N-30D 1 0001.txt ISHARES ANNUAL REPORT iShares MSCI Series ANNUAL REPORT August 31, 2000 i|Shares ------------------------------- BARCLAYS GLOBAL INVESTORS (LOGO) THE WAY YOU INVEST NOW. [GRAPHIC OMITTED] ONLY BETTER. iSHARES, INC. ================================================================================ October 20, 2000 Dear Shareholder: We are pleased to present the annual report for the iShares MSCI Index Funds, (each a "Fund", collectively the "Funds"), and formerly known as WEBS Index Funds. The shares of the Funds were formerly known as World Equity Benchmark Shares, or WEBS, and are now known as iShares. This report covers the annual period from September 1, 1999 through August 31, 2000. The annual report contains important information about the performance of your investment, a manager's discussion and analysis for each Fund from its Investment Adviser, Barclays Global Fund Advisors, as well as important financial information. Each Fund seeks to provide broad-based exposure to a particular country's stock market by tracking the performance of a Morgan Stanley Capital International ("MSCI") Index. The Investment Adviser's discussion contains information about performance and tracking for each of the Funds. GROWTH ACTIVITY With your help, the Funds have continued to grow as an efficient way to invest in selected foreign equity markets. As of August 31, 2000, net assets of the twenty-one Funds that have commenced operations have grown to $1.9 billion, representing a 20% growth over the net assets of the seventeen original Funds at August 31, 1999. Since the semi-annual report, four new Funds have been introduced: the iShares MSCI Brazil (Free) Index Fund, the iShares MSCI EMU Index Fund, the iShares MSCI South Korea Index Fund, and the iShares MSCI Taiwan Index Fund. Because the value of total net assets fluctuates with the performance of the respective foreign equity markets, we believe that the number of iShares outstanding offers a better indicator of the Funds' attractiveness to investors. iShares outstanding at August 31, 2000 were 136.7 million, an increase of 9.8% from August 31, 1999. The sustained increase in shares outstanding shows the growing acceptance of iShares among investors as a way to access foreign equity markets. INTERNATIONAL PERFORMANCE Although the performance reviews for each Fund contained in this report address specific issues affecting the performance of each Fund's particular market, a number of trends had a global impact over the past year. During the first seven months of the reporting period (from September 1, 1999 through March 31, 2000), technology and telecommunications stocks led numerous international markets by a wide margin. Internet-related stocks were especially popular. This trend abruptly ended with a sharp correction in March. Although technology and other growth-oriented issues recovered over the summer, telecommunications stocks remained subdued due to concerns about slowing growth in the sector. Other key factors included the direction of U.S. interest rates, which rose several times over the reporting period but appeared to stabilize over the summer. SPECIAL MEETING OF SHAREHOLDERS On May 5, 2000 the shareholders of each Fund approved a proposal to amend the Company's agreement with the Investment Adviser in various respects. An important result of the amendments was to effectively fix the expense ratio of the Company's 17 original iShares MSCI Index Funds at 0.84% of net assets and assuming no unusual expenses. The amendment of the Advisory Agreement, the change from WEBS to iShares, and the appointment of SEI Investments Distribution Company as the Funds' distributor effective March 27, 2000 occurred in connection with the Investment Adviser's decision to substantially increase its activities in the exchange-traded funds market. As of the date of this letter, a total of 56 types of iShares are offered by iShares, Inc. and by iShares Trust, which is also advised by the Investment Adviser. At a meeting that had been adjourned until June 27, 2000 the shareholders of the iShares MSCI Canada Index Fund approved a proposal to change that fund from "diversified" to "non-diversified" for purposes of the Investment Company Act. Such change became effective immediately. Shareholders of the iShares MSCI Japan and United Kingdom Index Funds did not approve similar proposals at special meetings that had been adjourned until July 3, 2000. Accordingly, these Funds continue to operate as diversified funds. SPECIAL NOTE WITH RESPECT TO MALAYSIA As a result of capital controls imposed by the Malaysian Government on September 1, 1998, sales of Creation Units of the iShares MSCI Malaysia (Free) Index Fund (the "Malaysia Fund") were suspended, and the Company announced that it would no longer be able to effect redemptions of Creation Units of Malaysia Fund iShares on an "in kind" basis. Following this announcement, the trading prices of the Malaysia Fund's iShares often differed materially from their net asset values. Effective May 12, 2000, the Malaysia Fund offered to redeem Creation Units of its iShares for U.S. dollars, and offers of such Creation Units for U.S. dollars commenced effective May 26, 2000. As a result of these actions Malaysia Fund iShares have been trading at prices much closer to their net asset values. The Malaysia Fund recently received regulatory relief from the Malaysian authorities and is currently investigating the possibility of re-instituting creations and redemptions on an "in kind" basis. CONCLUSION The continued popularity of the iShares MSCI Index Funds continues because investors such as yourself understand that the Funds provides an easy, relatively inexpensive way to access any of more than twenty foreign stock markets. We thank you for your continued support of and confidence in iShares, Inc. and hope the Funds will continue to meet your portfolio needs. Sincerely, /S/ NATHAN MOST Nathan Most Chairman and President iShares, Inc. 1 ================================================================================ INTRODUCTION In this section, the Investment Adviser discusses the performance of each fund. The introduction provides an overview of how the iShares MSCI Index Funds (each, a "Fund," and collectively, "the Funds") seek to track their respective indices. In addition, the introduction identifies some of the key factors that contribute to the Funds' performance against their benchmarks. Each Fund invests in a representative sample of the underlying securities in a corresponding MSCI Index (using the analytic technique known as "portfolio sampling"), as opposed to a full replication of the corresponding MSCI Index. Certain funds may also invest to a limited extent in stocks that are not included in the relevant MSCI Index to permit them additional flexibility to comply with diversification and other regulatory requirements. There are several important factors that should be kept in mind when reviewing the performance of each Fund. PORTFOLIO SAMPLING: Portfolio sampling is a disciplined approach to capturing index returns which involves maximizing float and liquidity, reflecting accurately the market's size and industry profiles and minimizing cross-ownership. Because of portfolio sampling, the composition of each Fund will vary from that of its benchmark MSCI Index. This may cause performance to vary positively or negatively from that of its corresponding MSCI Index during any period. FUND EXPENSES: The MSCI Indices are statistical composites that track changes in the financial markets of a particular country or region. Since the indices do not actually hold a portfolio of securities, they do not bear management, administration, distribution, transaction or other expenses, while the Funds do incur such expenses, thereby negatively impacting the performance of the Funds. REGULATORY CONSTRAINTS: Regulatory constraints may also adversely impact the Investment Adviser's ability to "optimize" the portfolios of certain Funds through the use of portfolio sampling. For example, each Fund must comply with the asset diversification tests of Subchapter M of the Internal Revenue Code at the end of each quarter of its taxable year. The principal regulatory constraints that affect Fund performance are the "Single Issuer Rule" and the "5/50 Rule." The "Single Issuer Rule" generally requires that not more than 25% of the value of a Fund's total assets may be invested in the securities of one single issuer. This constraint applies to all share classes of an issuer. As an example, Samsung Electronics had a weighting of 30.1% in the MSCI South Korea Index as of August 31, 2000. Because of the "Single Issuer Rule," however, the iShares MSCI South Korea Index Fund could not hold more than 25% in Samsung. The "5/50 Rule" generally precludes the sum of all of the securities weighted over 5% from exceeding 50% of a Fund's total assets. If a security has more than one share class, then all of the share classes must be considered as one security for 5/50 Rule purposes. Many of the benchmark MSCI Indices have a greater than 50% weighting of securities that account for more than 5% of the respective index. For example, the sum of all the stocks with weightings of 5% or greater in the MSCI Brazil (Free) Index was 62% as of August 31, so the iShares MSCI Brazil (Free) Index Fund had to be underweight in some of these stocks relative to the benchmark, and therefore overweight in other stocks. The Investment Company Act of 1940 generally requires funds that are "diversified" (for purposes of the Act) to meet a daily "5/25 Rule" that requires that the sum of all securities weighted over 5% not exceed 25% of the Fund's total assets. Although the MSCI Canada Index complied with the 5/25 Rule when the iShares MSCI Canada Index Fund (the "Canada Fund") was launched in March 1996, changes in the Canadian equities market resulted in the MSCI Canada Index falling out of compliance over time. The Canada Fund's tracking was adversely affected by the need to comply with the 5/25 Rule until the shareholders of the Canada Fund voted in June to change that fund from "diversified" to "non-diversified." Non-diversified funds are not subject to the 5/25 Rule. The only Funds that are currently "diversified," and therefore subject to the 5/25 Rule, are the iShares MSCI Japan and United Kingdom Index Funds. 2 iSHARES, INC. ================================================================================ REVENUE DIFFERENTIAL: A fourth factor that causes performance of the Funds to differ from that of their respective MSCI Indices is "revenue differential." The dividend revenues accrued by the Funds differ from those of the MSCI Indices both in amount (principally as a result of the portfolio sampling techniques described above) and timing. The Funds record dividend revenues on the "ex" dates of the underlying stocks while the MSCI Indices allocate annual dividend revenues evenly over a 12-month period. In addition, some of the Funds are subject to withholding taxes at rates that are more favorable than the rates assumed by the benchmark MSCI Indices, and this factor may affect the relative performance of such Fund. Finally, while the sole source of revenues for the MSCI Indices is dividends, the Funds receive interest on uninvested cash and, in the case of most Funds, revenues from the lending of portfolio securities. EFFECT OF UNINVESTED ASSETS: Finally, uninvested assets held by the Funds affect performance relative to their respective benchmark indices. Cash and deferred organizational expenses are the principal "unequitized" assets of the Funds. In contrast, the MSCI Indices are always fully invested in the underlying stocks and thus do not reflect any "unequitized" assets. The "Effect of Uninvested Assets" refers to the portion of a fund that is not invested in stocks. The effect of uninvested assets will tend to cause each Fund to outperform its benchmark index in falling markets and underperform the benchmark index in rising markets. However, even within a period that has a down market return (i.e. (10.0%) loss for the annual period), there can be a short stint of rising markets where the uninvested assets in the Fund have a negative impact on return. This would cause the effect of uninvested assets to further reduce the loss for the period (i.e. (10.4%) for the same period where the index returned (10.0%). 3 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ AUSTRALIA PERFORMANCE REVIEW The total return of the iShares MSCI Australia Index Fund (the "Australia Fund") was 1.84% for the year ended August 31, 2000. The corresponding MSCI Index returned 3.75% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Australia Fund underperformed the benchmark by 1.91 percentage points during this period, primarily as a result of portfolio sampling and expenses, which affected tracking by (1.93%) and (0.94%), respectively. These factors were partially offset by the positive impact of revenue differential of 0.88% and the effect of uninvested assets of 0.08%. As stated in the introduction, regulatory restrictions can adversely affect the Investment Adviser's ability to optimize the portfolio of a Fund. The MSCI Australia Index held more than 55% of its assets in names with weights of over 5%. Because of the 5/50 Rule, the Australia Fund was obligated to shift the weightings of some of its positions so that no more than 50% of its assets were in companies weighted 5% or more. This was the principal cause of the (1.93%) variance from the Index performance. KEY MARKET CONDITIONS Over the year ended August 31, 2000, the Australian equity market continued its transformation from a market driven by commodities to one increasingly influenced by media and telecommunications stocks. As of August 31, 2000, global media giant News Corp. accounted for approximately one fifth of the MSCI Australia Index while telecommunications firm Telstra made up another 12 percent. Both of these stocks benefited from investors' enthusiasm for "TMT" (technology, media and telecommunications) stocks in late 1999 and early 2000. Interest in those sectors cooled in the spring of 2000. News Corp. then recovered some ground in May, having reported higher-than-expected earnings and new expansion plans, including a bid to purchase U.S. television station operator Chris-Craft. Telstra did not perform as well, due to concerns about greater competition in Australia's domestic telecommunications market. Although the mining sector does not dominate the Australian market to quite the extent that it once did, it still had a powerful influence over the past year. Investors were encouraged by the prospect of further industry consolidation. Asia's economic recovery, coupled with weakness in the Australian dollar, has also improved the outlook for mining companies and other exporters. Those factors helped to keep the Australian economy healthy over the reporting period. In June, the country's unemployment rate fell to its lowest level in a decade. The strong level of growth raised expectations that interest rates would increase, after having already risen several times during the year. Income tax cuts, the Australian dollar's weakness, and a slight uptick in inflation also point to the likelihood of higher interest rates in the next few months. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI AUSTRALIA INDEX FUND VS. THE MSCI AUSTRALIA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Australia Index Fund MSCI Australia Index 03/12/96 $10,000 $10,000 08/31/96 $10,388 $10,383 02/28/97 $11,048 $11,054 08/31/97 $11,035 $10,990 02/28/98 $10,799 $10,880 08/31/98 $8,486 $8,724 02/28/99 $10,607 $10,994 08/31/99 $11,208 $11,471 02/29/00 $11,361 $11,778 08/31/00 $11,415 $11,902 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Australia Index Fund $11,415* MSCI Australia Index $11,902 ------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ----- ---------- iShares MSCI Australia Index Fund 1.84% 3.00% MSCI Australia Index 3.75% 3.97% ------------------------------------------------------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Australia Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 4 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ AUSTRIA PERFORMANCE REVIEW The total return of the iShares MSCI Austria Index Fund (the "Austria Fund") was (15.51%) for the year ended August 31, 2000. The corresponding MSCI Index returned (15.85%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The Austria Fund slightly outperformed the benchmark by 0.34 percentage points during the past year, primarily as a result of the positive effect on performance of portfolio sampling, which contributed 1.24%, and revenue differential, which added 0.30%. These factors were partially offset by the negative effects of expenses, which was (1.15%), and the effect of uninvested assets of (0.05%). KEY MARKET CONDITIONS Over the year ended August 31, 2000, the Austrian equity market turned in a weak performance. Unlike many other European markets, Austria continued to be dominated by so-called "Old Economy" banking and utilities companies. The market's largest stock as of August 31, 2000, was Bank Austria, which accounted for more than 32% of the index. Its second-largest stock as of that date was Verbund Oesterreich Elektrik, an electric-utilities company that, unlike other European utilities firms, has not ventured extensively into higher-growth areas such as telecommunications and the Internet. Political issues also weighed on the Austrian market at various times during the reporting period. The controversy surrounding Georg Haider put the country at odds with the European Union in early 2000, as did Austria's slow progress in deregulating its domestic telecommunications market. Toward the end of the period, however, the Austrian market was buoyed by positive sentiment. Investors the news that Bank Austria had agreed to be acquired by Germany's HypoVereinsbank as a potential spark for further consolidation in Austria. The deal, if successfully completed, would be the largest takeover in Austria's history. In addition, the Austrian economy continued to show signs of health over the past year. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI AUSTRIA INDEX FUND VS. THE MSCI AUSTRIA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Austria Index Fund MSCI Austria Index 03/12/96 $10,000 $10,000 08/31/96 $9,661 $10,073 02/28/97 $9,401 $9,848 08/31/97 $9,764 $9,928 02/28/98 $10,535 $11,513 08/31/98 $9,975 $10,770 02/28/99 $9,403 $10,353 08/31/99 $9,108 $9,906 02/29/00 $7,622 $8,247 08/31/00 $7,695 $8,336 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Austria Index Fund $7,695* MSCI Austria Index $8,336 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Austria Index Fund (15.51)% (5.69)% MSCI Austria Index (15.85)% (3.98)% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Austria Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 5 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ BELGIUM PERFORMANCE REVIEW The total return of the iShares MSCI Belgium Index Fund (the "Belgium Fund") was (15.50%) for the year ended August 31, 2000. The corresponding MSCI Index returned (16.36%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The Belgium Fund outperformed the benchmark by 0.86 percentage points during the past year. Contributing to the Fund's outperformance were portfolio sampling of 1.13%, revenue differential of 0.76%, and the effect of uninvested assets of 0.09%. These factors were partially offset by the negative impact of Fund expenses, (1.12%). KEY MARKET CONDITIONS Over the year ended August 31, 2000, the performance of the Belgian equity market was weak. In large part, that was because it continues to be dominated by so-called "Old Economy" companies in the financial services and electric-utilities industries. As of August 31, 2000, the market's three largest stocks were financial services firm Fortis Belgium, electric-utilities company Electrabel, and banking firm Kredietbank. These firms had weightings in the MSCI Belgium Index of 30.0%, 15.5%, and 18.0%, respectively. Stocks such as these generally underperformed "New Economy" stocks in the technology, media and telecommunications industries in the one-year period. Belgium's banking and utilities stocks were also negatively affected by rising interest rates. In March and again in May, however, Fortis reported stronger-than-expected earnings and its shares rose, helping the Belgian market recover some of its losses for the period. Now Europe's largest combined banking and insurance company, Fortis has also benefited from its 1999 purchase of American Banking Insurance Group. The Belgian market was also supported by relatively good economic conditions over the past year. Although not as robust as other European economies, Belgium has benefited somewhat from a better fiscal environment, lower unemployment and accelerating global growth. In March, the Brussels Stock Exchange announced that it planned to merge with the Amsterdam and Paris stock exchanges. Such an exchange would be second in size only to London among European bourses. In addition, the Belgian firm Interbrew announced plans to float an initial public offering later in 2000. Interbrew is now the world's second-largest brewer. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI BELGIUM INDEX FUND VS. THE MSCI BELGIUM INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Belgium Index Fund MSCI Belgium Index 03/12/96 $10,000 $10,000 08/31/96 $10,501 $10,496 02/28/97 $11,204 $11,595 08/31/97 $11,474 $11,662 02/28/98 $13,161 $13,768 08/31/98 $15,996 $17,633 02/28/99 $16,752 $19,637 08/31/99 $15,836 $18,184 02/29/00 $12,328 $14,178 08/31/00 $13,382 $15,209 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Belgium Index Fund $13,382* MSCI Belgium Index $15,209 ----------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Belgium Index Fund (15.50)% 6.72% MSCI Belgium Index (16.36)% 9.82% ----------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Belgium Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 6 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ BRAZIL (FREE) PERFORMANCE REVIEW The total return of the iShares MSCI Brazil (Free) Index Fund (the "Brazil Fund") was (2.97%) for the period since the Fund's inception on July 11th to the end of the period. The corresponding MSCI Index returned (3.03%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The Brazil Fund outperformed the benchmark during the reporting period by 0.06 percentage points. Portfolio sampling contributed 0.28% to the Fund's performance. This was offset by the negative impact of expenses, revenue differential and the effect of uninvested assets (which affected performance by (0.13%), (0.05%) and (0.04%), respectively. KEY MARKET CONDITIONS The Brazilian market was fairly volatile from July 11 (the Fund's inception) through August 31, 2000. In July and early August, the market was affected by a number of factors, including low trading volumes and weakness in the U.S. market. The market's performance improved later in August, however. One of the strongest performers was Petrobras, currently the largest and most liquid stock in Brazil. Petrobras has benefited from several trends, especially higher prices for crude oil (which has resulted in record profits for the company), optimism over the company's global share offering, and general euphoria about the strength of Brazil's economy. As a testament to Petrobras' success, the company had a successful $4.1 billion equity offering of ordinary shares in mid-August, the largest in Latin American history. That same optimism helped to lift other liquid stocks in the country's banking and telecommunications sectors. Investors also raised their exposure to Petrobras prior to a reconstitution of Brazil's stock indexes, which gave even greater prominence to the company. One of the stocks on the losing end of that trend was Eletrobras, the Brazilian market's third-largest stock at the end of August. The index reshuffling reduced Eletrobras' representation, while putting more emphasis on such companies as cable-television provider Globo Cabo and aerospace company Embraer. A select group of Brazilian stocks also benefited from good news on the privatization front over July and August. Investors boosted shares of banking company Banespa, for example, after a court decision cleared the way for its postponed privatization to get back on track. Like the market's other financial services companies, Banespa also benefited from the central bank's decision to lower the key Selic interest rate to its lowest level in six years. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI BRAZIL (FREE) INDEX FUND VS. THE MSCI BRAZIL (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Brazil (Free) Index Fund MSCI Brazil (Free) Index 07/11/00 $10,000 $10,000 07/31/00 $9,466 $9,457 08/31/00 $9,703 $9,697 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Brazil (Free) Index Fund $9,703* MSCI Brazil (Free) Index $9,697 -------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION+ ---- ---------- iShares MSCI Brazil (Free) Index Fund -- (2.97)% MSCI Brazil (Free) Index -- (3.03)% -------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Brazil (Free) Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. + For the period July 11, 2000 (commencement of operations) through August 31, 2000 (unannualized). 7 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ CANADA PERFORMANCE REVIEW The total return of the iShares MSCI Canada Index Fund (the "Canada Fund") was 67.21% for the year ended August 31, 2000. The corresponding MSCI Index returned 80.55% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Canada Fund underperformed the benchmark by 13.34 percentage points during the past year, primarily as a result of portfolio sampling, which impacted tracking by (11.65%). Expenses, revenue differential and the effect of uninvested assets also contributed to the Canada Fund's underperformance although to a much lesser extent (with impacts of (1.15%), (0.48%) and (0.06%), respectively). As stated in the introduction, regulatory restrictions can adversely affect the Investment Adviser's ability to optimize the portfolio of a Fund. Due to the Single Issuer Rule, the Canada Fund was obligated to underweight Nortel Networks by approximately 8%, on average, during the reporting period. Nortel appreciated by nearly 300% during that period. (Nortel began the fiscal year at 18% of the MSCI Canada Index but grew to an index weighting of approximately 41% by August 31, 2000.) To compensate, the Investment Advisor had to overweight other securities, which underperformed Nortel. In addition, the 5/25 Rule limited the Investment Adviser's ability to optimize the Canada Fund's portfolio in fiscal 2000. As a result of the shareholder vote described in the introduction, the Canada Fund is no longer subject to the 5/25 Rule. KEY MARKET CONDITIONS Over the year ended August 31, 2000, the Canadian equity market reflected in large part the performance of one stock, Nortel Networks. As of August 31, 2000, Nortel made up almost 41% of the MSCI Canada Index. Moreover, Nortel's influence continued to rise with the price of its shares. Like other telecommunications companies, Nortel benefited from the rally of "New Economy" stocks. Nortel has been aggressively expanding into the Internet-access and optical-networking businesses with a string of recent acquisitions. During the spring, however, Nortel gave back some of its gains, along with other telecommunications and technology-related stocks. It quickly recovered, and ended the reporting period with a gain of close to 300%. Like Nortel, the media conglomerate Seagram also benefited from investors' enthusiasm for "TMT" (telecommunications, media and technology) stocks. Although it, too, weakened over the spring, Seagram's shares later rebounded. In June, it agreed to merge with the French firm Vivendi to form the world's second-largest media company. Other sectors of the Canadian equity market were also strong over the past year. Shares of energy companies rose on higher crude oil prices and, like commodity producers in general, continued to benefit from accelerating global growth and a stabilization of the Canadian dollar. Like its neighbor to the south, Canada's economy remained very healthy during the reporting period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI CANADA INDEX FUND VS. THE MSCI CANADA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Canada Index Fund MSCI Canada Index 03/12/96 $10,000 $10,000 08/31/96 $10,463 $10,521 02/28/97 $12,569 $12,713 08/31/97 $13,445 $13,745 02/28/98 $14,322 $14,679 08/31/98 $10,529 $10,921 02/28/99 $12,717 $13,205 08/31/99 $14,711 $15,203 02/29/00 $18,943 $21,132 08/31/00 $24,594 $27,448 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Canada Index Fund $24,598* MSCI Canada Index $27,448 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------ --------- iShares MSCI Canada Index Fund 67.21% 22.27% MSCI Canada Index 80.55% 25.30% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Canada Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 8 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ EMU PERFORMANCE REVIEW The total return of the iShares MSCI EMU Index Fund (the "EMU Fund") was (5.82%) for the period from inception through August 31, 2000. The corresponding MSCI Index returned (5.78%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The EMU Fund, which began operations on July 26, 2000, underperformed the benchmark by 0.04% for the period. Those results were primarily due to the negative impact of expenses, which was (0.12%). Like all indices, the MSCI EMU Index is unmanaged and, therefore, does not bear management, administration, distribution, transaction or other expenses. The Fund's underperformance also reflected revenue differential of (0.01%). At the same time, the effect of uninvested assets contributed 0.02% to the Fund's returns and portfolio sampling added 0.07%. KEY MARKET CONDITIONS Due to the Euro's persistent weakness, the US dollar returns from most stock markets of European Monetary Union (EMU) member countries fell into negative territory during August. In local-currency terms, however, most of them posted modest gains, having recovered from a volatile July. In July, increasingly influential telecom bellwethers such as Nokia and Ericsson announced that they were expecting slower growth over at least the next quarter. This news created a domino effect in EMU markets, which have been driven by telecommunications stocks for some time. As of August 31, 2000, the two largest weightings in the MSCI EMU Index were telecommunications-related issues: Nokia and France Telecom with weightings of 6.55% and 3.81%, respectively. August brought an opportunity for investors to reassess the situation, and a somewhat more optimistic consensus emerged. Positive economic trends in EMU member countries and a stabilization of US interest rates helped bolster confidence as well; a continuation of both those trends would lend support to further gains in the EMU markets. Investors remain concerned about the auction of third-generation (3G) wireless licenses in several European markets, however, as these licenses have commanded much higher prices than investors had been expecting. That has prompted credit agencies to review the ratings of firms that won the bidding and has left investors concerned about the long-term costs of building 3G networks across Europe. Over the next few months, investors are likely to keep a careful watch on how these developments unfold and affect the performance of the increasingly telecom-driven EMU markets. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI EMU INDEX FUND VS. THE MSCI EMU INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI EMU Index Fund MSCI EMU Index 07/26/00 $10,000 $10,000 07/31/00 $9,668 $9,657 08/31/00 $9,418 $9,422 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI EMU Index Fund $9,418* MSCI EMU Index $9,422 -------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION+ ---- ---------- iShares MSCI EMU Index Fund -- (5.82)% MSCI EMU Index -- (5.78)% -------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI EMU Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. + For the period July 26, 2000 (commencement of operations) through August 31, 2000 (unannualized). 9 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ FRANCE PERFORMANCE REVIEW The total return of the iShares MSCI France Index Fund (the "France Fund") was 23.45% for the year ended August 31, 2000. The corresponding MSCI Index returned 24.87% over the same period. SIGNIFICANT PERFORMANCE FACTORS The France Fund underperformed the benchmark by 1.42 percentage points during the past year, primarily as a result of the impact of expenses of (0.95%), portfolio sampling of (0.75%), and the effect of uninvested assets of (0.05%). Those factors were partially offset by the positive contribution of revenue differential, which was 0.33%. KEY MARKET CONDITIONS The past year was an exceptional period for the French equity market; driven by stocks in a variety of sectors. During the period, the French market was one of Europe's top performers. Telecommunications and media-related stocks led the French market over much of the reporting period. Shares of France Telecom, the market's largest stock, rose as investors favored TMT (technology, telecommunications and media) issues. Until the spring, investors continued to be drawn by France Telecom's record earnings, strategic acquisitions and plans to float its rapidly growing Internet and cellular telephone businesses. Since March, however, the stock has weakened significantly due to growing concerns about the costs of building "third generation" wireless networks. Other weak areas during the year included a number of "Old Economy" stocks in areas such as food, household products and financial services. The latter were hurt by rising interest rates. Nonetheless, stocks such as TotalFinaElf--the market's second-largest stock--have continued to provide some support for the French market. TotalFinaElf shares rose along with the price of crude oil. Toward the end of the reporting period, growth-oriented stocks were once again leading the Paris Stock Exchange. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI FRANCE INDEX FUND VS. THE MSCI FRANCE INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI France Index Fund MSCI France Index 03/12/96 $10,000 $10,000 08/31/96 $10,495 $10,371 02/28/97 $12,177 $12,210 08/31/97 $12,237 $12,194 02/28/98 $14,880 $14,933 08/31/98 $16,492 $16,500 02/28/99 $18,010 $18,103 08/31/99 $19,957 $19,836 02/29/00 $24,561 $24,763 08/31/00 $24,637 $24,768 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI France Index Fund $24,637* MSCI France Index $24,768 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------ --------- iShares MSCI France Index Fund 23.45% 22.31% MSCI France Index 24.87% 22.46% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI France Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 10 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ GERMANY PERFORMANCE REVIEW The total return of the iShares MSCI Germany Index Fund (the "Germany Fund") was 8.44% for the year ended August 31, 2000. The corresponding MSCI Index returned 10.13% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Germany Fund underperformed its benchmark by 1.69 percentage points during the past year as a result of the effects of portfolio sampling, which was (1.31%), expenses of (0.92%), and the effect of uninvested assets of (0.01%). These factors were partially offset by revenue differential's positive contribution of 0.55%. KEY MARKET CONDITIONS A number of factors converged to make Germany one of Europe's best performing markets for the year ended August 31, 2000. Corporate restructuring and growing pro business sentiment on the part of the government attracted new investors and capital to the German market last year. One of the most positive developments, in the eyes of investors, was the government's plan to significantly reduce corporate and personal income taxes. The German government also announced that it would abolish the 50% capital gains tax previously levied on corporations when they sold shares in other companies. Investors greeted this last reform in particular with enthusiasm, as it will allow German corporations to unwind the extensive network of cross shareholdings and permit restructuring. The tax reforms added fuel to the rally already underway. The German equity market had been on the upswing throughout late 1999 and early 2000, thanks to strength in its telecommunications and technology-related stocks. Deutsche Telekom (DT), by far the market's largest stock, appreciated steadily through March. The positive sentiment toward DT began to turn south over the spring, however. Like other telecommunications providers, DT has faced some uncertainty now that the cost of building third generation wireless networks appears to be much higher than expected. Investors have also been concerned that DT is paying too much for the U.S. firm VoiceStream Wireless, which DT announced plans to acquire in order to extend its reach into the United States telecom market. Although DT's weakness has weighed on the market, it has been supported by Germany's economic health. The country's GDP grew at a rate of about 3.3% during the period. Interest rates have risen, but not by much, and the Euro's weakness has helped to bolster the country's exports. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI GERMANY INDEX FUND VS. THE MSCI GERMANY INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Germany Index Fund MSCI Germany Index 03/12/96 $10,000 $10,000 08/31/96 $10,399 $10,451 02/28/97 $11,291 $11,476 08/31/97 $12,533 $12,778 02/28/98 $14,661 $15,107 08/31/98 $15,752 $16,102 02/28/99 $16,117 $16,643 08/31/99 $16,862 $17,112 02/29/00 $21,975 $22,837 08/31/00 $18,286 $18,845 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Germany Index Fund $18,285* MSCI Germany Index $18,845 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------ --------- iShares MSCI Germany Index Fund 8.44% 14.43% MSCI Germany Index 10.13% 15.21% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Germany Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 11 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ HONG KONG PERFORMANCE REVIEW The total return of the iShares MSCI Hong Kong Index Fund (the "Hong Kong Fund") was 14.73% for the year ended August 31, 2000. The corresponding MSCI Index returned 16.41% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Hong Kong Fund underperformed the benchmark by 1.68 percentage points during the past year, primarily as a result of the impact of portfolio sampling of (2.36%) and expenses of (0.93%). The impact of security sampling and expenses was partially offset by the positive effects of the effect of uninvested assets, which was 1.12%, and revenue differential of 0.49%. As stated in the introduction, regulatory restrictions can adversely affect the Investment Adviser's ability to optimize the portfolio of a Fund. Due to the 5/50 Rule, the Hong Kong Fund was underweight in Cheung Kong Holdings, a leading real-estate company, by approximately 7%. That stock appreciated by more than 60% from October 1999 through February 2000, a period in which the overall Hong Kong market rose 25%. During the quarterly reconstitution of the MSCI Hong Kong Index, it was noted that most of Cheung Kong's holdings were already represented individually in the MSCI Hong Kong Index; if the index held the holding company as well, it was essentially doubling the representation of Cheung Kong in the Index. Therefore, Cheung Kong Holdings was deleted from the MSCI Hong Kong Index during the quarterly index reconstitution on May 31st. KEY MARKET CONDITIONS The Hong Kong market ran on two tracks during the year ended August 31, 2000. On one track were Hong Kong's "Old Economy" firms. Rising interest rates-a perennial thorn in the side of the Hong Kong market--weighed on financial services companies such as Hang Seng Bank, which made up nearly 10% of the Index as of August 31. The performance of Old Economy stocks contrasted sharply with that of Hong Kong's growth oriented companies, especially in the technology, media and telecommunications sectors. Stocks such as Cable & Wireless HKT (one of Hong Kong's largest stocks) were lifted by positive sentiment in late 1999 and early 2000. Investors were excited by the possibility that China would liberalize its telecom and Internet-related markets, opening the way for Cable & Wireless HKT and newly public company China Telecom to build dominant positions in what is potentially the world's largest consumer market. Although those stocks declined along with many other telecom stocks worldwide in the spring and summer of 2000, their gains over the previous months served only to reinforce telecom's growing influence on the Hong Kong market. That shift has been most evident in the transformation of Hutchison Whampoa--which had a 28% weighting in the index as of August 31. The company's property business has gradually been overshadowed by its expansion into the telecom field. With a concentration in telecom rapidly replacing its former concentration in real estate, Hong Kong's new diversification has not led to a significant decline in volatility. The market enjoyed a good economic backdrop throughout the reporting period, with strong trade flows, very robust GDP growth and lower unemployment. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI HONG KONG INDEX FUND VS. THE MSCI HONG KONG INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Hong Kong Index Fund MSCI Hong Kong Index 03/12/96 $10,000 $10,000 08/31/96 $10,322 $10,415 02/28/97 $11,868 $12,190 08/31/97 $12,159 $12,645 02/28/98 $9,197 $9,871 08/31/98 $5,567 $6,108 02/28/99 $7,630 $8,761 08/31/99 $10,606 $11,932 02/29/00 $12,116 $14,505 08/31/00 $12,167 $13,891 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Hong Kong Index Fund $12,167* MSCI Hong Kong Index $13,891 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------ --------- iShares MSCI Hong Kong Index Fund 14.73% 4.48% MSCI Hong Kong Index 16.41% 7.62% -------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Hong Kong Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 12 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ ITALY PERFORMANCE REVIEW The total return of the iShares MSCI Italy Index Fund (the "Italy Fund") was 13.35% for the year ended August 31, 2000. The corresponding MSCI Index returned 13.91% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Italy Fund underperformed the benchmark by 0.56 percentage points during the past year, primarily as a result of the negative effect of expenses of (0.98%), and portfolio sampling, (0.72%). Those factors were partially offset by the positive impact of revenue differential, which was 1.12%, and the effect of uninvested assets of 0.02%. KEY MARKET CONDITIONS As with other European markets, the fortunes of Italy's stock exchange were tied closely to those of its telecommunications stock. As of August 31, Telecom Italia Mobile SpA and Telecom Italia made up a collective 28.5% of the MSCI Italy Index. From the beginning of the period--August 31, 1999--through mid-March 2000, shares of Telecom Italia Mobile and Telecom Italia rose sharply. Investors were excited about not only the outlook for continued strong growth in Europe's telecommunications market, but also the companies' expansion into new businesses such the Internet. In March, however, these stocks fell along with other TMT (technology, media and telecommunications) stocks. Exacerbating the decline in telecom stocks was the growing realization that the cost of building third generation wireless networks would be much higher than previously expected. Offsetting the performance of these stocks was the market's financial services sector. Banks such as ENI (the market's third largest stock as of March 31, 2000) were hurt by concerns that inflation was rising sharply and interest rates would soon follow suit. Despite the recent weakness of its telecom stocks, the Italian equity market benefited from the growing momentum of the country's economy. Italy's exporters also profited from the weakness of the Euro and higher demand in Asia and other regions. Italy's unemployment rate declined, although it is still higher than that of other European countries. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI ITALY INDEX FUND VS. THE MSCI ITALY INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Italy Index Fund MSCI Italy Index 03/12/96 $10,000 $10,000 08/31/96 $10,411 $10,333 02/28/97 $11,151 $11,102 08/31/97 $12,845 $12,862 02/28/98 $17,250 $17,297 08/31/98 $18,968 $19,129 02/28/99 $21,328 $21,666 08/31/99 $19,943 $19,963 02/29/00 $24,734 $24,638 08/31/00 $22,605 $22,740 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Italy Index Fund $22,604* MSCI Italy Index $22,740 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------ --------- iShares MSCI Italy Index Fund 13.35% 19.98% MSCI Italy Index 13.91% 20.14% -------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Italy Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 13 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ JAPAN PERFORMANCE REVIEW The total return of the iShares MSCI Japan Index Fund (the "Japan Fund") was 8.75% for the year ended August 31, 2000. The corresponding MSCI Index returned 9.22% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Japan Fund underperformed the benchmark by 0.47 percentage points during the past year as a result of expenses of (0.87%) and the effect of uninvested assets of (0.09%). The Fund benefited from portfolio sampling of 0.47% and revenue differential of 0.02%. KEY MARKET CONDITIONS The performance of Japan's equity market over the past year was muted by disappointing economic developments. News that the Japanese economy had officially sunk back into recession in the fourth quarter of 1999 sent the market tumbling. The nation's unemployment rate also reached a post-war record high. In addition, the Yen continued to strengthen versus the U.S. dollar, putting Japanese exporters at a disadvantage on the global playing field. Even so, the Japanese market did benefit for a time from the strength of "New Economy" stocks. Companies such as NTT and Sony attracted investors during late 1999 and early 2000. Although those stocks subsequently lost ground during the spring's tech and telecom downturn, by the end of the period Sony, and other Japanese growth stocks, had begun to recover. In addition, recent data suggest that Japan's economy was stronger toward the end of the period. With the unemployment rate dipping over the spring, investors speculated that the Bank of Japan was on the verge of setting aside its zero interest rate policy. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI JAPAN INDEX FUND VS. THE MSCI JAPAN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Japan Index Fund MSCI Japan Index 03/12/96 $10,000 $10,000 08/31/96 $9,689 $9,720 02/28/97 $8,060 $8,117 08/31/97 $8,529 $8,596 02/28/98 $7,366 $7,438 08/31/98 $5,682 $5,785 02/28/99 $6,867 $7,031 08/31/99 $8,986 $9,409 02/29/00 $10,297 $10,742 08/31/00 $9,772 $10,277 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Japan Index Fund $9,772* MSCI Japan Index $10,277 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ----- --------- iShares MSCI Japan Index Fund 8.75% (0.51)% MSCI Japan Index 9.22% 0.61% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Japan Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 14 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ MALAYSIA (FREE) PERFORMANCE REVIEW The total return of the iShares MSCI Malaysia (Free) Index Fund (the "Malaysia Fund") was 7.57% for the year ended August 31, 2000. The corresponding MSCI Index returned 6.54% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Malaysia Fund outperformed the benchmark by 1.03 percentage points during the past year, primarily as a result of portfolio sampling which contributed 2.22% and revenue differential which added 0.59%. These factors were mitigated by expenses of (0.95%) and the effect of uninvested assets of (0.83%). The portfolio sampling contribution to performance of 2.2% was caused by the Fund being underweight in several of the less liquid securities in the benchmark index. Such securities underperformed the benchmark during the reporting period. KEY MARKET CONDITIONS Unlike other Asian markets, the Malaysian stock exchange posted a flat performance over the first half of the reporting period in the late months of 1999. The market's large share of "Old Economy" firms, such as banks and electric utilities, meant that it was on the losing end of a global rally in "New Economy" stocks. That changed dramatically in the second half of the reporting period. Attracted by strength on both the corporate and economic levels, as well as seemingly greater political stability, investors drove up the Malaysian market sharply. Malaysia's reinstatement in the MSCI Emerging Markets Indices as of May 2000 encouraged foreign investors to revisit the market, after having pulled out en masse after the government relaxed capital controls in 1999. Rising interest rates later took some of the wind out of the rally, but investors continued to be encouraged by Malaysia's economic strength. The country's GDP grew at a rate of 8.2% in the third quarter of 1999 and 10.6% in the fourth quarter. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI MALAYSIA (FREE) INDEX FUND VS. THE MSCI MALAYSIA (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Malaysia (Free) Index Fund MSCI Malaysia (Free) Index 03/12/96 $10,000 $10,000 08/31/96 $10,428 $10,512 02/28/97 $11,834 $12,172 08/31/97 $6,237 $6,385 02/28/98 $4,877 $4,890 08/31/98 $1,648 $1,657 02/28/99 $2,428 $2,852 08/31/99 $4,711 $5,050 02/29/00 $6,304 $6,737 05/31/00 $5,958 $6,352 08/31/00 $5,068 $5,380 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value -------- iShares MSCI Malaysia (Free) Index Fund - August 31, 2000 $5,067* MSCI Malaysia (Free) Index - May 31, 2000 $6,352** MSCI Malaysia (Free) Index - August 31, 2000 $5,380** -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------ --------- iShares MSCI Malaysia (Free) Index Fund 7.57% (14.09)% MSCI Malaysia (Free) Index 6.54% (12.93)% -------------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Malaysia (Free) Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** The MSCI Malaysia (Free) Index changed from a Net to Gross Index effective May 31, 2000. 15 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ MEXICO (FREE) PERFORMANCE REVIEW The total return of the iShares MSCI Mexico Index Fund (the "Mexico Fund") was 28.20% for the year ended August 31, 2000. The corresponding MSCI Index returned 29.21% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Mexico Fund underperformed the benchmark by 1.01 percentage points during the past year. Although its returns were strong in absolute terms, its performance relative to the Index was negatively impacted by expenses of (1.04%) and portfolio sampling of (0.27%). Those factors were partially offset by the positive effect of revenue differential, which was 0.24%, and the effect of uninvested assets, which was 0.06%. KEY MARKET CONDITIONS The Mexican equity market was driven by a number of favorable trends over the past year. The global rush for telecommunications stocks extended to Telefonos de Mexico ("Telmex"), which, at 34.2% of the Index on August 31, 2000, is Mexico's most important stock. That rally lasted for much of the first half of the reporting period. In January, however, Mexican equities weakened as U.S. interest rates rose. Then in March Telmex shares came under pressure from higher U.S. interest rates, like telecommunications stocks everywhere. That decline was offset by news that Moody's Investors Service had upgraded Mexico's sovereign debt to investment-grade status. The Mexican market also benefited from higher prices for crude oil, a key export. Over the spring, however, the market continued to drop. Telmex shares again declined when the company reported lower-than-expected earnings and got involved in diplomatic wrangling with U.S. trade representatives over deregulation of Mexico's domestic telecom market. Overall, however, the Mexican market was supported by very favorable macroeconomic and political developments over the summer. Investors reacted very positively to the election of opposition candidate Vicente Fox in early July. His election brought an end to more than 70 years of uninterrupted rule by the Institutional Revolutionary Party. The following month brought news that Mexico had prepaid its $3.2 billion debt to the IMF. Many investors viewed this development as a very positive sign of Mexico's economic health. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI MEXICO (FREE) INDEX FUND VS. THE MSCI MEXICO (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Mexico (Free) Index Fund MSCI Mexico (Free) Index 03/12/96 $10,000 $10,000 08/31/96 $11,592 $11,736 02/28/97 $12,820 $13,254 08/31/97 $15,675 $16,321 02/28/98 $15,311 $16,136 08/31/98 $8,750 $9,159 02/28/99 $12,108 $13,071 08/31/99 $14,605 $16,055 02/29/00 $19,632 $22,171 08/31/00 $18,723 $20,746 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Mexico (Free) Index Fund $18,723* MSCI Mexico (Free) Index $20,746 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE YEAR SINCE INCEPTION ---------- --------------- iShares MSCI Mexico (Free) Index Fund 28.20% 15.04% MSCI Mexico (Free) Index 29.21% 17.71% -------------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Mexico (Free) Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 16 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ NETHERLANDS PERFORMANCE REVIEW The total return of the iShares MSCI Netherlands Index Fund (the "Netherlands Fund") was 1.28% for the year ended August 31, 2000. The corresponding MSCI Index returned 4.61% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Netherlands Fund underperformed the benchmark by 3.33 percentage points during the past year, as a result of the negative impact of portfolio sampling, which was (2.34%), expenses of (1.02%) and the effect of uninvested assets of (0.20%). These factors were partially offset by the favorable impact of revenue differential, which was 0.23%. As stated in the introduction, regulatory restrictions can adversely affect the Investment Adviser's ability to optimize the portfolio of a Fund. At August 31, 2000, the sum of all the weightings of 5% or greater in the MSCI Netherlands Index was over 70%. Because of the need to comply with the 5/50 Rule, the Netherlands Fund was underweighted in certain positions, and overweighted in others. The poor performance of the overweighted stocks compared to the MSCI Netherlands Index was the primary cause of the 2.35% of underperformance caused by security sampling. KEY MARKET CONDITIONS The export driven Dutch equity market benefited from accelerating global growth and other favorable trends over the past year. Not only did demand increase generally worldwide, but the price of crude oil also rose substantially. That trend benefited Royal Dutch/Shell Petroleum, which made up more than one fourth of the Index as of August 31, 2000. Higher global demand also helped to lift Philips Electronics, the index's second-largest stock. Its third-largest stock, telecommunications firm KPN, enjoyed very positive investor sentiment toward telecom stocks. Yet this last trend did not boost the Dutch market as much as other European markets, given the Netherlands' relative shortage of technology stocks. Its financial services stocks, another big component of the Index, were pressured by rising interest rates during the reporting period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI NETHERLANDS INDEX FUND VS. THE MSCI NETHERLANDS INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Netherlands Index Fund MSCI Netherlands Index 03/12/96 $10,000 $10,000 08/31/96 $11,118 $10,974 02/28/97 $12,934 $12,949 08/31/97 $14,237 $14,680 02/28/98 $16,811 $17,273 08/31/98 $16,716 $16,824 02/28/99 $16,952 $17,573 08/31/99 $18,209 $18,862 02/29/00 $18,076 $19,157 08/31/00 $18,450 $19,730 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Netherlands Index Fund $18,449* MSCI Netherlands Index $19,731 -------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ----- --------- iShares MSCI Netherlands Index Fund 1.28% 14.66% MSCI Netherlands Index 4.61% 16.39% -------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Netherlands Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 17 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ SINGAPORE (FREE) PERFORMANCE REVIEW The total return of the iShares MSCI Singapore Index Fund (the "Singapore Fund") was (1.29%) for the year ended August 31, 2000. The corresponding MSCI Index returned (3.06%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The Singapore Fund outperformed the benchmark by 1.77 percentage points during the past year, primarily as a result of the positive effects of revenue differential of 1.46% and portfolio sampling of 1.24%. These factors were partially offset by the negative impact of expenses, which were (0.93%). KEY MARKET CONDITIONS Singapore's equity market experienced periods of steep rises and sharp declines during the reporting period. Over the last four months of 1999, the Singapore market rallied tremendously. Growing demand in Asia and around the world helped lift Singapore's export driven economy. The country's electronics and chemical manufacturing sectors were especially strong. Investors were also encouraged by the policies the Singapore government had put in place to steer the economy through Asia's economic crisis and encourage the growth of a "homegrown" technology sector. With the turn of the New Year, however, Singapore's equity market deflated considerably. Rising interest rates pressured banks (which made up 33.50% of the MSCI Singapore Index as of August 31, 2000), other financial services and property-related stocks. In addition, the news that Nokia and several high profile telecommunications companies were expecting their growth to slow weighed on Singapore's large contingent of contract manufacturers over the summer. Profit-taking and rotation into other markets in the region also drew capital from the market over the second half of the reporting period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SINGAPORE (FREE) INDEX FUND VS. THE MSCI SINGAPORE (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Singapore (Free) Index Fund MSCI Singapore (Free) Index 03/12/96 $10,000 $10,000 08/31/96 $9,327 $9,196 02/28/97 $9,720 $9,670 08/31/97 $7,137 $6,961 02/28/98 $5,687 $5,978 08/31/98 $2,763 $3,108 02/28/99 $4,914 $5,246 08/31/99 $6,756 $7,274 02/29/00 $6,361 $6,951 08/31/00 $6,669 $7,051 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Singapore (Free) Index Fund $6,669* MSCI Singapore (Free) Index $7,051 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------- --------- iShares MSCI Singapore (Free) Index Fund (1.29)% (8.65)% MSCI Singapore (Free) Index (3.06)% (7.51)% -------------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Singapore (Free) Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 18 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ SOUTH KOREA PERFORMANCE REVIEW The total return of the iShares MSCI South Korea Index Fund (the "South Korea Fund") was (10.81%) for the period from May 10, 2000--the Fund's inception date--through August 31, 2000. The corresponding MSCI Index returned (12.52%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The South Korea Fund outperformed the benchmark by 1.71 percentage points during the reporting period, primarily as a result of portfolio sampling, which had a positive impact on performance of 2.15%. This positive influence more than offset the negative impacts of expenses, revenue differential and the effect of uninvested assets: (0.35%), (0.07%) and (0.02%), respectively. As stated in the introduction, regulatory restrictions can adversely affect the Investment Adviser's ability to optimize the portfolio of a Fund. Due to the Single Issuer Rule, the South Korea Fund was obligated to underweight Samsung Electronics, the largest security in the MSCI South Korea Index. Due to the 5/50 Rule, the Fund was also underweighted in the electronics components industry as a whole. These underweightings helped the Fund outperform the Index over the reporting period, and particularly in August, when Samsung Electronics lagged the market. The Fund's overweighting in Dae Duck Electronics (largely to compensate for its Samsung underweighting) was also beneficial, as this stock appreciated by approximately 21% during the reporting period. KEY MARKET CONDITIONS The South Korean equity market was volatile during the period from May 12, 2000 (the Fund's inception date) through August 31, 2000. Market sentiment was relatively poor as the reporting period began, due largely to a liquidity crisis at Hyundai, South Korea's largest conglomerate. The company's apparent reluctance to unwind its web of cross shareholdings and reduce its debt led investors to sell off shares of Hyundai as well as other industrial groups on and off until mid-August, when Hyundai finally announced a restructuring plan. Shares of Samsung Electronics were also intermittently depressed by weakening sentiment toward technology and telecommunications-related stocks early in the summer. That trend also weighed on SK Telecom, the nation's biggest telephone company and third-largest stock as of March 31. Sentiment toward the telecom and tech sector improved in August, however, helping to lift both stocks. In contrast to the somewhat uncertain economic environment, South Korea's political situation showed progress over the summer. The summit between South Korean President Kim Dae-jung and North Korean leader Kim Jong-il in mid-June helped buoy the equity market. Although the two countries' relationship remains tenuous, investors have been encouraged by the rapprochement and its potential to lessen the political risk long associated with the South Korean market. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SOUTH KOREA INDEX FUND VS. THE MSCI SOUTH KOREA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI South Korea Index Fund MSCI South Korea Index 05/10/00 $10,000 $10,000 05/31/00 $9,455 $9,437 08/31/00 $8,920 $8,748 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI South Korea Index Fund $8,920* MSCI South Korea Index $8,748 -------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION+ ----- ---------- iShares MSCI South Korea Index Fund -- (10.81)% MSCI South Korea Index -- (12.52)% -------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI South Korea Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. + For the period May 10, 2000 (commencement of operations) through August 31, 2000 (unannualized). 19 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ SPAIN PERFORMANCE REVIEW The total return of the iShares MSCI Spain Index Fund (the "Spain Fund") was (1.81%) for the year ended August 31, 2000. The corresponding MSCI Index returned 2.39% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Spain Fund underperformed the benchmark by 4.20 percentage points during the reporting period, primarily as a result of portfolio sampling of (3.91%) and expenses of (0.98%). Those factors were mitigated in part by the positive impact of revenue differential, which was 0.37%, and the effect of uninvested assets, which was 0.32%. As stated in the introduction, regulatory restrictions can adversely affect the Investment Adviser's ability to optimize the portfolio of a Fund. Due to the Single Issuer Rule, the Spain Fund was obligated to underweight Telefonica by approximately 7% from October 1999 through February 2000. Telefonica appreciated by more than 102% during that period. At the same time, the Investment Advisor had to overweight other securities, which underperformed Telefonica. KEY MARKET CONDITIONS Like several of its European neighbors, Spain's equity market was lifted by a number of positive trends over the first half of the reporting period. Along with other markets, its performance weakened somewhat in the spring and summer of 2000. TMT (technology, media and telecommunications) stocks led the market in the fall of 1999 and winter of 2000. Shares of Telefonica surged on positive sentiment toward telecom in general and Telefonica's rapid growth in particular. The company, which made up just over 30% of the MSCI Spain Index as of August 31, 2000, is Spain's largest by market capitalization. Although Telefonica has faced increased competition in its home market, investors have responded positively to its rapid expansion into new sectors (such as Internet access) and markets outside Spain. Some of this goodwill dissipated in the spring of 2000, however, amid a global sell-off in telecommunications stocks. From then through the end of the reporting period, the price of the company's stock was quite volatile. The same was true of Spain's banking shares, another key component of that market. BSCH Banco Santander Central and BBVA Group, which together made up almost 35% of the Index as of August 31, 2000, were beset by real and expected interest rate hikes. But they, too, were supported by investors' positive view of their expansion plans. Like Telefonica, BSCH and BBVA have broken out of the value stock mold, due to their rapid growth in Latin America and elsewhere in Europe. Overall growth in Spain's economy remained robust over the reporting period. In fact, the economy's strength has prompted concern that it is overheating. In July, inflation hit a four year high in both Spain and France, prompting speculation that the European Central Bank would hike interest rates. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SPAIN INDEX FUND VS. THE MSCI SPAIN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Spain Index Fund MSCI Spain Index 03/12/96 $10,000 $10,000 08/31/96 $10,845 $10,917 02/28/97 $12,893 $13,066 08/31/97 $15,092 $15,379 02/28/98 $20,478 $21,053 08/31/98 $20,009 $20,589 02/28/99 $24,389 $24,970 08/31/99 $22,687 $23,707 02/29/00 $24,902 $27,540 08/31/00 $22,275 $24,275 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Spain Index Fund $22,274* MSCI Spain Index $24,275 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION --------- --------- iShares MSCI Spain Index Fund (1.81)% 19.59% MSCI Spain Index 2.39% 21.91% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Spain Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 20 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ SWEDEN PERFORMANCE REVIEW The total return of the iShares MSCI Sweden Index Fund (the "Sweden Fund") was 39.15% for the year ended August 31, 2000. The corresponding MSCI Index returned 51.71% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Sweden Fund underperformed the benchmark by 12.56 percentage points during the past year primarily as a result of the negative effects of portfolio sampling of (12.25%) and expenses of (1.01%). The impact of portfolio sampling and expenses was partially offset by the effect of uninvested assets, which was 0.47%, and revenue differential, which was 0.23%. As stated in the introduction, regulatory restrictions can adversely affect the Investment Adviser's ability to optimize the portfolio of a Fund. Due to the Single Issuer Rule, the Sweden Fund was obligated to underweight Ericsson by approximately 20%, on average, during the reporting period. Ericsson appreciated by nearly 150% during that period. (Ericsson began the fiscal year at 33% of the MSCI Sweden Index but grew to an index weighting of over 50% by August 31, 2000.) At the same time, the portfolio was overweighted in other securities, which underperformed Ericsson. KEY MARKET CONDITIONS With its large telecommunications component, the Swedish equity market reflected changing sentiment toward "TMT" (technology, media and telecommunications) stocks over the reporting period. In the last four months of 1999 and first few months of 2000, investors seemingly could not get enough of TMT stocks in many markets around the world. That created a huge updraft for telecommunications bellwether Ericsson, which made up more than half the MSCI Sweden Index as of March 31, 2000. Driven largely by that one stock, the Swedish equity market rose swiftly to outperform most others in Europe. Yet it was that same stock that drove the Swedish market in the opposite direction over the spring and summer of 2000. Along with other TMT stocks worldwide, shares of Ericsson faltered in March when interest rates rose. Later that spring, the telecom sector took another hit as it became clearer that the cost of building third generation wireless networks would be higher than most in the industry had expected. The new "3G" technology will enable users to access the Internet via their cell phone and receive high quality video feeds over wireless devices. The summer brought more disappointing news for investors. In July, Ericsson announced that its handset division had posted a loss in the second quarter. It also said that the unit would end the year in the red, as sales of its high end phones decline as a share of the total. Investors sold off Ericsson's shares after the announcement and, through the end of the reporting period, they were still far from their previous high in early 2000. Overall, however, the Swedish market has continued to benefit from strong consumer confidence levels and liquidity. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SWEDEN INDEX FUND VS. THE MSCI SWEDEN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Sweden Index Fund MSCI Sweden Index 03/12/96 $10,000 $10,000 08/31/96 $11,413 $11,200 02/28/97 $13,357 $13,344 08/31/97 $14,847 $14,856 02/28/98 $16,353 $16,596 08/31/98 $15,659 $16,093 02/28/99 $16,748 $17,416 08/31/99 $19,589 $20,846 02/29/00 $31,615 $37,492 08/31/00 $27,260 $31,626 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Sweden Index Fund $27,260* MSCI Sweden Index $31,626 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ----- --------- iShares MSCI Sweden Index Fund 39.15% 25.11% MSCI Sweden Index 51.71% 29.33% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Sweden Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 21 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ SWITZERLAND PERFORMANCE REVIEW The total return of the iShares MSCI Switzerland Index Fund (the "Switzerland Fund") was 1.96% for the year ended August 31, 2000. The corresponding MSCI Index returned 0.45% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Switzerland Fund outperformed the benchmark by 1.51 percentage points during the past year, primarily as a result of portfolio sampling, which contributed 2.25%, and revenue differential, which added 0.35%. These factors were partially offset by the impact of expenses of (1.00%) and the effect of uninvested assets of (0.09%). As stated in the introduction, regulatory restrictions can affect the Investment Adviser's ability to optimize the portfolio of a Fund. At August 31, 2000, more than 70% of the MSCI Switzerland Index was comprised of names with weights of over 5%. Because of the 5/50 Rule, the Switzerland Fund shifted the weightings of some of its positions so that no more than 50% of its assets were in companies weighted 5% or more. The outperformance of the stocks that were overweighted in the Fund was the principal cause of the 2.26% positive variance from the MSCI Switzerland Index. KEY MARKET CONDITIONS With its large contingent of so-called "Old Economy" firms, Switzerland's equity market diverged from more growth-oriented markets over the past year. During the fall of 1999 and the early months of 2000, investors overwhelmingly favored TMT (technology, media and telecommunications) stocks over the market's pharmaceutical, food and banking stocks--sectors which collectively made up nearly 70% of the MSCI Switzerland Index as of August 31, 2000. Swiss banks and other financial services companies were also hurt by rising interest rates over the reporting period. The market's defensive characteristics became an advantage in the spring of 2000, however. When growth stocks fell into a sharp correction in mid-March, investors sought out the relative safety of such companies as pharmaceutical maker Novartis and food manufacturer Nestle. Although growth stocks later rebounded, investors' uncertainty about the direction of the global economy continued to support Switzerland's defensive shares. The general health of the Swiss economy also helped to sustain the country's equity market. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SWITZERLAND INDEX FUND VS. THE MSCI SWITZERLAND INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Switzerland Index Fund MSCI Switzerland Index 03/12/96 $10,000 $10,000 08/31/96 $10,260 $10,319 02/28/97 $10,210 $10,347 08/31/97 $11,972 $11,998 02/28/98 $15,124 $16,271 08/31/98 $14,515 $15,609 02/28/99 $15,019 $16,706 08/31/98 $14,727 $15,974 02/29/00 $13,569 $14,310 08/31/00 $15,016 $16,045 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Switzerland Index Fund $15,017* MSCI Switzerland Index $16,045 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ----- --------- iShares MSCI Switzerland Index Fund 1.96% 9.51% MSCI Switzerland Index 0.45% 11.14% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Switzerland Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 22 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ TAIWAN PERFORMANCE REVIEW The total return of the iShares MSCI Taiwan Index Fund (the "Taiwan Fund") was (12.10%) for the period from June 21, 2000 (the Fund's inception date) through August 31, 2000. The corresponding MSCI Index returned (12.15%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The Taiwan Fund outperformed the benchmark by 0.05 percentage points during the reporting period, including expenses of (0.23%) and portfolio sampling of (0.15%). The mitigating factor was the effect of uninvested assets which contributed 0.43% to the Fund performance. KEY MARKET CONDITIONS To a large extent, the performance of Taiwan's equity market over the reporting period reflected shifting sentiment toward the sector Electronic Components: Instruments, which includes the semi conductor industry. This sector comprised 52.8% of the MSCI Taiwan Index as of August 31, 2000. The sector was under a cloud for much of the summer. One issue was slower-than-expected sales of cellular-telephone handsets, which had been a voracious source of demand for chips. The election of Chen Shui-bian to Taiwan's presidency also weighed on the market in early summer. China warned that any moves by Taiwan to declare independence could spark hostilities between the two nations. But the president's conciliatory gestures helped to defuse tension and create a more positive backdrop for the equity market. The market remained volatile in July, but began to recover in August, when sentiment toward the semiconductor industry improved and helped to lift the overall market. Shares of Taiwan Semiconductor, the market's largest stock, were also bolstered by news that the company's first-half profits had surged 133% on a year-over-year basis. The market also became more settled as tensions between China and Taiwan cooled. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI TAIWAN INDEX FUND VS. THE MSCI TAIWAN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Taiwan Index Fund MSCI Taiwan Index 06/21/00 $10,000 $10,000 06/30/00 $9,638 $9,604 08/31/00 $8,790 $8,785 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI Taiwan Index Fund $8,790* MSCI Taiwan Index $8,785 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION+ ---- ---------- iShares MSCI Taiwan Index Fund -- (12.10)% MSCI Taiwan Index -- (12.15)% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI Taiwan Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. + For the period June 21, 2000 (commencement of operations) through August 31, 2000 (unannualized). 23 PERFORMANCE REVIEW iSHARES, INC. ================================================================================ UNITED KINGDOM PERFORMANCE REVIEW The total return of the iShares MSCI United Kingdom Index Fund (the "United Kingdom Fund") was (3.00%) for the year ended August 31, 2000. The corresponding MSCI Index returned (2.67%) over the same period. SIGNIFICANT PERFORMANCE FACTORS The United Kingdom Fund underperformed the benchmark by 0.33 percentage points during the past year, primarily as a result of expenses of (0.93%), revenue differential of (0.01%), and the effect of uninvested assets of (0.08%). These factors were partially offset by the positive impact of portfolio sampling, which was 0.69%. KEY MARKET CONDITIONS During the reporting period, the U.K. market faced issues of "New Economy" versus "Old Economy" on the one hand, and rising growth versus rising interest rates on the other. From the autumn of 1999 into the winter of 2000, the market rallied along with many others in Europe. Although the U.K. market does not contain as large a percentage of "New Economy" stocks as some other European markets, the technology, media and telecommunications (TMT) stocks it does have contributed disproportionately large gains. With the start of the New Year, however, the Bank of England decided to put the brakes on the economy and raised interest rates. That, coupled with the pound's strength versus the Euro, created a more subdued market environment in early 2000. And, as investors continued to flock to TMT stocks, markets with a greater concentration in those areas outperformed the U.K. The U.K.'s relatively light share of TMT companies worked to its advantage over the spring and into summer, however, as investors retreated from those issues in favor of more defensive "Old Economy" stocks. This trend benefited the U.K.'s pharmaceutical issues, which made up just over 14% of the MSCI United Kingdom Index as of August 31, 2000. As the reporting period drew to a close, market sentiment remained in flux, with some expecting the U.K. economy's current rate of growth to prompt further interest rate increases. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI UNITED KINGDOM INDEX FUND VS. THE MSCI UNITED KINGDOM INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI United Kingdom Index Fund MSCI United Kingdom Index 03/12/96 $10,000 $10,000 08/31/96 $11,040 $11,078 02/28/97 $12,767 $12,996 08/31/97 $14,405 $14,601 02/28/98 $17,432 $17,851 08/31/98 $16,564 $16,742 02/28/99 $18,581 $18,971 08/31/99 $19,102 $19,461 02/29/00 $18,007 $18,552 08/31/00 $18,528 $18,941 -------------------------------------------------------- Past performance is not predictive of future performance -------------------------------------------------------- Value August 31, 2000 --------------- iShares MSCI United Kingdom Index Fund $18,528* MSCI United Kingdom Index $18,941 ------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------- --------- iShares MSCI United Kingdom Index Fund (3.00)% 14.77% MSCI United Kingdom Index (2.67)% 15.34% ------------------------------------------------------------------------- ------------------ * The chart assumes a hypothetical $10,000 initial investment in the iShares MSCI United Kingdom Index Fund and reflects all expenses of the Index Fund. Investors should note that the Index Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 24 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI AUSTRALIA INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% BANKING 21.33% 306,683 Commonwealth Bank of Australia $ 4,905,467 344,100 National Australia Bank Limited 5,050,053 390,848 Westpac Banking Corporation Limited 2,856,549 ----------- 12,812,069 ----------- BEVERAGES & TOBACCO 3.40% 42,904 British American Tobacco Australasia Limited 299,958 277,760 Coca-Cola Amatil Limited 632,329 468,224 Foster's Brewing Group Limited 1,109,213 ----------- 2,041,500 ----------- BROADCASTING & PUBLISHING 18.87% 472,502 News Corporation Limited 6,176,889 475,075 News Corporation Limited - Preferred 5,160,569 ----------- 11,337,458 ----------- BUILDING MATERIALS & COMPONENTS 1.99% 157,046 Boral Limited 193,188 302,622 CSR Limited 769,362 110,546 James Hardie Industries Limited 234,160 ----------- 1,196,710 ----------- BUSINESS & PUBLIC SERVICES 4.75% 64,387 Brambles Industries Limited 1,830,676 108,500 Computershare Limited 514,069 101,308 Mayne Nickless Limited 232,972 139,500 Transurban Group 274,776 ----------- 2,852,493 ----------- CHEMICALS 0.46% 76,074 Orica Limited 273,843 ----------- CONSTRUCTION & HOUSING 0.42% 68,107 Leighton Holdings Limited 252,641 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 0.52% 52,700 ERG Limited 311,991 ----------- ENERGY SOURCES 5.47% 247,132 Broken Hill Proprietary Company Limited 2,708,352 169,880 Santos Limited 574,216 ----------- 3,282,568 ----------- FINANCIAL SERVICES 0.59% 69,378 Suncorp-Metway Limited 355,969 ----------- FOOD & HOUSEHOLD PRODUCTS 0.42% 356,190 Goodman Fielder Limited 254,377 ----------- FOREST PRODUCTS & PAPER 1.12% 168,206 Amcor Limited 536,000 64,852 PaperlinX Limited 134,897 ----------- 670,897 ----------- GOLD MINES 1.03% 124,000 Newcrest Mining Limited* 290,673 558,000 Normandy Mining Limited 328,861 ----------- 619,534 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- HEALTH & PERSONAL CARE 2.04% 15,500 Cochlear Limited $ 257,446 35,433 CSL Limited 727,351 44,888 FH Faulding & Company Limited 238,614 ----------- 1,223,411 ----------- INSURANCE 5.58% 269,514 AMP Limited 2,775,023 115,847 QBE Insurance Group Limited 579,000 ----------- 3,354,023 ----------- LEISURE & TOURISM 0.96% 101,680 TABCORP Holdings Limited 578,694 ----------- MERCHANDISING 4.34% 316,138 Coles Myer Limited 1,318,838 325,345 Woolworths Limited 1,287,693 ----------- 2,606,531 ----------- METALS - NON FERROUS 5.13% 533,386 Mount Isa Mines Holdings Limited 351,337 82,770 Rio Tinto Limited 1,278,492 308,481 WMC Limited 1,454,263 ----------- 3,084,092 ----------- MULTI-INDUSTRY 2.58% 53,816 Howard Smith Limited 245,650 277,760 Pacific Dunlop Limited 250,364 168,640 Southcorp Limited 445,107 74,338 Wesfarmers Limited 607,133 ----------- 1,548,254 ----------- REAL ESTATE 6.67% 434,000 Gandel Retail Trust 283,365 399,900 General Property Trust 605,383 140,058 Lend Lease Corporation Limited 1,655,008 155,000 Mirvac Group 325,995 134,788 Stockland Trust Group 291,273 460,691 Westfield Trust 846,475 ----------- 4,007,499 ----------- RECREATION, OTHER CONSUMER GOODS 0.90% 148,800 Aristocrat Leisure Limited 538,214 ----------- TELECOMMUNICATIONS 10.49% 1,728,684 Telstra Corporation Limited 6,302,640 ----------- UTILITIES - ELECTRICAL & GAS 0.94% 93,000 Australian Gas Light Company Limited 564,222 ----------- TOTAL COMMON STOCK - BASKET (Cost $59,277,891) 60,069,630 ----------- See accompanying notes to financial statements. 25 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI AUSTRALIA INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - NON-BASKET 0.00% BANKING 0.00% 26 Commonwealth Bank of Australia $ 416 ----------- FOREST PRODUCTS & PAPER 0.00% 20 PaperlinX Limited 42 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $357) 458 ----------- TOTAL INVESTMENTS (COST $59,278,248)+ 100.00% $60,070,088 ======= =========== ------------ * Non-income producing security. + Aggregate cost for Federal income tax purposes is $59,622,376. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 6,194,324 Excess of tax cost over value (5,746,612) ----------- $ 447,712 =========== See accompanying notes to financial statements. 26 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI AUSTRIA INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% BANKING 23.95% 48,146 Bank Austria $ 2,581,245 ----------- BEVERAGES & TOBACCO 9.25% 13,720 Austria Tabakwerke 527,585 10,556 BBAG Oesterreichische Brau Beteiligungs 469,268 ----------- 996,853 ----------- BUILDING MATERIALS & COMPONENTS 4.72% 23,814 Wienerberger Baustoffindustrie 508,154 ----------- BUSINESS & PUBLIC SERVICES 4.64% 14,560 Flughafen Wien 499,819 ----------- CHEMICALS 2.23% 3,850 Lenzing 240,640 ----------- CONSTRUCTION & HOUSING 2.72% 9,562 Bau Holding 293,305 ----------- ENERGY SOURCES 9.03% 13,104 OMV 972,958 ----------- INSURANCE 4.35% 2,912 Generali Holding Vienna 468,621 ----------- MACHINERY & ENGINEERING 7.45% 12,180 BWT 409,346 8,092 VA Technologie 393,761 ----------- 803,107 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- METALS - STEEL 4.61% 15,568 Boehler-Uddeholm $ 497,050 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 9.06% 9,898 Mayr-Melnhof Karton 448,817 24,808 RHI 527,159 ----------- 975,976 ----------- TRANSPORTATION - AIRLINES 3.91% 36,302 Austrian Airlines 421,204 ----------- UTILITIES - ELECTRICAL & GAS 14.08% 16,254 Oesterreichische Elektrizitaetswirtschafts - Class A 1,517,404 ----------- TOTAL COMMON STOCK - BASKET (Cost $12,759,379) 10,776,336 ----------- TOTAL INVESTMENTS (COST $12,759,379)+ 100.00% $10,776,336 ======= =========== ----------- + Aggregate cost for Federal income tax purposes is $13,274,403. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 174,544 Excess of tax cost over value (2,672,611) ----------- $(2,498,067) =========== See accompanying notes to financial statements. 27 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI BELGIUM INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 3.54% 1,950 D'Ieteren $ 476,955 ----------- BANKING 15.47% 4,225 Dexia 594,271 32,475 KBC Bancassurance Holding NV 1,486,990 ----------- 2,081,261 ----------- RECREATION, OTHER CONSUMER GOODS 1.59% 5,000 Gevaert NV 213,384 ----------- CHEMICALS 4.10% 8,475 Solvay 552,326 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 4.50% 4,800 Barco NV 605,159 ----------- ENERGY SOURCES 1.65% 1,475 Electrafina 221,631 ----------- FINANCIAL SERVICES 4.74% 14,750 Algmene Maatschappij voor Nijverheidskredit NV 638,271 ----------- HEALTH & PERSONAL CARE 4.57% 16,125 UCB 614,761 ----------- INDUSTRIAL COMPONENTS 2.65% 7,850 Bekaert NV 355,952 ----------- INSURANCE 25.58% 113,175 Fortis B 3,442,352 ----------- MERCHANDISING 8.32% 14,325 Colruyt NV 562,312 9,975 Delhaize-Le Lion 557,847 ----------- 1,120,159 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- METALS - NON FERROUS 2.03% 7,725 Union Miniere $ 273,634 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 1.71% 3,200 Glaverbel 230,455 ----------- MULTI-INDUSTRY 7.50% 6,125 Compagnie Benelux Paribas 397,540 2,350 Groupe Bruxelles Lambert 611,147 ----------- 1,008,687 ----------- TRANSPORTATION - SHIPPING 0.89% 2,000 Compagnie Maritime Belge 120,029 ----------- UTILITIES - ELECTRICAL & GAS 11.16% 7,025 Electrabel 1,502,149 ----------- TOTAL COMMON STOCK - BASKET (Cost $15,057,249) 13,457,165 ----------- TOTAL INVESTMENTS (COST $15,057,249)+ 100.00% $13,457,165 ======= =========== ----------- + Aggregate cost for Federal income tax purposes is $15,946,468. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 201,827 Excess of tax cost over value (2,691,130) ----------- $(2,489,303) =========== See accompanying notes to financial statements. 28 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI BRAZIL (FREE) INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ----------- -------- ----- COMMON STOCK - BASKET 99.27% BANKING 10.28% 99,636,000 Banco Bradesco Pfd $ 837,829 6,251,000 Banco do Estado de Sao Paulo Pfd 211,974 8,835,000 Banco Itau Pfd 844,897 ----------- 1,894,700 ----------- BEVERAGES & TOBACCO 6.17% 817,000 Companhia Cervejaria Brahma Pfd 819,470 64,600 Souza Cruz 317,763 ----------- 1,137,233 ----------- BUILDING MATERIALS & COMPONENTS 1.93% 1,463,000 Companhia Cimento Portland Itau Pfd 248,473 3,059,000 Duratex Pfd 108,439 ----------- 356,912 ----------- CHEMICALS 0.82% 361,000 Copene Petroquimica do Nordeste Pfd A Shares 150,789 ----------- ENERGY SOURCES 16.99% 21,299,000 Companhia Brasileira de Petroleo Ipiranga Pfd 226,159 20,900 Petroleo Brasileiro 662,207 74,100 Petroleo Brasileiro Pfd 2,243,974 ----------- 3,132,340 ----------- FOOD & HOUSEHOLD PRODUCTS 1.48% 16,017,000 Bombril Pfd 152,291 190,000 Sadia Industria e Comercio Pfd 121,132 ----------- 273,423 ----------- FOREST PRODUCTS & PAPER 3.99% 209,000 Aracruz Celulose Pfd B Shares 420,412 7,961,000 Votorantim Celulose e Papel Pfd 315,027 ----------- 735,439 ----------- MACHINERY & ENGINEERING 0.35% 25,859,000 Inepar Industria e Construcoes Pfd* 64,239 ----------- MERCHANDISING 3.91% 18,259,000 Companhia Brasileira de Distribuicao Grupo Pao de Acucar Pfd 692,427 9,823,000 Lojas Americanas Pfd 27,803 ----------- 720,230 ----------- METALS - STEEL 13.58% 14,953,000 Companhia Siderurgica Nacional 543,222 62,700 Companhia Vale do Rio Doce Pfd A Shares 1,695,433 45,600 Usinas Siderurgicas de Minas Gerais Pfd A Shares 265,655 ----------- 2,504,310 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ----------- -------- ----- TELECOMMUNICATIONS 25.85% 21,128,000 Brasil Telecom Participacoes $ 232,240 11,039,000 Embratel Participacoes 209,313 29,013,000 Embratel Participacoes Pfd 644,202 49,818,000 Tele Celular Sul Participacoes 158,804 46,987,000 Tele Celular Sul Participacoes Pfd 192,390 75,468,000 Tele Centro Oeste Celular Participacoes Pfd 327,671 39,425,000 Tele Centro Sul Participacoes Pfd 563,369 70,357,000 Tele Nordeste Celular Participacoes Pfd 216,543 18,449,000 Tele Norte Leste Participacoes 361,984 39,368,000 Tele Norte Leste Participacoes Pfd 997,452 58,349,000 Telesp Celular Participacoes Pfd 862,648 ----------- 4,766,616 ----------- UTILITIES - ELECTRICAL & GAS 13.92% 43,092,000 Centrais Electricas Brasileiras 807,605 34,884,000 Centrais Electricas Brasileiras Pfd B Shares 709,375 99,313,000 Centrais Geradoras do Sul do Brasil* 157,198 62,605,000 Centrais Geradoras do Sul do Brasil Pfd* 99,094 44,308,000 Companhia Energetica de Minas Gerais Pfd 793,867 ----------- 2,567,139 ----------- TOTAL COMMON STOCK - BASKET (Cost $18,594,466) 18,303,370 ----------- COMMON STOCK - NON-BASKET 0.73% FINANCE 0.71% 191,205,000 Bradespar Pfd Shares* 131,358 ----------- TELECOMMUNICATIONS 0.02% 5,834,900 Telesp Celular Participation Rights Exp 10/2/00* 3,528 ----------- UTILITIES - ELECTRICAL & GAS 0.00% 1,371,989 Centrais Geradoras Rights Issue Exp 9/11/00* 8 2,176,445 Centrais Gerasul Common Rights Issue Exp 9/11/00* 12 ----------- 20 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $194,500) 134,906 ----------- TOTAL INVESTMENTS (COST $18,788,966)+ 100.00% $18,438,276 ======= =========== ------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $19,517,266. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 627,012 Excess of tax cost over value (1,706,002) ----------- $(1,078,990) =========== See accompanying notes to financial statements. 29 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI CANADA INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 3.32% 44,200 Bombardier Incorporated - Class B $ 728,324 ----------- BANKING 9.32% 36,231 Bank of Nova Scotia 949,568 33,800 Canadian Imperial Bank of Commerce 1,033,688 3,900 National Bank of Canada 61,752 ----------- 2,045,008 ----------- BEVERAGES & TOBACCO 5.28% 19,396 Seagram Company Limited 1,158,078 ----------- BROADCASTING & PUBLISHING 5.34% 3,900 Quebecor Incorporated - Class B 103,801 9,100 Rogers Communications Incorporated - Class B* 224,615 21,840 Thomson Corporation 842,677 ----------- 1,171,093 ----------- BUSINESS & PUBLIC SERVICES 3.19% 22,100 CGI Group Inc.* 185,078 9,100 Cognos, Inc.* 394,002 2,600 Descartes Systems Group, Inc.* 120,858 ----------- 699,938 ----------- CHEMICALS 1.53% 13,156 Agrium Incorporated 128,464 3,900 Potash Corporation of Saskatchewan Incorporated 206,544 ----------- 335,008 ----------- ELECTRICAL & ELECTRONICS 32.37% 10,400 Ballard Power Systems Inc* 1,053,258 15,600 Mitel Corporation* 379,765 60,541 Nortel Networks Corporation 4,936,635 3,900 Research in Motion, Limited* 292,890 5,200 Sierra Wireless* 337,099 15,600 SR Telecom Inc.* 105,784 ----------- 7,105,431 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 6.03% 11,700 ATI Technologies Inc.* 111,867 15,600 Celestica Inc.* 1,211,229 ----------- 1,323,096 ----------- ENERGY EQUIPMENT & SERVICES 0.40% 2,600 Precision Drilling Corporation* 88,330 ----------- ENERGY SOURCES 5.46% 10,881 Alberta Energy Company Limited 399,912 1,300 Canadian Natural Resources Limited* 41,873 975 Canadian Occidental Petroleum Limited 25,587 13,000 Gulf Canada Resources Limited* 71,845 10,400 Imperial Oil Limited 259,171 6,500 Petro-Canada 137,740 10,400 Suncor Energy Incorporated 234,488 806 Talisman Energy Incorporated* 27,027 ----------- 1,197,643 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FINANCIAL SERVICES 4.15% 15,600 C.I. Fund Management Inc $ 285,617 2,600 Mackenzie Financial Corporation 41,961 27,781 Power Corporation of Canada 583,991 ----------- 911,569 ----------- FOREST PRODUCTS & PAPER 0.97% 11,700 Abitibi Consolidated Incorporated 130,908 9,100 Domtar Incorporated 81,145 ----------- 212,053 ----------- HEALTH & PERSONAL CARE 3.05% 3,900 Biovail Corporation* 249,519 5,200 MDS Incorporated - Class B 223,910 2,600 QLT Inc.* 196,318 ----------- 669,747 ----------- INDUSTRIAL COMPONENTS 1.02% 4,706 Magna International Incorporated - Class A 225,136 ----------- INSURANCE 3.30% 650 Fairfax Financial Holdings Limited* 87,272 15,600 Manulife Financial Corporation 336,394 14,300 Sun Life Financial Services of Canada* 300,604 ----------- 724,270 ----------- LEISURE & TOURISM 0.45% 1,300 Four Seasons Hotel Inc 97,894 ----------- MACHINERY & ENGINEERING 2.00% 27,300 United Dominion Industries Limited 439,666 ----------- MERCHANDISING 0.83% 7,150 Canadian Tire Corporation - Class A 98,666 3,900 Hudson's Bay Company 40,859 2,600 Sobeys Canada Incorporated 41,873 ----------- 181,398 ----------- METALS - NON FERROUS 4.30% 11,700 Alcan Aluminium Limited 382,807 9,100 Cameco Corporation 117,244 5,200 Cominco Limited 73,344 6,006 Inco Limited* 106,501 28,275 Inco Limited VBN Shares* 167,767 1,950 Noranda Incorporated 19,438 3,900 Rio Algom Limited 76,694 ----------- 943,795 ----------- METALS - STEEL 1.48% 18,850 Dofasco Incorporated 325,948 ----------- MULTI-INDUSTRY 2.35% 14,300 Canadian Pacific Limited 387,875 9,750 EdperBrascan Corporation - Class A 127,272 ----------- 515,147 ----------- TELECOMMUNICATIONS 2.79% 27,365 BCE Incorporated 612,358 ----------- TRANSPORTATION - AIRLINES 1.04% 18,200 Air Canada Inc.* 227,701 ----------- See accompanying notes to financial statements. 30 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI CANADA INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET (CONTINUED) UTILITIES - ELECTRICAL & GAS 0.03% 585 Transcanada Pipelines Limited $ 5,673 ----------- TOTAL COMMON STOCK - BASKET (Cost $18,677,367) 21,944,304 ----------- COMMON STOCK - NON-BASKET 0.00% ENERGY SOURCES 0.00% 4 Talisman Energy Incorporated 134 ----------- INDUSTRIAL COMPONENTS 0.00% 8 Magna International Incorporated - Class A 383 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $491) 517 ----------- TOTAL INVESTMENTS (COST $18,677,858)+ 100.00% $21,944,821 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $18,974,636. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $3,436,905 Excess of tax cost over value (466,720) ---------- $2,970,185 ========== See accompanying notes to financial statements. 31 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI EMU INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 99.99% AUSTRIA 0.55% BANKING 0.18% 1,375 Bank Austria $ 73,718 ----------- BEVERAGES & TOBACCO 0.03% 264 Austria Tabakwerke 10,152 110 BBAG Oesterreichische Brau Beteiligungs 4,890 ----------- 15,042 ----------- BUILDING MATERIALS & COMPONENTS 0.04% 825 Wienerberger Baustoffindustrie 17,604 ----------- BUSINESS & PUBLIC SERVICES 0.02% 253 Flughafen Wien 8,685 ----------- CHEMICALS 0.01% 44 Lenzing 2,750 ----------- CONSTRUCTION & HOUSING 0.01% 88 Bau Holding 2,699 ----------- ENERGY SOURCES 0.06% 319 OMV 23,686 ----------- INSURANCE 0.03% 88 Generali Holding Vienna 14,162 ----------- MACHINERY & ENGINEERING 0.04% 198 BWT 6,654 176 VA Technologie 8,564 ----------- 15,218 ----------- METALS - STEEL 0.01% 132 Boehler-Uddeholm 4,214 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.03% 143 Mayr-Melnhof Karton 6,484 242 RHI 5,143 ----------- 11,627 ----------- TRANSPORTATION - AIRLINES 0.01% 407 Austrian Airlines 4,722 ----------- UTILITIES - ELECTRICAL & GAS 0.08% 363 Oesterreichische Elektrizitaetswirtschafts - Class A 33,888 ----------- TOTAL AUSTRIA (Cost $236,815) 228,015 ----------- BELGIUM 2.15% AUTOMOBILES 0.04% 66 D'Ieteren 16,143 ----------- BANKING 0.39% 3,542 KBC Bancassurance Holding NV 162,184 ----------- CHEMICALS 0.16% 1,001 Solvay 65,236 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 0.04% 143 Barco NV 18,029 ----------- HEALTH & PERSONAL CARE 0.16% 1,738 UCB 66,261 ----------- INDUSTRIAL COMPONENTS 0.03% 264 Bekaert NV 11,971 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- BELGIUM (continued) INSURANCE 0.64% 8,756 Fortis B $ 266,324 ----------- MERCHANDISING 0.13% 462 Colruyt NV 18,135 616 Delhaize-Le Lion 34,449 ----------- 52,584 ----------- METALS - NON FERROUS 0.03% 308 Union Miniere 10,910 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.01% 88 Glaverbel 6,338 ----------- MULTI-INDUSTRY 0.18% 286 Groupe Bruxelles Lambert 74,378 ----------- TRANSPORTATION - SHIPPING 0.01% 110 Compagnie Maritime Belge 6,601 ----------- UTILITIES - ELECTRICAL & GAS 0.33% 649 Electrabel 138,775 ----------- TOTAL BELGIUM (Cost $913,558) 895,734 ----------- FINLAND 7.42% BEVERAGES & TOBACCO 0.05% 1,100 Oyj Hartwall Abp 19,560 ----------- BUSINESS & PUBLIC SERVICES 0.08% 1,100 Tietoenator Oyj 35,844 ----------- CHEMICALS 0.01% 1,100 Kemira Oyj 5,858 ----------- ELECTRICAL & ELECTRONICS 6.15% 58,300 Nokia Oyj 2,559,077 ----------- FOOD & HOUSEHOLD PRODUCTS 0.01% 2,200 Raisio Group PLC 3,560 ----------- FOREST PRODUCTS & PAPER 0.20% 3,300 UPM-Kymmene Oyj 83,473 ----------- INSURANCE 0.11% 1,100 Sampo Insurance Co., Ltd. - A Shares 44,744 ----------- MACHINERY & ENGINEERING 0.03% 1,100 Metso Oyj 13,301 ----------- METALS - NON FERROUS 0.03% 1,100 Outokumpu Oyj 10,954 ----------- METALS - STEEL 0.02% 2,200 Rautaruukki Oyj 8,998 ----------- TELECOMMUNICATIONS 0.71% 8,800 Sonera Oyj 294,186 ----------- WHOLESALE & INTERNATIONAL TRADE 0.02% 1,100 Kesko Oyj - B 10,074 ----------- TOTAL FINLAND (Cost $3,592,733) 3,089,629 ----------- FRANCE 30.98% AEROSPACE & MILITARY TECHNOLOGY 0.23% 2,002 Thomson CSF 82,947 66 Zodiac SA 14,201 ----------- 97,148 ----------- See accompanying notes to financial statements. 32 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI EMU INDEX FUND (CONTINUED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FRANCE (continued) APPLIANCES & HOUSEHOLD DURABLES 0.03% 187 Seb SA $ 10,425 ----------- AUTOMOBILES 0.24% 539 PSA Peugeot Citroen 99,631 ----------- BANKING 1.89% 5,291 Banque Nationale de Paris 486,889 5,038 Societe Generale - Class A 298,769 ----------- 785,658 ----------- BEVERAGES & TOBACCO 0.08% 671 Pernod Ricard 35,258 ----------- BROADCASTING & PUBLISHING 0.59% 1,507 Canal Plus 246,403 ----------- BUILDING MATERIALS & COMPONENTS 0.57% 1,045 Compagnie de Saint Gobain 139,181 1,298 Lafarge 96,248 ----------- 235,429 ----------- BUSINESS & PUBLIC SERVICES 3.52% 1,441 Cap Gemini 301,081 1,353 Dassault Systemes SA 116,446 110 Publicis Groupe 43,130 396 Sodexho Alliance 62,108 2,365 Suez Lyonnaise des Eaux 350,945 7,194 Vivendi 588,451 ----------- 1,462,161 ----------- CHEMICALS 0.33% 1,089 Air Liquide 138,941 ----------- CONSTRUCTION & HOUSING 0.64% 3,883 Bouygues 244,256 187 Groupe GTM 22,262 ----------- 266,518 ----------- ELECTRICAL & ELECTRONICS 3.31% 13,596 Alcatel 1,112,722 451 Sagem 124,345 1,859 Schneider 137,186 ----------- 1,374,253 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 1.56% 10,571 ST Microelectronics NV 648,510 ----------- ENERGY EQUIPMENT & SERVICES 0.06% 220 Coflexip SA 26,798 ----------- ENERGY SOURCES 3.16% 8,855 Total - Class B 1,315,578 ----------- FINANCIAL SERVICES 0.08% 143 CPR* 5,562 55 Societe Eurafrance 28,362 ----------- 33,924 ----------- FOOD & HOUSEHOLD PRODUCTS 0.64% 1,771 Groupe Danone 242,173 275 Eridania Beghin-Say 24,450 ----------- 266,623 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FRANCE (continued) HEALTH & PERSONAL CARE 4.18% 9,306 Adventis SA $ 699,152 121 Essilor International 33,565 8,063 L'OREAL 583,543 8,723 Sanofi-Synthelabo 425,785 ----------- 1,742,045 ----------- INDUSTRIAL COMPONENTS 0.24% 1,606 Michelin - Class B 47,121 990 Valeo 53,165 ----------- 100,286 ----------- INSURANCE 1.60% 4,686 AXA 667,863 ----------- LEISURE & TOURISM 0.31% 2,343 Accor 101,034 209 Club Mediterranee 27,297 ----------- 128,331 ----------- MACHINERY & ENGINEERING 0.13% 187 Compagnie Francaise d'Etudes de Construction Technip 24,291 407 Sidel 27,755 ----------- 52,046 ----------- MERCHANDISING 2.38% 8,327 Carrefour 607,832 1,023 Casino Guichard Perrachon 102,325 209 Casino Guichard Perrachon - Pfd 13,286 1,419 Pinault-Printemps-Redoute 268,602 ----------- 992,045 ----------- METALS - NON FERROUS 0.11% 968 Pechiney - Class A 44,324 ----------- METALS - STEEL 0.07% 2,904 Usinor 31,113 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.06% 187 Imetal 21,614 154 Nord-Est SA 3,574 ----------- 25,188 ----------- MULTI-INDUSTRY 0.28% 1,628 Lagardere S.C.A. 116,159 ----------- REAL ESTATE 0.16% 231 Gecina 21,237 231 Simco 15,702 187 Union du Credit-Bail Immobilier 28,431 ----------- 65,370 ----------- RECREATION, OTHER CONSUMER GOODS 1.17% 5,841 LVMH (Louis Vuitton Moet Hennessy) 453,890 660 Societe BIC 31,130 ----------- 485,020 ----------- See accompanying notes to financial statements. 33 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI EMU INDEX FUND (CONTINUED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FRANCE (continued) TELECOMMUNICATIONS 3.35% 12,221 France Telecom $ 1,396,245 ----------- TEXTILES & APPAREL 0.01% 77 Chargeurs SA 4,210 ----------- TOTAL FRANCE (Cost $13,191,473) 12,893,503 ----------- GERMANY 23.08% AUTOMOBILES 1.97% 12,100 DaimlerChrysler 625,048 3,850 Volkswagen 167,729 1,100 Volkswagen - Preferred 28,656 ----------- 821,433 ----------- BANKING 2.86% 7,150 Deutsche Bank 624,901 6,050 Dresdner Bank 273,257 4,950 Bayerische HypoVereinsbank 289,369 ----------- 1,187,527 ----------- BROADCASTING & PUBLISHING 0.20% 1,650 EM. TV & Merchandising 83,033 ----------- BUILDING MATERIALS & COMPONENTS 0.12% 550 Buderus 8,949 550 Dyckerhoff - Preferred 10,758 550 Heidelberger Zement 30,318 ----------- 50,025 ----------- BUSINESS & PUBLIC SERVICES 2.27% 1,100 Fresenius Medical Care 95,161 2,200 SAP 430,326 1,650 SAP Vorzug 419,567 ----------- 945,054 ----------- CHEMICALS 1.54% 7,150 BASF 268,269 8,800 Bayer 372,818 ----------- 641,087 ----------- CONSTRUCTION & HOUSING 0.08% 550 Bilfinger & Berger Bau 6,846 1,100 Hochtief 26,651 ----------- 33,497 ----------- ELECTRICAL & ELECTRONICS 2.78% 7,150 Siemans 1,153,810 ----------- FOOD & HOUSEHOLD PRODUCTS 0.06% 1,100 Kamps 23,942 ----------- HEALTH & PERSONAL CARE 0.80% 1,100 Beiersdorf 101,224 1,100 Gehe 40,490 2,200 Merck KGAA 73,351 2,200 Schering 117,557 ----------- 332,622 ----------- INDUSTRIAL COMPONENTS 0.08% 1,650 Continental 30,001 550 FAG Kugelfischer Georg Schaefer 3,643 ----------- 33,644 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- GERMANY (continued) INSURANCE 3.68% 2,750 Allianz $ 929,112 2,200 Muenchener Rueckversicherung 604,412 ----------- 1,533,524 ----------- MACHINERY & ENGINEERING 0.29% 550 Deutz* 2,039 550 IWKA 6,699 1,650 Linde 69,683 1,100 MAN 30,807 550 MAN - Preferred 11,052 ----------- 120,280 ----------- MERCHANDISING 0.55% 550 Douglas Holding 17,849 1,650 Karstadt 50,539 3,850 Metro 146,506 550 Metro-Vorzug 15,159 ----------- 230,053 ----------- METALS - STEEL 0.22% 6,050 Thyssen 92,520 ----------- MULTI-INDUSTRY 0.19% 550 AGIV 5,428 2,200 Preussag 74,622 ----------- 80,050 ----------- REAL ESTATE 0.13% 2,200 WCM Beteiligungs-und Grundbesitz 55,062 ----------- RECREATION, OTHER CONSUMER GOODS 0.07% 550 Adidas-Salomon 29,585 ----------- TELECOMMUNICATIONS 3.37% 36,300 Deutsche Telekom 1,403,937 ----------- TRANSPORTATION - AIRLINES 0.23% 4,400 Deutsche Lufthansa 97,606 ----------- UTILITIES - ELECTRICAL & GAS 1.59% 5,500 RWE 204,649 1,100 RWE - Preferred 33,008 8,800 VEBA 422,501 ----------- 660,158 ----------- TOTAL GERMANY (Cost $10,246,637) 9,608,449 ----------- IRELAND 0.93% BANKING 0.20% 9,900 Allied Irish Banks Plc 81,948 ----------- BROADCASTING & PUBLISHING 0.05% 6,600 Independent News & Media Plc 22,885 ----------- BUILDING MATERIALS & COMPONENTS 0.18% 4,400 CRH Plc 73,625 ----------- FINANCIAL SERVICES 0.07% 3,300 Irish Life & Permanent Plc 28,460 ----------- See accompanying notes to financial statements. 34 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI EMU INDEX FUND (CONTINUED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- IRELAND (continued) FOOD & HOUSEHOLD PRODUCTS 0.09% 3,300 Fyffes Plc $ 2,846 2,200 Greencore Group Plc 5,770 2,200 Kerry Group Plc - A Shares 29,438 ----------- 38,054 ----------- FOREST PRODUCTS & PAPER 0.06% 13,200 Jefferson Smurfit Group Plc 25,585 ----------- LEISURE & TOURISM 0.02% 1,100 Jurys Doyle Hotel Group Plc 7,824 ----------- MULTI-INDUSTRY 0.03% 1,100 DCC Plc 10,563 ----------- RECREATION, OTHER CONSUMER GOODS 0.02% 8,800 Waterford Wedgewood Plc 10,093 ----------- TELECOMMUNICATIONS 0.13% 26,400 eircom Plc 55,629 ----------- TRANSPORTATION - AIRLINES 0.08% 4,400 Ryanair Holdings Plc* 32,470 ----------- TOTAL IRELAND (Cost $402,071) 387,136 ----------- ITALY 11.11% BANKING 2.46% 5,500 Banca Popolare di Milano SpA 38,759 55,000 Banco di Roma SpA 66,749 55,000 Banco Intesa SpA 235,065 11,000 Banco Intesa SpA Rnc 26,387 16,500 Istituto Bancario San Paolo di Torino SpA 292,612 8,250 Mediobanca SpA 88,153 55,000 Unicredito Italiano SpA 278,440 ----------- 1,026,165 ----------- BROADCASTING & PUBLISHING 0.86% 5,500 Arnoldo Mondadori Editore SpA 73,048 16,500 Mediaset SpA 284,308 ----------- 357,356 ----------- BUILDING MATERIALS & COMPONENTS 0.01% 1,254 Italcementi SpA 4,864 ----------- ENERGY SOURCES 1.32% 93,500 ENI SpA 548,083 ----------- FOOD & HOUSEHOLD PRODUCTS 0.10% 27,500 Parmalat Finanziaria SpA 39,830 ----------- INDUSTRIAL COMPONENTS 0.14% 22,000 Pirelli SpA 59,463 ----------- INSURANCE 1.39% 15,400 Assicurazioni Generali SpA 478,679 8,250 Riunione Adriatica di Sicurta SpA 96,046 429 Societa Assicuratrice Industriale SpA Rnc 3,429 ----------- 578,154 ----------- MERCHANDISING 0.08% 5,500 La Rinascente SpA 33,047 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- ITALY (continued) TELECOMMUNICATIONS 3.57% 55,000 Olivetti SpA $ 165,920 44,000 Telecom Italia SpA 530,944 11,000 Telecom Italia SpA Rnc 63,952 77,000 Telecom Italia Mobile SpA 645,723 16,500 Telecom Italia Mobile SpA Rnc 80,055 ----------- 1,486,594 ----------- TEXTILES & APPAREL 0.12% 27,500 Benetton Group SpA 51,321 ----------- TRANSPORTATION - AIRLINES 0.10% 22,000 Alitalia SpA* 40,822 ----------- UTILITIES - ELECTRICAL & GAS 0.96% 86,801 Enel SpA 347,982 11,000 Italgas SpA 51,042 ----------- 399,024 ----------- TOTAL ITALY (Cost $4,911,319) 4,624,723 ----------- NETHERLANDS 14.59% APPLIANCES & HOUSEHOLD DURABLES 1.84% 15,686 Philips Electronics 764,266 ----------- BANKING 1.05% 17,523 ABN AMRO Holding 436,232 ----------- BEVERAGES & TOBACCO 0.46% 3,740 Heineken 190,204 ----------- BROADCASTING & PUBLISHING 0.39% 7,975 Elsevier 96,574 3,311 Wolters Klumer CVA 67,119 ----------- 163,693 ----------- BUSINESS & PUBLIC SERVICES 0.48% 4,026 Getronics 50,543 5,698 TNT Post Group 133,289 1,144 Vedior 15,003 ----------- 198,835 ----------- CHEMICALS 0.36% 3,410 Akzo Nobel 151,016 ----------- CONSTRUCTION & HOUSING 0.05% 418 Hollandsche Beton Groep 4,292 330 IHC Caland 17,164 ----------- 21,456 ----------- DATA PROCESSING & REPRODUCTION 0.04% 1,012 Oce 15,071 ----------- ELECTRONIC COMPONENTS & INSTRUMENTS 0.45% 4,972 ASM Lithography Holding NV* 188,009 ----------- ENERGY SOURCES 3.74% 25,586 Royal Dutch/Shell Group 1,558,277 ----------- FINANCIAL SERVICES 1.86% 11,528 Ing Groep 772,818 ----------- FOOD & HOUSEHOLD PRODUCTS 0.78% 6,820 Unilever 323,194 ----------- See accompanying notes to financial statements. 35 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI EMU INDEX FUND (CONTINUED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- NETHERLANDS (continued) INSURANCE 1.50% 16,016 Aegon $ 625,130 ----------- MACHINERY & ENGINEERING 0.01% 385 Stork 4,176 ----------- MERCHANDISING 0.60% 8,822 Koninklijke Ahold 249,585 ----------- TELECOMMUNICATIONS 0.73% 11,374 Koninklijke Kpn 303,481 ----------- TRANSPORTATION - AIRLINES 0.04% 660 KLM Koninklijke Luchvaart Mij 16,519 ----------- TRANSPORTATION - ROAD & RAIL 0.01% 275 Koninklijke Nedlloyd 5,149 ----------- TRANSPORTATION - SHIPPING 0.03% 649 Koninklijke Vopak 13,733 ----------- WHOLESALE & INTERNATIONAL TRADE 0.17% 1,221 Buhrmann 34,685 1,276 Hagemeyer 36,565 ----------- 71,250 ----------- TOTAL NETHERLANDS (Cost $6,202,821) 6,072,094 ----------- PORTUGAL 1.38% BANKING 0.46% 24,376 Banco Comercial Portugues SA 127,002 2,288 Banco Espirito Santo SA 37,207 6,743 BPI - SGPS SA 23,981 ----------- 188,190 ----------- BUILDING MATERIALS & COMPONENTS 0.08% 1,606 Cimentos de Portugal SGPS SA 34,284 ----------- BUSINESS & PUBLIC SERVICES 0.07% 3,575 Brisa - Auto Estradas de Portugal SA 29,624 ----------- CHEMICALS 0.00% 297 CIN - Corporacao Industrial do Norte SA 1,426 ----------- CONSTRUCTION & HOUSING 0.00% 385 Sociedade de Construcoes Soares da Costa SA* 1,041 ----------- ELECTRICAL & ELECTRONICS 0.00% 165 EFACEC Capital SGPS SA* 996 ----------- FOREST PRODUCTS & PAPER 0.02% 363 INAPA - Investimentos Participacoes e Gestao SA 2,191 1,034 Portucel Industrial - Empresa Produtora de Celulose SA 6,527 ----------- 8,718 ----------- MERCHANDISING 0.15% 1,144 Jeronimo Martins SGPS SA 16,335 29,326 Sonae SGPS SA 45,368 ----------- 61,703 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.00% 176 Corticeira Amorim SGPS SA 1,402 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- PORTUGAL (continued) TELECOMMUNICATIONS 0.32% 12,463 Portugal Telecom SA $ 129,868 ----------- UTILITIES - ELECTRICAL & GAS 0.28% 35,794 Electricidade de Portugal SA 116,160 ----------- TOTAL PORTUGAL (Cost $607,353) 573,412 ----------- SPAIN 7.80% BANKING 2.71% 37,180 Banco Bilbao Vizcaya SA 552,380 53,031 Banco Santander Central Hispano SA 570,515 ----------- 1,122,895 ----------- BEVERAGES & TOBACCO 0.14% 4,169 Altadis SA 59,863 ----------- BUILDING MATERIALS & COMPONENTS 0.02% 264 Portland Valderrivas SA 5,032 605 Uralita SA 3,765 ----------- 8,797 ----------- BUSINESS & PUBLIC SERVICES 0.13% 1,650 Aguas de Barcelona 20,685 3,322 Autopistas Concesionaria Espanola SA 25,696 715 Prosegur Cia de Seguridad SA 8,741 ----------- 55,122 ----------- CHEMICALS 0.00% 2,794 Ercros SA* 1,341 ----------- CONSTRUCTION & HOUSING 0.14% 759 Actividades de Construccion y Servicios SA 18,727 1,430 Fomento de Construcciones y Contratas SA 22,886 2,057 Groupo Dragados 17,191 ----------- 58,804 ----------- ENERGY SOURCES 0.67% 14,168 Repsol SA 280,909 ----------- FOOD & HOUSEHOLD PRODUCTS 0.04% 792 Azucarera Ebro Agricolas SA 9,225 3,641 Puleva SA* 5,503 ----------- 14,728 ----------- FOREST PRODUCTS & PAPER 0.01% 253 Grupo Empresarial Ence SA 4,679 ----------- HEALTH & PERSONAL CARE 0.01% 396 Fabrica Espanola de Productos y Farmaceuticos SA 4,119 ----------- INSURANCE 0.03% 726 Corporacion Mapfre 11,554 ----------- LEISURE & TOURISM 0.08% 2,046 Sol Melia SA 20,920 2,563 TelePizza SA* 13,308 ----------- 34,228 ----------- MACHINERY & ENGINEERING 0.03% 1,628 Zardoya Otis SA 12,824 ----------- See accompanying notes to financial statements. 36 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI EMU INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- SPAIN (continued) MERCHANDISING 0.02% 473 Cortefiel SA $ 9,576 ----------- METALS - NON FERROUS 0.01% 484 Asturiana de Zinc 4,523 ----------- METALS - STEEL 0.05% 693 Acerinox SA 20,333 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.01% 583 Viscofan 3,613 ----------- MULTI-INDUSTRY 0.06% 979 Corporacion Financiera Alba 24,546 ----------- REAL ESTATE 0.06% 616 Metrovacesa SA 9,804 990 Urbis Ser 1,2,3* 4,260 1,540 Vallehermoso SA 9,858 ----------- 23,922 ----------- TELECOMMUNICATIONS 2.32% 50,358 Telefonica SA* 967,106 ----------- UTILITIES - ELECTRICAL & GAS 1.26% 12,628 Endesa SA 246,446 5,346 Gas Natural SDG SA 86,745 10,758 Iberdrola SA 123,866 3,630 Union Electrica Fenosa SA 67,486 ----------- 524,543 ----------- TOTAL SPAIN (Cost $3,384,037) 3,248,025 ----------- TOTAL COMMON STOCK - BASKET (Cost $43,688,817) 41,620,720 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - NON-BASKET 0.01% IRELAND 0.01% ENERGY SOURCES 0.01% 2,400 Tullow Oil Plc* $ 2,091 ----------- TOTAL IRELAND (Cost $2,236) 2,091 ----------- NETHERLANDS 0.00% APPLIANCES & HOUSEHOLD DURABLES 0.00% 9 Philips Electronics 439 ----------- TOTAL NETHERLANDS (Cost $429) 439 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $2,665) 2,530 ----------- TOTAL INVESTMENTS (COST $43,691,482)+ 100.00% $41,623,250 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $43,693,747. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 586,764 Excess of tax cost over value (2,657,261) ----------- $(2,070,497) =========== See accompanying notes to financial statements. 37 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI FRANCE INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 99.99% AEROSPACE & MILITARY TECHNOLOGY 0.66% 15,156 Thomson CSF $ 627,946 ----------- AUTOMOBILES 0.79% 4,032 PSA Peugeot Citroen 745,292 ----------- BANKING 6.30% 40,500 Banque Nationale de Paris 3,726,894 37,764 Societe Generale - Class A 2,239,523 ----------- 5,966,417 ----------- BEVERAGES & TOBACCO 0.24% 4,392 Pernod Ricard 230,782 ----------- BROADCASTING & PUBLISHING 1.92% 11,124 Canal Plus 1,818,840 ----------- BUILDING MATERIALS & COMPONENTS 1.83% 7,524 Compagnie de Saint Gobain 1,002,103 9,828 Lafarge 728,757 ----------- 1,730,860 ----------- BUSINESS & PUBLIC SERVICES 11.69% 10,908 Cap Gemini 2,279,107 10,332 Dassault Systemes 889,225 828 Publicis Groupe 324,654 3,168 Sodexho Alliance 496,862 17,568 Suez Lyonnaise des Eaux 2,606,936 54,630 Vivendi 4,468,592 ----------- 11,065,376 ----------- CHEMICALS 1.08% 8,028 Air Liquide 1,024,262 ----------- CONSTRUCTION & HOUSING 2.03% 27,720 Bouygues 1,743,698 1,476 Groupe GTM 175,719 ----------- 1,919,417 ----------- ELECTRICAL & ELECTRONICS 10.84% 101,034 Alcatel 8,268,811 3,438 Sagem 947,893 14,184 Schneider 1,046,715 ----------- 10,263,419 ----------- ELECTRICAL COMPONENTS, INSTRUMENTS 4.48% 69,210 STMicroelectronics NV 4,245,899 ----------- ENERGY EQUIPMENT & SERVICES 0.21% 1,620 Coflexip 197,327 ----------- ENERGY SOURCES 10.30% 65,628 Total - Class B 9,750,286 ----------- FINANCIAL SERVICES 0.32% 1,998 CPR* 77,719 432 Societe Eurafrance 222,773 ----------- 300,492 ----------- FOOD & HOUSEHOLD PRODUCTS 2.17% 2,412 Eridania Beghin-Say 214,451 13,446 Groupe Danone 1,838,659 ----------- 2,053,110 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- HEALTH & PERSONAL CARE 13.52% 69,138 Aventis $ 5,194,279 1,062 Essilor International 294,599 58,014 L'OREAL 4,198,643 63,900 Sanofi-Synthelabo 3,119,069 ----------- 12,806,590 ----------- INDUSTRIAL COMPONENTS 0.84% 13,122 Michelin - Class B 385,004 7,632 Valeo 409,852 ----------- 794,856 ----------- INSURANCE 5.30% 35,190 AXA 5,015,388 ----------- LEISURE & TOURISM 1.03% 17,370 Accor 749,020 1,746 Club Mediterranee 228,044 ----------- 977,064 ----------- MACHINERY & ENGINEERING 0.44% 1,530 Compagnie Francaise d'Etudes de Construction Technip 198,744 3,132 Sidel 213,584 ----------- 412,328 ----------- MERCHANDISING 7.40% 60,174 Carrefour 4,392,419 5,400 Casino Guichard Perrachon 540,130 10,944 Pinault-Printemps-Redoute 2,071,588 ----------- 7,004,137 ----------- METALS - NON FERROUS 0.36% 7,452 Pechiney - Class A 341,218 ----------- METALS - STEEL 0.26% 23,364 Usinor 250,314 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.18% 1,512 Imerys 174,762 ----------- MULTI-INDUSTRY 0.98% 12,978 Lagardere S.C.A. 925,986 ----------- REAL ESTATE 0.18% 576 Simco 39,152 864 Union du Credit-Bail Immobilier 131,359 ----------- 170,511 ----------- RECREATION, OTHER CONSUMER GOODS 3.77% 43,092 LVMH (Louis Vuitton Moet Hennessy) 3,348,573 4,716 Societe BIC 222,439 ----------- 3,571,012 ----------- TELECOMMUNICATIONS 10.87% 90,108 France Telecom 10,294,807 ----------- TOTAL COMMON STOCK - BASKET (Cost $76,399,698) 94,678,698 ----------- See accompanying notes to financial statements. 38 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI FRANCE INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - NON-BASKET 0.01% ELECTRICAL & ELECTRONICS 0.00% 9 Sagem $ 2,481 ----------- ENERGY EQUIPMENT & SERVICES 0.01% 54 Compagnie General de Geophysique* 4,033 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $5,514) 6,514 ----------- TOTAL INVESTMENTS (COST $76,405,212)+ 100.00% $94,685,212 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $76,499,118. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $20,373,205 Excess of tax cost over value (2,187,111) ----------- $18,186,094 =========== See accompanying notes to financial statements. 39 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI GERMANY INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 0.02% 2,500 Rheinmetall $ 28,451 ------------ AUTOMOBILES 7.18% 128,750 DaimlerChrysler 6,650,818 75,000 Volkswagen 3,267,451 40,000 Volkswagen - Preferred 1,042,028 ------------ 10,960,297 ------------ BANKING 12.18% 90,000 Bayerische HypoVereinsbank 5,261,263 77,500 Deutsche Bank 6,773,403 145,000 Dresdner Bank 6,549,127 ------------ 18,583,793 ------------ BEVERAGES & TOBACCO 0.03% 1,250 Brau und Brunnen* 40,843 ------------ BROADCASTING & PUBLISHING 0.83% 25,000 EM.TV & Merchandising 1,258,080 ------------ BUILDING MATERIALS & COMPONENTS 0.78% 16,250 Buderus 264,397 12,500 Dyckerhoff - Preferred 244,503 12,375 Heidelberger Zement 682,164 ------------ 1,191,064 ------------ BUSINESS & PUBLIC SERVICES 8.03% 18,750 Fresenius Medical Care 1,622,056 30,000 SAP 5,868,075 18,750 SAP - Vorzug 4,767,811 ------------ 12,257,942 ------------ CHEMICALS 6.52% 120,000 BASF 4,502,414 128,750 Bayer 5,454,587 ------------ 9,957,001 ------------ CONSTRUCTION & HOUSING 0.32% 10,000 Bilfinger & Berger Bau 124,474 15,000 Hochtief 363,421 ------------ 487,895 ------------ ELECTRICAL & ELECTRONICS 13.48% 127,500 Siemens 20,574,938 ------------ FOOD & HOUSEHOLD PRODUCTS 0.46% 32,500 Kamps 707,370 ------------ HEALTH & PERSONAL CARE 3.75% 16,250 Beiersdorf 1,495,359 15,000 Gehe 552,133 36,250 Merck KGAA 1,208,623 46,250 Schering 2,471,371 ------------ 5,727,486 ------------ INDUSTRIAL COMPONENTS 0.35% 23,750 Continental 431,826 15,000 FAG Kugelfischer Georg Schaefer 99,357 ------------ 531,183 ------------ --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- INSURANCE 15.67% 52,500 Allianz $ 17,737,590 22,500 Muenchener Rueckversicherung 6,181,484 ------------ 23,919,074 ------------ MACHINERY & ENGINEERING 1.32% 10,000 Deutz* 37,076 3,750 IWKA 45,678 15,000 Linde 633,485 37,500 MAN 1,050,252 12,500 MAN - Preferred 251,171 ------------ 2,017,662 ------------ MERCHANDISING 2.30% 16,250 Douglas Holding 527,349 28,750 Karstadt 880,600 48,750 Metro 1,855,112 8,750 Metro - Vorzug 241,169 ------------ 3,504,230 ------------ METALS - STEEL 0.94% 93,750 Thyssen 1,433,677 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.23% 5,000 SGL Carbon* 346,750 ------------ MULTI-INDUSTRY 1.06% 22,500 AGIV 222,053 41,250 Preussag 1,399,169 ------------ 1,621,222 ------------ REAL ESTATE 0.57% 35,000 WCM Beteiligungs-und Grundbesitz 875,988 ------------ RECREATION, OTHER CONSUMER GOODS 0.35% 10,000 Adidas-Salomon 537,907 ------------ TELECOMMUNICATIONS 15.17% 598,750 Deutsche Telekom 23,157,224 ------------ TRANSPORTATION - AIRLINES 1.33% 91,250 Deutsche Lufthansa 2,024,208 ------------ UTILITIES - ELECTRICAL & GAS 7.13% 102,375 RWE 3,809,264 21,875 RWE - Preferred 656,408 133,500 E.On 6,409,538 ------------ 10,875,210 ------------ TOTAL COMMON STOCK - BASKET (Cost $165,261,784) 152,619,495 ------------ TOTAL INVESTMENTS (COST $165,261,784)+ 100.00% $152,619,495 ======= ============ ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $168,119,494. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 8,368,096 Excess of tax cost over value (23,868,095) ------------ $(15,499,999) ============ See accompanying notes to financial statements. 40 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI HONG KONG INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 99.13% BANKING 6.52% 576,000 Bank Of East Asia Limited $ 1,344,121 360,000 Hang Seng Bank Limited 3,865,732 ----------- 5,209,853 ----------- BROADCASTING & PUBLISHING 2.61% 768,000 Oriental Press Group* 104,379 1,440,000 South China Morning Post Holdings Limited 1,080,097 160,000 Television Broadcasts Limited 904,697 ----------- 2,089,173 ----------- ELECTRICAL & ELECTRONICS 3.36% 1,280,000 Johnson Electric Holdings Limited 2,683,318 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 1.20% 160,000 ASM Pacific Technology Limited 508,764 480,000 QPL International Holdings Limited* 446,194 ----------- 954,958 ----------- LEISURE & TOURISM 1.77% 1,480,000 Hong Kong & Shanghai Hotels Limited 929,827 480,000 Shangri-La Asia Limited 486,197 ----------- 1,416,024 ----------- MERCHANDISING 1.11% 800,000 Esprit Holdings Limited 625,697 480,000 Giordano International Limited 261,562 ----------- 887,259 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.83% 320,000 Varitronix International Limited 666,726 ----------- MULTI-INDUSTRY 29.04% 400,000 Hopewell Holdings Limited 187,196 1,360,000 Hutchison Whampoa Limited 19,181,209 560,000 Swire Pacific Limited - Class A 3,841,370 ----------- 23,209,775 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- REAL ESTATE 25.87% 1,200,000 Hang Lung Development Company Limited $ 1,115,485 720,000 Henderson Land Development Company Limited 3,997,282 800,000 Hysan Development Company Limited 1,123,178 1,360,000 New World Development Company Limited 2,223,276 2,560,000 Sino Land Company Limited 1,370,379 880,000 Sun Hung Kai Properties Limited 8,377,675 1,040,000 Wharf Holdings Limited 2,473,555 ----------- 20,680,830 ----------- TELECOMMUNICATION 12.65% 5,440,000 Pacific Century Cyberworks Limited 10,113,728 ----------- TEXTILES & APPAREL 2.62% 480,000 Li & Fung Limited 2,092,495 ----------- TRANSPORTATION - AIRLINES 3.50% 1,440,000 Cathay Pacific Airways Limited 2,797,174 ----------- UTILITIES - ELECTRICAL & GAS 8.05% 680,000 CLP Holdings Limited 3,051,556 2,720,000 Hong Kong & China Gas Company Limited 3,382,868 ----------- 6,434,424 ----------- TOTAL COMMON STOCK - BASKET (Cost $60,352,546) 79,235,737 ----------- COMMON STOCK - NON-BASKET 0.87% FINANCIAL SERVICES 0.00% 276,000 Peregrine Investment Holdings Limited*/** -- ----------- MULTI-INDUSTRY 0.62% 34,800 Hutchison Whampoa Limited 490,813 ----------- TELECOMMUNICATIONS 0.13% 56,883 Pacific Century Cyberworks* 105,753 ----------- UTILITIES - ELECTRICAL & GAS 0.12% 78,300 Hong Kong & China Gas Company Limited 97,382 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $811,195) 693,948 ----------- TOTAL INVESTMENTS (COST $61,163,741)+ 100.00% $79,929,685 ======= =========== ----------- * Non-income producing security. ** Fair valued security. + Aggregate cost for Federal income tax purposes is $62,571,967. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $19,572,584 Excess of tax cost over value (2,214,866) ----------- $17,357,718 =========== See accompanying notes to financial statements. 