765,736,838		$	48,550,222		$	1,917,861,402		$	5,831,235,181
Affiliated issuers (Note 2)		32,222,271			817,520			24,390,923			1,393,586
Total value of investments		2,797,959,109			49,367,742			1,942,252,325			5,832,628,767
Receivables:
Investment securities sold		41,419,262			–			92,217,214			14,380,459
Interest		14,664,563			210,395			8,604,482			18,884,191
Total Assets		2,854,042,934			49,578,137			2,043,074,021			5,865,893,417
LIABILITIES
Payables:
Investment securities purchased		65,982,322			–			109,914,207			–
Collateral for securities on loan (Note 5)		875,996,112			18,800,334			543,211,251			1,736,189,864
Capital shares redeemed		–			197,368			463,126			–
Investment advisory fees (Note 2)		214,182			4,608			165,076			623,376
Total Liabilities		942,192,616			19,002,310			653,753,660			1,736,813,240
NET ASSETS	$	1,911,850,318		$	30,575,827		$	1,389,320,361		$	4,129,080,177
Net assets consist of:
Paid-in capital	$	1,935,331,287		$	30,152,848		$	1,423,514,030		$	4,194,060,562
Undistributed net investment income		6,794,008			135,220			3,575,836			2
Accumulated net realized loss		(39,287,869	)		(342	)		(12,299,383	)		(37,640,402	)
Net unrealized appreciation (depreciation)		9,012,892			288,101			(25,470,122	)		(27,339,985	)
NET ASSETS	$	1,911,850,318		$	30,575,827		$	1,389,320,361		$	4,129,080,177
Shares outstanding		22,900,000			300,000			15,400,000			40,900,000
Net asset value per share	$	83.49		$	101.92		$	90.22		$	100.96

^a Securities on loan with market values of $852,920,789, $18,184,636, $530,862,587 and $1,552,942,011, respectively. See Note 5.

See notes to financial statements.

FINANCIAL STATEMENTS 51

Statements of Operations

iSHARES^® TRUST

Year ended February 28, 2007

	iShares Lehman
	Short Treasury Bond Funda		1-3 Year Treasury Bond Fund			3-7 Year Treasury Bond Funda
NET INVESTMENT INCOME
Interest from unaffiliated issuers	$	217,665	$	217,159,155		$	179,641
Interest from affiliated issuers (Note 2)		5,098		459,714			576
Securities lending income		732		2,514,534			1,283
Total investment income		223,495		220,133,403			181,500
EXPENSES
Investment advisory fees (Note 2)		7,063		7,456,533			6,280
Total expenses		7,063		7,456,533			6,280
Net investment income		216,432		212,676,870			175,220
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		924		(24,890,294	)		(2,371	)
In-kind redemptions		–		2,962,981			24,203
Net realized gain (loss)		924		(21,927,313	)		21,832
Net change in unrealized appreciation (depreciation) on:
Investments		10,577		43,639,080			101,989
Short positions (Note 4)		–		118			–
Net change in unrealized appreciation (depreciation)		10,577		43,639,198			101,989
Net realized and unrealized gain		11,501		21,711,885			123,821
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	227,933	$	234,388,755		$	299,041

^a For the period from January 5, 2007 (commencement of operations) to February 28, 2007.

See notes to financial statements.

52 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Operations (Continued)

iSHARES^® TRUST

Year ended February 28, 2007

	iShares Lehman
	7-10 Year Treasury Bond Fund			10-20 Year Treasury Bond Funda			20+ Year Treasury Bond Fund			TIPS Bond Fund
NET INVESTMENT INCOME
Interest from unaffiliated issuers	$	71,415,075		$	242,624		$	61,551,504		$	166,624,233	b
Interest from affiliated issuers (Note 2)		251,074			1,721			211,003			254,553
Securities lending income		1,251,186			1,276			793,809			846,889
Total investment income		72,917,335			245,621			62,556,316			167,725,675
EXPENSES
Investment advisory fees (Note 2)		2,351,424			8,295			1,934,743			7,822,759
Total expenses		2,351,424			8,295			1,934,743			7,822,759
Net investment income		70,565,911			237,326			60,621,573			159,902,916
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(13,469,608	)		(1,369	)		(10,011,894	)		(29,322,368	)
In-kind redemptions		6,367,913			149,219			29,890,246			5,641,099
Net realized gain (loss)		(7,101,695	)		147,850			19,878,352			(23,681,269	)
Net change in unrealized appreciation (depreciation)		30,017,643			288,101			(1,793,062	)		(22,327,053	)
Net realized and unrealized gain (loss)		22,915,948			435,951			18,085,290			(46,008,322	)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	93,481,859		$	673,277		$	78,706,863		$	113,894,594

^a For the period from January 5, 2007 (commencement of operations) to February 28, 2007.

^b Includes monthly inflationary and deflationary adjustments to income. See Note 1.

See notes to financial statements.

FINANCIAL STATEMENTS 53

Statements of Changes in Net Assets

iSHARES^® TRUST

	iShares Lehman Short Treasury Bond Fund			iShares Lehman 1-3 Year Treasury Bond Fund						iShares Lehman 3-7 Year Treasury Bond Fund
	Period from January 5, 2007a to February 28, 2007			Year ended February 28, 2007			Year ended February 28, 2006			Period from January 5, 2007a to February 28, 2007
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	216,432		$	212,676,870		$	135,077,394		$	175,220
Net realized gain (loss)		924			(21,927,313	)		(38,056,694	)		21,832
Net change in unrealized appreciation (depreciation)		10,577			43,639,198			(17,012,252	)		101,989
Net increase in net assets resulting from operations		227,933			234,388,755			80,008,448			299,041
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(94,075	)		(206,518,199	)		(126,416,707	)		(73,974	)
Total distributions to shareholders		(94,075	)		(206,518,199	)		(126,416,707	)		(73,974	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		65,282,662			2,515,220,606			2,857,171,622			30,021,508
Cost of shares redeemed		–			(776,379,666	)		(1,768,445,262	)		(10,040,909	)
Net increase in net assets from capital share transactions		65,282,662			1,738,840,940			1,088,726,360			19,980,599
INCREASE IN NET ASSETS		65,416,520			1,766,711,496			1,042,318,101			20,205,666
NET ASSETS
Beginning of period		–			3,771,679,135			2,729,361,034			–
End of period	$	65,416,520		$	5,538,390,631		$	3,771,679,135		$	20,205,666
Undistributed net investment income included in net assets at end of period	$	122,357		$	19,158,233		$	13,151,817		$	101,161
SHARES ISSUED AND REDEEMED
Shares sold		600,000			31,500,000			35,400,000			300,000
Shares redeemed		–			(9,700,000	)		(22,000,000	)		(100,000	)
Net increase in shares outstanding		600,000			21,800,000			13,400,000			200,000

^a Commencement of operations.

See notes to financial statements.

54 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Changes in Net Assets (Continued)

iSHARES^® TRUST

	iShares Lehman 7-10 Year Treasury Bond Fund						iShares Lehman 10-20 Year Treasury Bond Fund			iShares Lehman 20+Year Treasury Bond Fund
	Year ended February 28, 2007			Year ended February 28, 2006			Period from January 5, 2007a to February 28, 2007			Year ended February 28, 2007			Year ended February 28, 2006
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	70,565,911		$	41,588,376		$	237,326		$	60,621,573		$	33,868,894
Net realized gain (loss)		(7,101,695	)		(15,207,137	)		147,850			19,878,352			19,957,480
Net change in unrealized appreciation (depreciation)		30,017,643			(10,010,704	)		288,101			(1,793,062	)		(7,015,936	)
Net increase in net assets resulting from operations		93,481,859			16,370,535			673,277			78,706,863			46,810,438
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(67,053,908	)		(39,810,668	)		(102,106	)		(58,936,706	)		(33,869,183	)
Total distributions to shareholders		(67,053,908	)		(39,810,668	)		(102,106	)		(58,936,706	)		(33,869,183	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		1,045,172,170			1,285,245,993			40,196,598			2,915,657,586			5,632,855,008
Cost of shares redeemed		(337,128,949	)		(851,526,249	)		(10,191,942	)		(2,414,509,069	)		(5,525,417,004	)
Net increase in net assets from capital share transactions		708,043,221			433,719,744			30,004,656			501,148,517			107,438,004
INCREASE IN NET ASSETS		734,471,172			410,279,611			30,575,827			520,918,674			120,379,259
NET ASSETS
Beginning of period		1,177,379,146			767,099,535			–			868,401,687			748,022,428
End of period	$	1,911,850,318		$	1,177,379,146		$	30,575,827		$	1,389,320,361		$	868,401,687
Undistributed net investment income included in net assets at end of period	$	6,794,008		$	3,442,121		$	135,220		$	3,575,836		$	1,918,236
SHARES ISSUED AND REDEEMED
Shares sold		12,800,000			15,200,000			400,000			33,500,000			61,200,000
Shares redeemed		(4,100,000	)		(10,100,000	)		(100,000	)		(27,600,000	)		(60,000,000	)
Net increase in shares outstanding		8,700,000			5,100,000			300,000			5,900,000			1,200,000

^a Commencement of operations.

See notes to financial statements.

FINANCIAL STATEMENTS 55

Statements of Changes in Net Assets (Continued)

iSHARES^® TRUST

	iShares Lehman TIPS Bond Fund
	Year ended February 28, 2007			Year ended February 28, 2006
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	159,902,916		$	114,437,642
Net realized loss		(23,681,269	)		(2,081,481	)
Net change in unrealized appreciation (depreciation)		(22,327,053	)		(33,098,547	)
Net increase in net assets resulting from operations		113,894,594			79,257,614
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(159,902,934	)		(142,905,626	)
Return of capital		(6,372,908	)		(1,298,777	)
Total distributions to shareholders		(166,275,842	)		(144,204,403	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		946,382,221			2,193,167,185
Cost of shares redeemed		(381,588,164	)		(517,639,928	)
Net increase in net assets from capital share transactions		564,794,057			1,675,527,257
INCREASE IN NET ASSETS		512,412,809			1,610,580,468
NET ASSETS
Beginning of year		3,616,667,368			2,006,086,900
End of year	$	4,129,080,177		$	3,616,667,368
Undistributed net investment income included in net assets at end of year	$	2		$	22
SHARES ISSUED AND REDEEMED
Shares sold		9,500,000			21,100,000
Shares redeemed		(3,800,000	)		(5,000,000	)
Net increase in shares outstanding		5,700,000			16,100,000

See notes to financial statements.

56 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights

iSHARES^® TRUST

(For a share outstanding throughout the period)

	iShares Lehman Short Treasury Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$    108.57
Income from investment operations:
Net investment incomeb	0.74
Net realized and unrealized gainc	0.03
Total from investment operations	0.77
Less distributions from:
Net investment income	(0.31	)
Total distributions	(0.31	)
Net asset value, end of period	$    109.03
Total return	0.72	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$    65,417
Ratio of expenses to average net assetse	0.15	%
Ratio of net investment income to average net assetse	4.60	%
Portfolio turnover ratef	30	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 57

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout each period)

	iShares Lehman 1-3 Year Treasury Bond Fund
	Year ended Feb. 28, 2007			Year ended Feb. 28, 2006			Year ended Feb. 28, 2005			Year ended Feb. 29, 2004			Period from Jul. 22, 2002a to Feb. 28, 2003
Net asset value, beginning of period	$	80.08		$	80.99		$	82.80		$	82.40		$	81.01
Income from investment operations:
Net investment income		3.42	b		2.66			1.66			1.31			0.84
Net realized and unrealized gain (loss)c		0.24			(1.05	)		(1.84	)		0.40			1.32
Total from investment operations		3.66			1.61			(0.18	)		1.71			2.16
Less distributions from:
Net investment income		(3.36	)		(2.52	)		(1.63	)		(1.31	)		(0.77	)
Total distributions		(3.36	)		(2.52	)		(1.63	)		(1.31	)		(0.77	)
Net asset value, end of period	$	80.38		$	80.08		$	80.99		$	82.80		$	82.40
Total return		4.69	%		2.01	%		(0.21	)%		2.11	%		2.66	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	5,538,391		$	3,771,679		$	2,729,361		$	1,548,436		$	922,908
Ratio of expenses to average net assetse		0.15	%		0.15	%		0.15	%		0.15	%		0.15	%
Ratio of net investment income to average net assetse		4.28	%		3.36	%		2.11	%		1.63	%		1.80	%
Portfolio turnover ratef		64	%		83	%		106	%		21	%		44	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

58 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout the period)

	iShares Lehman 3-7 Year Treasury Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$	100.11
Income from investment operations:
Net investment incomeb		0.62
Net realized and unrealized gainc		0.55
Total from investment operations		1.17
Less distributions from:
Net investment income		(0.25	)
Total distributions		(0.25	)
Net asset value, end of period	$	101.03
Total return		1.17	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	20,206
Ratio of expenses to average net assetse		0.15	%
Ratio of net investment income to average net assetse		4.19	%
Portfolio turnover ratef		2	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 59

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout each period)

	iShares Lehman 7-10 Year Treasury Bond Fund
	Year ended Feb. 28, 2007			Year ended Feb. 28, 2006			Year ended Feb. 28, 2005			Year ended Feb. 29, 2004			Period from Jul. 22, 2002a to Feb. 28, 2003
Net asset value, beginning of period	$	82.91		$	84.30		$	86.65		$	87.10		$	82.13
Income from investment operations:
Net investment income		3.69	b		3.29			2.88			3.43			1.99
Net realized and unrealized gain (loss)c		0.43			(1.43	)		(2.05	)		(0.68	)		5.04
Total from investment operations		4.12			1.86			0.83			2.75			7.03
Less distributions from:
Net investment income		(3.54	)		(3.25	)		(3.18	)		(3.20	)		(1.68	)
Net realized gain		–			–			–			–			(0.38	)d
Total distributions		(3.54	)		(3.25	)		(3.18	)		(3.20	)		(2.06	)
Net asset value, end of period	$	83.49		$	82.91		$	84.30		$	86.65		$	87.10
Total return		5.14	%		2.21	%		1.06	%		3.26	%		8.64	%e
Ratios/Supplemental data:
Net assets, end of period (000s)	$	1,911,850		$	1,177,379		$	767,100		$	199,285		$	444,194
Ratio of expenses to average net assetsf		0.15	%		0.15	%		0.15	%		0.15	%		0.15	%
Ratio of net investment income to average net assetsf		4.50	%		4.02	%		3.75	%		3.59	%		3.79	%
Portfolio turnover rateg		45	%		94	%		121	%		74	%		54	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Represents all short-term capital gain distributions. Short-term capital gain distributions are treated as ordinary dividends for tax purposes.

^e Not annualized.

^f Annualized for periods of less than one year.

^g Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

60 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout the period)

	iShares Lehman 10-20 Year Treasury Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$	100.77
Income from investment operations:
Net investment incomeb		0.63
Net realized and unrealized gainc		0.78
Total from investment operations		1.41
Less distributions from:
Net investment income		(0.26	)
Total distributions		(0.26	)
Net asset value, end of period	$	101.92
Total return		1.41	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	30,576
Ratio of expenses to average net assetse		0.15	%
Ratio of net investment income to average net assetse		4.29	%
Portfolio turnover ratef		0	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 61

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout each period)

	iShares Lehman 20+ Year Treasury Bond Fund
	Year ended Feb. 28, 2007			Year ended Feb. 28, 2006			Year ended Feb. 28, 2005			Year ended Feb. 29, 2004			Period from Jul. 22, 2002a to Feb. 28, 2003
Net asset value, beginning of period	$	91.41		$	90.12		$	88.57		$	90.52		$	82.69
Income from investment operations:
Net investment income		4.10	b		4.12			4.00			4.35			2.79
Net realized and unrealized gain (loss)c		(1.26	)		1.32			1.68			(1.72	)		7.29
Total from investment operations		2.84			5.44			5.68			2.63			10.08
Less distributions from:
Net investment income		(4.03	)		(4.15	)		(4.13	)		(4.58	)		(2.20	)
Net realized gain		—			—			—			—			(0.05	)d
Total distributions		(4.03	)		(4.15	)		(4.13	)		(4.58	)		(2.25	)
Net asset value, end of period	$	90.22		$	91.41		$	90.12		$	88.57		$	90.52
Total return		3.37	%		6.12	%		6.72	%		3.11	%		12.31	%e
Ratios/Supplemental data:
Net assets, end of period (000s)	$	1,389,320		$	868,402		$	748,022		$	265,696		$	316,828
Ratio of expenses to average net assetsf		0.15	%		0.15	%		0.15	%		0.15	%		0.15	%
Ratio of net investment income to average net assetsf		4.70	%		4.42	%		4.71	%		4.84	%		4.92	%
Portfolio turnover rateg		25	%		25	%		18	%		31	%		7	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Represents all short-term capital gain distributions. Short-term capital gain distributions are treated as ordinary dividends for tax purposes.

^e Not annualized.

^f Annualized for periods of less than one year.

^g Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

62 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout each period)

	iShares Lehman TIPS Bond Fund
	Year ended Feb. 28, 2007			Year ended Feb. 28, 2006			Year ended Feb. 28, 2005			Period from Dec. 4, 2003a to Feb. 29, 2004
Net asset value, beginning of period	$	102.75		$	105.03		$	105.12		$	100.92
Income from investment operations:
Net investment income (loss)		4.08	b		4.29			3.74			(0.06	)
Net realized and unrealized gain (loss)c		(1.60	)		(1.15	)		0.48			4.38
Total from investment operations		2.48			3.14			4.22			4.32
Less distributions from:
Net investment income		(4.11	)		(5.37	)		(3.95	)		(0.02	)
Return of capital		(0.16	)		(0.05	)		(0.36	)		(0.10	)
Total distributions		(4.27	)		(5.42	)		(4.31	)		(0.12	)
Net asset value, end of period	$	100.96		$	102.75		$	105.03		$	105.12
Total return		2.56	%		3.04	%		4.16	%		4.29	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	4,129,080		$	3,616,667		$	2,006,087		$	588,671
Ratio of expenses to average net assetse		0.20	%		0.20	%		0.20	%		0.20	%
Ratio of net investment income (loss) to average net assetse		4.09	%		4.12	%		3.60	%		(0.25	)%
Portfolio turnover ratef		17	%		13	%		32	%		2	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 63

Notes to Financial Statements

iSHARES^® TRUST

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 February 28, 2007, the Trust offered 101 investment portfolios or funds.

These financial statements relate only to the iShares Lehman Short Treasury Bond Fund, iShares Lehman 1-3 Year Treasury Bond Fund, iShares Lehman 3-7 Year Treasury Bond Fund, iShares Lehman 7-10 Year Treasury Bond Fund, iShares Lehman 10-20 Year Treasury Bond Fund, iShares Lehman 20+ Year Treasury Bond Fund and iShares Lehman TIPS Bond Fund (each, a “Fund,” collectively, the “Funds”). The iShares Lehman Short Treasury Bond Fund, iShares Lehman 3-7 Year Treasury Bond Fund and iShares Lehman 10-20 Year Treasury Bond Fund commenced operations on January 5, 2007.

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. The investment advise ruses a “passive” or index approach to achieve each Fund’s investment objective. Each of the Funds is classified as a diversified fund under the 1940 Act, except for the iShares Lehman Short Treasury Bond Fund, iShares Lehman 3-7 Year Treasury Bond Fund and iShares Lehman 10-20 Year Treasury Bond Fund, which are classified as non-diversified funds. Non-diversified funds generally hold securities of fewer companies than diversified funds and may be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence affecting these companies.

Pursuant to the Trust’s organizational documents, the Funds’ 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.

1. SIGNIFICANT ACCOUNTING POLICIES

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 the financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Certain prior year amounts in the financial statements have been reclassified to be consistent with the current period presentation. Those reclassifications had no impact on the prior year net assets, net income or distributions.

SECURITY VALUATION

The securities and other assets of each Fund are generally valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service or a major market maker (or dealer), (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service or a major market maker (or dealer) or (iii) based on amortized cost. In the case of shares of funds that are not traded on an exchange, a market valuation means such fund’s published net asset value per share. The investment adviser may use various pricing services or discontinue the use of any pricing service. A price obtained from a pricing service based on such pricing service’s valuation matrix may be considered a market valuation. In the event that current market valuations are not readily available or such valuations do not reflect current market values, the affected investments will be valued using fair value pricing pursuant to the pricing policy and procedures approved by the Board of Trustees of the Trust (the “Board”).

64 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (Continued)

iSHARES^® TRUST

SECURITY TRANSACTIONS AND INCOME RECOGNITION

Security transactions are accounted for on trade date. Interest income is accrued daily. Realized gains and losses on investment transactions are determined using the specific identification method. The Funds amortize premiums and accrete discounts on debt securities purchased, using a constant yield to maturity method.

The inflation-protected public obligations held by the iShares Lehman TIPS Bond Fund are income-generating instruments whose interest and principal payments are adjusted for inflation (or deflation). The inflation (deflation) adjustment is applied to the principal of each bond on a monthly basis and is accounted for as interest income in the Fund’s Statement of Operations.

DISTRIBUTIONS TO SHAREHOLDERS

Distributions to shareholders from net investment income, if any, are declared and distributed at least monthly by each Fund. Distributions of net realized capital gains, if any, generally are declared and distributed at least once a year. Distributions are determined on a tax basis and may differ from net investment income and net realized capital gains for financial reporting purposes. Dividends and distributions cannot be automatically reinvested in additional shares of the Funds.

As of February 28, 2007, the tax year-end of the Funds, the components of net distributable earnings (accumulated losses) on a tax basis were as follows:

iShares Bond Fund	Undistributed Ordinary Income		Unrealized Appreciation (Depreciation)			Capital and Other Losses			Net Distributable Earnings (Accumulated Losses)
Lehman Short Treasury	$	123,281	$	10,577		$	–		$	133,858
Lehman 1-3 Year Treasury		18,578,393		(2,121,016	)		(66,259,408	)		(49,802,031	)
Lehman 3-7 Year Treasury		101,131		101,229			–			202,360
Lehman 7-10 Year Treasury		6,576,401		7,636,982			(37,694,352	)		(23,480,969	)
Lehman 10-20 Year Treasury		135,220		287,759			–			422,979
Lehman 20+ Year Treasury		3,548,306		(26,940,379	)		(10,801,596	)		(34,193,669	)
Lehman TIPS		–		(45,241,917	)		(19,738,468	)		(64,980,385	)

The tax character of distributions paid during the years ended February 28, 2007 and February 28, 2006, were as follows:

iShares Bond Fund	2007		2006
Lehman Short Treasurya
Distributions paid from:
Ordinary income	$	94,075	$	–
Total Distributions	$	94,075	$	–

NOTES TO FINANCIAL STATEMENTS 65

Notes to Financial Statements (Continued)

iSHARES^® TRUST

iShares Bond Fund	2007		2006
Lehman 1-3 Year Treasury
Distributions paid from:
Ordinary income	$	206,518,199	$	126,416,707
Total Distributions	$	206,518,199	$	126,416,707
Lehman 3-7 Year Treasurya
Distributions paid from:
Ordinary income	$	73,974	$	–
Total Distributions	$	73,974	$	–
Lehman 7-10 Year Treasury
Distributions paid from:
Ordinary income	$	67,053,908	$	39,810,668
Total Distributions	$	67,053,908	$	39,810,668
Lehman 10-20 Year Treasurya
Distributions paid from:
Ordinary income	$	102,106	$	–
Total Distributions	$	102,106	$	–
Lehman 20+ Year Treasury
Distributions paid from:
Ordinary income	$	58,936,706	$	33,869,183
Total Distributions	$	58,936,706	$	33,869,183
Lehman TIPS
Distributions paid from:
Ordinary income	$	159,902,934	$	142,905,626
Return of Capital		6,372,908		1,298,777
Total Distributions	$	166,275,842	$	144,204,403

^a Commencement of operations on January 5, 2007.

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 year ended February 28, 2007.

66 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (Continued)

iSHARES^® TRUST

From November 1, 2006 to February 28, 2007, the Funds incurred net realized capital losses. As permitted by tax regulations, the Funds have elected to defer those losses and treat them as arising in the year ending February 29, 2008, as follows:

iShares Bond Fund	Deferred Net Realized Capital Losses
Lehman 1-3 Year Treasury	$	7,123,194
Lehman 7-10 Year Treasury		1,658,979
Lehman 20+ Year Treasury		2,753,053
Lehman TIPS		3,583,065

The Funds had tax basis net capital loss carryforwards as of February 28, 2007, the tax year-end of the Funds, as follows:

iShares Bond Fund	Expiring 2012		Expiring 2013		Expiring 2014		Expiring 2015		Total
Lehman 1-3 Year Treasury	$	11,523	$	2,648,872	$	22,017,499	$	34,458,320	$	59,136,214
Lehman 7-10 Year Treasury		3,648,187		–		6,717,418		25,669,768		36,035,373
Lehman 20+ Year Treasury		2,218,753		–		1,105,659		4,724,131		8,048,543
Lehman TIPS		–		2,389,570		512,591		13,253,242		16,155,403

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 year ended February 28, 2007, certain Funds realized net capital gains or losses resulting from in-kind redemptions of large blocks of shares 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 net realized in-kind gains or losses for the year ended February 28, 2007 are disclosed in the Funds’ Statements of Operations.

As of February 28, 2007, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

iShares Bond Fund	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation (Depreciation)
Lehman Short Treasury	$	72,966,654	$	10,740	$	(163	)	$	10,577
Lehman 1-3 Year Treasury		7,993,846,716		10,052,107		(12,173,241	)		(2,121,134	)
Lehman 3-7 Year Treasury		28,278,663		101,229		–			101,229
Lehman 7-10 Year Treasury		2,790,322,127		10,199,300		(2,562,318	)		7,636,982
Lehman 10-20 Year Treasury		49,079,983		287,759		–			287,759
Lehman 20+ Year Treasury		1,969,192,704		–		(26,940,379	)		(26,940,379	)
Lehman TIPS		5,877,870,684		10,982,535		(56,224,452	)		(45,241,917	)

NOTES TO FINANCIAL STATEMENTS 67

Notes to Financial Statements (Continued)

iSHARES^® TRUST

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 an investment by the Fund, collateralized by securities, which are delivered to the Fund’s 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.

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 execution of portfolio transactions, distribution fees and extraordinary expenses.

For its investment advisory services to each Fund, BGFA is entitled to an annual investment advisory fee based on the average daily net assets of each Fund as follows:

iShares Bond Fund	Investment Advisory Fee
Lehman Short Treasury	0.15	%
Lehman 1-3 Year Treasury	0.15
Lehman 3-7 Year Treasury	0.15
Lehman 7-10 Year Treasury	0.15
Lehman 10-20 Year Treasury	0.15
Lehman 20+ Year Treasury	0.15
Lehman TIPS	0.20

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 and expenses are Covered Expenses as defined above.

SEI Investments Distribution Co. (“SEI”) serves as each Fund’s underwriter and distributor of the shares of each Fund, pursuant to a Distribution Agreement with the Trust. SEI does not receive a fee from the Funds for its distribution services.

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission (“SEC”), the Funds are permitted to lend portfolio securities to Barclays Capital Inc. (“BarCap”). Pursuant to the same exemptive order, Barclays Global Investors, N.A. (“BGI”) serves as securities lending agent for the Trust. BarCap and BGI are affiliates of BGFA, the Funds’ investment adviser. As securities lending agent,

68 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (Continued)

iSHARES^® TRUST

BGI receives, as fees, a share of the income earned on investment of the cash collateral received for the loan of securities. For the year ended February 28, 2007, BGI earned securities lending agent fees as follows:

iShares Bond Fund	Securities Lending Agent Fees
Lehman Short Treasury	$         732
Lehman 1-3 Year Treasury	2,514,534
Lehman 3-7 Year Treasury	1,283
Lehman 7-10 Year Treasury	1,251,186
Lehman 10-20 Year Treasury	1,276
Lehman 20+ Year Treasury	793,809
Lehman TIPS	846,889

Each Fund may invest in the Institutional Shares of certain money market funds managed by BGFA, the Funds’ investment adviser, including the Government Money Market Fund (“GMMF”), Institutional Money Market Fund (“IMMF”), Prime Money Market Fund (“PMMF”) and Treasury Money Market Fund (“TMMF”) of Barclays Global Investors Funds. The GMMF, IMMF, PMMF and TMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (collectively, the “Money Market Master Portfolios”), respectively, which are also managed by BGFA. While the GMMF, IMMF, PMMF and TMMF do not directly charge an investment advisory fee, the Money Market Master Portfolios in which they invest do charge an investment advisory fee. Income distributions from the GMMF, IMMF, PMMF and TMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Funds from temporary cash investments are recorded as interest from affiliated issuers in the accompanying Statements of Operations. Income distributions earned by the Funds from the investment of securities lending collateral, if any, are included in securities lending income in the accompanying Statements of Operations.

As of February 28, 2007, certain trustees and officers of the Trust are also officers of BGI and/or BGFA.

3. INVESTMENT PORTFOLIO TRANSACTIONS

Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the year ended February 28, 2007, were as follows:

	U.S. Government Obligations
iShares Bond Fund	Purchases		Sales
Lehman Short Treasury	$	11,837,420	$	11,989,250
Lehman 1-3 Year Treasury		3,147,559,305		3,172,217,306
Lehman 3-7 Year Treasury		377,449		409,873
Lehman 7-10 Year Treasury		717,835,768		695,525,455
Lehman 10-20 Year Treasury		–		111,366
Lehman 20+ Year Treasury		327,834,484		320,300,513
Lehman TIPS		665,918,042		750,807,582

NOTES TO FINANCIAL STATEMENTS 69

Notes to Financial Statements (Continued)

iSHARES^® TRUST

In-kind transactions (See Note 4) for the year ended February 28, 2007, were as follows:

iShares Bond Fund	In-kind Purchases		In-kind Sales
Lehman Short Treasury	$	64,874,949	$	–
Lehman 1-3 Year Treasury		2,487,359,947		767,535,711
Lehman 3-7 Year Treasury		29,597,629		9,859,037
Lehman 7-10 Year Treasury		1,027,483,884		331,752,286
Lehman 10-20 Year Treasury		39,401,242		9,916,629
Lehman 20+ Year Treasury		2,871,626,282		2,376,609,897
Lehman TIPS		938,142,639		379,046,795

4. CAPITAL SHARE TRANSACTIONS

As of February 28, 2007, there were an unlimited number of no par value capital shares of beneficial interest authorized by the Trust. Capital shares are issued and redeemed by each Fund only in Creation Units or multiples thereof. Except when aggregated in Creation Units, shares of each Fund are not redeemable. Transactions in capital shares 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 securities constituting a portfolio sampling representation of the securities involved in the relevant Fund’s underlying index and an amount of cash. Investors purchasing and redeeming Creation Units in the iShares Lehman Short Treasury Bond Fund, iShares Lehman 3-7 Year Treasury Bond Fund and iShares Lehman 10-20 Year Treasury Bond Fund pay a purchase transaction fee and a redemption transaction fee directly to Investors Bank, the administrator, to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units.

