-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GgDdZSLMy311xmr5vsQRiX8eo95CWB9i3nU++db6Cr4o8z7JTvW6gzA5wSrnosVi Dv5rTGEWxzwyCLg/NcUi6g== 0000935069-01-500062.txt : 20010501 0000935069-01-500062.hdr.sgml : 20010501 ACCESSION NUMBER: 0000935069-01-500062 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010228 FILED AS OF DATE: 20010430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISHARES INC CENTRAL INDEX KEY: 0000930667 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 510396525 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-09102 FILM NUMBER: 1615251 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 800-810-93 FORMER COMPANY: FORMER CONFORMED NAME: WEBS INDEX FUND INC DATE OF NAME CHANGE: 19970211 FORMER COMPANY: FORMER CONFORMED NAME: WFBS INDEX FUND INC DATE OF NAME CHANGE: 19961226 FORMER COMPANY: FORMER CONFORMED NAME: FOREIGN FUND INC DATE OF NAME CHANGE: 19950524 N-30D 1 w01-0237.txt ISHARES SEMI-ANNUAL REPORT iShares MSCI Series [GRAPHICS OMITTED] SEMI-ANNUAL REPORT February 28, 2001 THE WAY YOU INVEST NOW. ONLY BETTER. [GRAPHICS OMITTED] iShares BARCLAYS GLOBAL INVESTORS ISHARES, INC. - -------------------------------------------------------------------------------- April 11, 2001 Dear Shareholder: We are pleased to present the semi-annual report for the iShares MSCI Index Funds (the "Funds"). The shares of the Funds are known as "iShares". This report covers the semi-annual period from September 1, 2000 through February 28, 2001. The semi-annual report contains important information about the performance of your investment, a manager's discussion and analysis for each Fund from the Fund's 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 or region'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 February, 2001, net assets of the twenty-one iShares MSCI Index Funds totalled almost $1.7 billion. Because the value of total net assets fluctuates with the performance of the respective foreign equity markets, we believe that the number of shares outstanding offers a better indicator of the Funds' attractiveness to investors. Shares outstanding are now at 139.6 million, up from 136.7 million at August 31, 2000. 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 the specific issues that affected the performance of the Fund's particular market, a number of trends had a global impact over the reporting period. The ongoing correction in the technology and telecommunications sectors continued to pressure many foreign markets as demand for technology and telecom products slowed. That trend was in part cause and effect of slowing growth in the overall U.S. economy, which in turn triggered declines in markets and individual exporters that rely heavily on U.S. consumer demand. The U.S. slowdown did, however, led to expectations that the U.S. Federal Reserve Board would lower interest rates, which it did in January. The Fed's one-percentage-point reduction in rates that month helped to boost many foreign markets in January and February. CONCLUSION The continued popularity of the iShares MSCI Index Funds continues because investors such as yourself understand that iShares 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 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 only 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. CONSTRAINTS ON PORTFOLIO MANAGEMENT: The Investment Adviser is subject to a number of constraints in managing the MSCI Index Funds' portfolios. The "Single Issuer Rule" and the "5/50 Rule" are two constraints in the Internal Revenue Code that affect the performance of a number of the Funds. 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, Telefonica had a weighting of 29% in the MSCI Spain Index as of February 28, 2001. Because of the "Single Issuer Rule," however, the iShares MSCI Spain Index Fund could not hold more than 25% in Telefonica. 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 South Korea Index was 56% as of February 28, 2001, so the iShares MSCI South Korea Index Fund had to be underweight in some of these stocks relative to the benchmark, and therefore overweight in other stocks. 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, until recently, the MSCI Indices allocated 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 Funds. Finally, 2 ISHARES, INC. - -------------------------------------------------------------------------------- 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. Since the start of this year, the MSCI Indices no longer allocate annual dividend revenues evenly over the 12-month period. They now record the dividends on the "ex" dates of the underlying stocks. Going forward, therefore, "dividend smoothing" will not contribute to revenue differential. EFFECT OF UNINVESTED ASSETS: Finally, uninvested assets held by the Funds affect performance relative to their respective benchmark indices. 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 impact on performance of the portion of a Fund that is not invested in stocks. Cash and deferred organizational expenses are the principal "unequitized" assets of the Funds. As of March 11, 2001, organizational expenses were fully amortized and therefore will not impact performance going forward. 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 semi-annual period), there can be a short period of rising market where the uninvested assets in the Fund have a negative impact on return. This would cause the effect of uninvested assets to worsen the loss for the period (e.g., -10.4% for a 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 -5.62% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -6.00% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Australia Fund outperformed the benchmark by 0.38 percentage points over the reporting period, primarily due to the positive impact of revenue differential and the effect of uninvested assets, which added 0.79 and 0.02 percentage points, respectively, to the Fund's return. These factors were partially offset by the negative impact of expenses and portfolio sampling, which subtracted 0.42 and 0.01 percentage points, respectively, from its returns. KEY MARKET CONDITIONS Like many other markets around the world, the Australian equity market posted a significant decline over the reporting period. Poor sentiment toward media and telecommunications companies such as News Corp. and Telstra (the Fund's two largest holdings as of February 28, 2001) was a major factor in the market's weak performance. News Corp. also reported disappointing results in November, in part because of declining ratings and ad sales at its television stations. Both companies announced better-than-expected results in early 2001, however, which helped their share prices to recover somewhat. The weakness of the Australian dollar, which fell to a record low against its U.S. counterpart in September, was a mixed blessing: It was negative for U.S. dollar-based investors, but positive for the Australian exporters in which they invested. Strong demand on the domestic front also helped a number of Australia's leading companies, including Westpac Banking Corp. and National Australia Bank, post record profits during the fall. As 2000 drew to a close, however, there were signs that a slowdown in Australia's domestic economy was echoing a more serious deceleration in the United States. The ensuing speculation that U.S. and Australian interest rates might decline helped to boost the financial-service sector. As it turned out, the Australian Federal Reserve Board did lower rates by 50 basis points in early February. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI AUSTRALIA INDEX FUND VS. THE MSCI AUSTRALIA INDEX* [GRAPHICS 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 02/28/01 10,773 11,188 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Australia Index Fund $10,773* MSCI Australia Index $11,188 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- iShares MSCI Australia Index Fund (5.17)% 1.51% MSCI Australia Index (5.01)% 2.28% - ------------------ * 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 MSCIIndex 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 10.43% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned 9.80% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Austria Fund outperformed the benchmark by 0.63 percentage points over the reporting period, primarily due to the positive impact of portfolio sampling and the effect of uninvested assets, which added 1.51 and 0.14 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of revenue differential and expenses, which subtracted 0.60 and 0.42 percentage points, respectively, from the Fund's returns. As stated in the introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the Single Issuer and 5-50 Rules, for example, the Austria Fund was obligated to underweight Bank Austria and Telekom Austria during the reporting period. These underweightings were largely responsible for the Fund's positive variance from the Index. KEY MARKET CONDITIONS Over the six months ended February 28, 2001, the MSCI Austria Index was one of the best performing developed-market indices in the world. Its performance likely would have been even better but the euro was weak against the U.S. dollar, especially in September and October. Exchange rates shifted back in the euro's favor in November and December, but the trend was short-lived. Nonetheless, the Index's "old economy" orientation proved a distinct benefit in late 2000 after having been a liability earlier in 2000 and in 1999. Concerned about slowing economic growth in the United States and elsewhere, many investors favored shares of utilities, banks and other companies that in the past have tended to hold up fairly well even during an economic downturn. Given the large percentage of utilities and banking stocks in the MSCI Austria Index, this trend helped to boost the benchmark. On an individual basis, several Austrian stocks were bolstered by other positive news. Shares of Bank Austria, the Index's largest stock at the beginning of the reporting period, rose in September after regulators allowed its acquisition by Germany's HypoVereinsbank to proceed. After the completion of the merger on February 1, 2001, Bank Austria was removed from the MSCI Austria Index. Another strong performer was Austria Tabakwerke, which appreciated in November on anticipation that the Austrian government would sell its large stake in the company. As of the end of the reporting period, Austria Tabakwerke was slated to be completely privatized by the end of the first half of 2001. Austrian companies in general continued to benefit in late 2000 from economic expansion at home and in export markets throughout Western and Eastern europe. In reporting results at the beginning of 2001, however, a number of Austrian companies said that they expected high energy prices and lower orders to slow their businesses in the future. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI AUSTRIA INDEX FUND VS. THE MSCI AUSTRIA INDEX* [GRAPHICS 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 02/28/01 8,498 9,153 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Austria Index Fund $8,498* MSCI Austria Index $9,153 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------ --------- iShares MSCI Austria Index Fund 11.49% (3.22)% MSCI Austria Index 10.98% (1.76)% - ------------------ * 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 -2.67% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -2.84% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Belgium Fund outperformed the benchmark by 0.17 percentage points over the reporting period, due to the positive impact of portfolio sampling, which contributed 1.34 percentage points to the Fund's return. This factor was partially offset by the negative impact of revenue differential, expenses and the effect of uninvested assets, which subtracted 0.67, 0.42 and 0.08 percentage points, respectively, from the Fund's returns. As stated in the introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the 5-50 Rule, for example, the Belgium Fund was obligated to underweight the banking sector. This sector underperformed others in the MSCI Belgium Index at times during the reporting period, especially in November 2000. As a result, the underweighting was largely responsible for the Fund's positive variance from the Index through portfolio sampling. KEY MARKET CONDITIONS After having been a disadvantage in 1999 and early 2000, the Belgian equity market's high number of "old economy" companies proved advantageous in late 2000 and early 2001. Concerned about the possibility of an economic slowdown, many investors turned away from more speculative investments and toward the perceived safety of utilities, banks and insurers. Collectively, these stocks made up nearly half of the MSCI Belgium Fund as of February 28, 2001. Expectations that European interest rates might be cut to counter the impact of a U.S. slowdown also buoyed stocks like insurer Fortis and KBC Bancassurance Holding. They were respectively the Fund's largest and second-largest positions at the end of the reporting period. Utilities such as Electrabel (the Fund's third-largest stock as of February 28, 2001) also benefited from expectations that interest rates might decline. Electrabel's removal from the Dow Jones Eurostoxx 50 Index in September did, however, drive some capital out of the stock. And, as it turned out, the European Central Bank refrained from cutting interest rates during the reporting period. Many market observers expected it to do so in the second quarter, though, which helped to support utilities and financial stocks. Overall, Belgium's Old Economy orientation spared it from the severe losses that befell its technology- and telecommunications-laden neighbors. But, as in most foreign markets, the U.S. dollar's strength over much of the reporting period did suppress the returns of dollar-based investors in Belgium. Although the Belgian economy continued to expand at a healthy pace, there was some evidence that its rapid growth was leading to higher inflation. In November, for example, came news that the country's producer-price index had risen 7.8% in the 12 months ended September 30, 2000. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI BELGIUM INDEX FUND VS. THE MSCI BELGIUM INDEX* [GRAPHICS 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 02/28/01 13,025 14,777 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Belgium Index Fund $13,025* MSCI Belgium Index $14,777 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ----- --------- iShares MSCI Belgium Index Fund 5.65% 5.46% MSCI Belgium Index 4.22% 8.17% - ------------------ * 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 -13.84% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -11.11% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Brazil Fund underperformed the benchmark during the reporting period by 2.73 percentage points, due to the negative impact of portfolio sampling, uninvested assets and expenses. These factors lowered the Fund's returns by, respectively, 2.02, 0.55 and 0.49 percentage points. They were partially offset, however, by the positive impact of revenue differential, which added 0.33 percentage points to the Fund's returns. As stated in the introduction, certain portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the 5/50 Rule, the Brazil Fund was obligated to underweight stocks such as Ambev and Eletrobras. These stocks considerably outperformed the market during the reporting period, and the underweightings were the principal reason for the Fund's negative variance from the MSCI Brazil Index. KEY MARKET CONDITIONS External pressures weighed heavily on Brazil's equity market during the reporting period, overshadowing some positive results on both the corporate and economic front. Generally poor sentiment toward the emerging markets had a major impact on Brazil's equity market, whose liquidity has proved to be a double-edged sword. Often a prime beneficiary of capital inflows when emerging markets are in favor, Brazil's stock market also tends to suffer large outflows when investors become more pessimistic. That phenomenon drove down Brazil's liquid telecommunications stocks in particular, which had already been depressed by many investors' overall negativity toward the telecom sector since early 2000. Even good results from a number of telecom companies could not reverse the downturn. Sentiment toward Brazil was also worsened by the financial crisis in Argentina during the fall months. The crisis began to recede in December and January, helping the Brazilian market to post gains. But the market again faltered in February as the U.S. economy showed signs of weakening and another financial crisis emerged in Turkey. Despite a lack of significant links between Turkey and Brazil, Turkey's crisis only served to worsen sentiment toward the emerging markets. Higher energy prices also drove the Brazilian market down over the reporting period. Although rising oil prices were positive for one of Brazil's largest stocks, Petrobras, many investors viewed the trend as an overall negative for the market. Not only is Brazil a net importer of oil, but there was also growing concern that higher energy prices would drive up the country's inflation rate. Some investors found that prospect very unsettling, given the country's problems with hyperinflation in the past. Data showing that inflation was actually on the decline did little to calm investors' concerns, and government intervention to halt price increases only added to concern. Together, these factors weakened Brazil's currency, the REAL, and therefore, lowered returns for U.S. dollar-based investors in every month of the reporting period except December. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI BRAZIL (FREE) INDEX FUND VS. THE MSCI BRAZIL (FREE) INDEX* [GRAPHICS 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 12/31/00 8,259 8,481 02/28/01 8,359 8,619 Past performance is not predictive of future performance Value -------- iShares MSCI Brazil (Free) Index Fund - February 28, 2001 $8,359* MSCI Brazil (Free) Index - December 31, 2000 $8,481** MSCI Brazil (Free) Index - February 28, 2001 $8,619** AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION+ ---------- iShares MSCI Brazil (Free) Index Fund (16.41)% MSCI Brazil (Free) Index (13.81)% - ------------------ * 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. ** The MSCI Brazil (Free) Index changed from a Gross to Net Index effective December 31, 2000. + For the period July 11, 2000 (commencement of operations) through February 28, 2001 (not annualized). 