41 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI ITALY INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 99.85% AUTOMOBILES 3.29% 48,615 Fiat SpA $ 1,212,857 15,000 Fiat SpA-Pfd 231,229 15,000 Fiat RNC SpA 200,835 ----------- 1,644,921 ----------- BANKING 18.26% 39,795 Banca Popolare di Milano SpA 280,436 937,500 Banco di Roma SpA 1,137,773 505,620 Banco Intesa SpA 2,160,977 132,750 Istituto Bancario San Paolo di Torino SpA 2,354,193 86,250 Mediobanca SpA 921,601 450,000 Unicredito Italiano SpA 2,278,147 ----------- 9,133,127 ----------- BROADCASTING & PUBLISHING 5.74% 30,000 Arnoldo Mondadori Editore SpA 398,442 143,715 Mediaset SpA 2,476,325 ----------- 2,874,767 ----------- BUILDING MATERIALS & COMPONENTS 0.44% 75,000 Cementerie del Tirreno SpA 113,427 11,250 Italcementi SpA 106,316 ----------- 219,743 ----------- CONSTRUCTION & HOUSING 0.48% 75,000 Impregilo SpA 45,804 131,310 Sirti SpA 195,086 ----------- 240,890 ----------- ENERGY SOURCES 11.07% 945,000 ENI SpA 5,539,449 ----------- FOOD & HOUSEHOLD PRODUCTS 0.60% 206,085 Parmalat Finanziaria SpA 298,483 ----------- FOREST PRODUCTS & PAPER 0.13% 30,000 Reno de Medici SpA 63,562 ----------- INDUSTRIAL COMPONENTS 1.84% 240,000 Pirelli SpA 648,689 120,000 Pirelli SpA Rnc 273,346 ----------- 922,035 ----------- INSURANCE 12.85% 160,350 Assicurazioni Generali SpA 4,984,162 94,500 Riunione Adriatica di Sicurta SpA 1,100,160 16,845 Societa Assicuratrice Industriale SpA 299,434 5,625 Societa Assicuratrice Industriale SpA Rnc 44,961 ----------- 6,428,717 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- LEISURE & TOURISM 1.35% 60,000 Autogrill SpA $ 676,962 ----------- MERCHANDISING 1.79% 90,810 La Rinascente SpA 545,637 90,000 La Rinascente SpA-Rnc 349,364 ----------- 895,001 ----------- MULTI-INDUSTRY 0.98% 450,000 SNIA BPD SpA 491,718 ----------- RECREATION - OTHER CONSUMER GOODS 1.30% 57,870 Bulgari SpA 649,380 ----------- TELECOMMUNICATIONS 31.30% 590,670 Olivetti SpA 1,781,888 441,750 Telecom Italia SpA 5,330,551 109,050 Telecom Italia SpA Rnc 633,999 836,250 Telecom Italia Mobile SpA 7,012,803 185,340 Telecom Italia Mobile SpA Rnc 899,238 ----------- 15,658,479 ----------- TEXTILES & APPAREL 1.52% 300,000 Benetton Group SpA 559,868 23,415 Marzotto SpA 199,752 ----------- 759,620 ----------- TRANSPORTATION - AIRLINES 0.76% 205,155 Alitalia SpA* 380,677 ----------- UTILITIES - ELECTRICAL & GAS 6.15% 568,305 Enel SpA 2,278,313 171,945 Italgas SpA 797,863 ----------- 3,076,176 ----------- TOTAL COMMON STOCK - BASKET (Cost $46,229,317) 49,953,707 ----------- COMMON STOCK - NON-BASKET 0.15% MULTI-INDUSTRY 0.15% 35,022 Montedison SpA 72,552 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $53,187) 72,552 ----------- TOTAL INVESTMENTS (COST $46,282,504)+ 100.00% $50,026,259 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $46,453,042. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,861,888 Excess of tax cost over value (1,288,671) ----------- $ 3,573,217 ----------- See accompanying notes to financial statements. 42 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI JAPAN INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 99.99% APPLIANCES & HOUSEHOLD DURABLES 8.08% 665,000 Matsushita Electric Industrial Company Limited $ 18,208,927 95,000 Pioneer Corporation 4,008,815 665,000 Sanyo Electric Company Limited 5,643,520 380,000 Sharp Corporation 6,054,201 266,000 Sony Corporation 29,683,046 ------------ 63,598,509 ------------ AUTOMOBILES 8.69% 285,000 Honda Motor Company Limited 10,422,918 1,330,000 Nissan Motor Company Limited* 6,684,921 1,178,000 Toyota Motor Corporation 51,255,814 ------------ 68,363,653 ------------ BANKING 10.05% 855,000 Asahi Bank Limited 3,367,404 190,000 Ashikaga Bank Limited* 358,121 190,000 Bank of Fukuoka Limited 1,209,771 1,615,000 Bank of Tokyo-Mitsubishi Limited 19,778,601 380,000 Bank of Yokohama Limited 1,671,230 95,000 Chuo Mitsui Trust & Banking Company Limited 365,247 1,140,000 Fuji Bank Limited 8,669,730 190,000 Gunma Bank Limited 979,932 285,000 Hokuriku Bank Limited* 628,048 760,000 Industrial Bank of Japan Limited 5,765,566 380,000 Joyo Bank Limited 1,371,905 475,000 Mitsubishi Trust & Banking Corporation 3,652,476 1,235,000 Sakura Bank Limited 9,195,330 190,000 Seventy-Seven Bank Limited 1,478,807 285,000 Shizuoka Bank Limited 2,373,218 1,045,000 Sumitomo Bank Limited 12,935,109 570,000 The Daiwa Bank Limited 1,432,483 760,000 Tokai Bank Limited 3,848,462 ------------ 79,081,440 ------------ BEVERAGES & TOBACCO 1.66% 190,000 Asahi Breweries Limited 1,737,153 665 Japan Tobacco Incorporated 5,100,994 380,000 Kirin Brewery Company Limited 4,169,167 95,000 Takara Shuzo Company Limited 2,075,675 ------------ 13,082,989 ------------ BUILDING MATERIALS & COMPONENTS 0.70% 95,000 Inax Corporation 514,019 190,000 Sekisui Chemical Company Limited 664,572 95,000 Sumitomo Forestry Company Limited 710,896 475,000 Taiheiyo Cement Corporation 766,129 95,000 Tostem Corporation 1,379,923 190,000 Toto Limited 1,485,934 ------------ 5,521,473 ------------ BROADCASTING & PUBLISHING 0.17% 95 Fuji Television Network, Incorporated 1,327,363 ------------ --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- BUSINESS & PUBLIC SERVICES 4.85% 38,000 Benesse Corporation $ 2,262,753 19,000 CSK Corporation 513,128 285,000 Dai Nippon Printing Company Limited 4,487,200 9,500 Fuji Soft ABC Incorporated 727,823 95,000 Kokuyo Company Limited 1,640,051 38,000 Konami Company Limited 3,142,911 9,500 Meitec Corporation 439,188 9,500 OYO Corporation 122,937 95,000 Secom Company Limited 6,921,887 104,500 Softbank Corporation 13,807,249 285,000 Toppan Printing Company Limited 2,784,790 9,500 Trans Cosmos Incorporated 1,346,071 ------------ 38,195,988 ------------ CHEMICALS 2.77% 570,000 Asahi Chemical Industry Company Limited 3,565,173 95,000 Daicel Chemical Industries Limited 268,145 380,000 Dainippon Ink & Chemicals Incorporated 1,336,272 95,000 Kaneka Corporation 1,047,637 190,000 Kuraray Company Limited 1,658,758 760,000 Mitsubishi Chemical Corporation 2,501,500 95,000 NOF Corporation 210,240 95,000 Shin-Etsu Chemical Company Limited 4,668,042 665,000 Sumitomo Chemical Company Limited 3,093,023 380,000 Teijin Limited 1,411,103 475,000 Toray Industries Incorporated 1,737,153 95,000 Tosoh Corporation 347,431 ------------ 21,844,477 ------------ CONSTRUCTION & HOUSING 1.33% 47,500 Daito Trust Construction Company Limited 797,309 190,000 Daiwa House Industry Company Limited 1,247,187 475,000 Kajima Corporation 1,411,994 95,000 Kinden Corporation 610,231 285,000 Obayashi Corporation 1,138,503 285,000 Sekisui House Limited 2,891,692 475,000 Shimizu Corporation 1,403,085 665,000 Taisei Corporation 972,806 ------------ 10,472,807 ------------ DATA PROCESSING & REPRODUCTION 3.72% 285,000 Canon Incorporated 12,748,031 570,000 Fujitsu Limited 16,516,317 ------------ 29,264,348 ------------ ELECTRICAL & ELECTRONICS 6.15% 1,045,000 Hitachi Limited 12,376,547 760,000 Mitsubishi Electric Corporation 7,091,148 570,000 NEC Corporation 16,302,513 95,000 Omron Corporation 2,360,746 1,045,000 Toshiba Corporation 10,279,492 ------------ 48,410,446 ------------ See accompanying notes to financial statements. 43 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI JAPAN INDEX FUND (CONTINUED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET (CONTINUED) ELECTRONIC COMPONENTS, INSTRUMENTS 8.74% 28,500 Advantest Corporation $ 5,812,781 95,000 Alps Electric Company Limited 2,004,407 76,000 Fanuc Limited 8,267,067 9,500 Hirose Electric Company Limited 1,377,251 66,500 Kyocera Corporation 11,873,218 85,500 Murata Manufacturing Company Limited 13,092,789 19,000 Nidec Corporation 1,656,977 95,000 Nikon Corporation 2,913,072 95,000 Olympus Optical Company Limited 1,665,885 38,000 Rohm Company Limited 10,814,891 66,500 Tokyo Electron Limited 9,341,429 ------------ 68,819,767 ------------ ENERGY SOURCES 0.46% 475,000 Nippon Mitsubishi Oil Corporation 2,699,269 190,000 Showa Shell Sekiyu K. K. 937,172 ------------ 3,636,441 ------------ FINANCIAL SERVICES 4.76% 47,500 Acom Company Limited 4,048,903 47,500 Credit Saison Company Limited 1,146,966 475,000 Daiwa Securities Group Incorporated 5,924,137 28,500 Nichiei Company Limited 339,413 95,000 Nippon Shinpan Company Limited 201,332 665,000 Nomura Securities Company Limited 15,558,655 95,000 Orient Corporation* 386,628 19,000 Orix Corporation 2,530,007 38,000 Promise Company Limited 2,647,599 47,500 Takefuji Corporation 4,672,496 ------------ 37,456,136 ------------ FOOD & HOUSEHOLD PRODUCTS 1.60% 190,000 Ajinomoto Company Incorporated 2,059,640 190,000 Kao Corporation 5,220,368 190,000 Meiji Seika Incorporated 1,090,398 95,000 Nisshin Flour Milling Company Limited 899,756 47,500 Nissin Food Products Company Limited 1,238,278 95,000 Snow Brand Milk Products Company Limited 359,902 95,000 Yakult Honsha Company Limited 962,116 95,000 Yamazaki Baking Company Limited 769,692 ------------ 12,600,150 ------------ FOREST PRODUCTS & PAPER 0.56% 285,000 Nippon Paper Industries Company 1,873,453 380,000 Oji Paper Company Limited 2,526,444 ------------ 4,399,897 ------------ HEALTH & PERSONAL CARE 5.58% 95,000 Chugai Pharmaceutical Company Limited 1,692,611 95,000 Daiichi Pharmaceutical Company Limited 2,244,936 95,000 Eisai Company Limited 2,868,530 190,000 Kanebo Limited* 559,452 190,000 Kyowa Hakko Kogyo Company Limited 1,560,765 190,000 Sankyo Company Limited 4,400,788 95,000 Shionogi & Company Limited 1,674,794 --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- HEALTH & PERSONAL CARE (CONTINUED) 95,000 Shiseido Company Limited $ 1,122,468 95,000 Taisho Pharmaceutical Company Limited 2,877,438 285,000 Takeda Chemical Industries 16,863,747 85,500 Terumo Corporation 2,365,201 19,000 Uni-Charm Corporation 988,841 95,000 Yamanouchi Pharmaceutical Company Limited 4,703,676 ------------ 43,923,247 ------------ INDUSTRIAL COMPONENTS 3.70% 285,000 Bridgestone Corporation 3,688,110 285,000 Denso Corporation 6,761,534 95,000 Fujikura Limited 819,580 190,000 Furukawa Electric Company Limited 6,111,215 95,000 Koyo Seiko Company Limited 728,713 95,000 Minebea Company Limited 1,229,370 95,000 NGK Insulators Limited 1,305,092 95,000 NGK Spark Plug Company Limited 1,718,445 190,000 NSK Limited 1,459,209 285,000 Sumitomo Electric Industries 5,264,910 ------------ 29,086,178 ------------ INSURANCE 0.82% 285,000 Mitsui Marine & Fire Insurance Company Limited 1,419,120 190,000 Sumitomo Marine & Fire Insurance Company Limited 1,142,067 380,000 Tokio Marine & Fire Insurance Company Limited 3,859,152 ------------ 6,420,339 ------------ LEISURE & TOURISM 0.40% 19,000 Namco Limited 530,945 28,500 Oriental Land Company Limited 2,624,437 ------------ 3,155,382 ------------ MACHINERY & ENGINEERING 2.35% 95,000 Amada Company Limited 815,126 95,000 Daikin Industries Limited 1,910,868 95,000 Ebara Corporation 1,389,722 380,000 Ishikawajima-Harima Heavy Industries Company Limited* 555,889 95,000 Japan Steel Works Limited* 106,011 285,000 Kawasaki Heavy Industries Limited* 328,723 285,000 Komatsu Limited 1,841,382 570,000 Kubota Corporation 1,838,710 95,000 Kurita Water Industries Limited 1,977,682 1,140,000 Mitsubishi Heavy Industries Limited 4,008,815 95,000 Mitsui Engineering & Shipbuilding Company Limited* 81,067 19,000 SMC Corporation 3,367,404 95,000 Sumitomo Heavy Industries Limited 235,184 ------------ 18,456,583 ------------ MERCHANDISING 1.85% 28,500 Aoyama Trading Company Limited 386,182 9,500 Autobacs Seven Company Limited 271,709 285,000 Daiei Incorporated* 817,798 95,000 Hankyu Department Stores 498,875 95,000 Isetan Company Limited Incorporated 856,105 95,000 Ito-Yokado Company Limited 4,721,493 95,000 Jusco Company Limited 1,786,150 See accompanying notes to financial statements. 44 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI JAPAN INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET (CONTINUED) MERCHANDISING (CONTINUED) 95,000 Marui Company Limited $ 1,497,515 190,000 Mitsukoshi Limited* 653,882 95,000 Mycal Corporation 276,163 95,000 Seiyu Limited* 375,047 9,500 Shimamura Company Limited 728,713 95,000 Takashimaya Company Limited 650,319 95,000 Uny Company Limited 1,012,894 ------------ 14,532,845 ------------ METALS - NON FERROUS 0.53% 475,000 Mitsubishi Materials Corporation 1,492,170 190,000 Mitsui Mining & Smelting Company Limited 1,505,533 95,000 Nippon Light Metal Company Limited 99,775 190,000 Sumitomo Metal Mining Company* 1,042,292 ------------ 4,139,770 ------------ METALS - STEEL 0.93% 1,140,000 Kawasaki Steel Corporation 1,443,173 2,755,000 Nippon Steel Corporation 5,166,917 1,140,000 Sumitomo Metal Industries Limited 684,171 ------------ 7,294,261 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 1.25% 380,000 Asahi Glass Company Limited 3,552,701 95,000 Nippon Sheet Glass Company Limited 1,726,463 66,500 Nitto Denko Corporation 2,693,923 95,000 Toyo Seikan Kaisha Limited 1,630,251 95,000 Ube Industries Limited 228,948 ------------ 9,832,286 ------------ REAL ESTATE 0.75% 285,000 Mitsubishi Estate Company Limited 2,806,170 285,000 Mitsui Fudosan Company Limited 3,086,787 ------------ 5,892,957 ------------ RECREATION - OTHER CONSUMER GOODS 2.43% 190,000 Citizen Watch Company Limited 2,073,893 190,000 Fuji Photo Film Company 6,806,077 47,500 Nintendo Company Limited 8,200,253 19,000 Sega Enterprises Limited* 218,258 47,500 Shimano Incorporated 982,160 95,000 Yamaha Corporation 834,724 ------------ 19,115,365 ------------ TELECOMMUNICATIONS 6.04% 3,990 Nippon Telegraph & Telephone Corporation 47,517,817 ------------ TEXTILES & APPAREL 0.16% 95,000 Onward Kashiyama Company Limited 932,718 9,500 World Company Limited 289,526 ------------ 1,222,244 ------------ TRANSPORTATION - AIRLINES 0.30% 665,000 Japan Airlines Company Limited 2,388,363 ------------ --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- TRANSPORTATION - ROAD & RAIL 3.23% 760 Central Japan Railway Company $ 4,404,351 1,425 East Japan Railway Company 7,750,375 570,000 Kinki Nippon Railway Company Limited 2,506,845 380,000 Nippon Express Company Limited 2,134,471 665,000 Tobu Railway Company Limited 1,983,027 475,000 Tokyu Corporation 2,481,011 190,000 Yamato Transport Company Limited 4,142,442 ------------ 25,402,522 ------------ TRANSPORTATION - SHIPPING 0.24% 95,000 Kawasaki Kisen Kaisha Limited 176,388 380,000 Nippon Yusen Kabushiki Kaisha 1,681,920 ------------ 1,858,308 ------------ UTILITIES - ELECTRICAL & GAS 3.15% 370,500 Kansai Electric Power Company Incorporated 6,080,036 855,000 Osaka Gas Company Limited 2,148,725 247,000 Tohoku Electric Power Company Incorporated 3,532,211 475,000 Tokyo Electric Power Company 10,623,359 950,000 Tokyo Gas Company Limited 2,440,923 ------------ 24,825,254 ------------ WHOLESALE & INTERNATIONAL TRADE 1.99% 475,000 Itochu Corporation* 2,093,492 570,000 Marubeni Corporation* 1,576,800 570,000 Mitsubishi Corporation 4,169,167 665,000 Mitsui & Company Limited 4,471,165 380,000 Sumitomo Corporation 3,313,953 ------------ 15,624,577 ------------ TOTAL COMMON STOCK - BASKET (Cost $681,751,661) 786,764,182 ------------ COMMON STOCK - NON-BASKET 0.01% BANKING 0.01% 14,000 Chuo Mitsui Trust & Banking Company Limited 53,826 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 0.00% 352 Tokyo Electron Limited 49,447 ------------ ENERGY SOURCES 0.00% 500 Nippon Mitsubishi Oil Corporation 2,841 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $99,451) 106,114 ------------ TOTAL INVESTMENTS (COST $681,851,112)+ 100.00% $786,870,296 ======= ============ ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $687,181,147. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $153,524,768 Excess of tax cost over value (53,835,619) ------------ $ 99,689,149 ============ See accompanying notes to financial statements. 45 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI MALAYSIA (FREE) INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 3.01% 222,000 Edaran Otomobil Nasional $ 607,579 444,000 Oriental Holdings 917,210 666,000 Perusahaan Otomobil Nasional 872,810 1,554,000 Tan Chong Motor Holdings 568,437 ----------- 2,966,036 ----------- BANKING 20.25% 1,554,000 Commerce Asset Holdings 4,089,474 2,886,000 Malayan Banking 11,088,316 2,442,000 Public Bank 2,133,537 2,442,000 RHB Capital 2,647,642 ----------- 19,958,969 ----------- BEVERAGES & TOBACCO 4.83% 444,000 British American Tobacco (Malaysia) 4,147,895 666,000 Guinness Anchor 609,916 ----------- 4,757,811 ----------- BROADCASTING & PUBLISHING 1.31% 222,000 New Straits Times Press 470,289 222,000 Star Publications (Malaysia) 817,895 ----------- 1,288,184 ----------- BUILDING MATERIALS & COMPONENTS 2.31% 666,000 Hume Industries (Malaysia) 746,621 3,552,000 Malayan Cement 1,233,853 1,110,000 Pan Malaysia Corporation 297,947 ----------- 2,278,421 ----------- CHEMICALS 0.62% 222,000 Malaysian Oxygen 613,421 ----------- CONSTRUCTION & HOUSING 4.30% 222,000 Ekran* 64,263 666,000 Gamuda 753,631 444,000 IJM Corporation 399,600 444,000 Road Builder Holdings 495,410 1,998,000 YTL Corporation 2,523,789 ----------- 4,236,693 ----------- ELECTRICAL & ELECTRONICS 1.11% 1,110,000 Time Engineering* 1,098,316 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 3.13% 222,000 Malaysian Pacific Industries 1,927,895 222,000 Unisem 1,156,737 ----------- 3,084,632 ----------- FINANCIAL SERVICES 2.94% 488,400 AMMB Holdings 1,606,579 1,110,000 MBF Capital* 92,013 888,000 Rashid Hussain* 689,368 1,776,000 TA Enterprises 514,105 ----------- 2,902,065 ----------- FOOD & HOUSEHOLD PRODUCTS 1.94% 222,000 Nestle (Malaysia) 1,121,684 666,000 PPB Group 788,684 ----------- 1,910,368 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FOREST PRODUCTS & PAPER 0.72% 222,000 Jaya Tiasa Holdings $ 268,737 222,000 WTK Holdings 441,079 ----------- 709,816 ----------- INDUSTRIAL COMPONENTS 0.26% 888,000 Leader Universal Holdings* 252,379 ----------- LEISURE & TOURISM 5.15% 666,000 Berjaya Sports Toto 1,069,105 1,998,000 Magnum Corporation 1,256,637 1,332,000 Resorts World 2,751,632 ----------- 5,077,374 ----------- MACHINERY & ENGINEERING 1.01% 666,000 UMW Holdings 990,237 ----------- METALS - STEEL 0.23% 2,442,000 Amsteel Corporation 228,134 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 5.60% 1,998,000 Golden Hope Plantations 1,945,421 1,554,000 Highlands & Lowlands 1,063,263 1,110,000 IOI Corporation 946,421 222,000 Kian Joo Can Factory 303,789 888,000 Kuala Lumpur Kepong 1,261,895 ----------- 5,520,789 ----------- MULTI-INDUSTRY 8.59% 444,000 Land & General* 94,642 1,776,000 Malaysia Mining Corporation 1,065,600 1,554,000 Malaysian Resources Corporation* 997,832 1,776,000 Malayan United Industries* 273,411 1,332,000 Mulpha International* 182,274 1,554,000 Multi-Purpose Holdings* 523,453 2,664,000 Sime Darby 2,958,442 1,110,000 United Engineers (Malaysia) 2,366,053 ----------- 8,461,707 ----------- REAL ESTATE 1.36% 1,332,000 FACB Resorts 245,368 1,998,000 Hong Leong Properties 694,042 444,000 S P Setia Group 404,274 ----------- 1,343,684 ----------- TELECOMMUNICATIONS 12.61% 888,000 Technology Resources Industries* 1,065,600 3,996,000 Telekom Malaysia 11,357,053 ----------- 12,422,653 ----------- TRANSPORTATION - AIRLINES 0.67% 666,000 Malaysian Airline System* 658,989 ----------- TRANSPORTATION - SHIPPING 3.75% 2,442,000 Malaysia International Shipping 3,695,132 ----------- UTILITIES - ELECTRICAL & GAS 14.30% 4,218,000 Tenaga Nasional 14,097,000 ----------- TOTAL COMMON STOCK - BASKET (Cost $74,480,948) 98,552,810 ----------- See accompanying notes to financial statements. 46 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI MALAYSIA (FREE) INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - NON-BASKET 0.00% METALS - STEEL 0.00% 35,944 Silverstone*/** $ -- ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $0) -- ----------- TOTAL INVESTMENTS (COST $74,480,948)+ 100.00% $98,552,810 ======= =========== ----------- * Non-income producing security. ** Fair valued security. + Aggregate cost for Federal income tax purposes is $76,559,835. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $28,575,459 Excess of tax cost over value (6,582,484) ----------- $21,992,975 =========== See accompanying notes to financial statements. 47 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI MEXICO (FREE) INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% BANKING 9.83% 360,000 Grupo Financiero Banamex Accival SA de CV - Series O* $ 1,838,032 3,456,000 Grupo Financiero BBVA Bancomer SA de CV - Series O* 2,072,361 ----------- 3,910,393 ----------- BEVERAGES & TOBACCO 14.89% 408,000 Fomento Economico Mexicano SA de CV - Series UBD 1,843,767 355,200 Grupo Continental SA 451,452 1,104,000 Grupo Modelo SA de CV - Series C 2,752,355 192,000 Savia SA de CV* 873,912 ----------- 5,921,486 ----------- BROADCASTING & PUBLISHING 7.21% 888,000 Grupo Televisa SA - Series CPO* 2,869,806 ----------- BUILDING MATERIALS & COMPONENTS 4.53% 384,000 Cemex SA de CV - Series CPO 1,802,053 ----------- ENERGY EQUIPMENT & SERVICES 1.82% 48,000 Tubos de Acero de Mexico SA 724,784 ----------- FOOD & HOUSEHOLD PRODUCTS 3.18% 792,000 Grupo Industrial Bimbo SA de CV - Series A 1,264,722 ----------- HEALTH & PERSONAL CARE 4.50% 576,000 Kimberly-Clark de Mexico SA de CV - Series A 1,789,539 ----------- MERCHANDISING 16.22% 744,000 Controladora Comercial Mexicana SA de CV - Series UBC 953,691 1,560,000 Grupo Elektra SA de CV - Series CPO 1,592,961 336,000 Walmart de Mexico C* 788,398 1,248,000 Walmart de Mexico V* 3,118,136 ----------- 6,453,186 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- METALS - NON FERROUS 3.52% 264,000 Grupo Mexico SA - Series B $ 1,178,687 144,000 Industrias Penoles SA - Series CP 222,128 ----------- 1,400,815 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.47% 168,000 Vitro SA - Series A 186,150 ----------- MULTI-INDUSTRY 10.64% 528,000 Alfa SA de CV - Series A 1,454,000 1,872,000 Desc SA de CV - Series B 1,159,133 456,000 Grupo Carso SA de CV - Series A1* 1,619,814 ----------- 4,232,947 ----------- TELECOMMUNICATIONS 23.19% 96,000 Telefonos de Mexico SA - Series A 260,714 3,288,000 Telefonos de Mexico SA - Series L 8,965,162 ----------- 9,225,876 ----------- TOTAL COMMON STOCK - BASKET (Cost $35,191,865) 39,781,757 ----------- TOTAL INVESTMENTS (COST $35,191,865)+ 100.00% $39,781,757 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $35,390,336. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 5,822,297 Excess of tax cost over value (1,430,876) ---------- $ 4,391,421 =========== See accompanying notes to financial statements. 48 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI NETHERLANDS INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 11.83% 74,334 Philips Electronics $ 3,621,761 ----------- BANKING 4.88% 60,034 ABN AMRO Holding 1,494,538 ----------- BEVERAGES & TOBACCO 3.76% 22,620 Heineken 1,150,377 ----------- BROADCASTING & PUBLISHING 4.22% 64,168 Elsevier 777,047 1,040 VNU 55,480 22,620 Wolters Klumer - CVA 458,542 ----------- 1,291,069 ----------- BUSINESS & PUBLIC SERVICES 6.45% 40,638 Getronics 510,175 5,200 Randstad Holding 141,936 48,880 TNT Post Group 1,143,415 13,780 Vedior 180,715 ----------- 1,976,241 ----------- CHEMICALS 3.69% 24,440 Akzo Nobel 1,082,354 1,560 DSM 47,713 ----------- 1,130,067 ----------- CONSTRUCTION & HOUSING 1.20% 18,980 Hollandsche Beton Groep 194,908 3,302 IHC Caland 171,745 ----------- 366,653 ----------- DATA PROCESSING & REPRODUCTION 1.87% 38,350 Oce 571,126 ----------- ELECTRICAL COMPONENTS, INSTRUMENTS 3.71% 30,030 ASM Lithography Holding NV* 1,135,540 ----------- ENERGY SOURCES 23.09% 116,090 Royal Dutch/Shell Group 7,070,288 ----------- FINANCIAL SERVICES 5.22% 23,842 Ing Groep 1,598,327 ----------- FOOD & HOUSEHOLD PRODUCTS 4.35% 7,800 Koninklijke Wessanen 87,381 26,260 Unilever 1,244,439 ----------- 1,331,820 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- INSURANCE 10.49% 78,156 Aegon $ 3,050,553 5,200 Fortis (NL) 160,291 ----------- 3,210,844 ----------- MACHINERY & ENGINEERING 0.52% 14,638 Stork 158,779 ----------- MERCHANDISING 4.65% 50,336 Koninklijke Ahold 1,424,068 ----------- MULTI-INDUSTRY 0.24% 2,600 Hunter Douglas 74,551 ----------- TELECOMMUNICATIONS 3.07% 35,204 Koninklijke Kpn 939,312 ----------- TRANSPORTATION - AIRLINES 1.35% 16,562 KLM - Koninklijke Luchvaart Mij 414,518 ----------- TRANSPORTATION - ROAD & RAIL 0.31% 5,070 Koninklijke Nedlloyd* 94,933 ----------- TRANSPORTATION - SHIPPING 1.96% 28,340 Koninklijke Vopak 599,692 ----------- WHOLESALE & INTERNATIONAL TRADE 3.14% 9,334 Buhrmann 265,149 24,310 Hagemeyer 696,622 ----------- 961,771 ----------- TOTAL COMMON STOCK - BASKET (Cost $30,137,407) 30,616,275 ----------- COMMON STOCK - NON-BASKET 0.00% APPLIANCES & HOUSEHOLD DURABLES 0.00% 13 Philips Electronics 633 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $415) 633 ----------- TOTAL INVESTMENTS (COST $30,137,822)+ 100.00% $30,616,908 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $30,423,435. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,617,719 Excess of tax cost over value (2,424,246) ----------- $ 193,473 =========== See accompanying notes to financial statements. 49 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI SINGAPORE (FREE) INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 0.57% 234,000 Cycle & Carriage Limited $ 516,586 ----------- BANKING 31.80% 1,170,000 Development Bank of Singapore Limited 14,138,151 1,234,350 Oversea-Chinese Banking Corporation Limited 8,533,530 234,000 Overseas Union Bank Limited 1,182,711 617,760 United Overseas Bank Limited 4,845,036 ----------- 28,699,428 ----------- BEVERAGES & TOBACCO 0.97% 234,000 Fraser & Neave Limited 870,040 ----------- BROADCASTING & PUBLISHING 4.17% 234,000 Singapore Press Holdings Limited 3,765,642 ----------- BUSINESS & PUBLIC SERVICES 1.90% 585,000 Parkway Holdings Limited 1,488,584 117,000 Singapore Computer Systems Limited 224,307 ----------- 1,712,891 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 17.76% 1,053,000 Chartered Semiconductor Manufacturing, Limited* 8,809,156 87,750 Creative Technology Limited 1,906,611 468,000 Natsteel Electronics Limited 1,563,353 351,000 Omni Industries Limited 758,566 234,000 Venture Manufacturing (Singapore) Limited 2,990,763 ----------- 16,028,449 ----------- LEISURE & TOURISM 1.33% 234,000 Hotel Properties Limited 202,556 351,000 Overseas Union Enterprise Limited 999,187 ----------- 1,201,743 ----------- MACHINERY & ENGINEERING 4.19% 2,808,000 Singapore Technologies Engineering Limited 3,784,674 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- MULTI-INDUSTRY 5.32% 152,100 Haw Par Corporation Limited $ 272,159 585,000 Keppel Corporation Limited 1,325,452 2,223,000 Sembcorp Industries Limited 2,376,297 968,760 Straits Trading Company Limited 827,327 ----------- 4,801,235 ----------- REAL ESTATE 10.11% 702,000 City Developments Limited 3,486,958 1,755,000 DBS Land Limited 2,834,428 117,000 First Capital Corporation Limited 113,513 2,223,000 United Industrial Corporation Limited 1,059,002 1,404,000 United Overseas Land Limited 1,321,373 351,000 Wing Tai Holdings Limited 309,952 ----------- 9,125,226 ----------- TELECOMMUNICATIONS 6.85% 3,744,000 Singapore Telecommunications Limited 6,177,285 ----------- TRANSPORTATION - AIRLINES 12.50% 1,170,000 Singapore Airlines Limited 11,283,332 ----------- TRANSPORTATION - ROAD & RAIL 0.69% 1,170,000 Comfort Group Limited 621,943 ----------- TRANSPORTATION - SHIPPING 1.84% 1,521,000 Neptune Orient Lines Limited* 1,661,233 ----------- TOTAL COMMON STOCK - BASKET (Cost $80,656,699) 90,249,707 ----------- TOTAL INVESTMENTS (COST $80,656,699)+ 100.00% $90,249,707 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $81,462,780. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 9,795,095 Excess of tax cost over value (1,008,168) ----------- $ 8,786,927 =========== See accompanying notes to financial statements. 50 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI SOUTH KOREA INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 3.49% 18,600 LG Electronics $ 473,073 ----------- AUTOMOBILES 4.59% 41,100 Hyundai Motor Company, Limited 622,755 ----------- BANKING 8.53% 37,650 Kookmin Bank 458,422 48,000 Korea Exchange Bank* 101,520 16,800 Korea Housing Bank 359,107 21,750 Shinhan Bank 237,362 ----------- 1,156,411 ----------- BEVERAGES & TOBACCO 1.40% 2,550 Doosan Corporation* 48,528 3,300 Hite Brewery Company 141,375 ----------- 189,903 ----------- BUILDING MATERIALS & COMPONENTS 0.97% 3,150 Kumkang Korea Chemical Company Limited 132,108 ----------- BUSINESS & PUBLIC SERVICES 2.77% 300 Cheil Communications, Inc. 31,657 3,000 Daou Technology, Inc. 20,158 1,200 Daum Communications Corporation* 74,895 4,950 Haansoft, Inc.* 58,485 2,400 Handysoft Corporation* 44,807 1,200 Korea Information & Communications Company Limited* 64,289 3,600 Serome Technology Inc. 81,335 ----------- 375,626 ----------- CHEMICALS 3.43% 13,350 Hanwha Chemical Corporation* 44,189 18,450 Honam Petrochemical Corporation 127,299 2,850 Isu Chemical Company Limited 17,736 16,350 LG Chemical Limited 275,756 ----------- 464,980 ----------- CONSTRUCTION & HOUSING 0.44% 4,800 Daelim Industrial Company 26,062 12,450 Hyundai Engineering & Construction Company* 33,574 ----------- 59,636 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 30.16% 6,600 Anam Semiconductor Inc* 60,717 30,750 Dae Duck Electronics Company 292,593 9,900 Samsung SDI Company Limited 441,984 9,150 Samsung Electro-Mechanics Company* 388,694 11,775 Samsung Electronics 2,904,589 ----------- 4,088,577 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FINANCIAL SERVICES 2.83% 3,975 Dongwon Securities Company $ 25,096 9,000 KTBNetwork 68,997 4,800 LG Investment & Securities Company Limited 50,435 11,700 Samsung Securities Company Limited 238,485 ----------- 383,013 ----------- FOOD & HOUSEHOLD PRODUCTS 0.81% 2,550 Cheil Jedang Corporation 106,945 2,250 Daesang Corporation 3,399 ----------- 110,344 ----------- FOREST PRODUCTS & PAPER 0.22% 7,350 Hansol Paper Company 30,096 ----------- HEALTH & PERSONAL CARE 0.11% 300 Korea Green Cross Corporation 12,298 450 Medison Company Limited 3,052 ----------- 15,350 ----------- INDUSTRIAL COMPONENTS 1.16% 10,050 Hankook Tire Company 24,655 9,600 LG Cable Limited 132,474 ----------- 157,129 ----------- INSURANCE 1.68% 8,550 Samsung Fire & Marine Insurance 228,257 ----------- MACHINERY & ENGINEERING 1.38% 12,600 Hanjin Heavy Industries 32,615 39,450 Samsung Heavy Industries Company, Limited* 154,776 ----------- 187,391 ----------- MERCHANDISING 0.86% 600 Hyundai Department Store Company Limited 4,546 2,250 Shinsegae Department Store Company 112,018 ----------- 116,564 ----------- METALS - NON FERROUS 0.02% 150 Korea Zinc Company 2,029 ----------- METALS - STEEL 3.93% 7,200 Pohang Iron & Steel Company Limited 532,492 ----------- MULTI-INDUSTRY 11.03% 49,200 Korea Electric Power Corporation 1,446,602 4,050 S1 Corporation 48,216 ----------- 1,494,818 ----------- TELECOMMUNICATIONS 16.48% 9,000 Korea Telecom Corporation 616,099 7,350 SK Telecom 1,617,497 ----------- 2,233,596 ----------- TRANSPORTATION - AIRLINES 0.78% 14,850 Korean Air Company Limited 105,674 ----------- See accompanying notes to financial statements. 51 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI SOUTH KOREA INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET (CONTINUED) TRANSPORTATION - ROAD & RAIL 0.49% 13,800 Korea Express Company* $ 66,215 ----------- TRANSPORTATION - SHIPPING 0.40% 14,250 Hyundai Merchant Marine 53,594 ----------- WHOLESALE & INTERNATIONAL TRADE 2.04% 24,450 Samsung Corporation 221,621 5,100 SK Global 54,507 ----------- 276,128 ----------- TOTAL COMMON STOCK - BASKET (Cost $14,234,885) 13,555,759 ----------- TOTAL INVESTMENTS (COST $14,234,885)+ 100.00% $13,555,759 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $14,561,571. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 847,789 Excess of tax cost over value (1,853,601) ----------- $(1,005,812) =========== See accompanying notes to financial statements. 52 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI SPAIN INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% BANKING 23.93% 317,900 Banco Bilbao Vizcaya SA $ 4,723,008 437,382 Banco Santander Central Hispano SA 4,705,416 ----------- 9,428,424 ----------- BEVERAGES & TOBACCO 1.56% 42,702 Altadis SA 613,158 ----------- BUILDING MATERIALS & COMPONENTS 1.46% 17,622 Portland Valderrivas SA 335,917 38,544 Uralita SA 239,887 ----------- 575,804 ----------- BUSINESS & PUBLIC SERVICES 4.56% 40,040 Aguas de Barcelona 501,955 100,100 Autopistas Concesionaria Espanola SA 774,292 42,658 Prosegur Cia de Seguridad SA 521,501 ----------- 1,797,748 ----------- CHEMICALS 1.43% 1,172,666 Ercros SA* 563,015 ----------- CONSTRUCTION & HOUSING 3.19% 11,000 Actividades de Construccion y Servicios SA 271,398 29,876 Fomento de Construcciones y Contratas SA 478,131 60,830 Groupo Dragados 508,390 ----------- 1,257,919 ----------- ENERGY SOURCES 4.61% 91,542 Repsol SA 1,815,001 ----------- FOOD & HOUSEHOLD PRODUCTS 1.38% 13,816 Azucarera Ebro Agricolas SA 160,918 253,704 Puleva SA* 383,467 ----------- 544,385 ----------- FOREST PRODUCTS & PAPER 0.41% 8,800 Grupo Empresarial Ence SA 162,741 ----------- HEALTH & PERSONAL CARE 1.70% 64,152 Fabrica Espanola de Productos y Farmaceuticos SA 667,341 ----------- INSURANCE 2.54% 62,810 Corporacion Mapfre 999,617 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- LEISURE & TOURISM 2.42% 70,774 Sol Melia SA $ 723,641 44,000 TelePizza SA* 228,464 ----------- 952,105 ----------- MACHINERY & ENGINEERING 1.40% 69,960 Zardoya Otis SA 551,106 ----------- MERCHANDISING 0.78% 15,158 Cortefiel SA 306,872 ----------- METALS - NON FERROUS 0.66% 27,984 Asturiana de Zinc 261,495 ----------- METALS - STEEL 3.12% 41,888 Acerinox SA 1,229,010 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.43% 27,500 Viscofan 170,419 ----------- MULTI-INDUSTRY 2.34% 36,828 Corporacion Financiere Alba 923,377 ----------- REAL ESTATE 1.81% 58,674 Urbis Ser 1,2,3* 252,489 72,072 Vallehermoso SA 461,372 ----------- 713,861 ----------- TELECOMMUNICATIONS 22.44% 460,196 Telefonica SA* 8,837,884 ----------- UTILITIES - ELECTRICAL & GAS 17.83% 90,090 Endesa SA 1,758,178 110,000 Gas Natural SDG SA 1,784,873 145,926 Iberdrola SA 1,680,174 96,800 Union Electrica Fenosa SA 1,799,621 ----------- 7,022,846 ----------- TOTAL COMMON STOCK - BASKET (Cost $41,821,643) 39,394,128 ----------- TOTAL INVESTMENTS (COST $41,821,643)+ 100.00% $39,394,128 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $42,279,803. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,011,774 Excess of tax cost over value (4,897,449) ----------- $(2,885,675) =========== See accompanying notes to financial statements. 53 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI SWEDEN INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 1.73% 32,500 Electrolux AB - B $ 402,957 ----------- BANKING 16.60% 33,800 ForeningsSparbanken AB 503,248 214,500 Nordbanken Holding AB 1,488,873 84,500 Skandinaviska Enskilda Banken AB - A 1,011,869 41,600 Svenska Handelsbanken AB - A 687,713 10,400 Svenska Handelsbanken AB - B 169,173 ----------- 3,860,876 ----------- BUSINESS & PUBLIC SERVICES 13.40% 11,700 Esselte AB - B 69,432 67,600 Icon Medialab International AB* 1,289,461 45,500 Securitas AB - B 1,012,558 132,600 WM-Data AB - B 744,746 ----------- 3,116,197 ----------- ELECTRICAL & ELECTRONICS 23.35% 269,100 Ericsson LM - B 5,432,475 ----------- FINANCIAL SERVICES 4.76% 22,100 Om Gruppen AB 1,107,752 ----------- HEALTH & PERSONAL CARE 0.38% 10,400 Gambro AB - B 87,066 ----------- INDUSTRIAL COMPONENTS 1.64% 16,900 SKF AB - A 229,238 10,400 SKF AB - B 150,988 ----------- 380,226 ----------- INSURANCE 13.57% 156,000 Skandia Forsakrings AB 3,157,527 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- MACHINERY & ENGINEERING 7.06% 5,200 Atlas Copco AB - A $ 107,455 5,200 Atlas Copco AB - B 101,945 24,700 Sandvik AB 539,204 22,100 Volvo AB - A 353,637 32,500 Volvo AB - B 538,997 ----------- 1,641,238 ----------- MERCHANDISING 3.99% 52,975 Hennes Mauritz AB - B 929,090 ----------- MULTI-INDUSTRY 4.58% 39,000 Industriforvaltnings Kinnevik AB - B 1,012,558 7,800 Trelleborg AB - B 53,314 ----------- 1,065,872 ----------- REAL ESTATE 0.81% 16,900 Drott AB - B 188,046 ----------- TELECOMMUNICATIONS 8.13% 17,875 NetCom AB - B* 943,332 132,600 Telia AB* 948,498 ----------- 1,891,830 ----------- TOTAL COMMON STOCK - BASKET (Cost $21,973,014) 23,261,152 ----------- TOTAL INVESTMENTS (COST $21,973,014)+ 100.00% $23,261,152 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $22,111,227. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 3,760,961 Excess of tax cost over value (2,611,036) ----------- $ 1,149,925 =========== See accompanying notes to financial statements. 54 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI SWITZERLAND INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 100.00% BANKING 16.14% 1,472 Banque Cantonale Vaudoise $ 506,829 12,719 Credit Suisse Group 2,656,786 23,000 UBS AG 3,345,863 276 Vontobel Holding AG 736,486 ----------- 7,245,964 ----------- BUILDING MATERIALS & COMPONENTS 3.75% 1,104 Forbo Holding AG 482,755 874 Holderbank Financiere Glarus AG - Bearer 1,031,687 529 Holderbank Financiere Glarus AG - Registered 167,267 ----------- 1,681,709 ----------- BUSINESS & PUBLIC SERVICES 2.85% 1,633 Adecco SA 1,251,036 69 SGS Societe Generale de Surveillance Holding SA 27,717 ----------- 1,278,753 ----------- CHEMICALS 5.11% 276 EMS-Chemie Holding AG* 1,187,880 1,380 Lonza AG 671,548 1,472 Sika Finanz AG 435,873 ----------- 2,295,301 ----------- ELECTRICAL & ELECTRONICS 3.88% 15,571 ABB Ltd. 1,742,422 ----------- FINANCIAL SERVICES 3.03% 276 Julius Baer Holding Limited AG 1,362,103 ----------- FOOD & HOUSEHOLD PRODUCTS 9.93% 2,070 Nestle SA 4,459,302 ----------- HEALTH & PERSONAL CARE 31.26% 598 Givaudan* 159,915 5,589 Novartis AG 8,447,966 69 Roche Holding AG - Bearer 690,950 529 Roche Holding AG - Genussein 4,735,682 ----------- 14,034,513 ----------- INSURANCE 9.74% 1,081 Schweizerische Rueckversicherungs (Swiss Re) 2,218,327 4,186 Zurich Allied AG 2,154,735 ----------- 4,373,062 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- LEISURE & TOURISM 0.66% 92 Kuoni Reisen Holding AG $ 41,338 621 Moevenpick Holding AG 256,582 ----------- 297,920 ----------- MACHINERY & ENGINEERING 3.16% 1,610 Georg Fischer AG 476,736 46 Schindler Holding AG - Particapation Certificates 75,364 115 Schindler Holding AG - Registered 197,188 920 Sulzer AG* 667,853 ----------- 1,417,141 ----------- MERCHANDISING 3.93% 552 Jelmoli Holding AG - Bearer 696,256 2,622 Jelmoli Holding AG - Registered 653,017 1,679 Valora Holding AG 417,197 ----------- 1,766,470 ----------- MULTI-INDUSTRY 1.50% 1,012 Alusuisse Lonza Group AG* 671,337 ----------- RECREATION, OTHER CONSUMER GOODS 0.36% 115 The Swatch Group AG - B 163,334 ----------- TELECOMMUNICATIONS 3.15% 4,991 Swisscom AG 1,414,871 ----------- TRANSPORTATION - AIRLINES 1.55% 4,485 SairGroup 693,623 ----------- TOTAL COMMON STOCK - BASKET (Cost $45,616,229) 44,897,825 ----------- TOTAL INVESTMENTS (COST $45,616,229)+ 100.00% $44,897,825 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $45,948,629. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,385,886 Excess of tax cost over value (3,436,690) ----------- $(1,050,804) =========== See accompanying notes to financial statements. 55 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI TAIWAN INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 99.19% APPLIANCES & HOUSEHOLD DURABLES 0.26% 208,000 Sampo Corporation* $ 107,774 ----------- AUTOMOBILES 1.03% 208,000 China Motor Company 208,853 312,000 Yulon Motor Company Limited* 220,903 ----------- 429,756 ----------- BANKING 9.86% 624,000 Chang Hwa Commercial Bank 389,592 1,144,000 China Development Industrial Bank* 1,181,829 728,000 Chinatrust Commercial Bank* 574,012 624,000 First Commercial Bank 542,216 572,000 Hua Nan Commercial Bank 452,851 572,000 International Commercial Bank of China 449,169 624,000 United World Chinese Commercial Bank 536,191 ----------- 4,125,860 ----------- BUILDING MATERIALS & COMPONENTS 1.67% 364,000 Asia Cement Corporation 197,976 260,000 Goldsun Development and Construction Company* 45,185 416,000 Taiwan Cement Corporation 262,406 208,000 Taiwan Glass Industrial Corporation 192,788 ----------- 698,355 ----------- CHEMICALS 8.60% 52,000 China Synthetic Rubber Corporation 46,189 624,000 Formosa Chemical & Fibre Corporation 700,864 676,000 Formosa Plastics Corporation 1,087,779 572,000 Hualon Corporation* 51,912 104,000 Lee Chang Yung Chemicals Industries Corporation* 43,176 936,000 Nan Ya Plastic Corporation 1,551,340 104,000 Oriental Union Chemical Corporation 36,984 364,000 Shinkong Synthetic Fibers Corporation* 50,372 468,000 Tuntex Distinct Corporation* 30,424 ----------- 3,599,040 ----------- CONSTRUCTION & HOUSING 0.36% 260,000 BES Engineering Corporation* 40,833 156,000 Continental Engineering Corporation* 83,843 208,000 Ever Fortune Industrial Company* 27,780 ----------- 152,456 ----------- DATA PROCESSING & REPRODUCTION 5.91% 676,000 Acer Incorporated 841,941 260,000 Compal Electronics Incorporated 497,868 312,000 Quanta Computer Incorporated 1,134,637 ----------- 2,474,446 ----------- ELECTRICAL & ELECTRONICS 1.34% 104,000 Lite-On Electronics Incorporated 135,554 52,000 Microelectronics Technology Incorporated* 154,799 312,000 Teco Electric & Machinery Company Limited 271,108 ----------- 561,461 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- ELECTRONIC COMPONENTS, INSTRUMENTS 51.94% 468,000 Advanced Semiconductor Engineering Incorporated* $ 866,039 260,000 Asustek Computer Incorporated 1,598,198 156,000 Delta Electronics Incorporated 597,441 260,000 Hon Hai Precision Industry Company 1,983,104 520,000 Mosel Vitelic Incorporated* 895,325 2,080,000 Taiwan Semiconductor Manufacturing Company* 9,003,460 1,976,000 United Microelectronics Corporation* 5,246,440 624,000 Winbond Electronics Corporation* 1,546,319 ----------- 21,736,326 ----------- FINANCIAL SERVICES 0.40% 572,000 Chung Hsing Bills Finance Corporation 165,677 ----------- FOOD & HOUSEHOLD PRODUCTS 1.02% 104,000 Lien Hwa Industrial Corporation 33,805 572,000 Uni-President Enterprises Company 393,943 ----------- 427,748 ----------- FOREST PRODUCTS & PAPER 0.26% 104,000 Chung Hwa Pulp Corporation* 60,581 52,000 Shihlin Paper Corporation* 46,858 ----------- 107,439 ----------- INDUSTRIAL COMPONENTS 2.50% 156,000 Cheng Shin Rubber Industries Company 95,390 572,000 Pacific Electric Wire & Cable Company Limited* 425,238 104,000 Shihlin Electric & Engineering Corporation 72,630 624,000 Walsin Lihwa Corporation 453,855 ----------- 1,047,113 ----------- INSURANCE 5.43% 988,000 Cathay Life Insurance Company 2,273,457 ----------- MERCHANDISING 0.52% 104,000 Aurora Corporation* 140,574 156,000 Far East Department Stores Limited 78,320 ----------- 218,894 ----------- METALS - STEEL 2.62% 1,560,000 China Steel Corporation 1,034,226 156,000 Tung Ho Steel Enterprise* 61,250 ----------- 1,095,476 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.23% 312,000 Ton Yi Industrial Corporation 95,390 ----------- MULTI-INDUSTRY 1.15% 780,000 Tatung Company, Limited 481,970 ----------- REAL ESTATE 0.37% 364,000 Cathay Construction Corporation 97,231 260,000 Pacific Construction Company* 58,154 ----------- 155,385 ----------- RECREATION, OTHER CONSUMER GOODS 1.07% 156,000 Kinpo Electronics Incorporated 171,200 208,000 Pou Chen Corporation* 275,794 ----------- 446,994 ----------- See accompanying notes to financial statements. 