As of February 28, 2007, the iShares Lehman 1-3 Year Treasury Bond Fund had two short positions as a result of an in-kind redemption. The obligation to deliver the securities is recorded as a liability on the Fund’s Statement of Assets and Liabilities and is equal to the current market value of the securities to be delivered. Any market fluctuations between the value of the obligation to sell these securities and the current market value are reflected in the Fund’s Statement of Operations. Details of the short positions resulting from an in-kind redemption by the Fund are included in its Schedule of Investments.

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 by each Fund is required to have a value of at least 102% of the market value of the loaned securities plus the interest accrued on such securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan plus accrued interest, if any. The risks to the Funds of securities lending are that the borrower may not provide additional collateral when required or may not return the securities when due.

As of February 28, 2007, the Funds had loaned securities which were collateralized by cash. Pursuant to an exemptive order issued by the SEC, the cash collateral received was invested in a joint account with other investment funds managed by BGFA. The joint account invests in securities with remaining maturities of 397 days or less, repurchase agreements and money market mutual funds, including

70 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (Continued)

iSHARES^® TRUST

money market funds managed by BGFA. Repurchase agreements held in the joint account are fully collateralized by U.S. Government securities or non-U.S. Government debt securities. The market value of the securities on loan as of February 28, 2007 and the value of the related collateral are disclosed in the Statements of Assets and Liabilities. Securities lending income, as disclosed in the Funds’ Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to BGI as securities lending agent.

6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The SEC staff has stated that it would not object if a fund does not implement FIN 48 in its NAV calculation until the date of the fund’s last NAV calculation in the first required financial statement reporting period for its fiscal year beginning after December 15, 2006. The Trust is currently evaluating the impact of applying the various provisions of FIN 48.

In September 2006, FASB issued Statement of Financial Accounting Standards No. 157 (“FAS 157”), “Fair Value Measurements.” FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure about fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The Trust is currently evaluating the impact the adoption of FAS 157 will have on the Funds’ financial statement disclosures.

NOTES TO FINANCIAL STATEMENTS 71

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of

iShares Trust:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the iShares Lehman Short Treasury Bond Fund, iShares Lehman 1-3 Year Treasury Bond Fund, iShares Lehman 3-7 Year Treasury Bond Fund, iShares Lehman 7-10 Year Treasury Bond Fund, iShares Lehman 10-20 Year Treasury Bond Fund, iShares Lehman 20+ Year Treasury Bond Fund and iShares Lehman TIPS Bond Fund each a Fund of the iShares Bond Funds Series (the “Funds”), at February 28, 2007, the results of each of their operations, the changes in each of their net assets and their financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

April 20, 2007

72 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Tax Information (Unaudited)

iSHARES^® TRUST

Under Section 871(k)(1)(C) of the Internal Revenue Code, the Funds hereby designate the following maximum amounts allowable as interest-related dividends for the fiscal year ended February 28, 2007:

iShares Bond Fund	Interest- Related Dividends
Lehman Short Treasury	$	91,066
Lehman 1-3 Year Treasury		131,292,237
Lehman 3-7 Year Treasury		71,832
Lehman 7-10 Year Treasury		40,087,716
Lehman 10-20 Year Treasury		92,752
Lehman 20+ Year Treasury		37,611,388
Lehman TIPS		113,138,172

TAX INFORMATION 73

Supplemental Information (Unaudited)

iSHARES^® TRUST

The tables that follow present information about the differences between the daily market price on secondary markets for shares of a Fund and that Fund’s net asset value. Net asset value, or “NAV”, is the price per share at which each Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The “Market Price ”of each Fund generally is determined using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of such Fund is listed for trading, as of the time that the Fund’s NAV is calculated. Each Fund’s Market Price may be at, above or below its NAV. The NAV of each Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of each Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand.

Premiums or discounts are the differences (expressed as a percentage) between the NAV and Market Price of a Fund on a given day, generally at the time NAV is calculated. A premium is the amount that a Fund is trading above the reported NAV, expressed as a percentage of the NAV. A discount is the amount that a Fund is trading below the reported NAV, expressed as a percentage of the NAV.

The following information shows the frequency distributions of premiums and discounts for each of the iShares Funds included in this report except for the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds. The information shown for each Fund is for five calendar years (or for each full calendar quarter completed after the inception date of such Fund if less than five years) through the date of the most recent calendar quarter-end. Information for the iShares Lehman Short Treasury, iShares Lehman 3-7 Year Treasury and iShares Lehman 10-20 Year Treasury Bond Funds is not presented as these Funds did not commence operations until after the date of the most recent calendar quarter-end. The specific periods covered for each Fund are disclosed in the table for such Fund.

Each line in the table shows the number of trading days in which the Fund traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by each table. All data presented here represents past performance, which cannot be used to predict future results.

iShares Lehman 1-3 Year Treasury Bond Fund

Period Covered: October 1, 2002 through December 31, 2006

	Number of Days	Percentage of Total Days
Between 0.5% and – 0.5%	1,070	100.00	%
	1,070	100.00	%

iShares Lehman 7-10 Year Treasury Bond Fund

Period Covered: October 1, 2002 through December 31, 2006

	Number of Days	Percentage of Total Days
Greater than 0.5% and Less than 1.0%	1	0.09	%
Between 0.5% and – 0.5%	1,069	99.91
	1,070	100.00	%

74 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Supplemental Information (Unaudited) (Continued)

iSHARES^® TRUST

iShares Lehman 20+ Year Treasury Bond Fund

Period Covered: October 1, 2002 through December 31, 2006

	Number of Days	Percentage of Total Days
Greater than 0.5% and Less than 1.0%	2	0.19	%
Between 0.5% and – 0.5%	1,067	99.72
Less than – 0.5% and Greater than – 1.0%	1	0.09
	1,070	100.00	%

iShares Lehman TIPS Bond Fund

Period Covered: January 1, 2004 through December 31, 2006

	Number of Days	Percentage of Total Days
Greater than 05% and Less than 1.0%	4	0.53	%
Between 0.5% and – 0.5%	751	99.47
	755	100.00	%

SUPPLEMENTAL INFORMATION 75

Trustee and Officer Information (Unaudited)

iSHARES^® TRUST

The Board of Trustees has responsibility for the overall management and operations of the Trust, including general supervision of the duties performed by BGFA and other service providers. Each Trustee serves until he or she resigns, is removed, dies, retires or becomes incapacitated. Each Officer serves until he or she resigns, is removed, dies, retires or becomes disqualified.

iShares Trust, iShares, Inc., Barclays Global Investors Funds (“BGIF”) and Master Investment Portfolio (“MIP”) are considered to be members of the same fund complex, as defined in Form N-1A under the 1940 Act. Each Trustee of iShares Trust also serves as a Director for iShares, Inc. and oversees 125 portfolios within the fund complex. In addition, Lee T. Kranefuss serves as a Trustee for BGIF and MIP and oversees an additional 24 portfolios within the fund complex.

Unless otherwise noted in the tables below, the address for each Trustee and Officer is c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, California 94105. The Board has designated George G.C. Parker as its Lead Trustee. Additional information about the Funds’ Trustees and Officers may be found in the Funds’ combined Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-474-2737.

Interested Trustees and Officers

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
*Lee T. Kranefuss, 1961	Trustee, Chairman, and President (since 2003).	Chief Executive Officer of Global Index and Markets Group of BGI (since 2005); Chief Executive Officer of the Intermediary Investor and Exchange Traded Products Business of BGI (since 2003); Director of Barclays Global Fund Advisors (since 2005); Director, President and Chief Executive Officer of Barclays Global Investors International, Inc. (since 2005); Director, Chairman and Chief Executive Officer of Barclays Global Investors Services (since 2005); Chief Executive Officer of the Individual Investor Business of BGI (1999-2003).	Director (since 2003) of iShares, Inc.; Trustee (since 2001) of BGIF and MIP; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.
*John E. Martinez, 1962	Trustee (since 2003).	Co-Chief Executive Officer of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); Chief Executive Officer of Capital Markets Group of BGI (1996-2001).	Director (since 2003) of iShares, Inc.; Director (since 2005) of Real Estate Equity Exchange.

* Lee T. Kranefuss and John E. Martinez are deemed to be “interested persons” (as defined in the 1940 Act) of the Trust due to their affiliations with BGFA, the Funds’ investment adviser, BGI, the parent company of BGFA, and Barclays Global Investors Services, an affiliate of BGFA and BGI.

76 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Trustee and Officer Information (Unaudited) (Continued)

iSHARES^® TRUST

Independent Trustees Principal

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
George G. C. Parker, 1939	Trustee (since 2000) Lead Independent Trustee (since 2006)	Dean Witter Distinguished Professor of Finance, Emeritus (since 1994); Formerly Senior Associate Dean for Academic Affairs, Director of MBA Program, Stanford University: Graduate School of Business (1993-2001).	Director (since 2002) of iShares, Inc.; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (since 1999) of Tejon Ranch Company; Director (since 2003) of First Republic Bank; Director (since 2004) of Threshold Pharmaceuticals; Director (since 2007) of NETGEAR, Inc.
Cecilia H. Herbert, 1949	Trustee (since 2005).	Member of Finance Council, Archdiocese of San Francisco (1991-2006); Chair of Investment Committee, Archdiocese of San Francisco (1994-2005); President of the Board of Directors, Catholic Charities CYO (since 2007); Chair of Thacher School Finance and Investment Committees.	Director (since 2005) of iShares, Inc.; Trustee (2004-2005) of Pacific Select Funds; Trustee (1992-2003) of the Montgomery Funds; Trustee (since 2002) of the Thacher School; Director (since 1998) of Catholic Charities CYO; Director (2004 -2006) of Women’s Forum West (professional association).
Charles A. Hurty, 1943	Trustee (since 2005).	Retired; Partner, KPMG, LLP (1968-2001).	Director (since 2005) of iShares, Inc.; Director (since 2002) of GMAM Absolute Return Strategy Fund (1 portfolio); Director (since 2002) of Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC (1 portfolio); Director (since 2005) of CSFB Alternative Investments Fund (6 portfolios).
John E. Kerrigan, 1955	Trustee (since 2005).	Chief Investment Officer, Santa Clara University (since 2002); Managing Director, Merrill Lynch (1994-2002).	Director (since 2005) of iShares, Inc.; Member (since 2004) of Advisory Council for Common fund Distressed Debt Partners II.

TRUSTEE AND OFFICER INFORMATION 77

Trustee and Officer Information (Unaudited)(Continued)

iSHARES^® TRUST

Independent Trustees (Continued)

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Robert H. Silver, 1955	Trustee (since 2007)	President and Co-Founder of The Bravitas Group, Inc. (since 2006); Member, Non-Investor Advisory Board of Russia Partners II, LP (since 2006); President and Chief Operating Officer of UBS Financial Services, Inc. (2003-2005); President and Chief Executive Officer of UBS Services USA, LLC (1999-2005); Managing Director, UBS America, Inc. (2000-2005); Broadway Producer (since 2006).	Director (since 2007) of iShares, Inc.; Director and Member (since 2006) of the Audit and Compensation Committee of EPAM Systems, Inc.; Director and Vice Chairman (since 2001) of the YMCA of Greater NYC; Trustee (since 2005), Newark Academy; Director (1990-2005), UBS Financial Services, Inc.
Officer
Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Michael A. Latham, 1965	Secretary, Treasurer and Principal Financial Officer (since 2002).	Chief Operating Officer of the Intermediary Investor and Exchange Traded Products Business of BGI (since 2003); Director and Chief Financial Officer of Barclays Global Investors International, Inc. (since 2005); Director of Mutual Fund Delivery in the U.S. Individual Investor Business of BGI (2000-2003).	None.

78 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes:

NOTES: 79

Notes:

80 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes:

NOTES: 81

The iShares^® Family of Funds

The following is a list of iShares Funds being offered, along with their respective exchange trading symbols. Please call 1-800-iShares (1-800-474-2737) to obtain a prospectus for any iShares Fund. The prospectus contains more complete information, including charges, expenses, investment objectives and risk factors that should be carefully considered to determine if the Fund(s) are an appropriate investment for you. Read the prospectus(es) carefully before investing. Investing involves risk, including possible loss of principal.

iShares S&P Domestic Index Funds

iShares S&P 1500 (ISI)

iShares S&P 100 (OEF)

iShares S&P 500 (IVV)

iShares S&P 500 Growth (IVW)

iShares S&P 500 Value (IVE)

iShares S&P MidCap 400 (IJH)

iShares S&P MidCap 400 Growth (IJK)

iShares S&P MidCap 400 Value (IJJ)

iShares S&P SmallCap 600 (IJR)

iShares S&P SmallCap 600 Growth (IJT)

iShares S&P SmallCap 600 Value (IJS)

iShares Domestic Sector Index Funds

iShares Cohen & Steers Realty Majors (ICF)

iShares Dow Jones U.S. Basic Materials Sector (IYM)

iShares Dow Jones U.S. Consumer Services Sector (IYC)

iShares Dow Jones U.S. Consumer Goods Sector (IYK)

iShares Dow Jones U.S. Energy Sector (IYE)

iShares Dow Jones U.S. Financial Sector (IYF)

iShares Dow Jones U.S. Financial Services (IYG)

iShares Dow Jones U.S. Healthcare Sector (IYH)

iShares Dow Jones U.S. Industrial Sector (IYJ)

iShares Dow Jones U.S. Real Estate (IYR)

iShares Dow Jones U.S. Technology Sector (IYW)

iShares Dow Jones U.S. Telecommunications Sector (IYZ)

iShares Dow Jones Transportation Average (IYT)

iShares Dow Jones U.S. Utilities Sector (IDU)

iShares Dow Jones U.S. Total Market (IYY)

iShares Goldman Sachs Natural Resources (IGE)

iShares Goldman Sachs Networking (IGN)

iShares Goldman Sachs Semiconductor (IGW)

iShares Goldman Sachs Software (IGV)

iShares Goldman Sachs Technology (IGM)

iShares Nasdaq Biotechnology (IBB)

iShares Domestic Subsector Index Funds

iShares Dow Jones U.S. Aerospace & Defense (ITA)

iShares Dow Jones U.S. Broker-Dealers (IAI)

iShares Dow Jones U.S. Healthcare Providers (IHF)

iShares Dow Jones U.S. Home Construction (ITB)

iShares Dow Jones U.S. Insurance (IAK)

iShares Dow Jones U.S. Medical Devices (IHI)

iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO)

iShares Dow Jones U.S. Oil Equipment & Services (IEZ)

iShares Dow Jones U.S. Pharmaceuticals (IHE)

iShares Dow Jones U.S. Regional Banks (IAT)

iShares Global Index Funds

iShares S&P Global 100 (IOO)

iShares S&P Global Consumer Discretionary Sector (RXI)

iShares S&P Global Consumer Staples Sector (KXI)

iShares S&P Global Energy Sector (IXC)

iShares S&PGlobal Financials Sector (IXG)

iShares S&PGlobal Healthcare Sector (IXJ)

iShares S&PGlobal Industrials Sector (EXI)

iShares S&PGlobal Materials Sector (MXI)

iShares S&PGlobal Technology Sector (IXN)

iShares S&P Global Telecommunications Sector (IXP)

iShares S&P Global Utilities Sector (JXI)

iShares Russell Index Funds

iShares Russell 3000 (IWV)

iShares Russell 3000 Growth (IWZ)

iShares Russell 3000 Value (IWW)

iShares Russell 1000 (IWB)

iShares Russell 1000 Growth (IWF)

iShares Russell 1000 Value (IWD)

iShares Russell Midcap (IWR)

iShares Russell Midcap Growth (IWP)

iShares Russell Midcap Value (IWS)

iShares Russell 2000 (IWM)

iShares Russell 2000 Growth (IWO)

iShares Russell 2000 Value (IWN)

iShares Russell Microcap™ (IWC)

iShares International Country Index Funds

iShares FTSE/Xinhua China 25 (FXI)

iShares MSCI Australia (EWA)

iShares MSCI Austria (EWO)

iShares MSCI Belgium (EWK)

iShares MSCI Brazil (EWZ)

iShares MSCI Canada (EWC)

iShares MSCI France (EWQ)

iShares MSCI Germany (EWG)

iShares MSCI Hong Kong (EWH)

iShares MSCI Italy (EWI)

iShares MSCI Japan (EWJ)

iShares MSCI Malaysia (EWM)

iShares MSCI Mexico (EWW)

iShares MSCI Netherlands (EWN)

iShares MSCI Singapore (EWS)

iShares MSCI South Africa (EZA)

iShares MSCI South Korea (EWY)

iShares MSCI Spain (EWP)

iShares MSCI Sweden (EWD)

iShares MSCI Switzerland (EWL)

iShares MSCI Taiwan (EWT)

iShares MSCI United Kingdom (EWU)

iShares S&P/TOPIX 150 (ITF)

iShares Bond Funds

iShares Lehman Aggregate (AGG)

iShares Lehman Short Treasury (SHV)

iShares Lehman 1-3 Year Treasury (SHY)

iShares Lehman 3-7 Year Treasury (IEI)

iShares Lehman 7-10 Year Treasury (IEF)

iShares Lehman 10-20 Year Treasury (TLH)

iShares Lehman 20+ Year Treasury (TLT)

iShares Lehman TIPS (TIP)

iShares Lehman Credit (CFT)

iShares Lehman 1-3 Year Credit (CSJ)

iShares Lehman Intermediate Credit (CIU)

iShares iBoxx $ Investment Grade Corporate (LQD)

iShares Lehman Government/Credit (GBF)

iShares Lehman Intermediate Government/Credit (GVI)

iShares Lehman MBS Fixed-Rate (MBB)

iShares iBoxx $ High Yield Corporate (HYG)

iShares Specialty Index Funds

iShares KLD Select Social^SM (KLD)

iShares KLD 400 Social (DSI)

iShares Dow Jones Select Dividend (DVY)

iShares S&P U.S. Preferred Stock (PFF)

iShares International Index Funds

iShares MSCI EAFE (EFA)

iShares MSCI EAFE Growth (EFG)

iShares MSCI EAFEValue (EFV)

iShares MSCI Emerging Markets (EEM)

iShares MSCI EMU (EZU)

iShares MSCI Pacific ex-Japan (EPP)

iShares S&P Europe 350 (IEV)

iShares S&P Latin America 40 (ILF)

iShares Morningstar Index Funds

iShares Morningstar Large Core (JKD)

iShares Morningstar Large Growth (JKE)

iShares Morningstar Large Value (JKF)

iShares Morningstar Mid Core (JKG)

iShares Morningstar Mid Growth (JKH)

iShares Morningstar Mid Value (JKI)

iShares Morningstar Small Core (JKJ)

iShares Morningstar Small Growth (JKK)

iShares Morningstar Small Value (JKL)

iShares NYSE Index Funds

iShares NYSE Composite (NYC)

iShares NYSE100 (NY)

iShares^® is a registered trademark of Barclays Global Investors, N.A. The iShares Funds are not sponsored, endorsed or issued by Goldman, Sachs & Co. or Lehman Brothers, nor are they sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., Dow Jones & Company, Inc., FTSE/Xinhua Index Limited (“FXI”), iBoxx, KLD Research & Analytics, Inc., Morgan Stanley Capital International, Morningstar, Inc., The Nasdaq Stock Market, Inc., New York Stock Exchange LLC, Frank Russell Company, or Standard & Poor’s. None of these companies make any representation regarding the advisability of investing in the iShares Funds. Neither SEI nor BGI, nor any of their affiliates, are affiliated with the companies listed above. iBoxx is a registered trademark of International Index Company Limited. “Goldman Sachs” is a trademark of Goldman, Sachs & Co. FXI does not make any warranty regarding the FTSE/Xinhua Index. All rights in the FTSE/Xinhua Index vest in FXI. “FTSE” is a trade and service mark of London Stock Exchange and The Financial Times; “Xinhua” is a trade and service mark of Xinhua Financial Network Limited.

An investment in the Fund(s) is not a deposit of a bank and it is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

This advertising section does not constitute part of the 2007 Annual Report.

82 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Table of Contents

Management’s Discussions of Fund Performance	1
Shareholder Expenses (Unaudited)	12
Schedules of Investments	14
iShares Lehman 1-3 Year Credit Bond Fund	14
iShares Lehman Intermediate Credit Bond Fund	17
iShares Lehman Credit Bond Fund	21
iShares Lehman Intermediate Government/Credit Bond Fund	26
iShares Lehman Government/Credit Bond Fund	34
iShares Lehman Aggregate Bond Fund	43
iShares iBoxx $ Investment Grade Corporate Bond Fund	52
Financial Statements	55
Financial Highlights	64
Notes to Financial Statements	71
Report of Independent Registered Public Accounting Firm	78
Tax Information (Unaudited)	79
Supplemental Information (Unaudited)	80
Trustee and Officer Information (Unaudited)	81
iShares Family of Funds	86

Management’s Discussion of Fund Performance

iSHARES^® LEHMAN CREDIT BOND FUNDS

Performance as of February 28, 2007

	Cumulative Total Returns
	Inception to 2/28/07
iSHARES BOND FUND	NAV	MARKET	INDEX
Lehman 1-3 Year Credit	0.97%	1.21%	0.99%
Lehman Intermediate Credit	1.27%	1.56%	1.35%
Lehman Credit	1.48%	1.95%	1.52%

“Cumulative Total Returns” represent the total change in value of an investment over the periods indicated, and are calculated from an inception date of 1/5/07.

Each Fund’s per share net asset value or “NAV” is the value of one share of such Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of each Fund and the market return is based on the market price per share of each 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 stock exchange on which the shares of the Funds are listed for trading, as of the time that the Funds’ NAV is calculated. Since shares of each Fund did not trade in the secondary market until several days after the Funds’ inception, for the period from inception to the first day of secondary market trading in shares of the Funds (1/11/07), the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in each Fund at Market Price and NAV, respectively.

An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each 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 tables 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 each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund’s past performance is no guarantee of future results.

As of the fiscal year ended 2/28/07, the Funds did not have six months of performance and therefore line graphs are not presented.

The iShares Lehman 1-3 Year Credit Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the investment grade credit sector of the United States bond market as defined by the Lehman Brothers 1-3 Year U.S. Credit Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007 (the “reporting period”), the Fund returned 0.97%, while the Index returned 0.99%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
Financial	62.69	%
Foreign Government Obligations	9.27
Communications	7.70
Consumer Cyclical	6.50
Consumer Non-Cyclical	6.24
Utilities	2.56
Technology	1.81
Energy	1.25
Basic Materials	0.52
Short-Term and Other Net Assets	1.46
TOTAL	100.00	%

TEN LARGEST FUND HOLDINGS As of 2/28/07
Security Net	Percentage of Assets
General Electric Capital Corp., 3.50%, 05/01/08	3.66	%
KfW Bankengruppe, 5.25%, 05/19/09	3.11
Goldman Sachs Group Inc. (The), 6.65%, 05/15/09	2.56
Citigroup Inc., 3.50%, 02/01/08	2.45
Wells Fargo & Co., 3.50%, 04/04/08	2.19
Korea (Republic of), 8.88%, 04/15/08	2.17
DaimlerChrysler N.A. Holding Corp., 4.05%, 06/04/08	2.15
KfW Bankengruppe, 3.50%, 03/14/08	2.05
European Investment Bank, 3.00%, 06/16/08	2.03
European Investment Bank, 3.38%, 03/16/09	2.03
TOTAL	24.40	%

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 1

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN CREDIT BOND FUNDS

The iShares Lehman Intermediate Credit Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the investment grade credit sector of the United States bond market as defined by the Lehman Brothers Intermediate U.S. Credit Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007 (the “reporting period”), the Fund returned 1.27%, while the Index returned 1.35%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
Financial	49.17	%
Communications	11.61
Consumer Non-Cyclical	8.91
Foreign Government Obligations	8.08
Consumer Cyclical	5.25
Utilities	4.44
Industrial	3.81
Energy	3.04
Basic Materials	2.00
Technology	1.26
Short-Term and Other Net Assets	2.43
TOTAL	100.00	%

TEN LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
Citigroup Inc., 6.00%, 02/21/12	3.09	%
Italy (Republic of), 6.00%, 02/22/11	3.08
European Investment Bank, 4.63%, 05/15/14	2.94
KfW Bankengruppe, 4.25%, 06/15/10	2.92
General Electric Capital Corp., 4.13%, 09/01/09	2.91
JPMorgan Chase & Co., 5.75%, 01/02/13	2.03
Ontario (Province of), 5.50%, 10/01/08	1.99
Wells Fargo & Co., 4.88%, 01/12/11	1.97
Goldman Sachs Group Inc. (The), 3.88%, 01/15/09	1.94
Wachovia Corp., 3.50%, 08/15/08	1.93
TOTAL	24.80	%

The iShares Lehman Credit Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the investment grade credit sector of the United States bond market as defined by the Lehman Brothers U.S. Credit Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007 (the “reporting period”), the Fund returned 1.48%, while the Index returned 1.52%.

2 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN CREDIT BOND FUNDS

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
Financial	43.39	%
Communications	13.35
Foreign Government Obligations	7.96
Consumer Non-Cyclical	6.43
Utilities	6.19
Energy	5.61
Consumer Cyclical	4.81
Industrial	4.32
Basic Materials	3.21
Technology	1.75
Municipal Obligations	0.96
Short-Term and Other Net Assets	2.02
TOTAL	100.00	%

TEN LARGEST FUND HOLDINGS As of 2/28/07
Sector	Percentage of Net Assets
Italy (Republic of), 6.00%, 02/22/11	2.55	%
Ontario (Province of), 5.50%, 10/01/08	1.98
Wells Fargo & Co., 4.88%, 01/12/11	1.96
Bank of America Corp., 4.50%, 08/01/10	1.94
Merrill Lynch & Co. Inc., 3.70%, 04/21/08	1.93
Metlife Inc., 5.00%, 06/15/15	1.93
Goldman Sachs Group Inc. (The), 3.88%, 01/15/09	1.92
KfW Bankengruppe, 5.13%, 03/14/16	1.50
European Investment Bank, 4.63%, 05/15/14	1.46
International Bank for Reconstruction & Development, 4.13%, 08/12/09	1.45
TOTAL	18.62	%

Despite some notable volatility, U.S. bonds posted positive returns for the reporting period. The bond market lost ground in January 2007 as strong economic growth data led to concerns about the possibility of more short-term interest rate hikes by the Federal Reserve. (The Federal Reserve had raised rates 17 times between June 2004 and June 2006.) In particular, the initial estimate of U.S. economic growth for the fourth quarter of 2006 came in at a robust 3.5% annualized rate. In February 2007, however, the bond market reversed course, enjoying its best month of performance since August 2004. The catalysts for the bond market rally appeared to include a slumping stock market, a sharp downward revision to fourth-quarter economic growth (to a 2.2% annualized rate), and further weakness in the housing market, including the biggest monthly drop-off in new home sales since 1994.

The credit sector outperformed the broader bond market during the reporting period. Corporate bonds delivered the best results, reflecting their relatively high yields, while sovereign and supranational debt posted the weakest returns. From a maturity perspective, longer-term bonds generally performed better than short- and intermediate-term bonds.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 3

Management’s Discussion of Fund Performance

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUNDS

Performance as of February 28, 2007

	Cumulative Total Returns
	Inception to 2/28/07
iSHARES BOND FUND	NAV	MARKET	INDEX
Lehman Intermediate Government/Credit	1.09%	1.24%	1.13%
Lehman Government/Credit	1.20%	1.34%	1.24%

“Cumulative Total Returns” represent the total change in value of an investment over the periods indicated, and are calculated from an inception date of 1/5/07.

Each Fund’s per share net asset value or “NAV” is the value of one share of such Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of each Fund and the market return is based on the market price per share of each 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 stock exchange on which the shares of the Funds are listed for trading, as of the time that the Funds’ NAV is calculated. Since shares of each Fund did not trade in the secondary market until several days after the Funds’ inception, for the period from inception to the first day of secondary market trading in shares of the Funds (1/11/07), the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in each Fund at Market Price and NAV, respectively.

An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each 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 tables 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 each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund’s past performance is no guarantee of future results.

As of the fiscal year ended 2/28/07, the Funds did not have six months of performance and therefore line graphs are not presented.

The iShares Lehman Intermediate Government/Credit Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the U.S. government and investment grade U.S. corporate securities of the United States bond market as defined by the Lehman Brothers Intermediate U.S. Government/Credit Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007 (the “reporting period”), the Fund returned 1.09%, while the Index returned 1.13%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	40.39	%
U.S. Government Agency Obligations	21.24
Financial	18.37
Communications	4.35
Consumer Non-Cyclical	3.32
Foreign Government Obligations	3.01
Consumer Cyclical	1.97
Utilities	1.66
Industrial	1.44
Energy	1.13
Basic Materials	0.75
Technology	0.48
Short-Term and Other Net Assets	1.89
TOTAL	100.00	%

TEN LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Notes, 6.00%, 08/15/09	9.21	%
U.S. Treasury Notes, 5.13%, 06/30/08	8.97
Federal National Mortgage Association, 7.25%, 01/15/10	8.02
Federal Home Loan Mortgage Corp., 4.63%, 02/21/08	7.90
U.S. Treasury Notes, 4.88%, 07/31/11	7.85
U.S. Treasury Notes, 4.75%, 05/15/14	5.63
U.S. Treasury Notes, 4.88%, 08/15/16	4.77
U.S. Treasury Notes, 4.50%, 02/15/09	3.96
Federal Home Loan Mortgage Corp.,     4.50%, 01/15/13	3.32
Federal National Mortgage Association, 5.00%, 04/15/15	2.00
TOTAL	61.63	%

4 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUNDS

The iShares Lehman Government/Credit Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the U.S. government and investment grade U.S corporate securities of the United States bond market as defined by the Lehman Brothers U.S. Government/Credit Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the period from the Fund’s inception on January 5, 2007 through February 28, 2007 (the “reporting period”), the Fund returned 1.20%, while the Index returned 1.24%.