7 PERFORMANCE REVIEW ISHARES, INC. - -------------------------------------------------------------------------------- CANADA PERFORMANCE REVIEW The total return of the iShares MSCI Canada Index Fund (the "Canada Fund") was -27.72% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -32.73% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Canada Fund outperformed the benchmark by 5.01 percentage points over the reporting period, primarily due to the positive impact of portfolio sampling, which contributed 5.09 percentage points to the Fund's returns. Revenue differential and the effect of uninvested assets also added 0.32 and 0.02 percentage points, respectively, to its returns. These factors were partially offset by the negative impact of expenses, which subtracted 0.42 percentage points from the Fund's returns. As stated in the introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. Due to the Single Issuer Rule, the managers of the Canada Fund were obligated to underweight Nortel Networks by approximately 18 percentage points as the reporting period began. As shares of Nortel depreciated sharply over the reporting period, the Investment Adviser added to the Fund's position in the stock so that at the end of the reporting period the Fund was underweighted in Nortel by only 3.5 percentage points. Nonetheless, the underweighting in Nortel was significant enough over the reporting period to enable the Fund to outperform the Index by a significant margin. KEY MARKET CONDITIONS The MSCI Canada Index suffered a series of large declines during the six months ended February 28, 2001. A major factor in that downturn was the very weak performance of Nortel Networks, the largest stock in the Index and a bellwether of the optical-networking industry. Until the fall of 2000, that segment had been one of the few areas of the communications sector unscathed by a widespread downturn. But when, in October, Nortel announced revenues that fell short of analysts' expectations, its shares dropped sharply. Nortel disappointed many investors again in February, when it warned that it would post a first-quarter loss. The company also reduced its growth forecast due to the slowing U.S. economy and said that it would cut 10,000 jobs. These announcements led to another steep decline in Nortel's stock. While Nortel's woes put pressure on the MSCI Canada Index over much of the reporting period, a few stocks still managed to post good results. Electronics manufacturer Celestica, for example, reported fourth-quarter results that were significantly better than most investors had expected. Its shares posted gains after the results were announced. Financial-service companies, in general, also benefited from lower interest rates, while gold-mining concerns were temporarily boosted by speculation that the price of gold would rise. Despite the slowdown in the United States, the Canadian economy continued to expand during the reporting period. The Bank of Canada estimated that the country's GDP expanded at an annual rate of about 5% in 2000. But by late 2000 that pace of growth, coupled with high energy prices, helped to drive Canada's inflation rate to its highest level in almost nine years. Employment levels also came in stronger than many investors had expected. Yet the Bank of Canada nonetheless opted to lower interest rates in January, apparently in an effort to offset the impact of the U.S. slowdown. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCICANADA INDEX FUND VS. THE MSCI CANADA INDEX* [GRAPHICS 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 24,597 27,448 02/28/01 17,780 18,463 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Canada Index Fund $17,780* MSCI Canada Index $18,463 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- iShares MSCI Canada Index Fund (6.14)% 12.27% MSCI Canada Index (12.63)% 13.12% - ------------------ * 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 MSCIIndex 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 - -12.79% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -12.37% over the same period. SIGNIFICANT PERFORMANCE FACTORS The EMU Fund underperformed the benchmark by 0.42 percentage points, due to the negative impact of expenses and revenue differential, which subtracted 0.42 and 0.24 percentage points, respectively, from the Fund's returns. Those factors were partially offset by the positive impact of portfolio sampling and the effect of uninvested assets, which contributed 0.21 and 0.03 percentage points, respectively, to the Fund's returns. KEY MARKET CONDITIONS The period from September 1, 2000, through February 28, 2001, was marked by significant volatility in the MSCI EMU Index. Telecommunications and Electrical & Electronics stocks were by far the most volatile, driven down by poor sentiment and concerns about slowing global demand. This trend fell very heavily on Nokia, one of the Fund's largest stocks. In January, Nokia's stock experienced a sell-off when the company announced that its sales of mobile phones in 2000 had fallen short of some analysts' expectations. The repercussions of that announcement helped drive down other telecom stocks, such as Deutsche Telekom and Telefonica. While telecommunications and technology-related shares sank, investors shifted to areas of the market that are traditionally regarded as more stable, including the financial sector. Financial stocks such as Allianz and ING Groep also rose in anticipation of lower interest rates, although the European Central Bank (ECB) ultimately did not cut rates before the end of the reporting period. Yet many investors expected the ECB to do so in the second quarter, and those expectations helped to support European financial shares. Meanwhile, high crude oil prices translated into good results for stocks such as Royal Dutch/Shell and TotalFinaElf, two of the Fund's largest holdings as of February 28, 2001. But high energy prices depressed profit margins in other sectors, disappointing investors in some companies and leading some to sell off their shares. As the reporting period drew to a close, many investors became increasingly concerned about the economic slowdown in the United States. In February the MSCI EMU Index posted its worst monthly loss of the period, with a decline of 8.87% in local-currency terms (9.89% in U.S. dollar terms). COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI EMU INDEX FUND VS. THE MSCI EMU INDEX* [GRAPHICS 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 02/28/01 8,213 8,256 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI EMU Index Fund $8,213* MSCI EMU Index $8,256 AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION+ ------------ iShares MSCI EMU Index Fund (17.87)% MSCI EMU Index (17.44)% - ------------------ * 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 February 28, 2001 (not annualized). 9 PERFORMANCE REVIEW ISHARES, INC. - -------------------------------------------------------------------------------- FRANCE PERFORMANCE REVIEW The total return of the iShares MSCI France Index Fund (the "France Fund") was -16.77% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -16.35% over the same period. SIGNIFICANT PERFORMANCE FACTORS The France Fund underperformed the benchmark during the reporting period by 0.42 percentage points, due to the negative impact of expenses and revenue differential, which respectively subtracted 0.42 and 0.29 percentage points from the Fund's returns. These factors were partially offset by the positive impact of portfolio sampling, which added 0.29 percentage points to the Fund's returns. KEY MARKET CONDITIONS French equities were depressed by deceleration in the U.S. economy and by investors' retreat from telecommunications stocks over much of the reporting period. Sentiment toward the telecom sector waxed and waned in late 2000 and early 2001, but overall it was pessimistic. Many investors became increasingly concerned about the high levels of debt telecom operators had taken on in order to secure licenses for third-generation cellular networks. Several telecom companies also announced that they were expecting slower growth in 2001. The news drove down shares of France Telecom and telecom-equipment manufacturer Alcatel, among others. High energy prices also took their toll on the French equity market, by pressuring profit margins and kindling inflation. Rising inflation was apparently a major factor in the European Central Bank's decision not to lower interest rates over the reporting period. In contrast, the U.S. Federal Reserve Board decreased American rates by a full percentage point in the month of January alone. Higher oil prices were, however, positive for integrated oil and gas company TotalFinaElf, the Fund's largest holding as of February 28, 2001. Although many investors expected the U.S. economic slowdown to dampen U.S. retail sales as 2001 progressed, consumer demand remained strong enough in late 2000 and early 2001 to deliver better-than-expected profits to companies such as L'Oreal. L'Oreal said that those earnings were driven in large part by new acquisitions in the United States. Likewise, several other companies in the MSCI France Index reported that recent acquisitions in the U.S. were having a positive impact on their bottom line. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI FRANCE INDEX FUND VS. THE MSCI FRANCE INDEX* [GRAPHICS 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 02/28/01 20,505 20,720 Past performance is not predictive of future performance Value February 28, 2001 ----------------- Shares MSCI France Index Fund $20,505* MSCI France Index $20,720 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI France Index Fund (16.52)% 15.54% MSCI France Index (16.33)% 15.78% - ------------------ * 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 -9.29% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -8.56% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Germany Fund underperformed the benchmark during the reporting period by 0.73 percentage points, primarily as a result of expenses and revenue differential, which respectively subtracted 0.42 and 0.15 percentage points from the Fund's returns. Portfolio sampling and the effect of uninvested assets subtracted an additional 0.12 and 0.04 percentage points, respectively, from returns. KEY MARKET CONDITIONS Germany's "old economy" components helped lend it some support during a volatile period for stock markets around the world. Although the MSCI Germany Index did post a significant loss, its performance was better than that of neighboring countries with larger technology and telecommunications sectors. As data began to reveal a major slowdown in the U.S. economy, many investors in Germany's market turned to the perceived safety of banks and insurers. Together, those two sectors represented more than 30% of the Fund as of February 28, 2001. Many investors also favored utilities, a sector that in the past has fared relatively well during economic downturns. Shares of utility E.On, formed from the merger of Viag and Veba, were a prime beneficiary of investors' caution during the first quarter. The resilience of Germany's banks, insurers and utilities helped somewhat to offset sharp declines in several of the market's "new economy" names. Siemens, Deutsche Telekom and SAP -- respectively the Fund's second-, third-, and fourth-largest holdings as of February 28, 2001 -- all posted significant declines in late 2000 and early 2001. Like utilities and financial stocks, shares of Germany's automakers also benefited for a while as many investors began to favor large, stable companies over more aggressive investments during the reporting period. But weak sales at DaimlerChrysler's U.S. division led some investors to sell off the stock. Analysts noted that DaimlerChrysler's results likely would have been more disappointing had the euro's weakness versus the U.S. dollar not helped prop up the company's earnings. In fact the euro's weakness was an overall boon for Germany's exporters, but the U.S. economic slowdown was beginning to cast a shadow over exports as the reporting period ended. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI GERMANY INDEX FUND VS. THE MSCI GERMANY INDEX* [GRAPHICS 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 02/28/01 16,587 17,232 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Germany Index Fund $16,587* MSCI Germany Index $17,232 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Germany Index Fund (24.52)% 10.71% MSCI Germany Index (24.54)% 11.57% - ------------------ * 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 -9.03% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -8.49% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Hong Kong Fund underperformed the benchmark during the reporting period by 0.54 percentage points, as a result of the negative impact of expenses, revenue differential and portfolio sampling. Respectively, these factors subtracted 0.42, 0.26, and 0.11 percentage points from the Fund's returns. They were partially offset by the positive impact of uninvested assets, however, which added 0.25 percentage points to the Fund's returns. KEY MARKET CONDITIONS As in the past, Hong Kong's equity market was acutely sensitive to trends in the U.S. economy over the reporting period. Given that Hong Kong interest rates are pegged to those of the U.S., and that Hong Kong's stock market is dominated by interest rate-sensitive stocks, the MSCI Hong Kong Index tends to rise and fall as investors anticipate ups and downs in the U.S. economy and corresponding changes in U.S. interest rates. Over the first few months of the reporting period, Hong Kong's equity market declined as the U.S. Federal Reserve Board (the "Fed") refrained from lowering interest rates. In December, investors began to anticipate that the Fed would, in fact, lower rates in early 2001, and the Hong Kong market rallied. The Fed finally did lower interest rates by a full percentage point in January, helping to keep the rally going. Liquid stocks such as Sun Hung Kai Properties, Hang Seng and Henderson Land Development were among the issues that benefited from lower rates. The Hong Kong market again dropped in February, however, after Fed Chairman Alan Greenspan indicated that the Fed did not intend to cut rates again right away. Signs that both the U.S. and Japanese economies were slowing significantly added to the pressure, especially on exporters. For example, shares of Johnson Electric dropped after data were released showing that U.S. manufacturing activity had slowed in December to its lowest level in a decade. The weakest segment of the market was the telecommunications sector. Pacific Century CyberWorks (PCCW), one of the Fund's top 10 holdings over the reporting period, posted several sharp declines as many investors became more concerned that the telecom industry's growth potential was waning. These declines were on top of those PCCW had already incurred when, in February 2000, it announced plans to acquire Cable & Wireless HKT. In this environment, companies that failed to meet expectations saw their stock prices decline sharply. Just before the reporting period ended, shares of conglomerate Hutchison Whampoa dropped nearly 8% in a single day after the company's pretax profits for 2000 came in short of consensus estimates. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI HONG KONG INDEX FUND VS. THE MSCI HONG KONG INDEX* [GRAPHICS 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 02/28/01 11,068 12,711 Past performance is not predictive of future performance Value February 28, 2001 ----------------- Shares MSCI Hong Kong Index Fund $11,068* MSCI Hong Kong Index $12,711 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Hong Kong Index Fund (8.65)% 2.06% MSCI Hong Kong Index (12.36)% 4.94% - ------------------ * 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 - -7.02% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -8.10% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Italy Fund outperformed the benchmark by 1.08 percentage points, due to the positive impact of portfolio sampling and the effect of uninvested assets, which respectively contributed 1.82 and 0.06 percentage points to the Fund's returns. These factors were partially offset by the negative impact of expenses, which subtracted 0.42 percentage points from the Fund's returns, and revenue differential, which subtracted 0.38 percentage points. As stated in the introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the 5/50 Rule, the Fund was obligated to underweight the telecommunications sector of the MSCI Italy Index. This sector underperformed during the period, causing the Fund to outperform its benchmark. KEY MARKET CONDITIONS Negative economic news and continued pessimism about the telecommunications sector frequently pressured the Italian equity market from September 2000 through February 2001. Telecom stocks such as Telecom Italia Mobile and Telecom Italia remained out of favor over most of the reporting period. Collectively, those stocks accounted for nearly one-fourth of the Fund's total net assets as of February 28, 2001. Indications that the U.S. economy was slowing significantly also led to sell-offs in Italy and other European markets over the fall months and again in February. January provided a brief respite, when the U.S. Federal Reserve Board lowered interest rates. There were some expectations in late 2000 that the European Central Bank ("ECB") might do the same. The prospect of lower interest rates in Europe helped to lift Italian banking stocks for a time. As it turned out, however, the ECB kept rates untouched through the end of the reporting period, apparently to contain inflation that had begun to creep above the Bank's 2.0% target. Financial stocks nonetheless continued to be supported by expectations that the ECB would lower interest rates in the second quarter despite the uptick in inflation. A prime cause of the rising inflation was higher energy prices, which pressured profits at several Italian companies. The same trend helped to push up shares of integrated energy company Eni, however, the Fund's second-largest position at the close of the reporting period. But the stock did not rally as much as might have been expected. Some investors apparently remain concerned about Eni's declining market share at home and its difficulty in making significant strategic acquisitions that would help it compete with large multinational energy companies such as Exxon and Mobil. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI ITALY INDEX FUND VS. THE MSCI ITALY INDEX* [GRAPHICS 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 02/28/01 21,017 20,899 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Italy Index Fund $21,017* MSCI Italy Index $20,899 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Italy Index Fund (15.02)% 16.11% MSCI Italy Index (15.18)% 15.98% - ------------------ * 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 - -24.10% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -23.96% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Japan Fund underperformed the benchmark during the reporting period by 0.14 percentage points, due to the negative impact of expenses, which subtracted 0.42 percentage points from the Fund's returns. This factor was partially offset by the positive impact of revenue differential, portfolio sampling and the effect of uninvested assets. Respectively, these factors contributed 0.17, 0.10 and 0.01 percentage points to the Fund's returns over the reporting period. KEY MARKET CONDITIONS The MSCI Japan Index posted a loss in local-currency terms in every month of the reporting period except January. Several factors drove the market down. One factor was the ongoing correction in the electronic-components and telecommunications sectors, respectively 6.37% and 4.37% of the Fund's total net assets as of February 28, 2001. Semiconductor stocks bore the brunt of market pessimism, reflecting growing concerns about slowing global demand. Those concerns were heightened by the rapid cooling of the U.S. economy, a trend that pressured the Japanese market as a whole over the reporting period. As it became more apparent to investors that U.S. consumer demand had declined, consumer-electronics stocks such as Sony dropped in price. Japan's stock market recovered modestly in January 2001, as the U.S. Federal Reserve Board (the "Fed") cut interest rates by a full percentage point. When Fed Chairman Alan Greenspan stated publicly that the Fed was not planning another immediate cut in interest rates, Japanese equities retreated again. The market's decline was worsened by signals that the Japanese economy was also slowing rapidly. The deterioration of Japan's economy led rating agencies Standard & Poor's, Moody's and Fitch to downgrade the country's sovereign debt. It also led some investors to call for the resignation of Prime Minister Yoshiro Mori, whom many believed was reluctant to institute reforms needed to revive the country's economy. Both of these developments contributed to poor sentiment among investors. For its part, Japan's central bank did move to cut interest rates in February, helping to bolster banking stocks. Their recovery was reined in, however, by continued weakness in other areas of the market. Many investors worried about how the market's overall decline would affect banks such as Mizuho Holdings that have extensive investments in the Japanese equity market. The extent of bad loans at many banks was another ongoing source of concern. By the end of the reporting period, the Nikkei 225 Average had fallen to a 15-year low. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI JAPAN INDEX FUND VS. THE MSCI JAPAN INDEX* [GRAPHICS 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 02/28/01 7,417 7,815 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Japan Index Fund $7,417* MSCI Japan Index $7,815 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Japan Index Fund (27.97)% (5.83)% MSCI Japan Index (27.25)% (4.84)% - ------------------ * 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 Index Fund (the "Malaysia Fund") was -10.48% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -10.01% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Malaysia Fund underperformed the benchmark by 0.47 percentage points over the reporting period, due to the negative impact of expenses, portfolio sampling and revenue differential. These factors lowered the Fund's returns by, respectively, 0.42, 0.17 and 0.08 percentage points. They were partially offset, however, by the positive impact of uninvested assets, which contributed 0.20 percentage points to the Fund's returns. KEY MARKET CONDITIONS Malaysia was one of the better-performing markets in Asia over the six months ended February 28, 2001. While the MSCI South Korea and Taiwan Indices, for example, suffered losses of more than 24% over that period, the MSCI Malaysia Index declined a comparatively moderate 10%. Several factors were responsible. First, unlike most Asian nations, Malaysia is a net exporter of oil. That fact helped to buffer its equity market from the impact of higher energy costs. Second, Malaysia's smaller percentage of technology and telecommunications stocks meant that it was somewhat less affected by the sharp correction in that area. Financial stocks such as Malayan Banking and Commerce Asset Holdings were also driven up by renewed merger-and-acquisition activity during the reporting period. That said, toward the end of the reporting period, Malaysia's market did begin to reflect investor concern about the U.S. economic slowdown. Malaysia's recovery since the Asian financial crisis of 1997 and 1998 was driven in large part by strong demand for the country's electronics exports. Profits from that sector, in turn, helped to boost earnings for banks and other segments of Malaysia's economy in 2000. Given the country's dependence on electronics exports to the U.S., investors were apparently worried that a prolonged slowdown in the American economy would create challenges for Malaysia's economy. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI MALAYSIA (FREE) INDEX FUND VS. THE MSCI MALAYSIA (FREE) INDEX* [GRAPHICS 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 12/31/00 4,297 4,591 02/28/01 4,536 4,841 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Malaysia (Free) Index Fund - February 28, 2001 $4,536* MSCI Malaysia (Free) Index - May 31, 2000 $6,352** MSCI Malaysia (Free) Index - December 31, 2000 $4,591*** MSCI Malaysia (Free) Index - February 28, 2001 $4,841*** AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Malaysia (Free) Index Fund (28.04)% (14.70)% MSCI Malaysia (Free) Index (28.14)% (13.57)% - ------------------ * 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. ***The MSCI Malaysia (Free) Index changed from a Gross to Net Index effective December 31, 2000. 15 PERFORMANCE REVIEW ISHARES, INC. - -------------------------------------------------------------------------------- MEXICO (FREE) PERFORMANCE REVIEW The total return of the iShares MSCI Mexico (Free) Index Fund (the "Mexico Fund") was -14.41% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -11.38% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Mexico Fund underperformed the benchmark during the reporting period by 3.03 percentage points, due to the negative impact of portfolio sampling and expenses. These factors lowered the Fund's returns by, respectively, 2.89 and 0.42 percentage points. They were partially offset by the positive impact of uninvested assets and revenue differential, which respectively contributed 0.18 and 0.10 percentage points to the Fund's returns. As stated in the introduction, portfolio management constraints can restrict an Investment Adviser's ability to optimize a Fund's portfolio. To comply with the Single Issuer Rule, for example, the Mexico Fund was obligated to underweight Telefonos de Mexico over part of the reporting period. Because the share price of Telemex fell approximately 2% in the six-month period, this underweighting was partially responsible for the Fund's negative variance from the Index. However, with the spin-off of America Movil in early 2001 that is referenced below, Telefonos de Mexico's weight in the MSCI Mexico Index decreased enough that the Single Issuer Rule was no longer a constraint. KEY MARKET CONDITIONS Mexico's weak performance over the reporting period reflected deteriorating sentiment toward emerging markets and growing concern about the U.S. economic slowdown. Given that some 90% of Mexico's exports are destined for the United States, decelerating growth in the U.S. led many investors to sell off Mexican stocks at times. As the most liquid (and therefore most easily traded) stock in the MSCI Mexico Index, Telefonos de Mexico ("Telmex") often bore the brunt of those declines. But Telmex also led the market up when sentiment improved, as it did in October 2000 and again in January 2001, when the U.S. Federal Reserve Board cut U.S. interest rates. Telmex represented 21.26% of the Fund's total net assets on February 28, 2001. The belief that Telmex is a barometer of the wider Mexican economy was reinforced by the company's decision to spin off its cellular business during the reporting period. In September, the company announced that its cellular business would begin trading separately as an entity called America Movil in early 2001. The parent company's stock would reflect the performance of Telmex's traditional domestic operations, while shares of America Movil would be more a measure of the growth of cellular in international markets. Higher energy prices, the other major economic trend during the reporting period, were a mixed blessing for Mexico. As a net exporter of oil, the country benefited from rising crude-oil prices. At the same time, spiraling energy costs weighed on the results of several Mexican companies. Although external economic trends dominated the market's direction, domestic growth did help bolster some areas of Mexico's stock market over the reporting period. Specifically, construction and retail stocks benefited from higher consumer demand. Banks were another strong area of the market. The sector as a whole rose on expectations that the U.S. would cut interest rates. On an individual basis, Grupo Financiero Banamex Accival ("Banamex") was a standout; beginning in December, the stock was driven up by rumors that the bank might be acquired by Citigroup or another large financial-services firm. Although Banamex made no formal announcement about a merger through the end of the reporting period, its shares continued to be supported by positive inflation data, stock-analyst upgrades and other positive developments. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI MEXICO (FREE) INDEX FUND VS. THE MSCI MEXICO (FREE) INDEX* [GRAPHICS 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 14,604 16,055 02/29/00 19,632 22,171 08/31/00 18,723 20,885 12/31/00 15,169 17,261 02/28/01 16,024 18,507 Past performance is not predictive of future performance Value --------- iShares MSCI Mexico (Free) Index Fund - February 28, 2001 $16,024* MSCI Mexico (Free) Index - December 31, 2000 $17,261** MSCI Mexico (Free) Index - February 28, 2001 $18,507** AVERAGE ANNUAL TOTAL RETURN ONE YEAR SINCE INCEPTION -------- --------------- iShares MSCI Mexico (Free) Index Fund (18.37)% 9.95% MSCI Mexico (Free) Index (16.52)% 13.18% - ------------------ * 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. ** The MSCI Mexico (Free) Index changed from a Gross to Net Index effective December 31, 2000. 16 PERFORMANCE REVIEW ISHARES, INC. - -------------------------------------------------------------------------------- NETHERLANDS PERFORMANCE REVIEW The total return of the iShares MSCI Netherlands Index Fund (the "Netherlands Fund") was -8.50% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -7.68% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Netherlands Fund underperformed the benchmark by 0.82 percentage points over the reporting period, due to the negative impact of expenses, revenue differential and portfolio sampling. These factors subtracted 0.42, 0.35 and 0.07 percentage points, respectively, from the Fund's returns. Their impact was partially offset, however, by the positive impact of uninvested assets, which added 0.02 percentage points to the Fund's returns over the reporting period. KEY MARKET CONDITIONS Although the Dutch equity market was generally weak during the reporting period, its performance was significantly better than that of other developed markets with large technology and telecommunications components. With sentiment toward those sectors remaining pessimistic in late 2000 and early 2001, many investors sought out defensive issues, such as the Netherland's multinational energy, insurance, financial-services and consumer-oriented firms. As of February 28, 2001, these sectors accounted for more than two-thirds of the Fund's assets. Several macroeconomic trends also helped support the Netherlands' largest stocks. Rising oil prices, for example, lifted shares of Royal Dutch/Shell, the Fund's largest holding as of February 28, 2001. Although higher oil prices helped the company's profits increase by 80% in the third quarter of 2000, those results were on the lower end of analysts' expectations. As a result, its shares dropped. The share price made up some ground in February, however, when Royal Dutch/Shell announced plans to buy back some of its shares and continued to improve its profit margins through cost-cutting measures. For the period, the company returned -4.07% in U.S. dollar terms. Meanwhile, the possibility of lower interest rates was beneficial to the Netherlands' large contingent of financial-services firms. These expectations resulted in gains for stocks such as ING Groep during the fall. But, although the U.S. Federal Reserve Board did lower interest rates by a full percentage point in January 2001, the European Central Bank did not follow suit. The U.S. dollar's strength was another boon for Dutch exporters such as Heineken during the fall of 2000; the trend made Dutch goods more competitive in the U.S. consumer market. As the reporting period ended, however, the dependence of many Dutch companies on U.S. demand became more of a liability. Signs that U.S. consumers were cutting back on their spending created doubts about the prospects for Dutch exporters such as Philips Electronics. The positive effects of lower interest rates and the strong dollar were not enough to offset the negative market conditions that affected markets globally. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI NETHERLANDS INDEX FUND VS. THE MSCI NETHERLANDS INDEX* [GRAPHICS 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 14,236 14,680 02/28/98 16,810 17,273 08/31/98 16,715 16,824 02/28/99 16,958 17,573 08/31/99 18,216 18,862 02/29/00 18,076 19,157 08/31/00 18,450 19,730 02/28/01 16,881 18,215 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Netherlands Index Fund $16,881* MSCI Netherlands Index $18,215 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------- --------- iShares MSCI Netherlands Index Fund (6.61)% 11.10% MSCI Netherlands Index (4.92)% 12.82% - ------------------ * 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 (Free) Index Fund (the "Singapore Fund") was -12.09% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -11.53% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Singapore Fund underperformed the benchmark by 0.56 percentage points over the reporting period, due to the negative impact of expenses, portfolio sampling and revenue differential. These factors subtracted 0.42, 0.14 and 0.06 percentage points, respectively, from the Fund's returns. They were partially offset, however, by the positive impact of uninvested assets, which added 0.06 percentage points to the Fund's returns. KEY MARKET CONDITIONS Like many stock markets around the world, Singapore was negatively affected by deteriorating economic conditions and market sentiment during the reporting period. Signs that the U.S. economy was rapidly slowing dampened market sentiment. The ongoing correction in technology and telecommunications-related sectors was another chief cause of the market's decline. The correction continued to hit stocks such as Chartered Semiconductor Manufacturing (one of the Fund's top 10 holdings as of February 28, 2001) and Singapore Telecommunications especially hard. Beyond the broad-scale slowdown in the technology sector, disappointments at individual companies also weighed on the market from time to time. In mid-November, for example, shares of Singapore Technologies Engineering dropped 12% in one day when the company lost a multi-billion dollar contract to build light armored vehicles for the U.S. Army. (The stock was the Fund's fifth-largest holding as of February 28, 2001.) While technology and telecom stocks posted relatively few up days, the performance of Singapore's two other large sectors -- banking and real-estate stocks -- was more mixed over the reporting period. Like the market's technology shares, banking stocks such as DBS Group Holdings and Overseas-China Banking Corporation were sold off when sentiment toward the emerging markets weakened. They rallied in late 2000 and early 2001, however, as many investors began to anticipate an interest-rate cut in the United States. As it turned out, the U.S. Federal Reserve Board did lower interest rates by a full percentage point in January 2001, helping to support Singapore's equity market. Lower interest rates also helped to propel real-estate stocks such as CapitaLand and City Developments Ltd. Near the end of the reporting period, the market was also bolstered by the Singapore government's decision to cut corporate taxes. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI SINGAPORE (FREE) INDEX FUND VS. THE MSCI SINGAPORE (FREE) INDEX* [GRAPHICS 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 02/28/01 5,863 6,238 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Singapore (Free) Index Fund $5,863* MSCI Singapore (Free) Index $6,238 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Singapore (Free) Index Fund (7.84)% (10.18)% MSCI Singapore (Free) Index (10.27)% (9.06)% - ------------------ * 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 returned -22.30% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -24.47% over the same period. SIGNIFICANT PERFORMANCE FACTORS The South Korea Fund outperformed the benchmark by 2.17 percentage points over the reporting period, due to the positive impact of portfolio sampling, which added 2.88 percentage points to the Fund's returns. It was partially offset by the negative impact of expenses, revenue differential and the effect of uninvested assets. Those three factors lowered the Fund's returns by, respectively, 0.49, 0.17 and 0.05 percentage points over the reporting period. As stated in the introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. 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, during the reporting period. Due to the 5/50 Rule, the Fund was also underweighted in the electronic-components industry as a whole. Samsung and other electronic-components stocks significantly underperformed other areas of the South Korean equity market during the reporting period. As a result, the Fund's underweightings in Samsung and the electronic-components industry as a whole helped the Fund outperform the Index. KEY MARKET CONDITIONS Like most Asian stock markets, the South Korean market posted significant losses during the reporting period. In large part, that performance reflected weakness in the market's largest and most influential component, Samsung Electronics. Although the Fund was obligated to underweight the stock due to the Single Issuer Rule, Samsung Electronics still accounted for approximately 22% of the Fund's total net assets as of February 28, 2001. Over the six-month period, shares of Samsung Electronics depreciated by 10.57%. In addition, the corporation's various subsidiaries, including Samsung Display Devices and Samsung Electro-Mechanics, are large components of the Index in their own right. They also declined in value over the reporting period, as did South Korea Telecom, the Fund's second-largest holding. After posting severe declines over the fall -- including a drop of 17.28% in October alone -- the South Korean markeT began 2001 on an upswing. It was bolstered by improving sentiment toward the technology sector and by the U.S. Federal Reserve's decision to cut interest rates in January. That month, the MSCI South Korea Index rose 26.65% in local-currency terms. Its gain was even more pronounced in U.S. dollar terms, as the dollar weakened against South Korea's currency. Samsung Electronics led the market up, with the news that it had achieved record full-year profits for 2000. Shares of Pohang Iron & Steel also rose when it announced a joint venture with Australia's Broken Hill Proprietary to develop an iron ore mine in Western Australia. The Index reversed direction in February, however, declining 7.62% as sentiment toward technology stocks and the emerging markets again deteriorated. Growing concern about an economic slowdown in the United States and other countries led investors to sell off South Korea's export-oriented companies. By the end of the reporting period, negative sentiment continued to weigh on the 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* [GRAPHICS 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 12/31/00 5,909 5,583 02/28/01 6,930 6,608 Past performance is not predictive of future performance Value -------- iiShares MSCI South Korea Index Fund - February 28, 2001 $6,930* MSCI South Korea Index - December 31, 2000 $5,583** MSCI South Korea Index - February 28, 2001 $6,608** AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION+ ---------- iShares MSCI South Korea Index Fund (30.70)% MSCI South Korea Index (33.92)% - ------------------ * 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. ** The MSCI South Korea Index changed from a Gross to Net Index effective December 31, 2000. + For the period May 10, 2000 (commencement of operations) through February 28, 2001 (not annualized). 