56 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI TAIWAN INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET (CONTINUED) TEXTILES & APPAREL 1.68% 572,000 Far Eastern Textile Limited $ 636,936 52,000 Nien Hsing Textile Corporation Limited* 67,777 ----------- 704,713 ----------- TRANSPORTATION - SHIPPING 0.84% 364,000 Evergreen Marine Corporation* 234,291 312,000 Yang Ming Marine Transport 116,476 ----------- 350,767 ----------- WHOLESALE & INTERNATIONAL TRADE 0.13% 208,000 Taiwan Tea Corporation* 52,213 ----------- TOTAL COMMON STOCK - BASKET (Cost $45,330,224) 41,508,710 ----------- COMMON STOCK - NON-BASKET 0.81% AUTOMOBILES 0.01% 4,000 China Motor Company 4,017 ----------- BANKING 0.08% 2,000 Chang Hwa Commercial Bank* 1,249 14,000 China Development Industrial Bank* 14,463 1,600 Chinatrust Commercial Bank 1,262 4,000 First Commercial Bank 3,476 4,000 Hua Nan Commercial Bank 3,167 2,000 International Commercial Bank of China 1,570 11,200 United World Chinese Commercial Bank 9,624 ----------- 34,811 ----------- BUILDING MATERIALS & COMPONENTS 0.05% 12,600 Asia Cement Corporation 6,853 22,400 Taiwan Cement Corporation 14,130 ----------- 20,983 ----------- CHEMICALS 0.15% 5,250 China Synthetic Rubber Corporation 4,663 17,400 Formosa Chemical & Fibre Corporation 19,543 5,950 Formosa Plastics Corporation 9,575 16,000 Nan Ya Plastic Corporation 26,519 ----------- 60,300 ----------- CONSTRUCTION & HOUSING 0.02% 7,000 BES Engineering Corporation* 1,099 15,600 Continental Engineering Corporation* 8,384 ----------- 9,483 ----------- DATA PROCESSING & REPRODUCTION 0.05% 15,000 Acer Incorporated 18,682 ----------- ELECTRICAL & ELECTRONICS 0.02% 7,500 Lite-On Electronics Incorporated 9,776 ----------- --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- ELECTRONIC COMPONENTS, INSTRUMENTS 0.26% 4,100 Advanced Semiconductor Engineering Incorporated* $ 7,587 17,250 Delta Electronics Incorporated 66,063 4,000 Hon Hai Precision Industry Company 30,509 2,800 Mosel Vitelic Incorporated* 4,821 ----------- 108,980 ----------- FOOD & HOUSEHOLD PRODUCTS 0.03% 3,150 Lien Hwa Industrial Corporation 1,024 17,600 Uni-President Enterprises Company 12,121 ----------- 13,145 ----------- FOREST PRODUCTS & PAPER 0.01% 3,120 Chung Hwa Pulp Corporation* 1,817 ----------- INDUSTRIAL COMPONENTS 0.02% 5,250 Cheng Shin Rubber Industries Company 3,210 7,000 Pacific Electric Wire & Cable Company Limited* 5,204 ----------- 8,414 ----------- MERCHANDISING 0.01% 7,500 Far East Department Stores Limited 3,765 ----------- MULTI-INDUSTRY 0.00% 2,400 Tatung Company Limited 1,483 ----------- REAL ESTATE 0.01% 10,400 Pacific Construction Company* 2,326 ----------- RECREATION, OTHER CONSUMER GOODS 0.03% 10,400 Pou Chen Corporation* 13,790 ----------- TEXTILES & APPAREL 0.01% 4,000 Far Eastern Textile Limited 4,454 ----------- TRANSPORTATION - SHIPPING 0.05% 29,120 Evergreen Marine Corporation* 18,743 7,200 Yang Ming Marine Transport 2,688 ----------- 21,431 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $405,288) 337,657 ----------- TOTAL INVESTMENTS (COST $45,735,512)+ 100.00% $41,846,367 ======= =========== ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $47,128,045. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 48,083 Excess of tax cost over value (5,329,761) ----------- $(5,281,678) =========== See accompanying notes to financial statements. 57 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI UNITED KINGDOM INDEX FUND --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET 99.95% AEROSPACE & MILITARY TECHNOLOGY 0.92% 215,400 BAE Systems Plc $ 1,344,516 ------------ BANKING 14.04% 122,720 Abbey National Plc 1,489,170 116,440 Barclays Plc 2,914,027 198,800 Halifax Group Plc 1,556,186 473,040 HSBC Holdings Plc 6,820,787 426,480 Lloyds TSB Group Plc 4,021,024 204,960 Royal Bank of Scotland Group Plc 3,709,817 ------------ 20,511,011 ------------ BEVERAGES & TOBACCO 2.90% 169,960 British American Tobacco Plc 1,095,503 151,640 Cadbury Schweppes Plc 873,719 265,080 Diageo Plc 2,267,865 ------------ 4,237,087 ------------ BROADCASTING & PUBLISHING 3.23% 149,280 British Sky Broadcasting Group Plc* 2,434,839 52,560 Pearson Plc 1,521,848 88,200 Reed International Plc 757,153 ------------ 4,713,840 ------------ BUILDING MATERIALS & COMPONENTS 0.95% 28,400 Blue Circle Industries Plc 163,222 58,760 Caradon Plc 153,465 78,360 Hanson Plc 465,176 31,800 Hepworth Plc 96,471 27,800 RMC Group Plc 260,896 44,000 Wolseley Plc 243,916 ------------ 1,383,146 ------------ BUSINESS & PUBLIC SERVICES 7.55% 22,560 Anglian Water Plc* 183,491 86,280 British Airport Authority Plc 690,456 48,840 Capita Group Plc 371,300 19,040 De La Rue Plc 105,965 25,080 Exel Plc 428,774 159,040 Hays Plc 932,555 32,360 Logica Plc 1,014,656 48,520 Misys Plc 563,714 30,720 Railtrack Group Plc 439,824 171,320 Rentokil Initial Plc 401,326 111,080 Reuters Group Plc 2,230,375 108,400 Sage Group Plc 1,002,323 41,480 SEMA Group Plc 778,559 28,280 Thames Water Plc 343,581 54,560 United Utilities Plc 508,063 72,560 WPP Group Plc 1,032,521 ------------ 11,027,483 ------------ CHEMICALS 0.77% 41,680 BOC Group Plc 607,050 75,720 Imperial Chemical Industries Plc 512,303 ------------ 1,119,353 ------------ CONSTRUCTION & HOUSING 0.10% 62,200 Taylor Woodrow Plc 147,517 ----------- DATA PROCESSING & REPRODUCTION 0.20% 23,000 Psion Plc 294,492 ------------ --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- ELECTRICAL & ELECTRONICS 2.56% 209,920 Marconi Plc $ 3,732,399 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 1.97% 83,800 ARM Holdings Plc* 1,121,747 36,960 Electrocomponents Plc 435,592 234,480 Invensys Plc 917,743 72,920 Williams Plc 408,480 ------------ 2,883,562 ------------ ENERGY SOURCES 10.53% 1,656,880 BP Amoco Plc 15,199,844 80,800 Lasmo Plc 178,697 ------------ 15,378,541 ------------ FINANCIAL SERVICES 2.42% 64,200 Amvescap Plc 1,373,142 38,560 Provident Financial Plc 465,109 25,920 Schroders Plc 544,961 46,680 3i Group Plc 1,153,951 ------------ 3,537,163 ------------ FOOD & HOUSEHOLD PRODUCTS 0.99% 229,360 Unilever Plc 1,439,997 ------------ HEALTH & PERSONAL CARE 13.57% 139,720 Astrazeneca Plc 6,383,388 20,000 Celltech Group Plc* 424,860 224,440 Glaxo Wellcome Plc 6,469,158 58,800 Nycomed Amersham Plc 527,440 71,320 Smith & Nephew Plc 293,152 438,080 Smithkline Beecham Plc 5,720,722 ------------ 19,818,720 ------------ INDUSTRIAL COMPONENTS 0.33% 68,600 Balfour Beatty Plc 106,301 52,120 BBA Group Plc 380,690 ------------ 486,991 ------------ INSURANCE 4.89% 129,880 Allied Zurich AG Plc 1,594,007 172,400 CGU Plc 2,658,925 342,280 Legal & General Group Plc 881,491 152,720 Prudential Corporation Plc 2,004,313 ------------ 7,138,736 ------------ LEISURE & TOURISM 3.00% 80,760 Bass Plc 789,639 48,440 Carlton Communications Plc 528,601 195,800 Granada Compass Plc* 2,417,281 120,000 Hilton Group Plc 380,628 111,400 Rank Organisation Plc 272,306 ------------ 4,388,455 ------------ MACHINERY & ENGINEERING 0.67% 55,800 GKN Plc 726,642 19,080 Smith Industries Plc 249,853 ------------ 976,495 ------------ See accompanying notes to financial statements. 58 AUGUST 31, 2000 PORTFOLIO OF INVESTMENTS iSHARES, INC. ================================================================================ iSHARES MSCI UNITED KINGDOM INDEX FUND (CONCLUDED) --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - BASKET (CONTINUED) MERCHANDISING 3.73% 60,600 Boots Company Plc $ 447,919 153,360 Dixons Group Plc 532,744 76,920 Great Universal Stores Plc 546,163 117,880 Kingfisher Plc 857,577 261,360 Marks & Spencer Plc 789,078 131,640 Sainsbury Plc 683,784 505,800 Tesco Plc 1,595,148 ------------ 5,452,413 ------------ METALS - NON FERROUS 0.92% 83,680 Rio Tinto Plc 1,338,081 ------------ METALS - STEEL 0.16% 224,400 Corus Group Plc* 230,184 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.25% 119,200 Pilkington Plc 158,694 49,120 Rexam Plc 200,115 ------------ 358,809 ------------ MULTI-INDUSTRY 0.15% 42,680 TI Group Plc 217,348 ------------ REAL ESTATE 0.79% 36,000 British Land Company Plc 223,663 42,640 Canary Wharf Finance Plc* 309,586 52,040 Land Securities Plc 623,539 ------------ 1,156,788 ------------ RECREATION, OTHER CONSUMER GOODS 0.41% 64,560 EMI Group Plc 600,243 ------------ TELECOMMUNICATIONS 17.31% 507,440 British Telecommunications Plc 6,460,345 4,650,440 Vodafone Airtouch Plc 18,827,481 ------------ 25,287,826 ------------ --------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- TEXTILES & APPAREL 0.06% 127,800 Coats Viyella Plc $ 94,369 ------------ TRANSPORTATION - AIRLINES 0.39% 121,200 British Airways Plc 573,565 ------------ TRANSPORTATION - SHIPPING 0.40% 64,600 Peninsular & Oriental Steam Navigation Company Plc 579,937 ------------ UTILITIES - ELECTRICAL & GAS 3.79% 273,160 BG Plc 1,705,051 322,440 Centrica Plc 1,055,588 115,840 National Grid Group Plc 950,606 84,080 National Power Plc 576,205 163,200 Scottish Power Plc 1,246,644 ------------ 5,534,094 ------------ TOTAL COMMON STOCK - BASKET (Cost $154,137,718) 145,983,161 ------------ COMMON STOCK - NON-BASKET 0.05% HEALTH & PERSONAL CARE 0.00% 24 Smith & Nephew Plc 99 ------------ LEISURE & TOURISM 0.05% 5,341 Granada Compass Plc* 65,938 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $65,662) 66,037 ------------ TOTAL INVESTMENTS (COST $154,203,380)+ 100.00% $146,049,198 ======= ============ ----------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $155,971,319. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 8,426,268 Excess of tax cost over value (18,348,389) ------------ $ (9,922,121) ============ See accompanying notes to financial statements. 59 AUGUST 31, 2000 STATEMENTS OF ASSETS AND LIABILITIES iSHARES, INC. ================================================================================
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI AUSTRALIA AUSTRIA BELGIUM BRAZIL (FREE) CANADA INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------- ------------- ASSETS Investments, at value ............................. $60,070,088 $10,776,336 $13,457,165 $18,438,276 $21,944,821 Cash and foreign currency (at value) .............. 1,020,459 -- -- -- 76,227 Cash collateral for securities loaned ............. 7,687,795 2,734,620 881,124 -- -- Dividends receivable .............................. 99,597 13,812 42,789 53,552 18,922 Interest receivable ............................... 4,021 586 262 319 4,123 Receivable from investment adviser ................ -- 1,578 -- 12,856 275 Receivable for securities sold .................... 481,457 -- -- -- -- Assets for in-kind redemptions .................... -- -- -- -- -- Receivable for Fund shares sold ................... -- -- -- -- 3,362,026 Deferred organization cost ........................ 18,878 14,025 6,124 -- 13,319 Prepaid expenses .................................. 1,766 273 315 -- 431 ----------- ----------- ----------- ----------- ----------- Total assets .................................. 69,384,061 13,541,230 14,387,779 18,505,003 25,420,144 ----------- ----------- ----------- ----------- ----------- LIABILITIES Bank Overdraft .................................... -- 45,169 250,334 157,714 -- Payable for securities purchased .................. -- -- -- -- -- Payable for Fund shares redeemed .................. -- -- -- -- -- Liability for in-kind subscriptions ............... -- -- -- -- 3,345,965 Payable for securities loaned ..................... 7,687,795 2,734,620 881,124 -- -- Payable for foreign withholding tax ............... -- -- -- -- -- Advisory fee payable .............................. 29,976 -- 3,626 -- -- Administration fee payable ........................ 16,316 2,811 3,496 4,908 4,997 Distribution fee payable .......................... 27,192 4,684 5,827 8,179 8,327 Custody fee payable ............................... 12,254 3,928 2,499 28,643 11,824 Accrued expenses .................................. 36,038 9,357 11,176 22,381 20,836 ----------- ----------- ----------- ----------- ----------- Total liabilities ............................. 7,809,571 2,800,569 1,158,082 221,825 3,391,949 ----------- ----------- ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ................... 6,200 1,400 1,000 950 1,300 Paid-in capital ................................... 64,526,648 14,172,890 16,129,145 19,369,990 19,095,814 Accumulated net investment income/(loss) .......... (84,128) 5,920 (131,041) (8,267) (39,405) Accumulated net realized gain/(loss) on investments (3,656,162) (1,455,376) (1,159,102) (728,300) (296,778) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... 781,932 (1,984,173) (1,610,305) (351,195) 3,267,264 ----------- ----------- ----------- ----------- ----------- Net Assets ........................................ $61,574,490 $10,740,661 $13,229,697 $18,283,178 $22,028,195 =========== =========== =========== =========== =========== Shares of common stock issued and outstanding ..... 6,200,030 1,400,030 1,000,030 950,000 1,300,030 =========== =========== =========== =========== =========== Net Asset Value Per Share ......................... $ 9.93 $ 7.67 $ 13.23 $ 19.25 $ 16.94 =========== =========== =========== =========== ===========
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI EMU FRANCE GERMANY HONG KONG ITALY INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------- ------------ ASSETS Investments, at value ............................. $41,623,250 $94,685,212 $152,619,495 $79,929,685 $50,026,259 Cash and foreign currency (at value) .............. 185,295 254,846 938,437 -- 74,229 Cash collateral for securities loaned ............. -- 15,266,730 16,072,385 11,908,351 6,593,159 Dividends receivable .............................. 33,408 311,993 219,779 84,418 -- Interest receivable ............................... 726 5,378 15,157 10,229 10,274 Receivable from investment adviser ................ 21,916 -- -- -- -- Receivable for securities sold .................... 18,127 -- -- -- -- Assets for in-kind redemptions .................... -- -- -- -- -- Receivable for Fund shares sold ................... -- -- -- -- -- Deferred organization cost ........................ -- 36,560 34,732 9,680 18,411 Prepaid expenses .................................. -- 2,900 5,513 2,580 1,945 ----------- ----------- ------------ ----------- ----------- Total assets .................................. 41,882,722 110,563,619 169,905,498 91,944,943 56,724,277 ----------- ----------- ------------ ----------- ----------- LIABILITIES Bank Overdraft .................................... -- -- -- 389,960 -- Payable for securities purchased .................. -- -- -- -- -- Payable for Fund shares redeemed .................. -- -- -- -- -- Liability for in-kind subscriptions ............... -- -- -- -- -- Payable for securities loaned ..................... -- 15,266,730 16,072,385 11,908,351 6,593,159 Payable for foreign withholding tax ............... -- -- -- -- -- Advisory fee payable .............................. -- 39,927 97,621 40,632 34,744 Administration fee payable ........................ 6,012 24,804 45,283 20,170 16,919 Distribution fee payable .......................... 10,021 41,336 75,469 33,617 28,198 Custody fee payable ............................... 18,134 22,873 23,316 28,044 15,165 Accrued expenses .................................. 37,405 51,844 104,025 45,100 27,675 ----------- ----------- ------------ ----------- ----------- Total liabilities ............................. 71,572 15,447,514 16,418,099 12,465,874 6,715,860 ----------- ----------- ------------ ----------- ----------- NET ASSETS Capital stock, $0.001 par value ................... 550 3,601 7,501 6,001 2,250 Paid-in capital ................................... 43,879,732 77,030,716 168,985,176 66,714,893 46,464,802 Accumulated net investment income/(loss) .......... 1,158 (83,611) 14,651 (16,526) (31,459) Accumulated net realized gain/(loss) on investments (559) (91,660) (2,857,711) (5,991,307) (170,538) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... (2,069,731) 18,257,059 (12,662,218) 18,766,008 3,743,362 ----------- ----------- ------------ ----------- ----------- Net Assets ........................................ $41,811,150 $95,116,105 $153,487,399 $79,479,069 $50,008,417 =========== =========== ============ =========== =========== Shares of common stock issued and outstanding ..... 550,000 3,601,000 7,501,000 6,001,000 2,250,030 =========== =========== ============ =========== =========== Net Asset Value Per Share ......................... $ 76.02 $ 26.41 $ 20.46 $ 13.24 $ 22.23 =========== =========== ============ =========== ===========
iSHARES MSCI JAPAN INDEX FUND ------------ ASSETS Investments, at value ............................. $786,870,296 Cash and foreign currency (at value) .............. 2,224,904 Cash collateral for securities loaned ............. 83,952,455 Dividends receivable .............................. 122,689 Interest receivable ............................... 28,473 Receivable from investment adviser ................ -- Receivable for securities sold .................... -- Assets for in-kind redemptions .................... -- Receivable for Fund shares sold ................... -- Deferred organization cost ........................ 76,651 Prepaid expenses .................................. 27,261 ------------ Total assets .................................. 873,302,729 ------------ LIABILITIES Bank Overdraft .................................... -- Payable for securities purchased .................. -- Payable for Fund shares redeemed .................. -- Liability for in-kind subscriptions ............... -- Payable for securities loaned ..................... 83,952,455 Payable for foreign withholding tax ............... -- Advisory fee payable .............................. 516,416 Administration fee payable ........................ 206,540 Distribution fee payable .......................... 344,263 Custody fee payable ............................... 99,404 Accrued expenses .................................. 393,443 ------------ Total liabilities ............................. 85,512,521 ------------ NET ASSETS Capital stock, $0.001 par value ................... 57,001 Paid-in capital ................................... 688,035,589 Accumulated net investment income/(loss) .......... (3,501,630) Accumulated net realized gain/(loss) on investments (1,820,452) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... 105,019,700 ------------ Net Assets ........................................ $787,790,208 ============ Shares of common stock issued and outstanding ..... 57,001,000 ============ Net Asset Value Per Share ......................... $ 13.82 ============
See accompanying notes to financial statements. 60-61 AUGUST 31, 2000 STATEMENTS OF ASSETS AND LIABILITIES (concluded) iSHARES, INC. ================================================================================
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI MALAYSIA (FREE) MEXICO (FREE) NETHERLANDS SINGAPORE (FREE) INDEX FUND INDEX FUND INDEX FUND INDEX FUND ---------- ---------- ---------- ---------- ASSETS Investments, at value ............................. $ 98,552,810 $39,781,757 $30,616,908 $90,249,707 Cash and foreign currency (at value) .............. 739,883 333,871 -- -- Cash collateral for securities loaned ............. -- 3,932,481 -- 2,018,900 Dividends receivable .............................. 111,666 363 119,322 192,757 Interest receivable ............................... 3,877 5,499 1,111 875 Receivable from investment adviser ................ -- -- -- -- Receivable for securities sold .................... -- 3,096,575 -- -- Assets for in-kind redemptions .................... -- -- -- -- Receivable for Fund shares sold ................... -- -- -- -- Deferred organization cost ........................ 10,263 10,369 8,683 12,323 Prepaid expenses .................................. 3,782 844 715 3,050 ------------ ----------- ----------- ----------- Total assets .................................. 99,422,281 47,161,759 30,746,739 92,477,612 ------------ ----------- ----------- ----------- LIABILITIES Bank Overdraft .................................... -- -- 72,602 1,548,288 Payable for securities purchased .................. -- 3,026,128 -- -- Payable for Fund shares redeemed .................. -- -- -- -- Liability for in-kind subscriptions ............... -- -- -- -- Payable for securities loaned ..................... -- 3,932,481 -- 2,018,900 Payable for foreign withholding tax ............... -- -- -- -- Advisory fee payable .............................. 55,536 3,031 10,464 48,616 Administration fee payable ........................ 26,360 9,179 7,250 23,541 Distribution fee payable .......................... 43,928 15,303 12,081 39,235 Custody fee payable ............................... 34,939 21,741 12,706 26,339 Accrued expenses .................................. 55,663 27,114 18,360 53,531 ------------ ----------- ----------- ----------- Total liabilities ............................. 216,426 7,034,977 133,463 3,758,450 ------------ ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ................... 16,650 2,400 1,301 11,700 Paid-in capital ................................... 85,846,225 35,552,329 30,426,542 79,905,979 Accumulated net investment income/(loss) .......... 4,339 95,163 3,674 5,130 Accumulated net realized gain/(loss) on investments (10,733,222) (113,966) (285,612) (806,081) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... 24,071,863 4,590,856 467,371 9,602,434 ------------ ----------- ----------- ----------- Net Assets ........................................ $ 99,205,855 $40,126,782 $30,613,276 $88,719,162 ============ =========== =========== =========== Shares of common stock issued and outstanding ..... 16,650,030 2,400,030 1,301,000 11,700,030 ============ =========== =========== =========== Net Asset Value Per Share ......................... $ 5.96 $ 16.72 $ 23.53 $ 7.58 ============ =========== =========== ===========
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI SOUTH KOREA SPAIN SWEDEN SWITZERLAND TAIWAN INDEX FUND INDEX FUND INDEX FUND INDEX FUND INDEX FUND ---------- ---------- ---------- ---------- ---------- ASSETS Investments, at value ............................. $13,555,759 $39,394,128 $23,261,152 $44,897,825 $41,846,367 Cash and foreign currency (at value) .............. 107,974 515,149 553,194 -- 907,089 Cash collateral for securities loaned ............. -- 6,792,669 1,484,900 3,209,850 -- Dividends receivable .............................. 4,970 65,956 -- 174,318 19,657 Interest receivable ............................... 472 3,274 3,199 906 5,527 Receivable from investment adviser ................ 13,484 -- -- -- 21,265 Receivable for securities sold .................... -- -- -- -- -- Assets for in-kind redemptions .................... -- -- -- -- -- Receivable for Fund shares sold ................... -- -- -- -- -- Deferred organization cost ........................ -- 15,221 9,910 23,399 -- Prepaid expenses .................................. -- 1,300 892 1,155 -- ----------- ----------- ----------- ----------- ----------- Total assets .................................. 13,682,659 46,787,697 25,313,247 48,307,453 42,799,905 ----------- ----------- ----------- ----------- ----------- LIABILITIES Bank Overdraft .................................... -- -- -- 328,017 -- Payable for securities purchased .................. -- -- -- -- -- Payable for Fund shares redeemed .................. -- -- -- -- -- Liability for in-kind subscriptions ............... -- -- -- -- -- Payable for securities loaned ..................... -- 6,792,669 1,484,900 3,209,850 -- Payable for foreign withholding tax ............... -- -- -- -- 29,679 Advisory fee payable .............................. -- 17,459 8,133 15,474 -- Administration fee payable ........................ 4,493 10,887 6,898 11,231 8,768 Distribution fee payable .......................... 7,488 18,145 11,498 18,718 14,614 Custody fee payable ............................... 35,347 9,777 9,665 12,628 43,224 Accrued expenses .................................. 13,758 25,899 17,837 26,417 36,345 ----------- ----------- ----------- ----------- ----------- Total liabilities ............................. 61,086 6,874,836 1,538,931 3,622,335 132,630 ----------- ----------- ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ................... 750 1,650 975 2,876 2,600 Paid-in capital ................................... 15,143,617 42,867,858 22,632,298 45,745,527 47,951,484 Accumulated net investment income/(loss) .......... (19,699) (58,260) (174) 9,437 (5,064) Accumulated net realized gain/(loss) on investments (823,996) (458,160) (138,213) (332,398) (1,392,533) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... (679,099) (2,440,227) 1,279,430 (740,324) (3,889,212) ----------- ----------- ----------- ----------- ----------- Net Assets ........................................ $13,621,573 $39,912,861 $23,774,316 $44,685,118 $42,667,275 =========== =========== =========== =========== =========== Shares of common stock issued and outstanding ..... 750,000 1,650,030 975,030 2,876,000 2,600,000 =========== =========== =========== =========== =========== Net Asset Value Per Share ......................... $ 18.16 $ 24.19 $ 24.38 $ 15.54 $ 16.41 =========== =========== =========== =========== ===========
iSHARES MSCI UNITED KINGDOM INDEX FUND ---------- ASSETS Investments, at value ............................. $146,049,198 Cash and foreign currency (at value) .............. 299,764 Cash collateral for securities loaned ............. -- Dividends receivable .............................. 716,598 Interest receivable ............................... 10,622 Receivable from investment adviser ................ -- Receivable for securities sold .................... -- Assets for in-kind redemptions .................... -- Receivable for Fund shares sold ................... -- Deferred organization cost ........................ 22,089 Prepaid expenses .................................. 3,592 ------------ Total assets .................................. 147,101,863 ------------ LIABILITIES Bank Overdraft .................................... -- Payable for securities purchased .................. -- Payable for Fund shares redeemed .................. -- Liability for in-kind subscriptions ............... -- Payable for securities loaned ..................... -- Payable for foreign withholding tax ............... -- Advisory fee payable .............................. 84,414 Administration fee payable ........................ 37,825 Distribution fee payable .......................... 63,032 Custody fee payable ............................... 19,850 Accrued expenses .................................. 94,041 ------------ Total liabilities ............................. 299,162 ------------ NET ASSETS Capital stock, $0.001 par value ................... 8,001 Paid-in capital ................................... 156,855,678 Accumulated net investment income/(loss) .......... (244,068) Accumulated net realized gain/(loss) on investments (1,634,878) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... (8,182,032) ------------ Net Assets ........................................ $146,802,701 ============ Shares of common stock issued and outstanding ..... 8,001,000 ============ Net Asset Value Per Share ......................... $ 18.35 ============
See accompanying notes to financial statements. 62-63 FOR THE YEAR ENDED AUGUST 31, 2000 STATEMENTS OF OPERATIONS iSHARES, INC. ================================================================================
iSHARES MSCI iSHARES MSCI iSHARES MSCI AUSTRALIA AUSTRIA BELGIUM INDEX FUND INDEX FUND INDEX FUND ---------- ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ................................. $1,915,380 $ 181,603 $ 309,677 Interest ..................................................................... 25,864 3,734 8,141 ---------- ----------- ----------- Total investment income .................................................... 1,941,244 185,337 317,818 ---------- ----------- ----------- EXPENSES: Advisory fees ................................................................ 148,628 19,889 25,952 Administration fees .......................................................... 106,930 19,678 22,408 Distribution fees ............................................................ 135,876 24,528 28,350 Custodian fees and expenses .................................................. 38,163 12,803 12,769 Transfer agent fees .......................................................... 17,125 11,872 12,405 Directors' fees .............................................................. 9,834 1,799 2,038 Legal fees ................................................................... 23,546 3,897 4,499 Audit fees ................................................................... 23,592 4,317 5,153 Federal and state registration fees .......................................... 2,840 1,696 5,434 Amortization of deferred organization costs .................................. 32,178 23,929 10,453 Insurance .................................................................... 5,266 1,158 1,244 Printing ..................................................................... 7,342 1,087 1,415 Licensing fees ............................................................... 18,391 3,333 3,831 AMEX listing fee ............................................................. 937 121 193 Interest expense ............................................................. 4,963 300 6,077 Miscellaneous expenses ....................................................... 6,152 2,563 1,825 ---------- ----------- ----------- Total expenses ............................................................. 581,763 132,970 144,046 Less reimbursements from investment adviser ................................ -- (4,019) -- ---------- ----------- ----------- Net expenses ............................................................... 581,763 128,951 144,046 ---------- ----------- ----------- Net investment income/(loss) ................................................. 1,359,481 56,386 173,772 ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ...................................... 2,233,973) (466,783) (498,140) Net realized gain/(loss) on investments on in-kind redemptions ........................................................ 70,377 (586,740) -- Net realized gain/(loss) on foreign currency related transactions ....................................................... (76,422) 1,967 26,036 ---------- ----------- ----------- 2,240,018) (1,051,556) (472,104) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .............................. 2,071,775 (1,077,240) (1,751,697) ---------- ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .......................................... (168,243) (2,128,796) (2,223,801) ---------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................................ $1,191,238 $(2,072,410) $(2,050,029) ========== =========== ===========
iSHARES MSCI iSHARES MSCI iSHARES MSCI BRAZIL (FREE) CANADA EMU INDEX FUND(a) INDEX FUND INDEX FUND(b) ------------- ---------- ------------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ................................. $ 56,628 $ 730,908 $ 34,099 Interest ..................................................................... 1,032 7,848 733 --------- ----------- ----------- Total investment income .................................................... 57,660 738,756 34,832 --------- ----------- ----------- EXPENSES: Advisory fees ................................................................ 410 23,119 7,196 Administration fees .......................................................... 4,908 23,780 6,012 Distribution fees ............................................................ 8,179 31,942 10,021 Custodian fees and expenses .................................................. 9,743 12,688 2,134 Transfer agent fees .......................................................... 1,080 12,840 980 Directors' fees .............................................................. 264 2,474 594 Legal fees ................................................................... 3,253 8,501 5,778 Audit fees ................................................................... 5,044 6,992 9,268 Federal and state registration fees .......................................... 5,111 4,934 11,586 Amortization of deferred organization costs .................................. -- 22,731 -- Insurance .................................................................... 510 1,328 360 Printing ..................................................................... 963 2,469 2,261 Licensing fees ............................................................... 982 4,230 1,202 AMEX listing fee ............................................................. 5,135 281 5,311 Interest expense ............................................................. -- 2,052 -- Miscellaneous expenses ....................................................... 73 7,989 78 --------- ----------- ----------- Total expenses ............................................................. 45,655 168,350 62,781 Less reimbursements from investment adviser ................................ (13,265) (3,428) (29,111) --------- ----------- ----------- Net expenses ............................................................... 32,390 164,922 33,670 --------- ----------- ----------- Net investment income/(loss) ................................................. 25,270 573,834 1,162 --------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ...................................... (403,399) 4,532,079 (559) Net realized gain/(loss) on investments on in-kind redemptions ........................................................ -- -- -- Net realized gain/(loss) on foreign currency related transactions ....................................................... (12,733) (41,804) (4) --------- ----------- ----------- (416,132) 4,490,275 (563) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .............................. (351,195) 2,244,139 (2,069,731) --------- ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .......................................... (767,327) 6,734,414 (2,070,294) --------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................................ $(742,057) $ 7,308,248 $(2,069,132) ========= =========== ===========
iSHARES MSCI iSHARES MSCI iSHARES MSCI FRANCE GERMANY HONG KONG INDEX FUND INDEX FUND INDEX FUND ---------- ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ................................. $ 1,117,332 $ 2,555,684 $ 2,797,982 Interest ..................................................................... 45,239 111,153 39,361 ----------- ------------ ----------- Total investment income .................................................... 1,162,571 2,666,837 2,837,343 ----------- ------------ ----------- EXPENSES: Advisory fees ................................................................ 208,698 415,826 203,154 Administration fees .......................................................... 152,143 272,489 141,347 Distribution fees ............................................................ 197,119 359,126 178,342 Custodian fees and expenses .................................................. 64,830 90,391 55,596 Transfer agent fees .......................................................... 21,938 35,921 40,003 Directors' fees .............................................................. 14,259 27,305 9,903 Legal fees ................................................................... 35,084 66,160 31,286 Audit fees ................................................................... 34,565 59,912 30,057 Federal and state registration fees .......................................... 3,232 19,333 4,522 Amortization of deferred organization costs .................................. 62,387 59,271 16,522 Insurance .................................................................... 4,641 6,696 7,003 Printing ..................................................................... 12,065 23,479 9,439 Licensing fees ............................................................... 26,518 48,086 24,251 AMEX listing fee ............................................................. 1,442 2,654 1,252 Interest expense ............................................................. -- 4,422 5,007 Miscellaneous expenses ....................................................... 7,337 9,237 5,249 ----------- ------------ ----------- Total expenses ............................................................. 846,258 1,500,308 762,933 Less reimbursements from investment adviser ................................ -- -- -- ----------- ------------ ----------- Net expenses ............................................................... 846,258 1,500,308 762,933 ----------- ------------ ----------- Net investment income/(loss) ................................................. 316,313 1,166,529 2,074,410 ----------- ------------ ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ...................................... 5,585,604 14,993,834 5,977,121 Net realized gain/(loss) on investments on in-kind redemptions ........................................................ 3,534,049 1,613,589 2,956,325 Net realized gain/(loss) on foreign currency related transactions ....................................................... (34,008) 28,021 (2,848) ----------- ------------ ----------- 9,085,645 16,635,444 8,930,598 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .............................. 7,586,933 (13,766,948) (771,258) ----------- ------------ ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .......................................... 16,672,578 2,868,496 8,159,340 ----------- ------------ ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................................ $16,988,891 $ 4,035,025 $10,233,750 =========== ============ ===========
iSHARES MSCI iSHARES MSCI ITALY JAPAN INDEX FUND INDEX FUND ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ................................. $ 1,421,179 $ 4,596,673 Interest ..................................................................... 199,005 263,680 ----------- ----------- Total investment income .................................................... 1,620,184 4,860,353 ----------- ----------- EXPENSES: Advisory fees ................................................................ 154,493 2,363,952 Administration fees .......................................................... 107,296 1,506,281 Distribution fees ............................................................ 138,808 1,915,263 Custodian fees and expenses .................................................. 47,735 341,918 Transfer agent fees .......................................................... 15,203 149,448 Directors' fees .............................................................. 10,235 141,038 Legal fees ................................................................... 23,640 325,640 Audit fees ................................................................... 21,343 300,217 Federal and state registration fees .......................................... -- 11,091 Amortization of deferred organization costs .................................. 31,416 130,795 Insurance .................................................................... 8,035 14,356 Printing ..................................................................... 7,272 100,301 Licensing fees ............................................................... 18,656 259,402 AMEX listing fee ............................................................. 841 12,548 Interest expense ............................................................. 25,926 1,674 Miscellaneous expenses ....................................................... 6,813 39,593 ----------- ----------- Total expenses ............................................................. 617,712 7,613,517 Less reimbursements from investment adviser ................................ -- -- ----------- ----------- Net expenses ............................................................... 617,712 7,613,517 ----------- ----------- Net investment income/(loss) ................................................. 1,002,472 (2,753,164) ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ...................................... 3,883,525 33,478,937 Net realized gain/(loss) on investments on in-kind redemptions ........................................................ 4,300,150 17,913,316 Net realized gain/(loss) on foreign currency related transactions ....................................................... (80,346) 425,358 ----------- ----------- 8,103,329 51,817,611 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .............................. (2,555,628) 9,615,813 ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .......................................... 5,547,701 61,433,424 ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................................ $ 6,550,173 $58,680,260 =========== =========== (a) For the period July 11, 2000 (commencement of operations) through August 31, 2000. (b) For the period July 26, 2000 (commencement of operations) through August 31, 2000.