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
U.S. Government Obligations	39.47	%
U.S. Government Agency Obligations	19.68
Financial	17.54
Communications	5.30
Foreign Government Obligations	3.17
Consumer Non-Cyclical	2.53
Utilities	2.41
Energy	2.26
Consumer Cyclical	1.91
Industrial	1.72
Basic Materials	1.27
Technology	0.69
Municipal Obligations	0.39
Short-Term and Other Net Assets	1.66
TOTAL	100.00	%

TEN LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
U.S. Treasury Notes, 6.00%, 08/15/09	12.24	%
Federal National Mortgage Association, 7.25%, 01/15/10	9.26
U.S. Treasury Notes, 5.13%, 06/30/08	7.35
Federal Home Loan Mortgage Corp., 4.63%, 02/21/08	5.91
U.S. Treasury Bonds, 7.63%, 02/15/25	5.30
U.S. Treasury Notes, 4.63%, 11/15/16	5.26
U.S. Treasury Notes, 4.75%, 05/15/14	4.01
U.S. Treasury Notes, 4.63%, 12/31/11	2.70
U.S. Treasury Bonds, 8.13%, 08/15/19	2.61
Federal National Mortgage Association, 5.00%, 04/15/15	2.39
TOTAL	57.03	%

Despite some notable volatility, U.S. bonds posted positive returns for the reporting period. The bond market lost ground in January 2007 as strong economic growth data led to concerns about the possibility of more short-term interest rate hikes by the Federal Reserve. (The Federal Reserve had raised rates 17 times between June 2004 and June 2006.) In particular, the initial estimate of U.S. economic growth for the fourth quarter of 2006 came in at a robust 3.5% annualized rate. In February 2007, however, the bond market reversed course, enjoying its best month of performance since August 2004. The catalysts for the bond market rally appeared to include a slumping stock market, a sharp downward revision to fourth-quarter economic growth (to a 2.2% annualized rate), and further weakness in the housing market, including the biggest monthly drop-off in new home sales since 1994.

The credit sector outperformed the broader bond market during the reporting period as corporate bonds delivered the best results, reflecting the irrelatively high yields. The government sector lagged, with U.S. government agency bonds posting the weakest returns. From a maturity perspective, longer-term bonds generally performed better than short- and intermediate-term bonds.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 5

Management’s Discussion of Fund Performance

iSHARES^® LEHMAN AGGREGATE BOND FUND

Performance as of February 28, 2007

Average Annual Total Returns						Cumulative Total Returns
Year Ended 2/28/07			Inception to 2/28/07			Inception to 2/28/07
NAV	MARKET	INDEX	NAV	MARKET	INDEX	NAV	MARKET	INDEX
5.31%	5.30%	5.54%	3.89%	3.98%	4.15%	14.04%	14.37%	15.02%

Total returns for the periods since inception are calculated from the inception date of the Fund (9/22/03). “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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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 stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (9/26/03), the NAV of the Fund is used as a proxy for the 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, an 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 tables 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.

Performance figures assume reinvestment of all dividends and capital gain distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, an 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. The Fund’s past performance is no guarantee of future results.

6 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
Mortgage-Backed Securities	35.07	%
U.S. Government Obligations	23.88
Financial	16.71
U.S. Government Agency Obligations	11.00
Communications	2.79
Foreign Government Obligations	2.10
Utilities	1.42
Consumer Cyclical	1.40
Consumer Non-Cyclical	1.34
Energy	1.02
Basic Materials	0.63
Industrial	0.63
Technology	0.49
Municipal Obligations	0.24
Short-Term and Other Net Assets	1.28
TOTAL	100.00	%

TEN LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
Federal National Mortgage Association, 5.50%, 04/01/37	5.49	%
U.S. Treasury Notes, 6.00%, 08/15/09	5.17
Federal National Mortgage Association, 6.00%, 04/01/37	4.90
Federal Home Loan Mortgage Corp., 5.50%, 04/01/37	4.25
U.S. Treasury Bonds, 7.63%, 02/15/25	3.76
Federal Home Loan Mortgage Corp., 2.75%, 03/15/08	3.53
Federal National Mortgage Association, 6.50%, 04/01/37	3.45
U.S. Treasury Notes, 5.13%, 06/30/08	3.14
U.S. Treasury Bonds, 8.13%, 08/15/19	2.76
Federal Home Loan Mortgage Corp., 6.00%, 04/01/37	2.64
TOTAL	39.09	%

The iShares Lehman Aggregate Bond Fund (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the total United States investment-grade bond market as defined by the Lehman Brothers U.S. Aggregate Index (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended February 28, 2007 (the “reporting period”), the Fund returned 5.31%, while the Index returned 5.54%.

Moderate economic growth and declining inflation helped U.S. bonds post solid gains for the reporting period. Although the U.S. economy grew by 3.3% in 2006 – slightly ahead of the 3.2% growth rate in 2005 – economic activity slowed markedly as the year progressed. After growing at a robust 5.6% annualized rate in the first quarter of 2006, the economy slowed to a 2.6% annualized growth rate in the second quarter and a 2.1% annualized growth rate over the last six months of the year. One of the largest drags on the economy was a substantial slump in the housing market. According to government reports, existing home sales declined by 8.4% in 2006 from 2005, while new home sales fell by 17.3% and new residential construction was down 14.9%.

Inflation also eased during the reporting period. The consumer price index rose by 2.4% over the past year, down significantly from a 3.6% increase for the previous 12 months. The key factors behind the lower inflation rate included a 1% decrease in energy prices – including a 10% drop in the last six months – and a 0.6% decline in transportation costs.

With both economic growth and inflation appearing to be on the wane, the Federal Reserve (the “Fed”) ended its series of short-term interest rate increases during the second half of the reporting period. The Fed raised its federal funds rate three times between February and June 2006 – for a total of 17 rate hikes since June 2004 – and then held steady for the remainder of the reporting period.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 7

Management’s Discussion of Fund Performance (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

Despite the generally favorable economic environment, the bond market experienced an increase in volatility during the reporting period. Bonds fell early in the reporting period in response to a spike in energy prices and the Fed’s additional rate hikes. The bond market started to rebound in the second half of 2006 as the economy appeared to show signs of slower, more controlled growth, but strong economic data at the end of the year sparked another decline amid fears of potential inflation. Bonds regained their footing again in February 2007, rallying sharply in response to lower economic growth figures reported for the fourth quarter of 2006 and further evidence of weakness in the housing market.

For the reporting period as a whole, however, bond yields changed little from their levels at the beginning of the period. As a result, interest income provided the bulk of the bond market’s return.

From a sector perspective, corporate bonds produced the best returns in the domestic bond market for the reporting period. The outperformance of corporate bonds reflected their higher yields, as well as strong balance sheets and generally healthy profit growth in the corporate sector. Mortgage-backed securities also performed well, benefiting from their relatively high yields. U.S. Treasury and government agency bonds lagged, though they still posted positive returns overall.

8 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® iBOXX $ INVESTMENT GRADE CORPORATE BOND FUND

Performance as of February 28, 2007

Average Annual Total Returns						Cumulative Total Returns
Year Ended 2/28/07			Inception to 2/28/07			Inception to 2/28/07
NAV	MARKET	INDEX	NAV	MARKET	INDEX	NAV	MARKET	INDEX
6.03%	6.15%	6.11%	6.02%	6.09%	6.01%	30.93%	31.31%	30.85%

Total returns for the periods since inception are calculated from the inception date of the Fund (7/22/02). “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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 stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (7/26/02), the NAV of the Fund is used as a proxy for the 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, an 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 tables 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.

Performance figures assume reinvestment of all dividends and capital gain distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, an 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. The Fund’s past performance is no guarantee of future results.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 9

Management’s Discussion of Fund Performance (Continued)

iSHARES^® iBOXX $ INVESTMENT GRADE CORPORATE BOND FUND

PORTFOLIO ALLOCATION As of 2/28/07
Sector	Percentage of Net Assets
Financial	46.87	%
Communications	17.91
Consumer Non-Cyclical	11.67
Consumer Cyclical	6.65
Industrial	6.01
Energy	3.92
Utilities	2.00
Basic Materials	1.97
Technology	1.02
Short-Term and Other Net Assets	1.98
TOTAL	100.00	%

TEN LARGEST FUND HOLDINGS As of 2/28/07
Security	Percentage of Net Assets
Mohawk Industries Inc., 6.13%, 01/15/16	1.19	%
HSBC Holdings PLC, 6.50%, 05/02/36	1.07
United Technologies Corp., 4.38%, 05/01/10	1.05
Embarq Corp., 8.00%, 06/01/36	1.04
International Lease Finance Corp., 5.45%, 03/24/11	1.03
Caterpillar Inc., 6.05%, 08/15/36	1.03
Citigroup Inc., 6.13%, 08/25/36	1.03
Vale Overseas Ltd., 6.88%, 11/21/36	1.02
Oracle Corp., 5.00%, 01/15/11	1.02
AT&T Inc., 6.80%, 05/15/36	1.02
TOTAL	10.50	%

The iShares iBoxx $ Investment Grade Corporate Bond Fund (formerly the iShares GS $ InvesTop^TM Corporate Bond Fund) (the “Fund”) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of a segment of the U.S. investment-grade corporate bond market, as defined by the iBoxx $ Liquid Investment Grade Index (formerly the GS$ InvesTop^TM Index) (the “Index”). The Fund invests in a representative sample of the securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended February 28, 2007 (the “reporting period”), the Fund returned 6.03%, while the Index returned 6.11%.

Moderate economic growth and declining inflation helped U.S. bonds post solid gains for the reporting period. Although the U.S. economy grew by 3.3% in 2006 – slightly ahead of the 3.2% growth rate in 2005 – economic activity slowed markedly as the year progressed. After growing at a robust 5.6% annualized rate in the first quarter of 2006, the economy slowed to a 2.6% annualized growth rate in the second quarter and a 2.1% annualized growth rate over the last six months of the year. One of the largest drags on the economy was a substantial slump in the housing market. According to government reports, existing home sales declined by 8.4% in 2006 from 2005, while new home sales fell by 17.3% and new residential construction was down 14.9%.

Inflation also eased during the reporting period. The consumer price index rose by 2.4% over the past year, down significantly from a 3.6% increase for the previous 12 months. The key factors behind the lower inflation rate included a 1% decrease in energy prices – including a 10% drop in the last six months – and a 0.6% decline in transportation costs.

With both economic growth and inflation appearing to be on the wane, the Federal Reserve (the “Fed”) ended its series of short-term interest rate increases during the second half of the reporting period. The Fed raised its federal funds rate three times between February and June 2006 – for a total of 17 rate hikes since June 2004 – and then held steady for the remainder of the reporting period.

Despite the generally favorable economic environment, the bond market experienced an increase in volatility during the reporting period. Bonds fell early in the reporting period in response to a spike in energy prices and the Fed’s additional rate hikes. The bond market started to rebound in the second half of 2006 as the economy appeared to show signs of slower, more controlled growth, but strong economic data at the end of the year sparked another decline amid fears of potential inflation. Bonds regained their footing again in February 2007, rallying sharply in response to lower economic growth figures reported for the fourth quarter of 2006 and further evidence of weakness in the housing market.

10 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^® iBOXX $ INVESTMENT GRADE CORPORATE BOND FUND

For the reporting period as a whole, however, bond yields changed little from their levels at the beginning of the period. As a result, interest income provided the bulk of the bond market’s return.

Corporate bonds produced the best returns in the domestic bond market for the reporting period. The outperformance of corporate bonds reflected their higher yields, as well as strong balance sheets and generally healthy profit growth in the corporate sector. Lower-quality corporate bonds outperformed their higher-grade counterparts, benefiting from investor demand for higher yields offered by lower-rated securities.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 11

Shareholder Expenses (Unaudited)

iSHARES^® TRUST

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of fund shares and (2) ongoing costs, including management fees and other fund expenses. The following Example is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of investing in other funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2006 to February 28, 2007.

ACTUAL EXPENSES

The first line under each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line under each Fund in the table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. Therefore, the second line under each Fund in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

iShares Bond Fund	Beginning Account Value (9/1/06)a	Ending Account Value (2/28/07)a	Annualized Expense Ratio		Expenses Paid During Periodb (9/1/06 to 2/28/07)
Lehman 1-3 Year Credit
Actual	$    1,000.00	$    1,009.70	0.20	%	$    0.30
Hypothetical (5% return before expenses)	1,000.00	1,007.10	0.20		0.30
Lehman Intermediate Credit
Actual	1,000.00	1,012.70	0.20		0.30
Hypothetical (5% return before expenses)	1,000.00	1,007.10	0.20		0.30
Lehman Credit
Actual	1,000.00	1,014.80	0.20		0.30
Hypothetical (5% return before expenses)	1,000.00	1,007.10	0.20		0.30
Lehman Intermediate Government/Credit
Actual	1,000.00	1,010.90	0.20		0.30
Hypothetical (5% return before expenses)	1,000.00	1,007.10	0.20		0.30

12 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERs

Shareholder Expenses (Unaudited)(Continued)

iSHARES^® TRUST

iShares Bond Fund	Beginning Account Value (9/1/06)a	Ending Account Value (2/28/07)a	Annualized Expense Ratio		Expenses Paid During Periodb (9/1/06 to 2/28/07)
Lehman Government/Credit
Actual	$    1,000.00	$    1,012.00	0.20	%	$    0.30
Hypothetical (5% return before expenses)	1,000.00	1,007.10	0.20		0.30
Lehman Aggregate
Actual	1,000.00	1,036.30	0.20		1.01
Hypothetical (5% return before expenses)	1,000.00	1,023.80	0.20		1.00
iBoxx $ Investment Grade Corporate
Actual	1,000.00	1,045.80	0.15		0.76
Hypothetical (5% return before expenses)	1,000.00	1,024.10	0.15		0.75

^a Account values are based on a start date of January 5, 2007 (commencement of operations) for the iShares Lehman 1-3 Year Credit, iShares Lehman Intermediate Credit, iShares Lehman Credit, iShares Lehman Intermediate Government/Credit and iShares Lehman Government/Credit Bond Funds.

^b Expenses for the iShares Lehman Aggregate and iShares iBoxx $ Investment Grade Corporate Bond Funds are calculated using each Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (181 days) and divided by the number of days in the year (365 days). Expenses for the iShares Lehman 1-3 Year Credit, iShares Lehman Intermediate Credit, iShares Lehman Credit, iShares Lehman Intermediate Government/Credit and iShares Lehman Government/Credit Bond Funds, which commenced operations on January 5, 2007, are calculated using each Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (54 days) and divided by the number of days in the year (365 days).

SHAREHOLDER EXPENSES 13

Schedule of Investments

iSHARES^® LEHMAN 1-3 YEAR CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
CORPORATE BONDS & NOTES – 89.27%
AUTO MANUFACTURERS – 2.93%
DaimlerChrysler N.A. Holding Corp.
3.88%, 07/22/08	$	160,000	$	157,141
4.05%, 06/04/08		440,000		433,886
				591,027
BANKS – 18.13%
Bank of America Corp.
3.25%, 08/15/08		400,000		389,685
Bank One Corp.
6.00%, 08/01/08		240,000		242,840
BankAmerica Corp.
5.88%, 02/15/09		250,000		253,975
HSBC Holdings PLC
7.50%, 07/15/09		200,000		210,835
KfW Bankengruppe
3.50%, 03/14/08		420,000		413,918
5.25%, 05/19/09		620,000		625,759
Korea Development Bank
4.75%, 07/20/09		100,000		99,208
Landwirtschaftliche Rentenbank
3.63%, 10/20/09		180,000		174,815
4.13%, 07/15/08		180,000		177,998
US Bancorp
5.30%, 04/28/09		250,000		251,247
Wachovia Corp.
3.50%, 08/15/08		140,000		136,798
3.63%, 02/17/09		240,000		233,731
Wells Fargo & Co.
3.50%, 04/04/08		450,000		442,342
				3,653,151
BEVERAGES – 0.97%
Diageo Capital PLC
3.38%, 03/20/08		200,000		196,324
				196,324
BIOTECHNOLOGY – 0.97%
Amgen Inc.
4.00%, 11/18/09		200,000		194,999
				194,999
CHEMICALS – 0.52%
Du Pont (E.I.) de Nemours and Co.
6.88%, 10/15/09		100,000		104,686
				104,686

Security	Principal		Value
COMPUTERS – 1.28%
International Business Machines Corp.
3.80%, 02/01/08	$	260,000	$	257,002
				257,002
COSMETICS & PERSONAL CARE – 0.78%
Procter & Gamble Co.
6.88%, 09/15/09		150,000		156,572
				156,572
DIVERSIFIED FINANCIAL SERVICES – 34.64%
American Express Credit Corp.
3.00%, 05/16/08		200,000		195,016
American General Finance Corp.
3.88%, 10/01/09		400,000		388,507
Bear Stearns Companies Inc. (The)
2.88%, 07/02/08		200,000		194,190
Capital One Bank
5.00%, 06/15/09		100,000		99,716
Caterpillar Financial Services Corp.
4.50%, 06/15/09		100,000		98,544
CIT Group Inc.
3.38%, 04/01/09		100,000		96,610
4.13%, 11/03/09		200,000		195,202
Citigroup Inc.
3.50%, 02/01/08		500,000		492,910
4.25%, 07/29/09		400,000		393,211
Countrywide Home Loans Inc.
3.25%, 05/21/08		200,000		195,360
Credit Suisse First Boston USA Inc.
4.70%, 06/01/09		260,000		257,907
Eksportfinans ASA
4.38%, 07/15/09		300,000		296,698
General Electric Capital Corp.
3.50%, 05/01/08		750,000		736,706
5.25%, 10/27/09		200,000		201,540
Goldman Sachs Group Inc. (The)
6.65%, 05/15/09		500,000		516,350
HSBC Finance Corp.
5.88%, 02/01/09		260,000		263,813
6.40%, 06/17/08		240,000		243,808
International Lease Finance Corp.
3.50%, 04/01/09		200,000		193,440

14 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN 1-3 YEAR CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
JPMorgan Chase & Co.
3.50%, 03/15/09	$	400,000	$	388,352
Lehman Brothers Holdings Inc.
3.60%, 03/13/09		100,000		97,230
4.50%, 07/26/10		300,000		295,316
Merrill Lynch & Co. Inc.
6.00%, 02/17/09		340,000		345,762
Morgan Stanley
3.88%, 01/15/09		200,000		195,844
National Rural Utilities Cooperative Finance Corp.
3.88%, 02/15/08		300,000		296,171
SLM Corp.
4.00%, 01/15/09		100,000		97,968
Textron Financial Corp.
6.00%, 11/20/09		200,000		204,527
				6,980,698
ELECTRIC – 2.56%
Duke Energy Corp.
3.75%, 03/05/08		220,000		216,727
FPL Group Capital Inc.
7.38%, 06/01/09		100,000		104,898
Pacific Gas & Electric Co.
3.60%, 03/01/09		200,000		194,550
				516,175
FOOD – 3.02%
Fred Meyer Inc.
7.45%, 03/01/08		200,000		204,136
Kraft Foods Inc.
4.13%, 11/12/09		200,000		195,012
Safeway Inc.
7.50%, 09/15/09		200,000		210,297
				609,445
INSURANCE – 1.46%
Berkshire Hathaway Finance Corp.
4.13%, 01/15/10		300,000		294,185
				294,185
MEDIA – 2.81%
British Sky Broadcasting PLC
8.20%, 07/15/09		100,000		106,274

Security	Principal		Value
Comcast Cable Communications Inc.
6.88%, 06/15/09	$	300,000	$	311,142
Cox Communications Inc.
4.63%, 01/15/10		150,000		147,936
				565,352
MULTI-NATIONAL – 6.80%
European Investment Bank
3.00%, 06/16/08		420,000		410,163
3.38%, 03/16/09		420,000		409,203
Inter-American Development Bank
3.38%, 03/17/08		280,000		275,644
International Bank for Reconstruction & Development
4.13%, 06/24/09		140,000		138,127
International Finance Corp.
3.75%, 06/30/09		140,000		136,759
				1,369,896
OFFICE & BUSINESS EQUIPMENT – 0.53%
Xerox Corp.
9.75%, 01/15/09		100,000		107,000
				107,000
OIL & GAS – 1.25%
Enterprise Products Operating LP
4.63%, 10/15/09		150,000		148,103
Pemex Project Funding Master Trust
7.88%, 02/01/09		100,000		104,534
				252,637
PHARMACEUTICALS – 0.50%
Abbott Laboratories
5.38%, 05/15/09		100,000		100,808
				100,808
RETAIL – 3.57%
Federated Department Stores Inc.
6.63%, 09/01/08		200,000		204,063
Target Corp.
5.38%, 06/15/09		200,000		201,116
Wal-Mart Stores Inc.
6.88%, 08/10/09		300,000		313,507
				718,686

SCHEDULES OF INVESTMENTS 15

Schedule of Investments (Continued)

iSHARES^® LEHMAN 1-3 YEAR CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
SAVINGS & LOANS – 0.97%
Washington Mutual Inc.
4.00%, 01/15/09	$	200,000	$	195,832
				195,832
SOVEREIGN DEBT SECURITIES – 0.69%
Svensk Exportkredit AB
4.63%, 02/17/09		140,000		139,338
				139,338
TELECOMMUNICATIONS – 4.89%
SBC Communications Inc.
4.13%, 09/15/09		400,000		391,053
Sprint Capital Corp.
6.13%, 11/15/08		300,000		304,203
Telecom Italia Capital SA
4.00%, 01/15/10		300,000		289,532
				984,788
TOTAL CORPORATE BONDS & NOTES
(Cost: $17,944,548)				17,988,601
FOREIGN GOVERNMENT BONDS & NOTESa – 9.27%
Canada (Government of)
5.25%, 11/05/08		100,000		100,775
Italy (Republic of)
3.25%, 05/15/09		300,000		290,305
4.00%, 06/16/08		400,000		395,181
Korea (Republic of)
8.88%, 04/15/08		420,000		437,134
Ontario (Province of)
5.50%, 10/01/08		280,000		282,306
Quebec (Province of)
5.75%, 02/15/09		200,000		203,130
United Mexican States
4.63%, 10/08/08		160,000		158,472
TOTAL FOREIGN GOVERNMENT BONDS & NOTES (Cost: $1,866,979)
				1,867,303

Security	Shares	Value
SHORT-TERM INVESTMENTS – 0.30%
MONEY MARKET FUNDS – 0.30%
Barclays Global Investors Funds
Prime Money Market Fund,
Institutional Shares
5.26%b,c	61,319	$	61,319
			61,319
TOTAL SHORT-TERM INVESTMENTS (Cost: $61,319)
			61,319
TOTAL INVESTMENTS IN SECURITIES – 98.84% (Cost: $19,872,846)
			19,917,223
Other Assets, Less Liabilities – 1.16%			234,667
NET ASSETS – 100.00%		$	20,151,890

^a Investments are denominated in U.S. dollars.

^b Affiliated issuer. See Note 2.

^c The rate quoted is the annualized seven-day yield of the fund at period end.

See notes to financial statements.

16 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® LEHMAN INTERMEDIATE CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
CORPORATE BONDS & NOTES – 89.49%
AEROSPACE & DEFENSE – 1.00%
Raytheon Co.
6.15%, 11/01/08	$	200,000	$	203,171
				203,171
AUTO MANUFACTURERS – 1.01%
DaimlerChrysler N.A. Holding Corp.
4.05%, 06/04/08		100,000		98,611
6.50%, 11/15/13		100,000		104,964
				203,575
BANKS – 11.40%
Bank of America Corp.
4.50%, 08/01/10		238,000		234,564
4.88%, 01/15/13		300,000		295,848
Capital One Financial Corp.
5.70%, 09/15/11		100,000		101,660
KfW Bankengruppe
4.25%, 06/15/10		600,000		590,850
US Bank N.A.
4.80%, 04/15/15		200,000		193,971
Wachovia Corp.
3.50%, 08/15/08		400,000		390,852
5.30%, 10/15/11		100,000		101,082
Wells Fargo & Co.
4.88%, 01/12/11		400,000		398,471
				2,307,298
BIOTECHNOLOGY – 0.48%
Amgen Inc.
4.00%, 11/18/09		100,000		97,499
				97,499
BUILDING MATERIALS – 0.49%
CRH America Inc.
5.30%, 10/15/13		100,000		98,842
				98,842
COSMETICS & PERSONAL CARE – 0.96%
Procter & Gamble Co.
3.50%, 12/15/08		200,000		195,151
				195,151

Security	Principal		Value
DIVERSIFIED FINANCIAL SERVICES – 28.93%
American General Finance Corp.
5.38%, 10/01/12	$	200,000	$	201,155
Bear Stearns Companies Inc. (The)
5.70%, 11/15/14		200,000		204,609
CIT Group Inc.
7.75%, 04/02/12		300,000		333,032
Citigroup Inc.
6.00%, 02/21/12		600,000		624,689
Credit Suisse First Boston USA Inc.
3.88%, 01/15/09		270,000		264,389
Credit Suisse USA Inc.
5.38%, 03/02/16		150,000		151,332
Deutsche Telekom International
Finance AG
8.00%, 06/15/10		100,000		108,720
General Electric Capital Corp.
4.13%, 09/01/09		600,000		588,847
5.00%, 01/08/16		100,000		98,659
General Electric Co.
5.00%, 02/01/13		200,000		198,981
Goldman Sachs Group Inc. (The)
3.88%, 01/15/09		400,000		391,548
Goldman Sachs Group LP
5.00%, 10/01/14		200,000		195,067
HSBC Finance Corp.
5.50%, 01/19/16		300,000		302,076
JPMorgan Chase & Co.
5.75%, 01/02/13		400,000		409,911
Lehman Brothers Holdings Inc.
5.50%, 04/04/16		200,000		202,128
5.75%, 07/18/11		200,000		205,323
Merrill Lynch & Co. Inc.
3.70%, 04/21/08		200,000		196,823
6.05%, 05/16/16		200,000		206,678
Morgan Stanley
6.75%, 04/15/11		340,000		360,552
National Rural Utilities Cooperative
Finance Corp.
7.25%, 03/01/12		100,000		109,507
Residential Capital Corp.
6.50%, 04/17/13		200,000		201,686

SCHEDULES OF INVESTMENTS 17

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
SLM Corp.
5.38%, 05/15/14	$	200,000	$	199,334
Toyota Motor Credit Corp.
4.25%, 03/15/10		100,000		97,841
				5,852,887
ELECTRIC – 4.44%
Constellation Energy Group Inc.
4.55%, 06/15/15		100,000		93,737
Dominion Resources Inc.
5.15%, 07/15/15		100,000		97,998
Duke Capital LLC
6.25%, 02/15/13		100,000		102,742
Exelon Corp.
4.90%, 06/15/15		100,000		96,041
Exelon Generation Co. LLC
5.35%, 01/15/14		100,000		98,583
Pacific Gas & Electric Co.
4.80%, 03/01/14		200,000		194,785
Progress Energy Inc.
7.10%, 03/01/11		200,000		213,913
				897,799
FOOD – 3.51%
Fred Meyer Inc.
7.45%, 03/01/08		200,000		204,136
Kraft Foods Inc.
4.00%, 10/01/08		300,000		294,898
Safeway Inc.
7.50%, 09/15/09		200,000		210,297
				709,331
FOREST PRODUCTS & PAPER – 0.52%
International Paper Co.
6.75%, 09/01/11		100,000		105,060
				105,060
HEALTH CARE - SERVICES – 0.98%
WellPoint Inc.
5.00%, 01/15/11		200,000		199,270
				199,270
HOME BUILDERS – 0.48%
Pulte Homes Inc.
5.25%, 01/15/14		100,000		97,741
				97,741

Security	Principal		Value
HOUSEHOLD PRODUCTS & WARES – 0.98%
Fortune Brands Inc.
5.13%, 01/15/11	$	200,000	$	197,791
				197,791
INSURANCE – 2.50%
Genworth Financial Inc.
6.15%, 11/15/66		100,000		101,081
Lincoln National Corp.
7.00%, 05/17/66		100,000		106,986
Marsh & McLennan Companies Inc.
5.15%, 09/15/10		200,000		198,827
Metlife Inc.
5.00%, 06/15/15		100,000		98,330
				505,224
MACHINERY – 0.76%
Caterpillar Inc.
5.70%, 08/15/16		150,000		154,301
				154,301
MANUFACTURING – 1.04%
Tyco International Group SA
6.38%, 10/15/11		200,000		211,351
				211,351
MEDIA – 3.05%
AOL Time Warner Inc.
6.88%, 05/01/12		100,000		107,199
Cox Communications Inc.
4.63%, 01/15/10		100,000		98,624
News America Inc.
5.30%, 12/15/14		200,000		200,237
Walt Disney Co.
6.38%, 03/01/12		200,000		211,823
				617,883
MINING – 1.48%
BHP Finance (USA) Ltd.
4.80%, 04/15/13		200,000		196,353
Vale Overseas Ltd.
6.25%, 01/11/16		100,000		103,118
				299,471
MULTI-NATIONAL – 5.41%
European Investment Bank
4.63%, 05/15/14		600,000		595,070

18 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Inter-American Development Bank
5.13%, 09/13/16	$	200,000	$	203,544
International Bank for Reconstruction & Development
4.13%, 08/12/09		300,000		295,984
				1,094,598
OFFICE & BUSINESS EQUIPMENT – 0.52%
Xerox Corp.
6.88%, 08/15/11		100,000		105,037
				105,037
OIL & GAS – 3.04%
Anadarko Petroleum Corp.
5.95%, 09/15/16		200,000		202,608
Conoco Funding Co.
6.35%, 10/15/11		200,000		210,642
Enterprise Products Operating LP
5.60%, 10/15/14		200,000		201,218
				614,468
PHARMACEUTICALS – 2.00%
Abbott Laboratories
5.38%, 05/15/09		200,000		201,617
Wyeth
5.50%, 02/01/14		200,000		203,207
				404,824
REAL ESTATE INVESTMENT TRUSTS – 0.50%
Simon Property Group LP
5.60%, 09/01/11		100,000		101,573
				101,573
RETAIL – 2.48%
Home Depot Inc.
5.40%, 03/01/16		100,000		98,602
Target Corp.
5.40%, 10/01/08		200,000		201,014
Wal-Mart Stores Inc.
4.55%, 05/01/13		100,000		97,166
6.88%, 08/10/09		100,000		104,502
				501,284
SAVINGS & LOANS – 0.97%
Washington Mutual Inc.
4.00%, 01/15/09		200,000		195,832
				195,832

Security	Principal		Value
SOFTWARE – 0.74%
Oracle Corp.
5.25%, 01/15/16	$	150,000	$	149,465
				149,465
TELECOMMUNICATIONS – 6.88%
AT&T Wireless Services Inc.
7.88%, 03/01/11		100,000		109,839
Cisco Systems Inc.
5.50%, 02/22/16		200,000		203,254
Embarq Corp.
7.08%, 06/01/16		150,000		155,030
France Telecom SA
7.75%, 03/01/11		100,000		109,468
SBC Communications Inc.
5.88%, 02/01/12		200,000		205,839
Sprint Capital Corp.
8.38%, 03/15/12		100,000		112,251
Telecom Italia Capital SA
4.00%, 01/15/10		200,000		193,021
Verizon Communications Inc.
5.55%, 02/15/16		200,000		201,820
Vodafone Group PLC
5.75%, 03/15/16		100,000		101,333
				1,391,855
TELEPHONE – 1.68%
Comcast Cable Communications Holdings Inc.
8.38%, 03/15/13		200,000		231,088
Telefonica Europe BV
7.75%, 09/15/10		100,000		108,031
				339,119
TEXTILES – 0.74%
Mohawk Industries Inc.
6.13%, 01/15/16		150,000		150,751
				150,751
TRANSPORTATION – 0.52%
CSX Corp.
6.75%, 03/15/11		100,000		105,306
				105,306
TOTAL CORPORATE BONDS & NOTES (Cost: $18,014,184)				18,107,757

SCHEDULES OF INVESTMENTS 19

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE CREDIT BOND FUND

February 28, 2007

Security	Shares or Principal		Value
FOREIGN GOVERNMENT BONDS & NOTESa – 8.08%
Italy (Republic of)
6.00%, 02/22/11	$	600,000	$	623,275
Ontario (Province of)
5.50%, 10/01/08		400,000		403,295
Quebec (Province of)
5.00%, 03/01/16		200,000		199,285
United Mexican States
4.63%, 10/08/08		200,000		198,090
6.38%, 01/16/13		200,000		210,434
TOTAL FOREIGN GOVERNMENT BONDS & NOTES (Cost: $1,630,208)				1,634,379
SHORT-TERM INVESTMENTS – 0.90%
MONEY MARKET FUNDS – 0.90%
Barclays Global Investors Funds
Prime Money Market Fund,
Institutional Shares
5.26%b,c		181,496		181,496
				181,496
TOTAL SHORT-TERM INVESTMENTS (Cost: $181,496)				181,496
TOTAL INVESTMENTS IN SECURITIES – 98.47% (Cost: $19,825,888)				19,923,632
Other Assets, Less Liabilities – 1.53%				309,471
NET ASSETS – 100.00%			$	20,233,103

^a Investments are denominated in U.S. dollars.