19 PERFORMANCE REVIEW ISHARES, INC. - -------------------------------------------------------------------------------- SPAIN PERFORMANCE REVIEW The total return of the iShares MSCI Spain Index Fund (the "Spain Fund") was 1.36% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -2.82% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Spain Fund outperformed the benchmark by 4.18 percentage points over the reporting period, due to the positive impact of portfolio sampling and uninvested assets, which added 4.48 and 0.21 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses and revenue differential, which respectively subtracted 0.42 and 0.09 percentage points from the Fund's returns. As stated in the introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. Due to the Single Issuer Rule, the Spain Fund was obligated to underweight Telefonica by maintaining an average weighting of 24% in that stock (versus Telefonica's average Index weighting of 30%). To comply with the 5/50 Rule, the Investment Adviser also underweighted the banking, energy, telecommunications and utilities sectors and overweighted other areas of the market. The stocks that the Fund was underweighting generally underperformed those that the Fund was overweighting. As a result, portfolio sampling was the primary reason why the Fund outperformed the MSCI Spain Index. KEY MARKET CONDITIONS Spain was one of the better-performing developed markets in the world over the reporting period. Its large contingent of banking stocks was boosted by expectations that interest rates would decline and by good results. In addition, both Banco Bilbao Vizcaya Argentaria (BBVA) and rival Banco Santander Central Hispano (BSCH) -- collectively 25% of the MSCI Spain Fund as of February 28, 2001 -- benefited from their expansion into Brazil and other Latin American markets. By the end of the reporting period, the European Central Bank ("ECB") had still not cut interest rates. A number of Spain's financial stocks nonetheless continued to perform fairly well, due in part to expectations that the ECB would eventually lower rates in the second quarter. Latin American expansion also helped to buoy Telefonica, the Fund's largest holding, despite negative sentiment toward telecom stocks. The company began the reporting period by announcing better-than-expected results, noting that its Latin America operations offset stagnating profits in its domestic wire-line business. Many other Spanish companies have been looking to markets abroad for growth opportunities and a more liberal regulatory environment. In December, electric utility Endesa announced plans to acquire the Dutch electricity and natural-gas distributor REMU. It has made less headway in its home market: In February, it abandoned merger talks with its rival Iberdrola, citing the heavy anti-trust conditions regulators were seeking to impose on the deal. Although Spain's market was not as hard-hit as those with even larger telecommunications components, exchange rates were unfavorable for U.S. dollar-based investors at times. As the market began to anticipate lower U.S. interest rates toward the end of 2000, that trend reversed course: In December, the MSCI Spain Index was up 1.44% in local-currency terms but up 9.4% in U.S. dollar terms. As the reporting period ended, it was unclear how much of an impact the U.S. economic slowdown would have on Spain's market. In the past, slower growth in the United States has translated into slower growth in Latin America. Given the growing dependence of many Spanish companies on the region, a repeat of that scenario may create a challenging environment for Spanish equities. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI SPAIN INDEX FUND VS. THE MSCI SPAIN INDEX* [GRAPHICS 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 22,686 23,707 02/29/00 24,902 27,540 08/31/00 22,275 24,275 02/28/01 22,578 23,591 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Spain Index Fund $22,578* MSCI Spain Index $23,591 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Spain Index Fund (9.33)% 17.80% MSCI Spain Index (14.34)% 18.84% - ------------------ * 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 -30.68% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -31.97% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Sweden Fund outperformed the benchmark by 1.29 percentage points over the reporting period, due to the positive impact of portfolio sampling and uninvested assets. Those factors added 1.72 and 0.19 percentage points, respectively, to the Fund's returns. They were partially offset, however, by the negative impact of expenses and revenue differential, which subtracted 0.42 and 0.20 percentage points, respectively. As stated in the introduction, portfolio management constraints can affect the Investment Adviser's ability to optimize a Fund's portfolio. Due to the Single Issuer Rule, the Sweden Fund was obligated to underweight Ericsson. The Fund's average weighting in Ericsson over the reporting period was 24%, versus the Index average of 41.2%. Shares of Ericsson depreciated by 56.4% during that period. At the same time, the portfolio was overweighted in other securities, which outperformed Ericsson. KEY MARKET CONDITIONS The MSCI Sweden Index posted a significant loss during the reporting period. In September alone, it dropped 11.31% in local-currency terms. The country's largest stock by market capitalization, L.M. Ericsson, led the declines. In October, the company cut its profit forecast for the fourth quarter of 2000, citing continued weakness in its cell-phone handset business. Its shares fell. Other stocks in the Index faced significant, if less extreme, declines during the fall months. Shares of OM Gruppen, which operates the Stockholm Stock Exchange, dropped after the company's hostile bid to acquire the London Stock Exchange was rejected by LSE shareholders. In December, shares of Telia, Sweden's national telecom operator, fell after the company failed to win a third-generation mobile-phone license in its home market. The continued weakness of the Swedish krona against the U.S. dollar added to losses for U.S. dollar-based investors during the autumn. That trend reversed course in December, however, as many global investors began to anticipate a decline in U.S. interest rates. Those expectations were realized when the U.S. Federal Reserve cut rates in early January, helping to boost telecom and technology stocks in Sweden and other markets. The respite was short-lived, however. In late January, Ericsson again surprised many investors with an announcement that it was quitting mobile phone production. It also cut its forecast for sales growth in 2001, leading to another major downturn in its stock price. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI SWEDEN INDEX FUND VS. THE MSCI SWEDEN INDEX* [GRAPHICS 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 19,590 20,846 02/29/00 31,615 37,492 08/31/00 27,260 31,626 02/28/01 18,896 21,515 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Sweden Index Fund $18,896* MSCI Sweden Index $21,515 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION -------- --------- iShares MSCI Sweden Index Fund (40.23)% 13.65% MSCI Sweden Index (42.62)% 16.66% - ------------------ * 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 -0.19% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -0.84% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Switzerland Fund outperformed the benchmark by 0.65 percentage points over the reporting period due to the positive impact of portfolio sampling and uninvested assets. These factors added 1.34 and 0.04 percentage points, respectively, to the Fund's returns. They were partially offset, however, by the negative impact of expenses and revenue differential, which subtracted 0.42 and 0.31 percentage points, respectively, from the Fund's returns. As stated in the introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. As of February 28, 2001, more than 70% of the MSCI Switzerland Index was comprised of names with weightings 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 a total of 50% of its assets was in companies weighted 5% or more. The outperformance of some of these overweighted positions was the principal cause of the Fund's positive variance from the MSCI Switzerland Index. KEY MARKET CONDITIONS Switzerland's equity market was comparatively sheltered from the volatility affecting other markets in Europe over the reporting period. Amid a great deal of economic uncertainty, many investors sought out Switzerland's large, stable "old economy" firms -- particularly in health & personal care, banking, food & household products and insurance. Collectively, these sectors comprised nearly 70% of the Fund's total net assets as of February 28, 2001. (Their representation would have been even larger had the Fund not underweighted some of these issues to comply with the 5/50 Rule.) Swiss banking stocks such as UBS AG also benefited from strong corporate results and from expectations that interest rates would decline. In October, UBS announced that its third-quarter 2000 profits had increased by 73%. It again reported good results in February, helped by its recent acquisition of U.S. broker PaineWebber. (The deal made UBS the world's largest private banking firm.) The Swiss Central Bank did not lower interest rates during the reporting period, however, subduing the financial sector somewhat. Consumer-oriented stocks were another relatively strong area of the Swiss market. Shares of Nestle, the Fund's second-largest holding as of February 28, rose in early 2001 after the company announced that its profits rose 22% in 2000. Swiss equities also benefited from positive trends in the domestic economy during the first part of the reporting period. The Organization of Economic Cooperation & Development ("OECD") estimated that, in 2000, the Swiss economy grew at its fastest rate in 10 years. Yet the Swiss market was not completely immune to the impact of global economic trends. For example, ABB Ltd., Europe's largest industrial-engineering company, underperformed analysts' expectations due to sluggish demand and its stock declined. The ongoing economic slowdown in the United States, and a more acute crisis in Turkey, were also pressuring Swiss stocks as the reporting period ended. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI SWITZERLAND INDEX FUND VS. THE MSCI SWITZERLAND INDEX* [GRAPHICS 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 02/28/01 14,988 15,910 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Switzerland Index Fund $14,988* MSCI Switzerland Index $15,910 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------- --------- iShares MSCI Switzerland Index Fund 10.45% 8.48% MSCI Switzerland Index 11.19% 9.79% - ------------------ * 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 -25.59% for the six-month period ended February 28, 2001. The corresponding MSCI Index returned -25.76% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Taiwan Fund outperformed the benchmark by 0.17 percentage points over the reporting period, due to the positive impact of uninvested assets, portfolio sampling and revenue differential. These factors respectively contributed 0.45, 0.16 and 0.05 percentage points to the Fund's returns over the reporting period. They were partially offset, however, by the negative impact of expenses, which lowered the Fund's returns by 0.49 percentage points. KEY MARKET CONDITIONS The MSCI Taiwan Index Fund's performance reflected a very difficult period for the electronic components sector, a major component of Taiwan's equity market. Although a prolonged correction had slightly reduced its weighting in the index, the electronic components sector still comprised 45.74% of the Taiwan Fund's total net assets as of February 28, 2001. Growing concern about a widespread technology slowdown led to sharp declines in stocks such as Taiwan Semiconductor Manufacturing and United Microelectronics. Those two issues collectively accounted for 28.89% of the Fund as of February 28. The U.S. dollar's strength over much of the reporting period heightened these losses for U.S.-dollar based investors. Sentiment did improve in early 2001 with the U.S. Federal Reserve's decision to lower interest rates. Taiwan's central bank followed suit, cutting interest rates by a quarter of a percentage point. The move boosted financial stocks such as Cathay Life Insurance, the Fund's third-largest holding as of February 28. The lower rates, coupled with many investors' more optimistic view toward the technology industry, helped the Taiwanese market stage a major comeback in January; that month, the MSCI Taiwan Index rose 26.47% in local-currency terms-after having declined 8.08% in December. A weakening of the U.S. dollar also magnified returns for U.S. dollar-based investors in January. But the recovery was short-lived. In February, both Taiwan Semiconductor Manufacturing and United Microelectronics warned investors that they expected disappointing sales in 2001. The news contributed to the MSCI Taiwan Index's 7.33% decline in February. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI TAIWAN INDEX FUND VS. THE MSCI TAIWAN INDEX* [GRAPHICS 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 12/31/00 5,469 5,441 02/28/01 6,540 6,523 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI Taiwan Index Fund - February 28, 2001 $6,540* MSCI Taiwan Index - December 31, 2000 $5,441** MSCI Taiwan Index - February 28, 2001 $6,523** AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION+ ---------- iShares MSCI Taiwan Index Fund (34.60)% MSCI Taiwan Index (34.77)% - ------------------ * 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. ** The MSCI Taiwan Index changed from a Gross to Net Index effective December 31, 2000. + For the period June 21, 2000 (commencement of operations) through February 28, 2001 (not annualized). 23 PERFORMANCE REVIEW ISHARES, INC. - -------------------------------------------------------------------------------- UNITED KINGDOM PERFORMANCE REVIEW The total return of the iShares MSCI United Kingdom Index Fund (the "U.K. Fund") was -9.72% over the six-month period ended February 28, 2001. The corresponding MSCI Index returned -9.54% over the same period. SIGNIFICANT PERFORMANCE FACTORS The United Kingdom Fund underperformed the benchmark during the reporting period by 0.18 percentage points, due to the negative impact of expenses and portfolio sampling, which respectively subtracted 0.42 and 0.01 percentage points from the Fund's returns. These factors were partially offset by the positive impact of uninvested assets and revenue differential, which added 0.17 and 0.08 percentage points to the Fund's returns. KEY MARKET CONDITIONS The U.K. Fund's performance in late 2000 and early 2001 reflected a continuing shift from "new economy" stocks to "old economy" shares. As the U.S. economy slowed, many international investors favored large, stable companies in the U.K.'s banking and health and personal care sectors. Banking shares were given a further boost by expectations that the Bank of England might lower interest rates -- which it did in early February. Several U.K. pharmaceutical companies also reported fairly good results, driven in part by strong U.S. sales growth. Soon after the merger between Glaxo Wellcome and SmithKline Beecham was completed in December, for example, the combined drug maker (trading as GlaxoSmithKline) reported better-than-expected earnings and its shares rose. That stock was the Fund's largest holding as of February 28, 2001. Energy stocks were also relatively strong, boosted by higher prices for crude oil. One of the companies benefiting from that trend was BP Amoco. In February, it announced that its fourth-quarter profits had doubled from their level a year earlier. BP's acquisition of the U.S. company Atlantic Richfield also made a positive contribution to its results. Contrasting sharply with the strength of these sectors was the ongoing weakness in the telecommunications sector. Company-specific factors also weighed on Vodafone Airtouch, one of the market's largest stocks. Many investors were concerned about the debt that Vodafone had assumed in order to win licenses for third-generation wireless networks in Europe. Some investors also worried about how the numerous acquisitions Vodafone had been making would affect its bottom line. Vodafone said that concern was unfounded when, in November, it announced that its profits had risen 24% over the first half of 2000. As the reporting period ended, the market appeared to be wary of repercussions from the U.S. economic slowdown. Given that companies such as GlaxoSmithKline depend heavily on the U.S. market, decelerating growth in the U.S. led to declines in shares of some U.K. exporters. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ISHARES MSCI UNITED KINGDOM INDEX FUND VS. THE MSCI UNITED KINGDOM INDEX* [GRAPHICS 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 02/28/01 16,727 17,134 Past performance is not predictive of future performance Value February 28, 2001 ----------------- iShares MSCI United Kingdom Index Fund $16,727* MSCI United Kingdom Index $17,134 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ------- --------- iShares MSCI United Kingdom Index Fund (7.11)% 10.90% MSCI United Kingdom Index (7.64)% 11.44% - ------------------ * 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 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI AUSTRALIA INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 22.57% 257,218 Commonwealth Bank of Australia $ 4,070,629 288,600 National Australia Bank Limited 4,552,139 309,738 Westpac Banking Corporation Limited 2,281,223 ----------- 10,903,991 ----------- BEVERAGES & TOBACCO 4.19% 35,984 British American Tobacco Australasia Limited 337,644 256,386 Coca-Cola Amatil Limited 696,179 392,704 Foster's Brewing Group Limited 989,341 ----------- 2,023,164 ----------- BROADCASTING & PUBLISHING 14.94% 404,664 News Corporation Limited 3,786,429 421,070 News Corporation Limited - Preferred 3,432,272 ----------- 7,218,701 ----------- BUILDING MATERIALS & COMPONENTS 2.37% 248,716 Boral Limited 294,522 253,812 CSR Limited 666,572 92,716 James Hardie Industries Limited 185,221 ----------- 1,146,315 ----------- BUSINESS & PUBLIC SERVICES 4.42% 48,620 Brambles Industries Limited 1,139,481 134,654 Computershare Limited 503,487 81,042 Mayne Nickless Limited 238,198 117,000 Transurban Group* 256,365 ----------- 2,137,531 ----------- CHEMICALS 0.34% 63,804 Orica Limited 162,447 ----------- CONSTRUCTION & HOUSING 0.43% 57,122 Leighton Holdings Limited 209,035 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 0.34% 163,592 ERG Limited 166,365 ----------- ENERGY SOURCES 6.93% 251,134 BHP Limited 2,771,116 169,364 Santos Limited 577,074 ----------- 3,348,190 ----------- FINANCIAL SERVICES 0.74% 58,188 Suncorp-Metway Limited++ 358,400 ----------- FOOD & HOUSEHOLD PRODUCTS 0.44% 298,740 Goodman Fielder Limited++ 212,975 ----------- FOREST PRODUCTS & PAPER 1.17% 150,878 Amcor Limited++ 460,068 54,392 PaperlinX Limited 104,070 ----------- 564,138 ----------- GOLD MINES 0.81% 17,420 Delta Gold Limited* 12,145 72,150 Newcrest Mining Limited 146,897 468,000 Normandy Mining Limited 233,059 ----------- 392,101 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- HEALTH & PERSONAL CARE 2.35% 13,000 Cochlear Limited $ 271,248 33,722 CSL Limited 643,445 37,648 FH Faulding & Company Limited 218,882 ----------- 1,133,575 ----------- INSURANCE 6.23% 226,044 AMP Limited 2,348,991 126,464 QBE Insurance Group Limited 663,455 ----------- 3,012,446 ----------- LEISURE & TOURISM 0.90% 85,280 TABCORP Holdings Limited 434,521 ----------- MERCHANDISING 4.12% 265,148 Coles Myer Limited 893,709 246,870 Woolworths Limited++ 1,096,096 ----------- 1,989,805 ----------- METALS - NON FERROUS 6.03% 493,194 Mount Isa Mines Holdings Limited 297,312 82,498 Rio Tinto Limited 1,432,289 282,620 WMC Limited 1,181,936 ----------- 2,911,537 ----------- METALS - STEEL 0.06% 62,764 OneSteel Limited* 28,295 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.32% 143,000 Futuris Corporation Limited 153,669 ----------- MULTI-INDUSTRY 3.18% 45,136 Howard Smith Limited 207,548 232,960 Pacific Dunlop Limited 151,426 141,440 Southcorp Limited 480,594 71,136 Wesfarmers Limited++ 696,978 ----------- 1,536,546 ----------- REAL ESTATE 5.86% 104,000 AMP Diversified Property Trust 130,840 364,000 Gandel Retail Trust 215,614 335,400 General Property Trust 476,815 111,878 Lend Lease Corporation Limited 876,764 130,000 Mirvac Group 241,101 113,048 Stockland Trust Group 236,506 386,386 Westfield Trust 654,216 ----------- 2,831,856 ----------- RECREATION, OTHER CONSUMER GOODS 0.64% 91,468 Aristocrat Leisure Limited 306,864 ----------- TELECOMMUNICATIONS 9.87% 1,449,864 Telstra Corporation Limited 4,771,397 ----------- UTILITIES - ELECTRICAL & GAS 0.75% 58,656 Australian Gas Light Company Limited 363,128 ----------- TOTAL COMMON STOCK - BASKET (Cost $51,865,015) 48,316,992 ----------- See accompanying notes to financial statements. 25 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) 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 $ 412 ----------- FOREST PRODUCTS & PAPER 0.00% 20 PaperlinX Limited 38 ----------- METALS - STEEL 0.00% 23 OneSteel Limited* 10 ----------- REAL ESTATE 0.00% 13,000 Mirvac Group-Options (Expiration Date 06/29/01) 68 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $481) 528 ----------- TOTAL INVESTMENTS (COST $51,865,496)+ 100.00% $48,317,520 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $52,177,881. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,461,713 Excess of tax cost over value (6,322,074) ----------- $(3,860,361) =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 26 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI AUSTRIA INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.99% BANKING 4.80% 11,046 Erste Bank der oesterreichischen Sparkassen AG $ 568,842 ----------- BEVERAGES & TOBACCO 11.64% 15,036 Austria Tabakwerke 956,835 10,458 BBAG Oesterreichische Brau Beteiligungs 423,156 ----------- 1,379,991 ----------- BUILDING MATERIALS & COMPONENTS 4.92% 26,404 Wienerberger Baustoffindustrie 582,747 ----------- BUSINESS & PUBLIC SERVICES 4.77% 15,372 Flughafen Wien 565,443 ----------- CHEMICALS 4.61% 6,944 Lenzing 546,297 ----------- ENERGY SOURCES 13.22% 19,348 OMV 1,567,155 ----------- INSURANCE 4.88% 3,038 Generali Holding Vienna 578,305 ----------- MACHINERY & ENGINEERING 8.77% 12,292 BWT 443,106 17,514 VA Technologie 596,722 ----------- 1,039,828 ----------- METALS - STEEL 3.71% 11,648 Boehler-Uddeholm 439,171 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MISCELLANEOUS MATERIALS & COMMODITIES 8.12% 10,976 Mayr-Melnhof Karton $ 530,213 20,454 RHI 431,678 ----------- 961,891 ----------- TELECOMMUNICATIONS 6.09% 126,448 Telekom Austria AG* 722,108 ----------- TRANSPORTATION - AIRLINES 3.57% 29,498 Austrian Airlines 423,442 ----------- UTILITIES - ELECTRICAL & GAS 20.89% 21,518 Oesterreichische Elektrizitaetswirtschafts - Class A 2,475,471 ----------- TOTAL COMMON STOCK - BASKET (Cost $12,368,284) 11,850,691 ----------- COMMON STOCK - NON-BASKET 0.01% UTILITIES - ELECTRICAL & GAS 0.01% 8 Osterreichische Elektrizitaetswirtsharfts - Class A 920 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $1,034) 920 ----------- TOTAL INVESTMENTS (COST $12,369,318)+ 100.00% $11,851,611 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $12,600,419. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 438,147 Excess of tax cost over value (1,186,955) ----------- $ (748,808) =========== See accompanying notes to financial statements. 27 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI BELGIUM INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.99% AUTOMOBILES 3.28% 1,638 D'Ieteren $ 352,927 ----------- BANKING 14.20% 714 Dexia 118,647 31,059 KBC Bancassurance Holding NV++ 1,408,384 ----------- 1,527,031 ----------- BEVERAGES & TOBACCO 4.35% 16,758 Interbrew* 467,097 ----------- CHEMICALS 3.98% 7,959 Solvay 427,435 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 3.28% 4,032 Barco NV 290,323 8,064 BarcoNet NV* 62,736 ----------- 353,059 ----------- FINANCIAL SERVICES 4.59% 12,390 Algmene Maatschappij voor Nijverheidskredit NV 493,353 ----------- HEALTH & PERSONAL CARE 4.64% 13,545 UCB 499,235 ----------- INDUSTRIAL COMPONENTS 0.44% 1,071 Bekaert NV 47,275 ----------- INSURANCE 22.73% 84,567 Fortis B 2,443,463 ----------- MERCHANDISING 9.27% 12,033 Colruyt NV 530,814 8,379 Delhaize-Le Lion 466,172 ----------- 996,986 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- METALS - NON FERROUS 2.45% 6,489 Union Miniere $ 263,157 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.62% 777 Glaverbel 66,844 ----------- MULTI-INDUSTRY 8.12% 756 Compagnie Benelux Paribas 45,189 1,239 Electrafina 201,329 1,470 Gevaert NV 61,169 1,974 Groupe Bruxelles Lambert++ 565,463 ----------- 873,150 ----------- RECREATION, OTHER CONSUMER GOODS 4.51% 22,281 Agfa Gevaert NV 485,194 ----------- TRANSPORTATION - SHIPPING 1.11% 1,680 Compagnie Maritime Belge 119,346 ----------- UTILITIES - ELECTRICAL & GAS 12.42% 5,901 Electrabel 1,334,933 ----------- TOTAL COMMON STOCK - BASKET (Cost $12,202,876) 10,750,485 ----------- COMMON STOCK - NON-BASKET 0.01% BANKING 0.01% 10 KBC Bancassurance Holding NV 453 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $456) 453 ----------- TOTAL INVESTMENTS (COST $12,203,332)+ 100.00% $10,750,938 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $12,936,654. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ -- Excess of tax cost over value (2,185,716) ----------- $(2,185,716) =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 28 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI BRAZIL (FREE) INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 3.27% 38,000 Empresa Brasileira de Aeronautica $ 353,315 19,000 Empresa Brasileira de Aeronautica Pfd 144,580 ----------- 497,895 ----------- BANKING 10.65% 98,724,000 Banco Bradesco Pfd 555,579 3,002,000 Banco do Estado de Sao Paulo Pfd 136,621 7,752,000 Banco Itau Pfd 646,790 6,118,000 Uniao de Bancos Brasileiros 284,419 ----------- 1,623,409 ----------- BEVERAGES & TOBACCO 7.05% 380,000 Companhia de Bebidas das Americas 91,118 2,750,000 Companhia de Bebidas das Americas Pfd 672,865 53,200 Souza Cruz 309,802 ----------- 1,073,785 ----------- BROADCASTING & PUBLISHING 0.74% 133,000 Globo Cabo Pfd* 112,596 ----------- BUILDING MATERIALS & COMPONENTS 0.27% 1,425,000 Duratex Pfd 41,491 ----------- CHEMICALS 0.72% 361,000 Copene Petroquimica do Nordeste Pfd A Shares 110,413 ----------- ENERGY SOURCES 22.71% 10,260,000 Companhia Brasileira de Petroleo Ipiranga Pfd 71,848 55,100 Petroleo Brasileiro 1,550,673 68,400 Petroleo Brasileiro Pfd 1,837,947 ----------- 3,460,468 ----------- FOOD & HOUSEHOLD PRODUCTS 0.49% 114,000 Sadia Industria e Comercio Pfd 74,196 ----------- FOREST PRODUCTS & PAPER 2.33% 152,000 Aracruz Celulose Pfd B Shares 200,832 5,567,000 Votorantim Celulose e Papel Pfd 153,893 ----------- 354,725 ----------- MACHINERY & ENGINEERING 0.21% 25,859,000 Inepar Industria e Construcoes Pfd* 32,775 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MERCHANDISING 3.59% 15,865,000 Companhia Brasileira de Distribuicao Grupo Pao de Acucar Pfd $ 524,046 9,823,000 Lojas Americanas Pfd 23,554 ----------- 547,600 ----------- METALS - STEEL 13.49% 11,039,000 Companhia Siderurgica Nacional 375,439 58,900 Companhia Vale do Rio Doce Pfd A Shares 1,516,095 32,300 Usinas Siderurgicas de Minas Gerais Pfd A Shares 164,385 ----------- 2,055,919 ----------- TELECOMMUNICATIONS 21.44% 16,169,000 Embratel Participacoes 156,824 29,583,000 Embratel Participacoes Pfd 356,270 49,818,000 Tele Celular Sul Participacoes 78,987 46,987,000 Tele Celular Sul Participacoes Pfd 95,882 75,468,000 Tele Centro Oeste Celular Participacoes Pfd 275,873 21,128,000 Tele Centro Sul Participacoes 176,179 32,889,000 Tele Centro Sul Participacoes Pfd 337,983 70,357,000 Tele Nordeste Celular Participacoes Pfd 113,962 18,449,000 Tele Norte Leste Participacoes 290,526 39,368,000 Tele Norte Leste Participacoes Pfd 853,439 57,855,000 Telesp Celular Participacoes Pfd 530,845 ----------- 3,266,770 ----------- UTILITIES - ELECTRICAL & GAS 13.04% 43,092,000 Centrais Electricas Brasileiras 844,127 34,884,000 Centrais Electricas Brasileiras Pfd B Shares 623,081 74,271,000 Centrais Geradoras do Sul do Brasil* 114,850 19,893,000 Centrais Geradoras do Sul do Brasil Pfd* 31,541 24,833,000 Companhia Energetica de Minas Gerais Pfd 373,072 ----------- 1,986,671 ----------- TOTAL COMMON STOCK - BASKET (Cost $18,291,850) 15,238,713 ----------- TOTAL INVESTMENTS (COST $18,291,850)+ 100.00% $15,238,713 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $18,963,854. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 318,130 Excess of tax cost over value (4,043,271) ----------- $(3,725,141) =========== See accompanying notes to financial statements. 29 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI CANADA INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.99% AEROSPACE & MILITARY TECHNOLOGY 4.08% 54,400 Bombardier Incorporated - Class B $ 779,681 ----------- BANKING 14.83% 2,000 Bank of Montreal 99,948 30,192 Bank of Nova Scotia 859,924 41,600 Canadian Imperial Bank of Commerce 1,288,926 4,800 National Bank of Canada 92,814 16,000 Royal Bank of Canada 489,679 ----------- 2,831,291 ----------- BEVERAGES & TOBACCO 0.25% 1,600 Molson Incorporated - Class A 47,557 ----------- BROADCASTING & PUBLISHING 6.47% 4,800 Quebecor Incorporated - Class B 78,704 11,200 Rogers Communications Incorporated - Class B 173,400 26,880 Thomson Corporation 983,329 ----------- 1,235,433 ----------- BUSINESS & PUBLIC SERVICES 1.68% 27,200 CGI Group Incorporated* 115,495 8,000 Cognos Incorporated* 170,630 2,240 Descartes Systems Group Incorporated* 34,021 ----------- 320,146 ----------- CHEMICALS 2.11% 16,192 Agrium Incorporated 214,405 3,200 Potash Corporation of Saskatchewan Incorporated 188,764 ----------- 403,169 ----------- ELECTRICAL & ELECTRONICS 14.00% 4,000 Ballard Power Systems Incorporated* 186,804 7,040 Mitel Corporation* 58,038 129,088 Nortel Networks Corporation 2,403,324 640 Research in Motion Limited* 24,667 ----------- 2,672,833 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 4.08% 11,200 ATI Technologies Incorporated* 57,507 15,040 Celestica Incorporated* 722,132 ----------- 779,639 ----------- ENERGY EQUIPMENT & SERVICES 1.75% 7,872 Precision Drilling Corporation* 334,257 ----------- ENERGY SOURCES 11.38% 8,592 Alberta Energy Company Limited 384,473 4,672 Anderson Exploration Limited* 99,495 9,472 Canadian Natural Resources Limited* 267,924 1,200 Enbridge Incorporated 31,748 16,000 Gulf Canada Resources Limited* 89,888 12,800 Imperial Oil Limited 315,986 5,200 Nexen Incorporated 125,686 11,072 Petro-Canada 260,815 12,800 Suncor Energy Incorporated 329,616 7,392 Talisman Energy Incorporated* 267,566 ----------- 2,173,197 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- FINANCIAL SERVICES 5.95% 38,400 C. I. Fund Management Incorporated $ 353,697 3,200 Mackenzie Financial Corporation 61,312 30,992 Power Corporation of Canada 721,756 ----------- 1,136,765 ----------- FOREST PRODUCTS & PAPER 1.09% 14,400 Abitibi Consolidated Incorporated 108,649 11,200 Domtar Incorporated 98,772 ----------- 207,421 ----------- GOLD MINES 0.30% 6,144 Placer Dome Incorporated 57,314 ----------- HEALTH & PERSONAL CARE 3.31% 8,000 Biovail Corporation 373,922 12,800 MDS Incorporated - Class B 211,633 1,600 QLT Incorporated* 46,731 ----------- 632,286 ----------- INDUSTRIAL COMPONENTS 0.73% 3,200 Magna International Incorporated - Class A 139,765 ----------- INSURANCE 5.88% 800 Fairfax Financial Holdings Limited* 114,973 22,272 Manulife Financial Corporation 613,542 17,600 Sun Life Financial Services of Canada 393,781 ----------- 1,122,296 ----------- LEISURE & TOURISM 0.44% 1,600 Four Seasons Hotel Incorporated 83,198 ----------- MACHINERY & ENGINEERING 1.34% 14,400 United Dominion Industries Limited 256,337 ----------- MERCHANDISING 1.30% 4,000 Canadian Tire Corporation - Class A 56,493 1,600 George Weston Limited 90,881 4,800 Hudson's Bay Company 56,127 3,200 Sobeys Canada Incorporated 43,899 ----------- 247,400 ----------- METALS - NON FERROUS 5.61% 14,400 Alcan Aluminium Limited 533,839 11,200 Cameco Corporation 215,835 6,400 Cominco Limited 102,012 7,392 Inco Limited* 132,310 2,400 Noranda Incorporated 26,261 6,400 Teck Corporation - Class B 61,876 ----------- 1,072,133 ----------- METALS - STEEL 1.12% 13,600 Dofasco Incorporated 213,666 ----------- MULTI-INDUSTRY 4.22% 8,800 Brascan Corporation - Class A 146,590 17,600 Canadian Pacific Limited 659,943 ----------- 806,533 ----------- TELECOMMUNICATIONS 5.25% 37,552 BCE Incorporated 1,002,090 ----------- TRANSPORTATION - AIRLINES 0.30% 9,600 Air Canada Incorporated* 58,009 ----------- See accompanying notes to financial statements. 30 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI CANADA INDEX FUND (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) UTILITIES - ELECTRICAL & GAS 2.52% 11,200 TransAlta Corporation $ 160,157 26,320 Transcanada Pipelines Limited 322,036 ----------- 482,193 ----------- TOTAL COMMON STOCK - BASKET (Cost $22,288,748) 19,094,609 ----------- COMMON STOCK - NON-BASKET 0.01% ELECTRICAL & ELECTRONICS 0.00% 12 Nortel Networks Corporation 223 ----------- ENERGY EQUIPMENT & SERVICES 0.00% 4 Precision Drilling Corporation* 170 ----------- ENERGY SOURCES 0.01% 4 Anderson Exploration Limited* 85 4 Canadian Natural Resources Limited* 113 4 Petro-Canada 94 4 Talisman Energy Incorporated* 145 ----------- 437 ----------- GOLD MINES 0.00% 8 Placer Dome Incorporated 75 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - NON-BASKET (CONTINUED) INDUSTRIAL COMPONENTS 0.00% 8 Magna International Incorporated - Class A $ 350 ----------- INSURANCE 0.00% 4 Manulife Financial Corporation 110 ----------- TELECOMMUNICATIONS 0.00% 4 BCE Incorporated 107 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $1,843) 1,472 ----------- TOTAL INVESTMENTS (COST $22,290,591)+ 100.00% $19,096,081 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $22,577,450. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,779,470 Excess of tax cost over value (5,260,839) ----------- $(3,481,369) =========== See accompanying notes to financial statements. 31 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI EMU INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.77% AUSTRIA 0.47% BEVERAGES & TOBACCO 0.06% 384 Austria Tabakwerke $ 24,436 160 BBAG Oesterreichische Brau Beteiligungs 6,474 ----------- 30,910 ----------- BUILDING MATERIALS & COMPONENTS 0.05% 1,200 Wienerberger Baustoffindustrie 26,484 ----------- BUSINESS & PUBLIC SERVICES 0.02% 368 Flughafen Wien 13,537 ----------- CHEMICALS 0.01% 64 Lenzing 5,035 ----------- ENERGY SOURCES 0.07% 464 OMV 37,583 ----------- INSURANCE 0.05% 128 Generali Holding Vienna 24,366 ----------- MACHINERY & ENGINEERING 0.04% 288 BWT 10,382 256 VA Technologie 8,722 ----------- 19,104 ----------- METALS - STEEL 0.01% 192 Boehler-Uddeholm 7,239 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.03% 208 Mayr-Melnhof Karton 10,048 352 RHI 7,429 ----------- 17,477 ----------- TRANSPORTATION - AIRLINES 0.02% 592 Austrian Airlines 8,498 ----------- UTILITIES - ELECTRICAL & GAS 0.11% 528 Oesterreichische Elektrizitaetswirtschafts - Class A 60,742 ----------- TOTAL AUSTRIA (Cost $226,967) 250,975 ----------- BELGIUM 2.42% AUTOMOBILES 0.04% 96 D'Ieteren 20,684 ----------- BANKING 0.44% 5,152 KBC Bancassurance Holding NV 233,620 ----------- CHEMICALS 0.15% 1,456 Solvay 78,194 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 0.03% 208 Barco NV 14,977 416 BarcoNet NV* 3,236 ----------- 18,213 ----------- HEALTH & PERSONAL CARE 0.18% 2,528 UCB 93,176 ----------- INDUSTRIAL COMPONENTS 0.03% 384 Bekaert NV 16,950 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- BELGIUM (continued) INSURANCE 0.70% 12,736 Fortis B $ 367,992 ----------- MERCHANDISING 0.15% 672 Colruyt NV 29,644 896 Delhaize-Le Lion 49,850 ----------- 79,494 ----------- METALS - NON FERROUS 0.03% 448 Union Miniere 18,168 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.02% 128 Glaverbel 11,012 ----------- MULTI-INDUSTRY 0.23% 416 Groupe Bruxelles Lambert 119,165 ----------- TRANSPORTATION - SHIPPING 0.02% 160 Compagnie Maritime Belge 11,366 ----------- UTILITIES - ELECTRICAL & GAS 0.40% 944 Electrabel 213,553 ----------- TOTAL BELGIUM (Cost $1,315,058) 1,281,587 ----------- FINLAND 4.31% BEVERAGES & TOBACCO 0.04% 1,600 Hartwall Abp Oyj 23,542 ----------- BUSINESS & PUBLIC SERVICES 0.08% 1,600 Tietoenator Oyj 41,934 ----------- CHEMICALS 0.02% 1,600 Kemira Oyj 9,122 ----------- ELECTRICAL & ELECTRONICS 3.35% 78,400 Nokia Oyj 1,773,576 ----------- FOOD & HOUSEHOLD PRODUCTS 0.01% 3,200 Raisio Group PLC 5,944 ----------- FOREST PRODUCTS & PAPER 0.28% 4,800 UPM-Kymmene Oyj 145,665 ----------- INSURANCE 0.16% 1,600 Sampo Insurance Co., Ltd. - A Shares 84,603 ----------- MACHINERY & ENGINEERING 0.03% 1,600 Metso Oyj 17,436 ----------- METALS - NON FERROUS 0.03% 1,600 Outokumpu Oyj 15,081 ----------- METALS - STEEL 0.02% 3,200 Rautaruukki Oyj 12,948 ----------- TELECOMMUNICATIONS 0.26% 12,800 Sonera Oyj 138,779 ----------- WHOLESALE & INTERNATIONAL TRADE 0.03% 1,600 Kesko Oyj - B 16,774 ----------- TOTAL FINLAND (Cost $4,490,555) 2,285,404 ----------- FRANCE 30.26% AEROSPACE & MILITARY TECHNOLOGY 0.27% 2,912 Thales SA 116,782 96 Zodiac SA 25,072 ----------- 141,854 ----------- See accompanying notes to financial statements. 32 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI EMU INDEX FUND (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) FRANCE (continued) APPLIANCES & HOUSEHOLD DURABLES 0.03% 272 Seb SA $ 15,358 ----------- AUTOMOBILES 0.40% 784 PSA Peugeot Citroen 212,469 ----------- BANKING 2.03% 7,696 Banque Nationale de Paris 628,459 7,328 Societe Generale - Class A 447,795 ----------- 1,076,254 ----------- BEVERAGES & TOBACCO 0.13% 976 Pernod Ricard 67,315 ----------- BUILDING MATERIALS & COMPONENTS 0.79% 1,520 Compagnie de Saint Gobain 232,033 1,888 Lafarge 184,038 ----------- 416,071 ----------- BUSINESS & PUBLIC SERVICES 4.91% 2,096 Cap Gemini 366,992 1,968 Dassault Systemes SA 101,438 1,600 Publicis Groupe 53,116 576 Sodexho Alliance 109,646 3,440 Suez Lyonnaise des Eaux 569,416 22,208 Vivendi Universal SA 1,400,981 ----------- 2,601,589 ----------- CHEMICALS 0.41% 1,584 Air Liquide 216,603 ----------- CONSTRUCTION & HOUSING 0.49% 5,648 Bouygues 220,169 640 Vinci SA 38,550 ----------- 258,719 ----------- ELECTRICAL & ELECTRONICS 1.91% 19,776 Alcatel 769,268 656 Sagem 68,470 2,704 Schneider Electric 176,548 ----------- 1,014,286 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 0.91% 15,376 STMicroelectronics NV 483,580 ----------- ENERGY EQUIPMENT & SERVICES 0.09% 320 Coflexip 47,937 ----------- ENERGY SOURCES 3.30% 12,384 TotalFinaElf SA 1,748,107 ----------- FINANCIAL SERVICES 0.11% 800 Societe Eurafrance 59,590 ----------- FOOD & HOUSEHOLD PRODUCTS 0.75% 400 Eridania Beghin-Say 38,550 2,576 Groupe Danone 356,044 ----------- 394,594 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- FRANCE (continued) HEALTH & PERSONAL CARE 5.12% 13,536 Aventis SA $ 1,092,908 176 Essilor International 53,896 11,728 L'OREAL 878,983 12,688 Sanofi-Synthelabo 688,405 ----------- 2,714,192 ----------- INDUSTRIAL COMPONENTS 0.31% 2,336 Michelin - Class B 89,150 1,440 Valeo 76,805 ----------- 165,955 ----------- INSURANCE 1.62% 6,816 AXA 859,968 ----------- LEISURE & TOURISM 0.31% 3,408 Accor 133,790 304 Club Mediterranee 29,493 ----------- 163,283 ----------- MACHINERY & ENGINEERING 0.11% 272 Compagnie Francaise d'Etudes de Construction Technip 38,695 592 Sidel 21,286 ----------- 59,981 ----------- MERCHANDISING 2.44% 12,112 Carrefour 706,718 1,488 Casino Guichard Perrachon 151,888 304 Casino Guichard Perrachon - Pfd 20,114 2,064 Pinault-Printemps-Redoute 415,863 ----------- 1,294,583 ----------- METALS - NON FERROUS 0.13% 1,408 Pechiney - Class A 69,919 ----------- METALS - STEEL 0.11% 4,224 Usinor 59,431 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.06% 272 Imersys 30,366 ----------- MULTI-INDUSTRY 0.26% 2,368 Lagardere S.C.A. 138,496 ----------- REAL ESTATE 0.20% 336 Gecina 32,134 336 Simco 23,915 272 Union du Credit-Bail Immobilier 47,525 ----------- 103,574 ----------- RECREATION, OTHER CONSUMER GOODS 1.06% 8,496 LVMH (Louis Vuitton Moet Hennessy) 521,512 960 Societe BIC 40,786 ----------- 562,298 ----------- TELECOMMUNICATIONS 2.00% 17,776 France Telecom 1,057,638 ----------- TOTAL FRANCE (Cost $18,830,983) 16,034,010 ----------- See accompanying notes to financial statements. 