See accompanying notes to financial statements. 64-65 FOR THE YEAR ENDED AUGUST 31, 2000 STATEMENTS OF OPERATIONS (concluded) iSHARES, INC. ================================================================================
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI MALAYSIA (FREE) MEXICO (FREE) NETHERLANDS SINGAPORE (FREE) INDEX FUND INDEX FUND INDEX FUND INDEX FUND ---------- ---------- ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $1,830,961 $ 327,840 $ 402,360 $ 2,642,915 Interest ............................................... 74,506 40,005 12,977 50,089 ---------- ---------- --------- ------------ Total investment income .............................. 1,905,467 367,845 415,337 2,693,004 ---------- ---------- --------- ------------ EXPENSES: Advisory fees .......................................... 264,088 45,446 61,274 268,788 Administration fees .................................... 185,310 45,292 47,334 188,421 Distribution fees ...................................... 238,818 58,906 58,919 232,087 Custodian fees and expenses ............................ 93,770 40,679 20,603 84,589 Transfer agent fees .................................... 36,387 16,552 13,560 53,965 Directors' fees ........................................ 17,423 4,014 4,149 16,766 Legal fees ............................................. 82,791 10,625 9,461 38,378 Audit fees ............................................. 37,185 11,895 11,339 37,652 Federal and state registration fees .................... 1,293 5,466 1,397 -- Amortization of deferred organization costs ............ 17,510 17,690 14,816 21,027 Insurance .............................................. 2,066 570 2,846 10,525 Printing ............................................... 13,247 4,111 2,889 10,728 Licensing fees ......................................... 32,257 7,911 8,018 31,794 AMEX listing fee ....................................... 1,673 472 407 1,439 Interest expense ....................................... -- 245 13,206 205 Miscellaneous expenses ................................. 8,477 5,673 3,996 2,700 ---------- ---------- --------- ------------ Total expenses ....................................... 1,032,295 275,547 274,214 999,064 Less reimbursements from investment adviser .......... -- (463) -- -- ---------- ---------- --------- ------------ Net expenses ......................................... 1,032,295 275,084 274,214 999,064 ---------- ---------- --------- ------------ Net investment income/(loss) ........................... 873,172 92,761 141,123 1,693,940 ---------- ---------- --------- ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ................ 3,891,844 1,035,145 178,529 13,086,839 Net realized gain/(loss) on investments on in-kind redemptions .................................. -- 5,425 (330,320) 6,060,555 Net realized gain/(loss) on foreign currency related transactions ................................. 54,571 (6,246) 5,784 2,766 ---------- ---------- --------- ------------ 3,946,415 1,034,324 (146,007) 19,150,160 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ 2,433,278 4,125,540 148,944 (22,721,621) ---------- ---------- --------- ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... 6,379,693 5,159,864 2,937 (3,571,461) ---------- ---------- --------- ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $7,252,865 $5,252,625 $ 144,060 $ (1,877,521) ========== ========== ========= ============
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI SOUTH KOREA SPAIN SWEDEN SWITZERLAND INDEX FUND(c) INDEX FUND INDEX FUND INDEX FUND ------------- ---------- ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $ 16,779 $ 618,882 $ 349,341 $ 492,538 Interest ............................................... 3,361 23,831 18,321 6,892 ----------- ----------- ----------- --------- Total investment income .............................. 20,140 642,713 367,662 499,430 ----------- ----------- ----------- --------- EXPENSES: Advisory fees .......................................... 8,252 94,886 52,196 88,433 Administration fees .................................... 8,322 71,035 42,428 69,813 Distribution fees ...................................... 13,870 91,261 55,163 89,178 Custodian fees and expenses ............................ 13,347 33,281 26,888 31,803 Transfer agent fees .................................... 2,040 16,087 14,046 14,886 Directors' fees ........................................ 1,130 6,661 4,010 6,549 Legal fees ............................................. 12,393 15,951 10,194 15,151 Audit fees ............................................. 3,126 15,435 9,582 16,246 Federal and state registration fees .................... 3,980 3,330 2,635 3,288 Amortization of deferred organization costs ............ -- 25,976 16,911 39,927 Insurance .............................................. 1,130 4,631 1,356 4,335 Printing ............................................... 762 5,138 3,459 4,922 Licensing fees ......................................... 1,665 12,308 7,417 12,034 AMEX listing fee ....................................... 5,097 629 411 626 Interest expense ....................................... -- 6,757 2,912 4,520 Miscellaneous expenses ................................. 1,549 4,835 3,890 4,568 ----------- ----------- ----------- --------- Total expenses ....................................... 76,663 408,201 253,498 406,279 Less reimbursements from investment adviser .......... (21,736) -- -- -- ----------- ----------- ----------- --------- Net expenses ......................................... 54,927 408,201 253,498 406,279 ----------- ----------- ----------- --------- Net investment income/(loss) ........................... (34,787) 234,512 114,164 93,151 ----------- ----------- ----------- --------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ................ (823,996) 855,519 5,792,582 371,467 Net realized gain/(loss) on investments on in-kind redemptions .................................. -- -- 2,645,700 375,640 Net realized gain/(loss) on foreign currency related transactions ................................. (19,699) (65,470) (3,926) 6,726 ----------- ----------- ----------- --------- (843,695) 790,049 8,434,356 753,833 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (679,099) (2,294,792) (2,132,301) (303,839) ----------- ----------- ----------- --------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (1,522,794) (1,504,743) 6,302,055 449,994 ----------- ----------- ----------- --------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(1,557,581) $(1,270,231) $ 6,416,219 $ 543,145 =========== =========== =========== =========
iSHARES MSCI iSHARES MSCI TAIWAN UNITED KINGDOM INDEX FUND(d) INDEX FUND ------------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $ 878,935 $ 2,999,601 Interest ............................................... 9,466 44,933 ----------- ----------- Total investment income .............................. 888,401 3,044,534 ----------- ----------- EXPENSES: Advisory fees .......................................... 16,530 349,463 Administration fees .................................... 9,318 226,121 Distribution fees ...................................... 15,531 293,126 Custodian fees and expenses ............................ 14,424 42,646 Transfer agent fees .................................... 1,280 30,018 Directors' fees ........................................ 683 21,637 Legal fees ............................................. 9,042 54,193 Audit fees ............................................. 8,428 53,734 Federal and state registration fees .................... 12,932 13,835 Amortization of deferred organization costs ............ -- 37,694 Insurance .............................................. 710 8,894 Printing ............................................... 2,602 16,924 Licensing fees ......................................... 1,864 39,287 AMEX listing fee ....................................... 5,368 2,124 Interest expense ....................................... -- 25,265 Miscellaneous expenses ................................. 583 13,394 ----------- ----------- Total expenses ....................................... 99,295 1,228,355 Less reimbursements from investment adviser .......... (37,794) -- ----------- ----------- Net expenses ......................................... 61,501 1,228,355 ----------- ----------- Net investment income/(loss) ........................... 826,900 1,816,179 ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ................ (1,134,217) 5,873,599 Net realized gain/(loss) on investments on in-kind redemptions .................................. -- 2,937,974 Net realized gain/(loss) on foreign currency related transactions ................................. (5,064) (37,499) ----------- ----------- (1,139,281) 8,774,074 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (3,889,212) (14,882,373) ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (5,028,493) (6,108,299) ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(4,201,593) $(4,292,120) =========== =========== (c) For the period May 10, 2000 (commencement of operations) through August 31, 2000. (d) For the period June 21, 2000 (commencement of operations) through August 31, 2000.
See accompanying notes to financial statements. 66-67 STATEMENTS OF CHANGES IN NET ASSETS iSHARES, INC. ================================================================================
iSHARES MSCI iSHARES MSCI AUSTRALIA AUSTRIA INDEX FUND INDEX FUND -------------------------------- ----------------------------- For the For the For the For the year year year year ended ended ended ended 08/31/00 08/31/99 08/31/00 08/31/99 ----------- ------------- ------------- ------------- OPERATIONS: Net investment income/(loss) .............. $ 1,359,481 $ 1,018,910 $ 56,386 $ 103,998 Net realized gain/(loss) on investments and foreign currency related transactions ... (2,240,018) (1,050,159) (1,051,556) (967,245) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 2,071,775 11,353,376 (1,077,240) 36,686 ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... 1,191,238 11,322,127 (2,072,410) (826,561) ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (1,359,481) (1,018,910) (56,386) (103,998) In excess of net investment income ........ (25,516) (7,396) (6,475) (13,614) Net realized gains ........................ -- -- -- -- In excess of net realized gains ........... -- -- -- -- Return of capital ......................... (156,130) (319,842) -- (25,471) ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ........................... (1,541,127) (1,346,148) (62,861) (143,083) ----------- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 12,114,567 14,143,418 2,349,160 5,660,757 Cost of shares redeemed ................... (4,147,344) (4,261,441) (2,249,507) -- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . 7,967,223 9,881,977 99,653 5,660,757 ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets ... 7,617,334 19,857,956 (2,035,618) 4,691,113 NET ASSETS: Beginning of period ....................... 53,957,156 34,099,200 12,776,279 8,085,166 ----------- ----------- ----------- ----------- End of period ............................. $61,574,490 $53,957,156 $10,740,661 $12,776,279 =========== =========== =========== =========== Capital Share Transactions: Shares sold ............................... 1,200,000 1,400,000 300,000 600,000 Shares redeemed ........................... (400,000) (400,000) (300,000) -- ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ......... 800,000 1,000,000 -- 600,000 =========== =========== =========== ===========
iSHARES MSCI iSHARES MSCI BELGIUM BRAZIL (FREE) INDEX FUND INDEX FUND -------------------------------- -------------- For the For the For the year year period ended ended 07/11/00*- 08/31/00 08/31/99 08/31/00 ----------- ----------- ---------- OPERATIONS: Net investment income/(loss) .............. $ 173,772 $ 74,362 $ 25,270 Net realized gain/(loss) on investments and foreign currency related transactions ... (472,104) 3,499,750 (416,132) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (1,751,697) (2,955,479) (351,195) ----------- ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (2,050,029) 618,633 (742,057) ----------- ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (173,772) -- (20,804) In excess of net investment income ........ (185,439) (7,001) -- Net realized gains ........................ -- (997,661) -- In excess of net realized gains ........... -- -- (324,901) Return of capital ......................... -- (770,321) -- ----------- ------------ ------------ Net decrease in net assets from distributions ........................... (359,211) (1,774,983) (345,705) ----------- ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 2,142,828 2,006,880 34,771,580 Cost of shares redeemed ................... -- (13,118,955) (15,400,640) ----------- ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 2,142,828 (11,112,075) 19,370,940 ----------- ------------ ------------ Total increase/(decrease) in net assets ... (266,412) (12,268,425) 18,283,178 NET ASSETS: Beginning of period ....................... 13,496,109 25,764,534 -- ----------- ------------ ------------ End of period ............................. $13,229,697 $ 13,496,109 $ 18,283,178 =========== ============ ============ Capital Share Transactions: Shares sold ............................... 160,000 120,000 1,750,000 Shares redeemed ........................... -- (680,000) (800,000) ----------- ------------ ------------ Net increase/(decrease) in shares ......... 160,000 (560,000) 950,000 =========== ============ ============
iSHARES MSCI iSHARES MSCI CANADA EMU INDEX FUND INDEX FUND -------------------------------- ------------- For the For the For the year year period ended ended 07/26/00*- 08/31/00 08/31/99 08/31/00 ----------- ------------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 573,834 $ 64,571 $ 1,162 Net realized gain/(loss) on investments and foreign currency related transactions ... 4,490,275 1,384,936 (563) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 2,244,139 2,309,528 (2,069,731) ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... 7,308,248 3,759,035 (2,069,132) ----------- ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (573,834) (64,571) -- In excess of net investment income ........ (28,480) (6,549) -- Net realized gains ........................ (4,490,275) (385,919) -- In excess of net realized gains ........... (338,582) -- -- Return of capital ......................... (134,421) -- -- ----------- ----------- ----------- Net decrease in net assets from distributions ........................... (5,565,592) (457,039) -- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 11,032,592 7,126,953 43,880,282 Cost of shares redeemed ................... -- (8,107,562) -- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . 11,032,592 (980,609) 43,880,282 ----------- ----------- ----------- Total increase/(decrease) in net assets ... 12,775,248 2,321,387 41,811,150 NET ASSETS: Beginning of period ....................... 9,252,947 6,931,560 -- ----------- ----------- ----------- End of period ............................. $22,028,195 $ 9,252,947 $41,811,150 =========== =========== =========== Capital Share Transactions: Shares sold ............................... 600,000 600,000 550,000 Shares redeemed ........................... -- (600,000) -- ----------- ----------- ----------- Net increase/(decrease) in shares ......... 600,000 -- 550,000 =========== =========== ===========
iSHARES MSCI FRANCE INDEX FUND ---------------------------------- For the For the year year ended ended 08/31/00 08/31/99 ----------- ------------- OPERATIONS: Net investment income/(loss) .............. $ 316,313 $ 343,192 Net realized gain/(loss) on investments and foreign currency related transactions ... 9,085,645 3,579,987 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 7,586,933 5,565,223 ----------- ------------ Net increase/(decrease) in net assets resulting from operations ............... 16,988,891 9,488,402 ----------- ------------ DISTRIBUTIONS: Net investment income ..................... (316,313) (343,192) In excess of net investment income ........ (62,610) (70,988) Net realized gains ........................ (5,551,596) (157,628) In excess of net realized gains ........... (115,993) -- Return of capital ......................... (91,967) (271,980) ----------- ------------ Net decrease in net assets from distributions ........................... (6,138,479) (843,788) ----------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 15,952,082 34,466,929 Cost of shares redeemed ................... (9,571,623) (11,147,991) ----------- ------------ Net increase/(decrease) in net assets derived from capital share transactions . 6,380,459 23,318,938 ----------- ------------ Total increase/(decrease) in net assets ... 17,230,871 31,963,552 NET ASSETS: Beginning of period ....................... 77,885,234 45,921,682 ----------- ------------ End of period ............................. $95,116,105 $ 77,885,234 =========== ============ Capital Share Transactions: Shares sold ............................... 600,000 1,600,000 Shares redeemed ........................... (400,000) (600,000) ----------- ------------ Net increase/(decrease) in shares ......... 200,000 1,000,000 =========== ============ * Commencement of operations.
See accompanying notes to financial statements. 68-69 STATEMENTS OF CHANGES IN NET ASSETS (continued) iSHARES, INC. ================================================================================
iSHARES MSCI iSHARES MSCI GERMANY HONG KONG INDEX FUND INDEX FUND ---------------------------- ----------------------------- For the For the For the For the year year year year ended ended ended ended 08/31/00 08/31/99 08/31/00 08/31/99 ------------ ------------ --------- ------------- OPERATIONS: Net investment income/(loss) .............. $ 1,166,529 $ 464,079 $ 2,074,410 $ 2,076,168 Net realized gain/(loss) on investments and foreign currency related transactions ... 16,635,444 9,046,609 8,930,598 (4,283,573) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (13,766,948) (4,137,292) (771,258) 45,476,872 ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... 4,035,025 5,373,396 10,233,750 43,269,467 ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (1,166,529) (464,079) (1,944,477) (2,076,168) In excess of net investment income ........ (56,709) (47,802) -- (331,861) Net realized gains ........................ (15,021,855) (1,463,921) -- -- In excess of net realized gains ........... (2,419,881) (380,445) -- -- Return of capital ......................... (324,558) (37,182) (146,976) -- ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ........................... (18,989,532) (2,393,429) (2,091,453) (2,408,029) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 93,602,539 50,334,147 6,699,833 4,990,436 Cost of shares redeemed ................... (26,805,867) (24,602,755) (12,563,378) (18,624,427) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 66,796,672 25,731,392 (5,863,545) (13,633,991) ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ... 51,842,165 28,711,359 2,278,752 27,227,447 NET ASSETS: Beginning of period ....................... 101,645,234 72,933,875 77,200,317 49,972,870 ------------ ------------ ------------ ------------ End of period ............................. $153,487,399 $101,645,234 $ 79,479,069 $ 77,200,317 ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................... 3,900,000 2,400,400 525,000 525,000 Shares redeemed ........................... (1,200,000) (1,200,000) (1,050,000) (1,800,000) ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ......... 2,700,000 1,200,000 (525,000) (1,275,000) ============ ============ ============ ============
iSHARES MSCI iSHARES MSCI ITALY JAPAN INDEX FUND INDEX FUND -------------------------- --------------------------- For the For the For the For the year year year year ended ended ended ended 08/31/00 08/31/99 08/31/00 08/31/99 ----------- ----------- --------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 1,002,472 $ 484,969 $ (2,753,164) $ (1,115,084) Net realized gain/(loss) on investments and foreign currency related transactions ... 8,103,329 12,220,165 51,817,611 (18,671,535) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (2,555,628) (9,880,532) 9,615,813 178,555,572 ------------ ------------ ------------- ------------ Net increase/(decrease) in net assets resulting from operations ............... 6,550,173 2,824,602 58,680,260 158,768,953 ------------ ------------ ------------- ------------ DISTRIBUTIONS: Net investment income ..................... (258,556) (179,682) -- -- In excess of net investment income ........ -- -- (87,603) (2,424,032) Net realized gains ........................ (3,803,179) (6,161,860) (30,206,630) -- In excess of net realized gains ........... (240,263) -- -- -- Return of capital ......................... (708,144) (689,335) (1,946,368) (265,218) ------------ ------------ ------------- ------------ Net decrease in net assets from distributions ........................... (5,010,142) (7,030,877) (32,240,601) (2,689,250) ------------ ------------ ------------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 11,166,696 18,459,343 153,087,778 383,655,690 Cost of shares redeemed ................... (20,922,156) (14,397,461) (105,390,299) (27,567,601) ------------ ------------ ------------- ------------ Net increase/(decrease) in net assets derived from capital share transactions . (9,755,460) 4,061,882 47,697,479 356,088,089 ------------ ------------ ------------- ------------ Total increase/(decrease) in net assets ... (8,215,429) (144,393) 74,137,138 512,167,792 NET ASSETS: Beginning of period ....................... 58,223,846 58,368,239 713,653,070 201,485,278 ------------ ------------ ------------- ------------ End of period ............................. $ 50,008,417 $ 58,223,846 $ 787,790,208 $713,653,070 ============ ============ ============= ============ Capital Share Transactions: Shares sold ............................... 450,000 750,000 10,200,000 33,000,000 Shares redeemed ........................... (900,000) (600,000) (7,200,000) (3,000,000) ------------ ------------ ------------- ------------ Net increase/(decrease) in shares ......... (450,000) 150,000 3,000,000 30,000,000 ============ ============ ============= ============
iSHARES MSCI iSHARES MSCI MALAYSIA (FREE) MEXICO (FREE) INDEX FUND INDEX FUND --------------------------- ------------------------ For the For the For the For the year year year year ended ended ended ended 08/31/00 08/31/99 08/31/00 08/31/99 ----------- ----------- ---------- ---------- OPERATIONS: Net investment income/(loss) .............. $ 873,172 $ 214,370 $ 92,761 $ 75,680 Net realized gain/(loss) on investments and foreign currency related transactions ... 3,946,415 (12,836,244) 1,034,324 (288,007) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 2,433,278 75,448,531 4,125,540 5,395,343 ----------- ------------ ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... 7,252,865 62,826,657 5,252,625 5,183,016 ----------- ------------ ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (873,172) (116,388) -- (75,680) In excess of net investment income ........ (13,993) -- -- (21,243) Net realized gains ........................ -- -- (1,016,173) -- In excess of net realized gains ........... -- -- -- (8,020) Return of capital ......................... (1,947) (3,326,074) -- (89,641) ----------- ------------ ----------- ----------- Net decrease in net assets from distributions ........................... (889,112) (3,442,462) (1,016,173) (194,584) ----------- ------------ ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... -- -- 15,769,905 11,363,778 Cost of shares redeemed ................... (2,408,796) -- (1,309,195) (2,218,426) ----------- ------------ ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . (2,408,796) -- 14,460,710 9,145,352 ----------- ------------ ----------- ----------- Total increase/(decrease) in net assets ... 3,954,957 59,384,195 18,697,162 14,133,784 NET ASSETS: Beginning of period ....................... 95,250,898 35,866,703 21,429,620 7,295,836 ----------- ------------ ----------- ----------- End of period ............................. $99,205,855 $ 95,250,898 $40,126,782 $21,429,620 =========== ============ =========== =========== Capital Share Transactions: Shares sold ............................... -- -- 900,000 900,000 Shares redeemed ........................... (375,000) -- (100,000) (200,000) ----------- ------------ ----------- ----------- Net increase/(decrease) in shares ......... (375,000) -- 800,000 700,000 =========== ============ =========== ===========
iSHARES MSCI NETHERLANDS INDEX FUND --------------------------- For the For the year year ended ended 08/31/00 08/31/99 ----------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 141,123 $ 555,367 Net realized gain/(loss) on investments and foreign currency related transactions ... (146,007) 2,580,324 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 148,944 (767,104) ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... 144,060 2,368,587 ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (103,829) (555,367) In excess of net investment income ........ -- (17,097) Net realized gains ........................ (142,337) (1,779,092) In excess of net realized gains ........... -- (319,338) Return of capital ......................... (47,470) (111,506) ----------- ----------- Net decrease in net assets from distributions ........................... (293,636) (2,782,400) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 7,236,808 13,324,865 Cost of shares redeemed ................... (8,159,114) (3,575,197) ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . (922,306) 9,749,668 ----------- ----------- Total increase/(decrease) in net assets ... (1,071,882) 9,335,855 NET ASSETS: Beginning of period ....................... 31,685,158 22,349,303 ----------- ----------- End of period ............................. $30,613,276 $31,685,158 =========== =========== Capital Share Transactions: Shares sold ............................... 300,000 550,000 Shares redeemed ........................... (350,000) (150,000) ----------- ----------- Net increase/(decrease) in shares ......... (50,000) 400,000 =========== ===========
See accompanying notes to financial statements. 70-71 STATEMENTS OF CHANGES IN NET ASSETS (concluded) iSHARES, INC. ================================================================================
iSHARES MSCI iSHARES MSCI iSHARES MSCI SINGAPORE (FREE) SOUTH KOREA SPAIN INDEX FUND INDEX FUND INDEX FUND --------------------------- -------------- ------------------------- For the For the For the For the For the year year period year year ended ended 05/10/00*- ended ended 08/31/00 08/31/99 08/31/00 08/31/00 08/31/99 ----------- ----------- ----------- ----------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 1,693,940 $ 718,400 $ (34,787) $ 234,512 $ 106,851 Net realized gain/(loss) on investments and foreign currency related transactions ... 19,150,160 5,548,829 (843,695) 790,049 2,903,295 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (22,721,621) 62,353,180 (679,099) (2,294,792) (665,542) ------------ ------------ ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... (1,877,521) 68,620,409 (1,557,581) (1,270,231) 2,344,604 ------------ ------------ ----------- ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (1,437,747) (718,400) -- (230,377) (106,851) In excess of net investment income ........ -- (901,448) -- -- (25,193) Net realized gains ........................ (1,615,815) -- -- (790,049) (1,779,176) In excess of net realized gains ........... -- -- -- (523,630) -- Return of capital ......................... (274,616) (151,866) -- (21,987) (52,032) ------------ ------------ ----------- ----------- ----------- Net decrease in net assets from distributions ........................... (3,328,178) (1,771,714) -- (1,566,043) (1,963,252) ------------ ------------ ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 1,597,919 25,731,770 19,717,804 6,280,595 15,098,787 Cost of shares redeemed ................... (21,110,456) (26,391,185) (4,538,650) -- (4,040,953) ------------ ------------ ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . (19,512,537) (659,415) 15,179,154 6,280,595 11,057,834 ------------ ------------ ----------- ----------- ----------- Total increase/(decrease) in net assets ... (24,718,236) 66,189,280 13,621,573 3,444,321 11,439,186 NET ASSETS: Beginning of period ....................... 113,437,398 47,248,118 -- 36,468,540 25,029,354 ------------ ------------ ----------- ----------- ----------- End of period ............................. $ 88,719,162 $113,437,398 $13,621,573 $39,912,861 $36,468,540 ============ ============ =========== =========== =========== Capital Share Transactions: Shares sold ............................... 200,000 3,800,000 1,000,000 225,000 525,000 Shares redeemed ........................... (2,800,000) (3,800,000) (250,000) -- (150,000) ------------ ------------ ----------- ----------- ----------- Net increase/(decrease) in shares ......... (2,600,000) -- 750,000 225,000 375,000 ============ ============ =========== =========== ===========
iSHARES MSCI iSHARES MSCI iSHARES MSCI SWEDEN SWITZERLAND TAIWAN INDEX FUND INDEX FUND INDEX FUND ---------------------------- --------------------------- ------------- For the For the For the For the For the year year year year period ended ended ended ended 06/21/00*- 08/31/00 08/31/99 08/31/00 08/31/99 08/31/00 ----------- ----------- --------- ----------- ------------ OPERATIONS: Net investment income/(loss) .............. $ 114,164 $ 79,147 $ 93,151 $ 84,982 $ 826,900 Net realized gain/(loss) on investments and foreign currency related transactions ... 8,434,356 554,296 753,833 1,006,580 (1,139,281) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (2,132,301) 3,068,134 (303,839) (1,316,317) (3,889,212) ----------- ----------- ----------- ----------- ------------ Net increase/(decrease) in net assets resulting from operations ............... 6,416,219 3,701,577 543,145 (224,755) (4,201,593) ----------- ----------- ----------- ----------- ------------ DISTRIBUTIONS: Net investment income ..................... (114,164) (79,147) (93,151) (84,982) (826,900) In excess of net investment income ........ (17,345) (9,823) (17,598) (90,051) -- Net realized gains ........................ (5,788,656) (549,798) (318,982) (415,196) -- In excess of net realized gains ........... (127,174) (11,025) -- (360,924) (258,316) Return of capital ......................... (42,411) (11,369) (22,376) (27,488) (1,144,284) ----------- ----------- ----------- ----------- ------------ Net decrease in net assets from distributions ........................... (6,089,750) (661,162) (452,107) (978,641) (2,229,500) ----------- ----------- ----------- ----------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 9,668,394 3,202,043 11,887,494 18,201,550 62,919,368 Cost of shares redeemed ................... (6,254,326) -- (5,792,803) (7,661,744) (13,821,000) ----------- ----------- ----------- ----------- ------------ Net increase/(decrease) in net assets derived from capital share transactions . 3,414,068 3,202,043 6,094,691 10,539,806 49,098,368 ----------- ----------- ----------- ----------- ------------ Total increase/(decrease) in net assets ... 3,740,537 6,242,458 6,185,729 9,336,410 42,667,275 NET ASSETS: Beginning of period ....................... 20,033,779 13,791,321 38,499,389 29,162,979 -- ----------- ----------- ----------- ----------- ------------ End of period ............................. $23,774,316 $20,033,779 $44,685,118 $38,499,389 $ 42,667,275 =========== =========== =========== =========== ============ Capital Share Transactions: Shares sold ............................... 300,000 150,000 750,000 1,125,000 3,350,000 Shares redeemed ........................... (225,000) -- (375,000) (500,000) (750,000) ----------- ----------- ----------- ----------- ------------ Net increase/(decrease) in shares ......... 75,000 150,000 375,000 625,000 2,600,000 =========== =========== =========== =========== ============
iSHARES MSCI UNITED KINGDOM INDEX FUND ----------------------------- For the For the year year ended ended 08/31/00 08/31/99 -------------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 1,816,179 $ 1,966,524 Net realized gain/(loss) on investments and foreign currency related transactions ... 8,774,074 6,660,234 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (14,882,373) 1,407,869 ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (4,292,120) 10,034,627 ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (1,816,179) (1,966,524) In excess of net investment income ........ (169,250) (30,855) Net realized gains ........................ (5,836,100) (3,268,152) In excess of net realized gains ........... (1,530,441) (100,408) Return of capital ......................... (362,073) (479,427) ------------ ------------ Net decrease in net assets from distributions ........................... (9,714,043) (5,845,366) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 63,726,690 57,840,429 Cost of shares redeemed ................... (16,319,883) (11,473,166) ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 47,406,807 46,367,263 ------------ ------------ Total increase/(decrease) in net assets ... 33,400,644 50,556,524 NET ASSETS: Beginning of period ....................... 113,402,057 62,845,533 ------------ ------------ End of period ............................. $146,802,701 $113,402,057 ============ ============ Capital Share Transactions: Shares sold ............................... 3,200,000 2,800,000 Shares redeemed ........................... (800,000) (600,000) ------------ ------------ Net increase/(decrease) in shares ......... 2,400,000 2,200,000 ============ ============ * Commencement of operations.