^b Affiliated issuer. See Note 2.

^c The rate quoted is the annualized seven-day yield of the fund at period end.

See notes to financial statements.

20 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® LEHMAN CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
CORPORATE BONDS & NOTES – 89.06%
AEROSPACE & DEFENSE – 1.00%
Raytheon Co.
6.15%, 11/01/08	$	200,000	$	203,171
				203,171
AUTO MANUFACTURERS – 1.03%
DaimlerChrysler N.A. Holding Corp.
6.50%, 11/15/13		200,000		209,927
				209,927
BANKS – 11.08%
BAC Capital Trust XI
6.63%, 05/23/36		100,000		109,043
Bank of America Corp.
4.50%, 08/01/10		400,000		394,226
4.88%, 01/15/13		100,000		98,616
KfW Bankengruppe
4.25%, 06/15/10		100,000		98,475
5.13%, 03/14/16		300,000		305,095
Landwirtschaftliche Rentenbank Series G
5.00%, 11/08/16		100,000		100,757
National City Corp.
6.88%, 05/15/19		100,000		111,624
US Bank N.A.
4.80%, 04/15/15		200,000		193,971
Wachovia Corp.
3.50%, 08/15/08		300,000		293,139
5.30%, 10/15/11		150,000		151,623
Wells Fargo & Co.
4.88%, 01/12/11		400,000		398,470
				2,255,039
BEVERAGES – 1.14%
Pepsi Bottling Group Inc.
7.00%, 03/01/29		200,000		232,184
				232,184
BIOTECHNOLOGY – 0.25%
Amgen Inc.
4.00%, 11/18/09		52,000		50,700
				50,700

Security	Principal		Value
BUILDING MATERIALS – 0.49%
CRH America Inc.
5.30%, 10/15/13	$	100,000	$	98,842
				98,842
CHEMICALS – 1.01%
Dow Chemical Co. (The)
6.00%, 10/01/12		200,000		204,709
				204,709
COMPUTERS – 0.74%
International Business Machines Corp.
3.80%, 02/01/08		152,000		150,247
				150,247
COSMETICS & PERSONAL CARE – 0.48%
Procter & Gamble Co.
3.50%, 12/15/08		100,000		97,575
				97,575
DIVERSIFIED FINANCIAL SERVICES – 24.47%
American General Finance Corp.
5.38%, 10/01/12		200,000		201,155
Associates Corp. N.A.
6.95%, 11/01/18		150,000		169,500
Bear Stearns Companies Inc. (The)
5.70%, 11/15/14		100,000		102,305
CIT Group Inc.
7.75%, 04/02/12		200,000		222,021
Citigroup Inc.
4.13%, 02/22/10		100,000		97,623
6.00%, 10/31/33		200,000		208,250
Credit Suisse First Boston USA Inc.
3.88%, 01/15/09		190,000		186,052
Credit Suisse USA Inc.
5.38%, 03/02/16		110,000		110,977
Deutsche Telekom International
Finance AG
8.00%, 06/15/10		130,000		141,336
General Electric Capital Corp.
4.13%, 09/01/09		300,000		294,424
6.75%, 03/15/32		100,000		116,179
General Electric Co.
5.00%, 02/01/13		200,000		198,981
Goldman Sachs Group Inc. (The)
3.88%, 01/15/09		400,000		391,548
6.35%, 02/15/34		100,000		102,726

SCHEDULES OF INVESTMENTS 21

Schedule of Investments (Continued)

iSHARES^® LEHMAN CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Goldman Sachs Group LP
5.00%, 10/01/14	$	152,000	$	148,251
HSBC Finance Corp.
5.50%, 01/19/16		250,000		251,730
JP Morgan Chase Capital XV
5.88%, 03/15/35		100,000		98,891
JPMorgan Chase & Co.
5.75%, 01/02/13		150,000		153,717
Lehman Brothers Holdings Inc.
4.50%, 07/26/10		110,000		108,282
5.50%, 04/04/16		150,000		151,596
Merrill Lynch & Co. Inc.
3.70%, 04/21/08		400,000		393,646
6.05%, 05/16/16		150,000		155,009
Morgan Stanley
5.75%, 10/18/16		200,000		203,387
National Rural Utilities Cooperative Finance Corp.
7.25%, 03/01/12		152,000		166,451
Residential Capital Corp.
6.50%, 04/17/13		152,000		153,282
SLM Corp.
5.38%, 05/15/14		100,000		99,667
Toyota Motor Credit Corp.
4.25%, 03/15/10		152,000		148,718
Unilever Capital Corp.
5.90%, 11/15/32		200,000		204,616
				4,980,320
ELECTRIC – 6.19%
Constellation Energy Group Inc.
4.55%, 06/15/15		76,000		71,240
Dominion Resources Inc.
5.15%, 07/15/15		152,000		148,958
Duke Capital LLC
6.25%, 02/15/13		152,000		156,167
Exelon Corp.
4.90%, 06/15/15		80,000		76,833
Exelon Generation Co. LLC
5.35%, 01/15/14		76,000		74,923
FirstEnergy Corp.
7.38%, 11/15/31		200,000		233,254

Security	Principal		Value
MidAmerican Energy Holdings Co.
6.13%, 04/01/36	$	100,000	$	103,294
Pacific Gas & Electric Co.
4.80%, 03/01/14		152,000		148,037
Progress Energy Inc.
7.10%, 03/01/11		152,000		162,573
Southern California Edison Co.
6.00%, 01/15/34		80,000		83,765
				1,259,044
FOOD – 2.28%
Fred Meyer Inc.
7.45%, 03/01/08		152,000		155,143
Kraft Foods Inc.
4.00%, 10/01/08		152,000		149,415
Safeway Inc.
7.50%, 09/15/09		152,000		159,826
				464,384
FOREST PRODUCTS & PAPER – 0.95%
International Paper Co.
6.75%, 09/01/11		80,000		84,048
Weyerhaeuser Co.
7.38%, 03/15/32		100,000		108,952
				193,000
HEALTH CARE - SERVICES – 0.78%
WellPoint Inc.
5.00%, 01/15/11		160,000		159,416
				159,416
HOME BUILDERS – 0.48%
Pulte Homes Inc.
5.25%, 01/15/14		100,000		97,741
				97,741
HOUSEHOLD PRODUCTS & WARES – 0.25%
Fortune Brands Inc.
5.13%, 01/15/11		52,000		51,426
				51,426
INSURANCE – 3.90%
Allstate Corp. (The)
5.55%, 05/09/35		200,000		196,166
Genworth Financial Inc.
6.15%, 11/15/66		50,000		50,540

22 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Lincoln National Corp.
7.00%, 05/17/66	$	50,000	$	53,493
Marsh & McLennan Companies Inc.
5.15%, 09/15/10		100,000		99,413
Metlife Inc.
5.00%, 06/15/15		400,000		393,319
				792,931
MACHINERY – 1.01%
Caterpillar Inc.
5.70%, 08/15/16		200,000		205,735
				205,735
MANUFACTURING – 0.79%
Tyco International Group SA
6.38%, 10/15/11		152,000		160,627
				160,627
MEDIA – 3.98%
AOL Time Warner Inc.
6.88%, 05/01/12		80,000		85,759
Comcast Corp.
6.45%, 03/15/37		100,000		103,991
Cox Communications Inc.
4.63%, 01/15/10		80,000		78,899
News America Inc.
5.30%, 12/15/14		152,000		152,180
Time Warner Inc.
7.70%, 05/01/32		100,000		117,026
Viacom Inc.
7.88%, 07/30/30		100,000		111,027
Walt Disney Co.
6.38%, 03/01/12		152,000		160,985
				809,867
MINING – 1.25%
BHP Finance (USA) Ltd.
4.80%, 04/15/13		152,000		149,228
Vale Overseas Ltd.
6.88%, 11/21/36		100,000		105,417
				254,645
MULTI-NATIONAL – 3.67%
European Investment Bank
4.63%, 05/15/14		300,000		297,535

Security	Principal		Value
Inter-American Development Bank
5.13%, 09/13/16	$	150,000	$	152,658
International Bank for Reconstruction & Development
4.13%, 08/12/09		300,000		295,984
				746,177
OFFICE & BUSINESS EQUIPMENT – 0.52%
Xerox Corp.
6.88%, 08/15/11		100,000		105,037
				105,037
OIL & GAS – 4.59%
Anadarko Petroleum Corp.
5.95%, 09/15/16		100,000		101,304
ConocoPhillips Holding Co.
6.95%, 04/15/29		200,000		232,119
Devon Energy Corp.
7.95%, 04/15/32		200,000		247,630
Enterprise Products Operating LP
5.60%, 10/15/14		110,000		110,670
Pemex Project Funding Master Trust
8.63%, 02/01/22		100,000		125,658
Valero Energy Corp.
7.50%, 04/15/32		100,000		117,484
				934,865
PHARMACEUTICALS – 1.25%
Teva Pharmaceutical Finance LLC
6.15%, 02/01/36		100,000		99,104
Wyeth
5.50%, 02/01/14		152,000		154,438
				253,542
PIPELINES – 1.02%
Kinder Morgan Energy Partners LP
6.50%, 02/01/37		100,000		102,854
6.75%, 03/15/11		100,000		105,010
				207,864
RETAIL – 2.12%
Federated Retail Holdings Inc.
5.90%, 12/01/16		100,000		102,070
Home Depot Inc.
5.40%, 03/01/16		100,000		98,601

SCHEDULES OF INVESTMENTS 23

Schedule of Investments (Continued)

iSHARES^® LEHMAN CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Target Corp.
5.40%, 10/01/08	$	152,000	$	152,771
Wal-Mart Stores Inc.
4.55%, 05/01/13		80,000		77,733
				431,175
SAVINGS & LOANS – 0.96%
Washington Mutual Inc.
4.00%, 01/15/09		200,000		195,832
				195,832
SOFTWARE – 0.49%
Oracle Corp.
5.25%, 01/15/16		100,000		99,644
				99,644
TELECOMMUNICATIONS – 7.90%
AT&T Wireless Services Inc.
7.88%, 03/01/11		200,000		219,678
BellSouth Corp.
6.00%, 11/15/34		100,000		99,366
Cisco Systems Inc.
5.50%, 02/22/16		52,000		52,846
Embarq Corp.
7.08%, 06/01/16		200,000		206,707
France Telecom SA
8.50%, 03/01/31		100,000		134,160
SBC Communications Inc.
5.88%, 02/01/12		200,000		205,839
Sprint Capital Corp.
6.88%, 11/15/28		150,000		153,539
Telecom Italia Capital SA
4.00%, 01/15/10		200,000		193,021
Verizon Communications Inc.
5.55%, 02/15/16		100,000		100,910
Verizon Global Funding Corp.
7.25%, 12/01/10		150,000		160,795
Vodafone Group PLC
5.75%, 03/15/16		80,000		81,067
				1,607,928
TELEPHONE – 1.47%
Comcast Cable Communications Holdings Inc.
8.38%, 03/15/13		152,000		175,627

Security	Principal		Value
Telefonica Europe BV
8.25%, 09/15/30	$	100,000	$	123,522
				299,149
TEXTILES – 0.49%
Mohawk Industries Inc.
6.13%, 01/15/16		100,000		100,501
				100,501
TRANSPORTATION – 1.03%
CSX Corp.
6.75%, 03/15/11		200,000		210,612
				210,612
TOTAL CORPORATE BONDS & NOTES (Cost: $17,999,181)				18,123,856
FOREIGN GOVERNMENT BONDS & NOTESa – 7.96%
Italy (Republic of)
6.00%, 02/22/11		500,000		519,396
Ontario (Province of)
5.50%, 10/01/08		400,000		403,295
Quebec (Province of)
5.00%, 03/01/16		100,000		99,642
7.50%, 09/15/29		100,000		129,421
United Mexican States
4.63%, 10/08/08		192,000		190,166
6.38%, 01/16/13		152,000		159,930
7.50%, 04/08/33		100,000		118,912
TOTAL FOREIGN GOVERNMENT BONDS & NOTES (Cost: $1,616,983)				1,620,762
MUNICIPAL DEBT OBLIGATIONS – 0.96%
ILLINOIS – 0.96%
Illinois State
5.10%, 06/01/33		200,000		196,056
				196,056
TOTAL MUNICIPAL DEBT OBLIGATIONS (Cost: $193,219)				196,056

24 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN CREDIT BOND FUND

February 28, 2007

Security	Shares	Value
SHORT-TERM INVESTMENTS – 0.37%
MONEY MARKET FUNDS – 0.37%
Barclays Global Investors Funds
Prime Money Market Fund,
Institutional Shares
5.26%b,c	74,458	$	74,458
			74,458
TOTAL SHORT-TERM INVESTMENTS (Cost: $74,458)			74,458
TOTAL INVESTMENTS IN SECURITIES – 98.35% (Cost: $19,883,841)			20,015,132
Other Assets, Less Liabilities – 1.65%			334,841
NET ASSETS – 100.00%		$	20,349,973

^a Investments are denominated in U.S. dollars.

^b Affiliated issuer. See Note 2.

^c The rate quoted is the annualized seven-day yield of the fund at period end.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 25

Schedule of Investments

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
CORPORATE BONDS & NOTES – 33.47%
AEROSPACE & DEFENSE – 0.37%
Raytheon Co.
6.15%, 11/01/08	$	74,000	$	75,173
				75,173
AUTO MANUFACTURERS – 0.38%
DaimlerChrysler N.A. Holding Corp.
4.05%, 06/04/08		38,000		37,472
6.50%, 11/15/13		38,000		39,886
				77,358
BANKS – 4.27%
Bank of America Corp.
4.50%, 08/01/10		86,000		84,759
4.88%, 01/15/13		112,000		110,450
Capital One Financial Corp.
5.70%, 09/15/11		38,000		38,631
KfW Bankengruppe
4.25%, 06/15/10		222,000		218,615
US Bank N.A.
4.80%, 04/15/15		74,000		71,769
Wachovia Corp.
3.50%, 08/15/08		150,000		146,570
5.30%, 10/15/11		40,000		40,433
Wells Fargo & Co.
4.88%, 01/12/11		150,000		149,426
				860,653
BIOTECHNOLOGY – 0.18%
Amgen Inc.
4.00%, 11/18/09		38,000		37,050
				37,050
BUILDING MATERIALS – 0.19%
CRH America Inc.
5.30%, 10/15/13		38,000		37,560
				37,560
COSMETICS & PERSONAL CARE – 0.36%
Procter & Gamble Co.
3.50%, 12/15/08		74,000		72,206
				72,206

Security	Principal		Value
DIVERSIFIED FINANCIAL SERVICES – 10.80%
American General Finance Corp.
5.38%, 10/01/12	$	74,000	$	74,427
Bear Stearns Companies Inc. (The)
5.70%, 11/15/14		74,000		75,705
CIT Group Inc.
7.75%, 04/02/12		112,000		124,332
Citigroup Inc.
6.00%, 02/21/12		222,000		231,135
Credit Suisse First Boston USA Inc.
3.88%, 01/15/09		100,000		97,922
Credit Suisse USA Inc.
5.38%, 03/02/16		56,000		56,497
Deutsche Telekom International Finance AG
8.00%, 06/15/10		38,000		41,314
General Electric Capital Corp.
4.13%, 09/01/09		222,000		217,873
5.00%, 01/08/16		38,000		37,490
General Electric Co.
5.00%, 02/01/13		74,000		73,623
Goldman Sachs Group Inc. (The)
3.88%, 01/15/09		150,000		146,831
Goldman Sachs Group LP
5.00%, 10/01/14		74,000		72,175
HSBC Finance Corp.
5.50%, 01/19/16		114,000		114,789
JPMorgan Chase & Co.
5.75%, 01/02/13		150,000		153,717
Lehman Brothers Holdings Inc.
5.50%, 04/04/16		74,000		74,787
5.75%, 07/18/11		74,000		75,969
Merrill Lynch & Co. Inc.
3.70%, 04/21/08		150,000		147,617
Morgan Stanley
6.75%, 04/15/11		126,000		133,616
National Rural Utilities Cooperative Finance Corp.
7.25%, 03/01/12		38,000		41,613
Residential Capital Corp.
6.50%, 04/17/13		74,000		74,624

26 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
SLM Corp.
5.38%, 05/15/14	$	74,000	$	73,754
Toyota Motor Credit Corp.
4.25%, 03/15/10		38,000		37,179
				2,176,989
ELECTRIC – 1.66%
Constellation Energy Group Inc.
4.55%, 06/15/15		36,000		33,745
Dominion Resources Inc.
5.15%, 07/15/15		38,000		37,239
Duke Capital LLC
6.25%, 02/15/13		38,000		39,042
Exelon Corp.
4.90%, 06/15/15		38,000		36,496
Exelon Generation Co. LLC
5.35%, 01/15/14		38,000		37,462
Pacific Gas & Electric Co.
4.80%, 03/01/14		74,000		72,070
Progress Energy Inc.
7.10%, 03/01/11		74,000		79,148
				335,202
FOOD – 1.31%
Fred Meyer Inc.
7.45%, 03/01/08		74,000		75,530
Kraft Foods Inc.
4.00%, 10/01/08		112,000		110,095
Safeway Inc.
7.50%, 09/15/09		74,000		77,810
				263,435
FOREST PRODUCTS & PAPER – 0.20%
International Paper Co.
6.75%, 09/01/11		38,000		39,923
				39,923
HEALTH CARE - SERVICES – 0.37%
WellPoint Inc.
5.00%, 01/15/11		74,000		73,730
				73,730
HOME BUILDERS – 0.18%
Pulte Homes Inc.
5.25%, 01/15/14		38,000		37,142
				37,142

Security	Principal		Value
HOUSEHOLD PRODUCTS & WARES – 0.36%
Fortune Brands Inc.
5.13%, 01/15/11	$	74,000	$	73,183
				73,183
INSURANCE – 0.94%
Genworth Financial Inc.
6.15%, 11/15/66		38,000		38,411
Lincoln National Corp.
7.00%, 05/17/66		38,000		40,655
Marsh & McLennan Companies Inc.
5.15%, 09/15/10		74,000		73,566
Metlife Inc.
5.00%, 06/15/15		38,000		37,365
				189,997
MACHINERY – 0.29%
Caterpillar Inc.
5.70%, 08/15/16		56,000		57,606
				57,606
MANUFACTURING – 0.39%
Tyco International Group SA
6.38%, 10/15/11		74,000		78,200
				78,200
MEDIA – 1.14%
AOL Time Warner Inc.
6.88%, 05/01/12		38,000		40,735
Cox Communications Inc.
4.63%, 01/15/10		38,000		37,477
News America Inc.
5.30%, 12/15/14		74,000		74,088
Walt Disney Co.
6.38%, 03/01/12		74,000		78,374
				230,674
MINING – 0.55%
BHP Finance (USA) Ltd.
4.80%, 04/15/13		74,000		72,651
Vale Overseas Ltd.
6.25%, 01/23/17		38,000		39,049
				111,700
MULTI-NATIONAL – 2.01%
European Investment Bank
4.63%, 05/15/14		222,000		220,176

SCHEDULES OF INVESTMENTS 27

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Inter-American Development Bank
5.13%, 09/13/16	$	74,000	$	75,311
International Bank for Reconstruction & Development
4.13%, 08/12/09		112,000		110,500
				405,987
OFFICE & BUSINESS EQUIPMENT – 0.20%
Xerox Corp.
6.88%, 08/15/11		38,000		39,914
				39,914
OIL & GAS – 1.13%
Anadarko Petroleum Corp.
5.95%, 09/15/16		74,000		74,965
Conoco Funding Co.
6.35%, 10/15/11		74,000		77,937
Enterprise Products Operating LP
5.60%, 10/15/14		74,000		74,451
				227,353
PHARMACEUTICALS – 0.74%
Abbott Laboratories
5.38%, 05/15/09		74,000		74,598
Wyeth
5.50%, 02/01/14		74,000		75,187
				149,785
REAL ESTATE INVESTMENT TRUSTS – 0.19%
Simon Property Group LP
5.60%, 09/01/11		38,000		38,598
				38,598
RETAIL – 0.93%
Home Depot Inc.
5.40%, 03/01/16		38,000		37,469
Target Corp.
5.40%, 10/01/08		74,000		74,375
Wal-Mart Stores Inc.
4.55%, 05/01/13		38,000		36,923
6.88%, 08/10/09		38,000		39,711
				188,478
SAVINGS & LOANS – 0.36%
Washington Mutual Inc.
4.00%, 01/15/09		74,000		72,458
				72,458

Security	Principal		Value
SOFTWARE – 0.28%
Oracle Corp.
5.25%, 01/15/16	$	56,000	$	55,800
				55,800
TELECOMMUNICATIONS – 2.58%
AT&T Wireless Services Inc.
7.88%, 03/01/11		38,000		41,739
Cisco Systems Inc.
5.50%, 02/22/16		74,000		75,204
Embarq Corp.
7.08%, 06/01/16		56,000		57,878
France Telecom SA
7.75%, 03/01/11		38,000		41,598
SBC Communications Inc.
5.88%, 02/01/12		74,000		76,160
Sprint Capital Corp.
8.38%, 03/15/12		38,000		42,655
Telecom Italia Capital SA
4.00%, 01/15/10		74,000		71,418
Verizon Communications Inc.
5.55%, 02/15/16		74,000		74,673
Vodafone Group PLC
5.75%, 03/15/16		38,000		38,507
				519,832
TELEPHONE – 0.63%
Comcast Cable Communications Holdings Inc.
8.38%, 03/15/13		74,000		85,503
Telefonica Europe BV
7.75%, 09/15/10		38,000		41,052
				126,555
TEXTILES – 0.28%
Mohawk Industries Inc.
6.13%, 01/15/16		56,000		56,280
				56,280
TRANSPORTATION – 0.20%
CSX Corp.
6.75%, 03/15/11		38,000		40,016
				40,016
TOTAL CORPORATE BONDS & NOTES (Cost: $6,714,284)				6,748,837

28 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
FOREIGN GOVERNMENT BONDS & NOTESa – 3.01%
Italy (Republic of)
6.00%, 02/22/11	$	222,000	$	230,612
Ontario (Province of)
5.50%, 10/01/08		150,000		151,236
Quebec (Province of)
5.00%, 03/01/16		74,000		73,735
United Mexican States
4.63%, 10/08/08		74,000		73,293
6.38%, 01/16/13		74,000		77,861
TOTAL FOREIGN GOVERNMENT BONDS & NOTES (Cost: $605,190)
				606,737
U.S. GOVERNMENT & AGENCY OBLIGATIONS – 61.63%
U.S. GOVERNMENT AGENCY OBLIGATIONS – 21.24%
Federal Home Loan Mortgage Corp.
4.50%, 01/15/13		680,000		668,753
4.63%, 02/21/08		1,600,000		1,592,452
Federal National Mortgage Association
5.00%, 04/15/15b		400,000		403,433
7.25%, 01/15/10		1,520,000		1,617,887
				4,282,525
U.S. GOVERNMENT OBLIGATIONS – 40.39%
U.S. Treasury Notes
4.50%, 02/15/09b		800,000		797,872
4.75%, 05/15/14b		1,120,000		1,134,649
4.88%, 07/31/11		1,560,000		1,582,495
4.88%, 08/15/16b		940,000		961,827
5.13%, 06/30/08b		1,800,000		1,808,154
6.00%, 08/15/09		1,800,000		1,858,050
				8,143,047
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost: $12,390,127)
				12,425,572
SHORT-TERM INVESTMENTS – 23.79%
CERTIFICATES OF DEPOSITc – 1.08%
Credit Suisse First Boston NY
5.28% - 5.43%,
04/23/07 - 08/21/07		50,005		50,005

Security	Principal		Value
Deutsche Bank AG
5.35%, 08/08/07	$	83,342	$	83,342
Washington Mutual Bank
5.33%, 03/19/07		83,342		83,342
				216,689
COMMERCIAL PAPERc – 5.16%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07d		31,707		31,493
BNP Paribas Finance Inc.
5.12%, 06/06/07		11,668		11,507
Bryant Park Funding LLC
5.27%, 03/06/07d		8,216		8,210
Cantabric Finance LLC
5.25%, 03/06/07d		26,669		26,650
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07d		25,003		24,823
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07d		16,991		16,946
Crown Point Capital Co. LLC
5.20%, 07/18/07d		38,509		37,736
Edison Asset Securitization LLC
5.21%, 04/11/07d		13,816		13,734
Five Finance Inc.
5.22%, 04/20/07d		15,335		15,224
General Electric Capital Corp.
5.12% - 5.20%,
06/04/07 - 07/17/07d		58,340		57,337
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07d		54,672		54,606
Grampian Funding LLC
5.14% - 5.23%,
04/23/07 - 06/06/07d		65,007		64,199
Harrier Finance Funding LLC
5.12%, 06/06/07d		33,337		32,877
Irish Permanent Treasury PLC
5.18%, 07/10/07		16,668		16,354
KKR Pacific Funding Trust
5.29%, 03/13/07d		41,671		41,598
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07d		42,120		41,403

SCHEDULES OF INVESTMENTS 29

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Liberty Street Funding Corp.
5.27%, 03/06/07d	$	4,000	$	3,997
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07d		75,207		74,492
Nationwide Building Society
5.21%, 04/13/07d		31,670		31,473
Nestle Capital Corp.
5.19%, 08/09/07		20,002		19,538
Sedna Finance Inc.
5.22%, 04/17/07d		19,002		18,873
Simba Funding Corp.
5.20%, 07/23/07d		33,337		32,643
Societe Generale
5.18%, 05/16/07		83,342		82,431
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07d		126,999		126,876
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07d		24,403		24,363
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07d		17,501		17,488
Tulip Funding Corp.
5.29%, 03/15/07d		63,994		63,862
Westpac Banking Corp.
5.20%, 07/12/07d		30,003		29,427
Zela Finance Inc.
5.20%, 07/16/07d		20,002		19,606
				1,039,766
MEDIUM-TERM NOTESc – 0.48%
Bank of America N.A.
5.28%, 04/20/07		8,334		8,334
Cullinan Finance Corp.
5.71%, 06/28/07d		25,003		25,003
K2 USA LLC
5.39%, 06/04/07d		25,003		25,003
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07d		39,004		39,004
				97,344

Security	Shares or Principal		Value
MONEY MARKET FUNDS – 0.96%
Barclays Global Investors Funds
Prime Money Market Fund,
Institutional Shares
5.26%e,f		194,284	$	194,284
				194,284
REPURCHASE AGREEMENTSc – 3.15%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $66,684 (collateralized by non-U.S. Government debt securities, value $68,728, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	66,674		66,674
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $50,012 (collateralized by non-U.S. Government debt securities, value $55,049, 0.00% to 9.20%, 10/17/18 to 11/25/52).		50,005		50,005
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $3,334 (collateralized by non-U.S. Government debt securities, value $3,503, 5.43%, 3/15/08).		3,334		3,334
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $50,012 (collateralized by non-U.S. Government debt securities, value $53,882, 0.00% to 10.00%, 5/27/33 to 8/25/46).		50,005		50,005
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $66,684 (collateralized by non-U.S. Government debt securities, value $70,063, 4.91% to 6.31%, 10/25/33 to 8/25/46).		66,674		66,674

30 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $36,677 (collateralized by non-U.S. Government debt securities, value $39,517, 0.00% to 10.00%, 5/27/33 to 8/25/46).	$	36,671	$	36,671
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $20,005 (collateralized by non-U.S. Government debt securities, value $22,283, 0.00% to 10.00%, 5/27/33 to 2/28/37).		20,002		20,002
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $12,372 (collateralized by non-U.S. Government debt securities, value $12,999, 4.52% to 6.89%, 1/15/09 to 10/25/36).		12,370		12,370
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $140,036 (collateralized by non-U.S. Government debt securities, value $154,380, 0.00% to 10.00%, 4/1/07 to 12/31/49).		140,015		140,015
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $16,670 (collateralized by non-U.S. Government debt securities, value $17,517, 3.72% to 5.99%, 12/15/36 to 6/1/46).		16,668		16,668
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $8,335 (collateralized by non-U.S. Government debt securities, value $8,759, 6.25% to 9.56%, 5/15/11 to 2/1/30).		8,334		8,334

Security	Principal		Value
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $33,342 (collateralized by non-U.S. Government debt securities, value $35,032, 1.63% to 14.50%, 5/1/07 to 9/18/37).	$	33,337	$	33,337
Morgan Stanley 5.36%, due 3/1/07, maturity value $33,342 (collateralized by non-U.S. Government debt securities, value $35,039, 0.00% to 10.00%, 3/1/07 to 2/28/37).		33,337		33,337
Morgan Stanley 5.51%, due 2/4/08, maturity value $24,529 (collateralized by non-U.S. Government debt securities, value $27,674, 0.00% to 10.00%, 3/1/07 to 2/28/37).g		23,336		23,336
Wachovia Capital 5.38%, due 3/1/07, maturity value $73,352 (collateralized by non-U.S. Government debt securities, value $77,069, 0.00% to 8.32%, 2/15/08 to 3/15/49).		73,341		73,341
				634,103
TIME DEPOSITSc – 0.95%
Bank of Nova Scotia
5.30%, 03/02/07		13,980		13,980
Chase Bank USA N.A.
5.38%, 03/01/07		50,005		50,005
Citibank N.A.
5.47%, 03/01/07		50,005		50,005
Deutsche Bank AG
5.38%, 03/01/07		78,299		78,299
				192,289
VARIABLE & FLOATING RATE NOTESc – 12.01%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08d		85,340		85,349

SCHEDULES OF INVESTMENTS 31

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
American Express Centurion Bank
5.41%, 07/19/07	$	36,671	$	36,687
American Express Credit Corp.
5.42%, 03/05/08		10,001		10,006
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		1,519		1,519
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07d		25,003		25,003
ASIF Global Financing
5.40%, 05/03/07d		3,334		3,334
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08d		21,669		21,669
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08d		48,338		48,340
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07d		85,009		85,010
BMW US Capital LLC
5.32%, 01/15/08d		33,337		33,337
BNP Paribas
5.33%, 11/19/07d		61,673		61,673
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07d		32,003		32,000
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07d		24,336		24,336
CC USA Inc.
5.36%, 07/30/07d		16,668		16,669
Commodore CDO Ltd.
5.44%, 12/12/07d		8,334		8,334
Credit Agricole SA
5.33%, 11/23/07		33,337		33,337
Credit Suisse First Boston NY
5.36%, 04/24/07		16,668		16,669
Cullinan Finance Corp.
5.36%, 04/25/07d		8,334		8,334
DaimlerChrysler Auto Trust Series 2006-C Class A1
5.33%, 10/08/07d		2,557		2,557

Security	Principal		Value
DEPFA Bank PLC
5.40%, 12/14/07d	$	33,337	$	33,337
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07d		38,337		38,339
Eli Lilly Services Inc.
5.31%, 03/01/07d		22,252		22,252
Fifth Third Bancorp
5.32%, 02/22/08d		66,674		66,674
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07d		21,669		21,668
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08d		35,004		35,007
Granite Master Issuer PLC
5.29%, 08/20/07d		116,679		116,679
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07d		43,338		43,338
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		50,005		50,009
HBOS Treasury Services PLC
5.46%, 01/24/08d		33,337		33,337
Holmes Financing PLC
5.29%, 07/16/07d		58,340		58,340
JP Morgan Securities Inc.
5.40%, 11/16/07		66,674		66,674
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08g		91,676		91,677
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07d		25,003		25,002
Kestrel Funding LLC
5.30%, 07/11/07d		13,335		13,334
Kommunalkredit Austria AG
5.32%, 02/08/08d		20,002		20,002
Leafs LLC
5.32%, 01/22/08d		32,299		32,299

32 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN INTERMEDIATE GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07d	$	36,671	$	36,670
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07d		11,753		11,753
Marshall & Ilsley Bank
5.32%, 02/15/08		18,335		18,335
Master Funding LLC
5.35%, 04/25/07 - 05/25/07d		60,331		60,331
Merrill Lynch & Co. Inc.
5.46%, 05/30/07g		36,671		36,671
Metropolitan Life Global Funding I
5.33%, 03/06/08d		50,005		50,005
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07d,g		3,334		3,334
Mound Financing PLC
5.29%, 05/08/07d		31,337		31,337
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08d		53,339		53,339
National City Bank of Indiana
5.34%, 05/21/07		16,668		16,669
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08d		110,012		110,024
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08d		33,420		33,416
Northern Rock PLC
5.38%, 02/01/08d		40,004		40,005
Northlake CDO I
5.42%, 09/06/07d		10,001		10,001
Pricoa Global Funding I
5.31%, 02/27/08d		45,005		45,005
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07d		48,338		48,338
Skandinaviska Enskilda Banken
5.32%, 02/15/08d		33,337		33,337
Strips III LLC
5.37%, 07/24/07d		6,783		6,783
SunTrust Bank
5.29%, 05/01/07		33,337		33,337

Security	Principal		Value
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07d	$	81,342	$	81,341
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07d		55,006		55,006
Wachovia Asset Securitization Inc.
5.31%, 03/25/07d		37,631		37,631
Wachovia Bank N.A.
5.36%, 05/22/07		66,674		66,674
Wal-Mart Stores Inc.
5.50%, 07/16/07d		25,003		25,009
Wells Fargo & Co.
5.33%, 11/15/07d		16,668		16,669
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07d		25,003		25,002
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07d		100,011		100,001
Wind Master Trust
5.31%, 07/25/07d		13,335		13,335
				2,421,489
TOTAL SHORT-TERM INVESTMENTS (Cost: $4,795,964)				4,795,964
TOTAL INVESTMENTS IN SECURITIES – 121.90% (Cost: $24,505,565)				24,577,110
Other Assets, Less Liabilities – (21.90)%				(4,415,774	)
NET ASSETS – 100.00%			$	20,161,336

^a Investments are denominated in U.S. dollars.

^b All or a portion of this security represents a security on loan. See Note 5.

^c All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^d This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^e Affiliated issuer. See Note 2.

^f The rate quoted is the annualized seven-day yield of the fund at period end.

^g The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 33

Schedule of Investments

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
CORPORATE BONDS & NOTES – 35.63%
AEROSPACE & DEFENSE – 0.40%
Raytheon Co.
6.15%, 11/01/08	$	80,000	$	81,269
				81,269
AUTO MANUFACTURERS – 0.41%
DaimlerChrysler N.A. Holding Corp.
6.50%, 11/15/13		80,000		83,971
				83,971
BANKS – 4.44%
BAC Capital Trust XI
6.63%, 05/23/36		40,000		43,617
Bank of America Corp.
4.50%, 08/01/10		158,000		155,719
4.88%, 01/15/13		40,000		39,446
KfW Bankengruppe
4.25%, 06/15/10		40,000		39,390
5.13%, 03/14/16		120,000		122,038
Landwirtschaftliche
Rentenbank Series G
5.00%, 11/08/16		40,000		40,303
National City Corp.
6.88%, 05/15/19		40,000		44,650
US Bank N.A.
4.80%, 04/15/15		80,000		77,588
Wachovia Corp.
3.50%, 08/15/08		120,000		117,256
5.30%, 10/15/11		60,000		60,649
Wells Fargo & Co.
4.88%, 01/12/11		158,000		157,396
				898,052
BEVERAGES – 0.46%
Pepsi Bottling Group Inc.
7.00%, 03/01/29		80,000		92,873
				92,873
BIOTECHNOLOGY – 0.10%
Amgen Inc.
4.00%, 11/18/09		20,000		19,500
				19,500

Security	Principal		Value
BUILDING MATERIALS – 0.19%
CRH America Inc.
5.30%, 10/15/13	$	40,000	$	39,537
				39,537
CHEMICALS – 0.40%
Dow Chemical Co. (The)
6.00%, 10/01/12		80,000		81,883
				81,883
COMPUTERS – 0.28%
International Business Machines Corp.
3.80%, 02/01/08		58,000		57,331
				57,331
COSMETICS & PERSONAL CARE – 0.19%
Procter & Gamble Co.
3.50%, 12/15/08		40,000		39,030
				39,030
DIVERSIFIED FINANCIAL SERVICES – 9.95%
American General Finance Corp.
5.38%, 10/01/12		80,000		80,462
Associates Corp. N.A.
6.95%, 11/01/18		60,000		67,800
Bear Stearns Companies Inc. (The)
5.70%, 11/15/14		40,000		40,922
CIT Group Inc.
7.75%, 04/02/12		80,000		88,809
Citigroup Inc.
4.13%, 02/22/10		80,000		78,098
6.00%, 10/31/33		80,000		83,300
Credit Suisse First Boston USA Inc.
3.88%, 01/15/09		74,000		72,462
Credit Suisse USA Inc.
5.38%, 03/02/16		44,000		44,391
Deutsche Telekom International Finance AG
8.00%, 06/15/10		50,000		54,360
General Electric Capital Corp.
4.13%, 09/01/09		120,000		117,769
6.75%, 03/15/32		40,000		46,472
General Electric Co.
5.00%, 02/01/13		80,000		79,593

34 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Goldman Sachs Group Inc. (The)
3.88%, 01/15/09	$	158,000	$	154,662
6.35%, 02/15/34		40,000		41,090
Goldman Sachs Group LP
5.00%, 10/01/14		58,000		56,569
HSBC Finance Corp.
5.50%, 01/19/16		100,000		100,692
JP Morgan Chase Capital XV
5.88%, 03/15/35		40,000		39,556
JPMorgan Chase & Co.
5.75%, 01/02/13		60,000		61,487
Lehman Brothers Holdings Inc.
4.50%, 07/26/10		46,000		45,282
5.50%, 04/04/16		58,000		58,617
Merrill Lynch & Co. Inc.
3.70%, 04/21/08		78,000		76,761
6.05%, 05/16/16		60,000		62,003
6.11%, 01/29/37		80,000		79,704
Morgan Stanley
5.75%, 10/18/16		80,000		81,355
National Rural Utilities Cooperative Finance Corp.
7.25%, 03/01/12		58,000		63,514
Residential Capital Corp.
6.50%, 04/17/13		58,000		58,489
SLM Corp.
5.38%, 05/15/14		40,000		39,867
Toyota Motor Credit Corp.
4.25%, 03/15/10		58,000		56,748
Unilever Capital Corp.
5.90%, 11/15/32		80,000		81,847
				2,012,681
ELECTRIC – 2.41%
Constellation Energy Group Inc.
4.55%, 06/15/15		30,000		28,121
Dominion Resources Inc.
5.15%, 07/15/15		58,000		56,839
Duke Capital LLC
6.25%, 02/15/13		58,000		59,590
Exelon Corp.
4.90%, 06/15/15		32,000		30,733

Security	Principal		Value
Exelon Generation Co. LLC
5.35%, 01/15/14	$	30,000	$	29,575
FirstEnergy Corp.
7.38%, 11/15/31		80,000		93,301
MidAmerican Energy Holdings Co.
6.13%, 04/01/36		40,000		41,318
Pacific Gas & Electric Co.
4.80%, 03/01/14		58,000		56,488
Progress Energy Inc.
7.10%, 03/01/11		58,000		62,035
Southern California Edison Co.
6.00%, 01/15/34		28,000		29,318
				487,318
FOOD – 0.88%
Fred Meyer Inc.
7.45%, 03/01/08		58,000		59,199
Kraft Foods Inc.
4.00%, 10/01/08		58,000		57,014
Safeway Inc.
7.50%, 09/15/09		58,000		60,986
				177,199
FOREST PRODUCTS & PAPER – 0.38%
International Paper Co.
6.75%, 09/01/11		32,000		33,619
Weyerhaeuser Co.
7.38%, 03/15/32		40,000		43,581
				77,200
HEALTH CARE – SERVICES – 0.31%
WellPoint Inc.
5.00%, 01/15/11		64,000		63,766
				63,766
HOME BUILDERS – 0.19%
Pulte Homes Inc.
5.25%, 01/15/14		40,000		39,096
				39,096
HOUSEHOLD PRODUCTS & WARES – 0.10%
Fortune Brands Inc.
5.13%, 01/15/11		20,000		19,779
				19,779

SCHEDULES OF INVESTMENTS 35

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
INSURANCE – 1.56%
Allstate Corp. (The)
5.55%, 05/09/35	$	80,000	$	78,466
Genworth Financial Inc.
6.15%, 11/15/66		20,000		20,216
Lincoln National Corp.
7.00%, 05/17/66		20,000		21,397
Marsh & McLennan Companies Inc.
5.15%, 09/15/10		40,000		39,765
Metlife Inc.
5.00%, 06/15/15		158,000		155,361
				315,205
MACHINERY – 0.41%
Caterpillar Inc.
5.70%, 08/15/16		80,000		82,294
				82,294
MANUFACTURING – 0.30%
Tyco International Group SA
6.38%, 10/15/11		58,000		61,292
				61,292
MEDIA – 1.57%
AOL Time Warner Inc.
6.88%, 05/01/12		32,000		34,304
Comcast Corp.
6.45%, 03/15/37		40,000		41,596
Cox Communications Inc.
4.63%, 01/15/10		32,000		31,560
News America Inc.
5.30%, 12/15/14		58,000		58,069
Time Warner Inc.
7.70%, 05/01/32		40,000		46,810
Viacom Inc.
7.88%, 07/30/30		40,000		44,411
Walt Disney Co.
6.38%, 03/01/12		58,000		61,429
				318,179
MINING – 0.49%
BHP Finance (USA) Ltd.
4.80%, 04/15/13		58,000		56,942
Vale Overseas Ltd.
6.88%, 11/21/36		40,000		42,167
				99,109

Security	Principal		Value
MULTI-NATIONAL – 1.47%
European Investment Bank
4.63%, 05/15/14	$	120,000	$	119,014
Inter-American Development Bank
5.13%, 09/13/16		60,000		61,063
International Bank for Reconstruction & Development
4.13%, 08/12/09		120,000		118,393
				298,470
OFFICE & BUSINESS EQUIPMENT – 0.21%
Xerox Corp.
6.88%, 08/15/11		40,000		42,015
				42,015
OIL & GAS – 1.85%
Anadarko Petroleum Corp.
5.95%, 09/15/16		40,000		40,522
ConocoPhillips Holding Co.
6.95%, 04/15/29		80,000		92,848
Devon Energy Corp.
7.95%, 04/15/32		80,000		99,052
Enterprise Products Operating LP
5.60%, 10/15/14		44,000		44,268
Pemex Project Funding MasterTrust
8.63%, 02/01/22		40,000		50,263
Valero Energy Corp.
7.50%, 04/15/32		40,000		46,994
				373,947
PHARMACEUTICALS – 0.49%
Teva Pharmaceutical Finance LLC
6.15%, 02/01/36		40,000		39,642
Wyeth
5.50%, 02/01/14		58,000		58,930
				98,572
PIPELINES – 0.41%
Kinder Morgan Energy Partners LP
6.50%, 02/01/37		40,000		41,142
6.75%, 03/15/11		40,000		42,004
				83,146
RETAIL – 0.84%
Federated Retail Holdings Inc.
5.90%, 12/01/16		40,000		40,828

36 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Home Depot Inc.
5.40%, 03/01/16	$	40,000	$	39,441
Target Corp.
5.40%, 10/01/08		58,000		58,294
Wal-Mart Stores Inc.
4.55%, 05/01/13		32,000		31,093
				169,656
SAVINGS & LOANS – 0.39%
Washington Mutual Inc.
4.00%, 01/15/09		80,000		78,333
				78,333
SOFTWARE – 0.20%
Oracle Corp.
5.25%, 01/15/16		40,000		39,857
				39,857
TELECOMMUNICATIONS – 3.15%
AT&T Wireless Services Inc.
7.88%, 03/01/11		80,000		87,871
BellSouth Corp.
6.00%, 11/15/34		40,000		39,746
Cisco Systems Inc.
5.50%, 02/22/16		20,000		20,325
Embarq Corp.
7.08%, 06/01/16		80,000		82,683
France Telecom SA
8.50%, 03/01/31		40,000		53,664
SBC Communications Inc.
5.88%, 02/01/12		80,000		82,336
Sprint Capital Corp.
6.88%, 11/15/28		58,000		59,368
Telecom Italia Capital SA
4.00%, 01/15/10		80,000		77,208
Verizon Communications Inc.
5.55%, 02/15/16		40,000		40,364
Verizon Global Funding Corp.
7.25%, 12/01/10		58,000		62,174
Vodafone Group PLC
5.75%, 03/15/16		32,000		32,427
				638,166
TELEPHONE – 0.58%
Comcast Cable Communications Holdings Inc.
8.38%, 03/15/13		58,000		67,016

Security	Principal		Value
Telefonica Europe BV
8.25%, 09/15/30	$	40,000	$	49,409
				116,425
TEXTILES – 0.20%
Mohawk Industries Inc.
6.13%, 01/15/16		40,000		40,200
				40,200
TRANSPORTATION – 0.42%
CSX Corp.
6.75%, 03/15/11		80,000		84,245
				84,245
TOTAL CORPORATE BONDS & NOTES (Cost: $7,159,778)				7,209,596
FOREIGN GOVERNMENT BONDS & NOTESa – 3.17%
Italy (Republic of)
6.00%, 02/22/11		200,000		207,758
Ontario (Province of)
5.50%, 10/01/08		158,000		159,301
Quebec (Province of)
5.00%, 03/01/16		40,000		39,857
7.50%, 09/15/29		40,000		51,769
United Mexican States
4.63%, 10/08/08		76,000		75,274
6.38%, 01/16/13		58,000		61,026
7.50%, 04/08/33		40,000		47,565
TOTAL FOREIGN GOVERNMENT BONDS & NOTES (Cost: $641,041)				642,550
MUNICIPAL DEBT OBLIGATIONS – 0.39%
ILLINOIS – 0.39%
Illinois State
5.10%, 06/01/33		80,000		78,422
				78,422
TOTAL MUNICIPAL DEBT OBLIGATIONS (Cost: $77,287)				78,422

SCHEDULES OF INVESTMENTS 37

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
U.S. GOVERNMENT & AGENCY OBLIGATIONS – 59.15%
U.S. GOVERNMENT AGENCY OBLIGATIONS – 19.68%
Federal Home Loan Mortgage Corp.
4.50%, 01/15/13	$	200,000	$	196,692
4.63%, 02/21/08		1,200,000		1,194,339
6.25%, 07/15/32		200,000		232,874
Federal National Mortgage Association
5.00%, 04/15/15b		480,000		484,119
7.25%, 01/15/10		1,760,000		1,873,343
				3,981,367
U.S. GOVERNMENT OBLIGATIONS – 39.47%
U.S. Treasury Bonds
7.63%, 02/15/25		800,000		1,072,672
8.13%, 08/15/19		400,000		528,276
U.S. Treasury Notes
4.63%, 12/31/11		544,000		546,443
4.63%, 11/15/16		1,060,000		1,064,717
4.75%, 05/15/14b		800,000		810,464
5.13%, 06/30/08b		1,480,000		1,486,705
6.00%, 08/15/09		2,400,000		2,477,400
				7,986,677
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost: $11,914,125)				11,968,044
SHORT-TERM INVESTMENTS – 20.44%
CERTIFICATES OF DEPOSITc – 0.92%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07		42,897		42,897
Deutsche Bank AG
5.35%, 08/08/07		71,496		71,496
Washington Mutual Bank
5.33%, 03/19/07		71,496		71,496
				185,889
COMMERCIAL PAPERc – 4.41%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07d		27,200		27,020

Security	Principal		Value
BNP Paribas Finance Inc.
5.12%, 06/06/07	$	10,009	$	9,871
Bryant Park Funding LLC
5.27%, 03/06/07d		7,048		7,043
Cantabric Finance LLC
5.25%, 03/06/07d		22,879		22,862
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07d		21,449		21,295
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07d		14,576		14,537
Crown Point Capital Co. LLC
5.20%, 07/18/07d		33,035		32,372
Edison Asset Securitization LLC
5.21%, 04/11/07d		11,852		11,782
Five Finance Inc.
5.22%, 04/20/07d		13,155		13,060
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07d		50,047		49,187
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07d		46,901		46,844
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07d		55,767		55,074
Harrier Finance Funding LLC
5.12%, 06/06/07d		28,598		28,204
Irish Permanent Treasury PLC
5.18%, 07/10/07		14,299		14,030
KKR Pacific Funding Trust
5.29%, 03/13/07d		35,748		35,685
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07d		36,133		35,518
Liberty Street Funding Corp.
5.27%, 03/06/07d		3,432		3,429
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07d		64,517		63,904
Nationwide Building Society
5.21%, 04/13/07d		27,168		26,999

38 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Shares or Principal		Value
Nestle Capital Corp.
5.19%, 08/09/07	$	17,159	$	16,761
Sedna Finance Inc.
5.22%, 04/17/07d		16,301		16,190
Simba Funding Corp.
5.20%, 07/23/07d		28,598		28,003
Societe Generale
5.18%, 05/16/07		71,496		70,714
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07d		108,947		108,841
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07d		20,934		20,900
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07d		15,014		15,002
Tulip Funding Corp.
5.29%, 03/15/07d		54,898		54,785
Westpac Banking Corp.
5.20%, 07/12/07d		25,738		25,244
Zela Finance Inc.
5.20%, 07/16/07d		17,159		16,819
				891,975
MEDIUM-TERM NOTESc – 0.41%
Bank of America N.A.
5.28%, 04/20/07		7,150		7,150
Cullinan Finance Corp.
5.71%, 06/28/07d		21,449		21,449
K2 USA LLC
5.39%, 06/04/07d		21,449		21,449
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07d		33,460		33,460
				83,508
MONEY MARKET FUNDS – 0.93%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%e,f		187,638		187,638
				187,638

Security	Principal		Value
REPURCHASE AGREEMENTSc – 2.69%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $57,206 (collateralized by non-U.S. Government debt securities, value $58,959, 5.50% to 7.70%, 9/15/09 to 5/1/19).	$	57,197	$	57,197
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $42,903 (collateralized by non-U.S. Government debt securities, value $47,224, 0.00% to 9.20%, 10/17/18 to 11/25/52).		42,897		42,897
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $2,860 (collateralized by non-U.S. Government debt securities, value $3,005, 5.43%, 3/15/08).		2,860		2,860
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $42,903 (collateralized by non-U.S. Government debt securities, value $46,223, 0.00% to 10.00%, 5/27/33 to 8/25/46).		42,897		42,897
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $57,206 (collateralized by non-U.S. Government debt securities, value $60,104, 4.91% to 6.31%, 10/25/33 to 8/25/46).		57,197		57,197
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $31,463 (collateralized by non-U.S. Government debt securities, value $33,900, 0.00% to 10.00%, 5/27/33 to 8/25/46).		31,458		31,458

SCHEDULES OF INVESTMENTS 39

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $17,162 (collateralized by non-U.S. Government debt securities, value $19,116, 0.00% to 10.00%, 5/27/33 to 2/28/37).
	$	17,159	$	17,159
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $10,614 (collateralized by non-U.S. Government debt securities, value $11,151, 4.52% to 6.89%, 1/15/09 to 10/25/36).
		10,612		10,612
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $120,131 (collateralized by non-U.S. Government debt securities, value $132,436, 0.00% to 10.00%, 4/1/07 to 12/31/49).
		120,113		120,113
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $14,301 (collateralized by non-U.S. Government debt securities, value $15,027, 3.72% to 5.99%, 12/15/36 to 6/1/46).
		14,299		14,299
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $7,151 (collateralized by non-U.S. Government debt securities, value $7,514, 6.25% to 9.56%, 5/15/11 to 2/1/30).
		7,150		7,150
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $28,602 (collateralized by non-U.S. Government debt securities, value $30,052, 1.63% to 14.50%, 5/1/07 to 9/18/37).
		28,598		28,598

Security	Principal		Value
Morgan Stanley 5.36%, due 3/1/07, maturity value $28,602 (collateralized by non-U.S. Government debt securities, value $30,059, 0.00% to 10.00%, 3/1/07 to 2/28/37).
	$	28,598	$	28,598
Morgan Stanley 5.51%, due 2/4/08, maturity value $21,042 (collateralized by non-U.S. Government debt securities, value $23,741, 0.00% to 10.00%, 3/1/07 to 2/28/37).g
		20,019		20,019
Wachovia Capital 5.38%, due 3/1/07, maturity value $62,925 (collateralized by non-U.S. Government debt securities, value $66,114, 0.00% to 8.32%, 2/15/08 to 3/15/49).
		62,916		62,916
				543,970
TIME DEPOSITSc – 0.81%
Bank of Nova Scotia
5.30%, 03/02/07		11,993		11,993
Chase Bank USA N.A.
5.38%, 03/01/07		42,897		42,897
Citibank N.A.
5.47%, 03/01/07		42,897		42,897
Deutsche Bank AG
5.38%, 03/01/07		67,169		67,169
				164,956
VARIABLE & FLOATING RATE NOTESc – 10.27%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08d		73,212		73,219
American Express Centurion Bank
5.41%, 07/19/07		31,458		31,472
American Express Credit Corp.
5.42%, 03/05/08		8,579		8,584

40 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07	$	1,303	$	1,303
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07d		21,449		21,449
ASIF Global Financing
5.40%, 05/03/07d		2,860		2,860
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08d		18,589		18,589
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08d		41,468		41,469
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07d		72,926		72,927
BMW US Capital LLC
5.32%, 01/15/08d		28,598		28,598
BNP Paribas
5.33%, 11/19/07d		52,907		52,907
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07d		27,454		27,452
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07d		20,877		20,877
CC USA Inc.
5.36%, 07/30/07d		14,299		14,300
Commodore CDO Ltd.
5.44%, 12/12/07d		7,150		7,150
Credit Agricole SA
5.33%, 11/23/07		28,598		28,598
Credit Suisse First Boston NY
5.36%, 04/24/07		14,299		14,299
Cullinan Finance Corp.
5.36%, 04/25/07d		7,150		7,150
DaimlerChrysler Auto Trust
Series 2006-C Class A1
5.33%, 10/08/07d		2,194		2,194
DEPFA Bank PLC
5.40%, 12/14/07d		28,598		28,598

Security	Principal		Value
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07d	$	32,888	$	32,889
Eli Lilly Services Inc.
5.31%, 03/01/07d		19,089		19,089
Fifth Third Bancorp
5.32%, 02/22/08d		57,197		57,197
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07d		18,589		18,588
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08d		30,028		30,031
Granite Master Issuer PLC
5.29%, 08/20/07d		100,094		100,094
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07d		37,178		37,178
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		42,897		42,900
HBOS Treasury Services PLC
5.46%, 01/24/08d		28,598		28,598
Holmes Financing PLC
5.29%, 07/16/07d		50,047		50,047
JP Morgan Securities Inc.
5.40%, 11/16/07		57,197		57,197
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08g		78,645		78,646
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07d		21,449		21,448
Kestrel Funding LLC
5.30%, 07/11/07d		11,439		11,439
Kommunalkredit Austria AG
5.32%, 02/08/08d		17,159		17,159
Leafs LLC
5.32%, 01/22/08d		27,708		27,708
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07d		31,458		31,458

SCHEDULES OF INVESTMENTS 41

Schedule of Investments (Continued)

iSHARES^® LEHMAN GOVERNMENT/CREDIT BOND FUND

February 28, 2007

Security	Principal		Value
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07d	$	10,082	$	10,082
Marshall & Ilsley Bank
5.32%, 02/15/08		15,729		15,729
Master Funding LLC
5.35%, 04/25/07 - 05/25/07d		51,755		51,755
Merrill Lynch & Co. Inc.
5.46%, 05/30/07g		31,458		31,458
Metropolitan Life Global Funding I
5.33%, 03/06/08d		42,897		42,897
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07d,g		2,860		2,860
Mound Financing PLC
5.29%, 05/08/07d		26,882		26,882
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08d		45,757		45,757
National City Bank of Indiana
5.34%, 05/21/07		14,299		14,299
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08d		94,374		94,385
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08d		28,670		28,666
Northern Rock PLC
5.38%, 02/01/08d		34,318		34,319
Northlake CDO I
5.42%, 09/06/07d		8,579		8,579
Pricoa Global Funding I
5.31%, 02/27/08d		38,608		38,608
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07d		41,468		41,467
Skandinaviska Enskilda Banken
5.32%, 02/15/08d		28,598		28,598
Strips III LLC
5.37%, 07/24/07d		5,819		5,819
SunTrust Bank
5.29%, 05/01/07		28,598		28,599

Security	Principal		Value
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07d	$	69,780	$	69,777
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07d		47,187		47,187
Wachovia Asset Securitization Inc.
5.31%, 03/25/07d		32,282		32,283
Wachovia Bank N.A.
5.36%, 05/22/07		57,197		57,197
Wal-Mart Stores Inc.
5.50%, 07/16/07d		21,449		21,454
Wells Fargo & Co.
5.33%, 11/15/07d		14,299		14,300
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07d		21,449		21,449
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07d		85,795		85,787
Wind Master Trust
5.31%, 07/25/07d		11,439		11,439
				2,077,293
TOTAL SHORT-TERM INVESTMENTS (Cost: $4,135,229)				4,135,229
TOTAL INVESTMENTS IN SECURITIES – 118.78% (Cost: $23,927,460)				24,033,841
Other Assets, Less Liabilities – (18.78)%				(3,800,642	)
NET ASSETS – 100.00%			$	20,233,199

^a Investments are denominated in U.S. dollars.

^b All or a portion of this security represents a security on loan. See Note 5.

^c All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^d This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^e Affiliated issuer. See Note 2.

^f The rate quoted is the annualized seven-day yield of the fund at period end.