See accompanying notes to financial statements. 72-73 AUGUST 31, 2000 FINANCIAL HIGHLIGHTS iSHARES, INC. ================================================================================ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI AUSTRALIA INDEX FUND ------------------------------------------------------ For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ----------- -------- ---------- --------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................................... $ 9.99 $ 7.75 $ 10.35 $ 10.15 $ 9.95(1) ------- ------- ------- ------- ------- Net investment income/(loss) (+) ....................................... 0.23 0.20 0.23 0.17 0.10 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ........................ (0.04) 2.29 (2.60) 0.47 0.29 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations .... 0.19 2.49 (2.37) 0.64 0.39 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ................................... (0.22) (0.19) (0.23) (0.16) (0.08) Dividends in excess of net investment income ........................... (0.01) (0.00)** (0.00)** (0.04) (0.05) Distributions from net realized gains .................................. -- -- -- (0.04) (0.02) Distributions in excess of net realized gains .......................... -- -- -- -- -- Return of capital ...................................................... (0.02) (0.06) -- (0.20) (0.04) ------- ------- ------- ------- ------- Total dividends and distributions .................................. (0.25) (0.25) (0.23) (0.44) (0.19) ------- ------- ------- ------- ------- Net asset value, end of period ......................................... $ 9.93 $ 9.99 $ 7.75 $ 10.35 $ 10.15 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) .............................................. 1.84% 32.09% (23.11)% 6.23% 3.88%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................................... $61,574 $53,957 $34,099 $41,406 $12,177 Ratios of expenses to average net assets (5) ........................... 0.95% 1.00% 1.05% 1.33% 1.59%(3) Ratios of net investment income/(loss) to average net assets (5) ....... 2.22% 2.03% 2.38% 1.57% 2.18%(3) Portfolio turnover rate (6) ............................................ 36.20% 13.83% 1.49% 5.30% 8.84%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.33% 1.60%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ......................... -- -- -- 1.57% 2.17%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI AUSTRIA INDEX FUND ------------------------------------------------------ For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 --------- ---------- ---------- --------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................................... $ 9.13 $ 10.11 $10.51 $10.40 $ 10.91(1) ------- ------- ------ ------ ------- Net investment income/(loss) (+) ....................................... 0.04 0.10 0.06 (0.02) 0.04 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ........................ (1.46) (0.98) 0.20 0.13 (0.41) ------- ------- ------ ------ ------- Net increase/(decrease) in net assets resulting from operations .... (1.42) (0.88) 0.26 0.11 (0.37) ------- ------- ------ ------ ------- LESS DISTRIBUTIONS Dividends from net investment income ................................... (0.04) (0.07) (0.04) -- (0.02) Dividends in excess of net investment income ........................... (0.00)** (0.01) (0.01) -- (0.01) Distributions from net realized gains .................................. -- -- (0.61) -- (0.03) Distributions in excess of net realized gains .......................... -- -- (0.00)** -- -- Return of capital ...................................................... -- (0.02) (0.00)** -- (0.08) ------- ------- ------ ------ ------- Total dividends and distributions .................................. (0.04) (0.10) (0.66) -- (0.14) ------- ------- ------ ------ ------- Net asset value, end of period ......................................... $ 7.67 $ 9.13 $10.11 $10.51 $ 10.40 ======= ======= ====== ====== ======= TOTAL INVESTMENT RETURN (2) .............................................. (15.51)% (8.69)% 2.16% 1.06% (3.39)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................................... $10,741 $12,776 $8,085 $4,205 $13,520 Ratios of expenses to average net assets (5) ........................... 1.16% 1.31% 1.41% 1.68% 1.56%(3) Ratios of net investment income/(loss) to average net assets (5) ....... 0.51% 1.04% 0.51% (0.22)% 0.87%(3) Portfolio turnover rate (6) ............................................ 33.65% 49.95% 36.14% 28.47% 9.60%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements 1.20% -- -- 1.69% 1.57%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ......................... 0.47% -- -- (0.22)% 0.86%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI BELGIUM INDEX FUND ------------------------------------------------------ For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ---------- -------- --------- ---------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................................... $ 16.07 $ 18.40 $ 15.64 $ 14.99 $14.92(1) ------- ------- ------- ------- ------ Net investment income/(loss) (+) ....................................... 0.19 0.08 0.24 0.77 0.40 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ........................ (2.67) (0.30) 6.09 0.62 0.36 ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations .... (2.48) (0.22) 6.33 1.39 0.76 ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income ................................... (0.17) -- (0.27) (0.33) (0.54) Dividends in excess of net investment income ........................... (0.19) (0.01) (1.21) (0.28) (0.09) Distributions from net realized gains .................................. -- (1.19) (1.99) (0.12) (0.06) Distributions in excess of net realized gains .......................... -- -- -- -- -- Return of capital ...................................................... -- (0.91) (0.10) (0.01) -- ------- ------- ------- ------- ------ Total dividends and distributions .................................. (0.36) (2.11) (3.57) (0.74) (0.69) ------- ------- ------- ------- ------ Net asset value, end of period ......................................... $ 13.23 $ 16.07 $ 18.40 $ 15.64 $14.99 ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) .............................................. (15.50)% (1.00)% 39.42% 9.26% 5.01%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................................... $13,230 $13,496 $25,765 $32,528 $1,800 Ratios of expenses to average net assets (5) ........................... 1.13% 1.24% 1.04% 1.24% 2.29%(3) Ratios of net investment income/(loss) to average net assets (5) ....... 1.36% 0.45% 1.28% 4.63% 5.67%(3) Portfolio turnover rate (6) ............................................ 53.27% 62.99% 50.46% 16.83% 6.25%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.24% 2.30%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ......................... -- -- -- 4.63% 5.66%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI BRAZIL (FREE) INDEX FUND ------------ For the period 07/11/00*- 08/31/00 ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................................... $ 20.22(1) ------- Net investment income/(loss) (+) ....................................... 0.02 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ........................ (0.63) ------- Net increase/(decrease) in net assets resulting from operations .... (0.61) ------- LESS DISTRIBUTIONS Dividends from net investment income ................................... (0.02) Dividends in excess of net investment income ........................... -- Distributions from net realized gains .................................. -- Distributions in excess of net realized gains .......................... (0.34) Return of capital ...................................................... -- ------- Total dividends and distributions .................................. (0.36) ------- Net asset value, end of period ......................................... $ 19.25 ======= TOTAL INVESTMENT RETURN (2) .............................................. (2.97)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................................... $18,283 Ratios of expenses to average net assets (5) ........................... 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) ....... 0.77%(3) Portfolio turnover rate (6) ............................................ 63.61%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements 1.40%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ......................... 0.37%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 74-75 AUGUST 31, 2000 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. ================================================================================ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI CANADA INDEX FUND ----------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ----------- -------- -------- ---------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ....................................... $ 13.22 $ 9.90 $ 13.43 $ 10.60 $ 10.17(1) ------- ------ ------- ------- ------- Net investment income/(loss) (+) ........................................... 0.70 0.07 0.07 0.05 0.04 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............................ 8.08 3.87 (2.89) 2.97 0.43 ------- ------ ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ........ 8.78 3.94 (2.82) 3.02 0.47 ------- ------ ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ....................................... (0.52) (0.08) (0.13) (0.05) (0.03) Dividends in excess of net investment income ............................... (0.03) (0.01) (0.00)** (0.00)** (0.01) Distributions from net realized gains ...................................... (4.08) (0.53) (0.58) (0.14) -- Distributions in excess of net realized gains .............................. (0.31) -- -- -- (0.00)** Return of capital .......................................................... (0.12) -- -- -- (0.00)** ------- ------ ------- ------- ------- Total dividends and distributions ...................................... (5.06) (0.62) (0.71) (0.19) (0.04) ------- ------ ------- ------- ------- Net asset value, end of period ............................................. $ 16.94 $13.22 $ 9.90 $ 13.43 $ 10.60 ======= ====== ======= ======= ======= TOTAL INVESTMENT RETURN (2) .................................................. 67.21% 39.71% (21.69)% 28.50% 4.63%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....................................... $22,028 $9,253 $ 6,932 $24,168 $13,776 Ratios of expenses to average net assets (5) ............................... 1.17% 1.23% 1.14% 1.35% 1.44%(3) Ratios of net investment income/(loss) to average net assets (5) ........... 4.07% 0.53% 0.46% 0.39% 0.79%(3) Portfolio turnover rate (6) ................................................ 64.03% 11.66% 3.70% 11.02% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements . 1.19% -- -- 1.36% 1.45%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ............................. 4.05% -- -- 0.39% 0.78%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s)
iSHARES MSCI EMU INDEX FUND ---------- For the period 07/26/00*- 08/31/00 ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ....................................... $ 80.72(1) ------- Net investment income/(loss) (+) ........................................... (0.00)** Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............................ (4.70) ------- Net increase/(decrease) in net assets resulting from operations ........ (4.70) ------- LESS DISTRIBUTIONS Dividends from net investment income ....................................... -- Dividends in excess of net investment income ............................... -- Distributions from net realized gains ...................................... -- Distributions in excess of net realized gains .............................. -- Return of capital .......................................................... -- ------- Total dividends and distributions ...................................... -- ------- Net asset value, end of period ............................................. $ 76.02 ======= TOTAL INVESTMENT RETURN (2) .................................................. (5.82)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....................................... $41,811 Ratios of expenses to average net assets (5) ............................... 0.84%(3) Ratios of net investment income/(loss) to average net assets (5) ........... 0.03%(3) Portfolio turnover rate (6) ................................................ 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements . 1.57%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ............................. (0.70)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s)
iSHARES MSCI FRANCE INDEX FUND ---------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 8/31/98 08/31/97 08/31/96 -------- ------------------ -------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ....................................... $ 22.90 $ 19.13 $ 14.50 $ 12.73 $ 12.42(1) ------- ------- ------- ------- ------- Net investment income/(loss) (+) ........................................... 0.10 0.14 0.30 0.17 0.17 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............................ 5.21 3.88 4.76 1.95 0.45 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ........ 5.31 4.02 5.06 2.12 0.62 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ....................................... (0.09) (0.10) (0.19) (0.15) (0.09) Dividends in excess of net investment income ............................... (0.02) (0.02) (0.03) -- (0.01) Distributions from net realized gains ...................................... (1.64) (0.05) (0.13) (0.20) (0.00)** Distributions in excess of net realized gains .............................. (0.03) -- (0.01) -- -- Return of capital .......................................................... (0.02) (0.08) (0.07) -- (0.21) ------- ------- ------- ------- ------- Total dividends and distributions ...................................... (1.80) (0.25) (0.43) (0.35) (0.31) ------- ------- ------- ------- ------- Net asset value, end of period ............................................. $ 26.41 $ 22.90 $ 19.13 $ 14.50 $ 12.73 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) .................................................. 23.45% 21.01% 34.77% 16.60% 4.95%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....................................... $95,116 $77,885 $45,922 $14,519 $22,930 Ratios of expenses to average net assets (5) ............................... 0.96% 1.06% 1.18% 1.52% 1.84%(3) Ratios of net investment income/(loss) to average net assets (5) ........... 0.36% 0.67% 1.58% 1.17% 2.72%(3) Portfolio turnover rate (6) ................................................ 17.43% 0.00% 5.65% 7.13% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements . -- -- -- 1.52% 1.85%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ............................. -- -- -- 1.17% 2.71%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s)
iSHARES MSCI GERMANY INDEX FUND ---------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 --------- --------- --------- --------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ....................................... $ 21.17 $ 20.25 $ 16.31 $ 13.64 $ 13.23(1) -------- -------- ------- ------- ------- Net investment income/(loss) (+) ........................................... 0.18 0.12 0.29 0.03 0.06 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............................ 1.64 1.31 3.92 2.77 0.47 -------- -------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ........ 1.82 1.43 4.21 2.80 0.53 -------- -------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ....................................... (0.16) (0.10) (0.17) (0.03) (0.03) Dividends in excess of net investment income ............................... (0.01) (0.01) (0.01) (0.01) (0.01) Distributions from net realized gains ...................................... (2.00) (0.31) (0.01) (0.07) -- Distributions in excess of net realized gains .............................. (0.32) (0.08) (0.00)** -- (0.01) Return of capital .......................................................... (0.04) (0.01) (0.08) (0.02) (0.07) -------- -------- ------- ------- ------- Total dividends and distributions ...................................... (2.53) (0.51) (0.27) (0.13) (0.12) -------- -------- ------- ------- ------- Net asset value, end of period ............................................. $ 20.46 $ 21.17 $ 20.25 $ 16.31 $ 13.64 ======== ======== ======= ======= ======= TOTAL INVESTMENT RETURN (2) .................................................. 8.44% 7.04% 25.69% 20.51% 4.00%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....................................... $153,487 $101,645 $72,934 $24,486 $28,664 Ratios of expenses to average net assets (5) ............................... 0.94% 1.00% 1.08% 1.37% 1.68%(3) Ratios of net investment income/(loss) to average net assets (5) ........... 0.73% 0.57% 1.43% 0.23% 1.00%(3) Portfolio turnover rate (6) ................................................ 56.38% 13.67% 0.64% 9.04% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements . -- -- -- 1.37% 1.69%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ............................. -- -- -- 0.22% 0.99%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s)
See accompanying notes to financial statements. 76-77 AUGUST 31, 2000 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. ================================================================================ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI HONG KONG INDEX FUND ----------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 --------- -------- --------- -------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 11.83 $ 6.41 $ 14.73 $ 13.05 $12.83(1) ------- ------- ------- ------- ------ Net investment income/(loss) (+) .................................. 0.33 0.29 0.35 0.26 0.15 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 1.42 5.49 (8.27) 2.12 0.27 ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations 1.75 5.78 (7.92) 2.38 0.42 ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.32) (0.31) (0.28) (0.21) (0.13) Dividends in excess of net investment income ...................... -- (0.05) (0.00)** (0.01) (0.02) Distributions from net realized gains ............................. -- -- -- (0.34) (0.01) Distributions in excess of net realized gains ..................... -- -- -- (0.00)** -- Return of capital ................................................. (0.02) -- (0.12) (0.14) (0.04) ------- ------- ------- ------- ------ Total dividends and distributions ............................. (0.34) (0.36) (0.40) (0.70) (0.20) ------- ------- ------- ------- ------ Net asset value, end of period .................................... $ 13.24 $ 11.83 $ 6.41 $ 14.73 $13.05 ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ......................................... 14.73% 90.51% (54.22)% 17.80% 3.22%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $79,479 $77,200 $49,973 $25,417 $7,845 Ratios of expenses to average net assets (5) ...................... 0.94% 1.01% 1.09% 1.43% 1.52%(3) Ratios of net investment income/(loss) to average net assets (5) .. 2.57% 2.84% 3.76% 1.71% 2.37%(3) Portfolio turnover rate (6) ....................................... 21.30% 42.89% 21.50% 22.90% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.43% 1.53%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- 1.71% 2.36%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI ITALY INDEX FUND ----------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 --------- -------- --------- ---------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 21.56 $ 22.89 $ 16.66 $ 13.79 $ 13.62(1) ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.39 0.17 0.18 0.12 0.25 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 2.51 1.05 7.94 3.10 0.31 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations 2.90 1.22 8.12 3.22 0.56 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.12) (0.06) (0.18) (0.11) (0.14) Dividends in excess of net investment income ...................... -- -- (1.02) (0.24) (0.03) Distributions from net realized gains ............................. (1.69) (2.24) (0.69) -- (0.14) Distributions in excess of net realized gains ..................... (0.11) -- -- -- -- Return of capital ................................................. (0.31) (0.25) -- -- (0.08) ------- ------- ------- ------- ------- Total dividends and distributions ............................. (2.23) (2.55) (1.89) (0.35) (0.39) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 22.23 $ 21.56 $ 22.89 $ 16.66 $ 13.79 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... 13.35% 5.14% 47.66% 23.37% 4.11%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $50,008 $58,224 $58,368 $32,495 $35,170 Ratios of expenses to average net assets (5) ...................... 0.99% 1.03% 1.02% 1.33% 1.43%(3) Ratios of net investment income/(loss) to average net assets (5) .. 1.61% 0.70% 0.76% 0.76% 3.69%(3) Portfolio turnover rate (6) ....................................... 39.85% 7.89% 8.16% 13.70% 19.80%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.33% 1.44%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- 0.76% 3.68%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI JAPAN INDEX FUND ----------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 -------- -------- -------- -------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 13.22 $ 8.39 $ 12.61 $ 14.33 $ 14.79(1) -------- -------- -------- -------- -------- Net investment income/(loss) (+) .................................. (0.05) (0.03) (0.02) (0.06) (0.07) Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 1.21 4.91 (4.19) (1.65) (0.39) -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations 1.16 4.88 (4.21) (1.71) (0.46) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income .............................. -- -- -- -- -- Dividends in excess of net investment income ...................... (0.00)** (0.04) -- -- -- Distributions from net realized gains ............................. (0.53) -- (0.00)** -- -- Distributions in excess of net realized gains ..................... -- -- -- (0.01) -- Return of capital ................................................. (0.03) (0.01) (0.01) -- -- -------- -------- -------- -------- -------- Total dividends and distributions ............................. (0.56) (0.05) (0.01) (0.01) -- -------- -------- -------- -------- -------- Net asset value, end of period .................................... $ 13.82 $ 13.22 $ 8.39 $ 12.61 $ 14.33 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ......................................... 8.75% 58.14% (33.38)% (11.97)% (3.11)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $787,790 $713,653 $201,485 $158,957 $103,164 Ratios of expenses to average net assets (5) ...................... 0.88% 0.94% 1.04% 1.19% 1.37%(3) Ratios of net investment income/(loss) to average net assets (5) .. (0.32)% (0.27)% (0.21)% (0.48)% (1.01)%(3) Portfolio turnover rate (6) ....................................... 21.93% 0.00% 0.00% 12.90% 21.54%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.19% 1.38%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- (0.48)% (1.02)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 78-79 AUGUST 31, 2000 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. ================================================================================ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI MALAYSIA (FREE) INDEX FUND ---------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ---------- -------- --------- --------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 5.59 $ 2.11 $ 8.23 $ 13.80 $13.24(1) ------- ------- ------- ------- ------ Net investment income/(loss) (+) .................................. 0.05 0.01 0.06 0.01 (0.02) Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 0.37 3.67 (6.10) (5.55) 0.59 ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations 0.42 3.68 (6.04) (5.54) 0.57 ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.05) (0.01) (0.05) (0.00)** -- Dividends in excess of net investment income ...................... (0.00)** -- -- (0.01) -- Distributions from net realized gains ............................. -- -- -- -- -- Distributions in excess of net realized gains ..................... -- -- -- -- -- Return of capital ................................................. (0.00)** (0.19) (0.03) (0.02) (0.01) ------- ------- ------- ------- ------ Total dividends and distributions ............................. (0.05) (0.20) (0.08) (0.03) (0.01) ------- ------- ------- ------- ------ Net asset value, end of period .................................. $ 5.96 $ 5.59 $ 2.11 $ 8.23 $13.80 ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ......................................... 7.57% 185.81% (73.57)% (40.20)% 4.28%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $99,206 $95,251 $35,867 $12,339 $9,318 Ratios of expenses to average net assets (5) ...................... 0.96% 1.43% 1.09% 1.46% 1.58%(3) Ratios of net investment income/(loss) to average net assets (5) .. 0.81% 0.33% 1.40% 0.04% (0.35)%(3) Portfolio turnover rate (6) ....................................... 17.56% 7.24% 2.11% 0.00% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.47% 1.59%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- 0.04% (0.36)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI MEXICO (FREE) INDEX FUND ------------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ----------- -------- --------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 13.39 $ 8.11 $15.11 $ 11.52 $ 9.95(1) ------- ------- ------ ------- ------ Net investment income/(loss) (+) .................................. 0.06 0.06 0.09 0.02 0.00** Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 3.69 5.36 (6.71) 4.07 1.59 ------- ------- ------ ------- ------ Net increase/(decrease) in net assets resulting from operations 3.75 5.42 (6.62) 4.09 1.59 ------- ------- ------ ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. -- (0.06) (0.09) (0.01) -- Dividends in excess of net investment income ...................... -- (0.01) -- (0.01) (0.01) Distributions from net realized gains ............................. (0.42) -- (0.29) (0.44) -- Distributions in excess of net realized gains ..................... -- (0.01) -- -- -- Return of capital ................................................. -- (0.06) -- (0.04) (0.01) ------- ------- ------ ------- ------ Total dividends and distributions ............................. (0.42) (0.14) (0.38) (0.50) (0.02) ------- ------- ------ ------- ------ Net asset value, end of period .................................. $ 16.72 $ 13.39 $ 8.11 $ 15.11 $11.52 ======= ======= ====== ======= ====== TOTAL INVESTMENT RETURN (2) ......................................... 28.20% 66.92% (44.18)% 35.21% 15.93%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $40,127 $21,430 $7,296 $16,627 $5,759 Ratios of expenses to average net assets (5) ...................... 1.04% 1.26% 1.34% 1.63% 1.75%(3) Ratios of net investment income/(loss) to average net assets (5) .. 0.35% 0.52% 0.60% 0.14% 0.01%(3) Portfolio turnover rate (6) ....................................... 23.97% 18.36% 14.05% 22.80% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements 1.04% -- -- 1.63% 1.76%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... 0.35% -- -- 0.13% 0.00%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI NETHERLANDS INDEX FUND ----------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ---------- ---------- --------- -------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 23.45 $ 23.50 $ 21.42 $17.36 $15.91(1) ------- ------- ------- ------ ------ Net investment income/(loss) (+) .................................. 0.13 0.53 0.25 0.11 0.24 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 0.18 1.60 3.53 4.79 1.54 ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations 0.31 2.13 3.78 4.90 1.78 ------- ------- ------- ------ ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.08) (0.43) (0.16) (0.10) (0.14) Dividends in excess of net investment income ...................... -- (0.01) -- (0.01) (0.01) Distributions from net realized gains ............................. (0.11) (1.42) (1.47) (0.71) (0.08) Distributions in excess of net realized gains ..................... -- (0.24) -- -- (0.01) Return of capital ................................................. (0.04) (0.08) (0.07) (0.02) (0.09) ------- ------- ------- ------ ------ Total dividends and distributions ............................. (0.23) (2.18) (1.70) (0.84) (0.33) ------- ------- ------- ------ ------ Net asset value, end of period .................................. $ 23.53 $ 23.45 $ 23.50 $21.42 $17.36 ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (2) ......................................... 1.28% 8.98% 17.41% 28.04% 11.19%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $30,613 $31,685 $22,349 $9,661 $6,962 Ratios of expenses to average net assets (5) ...................... 1.03% 1.07% 1.12% 1.46% 1.63%(3) Ratios of net investment income/(loss) to average net assets (5) .. 0.53% 2.20% 1.00% 0.54% 2.93%(3) Portfolio turnover rate (6) ....................................... 21.64% 32.13% 15.81% 12.68% 4.32%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.46% 1.64%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- 0.53% 2.92%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 80-81 AUGUST 31, 2000 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. ================================================================================ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI SINGAPORE (FREE) INDEX FUND -------------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ----------- --------- --------- ---------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 7.93 $ 3.30 $ 8.66 $ 11.38 $12.24(1) ------- -------- ------- ------- ------ Net investment income/(loss) (+) .................................. 0.13 0.05 0.07 (0.00)** 0.04 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (0.21) 4.70 (5.37) (2.67) (0.86) ------- -------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations (0.08) 4.75 (5.30) (2.67) (0.82) ------- -------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.11) (0.05) (0.04) (0.00)** (0.03) Dividends in excess of net investment income ...................... -- (0.06) (0.01) (0.01) (0.01) Distributions from net realized gains ............................. (0.14) -- -- (0.02) -- Distributions in excess of net realized gains ..................... -- -- -- -- -- Return of capital ................................................. (0.02) (0.01) (0.01) (0.02) -- ------- -------- ------- ------- ------ Total dividends and distributions ............................. (0.27) (0.12) (0.06) (0.05) (0.04) ------- -------- ------- ------- ------ Net asset value, end of period .................................... $ 7.58 $ 7.93 $ 3.30 $ 8.66 $11.38 ======= ======== ======= ======= ====== TOTAL INVESTMENT RETURN (2) ......................................... (1.29)% 144.52% (61.29)% (23.48)% (6.73)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $88,719 $113,438 $47,248 $14,722 $9,107 Ratios of expenses to average net assets (5) ...................... 0.94% 0.97% 1.08% 1.43% 1.56%(3) Ratios of net investment income/(loss) to average net assets (5) .. 1.60% 0.76% 1.17% 0.03% 0.69%(3) Portfolio turnover rate (6) ....................................... 52.06% 25.31% 67.17% 13.40% 26.29%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.43% 1.57%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- 0.03% 0.68%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI SOUTH KOREA INDEX FUND ---------- For the period 05/10/00*- 08/31/00 ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 20.36(1) ------- Net investment income/(loss) (+) .................................. (0.04) Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (2.16) ------- Net increase/(decrease) in net assets resulting from operations (2.20) ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. -- Dividends in excess of net investment income ...................... -- Distributions from net realized gains ............................. -- Distributions in excess of net realized gains ..................... -- Return of capital ................................................. -- ------- Total dividends and distributions ............................. -- ------- Net asset value, end of period .................................... $ 18.16 ======= TOTAL INVESTMENT RETURN (2) ......................................... (10.81)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $13,622 Ratios of expenses to average net assets (5) ...................... 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) .. (0.63)%(3) Portfolio turnover rate (6) ....................................... 55.13%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements 1.38%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... (1.02)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI SPAIN INDEX FUND ---------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 -------- -------- ---------- --------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 25.59 $ 23.84 $ 18.49 $14.09 $13.28(1) ------- ------- ------- ------ ------ Net investment income/(loss) (+) .................................. 0.15 0.09 0.16 0.19 0.14 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (0.60) 3.14 5.94 5.33 0.98 ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations (0.45) 3.23 6.10 5.52 1.12 ------- ------- ------- ------ ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.14) (0.07) (0.12) (0.12) (0.18) Dividends in excess of net investment income ...................... -- (0.02) (0.02) (0.05) -- Distributions from net realized gains ............................. (0.48) (1.35) (0.55) (0.86) (0.13) Distributions in excess of net realized gains ..................... (0.32) -- -- -- -- Return of capital ................................................. (0.01) (0.04) (0.06) (0.09) -- ------- ------- ------- ------ ------ Total dividends and distributions ............................. (0.95) (1.48) (0.75) (1.12) (0.31) ------- ------- ------- ------ ------ Net asset value, end of period .................................... $ 24.19 $ 25.59 $ 23.84 $18.49 $14.09 ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (2) ......................................... (1.81)% 13.39% 32.58% 39.15% 8.45%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $39,913 $36,469 $25,029 $8,321 $4,227 Ratios of expenses to average net assets (5) ...................... 0.99% 1.04% 1.11% 1.67% 1.76%(3) Ratios of net investment income/(loss) to average net assets (5) .. 0.57% 0.31% 0.61% 1.04% 2.04%(3) Portfolio turnover rate (6) ....................................... 39.42% 16.58% 9.10% 19.21% 4.73%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.67% 1.77%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- 1.04% 2.03%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI SWEDEN INDEX FUND ---------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ---------- --------- -------- --------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 22.26 $ 18.39 $ 18.32 $14.67 $13.22(1) ------- ------- ------- ------ ------ Net investment income/(loss) (+) .................................. 0.14 0.10 0.10 (0.03) 0.20 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... 8.38 4.52 0.95 4.45 1.67 ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations 8.52 4.62 1.05 4.42 1.87 ------- ------- ------- ------ ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.12) (0.09) (0.08) -- (0.23) Dividends in excess of net investment income ...................... (0.02) (0.01) (0.01) -- (0.07) Distributions from net realized gains ............................. (6.09) (0.62) (0.86) (0.77) (0.12) Distributions in excess of net realized gains ..................... (0.13) (0.01) (0.01) -- -- Return of capital ................................................. (0.04) (0.02) (0.02) -- -- ------- ------- ------- ------ ------ Total dividends and distributions ............................. (6.40) (0.75) (0.98) (0.77) (0.42) ------- ------- ------- ------ ------ Net asset value, end of period .................................... $ 24.38 $ 22.26 $ 18.39 $18.32 $14.67 ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (2) ......................................... 39.15% 25.09% 5.48% 30.10% 14.13%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $23,774 $20,034 $13,791 $8,243 $4,400 Ratios of expenses to average net assets (5) ...................... 1.03% 1.13% 1.17% 1.64% 1.75%(3) Ratios of net investment income/(loss) to average net assets (5) .. 0.46% 0.49% 0.48% (0.19)% 3.05%(3) Portfolio turnover rate (6) ....................................... 90.13% 33.44% 10.88% 13.71% 5.87%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.64% 1.76%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- (0.19)% 3.04%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 82-83 AUGUST 31, 2000 FINANCIAL HIGHLIGHTS (concluded) iSHARES, INC. ================================================================================ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI SWITZERLAND INDEX FUND ------------------------------------------------------ For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ----------- -------- -------- --------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 15.39 $ 15.55 $ 13.79 $ 12.29 $ 12.07(1) ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.04 0.04 (0.00)** (0.04) 0.08 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 0.27 0.19 3.01 2.11 0.24 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations 0.31 0.23 3.01 2.07 0.32 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.03) (0.03) -- -- (0.10) Dividends in excess of net investment income ...................... (0.01) (0.04) (0.01) -- -- Distributions from net realized gains ............................. (0.11) (0.17) (1.21) (0.57) -- Distributions in excess of net realized gains ..................... -- (0.14) -- -- -- Return of capital ................................................. (0.01) (0.01) (0.03) (0.00)** -- ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.16) (0.39) (1.25) (0.57) (0.10) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 15.54 $ 15.39 $ 15.55 $ 13.79 $ 12.29 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... 1.96% 1.47% 21.24% 16.69% 2.60%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $44,685 $38,499 $29,163 $13,805 $ 6,158 Ratios of expenses to average net assets (5) ...................... 1.01% 1.09% 1.15% 1.52% 1.82%(3) Ratios of net investment income/(loss) to average net assets (5) .. 0.23% 0.24% (0.03)% (0.29)% 1.39%(3) Portfolio turnover rate (6) ....................................... 34.87% 35.10% 43.09% 48.05% 17.06%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.53% 1.83%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- (0.29)% 1.38%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI TAIWAN INDEX FUND ------------ For the period 06/21/00*- 08/31/00 ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 19.59(1) ------- Net investment income/(loss) (+) .................................. 0.47 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... (2.79) ------- Net increase/(decrease) in net assets resulting from operations (2.32) ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.32) Dividends in excess of net investment income ...................... -- Distributions from net realized gains ............................. -- Distributions in excess of net realized gains ..................... (0.10) Return of capital ................................................. (0.44) ------- Total dividends and distributions ............................. (0.86) ------- Net asset value, end of period .................................... $ 16.41 ======= TOTAL INVESTMENT RETURN (2) ......................................... (12.10)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $42,667 Ratios of expenses to average net assets (5) ...................... 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) .. 13.31%(3) Portfolio turnover rate (6) ....................................... 51.68%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements 1.60%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... 12.70%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI UNITED KINGDOM INDEX FUND ---------------------------------------------------------- For the For the For the For the For the year year year year period ended ended ended ended 03/12/96*- 08/31/00 08/31/99 08/31/98 08/31/97 08/31/96 ------------ -------- ---------- ---------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 20.25 $ 18.48 $ 16.50 $ 13.15 $ 12.14(1) ------- -------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.27 0.44 0.37 0.38 0.21 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... (0.85) 2.40 2.12 3.62 1.06 ------- -------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (0.58) 2.84 2.49 4.00 1.27 ------- -------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.23) (0.36) (0.29) (0.32) (0.20) Dividends in excess of net investment income ...................... (0.02) (0.01) (0.04) (0.06) (0.03) Distributions from net realized gains ............................. (0.84) (0.60) (0.11) (0.17) (0.00)** Distributions in excess of net realized gains ..................... (0.19) (0.02) -- -- -- Return of capital ................................................. (0.04) (0.08) (0.07) (0.10) (0.03) -------- -------- ------- ------- ------- Total dividends and distributions ............................. (1.32) (1.07) (0.51) (0.65) (0.26) -------- -------- ------- ------- ------- Net asset value, end of period .................................... $ 18.35 $ 20.25 $ 18.48 $ 16.50 $ 13.15 ======== ======== ======= ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (3.00)% 15.33% 14.98% 30.48% 10.41%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $146,803 $113,402 $62,846 $29,721 $15,790 Ratios of expenses to average net assets (5) ...................... 0.94% 0.97% 1.03% 1.38% 1.61%(3) Ratios of net investment income/(loss) to average net assets (5) .. 1.39% 2.16% 1.90% 2.47% 3.62%(3) Portfolio turnover rate (6) ....................................... 32.83% 13.24% 2.83% 1.84% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- -- -- 1.38% 1.62%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... -- -- -- 2.47% 3.61%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 84-85 NOTES TO FINANCIAL STATEMENTS ================================================================================ GENERAL iShares, Inc. (formerly WEBS Index Fund, Inc.) (the "Fund") or (the "iShares MSCI Index Fund") was incorporated under the laws of the State of Maryland on September 1, 1994, and seventeen of its portfolios commenced operations on March 12, 1996. The iShares MSCI South Korea Index Fund commenced operations on May 10, 2000; the iShares MSCI Taiwan Index Fund commenced operations on June 21, 2000; the iShares MSCI Brazil (Free) Index Fund commenced operations on July 11, 2000 and the iShares MSCI EMU Index Fund commenced operations on July 26, 2000. The Fund is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open end management investment company. The shares of common stock of each iShares MSCI Index Fund are traded on the American Stock Exchange, Inc. (the "AMEX") under the following symbols: iSHARES MSCI INDEX FUND SYMBOL ----------------------- ------ iShares MSCI Australia Index Fund EWA iShares MSCI Austria Index Fund EWO iShares MSCI Belgium Index Fund EWK iShares MSCI Brazil (Free) Index Fund EWZ iShares MSCI Canada Index Fund EWC iShares MSCI EMU Index Fund EZU iShares MSCI France Index Fund EWQ iShares MSCI Germany Index Fund EWG iShares MSCI Hong Kong Index Fund EWH iShares MSCI Italy Index Fund EWI iShares MSCI Japan Index Fund EWJ iShares MSCI Malaysia (Free) Index Fund EWM iShares MSCI Mexico (Free) Index Fund EWW iShares MSCI Netherlands Index Fund EWN iShares MSCI Singapore (Free) Index Fund EWS iShares MSCI South Korea Index Fund EWY iShares MSCI Spain Index Fund EWP iShares MSCI Sweden Index Fund EWD iShares MSCI Switzerland Index Fund EWL iShares MSCI Taiwan Index Fund EWT iShares MSCI United Kingdom Index Fund EWU On December 9, 1999, the following iShares MSCI Index Funds were established: iShares MSCI Brazil (Free) Index Fund; iShares MSCI EMU Index Fund; iShares MSCI Greece Index Fund; iShares MSCI Indonesia (Free) Index Fund; iShares MSCI South Korea Index Fund; iShares MSCI Portugal Index Fund; iShares MSCI South Africa Index Fund; iShares MSCI Taiwan Index Fund; iShares MSCI Thailand (Free) Index Fund; iShares MSCI Turkey Index Fund and iShares MSCI USA Index Fund. Only the iShares MSCI Brazil (Free) Index Fund, iShares MSCI EMU Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund have commenced operations. The investment objective of each of the iShares MSCI Index Funds is to seek to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the aggregate in particular markets, as represented by a particular equity securities index compiled by Morgan Stanley Capital International Inc. ("MSCI"). The MSCI Indices utilized by the Fund reflect the reinvestment of net dividends (except for the MSCI Indices utilized by the iShares MSCI Brazil (Free) Index Fund, iShares MSCI Malaysia (Free) Index Fund, iShares MSCI Mexico (Free) Index Fund, iShares MSCI South Korea Fund and iShares MSCI Taiwan Fund which reflect the reinvestment of gross dividends). Each iShares MSCI Index Fund utilizes a "passive" or indexing investment approach in an effort to approximate the investment performance of its benchmark index through the use of quantitative analytical procedures. The Fund issues and redeems shares of each iShares MSCI Index Fund only in aggregations of a specified number of shares (each, a "Creation Unit") at net asset value. Except when aggregated in Creation Units, iShares are not redeemable securities. The non-redeemable iShares trade on the AMEX during the day at prices that differ to some degree from their net asset value. The Depository Trust Company ("DTC") acts as the securities depository for the shares of the iShares MSCI Index Funds. iShares MSCI Index Funds are represented by global securities, registered in the name of DTC or its nominee and deposited with, or on behalf of, the DTC. 86 iSHARES, INC. ================================================================================ Each of the iShares MSCI Japan Index Fund, the iShares MSCI United Kingdom Index Fund and the iShares MSCI USA Index Fund is classified as a "diversified" investment company under the Act. Each of the other iShares MSCI Index Funds are classified as a "non-diversified" investment company under the Act. SIGNIFICANT ACCOUNTING POLICIES The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States which may require the use of management estimates and assumptions. Actual results could differ from those estimates. PORTFOLIO VALUATION Investments are stated at value. All securities for which market quotations are readily available are valued at (i) the last sales price prior to the time of determination, if there was a sale on the date of determination, (ii) at the mean between the last current bid and asked prices if there was no sales price on such date and bid and asked quotations are available, or (iii) at the bid price if there was no sales price on such date and only bid quotations are available. Securities that are traded over-the-counter are valued at the last quoted bid price. Securities for which market values are not readily available are carried at fair value as determined in good faith by Barclays Global Fund Advisors (the "Adviser") in accordance with procedures adopted by the Fund's Board of Directors. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis; dividend income is recorded on the ex-dividend date. TAX STATUS No provision is made for U.S. Federal income or excise taxes as it is each iShares MSCI Index Fund's intention to continue to qualify as a regulated investment company and to make the requisite distributions to its shareholders which will be sufficient to relieve it from all, or substantially all, Federal income and excise taxes. If so elected, each iShares MSCI Fund's realized net foreign exchange losses and realized net capital losses incurred since October 31, 1999 will be treated for tax purposes as arising on September 1, 2000. Each iShares MSCI Index Fund incurred and will elect to defer such losses as follows:
FOREIGN EXCHANGE NET REALIZED CAPITAL iSHARES MSCI INDEX FUND LOSSES LOSSES -------------------------- ----------------- -------------------- iShares MSCI Australia Index Fund $ 86,025 $2,012,229 iShares MSCI Austria Index Fund $ -- $ 384,872 iShares MSCI Belgium Index Fund $ 3,839 $ 336,200 iShares MSCI Brazil (Free) Index Fund $ 12,733 $ -- iShares MSCI Canada Index Fund $ 45,033 $ -- iShares MSCI EMU Index Fund $ 4 $ 559 iShares MSCI France Index Fund $ 82,559 $ -- iShares MSCI Germany Index Fund $ -- $ -- iShares MSCI Hong Kong Index Fund $ 2,374 $ -- iShares MSCI Italy Index Fund $ 39,231 $ -- iShares MSCI Japan Index Fund $ -- $ -- iShares MSCI Malaysia (Free) Index Fund $ -- $ -- iShares MSCI Mexico (Free) Index Fund $ 6,504 $ -- iShares MSCI Netherlands Index Fund $ -- $ -- iShares MSCI Singapore (Free) Index Fund $ -- $ -- iShares MSCI South Korea Index Fund $ 19,699 $ 497,310 iShares MSCI Spain Index Fund $ 64,689 $ -- iShares MSCI Sweden Index Fund $ 4,360 $ -- iShares MSCI Switzerland Index Fund $ -- $ -- iShares MSCI Taiwan Index Fund $ 5,064 $ -- iShares MSCI United Kingdom Index Fund $118,193 $ --
87 NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ In addition, each of the following iShares MSCI Index Funds has a capital loss carryover which will expire as follows:
iSHARES MSCI INDEX FUND 2007 2008 ----------------------- ---------- -------- iShares MSCI Australia Index Fund $ 674,889 $630,985 iShares MSCI Austria Index Fund $ 4,273 $551,208 iShares MSCI Belgium Index Fund $ -- $ 94,675 iShares MSCI Hong Kong Index Fund $4,583,086 -- iShares MSCI Malaysia (Free) Index Fund $8,654,333 --
If any of the iShares MSCI Index Funds own shares in certain foreign investment entities, referred to, under U.S. tax law principles, as "passive foreign investment companies", the iShares MSCI Index Fund may elect to mark-to-market annually the shares of the passive foreign investment company, and would be required to distribute to shareholders any such mark-to-market gains. FOREIGN CURRENCY TRANSLATION The books and records of each iShares MSCI Index Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: (i) Market value of investment securities, assets and liabilities at the prevailing rates of exchange on the valuation date; and (ii) Purchases and sales of investment securities and investment income at the relevant rates of exchange prevailing on the respective dates of such transactions. Foreign currency and assets and liabilities denominated in foreign currency are generally converted into U.S. dollars using the same exchange rates utilized by MSCI in the calculation of the relevant MSCI Indices (currently, exchange rates as of 4:00 p.m. London time, except that the exchange rate for the MSCI Mexico (Free) Index is that as of 3:00 p.m. New York City time). However, the Fund may use a different exchange rate from the rate used by MSCI in the event that the Adviser concludes that such rate is more appropriate. Effective January 1, 1999, foreign currency amounts for the iShares MSCI Austria Index Fund, iShares MSCI Belgium Index Fund, iShares MSCI France Index Fund, iShares MSCI Germany Index Fund, iShares MSCI Italy Index Fund, iShares MSCI Netherlands Index Fund, and iShares MSCI Spain Index Fund are converted into U.S. Dollars using the Euro exchange rate. Each iShares MSCI Index Fund generally does not isolate the effect of fluctuations in foreign exchange rates from the effect of fluctuations in the market prices of securities. Each iShares MSCI Index Fund reports certain foreign exchange realized gains and losses on foreign currency related transactions as components of realized gains and losses for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the level of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability, and the fact that foreign securities markets may be smaller, less developed and have less reliable settlement and share registration procedures. DISTRIBUTION OF INCOME AND GAINS Each iShares MSCI Index Fund intends to distribute, at least annually, to shareholders, substantially all of its net investment income, including net foreign currency gains, if any, and any realized net capital gains after the utilization of available capital loss carryovers. An additional distribution may be made to the extent necessary to avoid payment of a 4% Federal excise tax. In addition, each iShares MSCI Index Fund intends to distribute at least annually amounts representing the dividend yield on the underlying portfolio securities of each iShares MSCI Index Fund, net of expenses, as if such iShares MSCI Index Fund owned such underlying portfolio securities for the entire dividend period. As a result, some portion of each distribution may result in a return of capital. Dividends and distributions are paid in U.S. dollars and cannot be automatically reinvested in additional iShares. Distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized gains are determined in accordance with U.S. tax law principles, which may differ from generally accepted accounting principles. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within each iShares MSCI Index Funds' capital accounts based on their Federal tax treatment. Dividends and distributions which exceed net investment income and realized net capital gains for financial 88 iSHARES, INC. ================================================================================ reporting purposes but not for tax purposes are reported as distributions in excess of net investment income and realized net capital gains, respectively. To the extent they exceed net investment income and net realized gains for tax purposes, they are reported as return of capital distributions. For the year ended August 31, 2000, each iShares MSCI Index Fund reclassified certain amounts from accumulated net realized gain (loss) on investments and foreign currency transactions and accumulated net investment income (loss), respectively, as a result of permanent book and tax differences primarily attributed to net investment loss, return of capital, passive foreign investment companies, realized foreign currency gains and losses and gains and losses on in-kind redemptions. ORGANIZATION COSTS Organization costs were originally allocated to each of the seventeen original iShares MSCI Index Funds based on the original net assets of each of these iShares MSCI Index Funds. Such organization costs have been deferred and are amortized ratably on the reverse sum of the years digits method over a period of sixty months from the commencement of operations. If any of the shares initially issued to the Distributor are redeemed before the end of the amortization period, the proceeds of the redemption will be reduced by their pro rata share of the unamortized organization costs. The pro rata share by which the proceeds are reduced is derived by dividing the number of original shares redeemed by the total number of original shares outstanding at the time of redemption. Organization costs of the iShares MSCI Brazil (Free) Index Fund; iShares MSCI EMU Index Fund; iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund have been expensed in their first year of operations. FEE ARRANGEMENTS The Adviser manages the investments of each of the iShares MSCI Index Funds. Effective May 8, 2000, the Fund modified its Advisory Agreement (the "Advisory Agreement") with the Adviser. Prior to May 8, 2000, for its services to each iShares MSCI Index Fund, the Adviser received fees based on the Fund's aggregate average daily net assets equal to .27% per annum up to aggregate net assets of $1.7 billion; plus .15% per annum of the aggregate net assets between $1.7 billion and $7 billion; plus .12% per annum of the aggregate net assets between $7 billion and $10 billion; plus .08% per annum of the aggregate net assets in excess of $10 billion. At a January 28, 2000 Special Meeting of the Board of Directors of the Fund, the Board considered and approved, and recommended to shareholders for their approval at a Special Meeting of Shareholders held on May 8, 2000, amendments to the Advisory Agreement between the Fund and the Adviser. The amendments provide for a revised investment advisory fee to be paid to the Adviser that would generally fix the expense ratio of each iShares MSCI Index Fund at .59% of average daily net assets plus payments under the Fund's Rule 12b-1 Distribution Plan of up to .25% of average daily net assets for a total expense ratio of .84% of average daily net assets for all iShares MSCI Index Funds except the iShares MSCI Brazil (Free) Index Fund, iShares MSCI South Korea and iShares MSCI Taiwan Index Fund. The expense ratio of each of these three Funds is .74% of average daily net assets plus payments under the Fund's Rule 12b-1 Distribution Plan of up to .25% of average daily net assets for a total expense ratio of .99% of average daily net assets. The Advisory Agreement was amended in several respects. Effective May 8, 2000, it now provides that, the Fund is responsible for its expenses, but that the Adviser will receive from the Fund the difference between the Fund's expenses (except for expenses incurred in connection with the execution of portfolio transactions; expenses incurred in connection with the Fund's Rule 12b-1 Distribution Plan; litigation expenses; taxes; any cost or expense that a majority of the Directors of the Fund who are not "interested persons" (as defined in the 1940 Act) deems to be an extraordinary expense; and the advisory fee itself) and .59% per annum of the aggregate net assets of the Developed Country Funds (the seventeen original iShares MSCI Index Funds plus the EMU and USA Index Funds) less than or equal to $7.0 billion, plus .54% per annum of the aggregate net assets of the Developed Country Funds between $7.0 billion and $11.0 billion, plus .49% per annum of the aggregate net assets of the Developed Country Funds in excess of $11.0 billion. For its investment management services to the iShares MSCI Brazil (Free) Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund, the Adviser is paid management fees equal to each of these three Index Funds' allocable portion of: 0.74% per annum of the aggregate net assets of these three Index Funds less than or equal to $2 billion, plus 0.69% per annum of the aggregate net assets of these three Index Funds between $2 billion and $4 billion, plus 0.64% per annum of the aggregate net assets of the net assets of these three Index Funds greater than $4 billion. The Adviser is responsible for any expenses of the Fund (other than the exceptions listed above) that would cause the Fund's expenses to exceed such levels. The Fund has an Administration and Accounting Services Agreement with PFPC Inc. ("PFPC" or the "Administrator"). Under the Administration and Accounting Services Agreement, PFPC assists in supervising the operations of each iShares MSCI Index Fund. 89 NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ Prior to February 1, 2000, for its services to the Fund, the Administrator received an aggregate fee equal to each iShares MSCI Index Fund's allocable portion of: .22% per annum of the aggregate average daily net assets of the Fund up to $1.5 billion; plus .15% per annum of the aggregate average daily net assets of the Fund between $1.5 billion and $3 billion, plus .14% per annum of the aggregate average daily net assets of the Fund between $3 billion and $5 billion, plus .13% per annum of the aggregate average daily net assets of the Fund between $5 billon and $7.5 billion, plus .115% per annum of the aggregate average daily net assets of the Fund between $7.5 billion and $10 billion, plus .10% per annum of the aggregate average daily net assets of the Fund in excess of $10 billion. Effective February 1, 2000, for its services to the iShares MSCI Index Funds, the Administrator receives an aggregate fee equal to each iShares MSCI Index Fund's allocable portion of: .15% per annum of the aggregate average daily net assets of the Fund up to $3 billion; plus .10% per annum of the aggregate average daily net assets of the Fund between $3 billion and $4.5 billion and .095% of the aggregate average daily net assets of the Fund in excess of $4.5 billion. The Administrator receives a minimum monthly fee of .05% of the aggregate average daily net assets of the Fund plus $131,250 for the current twenty one iShares MSCI Index Funds. PFPC and the Fund are party to a Sub-Administration Agreement with Morgan Stanley & Co. Incorporated ("MS&Co."). The Administrator pays MS&Co. an annual fee of .05% of the average daily net assets of the Fund for its sub-administration services. PFPC, Inc., an affiliate of the Administrator, serves as each iShares MSCI Index Fund's Transfer Agent and Dividend Disbursement Agent. The Fund has a Sub-License Agreement with Barclay Global Investors, N.A. for the use of the relevant MSCI Indices. Effective May 8, 2000 each iShares MSCI Index Fund no longer pays a fee for the use of such MSCI indices. Prior to May 8, 2000 each MSCI Index Fund paid a license fee equal to .03% per annum of the average daily net assets of each iShares MSCI Index Fund. Prior to March 26, 2000, the Fund had adopted a Distribution Plan pursuant to Rule 12b-1 under the Act ("Rule 12b-1 Plan") with respect to each of the original 17 iShares MSCI Index Funds. Under the Rule 12b-1 Plan, Funds Distributor, Inc. ("FDI") was paid an annual fee of up to .25% of the average daily net assets of each of the original 17 iShares MSCI Index Funds as compensation in connection with the offering and sale of shares of each of the original 17 iShares MSCI Index Funds. The fee paid to FDI under the Rule 12b-1 Plan was accrued daily and paid monthly with respect to each of the original 17 iShares MSCI Index Funds. For its services to the original 17 iShares MSCI Index Funds, FDI received an annual fee under the Rule 12b-1 Plan of .20% of the average daily net assets of each of the original 17 iShares MSCI Index Funds. At the January 28, 2000 meeting, the Board approved, upon the recommendation of the Adviser, the termination of FDI as distributor for the Fund and the appointment of SEI Investments Distribution Company ("SEI") as distributor, which became effective on March 27, 2000. The distribution agreement between the Fund and SEI is substantially identical to the Fund's former agreement with FDI. In addition, the Board approved the removal of the previous limitation on annual distribution fees paid by an iShares MSCI Index Fund under the Fund's Rule 12b-1 Distribution Plan (up to .20% of the average daily net assets of the iShares MSCI Index Fund) effective at the time that SEI became the Fund's distributor. Each iShares MSCI Index Fund may pay annual distribution fees of up to .25% of the average daily net assets of the iShares MSCI Index Fund under the Rule 12b-1 Distribution Plan. Accordingly, effective March 27, 2000, SEI is paid an annual fee of .25% of the average daily net assets of each iShares MSCI Index Fund. The Directors also approved, upon the recommendation of the Adviser, a Marketing and Consulting Agreement (the "Marketing Agreement") with FDI. The Marketing Agreement provides that FDI will provide certain marketing and consulting services in connection with the distribution of the Fund's shares for a period of three years after the date that SEI became the Fund's distributor, in return for a fee of .035% of the average daily net assets of the Fund's 17 initial iShares MSCI Index Funds. Such fee is paid from the Fund's Rule 12b-1 Distribution Plan. The Chase Manhattan Bank ("Chase") serves as global custodian as well as the Securities Lending Agent to each of the iShares MSCI Index Funds. Effective February 1, 1999, for its custody services to each iShares MSCI Index Fund, Chase was paid per annum fees based on the aggregate net assets of each iShares MSCI Index Fund as follows: iShares MSCI Australia Index Fund (.07%); iShares MSCI Austria Index Fund (.09%); iShares MSCI Belgium Index Fund (.09%); iShares MSCI Canada Index Fund (.05%); iShares MSCI France Index Fund (.09%); iShares MSCI Germany Index Fund (.08%); iShares MSCI Hong Kong Index Fund (.10%); iShares MSCI Italy Index Fund (.08%); iShares MSCI Japan Index Fund (.055%); iShares MSCI Malaysia (Free) Index Fund (.10%); iShares MSCI Mexico (Free) Index Fund (.15%); iShares MSCI Netherlands Index Fund (.09%); iShares MSCI Singapore Index Fund (.09%); iShares MSCI Spain Index Fund (.09%); iShares MSCI Sweden Index Fund (.09%); iShares MSCI Switzerland Index Fund (.09%); and iShares MSCI United Kingdom Index Fund (.05%). 90 iSHARES, INC. ================================================================================ Effective February 1, 2000, the fees payable under the Custody Agreement were revised. For its custody services to each iShares MSCI Index Fund, Chase is now paid per annum fees based on the aggregate net assets of each iShares MSCI Index Fund as follows: iShares MSCI Australia Index Fund (.05%); iShares MSCI Austria Index Fund (.06%); iShares MSCI Belgium Index Fund (.05%); iShares MSCI Brazil (Free) Index Fund (.20%); iShares MSCI Canada Index Fund (.02%); iShares MSCI EMU Index Fund (a fee based on the aggregate net assets of each of its investments in Austria, Belgium, France, Germany, Italy, Netherlands and Spain at the fees applicable to these countries plus Finland (.06%), Ireland (.06%) and Portugal (.20%); iShares MSCI France Index Fund (.05%); iShares MSCI Germany Index Fund (.04%); iShares MSCI Hong Kong Index Fund (.04%); iShares MSCI Italy Index Fund (.05%); iShares MSCI Japan Index Fund (.026%); iShares MSCI Malaysia (Free) Index Fund (.07%); iShares MSCI Mexico (Free) Index Fund (.15%); iShares MSCI Netherlands Index Fund (.04%); iShares MSCI Singapore Index Fund (.05%); iShares MSCI South Korea Index Fund (.15%); iShares MSCI Spain Index Fund (.05%); iShares MSCI Sweden Index Fund (.05%); iShares MSCI Switzerland Index Fund (.05%); iShares MSCI Taiwan Index Fund (.20%) and iShares MSCI United Kingdom Index Fund (.01%). Chase also receives certain fees for each transaction of each of the iShares MSCI Index Funds and is reimbursed for certain out-of-pocket expenses. The Fund pays each director who is not an "affiliated person" (as defined in the 1940 Act) of the Adviser an annual fee of $20,000 plus $5,000 for each Board of Directors meeting attended. The Chairman of the Board receives an annual fee of $30,000 plus $7,500 for each Board of Directors meeting attended. In addition, the Fund reimburses the directors for travel and out-of-pocket expenses incurred in connection with their attendance at the Board of Directors meetings. FOREIGN CURRENCY At August 31, 2000, each iShares MSCI Fund's cash or bank overdraft balances included the following amount of foreign currency: iSHARES MSCI INDEX FUND COST VALUE ----------------------- ---------- ---------- iShares MSCI Australia Index Fund $ 925,102 $ 928,744 iShares MSCI Austria Index Fund $ 12,866 $ 12,180 iShares MSCI Belgium Index Fund $ 96,800 $ 91,323 iShares MSCI Brazil (Free) Index Fund $ -- $ -- iShares MSCI Canada Index Fund $ 48,763 $ 49,020 iShares MSCI EMU Index Fund $ 4,115 $ 4,051 iShares MSCI France Index Fund $ 134,540 $ 132,295 iShares MSCI Germany Index Fund $ 700,946 $ 690,773 iShares MSCI Hong Kong Index Fund $ 812,349 $ 812,414 iShares MSCI Italy Index Fund $ 22,510 $ 22,117 iShares MSCI Japan Index Fund $1,067,080 $1,067,762 iShares MSCI Malaysia (Free) Index Fund $ 225,604 $ 225,604 iShares MSCI Mexico (Free) Index Fund $ 290,939 $ 291,898 iShares MSCI Netherlands Index Fund $ 194,920 $ 187,413 iShares MSCI Singapore (Free) Index Fund $ 454,213 $ 458,742 iShares MSCI South Korea Index Fund $ -- $ -- iShares MSCI Spain Index Fund $ 463,954 $ 458,744 iShares MSCI Sweden Index Fund $ 523,375 $ 514,668 iShares MSCI Switzerland Index Fund $ 92,151 $ 86,313 iShares MSCI Taiwan Index Fund $ 281,986 $ 281,954 iShares MSCI United Kingdom Index Fund $ 148,568 $ 146,829 STOCK LOAN Each iShares MSCI Index Fund may lend securities from its portfolio to brokers, dealers and other financial institutions. Because the collateral pledged to each iShares MSCI Index Fund in connection with these loans generates income, securities lending enables an iShares MSCI Index Fund to earn income that may partially offset the expenses of that iShares MSCI Index Fund. Each iShares MSCI Index Fund receives collateral equal to at least 100% of the current market value of the loaned securities. To the extent that the value of the collateral falls below the value of securities on loan, the Fund's Custodian will receive additional collateral on the next business day. Each iShares MSCI Index Fund receives cash collateral and may invest such collateral in short-term investments and bear the risk of loss of the invested collateral. In addition, an iShares MSCI Index Fund is exposed to the risk of loss should a borrower default on its obligation to return the borrowed securities. For its services as the securities lending agent, the Fund pays Chase, in respect of each iShares MSCI Index Fund, 40% of the net investment income earned on the collateral for securities loaned. The compensation each Fund earned in connection with securities lending is included in interest income. 91 NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ The market values of securities on loan to broker/dealers at August 31, 2000, and the cash collateral received with respect to such loans were as follows: CASH COLLATERAL MARKET VALUE OF iSHARES MSCI INDEX FUND RECEIVED LOANED SECURITIES ----------------------- ----------- ----------------- iShares MSCI Australia Index Fund $ 7,687,795 $ 7,280,908 iShares MSCI Austria Index Fund $ 2,734,620 $ 2,551,788 iShares MSCI Belgium Index Fund $ 881,124 $ 826,596 iShares MSCI Brazil (Free) Index Fund $ -- $ -- iShares MSCI Canada Index Fund $ -- $ -- iShares MSCI EMU Index Fund $ -- $ -- iShares MSCI France Index Fund $15,266,730 $14,453,599 iShares MSCI Germany Index Fund $16,072,385 $14,964,232 iShares MSCI Hong Kong Index Fund $11,908,351 $10,969,869 iShares MSCI Italy Index Fund $ 6,593,159 $ 6,281,581 iShares MSCI Japan Index Fund $83,952,455 $79,170,203 iShares MSCI Malaysia (Free) Index Fund $ -- $ -- iShares MSCI Mexico (Free) Index Fund $ 3,932,481 $ 3,748,187 iShares MSCI Netherlands Index Fund $ -- $ -- iShares MSCI Singapore (Free) Index Fund $ 2,018,900 $ 1,894,217 iShares MSCI South Korea Index Fund $ -- $ -- iShares MSCI Spain Index Fund $ 6,792,669 $ 6,356,727 iShares MSCI Sweden Index Fund $ 1,484,900 $ 1,531,324 iShares MSCI Switzerland Index Fund $ 3,209,850 $ 3,055,135 iShares MSCI Taiwan Index Fund $ -- $ -- iShares MSCI United Kingdom Index Fund $ -- $ -- CAPITAL SHARES The Fund's authorized shares are 10.9 billion shares of capital stock. The following number of shares were allocated to each iShares MSCI Index Fund: iShares MSCI Australia Index Fund (127.8 million shares); iShares MSCI Austria Index Fund (19.8 million shares); iShares MSCI Belgium Index Fund (136.2 million shares); iShares MSCI Brazil (Free) Index Fund (500 million shares); iShares MSCI Canada Index Fund (340.2 million shares); iShares MSCI EMU Index Fund (500 million shares); iShares MSCI France Index Fund (340.2 million shares); iShares MSCI Germany Index Fund (382.2 million shares); iShares MSCI Greece Index Fund (200 million shares); iShares MSCI Hong Kong Index Fund (191.4 million shares); iShares MSCI Indonesia (Free) Index Fund (200 million shares); iShares MSCI Italy Index Fund (63.6 million shares); iShares MSCI Japan Index Fund (2,124.6 million shares); iShares MSCI Malaysia (Free) Index Fund (127.8 million shares); iShares MSCI Mexico (Free) Index Fund (255 million shares); iShares MSCI Netherlands Index Fund (255 million shares); iShares MSCI Portugal Index Fund (200 million shares); iShares MSCI Singapore (Free) Index Fund (191.4 million shares); iShares MSCI South Africa Index Fund (200 million shares); iShares MSCI South Korea Index Fund (200 million shares); iShares MSCI Spain Index Fund (127.8 million shares); iShares MSCI Sweden Index Fund (63.6 million shares); iShares MSCI Switzerland Index Fund (318.625 million shares); iShares MSCI Taiwan Index Fund (200 million shares); iShares MSCI Thailand (Free) Index Fund (200 million shares); iShares MSCI Turkey Index Fund (200 million shares); iShares MSCI United Kingdom Index Fund (943.2 million shares); and the iShares MSCI USA Index Fund (500 million shares). The iShares MSCI Greece Index Fund, iShares MSCI Indonesia (Free) Index Fund, iShares MSCI Portugal Index Fund, iShares MSCI South Africa Index Fund, iShares MSCI Thailand (Free) Index Fund, iShares MSCI Turkey Index Fund and iShares MSCI USA Index Fund have not commenced operations. The shares will not be issued or redeemed individually, but only in specified aggregations of shares (a "Creation Unit"). The consideration for purchase of a Creation Unit of an iShares MSCI Index Fund is generally the in-kind deposit of a designated portfolio of equity securities constituting an optimized representation of the corresponding MSCI Index (the "Basket Securities") and an amount of cash (the "Cash Component") (except for the iShares MSCI Brazil (Free) Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund which are offered in Creation Units solely for cash and temporarily for the iShares MSCI Malaysia (Free) Index Fund which is offered in Creation Units for U.S. Dollars). In addition, certain iShares MSCI Index Funds may include securities that are not in its respective MSCI Index in the Basket Securities. Non-Basket Securities may be held by an iShares MSCI Index Fund as a result of corporate actions, odd share lots, or as a result of rebalancing of the Basket Securities. 92 iSHARES, INC. ================================================================================ Shares of each iShares MSCI Index Fund are offered in Creation Units at net asset value without an initial sales load, in exchange for an in-kind deposit of a designated portfolio of securities specified by the Distributor each day (except the iShares MSCI Brazil (Free) Index Fund, iShares MSCI EMU Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund which are offered in Creation Units solely for cash and temporarily for the iShare MSCI Malaysia (Free) Index Fund which is offered for U.S. Dollars), plus a specified amount of cash and a purchase transaction fee. Shares of each of the other iShares MSCI Index Funds may also be issued in the specified aggregations for cash at the sole discretion of the Fund. Redemptions of the shares of each iShares MSCI Index Fund in the specified aggregations are made in portfolio securities, (except the iShares MSCI Brazil (Free) Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund which are redeemed in Creation Units solely for cash and temporarily for the iShares MSCI Malaysia (Free) Index Fund which is redeemed in Malaysian Ringgits Units only) plus or minus a specified amount of cash, and minus a specified redemption transaction fee and except that residents of Australia and New Zealand are paid redemption proceeds in cash only. Shares of other iShares MSCI Index Funds may also be redeemed in the specified aggregations for cash by other persons at the sole discretion of the Fund. LOAN AGREEMENT At August 31, 1999 the Fund had entered into a Term Loan Agreement with PNC Bank, N.A., an affiliate of the Administrator. Under the terms of the Loan, any of the initial 17 iShares MSCI Index Funds could have requested an advance, under certain provisions, of the full amount of the $25,000,000 term loan. The Term Loan Agreement with PNC Bank was terminated effective September 30, 1999, therefore, there were no outstanding advances under loan arrangements at August 31, 2000.
AVERAGE ADVANCES AVERAGE NUMBER OF DAYS OUTSTANDING INTEREST ADVANCES OUTSTANDING iSHARES MSCI INDEX FUND DURING THE PERIOD RATE DURING THE PERIOD -------------------------------- ----------------- -------- -------------------- iShares MSCI Australia Index Fund $ 985,000 6.29% 29 iShares MSCI Austria Index Fund $ 82,000 6.30% 21 iShares MSCI Belgium Index Fund $1,663,000 6.30% 21 iShares MSCI Canada Index Fund $ 355,111 6.35% 36 iShares MSCI France Index Fund -- -- -- iShares MSCI Germany Index Fund $1,210,000 6.30% 21 iShares MSCI Hong Kong Index Fund $1,370,000 6.30% 22 iShares MSCI Italy Index Fund $4,490,000 6.35% 36 iShares MSCI Japan Index Fund $ 458,000 6.30% 22 iShares MSCI Malaysia (Free) Index Fund -- -- -- iShares MSCI Mexico (Free) Index Fund $ 67,000 6.30% 21 iShares MSCI Netherlands Index Fund $2,274,611 6.35% 36 iShares MSCI Singapore (Free) Index Fund $ 56,000 6.30% 22 iShares MSCI Spain Index Fund $1,341,000 6.29% 29 iShares MSCI Sweden Index Fund $ 578,000 6.29% 29 iShares MSCI Switzerland Index Fund $ 897,000 6.29% 29 iShares MSCI United Kingdom Index Fund $5,014,000 6.29% 29
93 NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ PORTFOLIO ACTIVITY The iShares MSCI Index Funds' purchases and sales of securities (excluding in-kind transactions), other than short-term obligations, were as follows, for the year ended August 31, 2000: PURCHASES OF SALES OF iSHARES MSCI INDEX FUND SECURITIES SECURITIES ----------------------- ------------- ------------ iShares MSCI Australia Index Fund $ 21,690,864 $ 24,257,825 iShares MSCI Austria Index Fund $ 3,778,063 $ 3,708,838 iShares MSCI Belgium Index Fund $ 7,244,600 $ 6,699,685 iShares MSCI Brazil (Free) Index Fund $ 35,655,864 $ 16,463,499 iShares MSCI Canada Index Fund $ 8,917,445 $ 14,576,131 iShares MSCI EMU Index Fund $ -- $ 4,119 iShares MSCI France Index Fund $ 15,116,582 $ 19,680,565 iShares MSCI Germany Index Fund $ 87,769,282 $105,215,914 iShares MSCI Hong Kong Index Fund $ 20,699,072 $ 16,927,596 iShares MSCI Italy Index Fund $ 24,127,653 $ 28,444,135 iShares MSCI Japan Index Fund $188,667,761 $224,558,910 iShares MSCI Malaysia (Free) Index Fund $ 18,504,302 $ 18,226,975 iShares MSCI Mexico (Free) Index Fund $ 6,234,182 $ 7,231,905 iShares MSCI Netherlands Index Fund $ 5,745,810 $ 5,912,086 iShares MSCI Singapore (Free) Index Fund $ 54,138,074 $ 54,477,924 iShares MSCI South Korea Index Fund $ 24,472,244 $ 9,413,363 iShares MSCI Spain Index Fund $ 15,881,716 $ 19,051,730 iShares MSCI Sweden Index Fund $ 21,633,170 $ 27,046,900 iShares MSCI Switzerland Index Fund $ 13,825,636 $ 14,584,916 iShares MSCI Taiwan Index Fund $ 62,037,314 $ 16,012,018 iShares MSCI United Kingdom Index Fund $ 42,634,095 $ 55,041,204 FOREIGN INCOME TAXES For the year ended August 31, 2000, the iShares MSCI Index Funds' net foreign withholding taxes deducted from foreign dividends received were as follows: FOREIGN WITHHOLDING iSHARES MSCI INDEX FUND TAX ------------------------------- ----------- iShares MSCI Australia Index Fund $ 72,892 iShares MSCI Austria Index Fund $ 32,032 iShares MSCI Belgium Index Fund $ 54,815 iShares MSCI Brazil (Free) Index Fund $ 4,388 iShares MSCI Canada Index Fund $ 30,242 iShares MSCI EMU Index Fund $ 5,803 iShares MSCI France Index Fund $216,534 iShares MSCI Germany Index Fund $283,556 iShares MSCI Hong Kong Index Fund $ -- iShares MSCI Italy Index Fund $246,622 iShares MSCI Japan Index Fund $811,189 iShares MSCI Malaysia (Free) Index Fund $ -- iShares MSCI Mexico (Free) Index Fund $ 27,205 iShares MSCI Netherlands Index Fund $ 71,115 iShares MSCI Singapore (Free) Index Fund $ -- iShares MSCI South Korea Index Fund $ 3,316 iShares MSCI Spain Index Fund $103,697 iShares MSCI Sweden Index Fund $ 64,813 iShares MSCI Switzerland Index Fund $ 86,919 iShares MSCI Taiwan Index Fund $ 53,004 iShares MSCI United Kingdom Index Fund $332,217 94 iSHARES, INC. ================================================================================ MARKET AND PORTFOLIO RISKS An investment in the iShares MSCI Index Funds involves risks similar to those of investing in a broadly-based portfolio of equity securities traded on exchanges in the relevant foreign securities market, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. Investing in iShares MSCI Index Funds generally involves certain risks and considerations not typically associated with investing in a fund that invests in the securities of U.S. issuers. These risks could include less liquid and less efficient securities markets; greater price volatility; exchange rate fluctuations and exchange controls; less publicly available information about issuers; the imposition of withholding or other taxes; restrictions on the expatriation of funds or other assets of an iShares MSCI Index Fund; higher transaction and custody costs; delays in settlement; difficulties in enforcing contractual obligations; less liquidity and smaller market capitalization of most non-U.S. securities markets; lower levels of regulation of the securities markets; different accounting, disclosure and reporting requirements; more substantial government involvement in the economy; higher rates of inflation; greater social, economic, and political uncertainty and the risk of nationalization or expropriation of assets and risk of war. With respect to the two most heavily weighted industries or groups of industries in the benchmark index of a iShares MSCI Index Fund, the iShares MSCI Index Fund will invest in portfolio securities (consistent with its investment objective and other investment policies) such that the weighting of each such industry or group of industries in the iShares MSCI Index Fund does not diverge by more than 10 percentage points from the respective weightings of such industry or group of industries in the benchmark index. An exception to the general policy stated in the previous sentence is that if investment in the stock of a single issuer would account for more than 25% of the iShares MSCI Index Fund, the iShares MSCI Index Fund will invest less than 25% of its net assets in such stock and will reallocate the excess to stock(s) in the same industry or group of industries, and/or to stock(s) in another industry or group of industries, in the benchmark index. The stocks of particular issuers, or of issuers in particular industries, may dominate the benchmark indices of certain iShares MSCI Index Funds and, consequently, the investment portfolios of such iShares MSCI Index Funds may adversely affect the performance of such iShares MSCI Index Funds or subject such iShares MSCI Index Funds to greater price volatility than that experienced by more diversified investment companies. MALAYSIAN CAPITAL RESTRICTIONS As a result of capital controls imposed by the Malaysian Government on September 1, 1998 that, among other things, imposed: (i) a one year prohibition on the repatriation of capital by foreign investors such as the iShares MSCI Malaysia (Free) Index Fund, (ii) stringent restrictions on transfers of Malaysian securities that made "in kind" sales and redemptions of Creation Units of the iShares MSCI Malaysia (Free) Index Fund unlawful, and (iii) a fixed exchange rate; sales of Creation Units of the iShares MSCI Malaysia (Free) Index Fund were suspended, and the Fund announced that it would no longer be able to effect redemptions of Creation Units on an "in kind" basis. Since April 1, 1999 the iShares MSCI Malaysia (Free) Index Fund has used a foreign exchange rate of 3.8 ringgits per U.S. dollar, the official exchange rate fixed by the Malaysian authorities, in computing its net asset value per share. The iShares MSCI Malaysia (Free) Index Fund may use different exchange rates for computing its net asset value in the future. The Malaysian capital controls have been revised several times since they were announced. Currently, repatriations by the iShares MSCI Malaysia (Free) Index Fund are generally subject to a levy of 10% of the amount attributable to "profit" as determined pursuant to the relevant Malaysian regulations. Effective May 12, 2000, the iShares MSCI Malaysia (Free) Index Fund offered to redeem Creation Units for U.S. dollars, and offers of such Creation Units for U.S. dollars commenced effective May 26, 2000. The iShares MSCI Malaysia (Free) Index Fund recently received regulatory relief from the Malaysian authorities and is currently investigating the possibility of reinstituting sales and redemptions of Creation Units on an "in kind" basis. POSSIBLE CLAIM A United States patentholder has notified the Fund that it believes that the manner of the Fund's operation results in the Fund, possibly in conjunction with others, engaging in acts of infringement of such patent and has suggested that the Fund or one or more of its service providers enter into a license agreement with it and pay it substantial license fees. In August 2000 the AMEX commenced an action seeking a declaratory judgement that its activities with respect to exchange traded funds, including the Fund, do not infringe the patentholder's patents. The patentholder has counterclaimed, alleging patent infringement by the AMEX. The Fund is not a party to this action. The Fund believes that it has valid defenses to any potential patent infringement claim by the patentholder. 95 REPORT OF INDEPENDENT AUDITORS iSHARES, INC. ================================================================================ Shareholders and Board of Directors iSHARES, INC. We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of iShares, Inc. (comprised of the iShares MSCI Australia Index Fund, the iShares MSCI Austria Index Fund, the iShares MSCI Belgium Index Fund, the iShares MSCI Brazil (Free) Index Fund, the iShares MSCI Canada Index Fund, the iShares MSCI EMU Fund, the iShares MSCI France Index Fund, the iShares MSCI Germany Index Fund, the iShares MSCI Hong Kong Index Fund, the iShares MSCI Italy Index Fund, the iShares MSCI Japan Index Fund, the iShares MSCI Malaysia (Free) Index Fund, the iShares MSCI Mexico (Free) Index Fund, the iShares MSCI Netherlands Index Fund, the iShares MSCI Singapore (Free) Index Fund, the iShares MSCI South Korea Index Fund, the iShares MSCI Spain Index Fund, the iShares MSCI Sweden Index Fund, the iShares MSCI Switzerland Index Fund, the iShares MSCI Taiwan Index Fund and the iShares MSCI United Kingdom Index Fund) (collectively, the "Funds") as of August 31, 2000, and the related statements of operations and changes in net assets and the financial highlights for each of the periods presented therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2000 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds comprising iShares, Inc. at August 31, 2000, and the results of their operations, the changes in their net assets and the financial highlights for the respective periods ended August 31, 2000, in conformity with accounting principles generally accepted in the United States. /S/ ERNST & YOUNG LLP New York, NY October 13, 2000 96 iSHARES, INC. ================================================================================ FEDERAL TAXATION NOTICE (UNAUDITED) The iShares MSCI Index Funds paid the following foreign taxes during the year ended August 31, 2000 which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code. In addition, each of the iShares MSCI Index Funds earned the following foreign source income and is designating the following distributions as long-term capital gain distributions:
FOREIGN SOURCE LONG-TERM iSHARES MSCI INDEX FUND INCOME FOREIGN TAXES CAPITAL GAINS DISTRIBUTIONS ----------------------- -------------- ------------- --------------------------- iShares MSCI Australia Index Fund $1,983,747 $ 72,892 $ -- iShares MSCI Austria Index Fund $ 214,177 $ 32,032 $ -- iShares MSCI Belgium Index Fund $ 578,866 $ 54,815 $ -- iShares MSCI Brazil (Free) Index Fund $ 61,016 $ 4,388 $ -- iShares MSCI Canada Index Fund $ 763,631 $ 30,242 $ 4,150,148 iShares MSCI EMU Index Fund $ 42,167 $ 5,803 $ -- iShares MSCI France Index Fund $ 928,627 $216,534 $ 4,912,901 iShares MSCI Germany Index Fund $2,873,271 $283,556 $ 9,702,076 iShares MSCI Hong Kong Index Fund $2,502,940 $ -- $ -- iShares MSCI Italy Index Fund $ 950,365 $246,622 $ 4,043,442 iShares MSCI Japan Index Fund $5,463,953 $811,189 $28,506,091 iShares MSCI Malaysia (Free) Index Fund $1,830,099 $ -- $ -- iShares MSCI Mexico (Free) Index Fund $ 354,819 $ 27,205 $ 810,815 iShares MSCI Netherlands Index Fund $ 475,724 $ 71,115 $ 138,873 iShares MSCI Singapore (Free) Index Fund $2,363,139 $ -- $ 1,615,816 iShares MSCI South Korea Index Fund $ 20,095 $ 3,316 $ -- iShares MSCI Spain Index Fund $ 725,345 $103,697 $ 1,313,679 iShares MSCI Sweden Index Fund $ 415,611 $ 64,813 $ 5,403,944 iShares MSCI Switzerland Index Fund $ 580,308 $ 86,919 $ 22,614 iShares MSCI Taiwan Index Fund $ 931,939 $ 53,004 $ -- iShares MSCI United Kingdom Index Fund $3,481,972 $332,217 $ 6,644,169
Shareholders will receive more detailed information along with Form 1099-DIV in January 2001. 97 RESULTS OF SPECIAL SHAREHOLDERS MEETING (UNAUDITED) iSHARES, INC. ================================================================================ A Special Shareholders Meeting was held on May 8, 2000. A quorum was obtained for Shareholder Proposal I on May 8, 2000. The meeting was adjourned several times for failure to obtain the necessary quorum to transact business for Shareholder Proposals II, III, and IV. At the meeting, as reconvened on June 27, 2000, the shareholders of the iShares MSCI Canada Index Fund approved Shareholder Proposal II to change such from diversified to non-diversified. The Shareholder Proposals III and IV failed to meet the necessary quorum. The following table provides information concerning the matters voted on: PROPOSAL I: TO APPROVE AMENDMENTS TO THE FUND'S ADVISORY AGREEMENT.
VOTES VOTES SHARES SHARES RECORD VOTES FOR AGAINST ABSTAINED PRESENT NOT VOTING DATE SHARES ----------- ------- --------- ---------- ---------- ----------- iShares MSCI Australia Index Fund 4,811,244 5,776 6,435 4,823,455 976,575 5,800,030 iShares MSCI Austria Index Fund 696,012 1,181 3,800 700,993 499,037 1,200,030 iShares MSCI Belgium Index Fund 441,123 818 300 422,241 397,789 840,030 iShares MSCI Canada Index Fund 565,324 1,780 900 568,004 232,026 800,030 iShares MSCI France Index Fund 2,114,995 4,680 5,497 2,125,172 1,275,828 3,401,000 iShares MSCI Germany Index Fund 3,773,915 23,100 10,353 3,807,368 2,793,632 6,601,000 iShares MSCI Hong Kong Index Fund 4,612,403 13,116 20,083 4,645,602 1,880,398 6,526,000 iShares MSCI Italy Index Fund 1,587,643 5,215 1,247 1,594,105 805,925 2,400,030 iShares MSCI Japan Index Fund 34,763,978 177,978 106,598 35,048,554 23,752,446 58,801,000 iShares MSCI Malaysia Index Fund 10,591,004 42,759 112,192 10,745,955 6,279,075 17,025,030 iShares MSCI Mexico Index Fund 1,150,080 4,755 9,362 1,164,197 335,833 1,500,030 iShares MSCI Netherlands Index Fund 663,326 1,633 905 665,864 335,136 1,001,000 iShares MSCI Singapore Index Fund 10,241,090 72,707 34,916 10,348,713 3,351,317 13,700,030 iShares MSCI Spain Index Fund 965,921 1,059 2,364 969,344 530,686 1,500,030 iShares MSCI Sweden Index Fund 440,630 3,175 1,575 445,380 379,650 825,030 iShares MSCI Switzerland Index Fund 1,897,894 3,130 3,190 1,904,214 721,786 2,626,000 iShares MSCI United Kingdom Index Fund 3,245,606 2,530 11,465 3,259,601 2,941,399 6,201,000
PROPOSAL II: TO APPROVE A CHANGE OF THE iSHARES MSCI CANADA INDEX FUND FROM DIVERSIFIED TO NON-DIVERSIFIED. VOTES VOTES BROKER SHARES SHARES RECORD VOTES FOR AGAINST ABSTAINED NON-VOTES PRESENT NOT VOTING DATE SHARES --------- ------- --------- --------- ------- ---------- ----------- iShares MSCI Canada Index Fund 307,134 10,145 4,396 128,342 450,017 350,013 800,030
PROPOSAL III: TO APPROVE A CHANGE OF THE iSHARES MSCI JAPAN INDEX FUND FROM DIVERSIFIED TO NON-DIVERSIFIED. VOTES VOTES BROKER SHARES SHARES RECORD VOTES FOR AGAINST ABSTAINED NON-VOTES PRESENT NOT VOTING DATE SHARES ---------- ------- --------- ---------- ---------- ---------- ----------- iShares MSCI Japan Index Fund 10,986,790 343,939 536,528 24,560,162 36,427,419 22,373,581 58,801,000
PROPOSAL IV: TO APPROVE A CHANGE OF THE iSHARES MSCI UNITED KINGDOM INDEX FUND FROM DIVERSIFIED TO NON-DIVERSIFIED. VOTES VOTES BROKER SHARES SHARES RECORD VOTES FOR AGAINST ABSTAINED NON-VOTES PRESENT NOT VOTING DATE SHARES ---------- ------- --------- ---------- ---------- ---------- ----------- iShares MSCI United Kingdom Index Fund 1,589,268 37,491 225,659 791,093 2,643,511 3,557,489 6,201,000
98 (THIS PAGE INTENTIONALLY LEFT BLANK.) (THIS PAGE INTENTIONALLY LEFT BLANK.) | I|Shares |------------------------------ BARCLAYS GLOBAL INVESTORS (LOGO) [GRAPHIC OMITTED] 45 Fremont Street WWW.iSHARES.COM 1-800-iSHARES San Francisco, CA 1-800-474-2737 94105 iShares are distributed by SEI Investments Distribution Co. Barclays Global Fund Advisors serves as an adviser to iShares and is a subsidiary of Barclays Global Investors, N.A., neither of which is affiliated with SEI. PFPC serves as administrator and transfer agent for the iShares MSCI Series. The Chase Manhattan Bank acts as custodian and securities lending agent. iShares are not sponsored, endorsed, sold or promoted by MSCI. Nor does this company make any representation regarding the advisability of investing in iShares. (COPYRIGHT) 2000 Barclays Global Investors. All rights reserved. iShares is a servicemark of Barclays Global Investors, N.A. All other trademarks, servicemarks or registered trademarks are the property of their respective owners. BGI-F-002-02000 (9/00) NOT FDIC INSURED HAVE NO BANK GUARANTEE MAY LOSE VALUE