^g The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

42 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
CORPORATE BONDS & NOTES – 26.43%
AEROSPACE & DEFENSE – 0.24%
United Technologies Corp.
4.38%, 05/01/10	$	13,425,000	$	13,164,212
				13,164,212
AUTO MANUFACTURERS – 0.76%
DaimlerChrysler N.A. Holding Corp.
3.88%, 07/22/08		13,425,000		13,185,120
4.05%, 06/04/08		13,425,000		13,238,464
7.30%, 01/15/12		13,425,000		14,495,877
				40,919,461
BANKS – 3.44%
Bank of America Corp.
4.50%, 08/01/10		26,850,000		26,462,411
4.88%, 01/15/13		13,425,000		13,239,199
Bank One Corp.
2.63%, 06/30/08		26,850,000		26,004,624
Capital One Financial Corp.
6.15%, 09/01/16		13,425,000		13,863,528
KfW Bankengruppe
4.25%, 06/15/10		26,850,000		26,440,543
US Bank N.A.
4.95%, 10/30/14		13,425,000		13,180,940
Wachovia Corp.
3.50%, 08/15/08		13,425,000		13,117,980
5.25%, 08/01/14		26,850,000		26,767,366
Wells Fargo & Co.
4.88%, 01/12/11		13,425,000		13,373,666
5.00%, 11/15/14		13,425,000		13,213,526
				185,663,783
BEVERAGES – 0.25%
Diageo Finance BV
5.30%, 10/28/15		13,425,000		13,359,638
				13,359,638
COMPUTERS – 0.24%
International Business Machines Corp.
4.25%, 09/15/09		13,425,000		13,189,218
				13,189,218

Security	Principal		Value
DIVERSIFIED FINANCIAL SERVICES – 10.52%
American Express Co.
4.88%, 07/15/13	$	26,850,000	$	26,451,701
American General Finance Corp.
5.38%, 10/01/12		26,850,000		27,005,043
Ameriprise Financial Inc.
5.35%, 11/15/10		13,425,000		13,547,966
Bear Stearns Companies Inc. (The)
2.88%, 07/02/08		13,425,000		13,034,997
Boeing Capital Corp.
5.80%, 01/15/13		13,425,000		13,916,509
CIT Group Funding Company of Canada
4.65%, 07/01/10		26,850,000		26,400,845
Citigroup Inc.
6.00%, 02/21/12a		45,645,000		47,523,211
Countrywide Home Loans Inc.
3.25%, 05/21/08		13,425,000		13,113,561
Credit Suisse First Boston USA Inc.
7.13%, 07/15/32		13,425,000		16,103,498
General Electric Capital Corp.
3.50%, 05/01/08		13,425,000		13,187,037
5.88%, 02/15/12		13,425,000		13,908,833
6.75%, 03/15/32		13,425,000		15,596,993
Goldman Sachs Group Inc. (The)
3.88%, 01/15/09		26,850,000		26,282,666
Goldman Sachs Group LP
5.00%, 10/01/14		26,850,000		26,187,739
Household Finance Corp.
6.38%, 11/27/12		26,850,000		28,390,917
HSBC Finance Corp.
5.50%, 01/19/16		13,425,000		13,517,923
International Lease Finance Corp.
5.75%, 06/15/11		13,425,000		13,728,555
John Deere Capital Corp.
7.00%, 03/15/12		13,425,000		14,524,910
JPMorgan Chase & Co.
5.75%, 01/02/13		13,425,000		13,757,633

SCHEDULES OF INVESTMENTS 43

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
Lehman Brothers Holdings Inc.
4.50%, 07/26/10	$	13,425,000	$	13,215,388
5.50%, 04/04/16		13,425,000		13,567,819
Merrill Lynch & Co. Inc.
3.70%, 04/21/08		13,425,000		13,211,745
5.00%, 01/15/15		26,850,000		26,251,060
Morgan Stanley
5.05%, 01/21/11		13,425,000		13,418,031
5.30%, 03/01/13		26,850,000		26,877,388
National Rural Utilities Cooperative Finance Corp.
7.25%, 03/01/12		13,425,000		14,701,345
Residential Capital Corp.
6.38%, 06/30/10		13,425,000		13,503,539
SLM Corp.
5.38%, 05/15/14		26,850,000		26,760,653
Unilever Capital Corp.
5.90%, 11/15/32		13,425,000		13,734,878
Verizon Global Funding Corp.
7.75%, 12/01/30		13,425,000		16,074,420
				567,496,803
ELECTRIC – 1.42%
Constellation Energy Group Inc.
4.55%, 06/15/15		8,055,000		7,550,486
Dominion Resources Inc.
5.15%, 07/15/15		13,425,000		13,156,295
Duke Capital LLC
6.25%, 02/15/13		13,425,000		13,793,054
Exelon Generation Co. LLC
5.35%, 01/15/14		5,370,000		5,293,926
MidAmerican Energy Holdings Co.
6.13%, 04/01/36		8,055,000		8,320,332
Pacific Gas & Electric Co.
6.05%, 03/01/34		13,425,000		13,867,710
Progress Energy Inc.
7.10%, 03/01/11		13,425,000		14,358,876
				76,340,679
FOOD – 0.25%
Kraft Foods Inc.
4.00%, 10/01/08		13,425,000		13,196,695
				13,196,695

Security	Principal		Value
FOREST PRODUCTS & PAPER – 0.27%
Weyerhaeuser Co.
7.38%, 03/15/32	$	13,425,000	$	14,626,790
				14,626,790
HEALTH CARE – SERVICES – 0.24%
UnitedHealth Group Inc.
4.88%, 03/15/15		13,425,000		13,089,443
				13,089,443
HOME BUILDERS – 0.15%
Pulte Homes Inc.
5.25%, 01/15/14		8,055,000		7,873,056
				7,873,056
INSURANCE – 1.26%
Allstate Corp. (The)
5.55%, 05/09/35		13,425,000		13,167,616
Genworth Financial Inc.
5.75%, 06/15/14		13,425,000		13,867,073
Lincoln National Corp.
7.00%, 05/17/66		13,425,000		14,362,867
Marsh & McLennan Companies Inc.
5.75%, 09/15/15		13,425,000		13,487,556
Metlife Inc.
5.00%, 06/15/15		13,425,000		13,200,754
				68,085,866
MANUFACTURING – 0.14%
Tyco International Group SA
6.38%, 10/15/11		6,981,000		7,377,216
				7,377,216
MEDIA – 0.67%
News America Inc.
6.20%, 12/15/34		13,425,000		13,536,257
Time Warner Inc.
7.70%, 05/01/32		13,425,000		15,710,738
Viacom Inc.
6.25%, 04/30/16		6,981,000		7,116,760
				36,363,755
MINING – 0.36%
Alcoa Inc.
6.00%, 01/15/12		13,425,000		13,896,638
Vale Overseas Ltd.
6.88%, 11/21/36		5,370,000		5,660,893
				19,557,531

44 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
MULTI-NATIONAL – 0.84%
European Investment Bank
4.63%, 05/15/14	$	26,850,000	$	26,629,398
Inter-American Development Bank
4.38%, 09/20/12		5,370,000		5,294,893
International Bank for Reconstruction & Development
4.13%, 08/12/09a		13,425,000		13,245,265
				45,169,556
OIL & GAS – 1.02%
Anadarko Petroleum Corp.
5.95%, 09/15/16		13,425,000		13,600,050
ConocoPhillips
5.90%, 10/15/32		13,425,000		13,918,860
Enterprise Products Operating LP
5.60%, 10/15/14		13,425,000		13,506,781
Hess Corp.
6.65%, 08/15/11		13,425,000		14,188,109
				55,213,800
PHARMACEUTICALS – 0.60%
AmerisourceBergen Corp.
5.88%, 09/15/15		13,425,000		13,357,985
Bristol-Myers Squibb Co.
5.88%, 11/15/36		13,425,000		13,764,901
Wyeth
5.50%, 02/01/14		5,370,000		5,456,117
				32,579,003
REAL ESTATE INVESTMENT TRUSTS – 0.41%
Boston Properties LP
6.25%, 01/15/13		13,425,000		14,012,303
iStar Financial Inc.
5.88%, 03/15/16		8,055,000		8,057,580
				22,069,883
RETAIL – 0.49%
Home Depot Inc.
5.40%, 03/01/16		13,425,000		13,237,253
Wal-Mart Stores Inc.
4.55%, 05/01/13		13,425,000		13,044,591
				26,281,844

Security	Principal		Value
SAVINGS & LOANS – 0.24%
Washington Mutual Inc.
4.00%, 01/15/09	$	13,425,000	$	13,145,205
				13,145,205
SOFTWARE – 0.25%
Oracle Corp.
5.25%, 01/15/16		13,425,000		13,377,154
				13,377,154
TELECOMMUNICATIONS – 1.83%
AT&T Wireless Services Inc.
7.88%, 03/01/11		19,869,000		21,823,932
BellSouth Corp.
6.00%, 11/15/34		13,425,000		13,339,894
Embarq Corp.
7.08%, 06/01/16		13,425,000		13,875,212
SBC Communications Inc.
5.88%, 02/01/12		13,425,000		13,816,947
Sprint Capital Corp.
8.38%, 03/15/12		13,425,000		15,069,725
Telecom Italia Capital SA
4.00%, 01/15/10		13,425,000		12,956,543
Vodafone Group PLC
5.63%, 02/27/17		8,055,000		8,064,113
				98,946,366
TELEPHONE – 0.29%
Comcast Cable Communications Holdings Inc.
8.38%, 03/15/13		13,425,000		15,511,791
				15,511,791
TRANSPORTATION – 0.25%
CSX Corp.
6.00%, 10/01/36		13,425,000		13,541,978
				13,541,978
TOTAL CORPORATE BONDS & NOTES (Cost: $1,420,751,913)				1,426,140,726
FOREIGN GOVERNMENT BONDS & NOTESb – 2.10%
Italy (Republic of)
5.25%, 09/20/16		13,425,000		13,656,696
6.00%, 02/22/11		13,425,000		13,945,784

SCHEDULES OF INVESTMENTS 45

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
Ontario (Province of)
5.50%, 10/01/08	$	13,425,000	$	13,535,577
Quebec (Province of)
7.50%, 09/15/29		13,425,000		17,374,786
United Mexican States
4.63%, 10/08/08		13,425,000		13,296,791
5.63%, 01/15/17		13,425,000		13,462,187
6.38%, 01/16/13		26,850,000		28,250,765
TOTAL FOREIGN GOVERNMENT BONDS & NOTES (Cost: $112,588,289)				113,522,586
MUNICIPAL DEBT OBLIGATIONS – 0.24%
ILLINOIS – 0.24%
Illinois State
5.10%, 06/01/33		13,425,000		13,160,259
				13,160,259
TOTAL MUNICIPAL DEBT OBLIGATIONS (Cost: $12,885,253)				13,160,259
U.S. GOVERNMENT & AGENCY OBLIGATIONS – 69.95%
MORTGAGE-BACKED SECURITIES – 35.07%
Federal Home Loan Mortgage Corp.
4.50%, 04/01/22c		70,347,000		68,170,640
5.00%, 04/01/22c		82,161,000		81,056,962
5.00%, 04/01/37c		129,954,000		126,055,380
5.50%, 04/01/22c		95,586,000		95,780,159
5.50%, 04/01/37c		231,447,000		229,566,493
6.00%, 04/01/37c		141,231,000		142,444,704
Federal National Mortgage Association
4.50%, 04/01/22c		70,347,000		68,203,615
5.00%, 04/01/22c		90,216,000		89,003,723
5.50%, 04/01/22c		56,922,000		57,046,517
5.50%, 04/01/37c		298,572,000		296,099,451
6.00%, 04/01/37c		262,056,000		264,185,205
6.50%, 04/01/37c		182,580,000		186,060,431
Government National Mortgage Association
5.00%, 04/01/37c		77,865,000		76,088,705

Security	Principal		Value
5.50%, 04/01/37c	$	70,347,000	$	70,215,099
6.00%, 04/01/37c		41,886,000		42,507,745
				1,892,484,829
U.S. GOVERNMENT AGENCY OBLIGATIONS – 11.00%
Federal Home Loan Mortgage Corp.
2.75%, 03/15/08a		194,931,000		190,323,221
4.50%, 01/15/13a		110,085,000		108,264,260
6.25%, 07/15/32a		35,979,000		41,892,951
Federal National Mortgage Association
5.00%, 09/15/08		125,121,000		125,246,809
5.00%, 04/15/15a		34,905,000		35,204,537
7.25%, 01/15/10a		86,994,000		92,596,370
				593,528,148
U.S. GOVERNMENT OBLIGATIONS – 23.88%
U.S. Treasury Bonds
6.25%, 05/15/30a		55,311,000		66,992,685
7.50%, 11/15/16		35,442,000		43,418,221
7.63%, 02/15/25a		151,434,000		203,048,765
8.13%, 08/15/19a		112,770,000		148,934,211
U.S. Treasury Notes
3.50%, 02/15/10a		114,918,000		111,622,157
4.63%, 03/31/08		64,440,000		64,266,014
4.75%, 11/15/08a		96,660,000		96,777,927
4.75%, 05/15/14a		104,178,000		105,540,647
5.13%, 06/30/08		168,618,000		169,381,858
6.00%, 08/15/09a		270,111,000		278,822,055
				1,288,804,540
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (Cost: $3,766,048,175)				3,774,817,517
SHORT-TERM INVESTMENTS – 55.16%
CERTIFICATES OF DEPOSITd – 0.92%
Credit Suisse First Boston NY
5.28% - 5.43%,
04/23/07 - 08/21/07		11,526,641		11,526,641
Deutsche Bank AG
5.35%, 08/08/07		19,211,068		19,211,068
Washington Mutual Bank
5.33%, 03/19/07		19,211,068		19,211,068
				49,948,777

46 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
COMMERCIAL PAPERd – 4.44%
Amstel Funding Corp.
5.22%, 04/16/07 - 04/17/07e	$	7,308,735	$	7,259,318
BNP Paribas Finance Inc.
5.12%, 06/06/07		2,689,549		2,652,482
Bryant Park Funding LLC
5.27%, 03/06/07e		1,893,750		1,892,364
Cantabric Finance LLC
5.25%, 03/06/07e		6,147,542		6,143,059
Cheyne Finance LLC
5.24%, 04/12/07 - 04/23/07e		5,763,320		5,721,935
Concord Minutemen Capital Co. LLC
5.29%, 03/19/07e		3,916,522		3,906,163
Crown Point Capital Co. LLC
5.20%, 07/18/07e		8,876,666		8,698,442
Edison Asset Securitization LLC
5.21%, 04/11/07e		3,184,657		3,165,761
Five Finance Inc.
5.22%, 04/20/07e		3,534,836		3,509,209
General Electric Capital Corp.
5.12% - 5.20%, 06/04/07 - 07/17/07e		13,447,747		13,216,778
Giro Funding Corp.
5.25%, 03/05/07 - 03/12/07e		12,602,460		12,587,264
Grampian Funding LLC
5.14% - 5.23%, 04/23/07 - 06/06/07e		14,984,633		14,798,525
Harrier Finance Funding LLC
5.12%, 06/06/07e		7,684,427		7,578,520
Irish Permanent Treasury PLC
5.18%, 07/10/07		3,842,214		3,769,790
KKR Pacific Funding Trust
5.29%, 03/13/07e		9,605,534		9,588,596
Lexington Parker Capital Co. LLC
5.18% - 5.20%, 05/17/07 - 07/25/07e		9,709,120		9,543,860

Security	Principal		Value
Liberty Street Funding Corp.
5.27%, 03/06/07e	$	922,131	$	921,456
Lockhart Funding LLC
5.25%, 05/04/07 - 05/14/07e		17,335,760		17,171,091
Nationwide Building Society
5.21%, 04/13/07e		7,300,206		7,254,776
Nestle Capital Corp.
5.19%, 08/09/07		4,610,656		4,503,639
Sedna Finance Inc.
5.22%, 04/17/07e		4,380,123		4,350,273
Simba Funding Corp.
5.20%, 07/23/07e		7,684,427		7,524,591
Societe Generale
5.18%, 05/16/07		19,211,068		19,000,984
Thames Asset Global Securitization No. 1 Inc.
5.25% - 5.28%, 03/02/07 - 03/12/07e		29,274,286		29,245,978
Thornburg Mortgage Capital Resources LLC
5.28%, 03/12/07e		5,625,001		5,615,926
Three Pillars Funding Corp.
5.26%, 03/01/07 - 03/12/07e		4,034,170		4,030,994
Tulip Funding Corp.
5.29%, 03/15/07e		14,751,103		14,720,757
Westpac Banking Corp.
5.20%, 07/12/07e		6,915,984		6,783,121
Zela Finance Inc.
5.20%, 07/16/07e		4,610,656		4,519,416
				239,675,068
MEDIUM-TERM NOTESd – 0.42%
Bank of America N.A.
5.28%, 04/20/07		1,921,107		1,921,107
Cullinan Finance Corp.
5.71%, 06/28/07e		5,763,320		5,763,320
K2 USA LLC
5.39%, 06/04/07e		5,763,320		5,763,320
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/07e		8,990,780		8,990,779
				22,438,526

SCHEDULES OF INVESTMENTS 47

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Shares or Principal		Value
MONEY MARKET FUNDS – 35.51%
Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares 5.26%f,g	$	1,916,177,827	$	1,916,177,827
				1,916,177,827
REPURCHASE AGREEMENTSd – 2.71%
Banc of America Securities LLC 5.36%, due 3/1/07, maturity value $15,371,142 (collateralized by non-U.S. Government debt securities, value $15,842,419, 5.50% to 7.70%, 9/15/09 to 5/1/19).		15,368,854		15,368,854
Bear Stearns Companies Inc. (The) 5.37%, due 3/1/07, maturity value $11,528,360 (collateralized by non-U.S. Government debt securities, value $12,689,316, 0.00% to 9.20%, 10/17/18 to 11/25/52).		11,526,641		11,526,641
BNP Securities Corp. 5.36%, due 3/1/07, maturity value $768,557 (collateralized by non-U.S. Government debt securities, value $807,502, 5.43%, 3/15/08).		768,443		768,443
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $11,528,357 (collateralized by non-U.S. Government debt securities, value $12,420,291, 0.00% to 10.00%, 5/27/33 to 8/25/46).		11,526,641		11,526,641

Security	Principal		Value
Citigroup Global Markets Holdings Inc. 5.36%, due 3/1/07, maturity value $15,371,142 (collateralized by non-U.S. Government debt securities, value $16,150,039, 4.91% to 6.31%, 10/25/33 to 8/25/46).	$	15,368,854	$	15,368,854
Citigroup Global Markets Holdings Inc. 5.42%, due 3/1/07, maturity value $8,454,143 (collateralized by non-U.S. Government debt securities, value $9,109,075, 0.00% to 10.00%, 5/27/33 to 8/25/46).		8,452,870		8,452,870
Citigroup Global Markets Holdings Inc. 5.46%, due 3/1/07, maturity value $4,611,355 (collateralized by non-U.S. Government debt securities, value $5,136,456, 0.00% to 10.00%, 5/27/33 to 2/28/37).		4,610,656		4,610,656
Goldman Sachs Group Inc. (The) 5.36%, due 3/1/07, maturity value $2,851,885 (collateralized by non-U.S. Government debt securities, value $2,996,397, 4.52% to 6.89%, 1/15/09 to 10/25/36).		2,851,460		2,851,460
Greenwich Capital Markets Inc. 5.46%, due 3/1/07, maturity value $32,279,488 (collateralized by non-U.S. Government debt securities, value $35,585,885, 0.00% to 10.00%, 4/1/07 to 12/31/49).		32,274,593		32,274,593

48 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
HSBC Securities Inc. 5.36%, due 3/1/07, maturity value $3,842,786 (collateralized by non-U.S. Government debt securities, value $4,037,768, 3.72% to 5.99%, 12/15/36 to 6/1/46).	$	3,842,214	$	3,842,214
JP Morgan Securities Inc. 5.41%, due 3/1/07, maturity value $1,921,396 (collateralized by non-U.S. Government debt securities, value $2,018,996, 6.25% to 9.56%, 5/15/11 to 2/1/30).		1,921,107		1,921,107
Merrill Lynch & Co. Inc. 5.36%, due 3/1/07, maturity value $7,685,571 (collateralized by non-U.S. Government debt securities, value $8,075,059, 1.63% to 14.50%, 5/1/07 to 9/18/37).		7,684,427		7,684,427
Morgan Stanley 5.36%, due 3/1/07, maturity value $7,685,571 (collateralized by non-U.S. Government debt securities, value $8,076,798, 0.00% to 10.00%, 3/1/07 to 2/28/37).		7,684,427		7,684,427
Morgan Stanley 5.51%, due 2/4/08, maturity value $5,654,082 (collateralized by non-U.S. Government debt securities, value $6,379,156, 0.00% to 10.00%, 3/1/07 to 2/28/37).h		5,379,099		5,379,099

Security	Principal		Value
Wachovia Capital 5.38%, due 3/1/07, maturity value $16,908,265 (collateralized by non-U.S. Government debt securities, value $17,765,043, 0.00% to 8.32%, 2/15/08 to 3/15/49).	$	16,905,739	$	16,905,739
				146,166,025
TIME DEPOSITSd – 0.82%
Bank of Nova Scotia
5.30%, 03/02/07		3,222,541		3,222,541
Chase Bank USA N.A.
5.38%, 03/01/07		11,526,641		11,526,641
Citibank N.A.
5.47%, 03/01/07		11,526,641		11,526,641
Deutsche Bank AG
5.38%, 03/01/07		18,048,491		18,048,491
				44,324,314
VARIABLE & FLOATING RATE NOTESd – 10.34%
Allstate Life Global Funding II
5.30% - 5.40%, 02/15/08 - 03/07/08e		19,672,125		19,674,082
American Express Centurion Bank
5.41%, 07/19/07		8,452,870		8,456,678
American Express Credit Corp.
5.42%, 03/05/08		2,305,328		2,306,451
AmeriCredit Automobile Receivables Trust
5.35%, 03/06/07		350,216		350,216
Arkle Master Issuer PLC Series 2006-1A Class 1A
5.30%, 11/19/07e		5,763,320		5,763,320
ASIF Global Financing
5.40%, 05/03/07e		768,443		768,513
Australia & New Zealand Banking Group Ltd.
5.32%, 02/22/08e		4,994,878		4,994,878

SCHEDULES OF INVESTMENTS 49

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
Bank of Ireland
5.30% - 5.32%, 08/14/07 - 02/20/08e	$	11,142,419	$	11,142,739
Beta Finance Inc.
5.29% - 5.41%, 04/25/07 - 07/25/07e		19,595,289		19,595,646
BMW US Capital LLC
5.32%, 01/15/08e		7,684,427		7,684,427
BNP Paribas
5.33%, 11/19/07e		14,216,190		14,216,190
Brigantine High Grade Funding Ltd.
5.40%, 09/05/07e		7,377,050		7,376,360
Carlyle Loan Investment Ltd.
5.37%, 04/13/07 - 07/15/07e		5,609,632		5,609,632
CC USA Inc.
5.36%, 07/30/07e		3,842,214		3,842,425
Commodore CDO Ltd.
5.44%, 12/12/07e		1,921,107		1,921,107
Credit Agricole SA
5.33%, 11/23/07		7,684,427		7,684,427
Credit Suisse First Boston NY
5.36%, 04/24/07		3,842,214		3,842,239
Cullinan Finance Corp.
5.36%, 04/25/07e		1,921,107		1,921,107
DaimlerChrysler Auto Trust
Series 2006-C Class A1
5.33%, 10/08/07e		589,460		589,460
DEPFA Bank PLC
5.40%, 12/14/07e		7,684,427		7,684,427
Dorada Finance Inc.
5.33% - 5.41%, 06/27/07 - 07/17/07e		8,837,091		8,837,239
Eli Lilly Services Inc.
5.31%, 03/01/07e		5,129,355		5,129,355
Fifth Third Bancorp
5.32%, 02/22/08e		15,368,854		15,368,854
Five Finance Inc.
5.31% - 5.37%, 06/29/07 - 07/13/07e		4,994,878		4,994,626
General Electric Capital Corp.
5.28% - 5.45%, 07/09/07 - 02/22/08e		8,068,648		8,069,441

Security	Principal		Value
Granite Master Issuer PLC
5.29%, 08/20/07e	$	26,895,495	$	26,895,495
Harrier Finance Funding LLC
5.29% - 5.36%, 07/25/07 - 08/15/07e		9,989,755		9,989,810
Hartford Life Global Funding Trust
5.36% - 5.40%, 07/13/07 - 03/14/08		11,526,641		11,527,381
HBOS Treasury Services PLC
5.46%, 01/24/08e		7,684,427		7,684,427
Holmes Financing PLC
5.29%, 07/16/07e		13,447,747		13,447,747
JP Morgan Securities Inc.
5.40%, 11/16/07		15,368,854		15,368,854
JPMorgan Chase & Co.
5.29% - 5.45%, 07/27/07 - 02/29/08h		21,132,174		21,132,174
K2 USA LLC
5.20% - 5.33%, 04/02/07 - 06/28/07e		5,763,320		5,763,220
Kestrel Funding LLC
5.30%, 07/11/07e		3,073,771		3,073,652
Kommunalkredit Austria AG
5.32%, 02/08/08e		4,610,656		4,610,656
Leafs LLC
5.32%, 01/22/08e		7,445,211		7,445,211
Links Finance LLC
5.28% - 5.35%, 05/10/07 - 05/16/07e		8,452,870		8,452,700
Lothian Mortgages Master Issuer PLC
5.29%, 04/24/07e		2,709,158		2,709,158
Marshall & Ilsley Bank
5.32%, 02/15/08		4,226,435		4,226,435
Master Funding LLC
5.35%, 04/25/07 - 05/25/07e		13,906,738		13,906,738
Merrill Lynch & Co. Inc.
5.46%, 05/30/07h		8,452,870		8,452,870
Metropolitan Life Global Funding I
5.33%, 03/06/08e		11,526,641		11,526,641

50 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® LEHMAN AGGREGATE BOND FUND

February 28, 2007

Security	Principal		Value
Metropolitan Life Insurance Funding Agreement
5.44%, 08/01/07e,h	$	768,443	$	768,443
Mound Financing PLC
5.29%, 05/08/07e		7,223,361		7,223,361
Natexis Banques Populaires
5.33% - 5.35%, 06/20/07 - 02/08/08e		12,295,083		12,294,943
National City Bank of Indiana
5.34%, 05/21/07		3,842,214		3,842,286
Nationwide Building Society
5.37% - 5.48%, 07/20/07 - 01/28/08e		25,358,609		25,361,463
Newcastle Ltd.
5.34%, 04/24/07 - 01/24/08e		7,703,638		7,702,618
Northern Rock PLC
5.38%, 02/01/08e		9,221,312		9,221,487
Northlake CDO I
5.42%, 09/06/07e		2,305,328		2,305,328
Pricoa Global Funding I
5.31%, 02/27/08e		10,373,976		10,373,976
Sedna Finance Inc.
5.32% - 5.34%, 05/25/07 - 08/21/07e		11,142,419		11,142,339
Skandinaviska Enskilda Banken
5.32%, 02/15/08e		7,684,427		7,684,427
Strips III LLC
5.37%, 07/24/07e		1,563,648		1,563,648
SunTrust Bank
5.29%, 05/01/07		7,684,427		7,684,494
Tango Finance Corp.
5.27% - 5.34%, 04/25/07 - 07/16/07e		18,750,002		18,749,382
Union Hamilton Special Funding LLC
5.36% - 5.37%, 03/28/07 - 06/21/07e		12,679,305		12,679,305
Wachovia Asset Securitization Inc.
5.31%, 03/25/07e		8,674,329		8,674,329
Wachovia Bank N.A.
5.36%, 05/22/07		15,368,854		15,368,854

Security	Principal		Value
Wal-Mart Stores Inc.
5.50%, 07/16/07e	$	5,763,320	$	5,764,779
Wells Fargo & Co.
5.33%, 11/15/07e		3,842,214		3,842,366
WhistleJacket Capital Ltd.
5.28% - 5.35%, 04/18/07 - 06/13/07e		5,763,320		5,763,343
White Pine Finance LLC
5.28% - 5.32%, 05/22/07 - 08/20/07e		23,053,281		23,051,214
Wind Master Trust
5.31%, 07/25/07e		3,073,771		3,073,771
				558,173,164
TOTAL SHORT-TERM INVESTMENTS (Cost: $2,976,903,701)				2,976,903,701
TOTAL INVESTMENTS IN SECURITIES – 153.88% (Cost: $8,289,177,331)				8,304,544,789
Other Assets, Less Liabilities – (53.88)%				(2,907,721,154	)
NET ASSETS – 100.00%			$	5,396,823,635

^a All or a portion of this security represents a security on loan. See Note 5.

^b Investments are denominated in U.S. dollars.

^c To-be-announced (TBA). See Note 1.

^d All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

^e This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

^f Affiliated issuer. See Note 2.

^g The rate quoted is the annualized seven-day yield of the fund at period end.

^h The investment adviser has determined that this security or a portion of these securities is “illiquid,” in that it cannot be sold within seven (7) days for approximately the value at which it is carried in the Fund.

See notes to financial statements.

SCHEDULES OF INVESTMENTS 51

Schedule of Investments

iSHARES^® iBOXX $ INVESTMENT GRADE CORPORATE BOND FUND

February 28, 2007

Security	Principal		Value
CORPORATE BONDS & NOTES – 98.02%
AEROSPACE & DEFENSE – 2.00%
United Technologies Corp.
4.38%, 05/01/10	$	30,590,000	$	30,046,161
4.88%, 05/01/15		27,930,000		27,302,574
				57,348,735
AUTO MANUFACTURERS – 0.99%
DaimlerChrysler N.A. Holding Corp.
5.88%, 03/15/11		27,930,000		28,439,667
				28,439,667
BANKS – 10.78%
Bank of America Corp.
5.38%, 08/15/11		27,930,000		28,291,468
5.63%, 10/14/16		26,600,000		27,353,135
Capital One Financial Corp.
5.70%, 09/15/11		27,930,000		28,383,778
6.15%, 09/01/16		27,930,000		28,881,000
HSBC Holdings PLC
6.50%, 05/02/36		27,930,000		30,638,208
US Bancorp
4.50%, 07/29/10		27,930,000		27,548,955
Wachovia Corp.
5.30%, 10/15/11		26,600,000		26,927,685
5.63%, 10/15/16		26,600,000		27,075,249
Wells Fargo & Co.
4.88%, 01/12/11		27,930,000		27,799,997
Wells Fargo Bank N.A.
5.75%, 05/16/16		26,600,000		27,603,535
5.95%, 08/26/36		27,930,000		29,234,266
				309,737,276
BEVERAGES – 1.95%
Diageo Capital PLC
5.88%, 09/30/36		27,930,000		27,889,781
Diageo Finance BV
5.50%, 04/01/13		27,930,000		28,277,687
				56,167,468
BUILDING MATERIALS – 1.98%
CRH America Inc.
5.63%, 09/30/11		27,930,000		28,359,619
6.00%, 09/30/16		27,930,000		28,571,469
				56,931,088

Security	Principal		Value
CHEMICALS – 0.95%
Du Pont (E.I.) de Nemours and Co.
4.13%, 04/30/10	$	27,930,000	$	27,269,279
				27,269,279
COMMERCIAL SERVICES – 1.96%
RR Donnelley & Sons Co.
5.63%, 01/15/12		27,930,000		28,400,385
Western Union Co.
5.40%, 11/17/11		27,930,000		27,823,866
				56,224,251
DIVERSIFIED FINANCIAL SERVICES – 32.25%
American Express Co.
5.50%, 09/12/16		27,930,000		28,544,795
American Express Credit Corp.
5.00%, 12/02/10		27,930,000		27,952,474
Bear Stearns Companies Inc. (The)
5.35%, 02/01/12		27,930,000		28,159,411
Caterpillar Financial Services Corp.
5.05%, 12/01/10		27,930,000		27,984,324
CIT Group Inc.
5.60%, 04/27/11		26,600,000		27,025,902
5.65%, 02/13/17		27,930,000		28,119,022
Citigroup Inc.
5.00%, 09/15/14		1,330,000		1,307,737
5.13%, 02/14/11		27,930,000		28,034,194
5.50%, 02/15/17		27,930,000		28,187,515
6.13%, 08/25/36		27,930,000		29,482,847
Credit Suisse First Boston USA Inc.
4.88%, 08/15/10		27,930,000		27,825,123
4.88%, 01/15/15		27,930,000		27,398,718
General Electric Capital Corp.
5.00%, 11/15/11		27,930,000		27,914,890
5.40%, 02/15/17		27,930,000		28,177,181
General Electric Co.
5.00%, 02/01/13		26,600,000		26,455,922
Goldman Sachs Group Inc. (The)
5.75%, 10/01/16		27,930,000		28,446,649
6.45%, 05/01/36		27,930,000		29,227,685
Goldman Sachs Group LP
4.50%, 06/15/10		27,930,000		27,500,007

52 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® iBOXX $ INVESTMENT GRADE CORPORATE BOND FUND

February 28, 2007

Security	Principal		Value
HSBC Finance Corp.
5.25%, 01/14/11	$	27,930,000	$	28,075,752
5.50%, 01/19/16		27,930,000		28,322,190
International Lease Finance Corp.
5.45%, 03/24/11		29,260,000		29,590,059
JPMorgan Chase & Co.
5.15%, 10/01/15		27,930,000		27,717,734
5.60%, 06/01/11		27,930,000		28,516,707
Lehman Brothers Holdings Inc.
5.25%, 02/06/12		26,600,000		26,721,028
5.75%, 01/03/17		26,600,000		26,974,397
Merrill Lynch & Co. Inc.
5.77%, 07/25/11		27,930,000		28,681,191
6.05%, 05/16/16		27,930,000		28,979,573
6.11%, 01/29/37		27,930,000		27,809,761
Morgan Stanley
5.63%, 01/09/12		27,930,000		28,499,000
5.75%, 10/18/16		27,930,000		28,330,201
ORIX Corp.
5.48%, 11/22/11		27,930,000		27,985,585
Residential Capital Corp.
6.38%, 06/30/10		27,930,000		28,142,511
SLM Corp.
4.50%, 07/26/10		27,930,000		27,411,651
Toyota Motor Credit Corp.
5.45%, 05/18/11		26,600,000		27,151,722
				926,653,458
ELECTRIC – 2.00%
FPL Group Capital Inc.
5.63%, 09/01/11		27,930,000		28,487,060
MidAmerican Energy Holdings Co.
6.13%, 04/01/36		27,930,000		29,013,812
				57,500,872
HEALTH CARE - SERVICES – 1.87%
UnitedHealth Group Inc.
5.25%, 03/15/11		27,930,000		28,021,587
5.80%, 03/15/36		25,536,000		25,732,789
				53,754,376

Security	Principal		Value
INSURANCE – 2.88%
American International Group Inc.
5.05%, 10/01/15	$	27,930,000	$	27,549,757
Berkshire Hathaway Finance Corp.
4.75%, 05/15/12		27,930,000		27,497,118
Marsh & McLennan Companies Inc.
5.15%, 09/15/10		27,930,000		27,604,587
				82,651,462
MACHINERY – 2.03%
Caterpillar Inc.
5.70%, 08/15/16		27,930,000		28,679,519
6.05%, 08/15/36		27,930,000		29,504,534
				58,184,053
MEDIA – 7.98%
Comcast Corp.
5.45%, 11/15/10		27,930,000		28,189,820
5.90%, 03/15/16		27,930,000		28,668,059
6.45%, 03/15/37		27,930,000		29,193,466
News America Inc.
6.40%, 12/15/35		27,930,000		28,781,303
Time Warner Inc.
5.50%, 11/15/11		27,930,000		28,311,738
Viacom Inc.
5.75%, 04/30/11		27,930,000		28,397,140
6.25%, 04/30/16		27,930,000		28,651,874
6.88%, 04/30/36		27,930,000		29,000,659
				229,194,059
MINING – 1.02%
Vale Overseas Ltd.
6.88%, 11/21/36		27,930,000		29,449,062
				29,449,062
OIL & GAS – 3.92%
Anadarko Petroleum Corp.
5.95%, 09/15/16		27,930,000		28,265,770
6.45%, 09/15/36		27,930,000		28,507,196
ConocoPhillips Australia Funding Co.
5.50%, 04/15/13		26,600,000		27,065,504

SCHEDULES OF INVESTMENTS 53

Schedule of Investments (Continued)

iSHARES^® iBOXX $ INVESTMENT GRADE CORPORATE BOND FUND

February 28, 2007

Security	Principal		Value
Shell International Finance BV
5.63%, 06/27/11	$	27,930,000	$	28,683,490
				112,521,960
PHARMACEUTICALS – 5.89%
Abbott Laboratories
5.60%, 05/15/11		27,930,000		28,377,140
5.88%, 05/15/16		26,600,000		27,810,300
Bristol-Myers Squibb Co.
5.88%, 11/15/36		27,930,000		28,538,168
Wyeth
5.50%, 02/01/14		27,930,000		28,406,742
5.50%, 02/15/16		27,930,000		28,421,083
6.00%, 02/15/36		26,600,000		27,668,956
				169,222,389
REAL ESTATE INVESTMENT TRUSTS – 0.96%
iStar Financial Inc.
5.15%, 03/01/12		27,930,000		27,478,520
				27,478,520
RETAIL – 3.86%
Home Depot Inc.
5.25%, 12/16/13		27,930,000		28,105,990
5.40%, 03/01/16		29,260,000		28,666,940
5.88%, 12/16/36		27,930,000		28,143,031
Wal-Mart Stores Inc.
4.13%, 07/01/10		26,600,000		25,883,834
				110,799,795
SOFTWARE – 1.02%
Oracle Corp.
5.00%, 01/15/11		29,260,000		29,257,329
				29,257,329
TELECOMMUNICATIONS – 9.93%
AT&T Inc.
5.30%, 11/15/10		27,930,000		28,083,474
6.80%, 05/15/36		26,600,000		29,237,469
BellSouth Corp.
4.75%, 11/15/12		27,930,000		27,299,533
Cisco Systems Inc.
5.25%, 02/22/11		27,930,000		28,203,799
5.50%, 02/22/16		27,930,000		28,472,787

Security	Shares or Principal		Value
Embarq Corp.
6.74%, 06/01/13	$	27,930,000	$	29,065,959
8.00%, 06/01/36		27,930,000		29,932,894
Verizon Communications Inc.
5.35%, 02/15/11		27,930,000		28,149,809
5.55%, 02/15/16		27,930,000		28,193,881
Verizon Global Funding Corp.
5.85%, 09/15/35		29,260,000		28,692,706
				285,332,311
TEXTILES – 1.80%
Mohawk Industries Inc.
5.75%, 01/15/11		17,556,000		17,733,399
6.13%, 01/15/16		33,782,000		34,115,153
				51,848,552
TOTAL CORPORATE BONDS & NOTES (Cost: $2,779,099,159)				2,815,965,962
SHORT-TERM INVESTMENTS – 0.47%
MONEY MARKET FUNDS – 0.47%
Barclays Global Investors Funds
Prime Money Market Fund,
Institutional Shares
5.26%a,b		13,677,364		13,677,364
				13,677,364
TOTAL SHORT-TERM INVESTMENTS (Cost: $13,677,364)				13,677,364
TOTAL INVESTMENTS IN SECURITIES – 98.49% (Cost: $2,792,776,523)				2,829,643,326
Other Assets, Less Liabilities – 1.51%				43,262,525
NET ASSETS – 100.00%			$	2,872,905,851

^a Affiliated issuer. See Note 2.

^b The rate quoted is the annualized seven-day yield of the fund at period end.

See notes to financial statements.

54 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Assets and Liabilities

iSHARES^® TRUST

February 28, 2007

	iShares Lehman
	1-3 Year Credit Bond Fund		Intermediate Credit Bond Fund			Credit Bond Fund
ASSETS
Investments, at cost:
Unaffiliated issuers	$	19,811,527	$	19,644,392		$	19,809,383
Affiliated issuers (Note 2)		61,319		181,496			74,458
Total cost of investments	$	19,872,846	$	19,825,888		$	19,883,841
Investments in securities, at value (Note 1):
Unaffiliated issuers	$	19,855,904	$	19,742,136		$	19,940,674
Affiliated issuers (Note 2)		61,319		181,496			74,458
Total value of investments		19,917,223		19,923,632			20,015,132
Cash		138,054		–			–
Receivables:
Investment securities sold		–		215,106			163,481
Interest		237,796		291,730			322,107
Total Assets		20,293,073		20,430,468			20,500,720
LIABILITIES
Payables:
Investment securities purchased		138,054		194,290			147,660
Investment advisory fees (Note 2)		3,129		3,075			3,087
Total Liabilities		141,183		197,365			150,747
NET ASSETS	$	20,151,890	$	20,233,103		$	20,349,973
Net assets consist of:
Paid-in capital	$	19,999,101	$	20,028,251		$	20,114,733
Undistributed net investment income		106,895		120,696			124,153
Undistributed net realized gain (accumulated net realized loss)		1,517		(13,588	)		(20,204	)
Net unrealized appreciation		44,377		97,744			131,291
NET ASSETS	$	20,151,890	$	20,233,103		$	20,349,973
Shares outstanding		200,000		200,000			200,000
Net asset value per share	$	100.76	$	101.17		$	101.75

See notes to financial statements.

FINANCIAL STATEMENTS 55

Statements of Assets and Liabilities (Continued)

iSHARES^® TRUST

February 28, 2007

	iShares Lehman
	Intermediate Government/ Credit Bond Fund			Government/ Credit Bond Fund			Aggregate Bond Fund
ASSETS
Investments, at cost:
Unaffiliated issuers	$	24,311,281		$	23,739,822		$	6,372,999,504
Affiliated issuers (Note 2)		194,284			187,638			1,916,177,827
Total cost of investments	$	24,505,565		$	23,927,460		$	8,289,177,331
Investments in securities, at value (including securities on loana) (Note 1):
Unaffiliated issuers	$	24,382,826		$	23,846,203		$	6,388,366,962
Affiliated issuers (Note 2)		194,284			187,638			1,916,177,827
Total value of investments		24,577,110			24,033,841			8,304,544,789
Receivables:
Investment securities sold		79,589			93,571			1,916,715,544
Interest		181,376			214,869			50,245,555
Capital shares sold		–			–			10,864,163
Total Assets		24,838,075			24,342,281			10,282,370,051
LIABILITIES
Payables:
Investment securities purchased		71,937			87,430			3,824,025,209
Collateral for securities on loan (Note 5)		4,601,680			3,947,591			1,060,725,874
Capital shares redeemed		–			69,453			–
Investment advisory fees (Note 2)		3,122			4,608			795,333
Total Liabilities		4,676,739			4,109,082			4,885,546,416
NET ASSETS	$	20,161,336		$	20,233,199		$	5,396,823,635
Net assets consist of:
Paid-in capital	$	19,987,664		$	20,023,101		$	5,396,148,680
Undistributed net investment income		107,685			128,879			23,323,081
Accumulated net realized loss		(5,558	)		(25,162	)		(38,015,584	)
Net unrealized appreciation		71,545			106,381			15,367,458
NET ASSETS	$	20,161,336		$	20,233,199		$	5,396,823,635
Shares outstanding		200,000			200,000			53,700,000
Net asset value per share	$	100.81		$	101.17		$	100.50

^a Securities on loan with market values of $4,494,050, $3,850,482 and $1,027,917,621, respectively. See Note 5.

See notes to financial statements.

56 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Assets and Liabilities (Continued)

iSHARES^® TRUST

February 28, 2007

	iShares iBoxx
	$ Investment Grade Corporate Bond Fund
ASSETS
Investments, at cost:
Unaffiliated issuers	$	2,779,099,159
Affiliated issuers (Note 2)		13,677,364
Total cost of investments	$	2,792,776,523
Investments in securities, at value (Note 1):
Unaffiliated issuers	$	2,815,965,962
Affiliated issuers (Note 2)		13,677,364
Total value of investments		2,829,643,326
Receivables:
Investment securities sold		173,317,732
Interest		40,608,059
Total Assets		3,043,569,117
LIABILITIES
Payables:
Investment securities purchased		170,340,260
Investment advisory fees (Note 2)		323,006
Total Liabilities		170,663,266
NET ASSETS	$	2,872,905,851
Net assets consist of:
Paid-in capital	$	2,908,616,862
Undistributed net investment income		12,935,073
Accumulated net realized loss		(85,512,887	)
Net unrealized appreciation		36,866,803
NET ASSETS	$	2,872,905,851
Shares outstanding		26,600,000
Net asset value per share	$	108.00

See notes to financial statements.

FINANCIAL STATEMENTS 57

Statements of Operations

iSHARES^® TRUST

Year ended February 28, 2007

	iShares Lehman
	1-3 Year Credit Bond Funda			Intermediate Credit Bond Funda			Credit Bond Funda
NET INVESTMENT INCOME
Interest from unaffiliated issuers	$	170,652		$	185,535		$	189,931
Interest from affiliated issuers (Note 2)		444			862			651
Securities lending income		–			–			5
Total investment income		171,096			186,397			190,587
EXPENSES
Investment advisory fees (Note 2)		7,021			6,961			6,598
Total expenses		7,021			6,961			6,598
Net investment income		164,075			179,436			183,989
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		771			(14,188	)		(20,246	)
In-kind redemptions		(8,371	)		(48,476	)		(25,815	)
Net realized loss		(7,600	)		(62,664	)		(46,061	)
Net change in unrealized appreciation (depreciation)		44,377			97,744			131,291
Net realized and unrealized gain		36,777			35,080			85,230
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	200,852		$	214,516		$	269,219

^a For the period from January 5, 2007 (commencement of operations) to February 28, 2007.

See notes to financial statements.

58 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Operations (Continued)

iSHARES^® TRUST

Year ended February 28, 2007

	iShares Lehman
	Intermediate Government/ Credit Bond Funda			Government/ Credit Bond Funda			Aggregate Bond Fund
NET INVESTMENT INCOME
Interest from unaffiliated issuers	$	168,499		$	211,128		$	129,168,393
Interest from affiliated issuers (Note 2)		843			946			70,525,257
Securities lending income		583			1,772			724,316
Total investment income		169,925			213,846		$	200,417,966
EXPENSES
Investment advisory fees (Note 2)		7,000			8,490			8,075,422
Total expenses		7,000			8,490			8,075,422
Net investment income		162,925			205,356			192,342,544
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(5,744	)		(32,531	)		574,622
In-kind redemptions		(27,437	)		95,595			735,814
Net realized gain (loss)		(33,181	)		63,064			1,310,436
Net change in unrealized appreciation (depreciation)		71,545			106,381			38,651,909
Net realized and unrealized gain		38,364			169,445			39,962,345
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	201,289		$	374,801		$	232,304,889

^a For the period from January 5, 2007 (commencement of operations) to February 28, 2007.

See notes to financial statements.

FINANCIAL STATEMENTS 59

Statements of Operations (Continued)

iSHARES^® TRUST

Year ended February 28, 2007

	iShares iBoxx
	$ Investment Grade Corporate Bond Fund
NET INVESTMENT INCOME
Interest from unaffiliated issuers	$	137,133,895
Interest from affiliated issuers (Note 2)		286,450
Securities lending income		1,034
Total investment income		137,421,379
EXPENSES
Investment advisory fees (Note 2)		3,809,910
Total expenses		3,809,910
Net investment income		133,611,469
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(58,981,139	)
In-kind redemptions		597,113
Net realized loss		(58,384,026	)
Net change in unrealized appreciation (depreciation)		83,392,049
Net realized and unrealized gain		25,008,023
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	158,619,492

See notes to financial statements.

60 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Changes in Net Assets

iSHARES^® TRUST

	iShares Lehman 1-3 Year Credit Bond Fund			iShares Lehman Intermediate Credit Bond Fund			iShares Lehman Credit Bond Fund
	Period from January 5, 2007a to February 28, 2007			Period from January 5, 2007a to February 28, 2007			Period from January 5, 2007a to February 28, 2007
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	164,075		$	179,436		$	183,989
Net realized loss		(7,600	)		(62,664	)		(46,061	)
Net change in unrealized appreciation (depreciation)		44,377			97,744			131,291
Net increase in net assets resulting from operations		200,852			214,516			269,219
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(57,180	)		(58,639	)		(59,763	)
Total distributions to shareholders		(57,180	)		(58,639	)		(59,763	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		30,027,794			30,046,668			30,152,226
Cost of shares redeemed		(10,019,576	)		(9,969,442	)		(10,011,709	)
Net increase in net assets from capital share transactions		20,008,218			20,077,226			20,140,517
INCREASE IN NET ASSETS		20,151,890			20,233,103			20,349,973
NET ASSETS
Beginning of period		–			–			–
End of period	$	20,151,890		$	20,233,103		$	20,349,973
Undistributed net investment income included in net assets at end of period	$	106,895		$	120,696		$	124,153
SHARES ISSUED AND REDEEMED
Shares sold		300,000			300,000			300,000
Shares redeemed		(100,000	)		(100,000	)		(100,000	)
Net increase in shares outstanding		200,000			200,000			200,000

^a Commencement of operations.

See notes to financial statements.

FINANCIAL STATEMENTS 61

Statements of Changes in Net Assets (Continued)

iSHARES^® TRUST

	iShares Lehman Intermediate Government/Credit Bond Fund			iShares Lehman Government/Credit Bond Fund			iShares Lehman Aggregate Bond Fund
	Period from January 5, 2007a to February 28, 2007			Period from January 5, 2007a to February 28, 2007			Year ended February 28, 2007			Year ended February 28, 2006
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	162,925		$	205,356		$	192,342,544		$	88,222,708
Net realized gain (loss)		(33,181	)		63,064			1,310,436			(19,021,880	)
Net change in unrealized appreciation (depreciation)		71,545			106,381			38,651,909			(17,014,253	)
Net increase in net assets resulting from operations		201,289			374,801			232,304,889			52,186,575
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(55,197	)		(76,298	)		(188,178,271	)		(91,986,737	)
Total distributions to shareholders		(55,197	)		(76,298	)		(188,178,271	)		(91,986,737	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		29,992,367			30,051,296			2,259,945,036			1,890,527,411
Cost of shares redeemed		(9,977,123	)		(10,116,600	)		(49,792,479	)		–
Net increase in net assets from capital share transactions		20,015,244			19,934,696			2,210,152,557			1,890,527,411
INCREASE IN NET ASSETS		20,161,336			20,233,199			2,254,279,175			1,850,727,249
NET ASSETS
Beginning of period		–			–			3,142,544,460			1,291,817,211
End of period	$	20,161,336		$	20,233,199		$	5,396,823,635		$	3,142,544,460
Undistributed net investment income included in net assets at end of period	$	107,685		$	128,879		$	23,323,081		$	11,805,975
SHARES ISSUED AND REDEEMED
Shares sold		300,000			300,000			22,800,000			18,700,000
Shares redeemed		(100,000	)		(100,000	)		(500,000	)		–
Net increase in shares outstanding		200,000			200,000			22,300,000			18,700,000

^a Commencement of operations.

See notes to financial statements.

62 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Changes in Net Assets (Continued)

iSHARES^® TRUST

	iShares iBoxx $ Investment Grade Corporate Bond Fund
	Year ended February 28, 2007			Year ended February 28, 2006
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	133,611,469		$	116,987,598
Net realized loss		(58,384,026	)		(21,521,440	)
Net change in unrealized appreciation (depreciation)		83,392,049			(68,444,863	)
Net increase in net assets resulting from operations		158,619,492			27,021,295
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(130,100,158	)		(116,439,147	)
Total distributions to shareholders		(130,100,158	)		(116,439,147	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		475,037,781			1,256,946,816
Cost of shares redeemed		(32,029,595	)		(1,321,068,628	)
Net increase (decrease) in net assets from capital share transactions		443,008,186			(64,121,812	)
INCREASE (DECREASE) IN NET ASSETS		471,527,520			(153,539,664	)
NET ASSETS
Beginning of year		2,401,378,331			2,554,917,995
End of year	$	2,872,905,851		$	2,401,378,331
Undistributed net investment income included in net assets at end of year	$	12,935,073		$	10,224,878
SHARES ISSUED AND REDEEMED
Shares sold		4,500,000			11,400,000
Shares redeemed		(300,000	)		(12,000,000	)
Net increase (decrease) in shares outstanding		4,200,000			(600,000	)

See notes to financial statements.

FINANCIAL STATEMENTS 63

Financial Highlights

iSHARES^® TRUST

(For a share outstanding throughout the period)

iShares Lehman         1-3 Year Credit Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$	100.08
Income from investment operations:
Net investment incomeb		0.69
Net realized and unrealized gainc		0.28
Total from investment operations		0.97
Less distributions from:
Net investment income		(0.29	)
Total distributions		(0.29	)
Net asset value, end of period	$	100.76
Total return		0.97	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	20,152
Ratio of expenses to average net assetse		0.20	%
Ratio of net investment income to average net assetse		4.67	%
Portfolio turnover ratef		13	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

64 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout the period)

iShares Lehman             Intermediate Credit Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$	100.19
Income from investment operations:
Net investment incomeb		0.76
Net realized and unrealized gainc		0.51
Total from investment operations		1.27
Less distributions from:
Net investment income		(0.29	)
Total distributions		(0.29	)
Net asset value, end of period	$	101.17
Total return		1.27	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	20,233
Ratio of expenses to average net assetse		0.20	%
Ratio of net investment income to average net assetse		5.16	%
Portfolio turnover ratef		4	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate 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 the period)

iShares Lehman Credit Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$	100.57
Income from investment operations:
Net investment incomeb		0.83
Net realized and unrealized gainc		0.65
Total from investment operations		1.48
Less distributions from:
Net investment income		(0.30	)
Total distributions		(0.30	)
Net asset value, end of period	$	101.75
Total return		1.48	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	20,350
Ratio of expenses to average net assetse		0.20	%
Ratio of net investment income to average net assetse		5.58	%
Portfolio turnover ratef		4	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

66 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout the period)

iShares Lehman Intermediate   Government/Credit Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$	100.00
Income from investment operations:
Net investment incomeb		0.69
Net realized and unrealized gainc		0.40
Total from investment operations		1.09
Less distributions from:
Net investment income		(0.28	)
Total distributions		(0.28	)
Net asset value, end of period	$	100.81
Total return		1.09	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	20,161
Ratio of expenses to average net assetse		0.20	%
Ratio of net investment income to average net assetse		4.65	%
Portfolio turnover ratef		2	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate 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 the period)

iShares Lehman             Government/Credit Bond Fund
	Period from Jan. 5, 2007a to Feb. 28, 2007
Net asset value, beginning of period	$	100.23
Income from investment operations:
Net investment incomeb		0.72
Net realized and unrealized gainc		0.47
Total from investment operations		1.19
Less distributions from:
Net investment income		(0.25	)
Total distributions		(0.25	)
Net asset value, end of period	$	101.17
Total return		1.20	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	20,233
Ratio of expenses to average net assetse		0.20	%
Ratio of net investment income to average net assetse		4.84	%
Portfolio turnover ratef		10	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amount reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

68 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout each period)

	iShares Lehman Aggregate Bond Fund
	Year ended Feb. 28, 2007			Year ended Feb. 28, 2006			Year ended Feb. 28, 2005			Period from Sep. 22, 2003a to Feb. 29, 2004
Net asset value, beginning of period	$	100.08		$	101.72		$	103.18		$	100.92
Income from investment operations:
Net investment income		4.71	b		3.83			3.73			1.12
Net realized and unrealized gain (loss)c		0.41			(1.32	)		(1.62	)		2.34
Total from investment operations		5.12			2.51			2.11			3.46
Less distributions from:
Net investment income		(4.70	)		(4.15	)		(3.57	)		(1.20	)
Total distributions		(4.70	)		(4.15	)		(3.57	)		(1.20	)
Net asset value, end of period	$	100.50		$	100.08		$	101.72		$	103.18
Total return		5.31	%		2.53	%		2.11	%		3.46	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	5,396,824		$	3,142,544		$	1,291,817		$	350,800
Ratio of expenses to average net assetse		0.20	%		0.20	%		0.20	%		0.20	%
Ratio of net investment income to average net assetse		4.76	%		3.89	%		2.90	%		2.47	%
Portfolio turnover ratef,g		483	%		456	%		457	%		165	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

^g Portfolio turnover rates include to-be-announced transactions. See Note 1.

See notes to financial statements.

FINANCIAL HIGHLIGHTS 69

Financial Highlights (Continued)

iSHARES^® TRUST

(For a share outstanding throughout each period)

	iShares iBoxx $ Investment Grade Corporate Bond Fund
	Year ended Feb. 28, 2007			Year ended Feb. 28, 2006			Year ended Feb. 28, 2005			Year ended Feb. 29, 2004			Period from Jul. 22, 2002a to Feb. 28, 2003
Net asset value, beginning of period	$	107.20		$	111.08		$	112.78		$	110.46		$	103.03
Income from investment operations:
Net investment income		5.54	b		5.15			5.18			5.35			3.24
Net realized and unrealized gain (loss)c		0.68			(3.92	)		(1.70	)		2.44			7.12
Total from investment operations		6.22			1.23			3.48			7.79			10.36
Less distributions from:
Net investment income		(5.42	)		(5.11	)		(5.18	)		(5.38	)		(2.93	)
Net realized gain		–			–			–			(0.09	)d		–
Total distributions		(5.42	)		(5.11	)		(5.18	)		(5.47	)		(2.93	)
Net asset value, end of period	$	108.00		$	107.20		$	111.08		$	112.78		$	110.46
Total return		6.03	%		1.12	%		3.24	%		7.29	%		10.22	%e
Ratios/Supplemental data:
Net assets, end of period (000s)	$	2,872,906		$	2,401,378		$	2,554,918		$	2,492,441		$	2,076,579
Ratio of expenses to average net assetsf		0.15	%		0.15	%		0.15	%		0.15	%		0.15	%
Ratio of net investment income to average net assetsf		5.26	%		4.75	%		4.71	%		4.83	%		5.38	%
Portfolio turnover rateg		89	%		71	%		32	%		0	%		20	%

^a Commencement of operations.

^b Based on average shares outstanding throughout the period.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Represents all short-term capital gain distributions. Short-term capital gain distributions are treated as ordinary dividends for tax purposes.

^e Not annualized.

^f Annualized for periods of less than one year.

^g Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to financial statements.

70 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements

iSHARES^® TRUST

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 February 28, 2007, the Trust offered 101 investment portfolios or funds.

These financial statements relate only to the iShares Lehman 1-3 Year Credit Bond Fund, iShares Lehman Intermediate Credit Bond Fund, iShares Lehman Credit Bond Fund, iShares Lehman Intermediate Government/Credit Bond Fund, iShares Lehman Government/Credit Bond Fund, iShares Lehman Aggregate Bond Fund and iShares iBoxx $ Investment Grade Corporate Bond Fund (formerly iShares GS$ InvesTop^TM Corporate Bond Fund) (each, a “Fund,” collectively, the “Funds”). The iShares Lehman 1-3 Year Credit Bond Fund, iShares Lehman Intermediate Credit Bond Fund, iShares Lehman Credit Bond Fund, iShares Lehman Intermediate Government/Credit Bond Fund and iShares Lehman Government/Credit Bond Fund commenced operations on January 5, 2007.

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. The investment adviser 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 Lehman Aggregate Bond Fund, which is classified as a diversified fund. Non-diversified funds generally hold securities of fewer companies than diversified funds and may be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence affecting these companies.

Pursuant to the Trust’s organizational documents, the Funds’ 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.

1. SIGNIFICANT ACCOUNTING POLICIES

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 the financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Certain prior year amounts in the financial statements have been reclassified to be consistent with the current period presentation. Those reclassifications had no impact on the prior year net assets, net income or distributions.

SECURITY VALUATION

The securities and other assets of each Fund are generally valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service or a major market maker (or dealer), (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service or a major market maker (or dealer) or (iii) based on amortized cost. In the case of shares of funds that are not traded on an exchange, a market valuation means such fund’s published net asset value per share. The investment adviser may use various pricing services or discontinue the use of any pricing service. A price obtained from a pricing service based on such pricing service’s valuation matrix may be considered a market valuation. In the event that current market valuations are not readily available or such valuations do not reflect current market values, the affected investments will be valued using fair value pricing pursuant to the pricing policy and procedures approved by the Board of Trustees of the Trust (the “Board”).

NOTES TO FINANCIAL STATEMENTS 71

Notes to Financial Statements (Continued)

iSHARES^® TRUST

SECURITY TRANSACTIONS AND INCOME RECOGNITION

Security transactions are accounted for on trade date. Interest income is accrued daily. Realized gains and losses on investment transactions are determined using the specific identification method. The Funds amortize premiums and accrete discounts on debt securities purchased, using a constant yield to maturity method.

DISTRIBUTIONS TO SHAREHOLDERS

Distributions to shareholders from net investment income, if any, are declared and distributed at least monthly by each Fund. Distributions of net realized capital gains, if any, generally are declared and distributed at least once a year. Distributions are determined on a tax basis and may differ from net investment income and net realized capital gains for financial reporting purposes. Dividends and distributions cannot be automatically reinvested in additional shares of the Funds.

As of February 28, 2007, the tax year-end of the Funds, the components of net distributable earnings (accumulated losses) on a tax basis were as follows:

iShares Bond Fund	Undistributed Ordinary Income		Unrealized Appreciation		Capital and Other Losses			Net Distributable Earnings (Accumulated Losses)
Lehman 1-3 Year Credit	$	108,390	$	44,399	$	–		$	152,789
Lehman Intermediate Credit		120,263		98,177		(13,588	)		204,852
Lehman Credit		123,824		131,620		(20,204	)		235,240
Lehman Intermediate Government/Credit		107,284		71,416		(5,028	)		173,672
Lehman Government/Credit		128,650		98,328		(16,880	)		210,098
Lehman Aggregate		23,028,099		2,677,185		(25,030,329	)		674,955
iBoxx $ Investment Grade Corporate		12,509,305		37,289,793		(85,510,109	)		(35,711,011	)

The tax character of distributions paid during the years ended February 28, 2007 and February 28, 2006, were as follows:

iShares Bond Fund	2007		2006
Lehman 1-3 Year Credita
Distributions paid from:
Ordinary income	$	57,180	$	–
Total Distributions	$	57,180	$	–
Lehman Intermediate Credita
Distributions paid from:
Ordinary income	$	58,639	$	–
Total Distributions	$	58,639	$	–

72 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (Continued)

iSHARES^® TRUST

iShares Bond Fund	2007		2006
Lehman Credita
Distributions paid from:
Ordinary income	$	59,763	$	–
Total Distributions	$	59,763	$	–
Lehman Intermediate Government/Credita
Distributions paid from:
Ordinary income	$	55,197	$	–
Total Distributions	$	55,197	$	–
Lehman Government/Credita
Distributions paid from:
Ordinary income	$	76,298	$	–
Total Distributions	$	76,298	$	–
Lehman Aggregate
Distributions paid from:
Ordinary income	$	188,178,271	$	91,986,737
Total Distributions	$	188,178,271	$	91,986,737
iBoxx $ Investment Grade Corporate
Distributions paid from:
Ordinary income	$	130,100,158	$	116,439,147
Total Distributions	$	130,100,158	$	116,439,147

^a Commencement of operations on January 5, 2007.

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 year ended February 28, 2007.

From November 1, 2006 to February 28, 2007, certain Funds incurred net realized capital losses. As permitted by tax regulations, the Funds have elected to defer those losses and treat them as arising in the year ending February 29, 2008, as follows:

iShares Bond Fund	Deferred Net Realized Capital Losses
Lehman Intermediate Credit	$	13,588
Lehman Credit		20,204
Lehman Intermediate Government/Credit		5,028
Lehman Government/Credit		16,880
Lehman Aggregate		3,004,370
iBoxx $ Investment Grade Corporate		5,145,449

NOTES TO FINANCIAL STATEMENTS 73

Notes to Financial Statements (Continued)

iSHARES^® TRUST

The Funds had tax basis net capital loss carryforwards as of February 28, 2007, the tax year-end of the Funds, as follows:

iShares Bond Fund	Expiring 2013		Expiring 2014		Expiring 2015		Total
Lehman Aggregate	$	1,089,293	$	4,420,413	$	16,516,253	$	22,025,959
iBoxx $ Investment Grade Corporate		4,185,823		7,993,294		68,185,543		80,364,660

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 year ended February 28, 2007, the Funds realized net capital gains or losses resulting from in-kind redemptions of large blocks of shares 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 net realized in-kind gains or losses for the year ended February 28, 2007 are disclosed in the Funds’ Statements of Operations.

As of February 28, 2007, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

iShares Bond Fund	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation
Lehman 1-3 Year Credit	$	19,872,824	$	47,221	$	(2,822	)	$	44,399
Lehman Intermediate Credit		19,825,455		100,581		(2,404	)		98,177
Lehman Credit		19,883,512		137,196		(5,576	)		131,620
Lehman Intermediate Government/Credit		24,505,694		72,485		(1,069	)		71,416
Lehman Government/Credit		23,935,513		100,682		(2,354	)		98,328
Lehman Aggregate		8,301,867,604		9,748,061		(7,070,876	)		2,677,185
iBoxx $ Investment Grade Corporate		2,792,353,533		42,390,758		(5,100,965	)		37,289,793

WHEN-ISSUED/TBA TRANSACTIONS

The iShares Lehman Aggregate Bond Fund may purchase mortgage pass-through securities on a when-issued or to-be-announced (“TBA”) basis, with payment and delivery scheduled for a future date. The Fund may enter into a TBA agreement, sell the obligation to purchase the pools stipulated in the TBA agreement prior to the stipulated settlement date and enter into a new TBA agreement for future delivery of pools of mortgage pass-through securities (a “TBA roll”). A TBA roll is treated by the Fund as a purchase transaction and a sale transaction in which the Fund realizes a gain or loss. The Fund’s use of TBA rolls may cause the Fund to experience higher portfolio turnover and higher transaction costs. The Fund could be exposed to possible risk if there is adverse market action, expenses or delays in connection with the TBA transactions, or if the counterparty fails to complete the transaction.

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

74 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (Continued)

iSHARES^® TRUST

agreement is accounted for as an investment by the Fund, collateralized by securities, which are delivered to the Fund’s 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.

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 execution of portfolio transactions, distribution fees and extraordinary expenses.

For its investment advisory services to each Fund, BGFA is entitled to an annual investment advisory fee based on the average daily net assets of each Fund as follows:

iShares Bond Fund	Investment Advisory Fee
Lehman 1-3 Year Credit	0.20	%
Lehman Intermediate Credit	0.20
Lehman Credit	0.20
Lehman Intermediate Government/Credit	0.20
Lehman Government/Credit	0.20
Lehman Aggregate	0.20
iBoxx $ Investment Grade Corporate	0.15

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 and expenses are Covered Expenses as defined above.

SEI Investments Distribution Co. (“SEI”) serves as each Fund’s underwriter and distributor of the shares of each Fund, pursuant to a Distribution Agreement with the Trust. SEI does not receive a fee from the Funds for its distribution services.

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission (“SEC”), the Funds are permitted to lend portfolio securities to Barclays Capital Inc. (“BarCap”). Pursuant to the same exemptive order, Barclays Global Investors, N.A. (“BGI”) serves as securities lending agent for the Trust. BarCap and BGI are affiliates of BGFA, the Funds’ investment adviser. As securities lending agent, BGI receives, as fees, a share of the income earned on investment of the cash collateral received for the loan of securities. For the year ended February 28, 2007, BGI earned securities lending agent fees as follows:

iShares Bond Fund	Securities Lending Agent Fees
Lehman Credit	$	5
Lehman Intermediate Government/Credit		583
Lehman Government/Credit		1,772
Lehman Aggregate		724,316
iBoxx $ Investment Grade Corporate		1,034

NOTES TO FINANCIAL STATEMENTS 75

Notes to Financial Statements (Continued)

iSHARES^® TRUST

Each Fund may invest in the Institutional Shares of certain money market funds managed by BGFA, the Funds’ investment adviser, including the Government Money Market Fund (“GMMF”), Institutional Money Market Fund (“IMMF”), Prime Money Market Fund (“PMMF”) and Treasury Money Market Fund (“TMMF”) of Barclays Global Investors Funds. The GMMF, IMMF, PMMF and TMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (collectively, the “Money Market Master Portfolios”), respectively, which are also managed by BGFA. While the GMMF, IMMF, PMMF and TMMF do not directly charge an investment advisory fee, the Money Market Master Portfolios in which they invest do charge an investment advisory fee. Income distributions from the GMMF, IMMF, PMMF and TMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Funds from temporary cash investments are recorded as interest from affiliated issuers in the accompanying Statements of Operations. Income distributions earned by the Funds from the investment of securities lending collateral, if any, are included in securities lending income in the accompanying Statements of Operations.

As of February 28, 2007, certain trustees and officers of the Trust are also officers of BGI and/or BGFA.

3. INVESTMENT PORTFOLIO TRANSACTIONS

Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the year ended February 28, 2007, were as follows:

	U.S. Government Obligations				Other Securities
iShares Bond Fund	Purchases		Sales		Purchases		Sales
Lehman 1-3 Year Credit	$	–	$	–	$	3,064,142	$	3,016,788
Lehman Intermediate Credit		–		–		798,000		946,933
Lehman Credit		–		–		888,991		1,002,917
Lehman Intermediate Government/Credit		119,008		39,732		262,452		317,828
Lehman Government/Credit		1,846,625		1,772,298		647,668		568,611
Lehman Aggregate		19,870,219,210		19,120,761,312		361,379,043		342,938,165
iBoxx $ Investment Grade Corporate		15,566,505		15,651,435		2,229,074,064		2,231,612,016

In-kind transactions (See Note 4) for the year ended February 28, 2007, were as follows:

iShares Bond Fund	In-kind Purchases		In-kind Sales
Lehman 1-3 Year Credit	$	29,606,981	$	9,851,585
Lehman Intermediate Credit		29,528,544		9,671,216
Lehman Credit		29,646,789		9,675,965
Lehman Intermediate Government/Credit		29,458,408		9,731,041
Lehman Government/Credit		29,539,883		9,949,306
Lehman Aggregate		1,445,611,379		31,611,651
iBoxx $ Investment Grade Corporate		467,079,274		31,516,837

76 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (Continued)

iSHARES^® TRUST

4. CAPITAL SHARE TRANSACTIONS

As of February 28, 2007, there were an unlimited number of no par value capital shares of beneficial interest authorized by the Trust. Capital shares are issued and redeemed by each Fund only in Creation Units or multiples thereof. Except when aggregated in Creation Units, shares of each Fund are not redeemable. Transactions in capital shares 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 securities constituting a portfolio sampling representation of the securities involved in the relevant Fund’s underlying index and an amount of cash. In the case of the iShares Lehman Aggregate Bond Fund, a portion of the designated portfolio of securities are purchased through TBA transactions, in which case the Fund generally requires the substitution of an amount of cash equivalent to the price of the securities involved in such TBA transactions. Investors purchasing and redeeming Creation Units in the Funds pay a purchase transaction fee and a redemption transaction fee directly to Investors Bank, the administrator, to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units.

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 by each Fund is required to have a value of at least 102% of the market value of the loaned securities plus the interest accrued on such securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan plus accrued interest. The risks to the Funds of securities lending are that the borrower may not provide additional collateral when required or may not return the securities when due.

As of February 28, 2007, certain Funds had loaned securities which were collateralized by cash. Pursuant to an exemptive order issued by the SEC, the cash collateral received was invested in a joint account with other investment funds managed by BGFA. The joint account invests in securities with remaining maturities of 397 days or less, repurchase agreements and money market mutual funds, including money market funds managed by BGFA. Repurchase agreements held in the joint account are fully collateralized by U.S. Government securities or non-U.S. Government debt securities. The market value of the securities on loan as of February 28, 2007 and the value of the related collateral are disclosed in the Statements of Assets and Liabilities. Securities lending income, as disclosed in the Funds’ Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to BGI as securities lending agent.

6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The SEC staff has stated that it would not object if a fund does not implement FIN 48 in its NAV calculation until the date of the fund’s last NAV calculation in the first required financial statement reporting period for its fiscal year beginning after December 15, 2006. The Trust is currently evaluating the impact of applying the various provisions of FIN 48.

In September 2006, FASB issued Statement of Financial Accounting Standards No. 157 (“FAS 157”), “FairValue Measurements. ”FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure about fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The Trust is currently evaluating the impact the adoption of FAS 157 will have on the Funds’ financial statement disclosures.

NOTES TO FINANCIAL STATEMENTS 77

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of

iShares Trust:

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the iShares Lehman 1-3 Year Credit Bond Fund, iShares Lehman Intermediate Credit Bond Fund, iShares Lehman Credit Bond Fund, iShares Lehman Intermediate Government/Credit Bond Fund, iShares Lehman Government/Credit Bond Fund, iShares Lehman Aggregate Bond Fund and iShares iBoxx $ Investment Grade Corporate Bond Fund (formerly iShares GS $ InvesTop^TM Corporate Bond Fund), each a Fund of the iShares Bond Funds Series (the “Funds”), at February 28, 2007, the results of each of their operations, the changes in each of their net assets and their financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

April 20, 2007

78 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Tax Information (Unaudited)

iSHARES^® TRUST

Under Section 871(k)(1)(C) of the Internal Revenue Code, the Funds hereby designate the following maximum amounts allowable as interest-related dividends for the fiscal year ended February 28, 2007:

iShares Bond Fund	Interest- Related Dividends
Lehman 1-3 Credit	$	57,180
Lehman Intermediate Credit		58,639
Lehman Credit		59,763
Lehman Intermediate Government/Credit		55,197
Lehman Government/Credit		72,386
Lehman Aggregate		131,315,717
Lehman iBoxx $ Investment Grade Corporate		117,875,746

TAX INFORMATION 79

Supplemental Information (Unaudited)

iSHARES^® TRUST

The tables that follow present information about the differences between the daily market price on secondary markets for shares of a Fund and that Fund’s net asset value. Net asset value, or “NAV”, is the price per share at which each Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The “Market Price” of each Fund generally is determined using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of such Fund is listed for trading, as of the time that the Fund’s NAV is calculated. Each Fund’s Market Price may be at, above or below its NAV. The NAV of each Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of each Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand.

Premiums or discounts are the differences (expressed as a percentage) between the NAV and Market Price of a Fund on a given day, generally at the time NAV is calculated. A premium is the amount that a Fund is trading above the reported NAV, expressed as a percentage of the NAV. A discount is the amount that a Fund is trading below the reported NAV, expressed as a percentage of the NAV.

The following information shows the frequency distributions of premiums and discounts for the iShares Lehman Aggregate and iShares iBoxx $ Investment Grade Corporate Bond Funds. The information shown for each Fund is for five calendar years (or for each full calendar quarter completed after the inception date of such Fund if less than five years) through the date of the most recent calendar quarter-end. Information for the iShares Lehman 1-3 Year Credit, iShares Lehman Intermediate Credit, iShares Lehman Credit, iShares Lehman Intermediate Government/Credit and iShares Lehman Government/Credit Bond Funds is not presented as these Funds did not commence operations until after the date of the most recent calendar quarter-end. The specific periods covered for each Fund are disclosed in the table for such Fund.

Each line in the table shows the number of trading days in which the Fund traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by each table. All data presented here represents past performance, which cannot be used to predict future results.

iShares Lehman Aggregate Bond Fund

Period Covered: October 1, 2003 through December 31, 2006

	Number of Days	Percentage of Total Days
Greater than 0.5% and Less than 1.0%	38	4.64	%
Between 0.5% and –0.5%	781	95.36
	819	100.00	%

iShares iBoxx $ Investment Grade Corporate Bond Fund

Period Covered: October 1, 2002 through December 31, 2006

	Number of Days	Percentage of Total Days
Greater than 1.0% and Less than 1.5%	13	1.21	%
Greater than 0.5% and Less than 1.0%	163	15.23
Between 0.5% and –0.5%	893	83.47
Less than –0.5% and Greater than –1.0%	1	0.09
	1,070	100.00	%

80 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Trustee and Officer Information (Unaudited)

iSHARES^® TRUST

The Board of Trustees has responsibility for the overall management and operations of the Trust, including general supervision of the duties performed by BGFA and other service providers. Each Trustee serves until he or she resigns, is removed, dies, retires or becomes incapacitated. Each Officer serves until he or she resigns, is removed, dies, retires or becomes disqualified.

iShares Trust, iShares, Inc., Barclays Global Investors Funds (“BGIF”) and Master Investment Portfolio (“MIP”) are considered to be members of the same fund complex, as defined in Form N-1A under the 1940 Act. Each Trustee of iShares Trust also serves as a Director for iShares, Inc. and oversees 125 portfolios within the fund complex. In addition, Lee T. Kranefuss serves as a Trustee for BGIF and MIP and oversees an additional 24 portfolios within the fund complex.

Unless otherwise noted in the tables below, the address for each Trustee and Officer is c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, California 94105. The Board has designated George G.C. Parker as its Lead Trustee. Additional information about the Funds’ Trustees and Officers may be found in the Funds’ combined Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-474-2737.

Interested Trustees and Officers

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
*Lee T. Kranefuss, 1961	Trustee, Chairman, and President (since 2003).	Chief Executive Officer of Global Index and Markets Group of BGI (since 2005); Chief Executive Officer of the Intermediary Investor and Exchange Traded Products Business of BGI (since 2003); Director of Barclays Global Fund Advisors (since 2005); Director, President and Chief Executive Officer of Barclays Global Investors International, Inc. (since 2005); Director, Chairman and Chief Executive Officer of Barclays Global Investors Services (since 2005); Chief Executive Officer of the Individual Investor Business of BGI (1999-2003).	Director (since 2003) of iShares, Inc.; Trustee (since 2001) of BGIF and MIP; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.
*John E. Martinez, 1962	Trustee (since 2003).	Co-Chief Executive Officer of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); Chief Executive Officer of Capital Markets Group of BGI (1996-2001).	Director (since 2003) of iShares, Inc.; Director (since 2005) of Real Estate Equity Exchange.

* Lee T. Kranefuss and John E. Martinez are deemed to be “interested persons” (as defined in the 1940 Act) of the Trust due to their affiliations with BGFA, the Funds’ investment adviser, BGI, the parent company of BGFA, and Barclays Global Investors Services, an affiliate of BGFA and BGI.

TRUSTEE AND OFFICER INFORMATION 81

Trustee and Officer Information (Unaudited) (Continued)

iSHARES^® TRUST

Independent Trustees

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
George G. C. Parker, 1939	Trustee (since 2000) Lead Independent Trustee (since 2006)	Dean Witter Distinguished Professor of Finance, Emeritus (since 1994); Formerly Senior Associate Dean for Academic Affairs, Director of MBA Program, Stanford University: Graduate School of Business (1993-2001).	Director (since 2002) of iShares, Inc.; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (since 1999) of Tejon Ranch Company; Director (since 2003) of First Republic Bank; Director (since 2004) of Threshold Pharmaceuticals; Director (since 2007) of NETGEAR, Inc.
Cecilia H. Herbert, 1949	Trustee (since 2005).	Member of Finance Council, Archdiocese of San Francisco (1991-2006); Chair of Investment Committee, Archdiocese of San Francisco (1994-2005); President of the Board of Directors, Catholic Charities CYO (since 2007); Chair of Thacher School Finance and Investment Committees.	Director (since 2005) of iShares, Inc.; Trustee (2004-2005) of Pacific Select Funds; Trustee (1992-2003) of the Montgomery Funds; Trustee (since 2002) of the Thacher School; Director (since 1998) of Catholic Charities CYO; Director (2004 -2006) of Women’s Forum West (professional association).
Charles A. Hurty, 1943	Trustee (since 2005).	Retired; Partner, KPMG, LLP (1968-2001).	Director (since 2005) of iShares, Inc.; Director (since 2002) of GMAM Absolute Return Strategy Fund (1 portfolio); Director (since 2002) of Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC (1 portfolio); Director (since 2005) of CSFB Alternative Investments Fund (6 portfolios).
John E. Kerrigan, 1955	Trustee (since 2005).	Chief Investment Officer, Santa Clara University (since 2002); Managing Director, Merrill Lynch (1994-2002).	Director (since 2005) of iShares, Inc.; Member (since 2004) of Advisory Council for Commonfund Distressed Debt Partners II.

82 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Trustee and Officer Information (Unaudited)(Continued)

iSHARES^® TRUST

Independent Trustees (Continued)

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Robert H. Silver, 1955	Trustee (since 2007)	President and Co-Founder of The Bravitas Group, Inc. (since 2006); Member, Non-Investor Advisory Board of Russia Partners II, LP (since 2006); President and Chief Operating Officer of UBS Financial Services, Inc. (2003-2005); President and Chief Executive Officer of UBS Services USA, LLC (1999-2005); Managing Director, UBS America, Inc. (2000-2005); Broadway Producer (since 2006).	Director (since 2007) of iShares, Inc.; Director and Member (since 2006) of the Audit and Compensation Committee of EPAM Systems, Inc.; Director and Vice Chairman (since 2001) of the YMCA of Greater NYC; Trustee (since 2005), Newark Academy; Director (1990-2005), UBS Financial Services, Inc.
Officer
Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Michael A. Latham, 1965	Secretary, Treasurer and Principal Financial Officer (since 2002).	Chief Operating Officer of the Intermediary Investor and Exchange Traded Products Business of BGI (since 2003); Director and Chief Financial Officer of Barclays Global Investors International, Inc. (since 2005); Director of Mutual Fund Delivery in the U.S. Individual Investor Business of BGI (2000- 2003).	None.

TRUSTEE AND OFFICER INFORMATION 83

Notes:

84 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes:

NOTES 85

The iShares^® Family of Funds

The following is a list of iShares Funds being offered, along with their respective exchange trading symbols. Please call 1-800-iShares (1-800-474-2737) to obtain a prospectus for any iShares Fund. The prospectus contains more complete information, including charges, expenses, investment objectives and risk factors that should be carefully considered to determine if the Fund(s) are an appropriate investment for you. Read the prospectus(es) carefully before investing. Investing involves risk, including possible loss of principal.

iShares S&P Domestic Index Funds

iShares S&P 1500 (ISI)

iShares S&P 100 (OEF)

iShares S&P 500 (IVV)

iShares S&P 500 Growth (IVW)

iShares S&P 500 Value (IVE)

iShares S&P MidCap 400 (IJH)

iShares S&P MidCap 400 Growth (IJK)

iShares S&P MidCap 400 Value (IJJ)

iShares S&P SmallCap 600 (IJR)

iShares S&P SmallCap 600 Growth (IJT)

iShares S&P SmallCap 600 Value (IJS)

iShares Domestic Sector Index Funds

iShares Cohen & Steers Realty Majors (ICF)

iShares Dow Jones U.S. Basic Materials Sector (IYM)

iShares Dow Jones U.S. Consumer Services Sector (IYC)

iShares Dow Jones U.S. Consumer Goods Sector (IYK)

iShares Dow Jones U.S. Energy Sector (IYE)

iShares Dow Jones U.S. Financial Sector (IYF)

iShares Dow Jones U.S. Financial Services (IYG)

iShares Dow Jones U.S. Healthcare Sector (IYH)

iShares Dow Jones U.S. Industrial Sector (IYJ)

iShares Dow Jones U.S. Real Estate (IYR)

iShares Dow Jones U.S. Technology Sector (IYW)

iShares Dow Jones U.S. Telecommunications Sector (IYZ)

iShares Dow Jones Transportation Average (IYT)

iShares Dow Jones U.S. Utilities Sector (IDU)

iShares Dow Jones U.S. Total Market (IYY)

iShares Goldman Sachs Natural Resources (IGE)

iShares Goldman Sachs Networking (IGN)

iShares Goldman Sachs Semiconductor (IGW)

iShares Goldman Sachs Software (IGV)

iShares Goldman Sachs Technology (IGM)

iShares Nasdaq Biotechnology (IBB)

iShares Domestic Subsector Index Funds

iShares Dow Jones U.S. Aerospace & Defense (ITA)

iShares Dow Jones U.S. Broker-Dealers (IAI)

iShares Dow Jones U.S. Healthcare Providers (IHF)

iShares Dow Jones U.S. Home Construction (ITB)

iShares Dow Jones U.S. Insurance (IAK)

iShares Dow Jones U.S. Medical Devices (IHI)

iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO)

iShares Dow Jones U.S. Oil Equipment & Services (IEZ)

iShares Dow Jones U.S. Pharmaceuticals (IHE)

iShares Dow Jones U.S. Regional Banks (IAT)

iShares Global Index Funds

iShares S&P Global 100 (IOO)

iShares S&P Global Consumer Discretionary Sector (RXI)

iShares S&P Global Consumer Staples Sector (KXI)

iShares S&P Global Energy Sector (IXC)

iShares S&P Global Financials Sector (IXG)

iShares S&P Global Healthcare Sector (IXJ)

iShares S&P Global Industrials Sector (EXI)

iShares S&P Global Materials Sector (MXI)

iShares S&P Global Technology Sector (IXN)

iShares S&P Global Telecommunications Sector (IXP)

iShares S&P Global Utilities Sector (JXI)

iShares Russell Index Funds

iShares Russell 3000 (IWV)

iShares Russell 3000 Growth (IWZ)

iShares Russell 3000 Value (IWW)

iShares Russell 1000 (IWB)

iShares Russell 1000 Growth (IWF)

iShares Russell 1000 Value (IWD)

iShares Russell Midcap (IWR)

iShares Russell Midcap Growth (IWP)

iShares Russell Midcap Value (IWS)

iShares Russell 2000 (IWM)

iShares Russell 2000 Growth (IWO)

iShares Russell 2000 Value (IWN)

iShares Russell Microcap™ (IWC)

iShares International Country Index Funds

iShares FTSE/Xinhua China 25 (FXI)

iShares MSCI Australia (EWA)

iShares MSCI Austria (EWO)

iShares MSCI Belgium (EWK)

iShares MSCI Brazil (EWZ)

iShares MSCI Canada (EWC)

iShares MSCI France (EWQ)

iShares MSCI Germany (EWG)

iShares MSCI Hong Kong (EWH)

iShares MSCI Italy (EWI)

iShares MSCI Japan (EWJ)

iShares MSCI Malaysia (EWM)

iShares MSCI Mexico (EWW)

iShares MSCI Netherlands (EWN)

iShares MSCI Singapore (EWS)

iShares MSCI South Africa (EZA)

iShares MSCI South Korea (EWY)

iShares MSCI Spain (EWP)

iShares MSCI Sweden (EWD)

iShares MSCI Switzerland (EWL)

iShares MSCI Taiwan (EWT)

iShares MSCI United Kingdom (EWU)

iShares S&P/TOPIX 150 (ITF)

iShares Bond Funds

iShares Lehman Aggregate (AGG)

iShares Lehman Short Treasury (SHV)

iShares Lehman 1-3 Year Treasury (SHY)

iShares Lehman 3-7 Year Treasury (IEI)

iShares Lehman 7-10 Year Treasury (IEF)

iShares Lehman 10-20 Year Treasury (TLH)

iShares Lehman 20+ Year Treasury (TLT)

iShares Lehman TIPS (TIP)

iShares Lehman Credit (CFT)

iShares Lehman 1-3 Year Credit (CSJ)

iShares Lehman Intermediate Credit (CIU)

iShares iBoxx $ Investment Grade Corporate (LQD)

iShares Lehman Government/Credit (GBF)

iShares Lehman Intermediate Government/Credit (GVI)

iShares Lehman MBS Fixed-Rate (MBB)

iShares iBoxx $ High Yield Corporate (HYG)

iShares Specialty Index Funds

iShares KLD Select Social^SM (KLD)

iShares KLD 400 Social (DSI)

iShares Dow Jones Select Dividend (DVY)

iShares S&P U.S. Preferred Stock (PFF)

iShares International Index Funds

iShares MSCI EAFE (EFA)

iShares MSCI EAFE Growth (EFG)

iShares MSCI EAFE Value (EFV)

iShares MSCI Emerging Markets (EEM)

iShares MSCI EMU (EZU)

iShares MSCI Pacific ex-Japan (EPP)

iShares S&P Europe 350 (IEV)

iShares S&P Latin America 40 (ILF)

iShares Morningstar Index Funds

iShares Morningstar Large Core (JKD)

iShares Morningstar Large Growth (JKE)

iShares Morningstar Large Value (JKF)

iShares Morningstar Mid Core (JKG)

iShares Morningstar Mid Growth (JKH)

iShares Morningstar Mid Value (JKI)

iShares Morningstar Small Core (JKJ)

iShares Morningstar Small Growth (JKK)

iShares Morningstar Small Value (JKL)

iShares NYSE Index Funds

iShares NYSE Composite (NYC)

iShares NYSE 100 (NY)

iShares^® is a registered trademark of Barclays Global Investors, N.A. The iShares Funds are not sponsored, endorsed or issued by Goldman, Sachs & Co. or Lehman Brothers, nor are they sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., Dow Jones & Company, Inc., FTSE/Xinhua Index Limited (“FXI”), iBoxx, KLD Research & Analytics, Inc., Morgan Stanley Capital International, Morningstar, Inc., The Nasdaq Stock Market, Inc., New York Stock Exchange LLC, Frank Russell Company, or Standard & Poor’s. None of these companies make any representation regarding the advisability of investing in the iShares Funds. Neither SEI nor BGI, nor any of their affiliates, are affiliated with the companies listed above. iBoxx is a registered trademark of International Index Company Limited. “Goldman Sachs^®” is a trademark of Goldman, Sachs & Co. FXI does not make any warranty regarding the FTSE/Xinhua Index. All rights in the FTSE/Xinhua Index vest in FXI. “FTSE” is a trade and service mark of London Stock Exchange and The Financial Times; “Xinhua” is a trade and service mark of Xinhua Financial Network Limited.

An investment in the Fund(s) is not a deposit of a bank and it is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

This advertising section does not constitute part of the 2007 Annual Report.

4322-iS-0407

86 2007 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Item 2. Code of Ethics.

As of February 28, 2007, iShares Trust (the “Registrant”) had adopted a code of ethics that applies to persons appointed by the Registrant’s Board of Trustees as the President and Chief Executive Officer, Chief Financial Officer, Treasurer and/or Chief Accounting Officer, and any persons performing similar functions. For the fiscal year ended February 28, 2007, there were no amendments to any provision of this code of ethics, nor were there any waivers granted from any provision of this code of ethics. A copy of this code of ethics is filed with this Form N-CSR under Item 12(a)(1).

Item 3. Audit Committee Financial Expert.

The Registrant’s Board of Trustees has determined that the Registrant has more than one audit committee financial expert, as that term is defined under Item 3(b) and 3(c), serving on its audit committee. The audit committee financial experts serving on the Registrant’s audit committee are Charles A. Hurty, John E. Kerrigan, George G.C. Parker and Robert H. Silver, all of whom are independent, as that term is defined under Item 3(a)(2).

Item 4. Principal Accountant Fees and Services.

The principal accountant fees disclosed in items 4(a), 4(b), 4(c), 4(d), and 4(g) are for the fourteen series of the Registrant for which the fiscal year-end is February 28, 2007 (the “Funds”) and whose annual financial statements are reported in Item 1.

(a) Audit Fees – The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Funds’ annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years, were $83,850 for the fiscal year ended February 28, 2006 and $200,234 for the fiscal year ended February 28, 2007.

(b) Audit-Related Fees – There were no fees billed for the fiscal years ended February 28, 2006 and February 28, 2007 for assurance and related services by the principal accountant that were reasonably related to the performance of the audit of the Funds’ financial statements and are not reported under (a) of this Item.

(c) Tax Fees – The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for the review of the Funds’ tax returns and excise tax calculations, were $36,572 for the fiscal year ended February 28, 2006 and $86,370 for the fiscal year ended February 28, 2007.

(d) All Other Fees – There were no other fees billed for the fiscal years ended February 28, 2006 and February 28, 2007 for products and services provided by the principal accountant, other than the services reported in (a) through (c) of this Item.

(e) (1) The Registrant’s audit committee charter, as amended in June 2006, provides that the audit committee is responsible for the approval, prior to appointment, of the engagement of the principal accountant to annually audit and provide their opinion on the Registrant’s financial statements. The audit committee must also approve, prior to appointment, the engagement of the principal accountant to provide non-audit services to the Registrant or to any entity controlling, controlled by or under common control with the Registrant’s investment adviser (“Adviser Affiliate”) that provides services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant.

(2) There were no services described in (b) through (d) above (including services required by the audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X) that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) None of the hours expended on the principal accountant’s engagement to audit the Funds’ financial statements for the fiscal year ended February 28, 2007 were attributable to work performed by persons other than the principal accountant’s full-time, permanent employees.

(g) The aggregate non-audit fees billed by the Registrant’s principal accountant for services rendered to the Funds, and rendered to the Registrant’s investment adviser, and any Adviser Affiliate that provides ongoing services to the Registrant were $905,938 for the fiscal year ended February 28, 2006 and $2,656,573 for the fiscal year ended February 28, 2007.

(h) The Registrant’s audit committee has considered whether the provision of non-audit services rendered to the Registrant’s investment adviser and any Adviser Affiliate that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, if any, are compatible with maintaining the principal accountant’s independence, and has determined that the provision of these services do not compromise the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.

The Registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act and has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are Cecilia H. Herbert, George G.C. Parker, Charles A. Hurty, John E. Kerrigan and Robert H. Silver.

Item 6. Schedule of Investments.

The Funds’ full schedules of investments are included as part of the reports to shareholders filed under Item 1 of this Form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to the Registrant.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable to the Registrant.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to the Registrant.

Item 10. Submission of Matters to a Vote of Security Holders.

The Nominating Committee of Registrant’s Board of Trustees (the “Nominating Committee”) is charged with identifying nominees to serve as Board members and recommending such nominees to the Board. The Board believes that shareholders as a group are best served by the efficient allocation of Registrant and Board resources. As such, the Board is not required to consider any person nominated by any shareholder of the Registrant (acting solely in the capacity as shareholder and not in any other capacity) to serve as an independent Trustee, although the Nominating Committee may consider any such person if the Nominating Committee of the Board deems it appropriate after considering all circumstances the Nominating Committee’s members deem relevant.

Item 11. Controls and Procedures.

(a) The Principal Executive Officer 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 the Registrant (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are reasonably designed to achieve the purposes described in Section 4(a) of the attached certification.

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a) (1) Code of Ethics for Senior Officers that is the subject of Item 2 is attached.

(a) (2) Section 302 Certifications are attached.

(a) (3) Not applicable to the Registrant.

(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 and Principal Executive Officer
	Date: April 20, 2007

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 and Principal Executive Officer
	Date: April 20, 2007

By:	/s/ Michael A. Latham
	Michael A. Latham, Principal Financial Officer
	Date: April 20, 2007