33 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI EMU INDEX FUND (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) GERMANY 23.79% AUTOMOBILES 2.16% 16,000 DaimlerChrysler $ 785,117 5,600 Volkswagen 308,213 1,600 Volkswagen - Preferred 52,454 ----------- 1,145,784 ----------- BANKING 3.14% 7,200 Bayerische Hypo-und Vereinsbank AG 441,695 10,400 Deutsche Bank 857,972 8,800 Dresdner Bank 364,566 ----------- 1,664,233 ----------- BROADCASTING & PUBLISHING 0.03% 2,400 EM. TV & Merchandising* 15,008 ----------- BUILDING MATERIALS & COMPONENTS 0.16% 800 Buderus 17,288 800 Dyckerhoff - Preferred 17,362 800 Heidelberger Zement 48,481 ----------- 83,131 ----------- BUSINESS & PUBLIC SERVICES 1.89% 1,600 Fresenius Medical Care 129,332 3,200 SAP 492,611 2,400 SAP Vorzug 377,404 ----------- 999,347 ----------- CHEMICALS 2.06% 10,400 BASF 468,150 12,800 Bayer 625,033 ----------- 1,093,183 ----------- CONSTRUCTION & HOUSING 0.10% 800 Bilfinger & Berger Bau 14,051 1,600 Hochtief 40,462 ----------- 54,513 ----------- ELECTRICAL & ELECTRONICS 2.26% 10,400 Siemans 1,198,827 ----------- FINANCIAL SERVICES 0.10% 3,200 WCM Beteiligungs-und Grundbesitz 55,323 ----------- FOOD & HOUSEHOLD PRODUCTS 0.03% 1,600 Kamps 15,891 ----------- HEALTH & PERSONAL CARE 1.04% 1,600 Beiersdorf 182,449 1,600 Gehe 56,942 3,200 Merck KGAA 145,076 3,200 Schering 163,909 ----------- 548,376 ----------- INDUSTRIAL COMPONENTS 0.09% 2,400 Continental 41,382 800 FAG Kugelfischer Georg Schaefer 5,878 ----------- 47,260 ----------- INSURANCE 4.46% 4,000 Allianz 1,324,628 3,200 Muenchener Rueckversicherung 1,037,455 ----------- 2,362,083 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- GERMANY (continued) MACHINERY & ENGINEERING 0.34% 2,400 Linde $ 114,766 1,600 MAN 47,584 800 MAN - Preferred 18,282 ----------- 180,632 ----------- MERCHANDISING 0.72% 800 Douglas Holding 27,956 2,400 Karstadt Quelle 83,647 5,600 Metro 268,817 ----------- 380,420 ----------- METALS - STEEL 0.30% 8,800 Thyssen Krupp 160,878 ----------- MULTI-INDUSTRY 0.23% 3,200 Preussag 121,858 ----------- RECREATION, OTHER CONSUMER GOODS 0.10% 800 Adidas-Salomon 50,026 ----------- TELECOMMUNICATIONS 2.42% 52,800 Deutsche Telekom 1,284,276 ----------- TRANSPORTATION - AIRLINES 0.26% 6,400 Deutsche Lufthansa 135,365 ----------- UTILITIES - ELECTRICAL & GAS 1.90% 12,800 E.On 657,639 8,000 RWE 304,718 1,600 RWE - Preferred 46,569 ----------- 1,008,926 ----------- TOTAL GERMANY (Cost $14,217,258) 12,605,340 ----------- IRELAND 1.56% BANKING 0.29% 14,400 Allied Irish Banks Plc 155,993 ----------- BROADCASTING & PUBLISHING 0.05% 9,600 Independent News & Media Plc 25,690 ----------- BUILDING MATERIALS & COMPONENTS 0.23% 6,400 CRH Plc 120,357 ----------- FOOD & HOUSEHOLD PRODUCTS 0.09% 3,200 Greencore Group Plc 8,887 3,200 Kerry Group Plc - A Shares 39,432 ----------- 48,319 ----------- FOREST PRODUCTS & PAPER 0.07% 19,200 Jefferson Smurfit Group Plc 34,960 ----------- HEALTH & PERSONAL CARE 0.33% 3,200 Elan Corporation Plc* 175,092 ----------- INSURANCE 0.11% 4,800 Irish Life & Permanent Plc 58,663 ----------- LEISURE & TOURISM 0.03% 1,600 Jurys Doyle Hotel Group Plc 16,259 ----------- MULTI-INDUSTRY 0.03% 1,600 DCC Plc 17,436 ----------- RECREATION, OTHER CONSUMER GOODS 0.03% 12,800 Waterford Wedgewood Plc 16,008 ----------- See accompanying notes to financial statements. 34 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI EMU INDEX FUND (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) IRELAND (continued) TELECOMMUNICATIONS 0.16% 38,400 eircom Plc $ 84,044 ----------- TRANSPORTATION - AIRLINES 0.14% 6,400 Ryanair Holdings Plc* 71,685 ----------- TOTAL IRELAND (Cost $776,004) 824,506 ----------- ITALY 11.84% AUTOMOBILES 0.08% 1,600 Fiat SpA 40,389 ----------- BANKING 2.63% 80,000 Banca di Roma SpA 85,560 80,000 Banca Intesa SpA 337,971 16,000 Banca Intesa SpA Rnc 41,227 8,000 Banca Popolare di Milano SpA 40,838 24,000 Istituto Bancario San Paolo di Torino SpA 366,810 12,000 Mediobanca SpA 132,444 80,000 Unicredito Italiano SpA 389,322 ----------- 1,394,172 ----------- BROADCASTING & PUBLISHING 0.62% 8,000 Arnoldo Mondadori Editore SpA 72,406 1,600 Gruppo Editoriale L'Espresso SpA 10,738 24,000 Mediaset SpA 247,564 ----------- 330,708 ----------- BUILDING MATERIALS & COMPONENTS 0.01% 1,824 Italcementi SpA 7,369 ----------- BUSINESS & PUBLIC SERVICES 0.20% 16,000 Concessioni e Costruzioni Autostrade SpA 103,701 ----------- ELECTRICAL & ELECTRONICS 0.22% 32,000 Pirelli SpA 116,120 ----------- ENERGY SOURCES 1.66% 136,000 ENI SpA 880,461 ----------- FINANCIAL SERVICES 0.13% 12,000 Banca Popolare-Carire SpA 69,500 ----------- FOOD & HOUSEHOLD PRODUCTS 0.12% 40,000 Parmalat Finanziaria SpA 63,121 ----------- INSURANCE 1.79% 22,400 Assicurazioni Generali SpA 781,733 12,000 Riunione Adriatica di Sicurta SpA 162,891 624 Societa Assicuratrice Industriale SpA Rnc 4,918 ----------- 949,542 ----------- MERCHANDISING 0.08% 8,000 La Rinascente SpA 40,683 ----------- TELECOMMUNICATIONS 3.08% 64,000 Telecom Italia SpA 668,468 16,000 Telecom Italia SpA Rnc 89,547 132,000 Telecom Italia Mobile SpA 872,895 ----------- 1,630,910 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- ITALY (continued) TEXTILES & APPAREL 0.13% 40,000 Benetton Group SpA $ 71,324 ----------- TRANSPORTATION - AIRLINES 0.11% 32,000 Alitalia SpA* 55,882 ----------- UTILITIES - ELECTRICAL & GAS 0.98% 126,256 Enel SpA 435,161 8,000 Italgas SPA 85,552 ----------- 520,713 ----------- TOTAL ITALY (Cost $7,022,040) 6,274,595 ----------- NETHERLANDS 15.10% APPLIANCES & HOUSEHOLD DURABLES 1.42% 22,816 Philips Electronics 750,511 ----------- BANKING 1.06% 25,488 ABN AMRO Holding 560,186 ----------- BEVERAGES & TOBACCO 0.57% 5,440 Heineken 300,407 ----------- BROADCASTING & PUBLISHING 0.53% 11,600 Elsevier 163,424 4,816 Wolters Klumer - CVA 115,547 ----------- 278,971 ----------- BUSINESS & PUBLIC SERVICES 0.47% 5,856 Getronics 33,119 8,288 TNT Post Group 195,190 1,664 Vedior 21,117 ----------- 249,426 ----------- CHEMICALS 0.45% 4,960 Akzo Nobel 240,376 ----------- CONSTRUCTION & HOUSING 0.05% 480 IHC Caland 25,425 ----------- DATA PROCESSING & REPRODUCTION 0.04% 1,472 Oce 23,960 ----------- ELECTRONIC COMPONENTS & INSTRUMENTS 0.30% 7,232 ASM Lithography Holding NV* 157,684 ----------- ENERGY SOURCES 4.00% 35,760 Royal Dutch/Shell Group 2,119,759 ----------- FINANCIAL SERVICES 2.18% 16,768 Ing Groep 1,157,259 ----------- FOOD & HOUSEHOLD PRODUCTS 1.06% 9,920 Unilever 559,661 ----------- INSURANCE 1.54% 23,296 Aegon 818,572 ----------- MERCHANDISING 0.78% 12,832 Koninklijke Ahold 413,483 ----------- TELECOMMUNICATIONS 0.39% 16,656 Koninklijke Kpn 204,480 ----------- See accompanying notes to financial statements. 35 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI EMU INDEX FUND (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) NETHERLANDS (continued) TRANSPORTATION - AIRLINES 0.04% 960 KLM Koninklijke Luchvaart Mij* $ 22,953 ----------- TRANSPORTATION - SHIPPING 0.04% 944 Koninklijke Vopak 21,876 ----------- WHOLESALE & INTERNATIONAL TRADE 0.18% 1,776 Buhrmann 53,569 1,856 Hagemeyer 43,369 ----------- 96,938 ----------- TOTAL NETHERLANDS (Cost $8,801,387) 8,001,927 ----------- PORTUGAL 1.49% BANKING 0.51% 35,456 Banco Comercial Portugues SA 180,960 3,328 Banco Espirito Santo SA 54,108 9,808 BPI - SGPS SA 31,929 ----------- 266,997 ----------- BUILDING MATERIALS & COMPONENTS 0.12% 2,336 Cimentos de Portugal SGPS SA 63,049 ----------- BUSINESS & PUBLIC SERVICES 0.09% 5,200 Brisa - Auto Estradas de Portugal SA 49,732 ----------- FOREST PRODUCTS & PAPER 0.02% 7,520 Portucel-Empresa Produtora de Pasta Papel SA 9,889 ----------- MERCHANDISING 0.13% 1,664 Jeronimo Martins SGPS SA 16,067 42,656 Sonae SGPS SA 52,563 ----------- 68,630 ----------- TELECOMMUNICATIONS 0.33% 18,128 Portugal Telecom SA 174,707 ----------- UTILITIES - ELECTRICAL & GAS 0.29% 52,064 Electricidade de Portugal SA 154,646 ----------- TOTAL PORTUGAL (Cost $852,099) 787,650 ----------- SPAIN 8.53% BANKING 3.01% 54,080 Banco Bilbao Vizcaya SA 804,663 77,136 Banco Santander Central Hispano SA 788,079 ----------- 1,592,742 ----------- BEVERAGES & TOBACCO 0.16% 6,064 Altadis SA 86,435 ----------- BUILDING MATERIALS & COMPONENTS 0.03% 384 Portland Valderrivas SA 8,298 880 Uralita SA 5,438 ----------- 13,736 ----------- BUSINESS & PUBLIC SERVICES 0.17% 2,400 Aguas de Barcelona 34,275 4,832 Autopistas Concesionaria Espanola SA 45,768 1,040 Prosegur Cia de Seguridad SA 12,242 ----------- 92,285 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- SPAIN (continued) CONSTRUCTION & HOUSING 0.21% 1,104 Actividades de Construccion y Servicios SA $ 29,696 2,080 Fomento de Construcciones y Contratas SA 43,994 2,992 Groupo Dragados 39,070 ----------- 112,760 ----------- ENERGY SOURCES 0.66% 20,608 Repsol SA 350,595 ----------- FOOD & HOUSEHOLD PRODUCTS 0.04% 1,808 Ebro Puleva SA 21,448 ----------- FOREST PRODUCTS & PAPER 0.01% 368 Grupo Empresarial Ence SA 5,618 ----------- HEALTH & PERSONAL CARE 0.01% 576 Fabrica Espanola de Productos y Farmaceuticos SA 7,506 ----------- INSURANCE 0.05% 1,056 Corporacion Mapfre 24,277 ----------- LEISURE & TOURISM 0.08% 2,976 Sol Melia SA 30,104 3,728 TelePizza SA* 9,599 ----------- 39,703 ----------- MACHINERY & ENGINEERING 0.04% 2,368 Zardoya Otis SA 22,734 ----------- MERCHANDISING 0.02% 688 Cortefiel SA 12,242 ----------- METALS - NON FERROUS 0.02% 704 Asturiana de Zinc 8,623 ----------- METALS - STEEL 0.06% 1,008 Acerinox SA 32,907 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.01% 848 Viscofan 4,367 ----------- REAL ESTATE 0.08% 896 Metrovacesa SA 15,655 1,440 Urbis Ser 1,2,3* 6,224 2,240 Vallehermoso SA 17,612 ----------- 39,491 ----------- TELECOMMUNICATIONS 2.39% 74,240 Telefonica SA* 1,266,428 ----------- UTILITIES - ELECTRICAL & GAS 1.48% 18,368 Endesa SA 314,345 7,776 Gas Natural SDG SA 130,073 15,648 Iberdrola SA 235,994 5,280 Union Electrica Fenosa SA 103,179 ----------- 783,591 ----------- TOTAL SPAIN (Cost $4,803,434) 4,517,488 ----------- TOTAL COMMON STOCK - BASKET (Cost $61,335,785) 52,863,482 ----------- See accompanying notes to financial statements. 36 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI EMU INDEX FUND (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - NON-BASKET 0.23% GERMANY 0.23% BANKING 0.23% 2,000 Bayerische Hypo-und Vereinsbank AG $ 122,675 ----------- TOTAL GERMANY (Cost $113,654) 122,675 ----------- PORTUGAL 0.00% BANKING 0.00% 35,456 Banco Comercial Portugues SA Rights (Expiration Date 03/16/01) -- ----------- TOTAL PORTUGAL (Cost $0) -- ----------- SPAIN 0.00% FOOD & HOUSEHOLD PRODUCTS 0.00% 6 Ebro Puleva SA 71 ----------- TELECOMMUNICATIONS 0.00% 15 Telefonica SA* 256 ----------- TOTAL SPAIN (Cost $378) 327 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $114,032) 123,002 ----------- TOTAL INVESTMENTS (COST $61,449,817)+ 100.00% $52,986,484 = ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $61,500,255. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,258,273 Excess of tax cost over value (9,772,044) ----------- $(8,513,771) =========== See accompanying notes to financial statements. 37 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI FRANCE INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 0.77% 14,314 Thales $ 574,045 ----------- AUTOMOBILES 1.38% 3,808 PSA Peugeot Citroen 1,031,991 ----------- BANKING 7.02% 37,519 Banque Nationale de Paris 3,063,818 35,513 Societe Generale - Class A 2,170,106 ----------- 5,233,924 ----------- BEVERAGES & TOBACCO 0.38% 4,148 Pernod Ricard 286,087 ----------- BUILDING MATERIALS & COMPONENTS 2.54% 6,885 Compagnie de Saint Gobain 1,051,019 8,602 Lafarge 838,502 ----------- 1,889,521 ----------- BUSINESS & PUBLIC SERVICES 15.19% 10,302 Cap Gemini 1,803,795 9,758 Dassault Systemes++ 502,962 8,925 Publicis Groupe 296,288 2,992 Sodexho Alliance 569,548 16,592 Suez Lyonnaise des Eaux 2,746,439 85,578 Vivendi Universal SA 5,398,647 ----------- 11,317,679 ----------- CHEMICALS 1.39% 7,582 Air Liquide 1,036,796 ----------- CONSTRUCTION & HOUSING 1.83% 26,180 Bouygues++ 1,020,544 5,678 Vinci SA 342,007 ----------- 1,362,551 ----------- ELECTRICAL & ELECTRONICS 6.58% 95,421 Alcatel 3,711,787 3,247 Sagem++ 338,904 13,039 Schneider Electric 851,337 ----------- 4,902,028 ----------- ELECTRICAL COMPONENTS, INSTRUMENTS 2.92% 69,258 STMicroelectronics NV 2,178,185 ----------- ENERGY EQUIPMENT & SERVICES 0.31% 1,530 Coflexip 229,198 ----------- ENERGY SOURCES 11.46% 60,520 TotalFinaElf SA 8,542,913 ----------- FINANCIAL SERVICES 0.41% 4,080 Societe Eurafrance 303,909 ----------- FOOD & HOUSEHOLD PRODUCTS 2.45% 2,278 Eridania Beghin-Say 219,540 11,611 Groupe Danone 1,604,824 ----------- 1,824,364 ----------- HEALTH & PERSONAL CARE 16.97% 62,458 Aventis 5,042,911 1,003 Essilor International 307,145 54,791 L'OREAL 4,106,440 58,786 Sanofi-Synthelabo 3,189,515 ----------- 12,646,011 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- INDUSTRIAL COMPONENTS 1.13% 12,393 Michelin - Class B $ 472,959 6,953 Valeo 370,850 ----------- 843,809 ----------- INSURANCE 5.45% 32,198 AXA 4,062,391 ----------- LEISURE & TOURISM 1.08% 16,405 Accor 644,023 1,649 Club Mediterranee 159,982 ----------- 804,005 ----------- MACHINERY & ENGINEERING 0.42% 1,445 Compagnie Francaise d'Etudes de Construction Technip 205,569 2,958 Sidel 106,359 ----------- 311,928 ----------- MERCHANDISING 7.91% 55,488 Carrefour 3,237,646 5,661 Casino Guichard Perrachon++ 577,850 10,336 Pinault-Printemps-Redoute++ 2,082,541 ----------- 5,898,037 ----------- METALS - NON FERROUS 0.47% 7,038 Pechiney - Class A 349,496 ----------- METALS - STEEL 0.40% 20,978 Usinor++ 295,158 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.21% 1,428 Imersys 159,421 ----------- MULTI-INDUSTRY 0.96% 12,257 Lagardere S.C.A. 716,869 ----------- REAL ESTATE 0.24% 544 Simco 38,720 816 Union du Credit-Bail Immobilier 142,575 ----------- 181,295 ----------- RECREATION - OTHER CONSUMER GOODS 3.47% 38,981 LVMH (Louis Vuitton Moet Hennessy) 2,392,781 4,454 Societe BIC 189,230 ----------- 2,582,011 ----------- TELECOMMUNICATIONS 6.66% 83,402 France Telecom 4,962,259 ----------- TOTAL COMMON STOCK - BASKET (Cost $73,577,592) 74,525,881 ----------- TOTAL INVESTMENTS (COST $73,577,592)+ 100.00% $74,525,881 ======= =========== + Aggregate cost for Federal income tax purposes is $73,671,498. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 6,624,683 Excess of tax cost over value (5,770,300) ----------- $ 854,383 =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 38 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI GERMANY INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.72% AUTOMOBILES 8.48% 149,350 DaimlerChrysler++ $ 7,328,578 87,000 Volkswagen++ 4,788,308 46,400 Volkswagen - Preferred 1,521,165 ------------ 13,638,051 ------------ BANKING 12.93% 104,400 Bayerische Hypo-und Vereinsbank AG++ 6,404,572 89,900 Deutsche Bank 7,416,504 168,200 Dresdner Bank++ 6,968,182 ------------ 20,789,258 ------------ BROADCASTING & PUBLISHING 0.11% 29,000 EM. TV & Merchandising*++ 181,345 ------------ BUILDING MATERIALS & COMPONENTS 0.99% 18,850 Buderus 407,360 14,500 Dyckerhoff - Preferred 314,687 14,355 Heidelberger Zement 869,936 ------------ 1,591,983 ------------ BUSINESS & PUBLIC SERVICES 6.55% 21,750 Fresenius Medical Care++ 1,758,113 34,800 SAP++ 5,357,145 21,750 SAP - Vorzug 3,420,220 ------------ 10,535,478 ------------ CHEMICALS 8.44% 139,200 BASF++ 6,266,003 149,350 Bayer 7,292,869 ------------ 13,558,872 ------------ CONSTRUCTION & HOUSING 0.40% 11,600 Bilfinger & Berger Bau 203,746 17,400 Hochtief 440,028 ------------ 643,774 ------------ ELECTRICAL & ELECTRONICS 10.61% 147,900 Siemens 17,048,697 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 0.12% 2,900 Epcos AG*++ 186,492 ------------ FINANCIAL SERVICES 0.44% 40,600 WCM Beteiligungs-und Grundbesitz++ 701,912 ------------ FOOD & HOUSEHOLD PRODUCTS 0.23% 37,700 Kamps++ 374,424 ------------ HEALTH & PERSONAL CARE 4.72% 18,850 Beiersdorf 2,149,472 17,400 Gehe 619,240 42,050 Merck KGAA 1,906,389 5,800 Qiagen NV 161,610 53,650 Schering 2,748,044 ------------ 7,584,755 ------------ INDUSTRIAL COMPONENTS 0.38% 27,550 Continental 475,031 17,400 FAG Kugelfischer Georg Schaefer 127,848 ------------ 602,879 ------------ NO. OF SHARES SECURITY VALUE ------ -------- ----- INSURANCE 17.81% 60,900 Allianz++ $ 20,167,458 26,100 Muenchener Rueckversicherung 8,461,745 ------------ 28,629,203 ------------ MACHINERY & ENGINEERING 1.53% 17,400 Linde++ 832,054 43,500 MAN 1,293,683 14,500 MAN - Preferred 331,355 ------------ 2,457,092 ------------ MERCHANDISING 2.82% 18,850 Douglas Holding 658,709 33,350 KarstadtQuelle 1,162,341 56,550 Metro - Vorzug++ 2,714,575 ------------ 4,535,625 ------------ METALS - STEEL 1.24% 108,750 Thyssen Krupp++ 1,988,128 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.22% 5,800 SGL Carbon* 347,756 ------------ MULTI-INDUSTRY 1.13% 47,850 Preussag++ 1,822,157 ------------ RECREATION - OTHER CONSUMER GOODS 0.45% 11,600 Adidas-Salomon 725,380 ------------ TELECOMMUNICATIONS 10.51% 694,550 Deutsche Telekom++ 16,893,821 ------------ TRANSPORTATION - AIRLINES 1.39% 105,850 Deutsche Lufthansa++ 2,238,811 ------------ UTILITIES - ELECTRICAL & GAS 8.22% 154,860 E.On++ 7,956,400 118,755 RWE AG++ 4,523,355 25,375 RWE AG-Preferred++ 738,548 ------------ 13,218,303 ------------ TOTAL COMMON STOCK - BASKET (Cost $187,861,896) 160,294,196 ------------ COMMON STOCK - NON-BASKET 0.28% MERCHANDISING 0.28% 9,450 Metro - Vorzug 453,629 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $307,002) 453,629 ------------ TOTAL INVESTMENTS (COST $188,168,898)+ 100.00% $160,747,825 ======= ============ - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $190,939,747. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 5,430,371 Excess of tax cost over value (35,622,293) ------------ $(30,191,922) ============ ++Denotes all or part of security on loan. See accompanying notes to financial statements. 39 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI HONG KONG INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.92% BANKING 13.10% 630,800 Bank of East Asia Limited++ $ 1,560,846 615,600 Hang Seng Bank Limited++ 7,320,209 ----------- 8,881,055 ----------- BROADCASTING & PUBLISHING 2.31% 729,600 Oriental Press Group 107,571 760,000 South China Morning Post Holdings Limited 545,648 152,000 Television Broadcasts Limited 913,960 ----------- 1,567,179 ----------- ELECTRICAL & ELECTRONICS 3.47% 1,406,000 Johnson Electric Holdings Limited++ 2,352,376 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 0.58% 152,000 ASM Pacific Technology Limited 308,876 152,000 QPL International Holdings Limited* 83,796 ----------- 392,672 ----------- LEISURE & TOURISM 2.41% 912,000 Hong Kong & Shanghai Hotels Limited 584,623 1,064,000 Shangri-La Asia Limited 1,050,372 ----------- 1,634,995 ----------- MERCHANDISING 1.31% 456,000 Esprit Holdings Limited 526,161 608,000 Giordano International Limited 358,569 ----------- 884,730 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.23% 152,000 Varitronix International Limited 154,925 ----------- MULTI-INDUSTRY 29.01% 608,000 Hopewell Holdings Limited 321,543 1,368,000 Hutchison Whampoa Limited 16,223,285 456,000 Swire Pacific Limited - Class A 3,127,732 ----------- 19,672,560 ----------- REAL ESTATE 27.81% 684,000 Hang Lung Development Company Limited 741,010 532,000 Henderson Land Development Company Limited 3,253,426 532,000 Hysan Development Company Limited++ 975,346 912,000 New World Development Company Limited++ 1,537,558 1,672,000 Sino Land Company Limited 1,018,218 760,000 Sun Hung Kai Properties Limited 8,477,032 988,000 Wharf Holdings Limited++ 2,856,370 ----------- 18,858,960 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- TELECOMMUNICATIONS 4.28% 5,092,000 Pacific Century Cyberworks Limited*++ $ 2,905,089 ----------- TRANSPORTATION - AIRLINES 2.85% 1,292,000 Cathay Pacific Airways Limited 1,929,743 ----------- UTILITIES - ELECTRICAL & GAS 9.70% 646,000 CLP Holdings Limited 3,387,402 2,128,000 Hong Kong & China Gas Company Limited 3,192,041 ----------- 6,579,443 ----------- WHOLESALE & INTERNATIONAL TRADE 2.86% 1,064,000 Li & Fung Limited 1,937,050 ----------- TOTAL COMMON STOCK - BASKET (Cost $57,101,225) 67,750,777 ----------- COMMON STOCK - NON-BASKET 0.08% ELECTRONIC COMPONENTS, INSTRUMENTS 0.07% 80,000 QPL International Holdings Limited - Warrants* (Expiration date 01/28/04) 44,103 ----------- FINANCIAL SERVICES 0.00% 276,000 Peregrine Investment Holdings Limited** -- ----------- MULTI-INDUSTRY 0.01% 800 Hutchison Whampoa Limited 9,487 ----------- TELECOMMUNICATIONS 0.00% 883 Pacific Century Cyberworks Limited* 504 ----------- UTILITIES - ELECTRICAL & GAS 0.00% 300 Hong Kong & China Gas Company Limited 450 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $520,406) 54,544 ----------- TOTAL INVESTMENTS (COST $57,621,631)+ 100.00% $67,805,321 ======= =========== - ---------- * Non-income producing security. **Fair valued security. + Aggregate cost for Federal income tax purposes is $58,702,707. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $16,606,223 Excess of tax cost over value (7,503,609) ----------- $ 9,102,614 =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 40 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI ITALY INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 3.65% 42,133 Fiat SpA++ $ 1,063,563 13,000 Fiat SpA-Pfd++ 217,613 13,000 Fiat RNC SpA 186,363 ----------- 1,467,539 ----------- BANKING 18.60% 812,500 Banca di Roma SpA++ 868,964 438,204 Banca Intesa SpA++ 1,851,254 34,489 Banca Popolare di Milano SpA++ 176,056 121,550 Istituto Bancario San Paolo di Torino SpA++ 1,857,739 74,750 Mediobanca SpA 825,018 390,000 Unicredito Italiano SpA 1,897,943 ----------- 7,476,974 ----------- BROADCASTING & PUBLISHING 4.25% 26,000 Arnoldo Mondadori Editore SpA 235,318 37,947 Gruppo Editoriale L'espresso SpA++ 254,671 118,053 Mediaset SpA++ 1,217,734 ----------- 1,707,723 ----------- BUILDING MATERIALS & COMPONENTS 0.46% 65,000 Cementerie del Tirreno SpA 96,774 9,750 Italcementi SpA++ 86,881 ----------- 183,655 ----------- BUSINESS & PUBLIC SERVICES 2.50% 134,212 Concessioni e Costruzioni Autostrade SpA++ 869,873 9,516 Tiscali SpA* 134,221 ----------- 1,004,094 ----------- CONSTRUCTION & HOUSING 0.08% 65,000 Impregilo SpA 33,450 ----------- ELECTRICAL & ELECTRONICS 2.07% 208,000 Pirelli SpA 754,778 22,763 Pirelli SpA Rnc 76,510 ----------- 831,288 ----------- ENERGY SOURCES 13.19% 819,000 ENI SpA++ 5,302,190 ----------- FINANCIAL SERVICES 2.81% 195,000 Banca Popolare-Carire SpA 1,129,369 ----------- FOOD & HOUSEHOLD PRODUCTS 0.70% 178,607 Parmalat Finanziaria SpA 281,848 ----------- INSURANCE 14.77% 129,870 Assicurazioni Generali SpA 4,532,307 81,900 Riunione Adriatica di Sicurta SpA 1,111,728 14,599 Societa Assicuratrice Industriale SpA 251,656 4,875 Societa Assicuratrice Industriale SpA Rnc++ 38,424 ----------- 5,934,115 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- LEISURE & TOURISM 0.91% 32,487 Autogrill SpA++ $ 363,758 ----------- MERCHANDISING 1.11% 78,702 La Rinascente SpA 400,230 13,000 La Rinascente SpA-Rnc 46,420 ----------- 446,650 ----------- MULTI-INDUSTRY 0.50% 96,928 SNIA BPD SpA 199,573 ----------- RECREATION - OTHER CONSUMER GOODS 1.35% 50,154 Bulgari SpA 543,174 ----------- TELECOMMUNICATIONS 24.56% 382,850 Telecom Italia SpA++ 3,998,796 94,510 Telecom Italia SpA Rnc 528,942 807,950 Telecom Italia Mobile SpA++ 5,342,844 ----------- 9,870,582 ----------- TEXTILES & APPAREL 1.15% 260,000 Benetton Group SpA++ 463,607 ----------- TRANSPORTATION - AIRLINES 0.77% 177,801 Alitalia SpA*++ 310,497 ----------- UTILITIES - ELECTRICAL & GAS 6.57% 534,651 Enel SpA 1,842,759 74,503 Italgas SpA 796,737 ----------- 2,639,496 ----------- TOTAL COMMON STOCK - BASKET (Cost $40,594,204) 40,189,582 ----------- COMMON STOCK - NON-BASKET 0.00% UTILITIES - ELECTRICAL & GAS 0.00% 8 Italgas SpA 86 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $71) 86 ----------- TOTAL INVESTMENTS (COST $40,594,275)+ 100.00% $40,189,668 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $40,603,938. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 3,181,343 Excess of tax cost over value (3,595,613) ----------- $ (414,270) =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 41 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI JAPAN INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 7.35% 637,000 Matsushita Electric Industrial Company Limited $ 12,001,961 91,000 Pioneer Corporation++ 2,358,498 637,000 Sanyo Electric Company Limited++ 4,024,187 364,000 Sharp Corporation 4,642,517 263,900 Sony Corporation 19,011,509 ------------ 42,038,672 ------------ AUTOMOBILES 10.06% 273,000 Honda Motor Company Limited 10,683,064 1,183,000 Nissan Motor Company Limited 7,624,775 1,128,400 Toyota Motor Corporation 39,250,369 ------------ 57,558,208 ------------ BANKING 11.32% 819,000 Asahi Bank Limited++ 2,548,574 182,000 Ashikaga Bank Limited* 305,674 182,000 Bank of Fukuoka Limited++ 813,061 1,456,000 Bank Of Tokyo-Mitsubishi Limited++ 14,411,663 364,000 Bank Of Yokohama Limited 1,331,310 91,000 Chuo Mitsui Trust & Banking Company++ 231,971 546,000 Daiwa Bank Limited 819,268 182,000 Gunma Bank Limited 808,406 273,000 Hokuriku Bank Limited* 521,352 364,000 Joyo Bank Limited 1,266,141 455,000 Mitsubishi Trust & Banking Corporation++ 3,134,319 2,548 Mizuho Holdings Incorporated 15,640,564 1,183,000 Sakura Bank Limited 7,009,549 91,000 Seventy-Seven Bank Limited 466,269 273,000 Shizuoka Bank Limited 2,374,014 1,001,000 Sumitomo Bank Limited 9,908,018 728,000 Tokai Bank Limited++ 3,177,765 ------------ 64,767,918 ------------ BEVERAGES & TOBACCO 1.68% 182,000 Asahi Breweries Limited 1,768,873 546 Japan Tobacco Incorporated 3,849,627 273,000 Kirin Brewery Company Limited 2,644,000 91,000 Takara Shuzo Company 1,366,998 ------------ 9,629,498 ------------ BROADCASTING 0.11% 91 Fuji Television Network, Incorporated 620,657 ------------ BUILDING MATERIALS & COMPONENTS 0.82% 91,000 Inax Corporation 453,856 182,000 Sekisui Chemical Company Limited 498,077 91,000 Sumitomo Forestry Company Limited 548,506 455,000 Taiheiyo Cement Corporation 892,195 91,000 Tostem Corporation++ 1,055,117 182,000 Toto Limited 1,256,831 ------------ 4,704,582 ------------ BUSINESS & PUBLIC SERVICES 3.56% 36,400 Benesse Corporation 1,424,409 18,200 CSK Corporation 373,946 273,000 Dai Nippon Printing Company Limited 3,412,064 9,100 Fuji Soft ABC Incorporated 450,752 36,400 Konami Company Limited++ 1,536,127 9,100 Meitec Corporation 269,986 NO. OF SHARES SECURITY VALUE ------ -------- ----- BUSINESS & PUBLIC SERVICES (CONTINUED) 9,100 OYO Corporation $ 85,728 91,000 Secom Company Limited 5,500,575 100,100 Softbank Corporation 4,471,836 9,100 TIS Incorporated++ 290,157 273,000 Toppan Printing Company Limited 2,152,905 9,100 Trans Cosmos Incorporated 407,306 ------------ 20,375,791 ------------ CHEMICALS 3.20% 546,000 Asahi Chemical Industry Company Limited 2,541,592 91,000 Daicel Chemical Industry Limited 272,313 364,000 Dainippon Ink & Chemicals Incorporated 1,002,362 91,000 Kaneka Corporation 728,497 182,000 Kuraray Company Limited++ 1,354,585 728,000 Mitsubishi Chemical Corporation 2,215,747 91,000 NOF Corporation 196,283 91,000 Shin-Etsu Chemical Company Limited 3,219,660 91,000 Showa Denko K.K.* 180,766 637,000 Sumitomo Chemical Company Limited 3,057,513 364,000 Teijin Limited 1,657,155 455,000 Toray Industries Incorporated 1,664,137 91,000 Tosoh Corporation 238,953 ------------ 18,329,563 ------------ CONSTRUCTION & HOUSING 1.67% 45,500 Daito Trust Construction Company Limited 828,190 182,000 Daiwa House Industry Company Limited 1,194,765 455,000 Kajima Corporation++ 1,221,919 91,000 Kinden Corporation 449,977 273,000 Obayashi Corporation 1,121,838 273,000 Sekisui House Limited 2,234,366 455,000 Shimizu Corporation 1,318,897 546,000 Taisei Corporation 1,159,078 ------------ 9,529,030 ------------ DATA PROCESSING & REPRODUCTION 2.86% 273,000 Canon Incorporated 8,890,916 546,000 Fujitsu Limited 7,480,472 ------------ 16,371,388 ------------ ELECTRICAL & ELECTRONICS 5.05% 1,001,000 Hitachi Limited 8,747,389 728,000 Mitsubishi Electric Corporation 4,245,296 546,000 NEC Corporation 8,886,261 91,000 Omron Corporation 1,443,028 1,001,000 Toshiba Corporation 5,589,795 ------------ 28,911,769 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 6.38% 27,300 Advantest Corporation 3,130,440 91,000 Alps Electric Company Limited++ 930,986 72,800 Fanuc Limited 4,046,686 9,100 Hirose Electric Company Limited 705,998 27,300 Hoya Corporation 1,885,247 63,700 Kyocera Corporation 5,751,166 81,900 Murata Manufacturing Company Limited 6,793,870 See accompanying notes to financial statements. 42 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI JAPAN INDEX FUND (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) ELECTRONIC COMPONENTS, INSTRUMENTS (CONTINUED) 18,200 Nidec Corporation $ 867,369 91,000 Nikon Corporation 1,079,168 91,000 Olympus Optical Company Limited 1,132,700 36,400 Rohm Company Limited 5,896,245 63,700 Tokyo Electron Limited 4,274,001 ------------ 36,493,876 ------------ ENERGY SOURCES 0.67% 364,000 Japan Energy Corporation* 605,141 455,000 Nippon Mitsubishi Oil Corporation 2,273,157 182,000 Showa Shell Sekiyu K. K. 941,847 ------------ 3,820,145 ------------ FINANCIAL SERVICES 5.04% 45,500 Acom Company Limited++ 3,405,857 45,500 Credit Saison Company Limited++ 946,502 455,000 Daiwa Securities Group Incorporated 4,154,525 27,300 Nichiei Company Limited++ 176,189 91,000 Nippon Shinpan Company Limited 110,167 637,000 Nomura Securities Company Limited 12,517,882 91,000 Orient Corporation* 105,512 18,200 Orix Corporation 1,626,122 36,400 Promise Company Limited 2,411,254 45,500 Takefuji Corporation 3,394,220 ------------ 28,848,230 ------------ FOOD & HOUSEHOLD PRODUCTS 1.96% 182,000 Ajinomoto Company Incorporated 2,113,338 182,000 Kao Corporation 4,546,315 182,000 Meiji Seika Incorporated 1,008,568 91,000 Nisshin Flour Milling Company Limited 765,736 36,400 Nissin Food Products Company Limited* 899,953 91,000 Snow Brand Milk Products Company Limited 293,261 91,000 Yakult Honsha Company Limited 993,052 91,000 Yamazaki Baking Company Limited 577,987 ------------ 11,198,210 ------------ FOREST PRODUCTS & PAPER 0.59% 273,000 Nippon Paper Industries Company++ 1,498,887 364,000 Oji Paper Company Limited 1,858,869 ------------ 3,357,756 ------------ HEALTH & PERSONAL CARE 5.96% 91,000 Chugai Pharmaceutical Company Limited 1,307,259 91,000 Daiichi Pharmaceutical Company Limited 2,083,081 91,000 Eisai Company Limited 2,319,707 182,000 Kanebo Limited* 481,009 182,000 Kyowa Hakko Kogyo Company Limited 1,250,624 182,000 Sankyo Company Limited 3,793,768 91,000 Shionogi & Company Limited 1,563,281 91,000 Shiseido Company Limited 908,487 91,000 Taisho Pharmaceutical Company Limited 1,924,038 273,000 Takeda Chemical Industries 12,917,430 72,800 Terumo Corporation 1,393,376 18,200 Uni-Charm Corporation 775,822 91,000 Yamanouchi Pharmaceutical Company Limited 3,405,857 ------------ 34,123,739 ------------ NO. OF SHARES SECURITY VALUE ------ -------- ----- INDUSTRIAL COMPONENTS 3.10% 273,000 Bridgestone Corporation++ $ 2,504,352 273,000 Denso Corporation++ 4,945,863 91,000 Fujikura Limited++ 592,728 182,000 Furukawa Electric Company Limited 2,405,047 91,000 Koyo Seiko Company Limited++ 505,060 91,000 Minebea Company Limited*++ 712,204 91,000 NGK Insulators Limited 996,931 91,000 NGK Spark Plug Company Limited++ 1,019,430 182,000 NSK Limited 799,096 273,000 Sumitomo Electric Industries 3,270,088 ------------ 17,750,799 ------------ INSURANCE 1.11% 273,000 Mitsui Marine & Fire Insurance Company Limited 1,482,595 182,000 Sumitomo Marine & Fire Insurance Company Limited 1,081,495 364,000 Tokio Marine & Fire Insurance Company Limited 3,817,042 ------------ 6,381,132 ------------ LEISURE & TOURISM 0.35% 18,200 Namco Limited++ 283,951 27,300 Oriental Land Company Limited 1,745,599 ------------ 2,029,550 ------------ MACHINERY & ENGINEERING 2.60% 91,000 Amada Company Limited 522,128 91,000 Daikin Industries Limited 1,687,412 91,000 Ebara Corporation++ 924,779 364,000 Ishikawajima-Harima Heavy Industries Company Limited* 899,953 91,000 Japan Steel Works Company Limited* 82,237 273,000 Kawasaki Heavy Industries Limited* 323,518 273,000 Komatsu Limited 1,273,123 546,000 Kubota Corporation 1,517,507 91,000 Kurita Water Industries Limited 1,101,667 1,092,000 Mitsubishi Heavy Industries Limited 4,329,085 91,000 Mitsui Engineering & Shipbuilding Company Limited 85,340 18,200 SMC Corporation 2,014,033 91,000 Sumitomo Heavy Industries Limited 141,200 ------------ 14,901,982 ------------ MERCHANDISING 2.37% 27,300 Aoyama Trading Company Limited 281,623 9,100 Autobacs Seven Company Limited 193,955 273,000 Daiei Incorporated*++ 430,581 91,000 Hankyu Department Stores 381,704 91,000 Isetan Company Limited Incorporated 977,535 91,000 Ito-Yokado Company Limited 4,748,028 91,000 Jusco Company Limited 2,141,268 91,000 Marui Company Limited 1,291,743 182,000 Mitsukoshi Limited++ 690,481 91,000 Mycal Corporation++ 159,043 91,000 Seiyu Limited*++ 249,039 9,100 Shimamura Company Limited 481,785 91,000 Takashimaya Company Limited++ 620,657 91,000 Uny Company Limited 915,470 ------------ 13,562,912 ------------ See accompanying notes to financial statements. 43 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI JAPAN INDEX FUND (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) METALS - NON FERROUS 0.52% 455,000 Mitsubishi Materials Corporation++ $ 1,062,876 182,000 Mitsubishi Mining & Smelting Company Limited 1,148,216 91,000 Nippon Light Metal Company Limited 67,496 182,000 Sumitomo Metal Mining Company 710,653 ------------ 2,989,241 ------------ METALS - STEEL 1.17% 1,092,000 Kawasaki Steel Corporation++ 1,219,592 2,639,000 Nippon Steel Corporation 4,814,749 1,092,000 Sumitomo Metal Industries Limited* 651,690 ------------ 6,686,031 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 1.19% 364,000 Asahi Glass Company Limited++ 2,510,559 91,000 Nippon Sheet Glass Company Limited 945,727 63,700 Nitto Denko Corporation++ 1,501,603 91,000 Toyo Seikan Kaisha Limited 1,660,258 91,000 Ube Industries Limited 214,127 ------------ 6,832,274 ------------ REAL ESTATE 0.93% 273,000 Mitsubishi Estate Company Limited++ 2,688,222 273,000 Mitsui Fudosan Company Limited 2,637,018 ------------ 5,325,240 ------------ RECREATION - OTHER CONSUMER GOODS 3.04% 91,000 Citizen Watch Company Limited 709,101 182,000 Fuji Photo Film Company 6,594,484 91,000 Konica Corporation 537,644 45,500 Nintendo Company Limited 7,409,097 18,200 Sega Enterprises Limited*++ 333,603 45,500 Shimano Incorporated 723,066 91,000 Yamaha Corporation 1,069,082 ------------ 17,376,077 ------------ TELECOMMUNICATIONS 4.37% 3,822 Nippon Telegraph & Telephone Corporation 25,024,903 ------------ TEXTILES & APPAREL 0.19% 91,000 Onward Kashiyama Company Limited++ 748,668 9,100 World Company Limited++ 318,087 ------------ 1,066,755 ------------ TRANSPORTATION - AIRLINES 0.48% 637,000 Japan Airlines Company Limited 2,726,237 ------------ NO. OF SHARES SECURITY VALUE ------ -------- ----- TRANSPORTATION - ROAD & RAIL 3.81% 728 Central Japan Railway Company $ 4,332,188 1,183 East Japan Railway Company 6,646,464 455,000 Kinki Nippon Railway Company Limited++ 1,733,961 364,000 Nippon Express Company Limited 1,768,873 637,000 Tobu Railway Company Limited 2,107,132 364,000 Tokyu Corporation++ 1,697,498 182,000 Yamato Transport Company Limited++ 3,514,472 ------------ 21,800,588 ------------ TRANSPORTATION - SHIPPING 0.31% 91,000 Kawasaki Kisen Kaisha Limited 148,958 364,000 Nippon Yusen Kabushiki Kaisha 1,626,122 ------------ 1,775,080 ------------ UTILITIES - ELECTRICAL & GAS 3.94% 354,900 Kansai Electric Power Company Incorporated 5,897,098 819,000 Osaka Gas Company Limited 2,136,613 182,000 Tohoku Electric Power Company Incorporated 2,544,695 400,400 Tokyo Electric Power Company++ 9,506,918 910,000 Tokyo Gas Company Limited++ 2,459,355 ------------ 22,544,679 ------------ WHOLESALE & INTERNATIONAL TRADE 2.24% 455,000 Itochu Corporation*++ 1,982,224 546,000 Marubeni Corporation++ 1,084,599 546,000 Mitsubishi Corporation 3,812,388 637,000 Mitsui & Company Limited 3,616,881 364,000 Sumitomo Corporation 2,324,362 ------------ 12,820,454 ------------ TOTAL COMMON STOCK - BASKET (Cost $660,919,917) 572,272,966 ------------ COMMON STOCK - NON-BASKET 0.00% ELECTRONIC COMPONENTS, INSTRUMENTS 0.00% 52 Tokyo Electron Limited 3,489 ------------ ENERGY SOURCES 0.00% 500 Nippon Mitsubishi Oil Corporation 2,498 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $4,070) 5,987 ------------ TOTAL INVESTMENTS (COST $660,923,987)+ 100.00% $572,278,953 ======= ============ - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $666,540,263. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 24,239,731 Excess of tax cost over value (118,501,041) ------------- $ (94,261,310) ============= ++Denotes all or part of security on loan. See accompanying notes to financial statements. 44 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI MALAYSIA (FREE) INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.95% AUTOMOBILES 2.45% 236,000 Edaran Otomobil Nasional $ 484,421 472,000 Oriental Holdings 452,126 708,000 Perusahaan Otomobil Nasional 1,080,632 944,000 Tan Chong Motor Holdings 283,200 ----------- 2,300,379 ----------- BANKING 21.83% 1,652,000 Commerce Asset Holdings 3,282,263 3,304,000 Malayan Banking 12,433,474 3,068,000 Public Bank 3,051,853 2,596,000 RHB Capital 1,707,895 ----------- 20,475,485 ----------- BEVERAGES & TOBACCO 5.01% 424,800 British American Tobacco (Malaysia) 4,303,895 472,000 Guinness Anchor 397,474 ----------- 4,701,369 ----------- BROADCASTING & PUBLISHING 0.84% 236,000 New Straits Times Press 236,000 236,000 Star Publications (Malaysia) 555,842 ----------- 791,842 ----------- BUILDING MATERIALS & COMPONENTS 1.88% 466,000 Hume Industries (Malaysia) 380,158 4,248,000 Malayan Cement 1,173,789 1,180,000 Pan Malaysia Corporation 212,710 ----------- 1,766,657 ----------- CHEMICALS 0.66% 236,000 Malaysian Oxygen 621,053 ----------- CONSTRUCTION & HOUSING 4.80% 708,000 Ekran* 150,916 944,000 Gamuda 988,716 472,000 IJM Corporation 366,421 472,000 Road Builder Holdings 368,905 2,124,000 YTL Corporation 2,627,053 ----------- 4,502,011 ----------- ELECTRICAL & ELECTRONICS 0.68% 1,180,000 Time Engineering* 636,579 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 1.68% 236,000 Malaysian Pacific Industries 1,055,789 236,000 Unisem 524,789 ----------- 1,580,578 ----------- ENERGY SOURCES 0.19% 236,000 Petronas Dagangan 180,105 ----------- FINANCIAL SERVICES 2.11% 1,274,400 AMMB Holdings 1,187,204 1,180,000 MBF Capital* 62,105 944,000 Rashid Hussain* 382,568 1,888,000 TA Enterprises 347,789 ----------- 1,979,666 ----------- FOOD & HOUSEHOLD PRODUCTS 1.91% 236,000 Nestle (Malaysia) 1,304,211 472,000 PPB Group 486,905 ----------- 1,791,116 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- FOREST PRODUCTS & PAPER 0.52% 236,000 Jaya Tiasa Holdings $ 186,316 236,000 WTK Holdings 298,105 ----------- 484,421 ----------- INDUSTRIAL COMPONENTS 0.13% 944,000 Leader Universal Holdings* 120,484 ----------- LEISURE & TOURISM 5.50% 944,000 Berjaya Sports Toto 1,187,453 2,124,000 Magnum Corporation 844,011 1,652,000 Resorts World 3,130,105 ----------- 5,161,569 ----------- MACHINERY & ENGINEERING 0.66% 472,000 UMW Holdings 621,053 ----------- METALS - STEEL 0.16% 2,596,000 Amsteel Corporation 150,295 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 4.08% 1,416,000 Golden Hope Plantations 1,192,421 944,000 Highlands & Lowlands 556,463 1,180,000 IOI Corporation 748,368 236,000 Kian Joo Can Factory 209,916 944,000 Kuala Lumpur Kepong 1,117,895 ----------- 3,825,063 ----------- MULTI-INDUSTRY 7.51% 472,000 Land & General* 49,063 1,888,000 Malayan United Industries* 186,316 1,180,000 Malaysia Mining Corporation 596,211 1,652,000 Malaysian Resources Corporation* 556,463 1,416,000 Mulpha International* 122,968 1,652,000 Multi-Purpose Holdings* 297,795 3,304,000 Sime Darby 4,173,474 1,180,000 United Engineers (Malaysia) 1,062,000 ----------- 7,044,290 ----------- REAL ESTATE 0.65% 1,416,000 FACB Resorts* 147,189 944,000 Hong Leong Properties 149,053 472,000 S P Setia Group 310,526 ----------- 606,768 ----------- TELECOMMUNICATIONS 15.86% 1,180,000 Technology Resources Industries* 835,316 4,484,000 Telekom Malaysia 14,042,000 ----------- 14,877,316 ----------- TRANSPORTATION - AIRLINES 1.01% 944,000 Malaysian Airline System 944,000 ----------- TRANSPORTATION - SHIPPING 4.70% 2,596,000 Malaysia International Shipping 4,406,368 ----------- UTILITIES - ELECTRICAL & GAS 15.13% 4,248,000 Tenaga Nasional 14,197,263 ----------- TOTAL COMMON STOCK - BASKET (Cost $79,682,511) 93,765,730 ----------- See accompanying notes to financial statements. 45 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI MALAYSIA (FREE) INDEX FUND (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - NON-BASKET 0.05% AUTOMOBILES 0.05% 46,400 Oriental Holdings $ 44,446 ----------- BEVERAGES & TOBACCO 0.00% 400 British American Tobacco (Malaysia) 4,053 ----------- METALS - STEEL 0.00% 35,944 Silverstone*/** -- ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $43,746) 48,499 ----------- TOTAL INVESTMENTS (COST $79,726,257)+ 100.00% $93,814,229 ======= =========== - ---------- * Non-income producing security. **Fair valued security. + Aggregate cost for Federal income tax purposes is $82,117,136. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 23,281,095 Excess of tax cost over value (11,584,002) ----------- $ 11,697,093 ============ See accompanying notes to financial statements. 46 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI MEXICO (FREE) INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 12.44% 1,329,400 Grupo Financiero Banamex Accival SA de CV - Series O $ 2,430,042 2,438,000 Grupo Financiero BBVA Bancomer SA de CV - Series O*++ 1,632,870 ----------- 4,062,912 ----------- BEVERAGES & TOBACCO 13.53% 483,000 Fomento Economico Mexicano SA de CV - Series UBD 1,513,947 340,400 Grupo Continental SA++ 486,837 627,900 Grupo Modelo SA de CV - Series C 1,585,116 184,000 Savia SA de CV*++ 833,261 ----------- 4,419,161 ----------- BROADCASTING & PUBLISHING 4.21% 701,500 Grupo Televisa SA - Series CPO*++ 1,376,255 ----------- BUILDING MATERIALS & COMPONENTS 5.02% 391,000 Cemex SA de CV - Series CPO 1,638,937 ----------- ENERGY EQUIPMENT & SERVICES 1.83% 46,000 Tubos de Acero de Mexico SA++ 597,218 ----------- FOOD & HOUSEHOLD PRODUCTS 2.83% 759,000 Grupo Industrial Bimbo SA de CV - Series A++ 922,844 ----------- HEALTH & PERSONAL CARE 4.41% 552,000 Kimberly-Clark de Mexico SA de CV - Series A 1,439,011 ----------- MERCHANDISING 11.80% 713,000 Controladora Comercial Mexicana SA de CV - Series UBC++ 506,924 989,000 Grupo Elektra SA de CV - Series CPO 898,813 1,037,300 Walmart De Mexico V* 2,447,622 ----------- 3,853,359 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- METALS - NON FERROUS 2.70% 253,000 Grupo Mexico SA - Series B++ $ 745,574 138,000 Industrias Penoles SA - Series CP++ 136,507 ----------- 882,081 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.45% 161,000 Vitro SA - Series A++ 147,645 ----------- MULTI-INDUSTRY 6.72% 506,000 Alfa SA de CV - Series A 656,940 1,150,000 Desc SA de CV - Series B++ 503,606 437,000 Grupo Carso SA de CV - Series A1*++ 1,035,652 ----------- 2,196,198 ----------- TELECOMMUNICATIONS 34.06% 4,692,000 America Movil SA de CV*++ 4,167,444 4,314,800 Telefonos de Mexico SA - Series L++ 6,957,921 ----------- 11,125,365 ----------- TOTAL COMMON STOCK - BASKET (Cost $34,425,939) 32,660,986 ----------- TOTAL INVESTMENTS (COST $34,425,939)+ 100.00% $32,660,986 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $34,618,402. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,400,434 Excess of tax cost over value (4,357,850) ----------- $(1,957,416) =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 47 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI NETHERLANDS INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 7.02% 75,834 Philips Electronics $ 2,494,489 ----------- BANKING 4.41% 71,313 ABN AMRO Holding 1,567,347 ----------- BEVERAGES & TOBACCO 4.95% 31,845 Heineken 1,758,543 ----------- BROADCASTING & PUBLISHING 3.90% 49,599 Elsevier 698,764 28,710 Wolters Klumer - CVA 688,820 ----------- 1,387,584 ----------- BUSINESS & PUBLIC SERVICES 5.28% 51,051 Getronics 288,721 6,600 Randstad Holding 103,786 52,173 TNT Post Group 1,228,723 15,774 Vedior 200,179 1,320 VNU 55,959 ----------- 1,877,368 ----------- CHEMICALS 4.86% 29,304 Akzo Nobel 1,420,157 8,217 DSM 308,148 ----------- 1,728,305 ----------- CONSTRUCTION & HOUSING 0.27% 1,782 IHC Caland 94,391 ----------- DATA PROCESSING & REPRODUCTION 2.23% 48,675 Oce 792,279 ----------- ELECTRICAL COMPONENTS & INSTRUMENTS 2.24% 36,498 ASM Lithography Holding NV* 795,792 ----------- ENERGY SOURCES 24.52% 147,048 Royal Dutch/Shell Group 8,716,620 ----------- FINANCIAL SERVICES 11.09% 57,090 ING Groep 3,940,120 ----------- FOOD & HOUSEHOLD PRODUCTS 4.96% 9,900 Koninklijke Wessanen 123,815 29,073 Unilever 1,640,224 ----------- 1,764,039 ----------- INSURANCE 10.03% 80,487 Aegon 2,828,144 25,476 Fortis (NL) 736,567 ----------- 3,564,711 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MERCHANDISING 5.70% 54,846 Koninklijke Ahold $ 1,767,290 18,150 Royal Vendex KBB NV 256,870 ----------- 2,024,160 ----------- MULTI-INDUSTRY 0.55% 7,755 Hunter Douglas 195,403 ----------- TELECOMMUNICATIONS 3.09% 89,529 Koninklijke Kpn 1,099,116 ----------- TRANSPORTATION - AIRLINES 0.99% 14,685 KLM - Koninklijke Luchvaart Mij* 351,112 ----------- TRANSPORTATION - SHIPPING 1.39% 21,252 Koninklijke Vopak 492,492 ----------- WHOLESALE & INTERNATIONAL TRADE 2.52% 11,847 Buhrmann 357,339 23,067 Hagemeyer 539,007 ----------- 896,346 ----------- TOTAL COMMON STOCK - BASKET (Cost $37,517,428) 35,540,217 ----------- COMMON STOCK - NON-BASKET 0.00% APPLIANCES & HOUSEHOLD DURABLES 0.00% 26 Philips Electronics 855 ----------- BANKING 0.00% 2 ABN AMRO Holding 44 ----------- INSURANCE 0.00% 3 Fortis (NL) 87 ----------- TELECOMMUNICATIONS 0.00% 14 Koninklijke Kpn 172 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $1,426) 1,158 ----------- TOTAL INVESTMENTS (COST $37,518,854)+ 100.00% $35,541,375 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $37,738,588. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,079,173 Excess of tax cost over value (3,276,386) ----------- $(2,197,213) =========== See accompanying notes to financial statements. 48 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI SINGAPORE (FREE) INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 0.63% 198,000 Cycle & Carriage Limited $ 406,352 ----------- BANKING 33.51% 990,000 DBS Group Holdings Limited 11,180,349 1,044,450 Oversea-Chinese Banking Corporation Limited 7,843,554 324,720 United Overseas Bank Limited 2,568,870 ----------- 21,592,773 ----------- BEVERAGES & TOBACCO 1.94% 297,000 Fraser & Neave Limited 1,251,404 ----------- BROADCASTING & PUBLISHING 3.87% 198,000 Singapore Press Holdings Limited 2,497,134 ----------- BUSINESS & PUBLIC SERVICES 1.52% 495,000 Parkway Holdings Limited++ 848,458 99,000 Singapore Computer Systems Limited 128,829 ----------- 977,287 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 8.39% 891,000 Chartered Semiconductor Manufacturing, Ltd.* 2,523,240 74,250 Creative Technology Limited++ 868,321 297,000 OMNI Industries Limited 480,131 198,000 Venture Manufacturing (Singapore) Limited 1,532,332 ----------- 5,404,024 ----------- LEISURE & TOURISM 2.22% 198,000 Hotel Properties Limited 172,529 297,000 Overseas Union Enterprise Limited 1,259,917 ----------- 1,432,446 ----------- MACHINERY & ENGINEERING 4.79% 1,980,000 Singapore Technologies Engineering Limited 3,087,365 ----------- MULTI-INDUSTRY 7.21% 227,700 Haw Par Corporation Limited 509,075 693,000 Keppel Corporation Limited 1,374,559 1,881,000 Sembcorp Industries Limited 2,005,652 720,720 Straits Trading Company Limited 756,087 ----------- 4,645,373 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- REAL ESTATE 13.58% 1,980,000 Capitaland Limited $ 3,019,262 693,000 City Developments Limited 3,019,262 99,000 First Capital Corporation Limited 69,806 1,881,000 United Industrial Corporation Limited 992,043 1,188,000 United Overseas Land Limited++ 1,198,624 693,000 Wing Tai Holdings Limited 452,889 ----------- 8,751,886 ----------- TELECOMMUNICATIONS 8.75% 3,564,000 Singapore Telecommunications Limited 5,638,982 ----------- TRANSPORTATION - AIRLINES 11.73% 891,000 Singapore Airlines Limited 7,559,505 ----------- TRANSPORTATION - ROAD & RAIL 0.75% 1,485,000 Comfort Group Limited 485,238 ----------- TRANSPORTATION - SHIPPING 1.11% 990,000 Neptune Orient Lines Limited* 715,088 ----------- TOTAL COMMON STOCK - BASKET (Cost $68,464,520) 64,444,857 ----------- TOTAL INVESTMENTS (COST $68,464,520)+ 100.00% $64,444,857 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $69,167,439. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,390,083 Excess of tax cost over value (9,112,665) ----------- $(4,722,582) =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 49 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI SOUTH KOREA INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.90% APPLIANCES & HOUSEHOLD DURABLES 1.61% 27,000 LG Electronics $ 305,717 ----------- AUTOMOBILES 4.02% 59,940 Hyundai Motor Company, Limited 764,724 ----------- BANKING 11.08% 21,060 Hana Bank* 130,985 25,650 H&CB 559,387 59,940 Kookmin Bank 865,094 43,200 Korea Exchange Bank* 114,364 39,150 Shinhan Bank 440,168 ----------- 2,109,998 ----------- BEVERAGES & TOBACCO 1.47% 4,590 Doosan Corporation* 69,540 5,940 Hite Brewery Company* 210,773 ----------- 280,313 ----------- BUILDING MATERIALS & COMPONENTS 0.75% 3,780 Kumkang Korea Chemical Company Limited 143,170 ----------- BUSINESS & PUBLIC SERVICES 1.87% 540 Cheil Communications, Inc. 45,212 5,400 Daou Technology, Inc.* 19,419 2,160 Daum Communications Corporation* 50,206 8,910 Haansoft, Inc.* 47,886 4,320 Handysoft Corporation* 42,370 2,160 Korea Information & Communications Company Limited* 45,642 6,480 Serome Technology Inc.* 105,666 ----------- 356,401 ----------- CHEMICALS 2.85% 24,030 Hanwha Chemical Corporation* 80,477 14,310 Honam Petrochemical Corporation 105,206 5,130 Isu Chemical Company Limited 28,634 29,430 LG Chemical Limited 328,538 ----------- 542,855 ----------- CONSTRUCTION & HOUSING 0.42% 8,640 Daelim Industrial Company 40,716 22,410 Hyundai Engineering & Construction Company* 39,670 ----------- 80,386 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 28.59% 11,880 Anam Semiconductor Inc.* 40,734 12,690 Daeduck Electronics Company 116,366 16,470 Samsung Electro-Mechanics Company 575,222 27,540 Samsung Electronics 4,106,515 11,880 Samsung SDI Company Limited 607,215 ----------- 5,446,052 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- FINANCIAL SERVICES 5.79% 25,920 Daewoo Securities Company, Limited* $ 219,083 7,290 Dongwon Securities Company 45,631 16,200 KTBNetwork* 65,751 21,330 LG Investment & Securities Company Limited 175,185 21,060 Samsung Securities Company Limited 597,828 ----------- 1,103,478 ----------- FOOD & HOUSEHOLD PRODUCTS 0.87% 4,590 Cheil Jedang Corporation 161,223 4,050 Daesang Corporation 4,344 ----------- 165,567 ----------- FOREST PRODUCTS & PAPER 0.21% 13,230 Hansol Paper Company* 39,824 ----------- HEALTH & PERSONAL CARE 0.10% 540 Korea Green Cross Corporation 14,963 810 Medison Company Limited* 3,132 ----------- 18,095 ----------- INDUSTRIAL COMPONENTS 0.74% 18,090 Hankook Tire Company* 31,446 11,070 LG Cable Limited 109,897 ----------- 141,343 ----------- INSURANCE 1.80% 11,880 Samsung Fire & Marine Insurance 341,973 ----------- MACHINERY & ENGINEERING 1.32% 22,680 Hanjin Heavy Industries* 48,557 46,980 Samsung Heavy Industries Company, Limited* 203,788 ----------- 252,345 ----------- MERCHANDISING 1.22% 1,080 Hyundai Department Store Company 6,950 4,050 Shinsegae Department Store Company 226,058 ----------- 233,008 ----------- METALS - NON FERROUS 0.02% 270 Korea Zinc Company 3,746 ----------- METALS - STEEL 4.91% 11,610 Pohang Iron & Steel Company Limited 935,021 ----------- MULTI-INDUSTRY 10.60% 95,040 Korea Electric Power Corporation 1,947,634 7,290 S1 Corporation 71,499 ----------- 2,019,133 ----------- TELECOMMUNICATIONS 16.75% 12,960 Korea Telecom Corporation 674,817 14,850 SK Telecom 2,516,247 ----------- 3,191,064 ----------- See accompanying notes to financial statements. 50 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI SOUTH KOREA INDEX FUND (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) TRANSPORTATION - AIRLINES 0.93% 28,620 Korean Air Company Limited $ 176,864 ----------- TRANSPORTATION - SHIPPING 0.31% 25,650 Hyundai Merchant Marine* 59,927 ----------- WHOLESALE & INTERNATIONAL TRADE 1.67% 44,010 Samsung Corporation 250,914 9,180 SK Global 66,978 ----------- 317,892 ----------- TOTAL COMMON STOCK - BASKET (Cost $21,766,499) 19,028,896 ----------- COMMON STOCK - NON-BASKET 0.10% BANKING 0.02% 189 H&CB 4,122 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 0.00% 102 Daeduck Electronics Company 935 ----------- FOOD & HOUSEHOLD PRODUCTS 0.00% 202 Daesang Corporation 217 ----------- MERCHANDISING 0.06% 202 Shinsegae Department Store Company 11,275 ----------- TRANSPORTATION - AIRLINES 0.01% 248 Korean Air Company Limited 1,533 ----------- WHOLESALE & INTERNATIONAL TRADE 0.01% 183 SK Global 1,335 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $15,627) 19,417 ----------- TOTAL INVESTMENTS (COST $21,782,126)+ 100.00% $19,048,313 =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $22,016,035. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,417,231 Excess of tax cost over value (4,384,953) ----------- $(2,967,722) =========== See accompanying notes to financial statements. 51 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI SPAIN INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 25.16% 267,750 Banco Bilbao Vizcaya SA $ 3,983,884 377,876 Banco Santander Central Hispano SA++ 3,860,665 ----------- 7,844,549 ----------- BEVERAGES & TOBACCO 1.51% 32,997 Altadis SA 470,332 ----------- BUILDING MATERIALS & COMPONENTS 1.53% 13,617 Portland Valderrivas SA 294,271 29,784 Uralita SA 184,056 ----------- 478,327 ----------- BUSINESS & PUBLIC SERVICES 4.69% 30,940 Aguas de Barcelona 441,866 77,350 Autopistas Concesionaria Espanola SA 732,650 24,463 Prosegur Cia de Seguridad SA 287,951 ----------- 1,462,467 ----------- CONSTRUCTION & HOUSING 3.49% 8,500 Actividades de Construccion y Servicios SA 228,635 23,086 Fomento de Construcciones y Contratas SA 488,287 28,390 Groupo Dragados 370,726 ----------- 1,087,648 ----------- ENERGY SOURCES 4.62% 84,626 Repsol SA 1,439,707 ----------- FOOD & HOUSEHOLD PRODUCTS 1.39% 36,465 Azucarera Ebro Agricolas SA 432,578 ----------- FOREST PRODUCTS & PAPER 0.33% 6,800 Grupo Empresarial Ence SA 103,804 ----------- HEALTH & PERSONAL CARE 2.51% 27,472 Fabrica Espanola de Productos y Farmaceuticos SA 357,980 31,875 Zeltia SA* 423,562 ----------- 781,542 ----------- INSURANCE 1.51% 20,485 Corporacion Mapfre 470,950 ----------- LEISURE & TOURISM 2.20% 54,689 Sol Melia SA++ 553,212 51,000 TelePizza SA* 131,319 ----------- 684,531 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MACHINERY & ENGINEERING 1.66% 54,060 Zardoya Otis SA++ $ 519,009 ----------- MERCHANDISING 0.67% 11,713 Cortefiel SA 208,424 ----------- METALS - NON FERROUS 0.85% 21,624 Asturiana de Zinc 264,874 ----------- METALS - STEEL 3.39% 32,368 Acerinox SA 1,056,679 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.35% 21,250 Viscofan++ 109,432 ----------- REAL ESTATE 0.96% 45,339 Urbis Ser 1,2,3* 195,961 13,192 Vallehermoso SA++ 103,723 ----------- 299,684 ----------- TELECOMMUNICATIONS 24.95% 456,025 Telefonica SA* 7,779,134 ----------- UTILITIES - ELECTRICAL & GAS 18.23% 83,708 Endesa SA 1,432,557 78,948 Gas Natural SDG SA++ 1,320,604 97,342 Iberdrola SA 1,468,056 74,800 Union Electrica Fenosa SA 1,461,703 ----------- 5,682,920 ----------- TOTAL COMMON STOCK - BASKET (Cost $33,089,808) 31,176,591 ----------- COMMON STOCK - NON-BASKET 0.00% FOOD & HOUSEHOLD PRODUCTS 0.00% 7 Azucarera Ebro Agricolas SA 83 ----------- TELECOMMUNICATIONS 0.00% 13 Telefonica SA* 222 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $311) 305 ----------- TOTAL INVESTMENTS (COST $33,090,119)+ 100.00% $31,176,896 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $33,422,830. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 634,590 Excess of tax cost over value (2,880,524) ----------- $(2,245,934) =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 52 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI SWEDEN INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 2.87% 28,600 Electrolux AB - B $ 470,997 ----------- BANKING 18.04% 214,500 Nordea AB 1,569,991 53,300 Skandinaviska Enskilda Banken AB - A 587,888 41,600 Svenska Handelsbanken AB - A 697,774 6,500 Svenska Handelsbanken AB - B++ 106,384 ----------- 2,962,037 ----------- BROADCASTING & PUBLISHING 0.47% 2,600 Modern Times Group MTG AB* 76,649 ----------- BUILDING MATERIALS & COMPONENTS 3.96% 39,000 Assa Abloy AB - B 650,198 ----------- BUSINESS & PUBLIC SERVICES 7.50% 54,600 Icon Medialab International AB*++ 56,060 40,300 Securitas AB - B 774,291 93,600 WM-Data AB - B 401,537 ----------- 1,231,888 ----------- CONSTRUCTION & HOUSING 0.66% 2,600 Skanska AB - B 108,102 ----------- ELECTRICAL & ELECTRONICS 23.78% 462,800 Ericsson LM - B 3,904,890 ----------- FINANCIAL SERVICES 1.54% 11,050 Om Gruppen AB 253,306 ----------- FOREST PRODUCTS & PAPER 3.64% 26,000 Svenska Cellulosa AB - B++ 598,658 ----------- HEALTH & PERSONAL CARE 1.53% 26,000 Gambro AB - A 179,730 10,400 Gambro AB - B 71,892 ----------- 251,622 ----------- INDUSTRIAL COMPONENTS 0.78% 3,900 SKF AB - A 60,064 3,900 SKF AB - B 67,399 ----------- 127,463 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- INSURANCE 4.62% 66,300 Skandia Forsakrings AB $ 758,234 ----------- MACHINERY & ENGINEERING 9.25% 5,200 Atlas Copco AB - A 124,754 1,300 Atlas Copco AB - B++ 29,536 24,700 Sandvik AB 581,280 14,300 Volvo AB - A 268,934 27,300 Volvo AB - B 514,806 ----------- 1,519,310 ----------- MERCHANDISING 6.23% 52,975 Hennes Mauritz AB - B++ 1,023,203 ----------- MULTI-INDUSTRY 4.33% 31,200 Industriforvaltnings Kinnevik AB-B 651,784 7,800 Trelleborg AB - B 59,866 ----------- 711,650 ----------- REAL ESTATE 1.36% 16,900 Drott AB - B++ 223,340 ----------- TELECOMMUNICATIONS 9.44% 20,475 Tele2 AB* 736,825 139,100 Telia AB*++ 813,078 ----------- 1,549,903 ----------- TOTAL COMMON STOCK - BASKET (Cost $20,432,249) 16,421,450 ----------- TOTAL INVESTMENTS (COST $20,432,249)+ 100.00% $16,421,450 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $21,001,670. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 337,804 Excess of tax cost over value (4,918,024) ----------- $(4,580,220) =========== ++Denotes all or part of security on loan. See accompanying notes to financial statements. 53 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI SWITZERLAND INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 18.94% 3,444 Banque Cantonale Vaudoise $ 1,174,114 10,563 Credit Suisse Group 1,964,520 24,780 UBS AG 3,935,447 252 Vontobel Holding AG 601,827 ----------- 7,675,908 ----------- BROADCASTING & PUBLISHING 0.22% 210 PubliGroupe SA 90,274 ----------- BUILDING MATERIALS & COMPONENTS 3.13% 1,008 Forbo Holding AG 441,741 588 Holderbank Financiere Glarus AG - Bearer 664,567 483 Holderbank Financiere Glarus AG - Registered 161,202 ----------- 1,267,510 ----------- BUSINESS & PUBLIC SERVICES 2.35% 1,491 Adecco SA 934,713 63 SGS Societe Generale de Surveillance Holding SA 18,205 ----------- 952,918 ----------- CHEMICALS 5.21% 231 EMS-Chemie Holding AG* 1,055,078 630 Lonza AG 393,444 11,403 Syngenta AG - Registered* 661,073 ----------- 2,109,595 ----------- ELECTRICAL & ELECTRONICS 5.58% 20,517 ABB Ltd. 1,733,331 2,100 Ascom Holding AG 150,457 399 Kudelski SA* 375,916 ----------- 2,259,704 ----------- FINANCIAL SERVICES 2.69% 252 Julius Baer Holding Limited AG 1,089,307 ----------- FOOD & HOUSEHOLD PRODUCTS 10.21% 1,890 Nestle SA 4,135,680 ----------- HEALTH & PERSONAL CARE 30.67% 1,344 Givaudan* 369,121 4,893 Novartis AG 8,267,473 441 Roche Holding AG - Genussein 3,791,510 ----------- 12,428,104 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- INSURANCE 9.14% 882 Schweizerische Rueckversicherungs (Swiss Re) $ 1,847,834 3,885 Zurich Allied AG 1,855,633 ----------- 3,703,467 ----------- LEISURE & TOURISM 0.79% 693 Kuoni Reisen Holding AG 320,661 ----------- MACHINERY & ENGINEERING 4.50% 2,940 Georg Fischer AG 859,233 42 Schindler Holding AG - Participation Certificates 62,690 210 Schindler Holding AG - Registered 325,990 840 Sulzer AG* 577,754 ----------- 1,825,667 ----------- MERCHANDISING 1.18% 420 Charles Voegele Holding AG 49,525 84 Jelmoli Holding AG - Bearer 125,130 1,533 Valora Holding AG 302,042 ----------- 476,697 ----------- RECREATION, OTHER CONSUMER GOODS 1.48% 105 The Swatch Group AG - B 116,604 2,100 The Swatch Group AG - Registered 485,223 ----------- 601,827 ----------- TELECOMMUNICATIONS 2.62% 4,557 Swisscom AG 1,061,096 ----------- TRANSPORTATION - AIRLINES 1.29% 4,095 SairGroup 523,213 ----------- TOTAL COMMON STOCK - BASKET (Cost $40,382,675) 40,521,628 ----------- TOTAL INVESTMENTS (COST $40,382,675)+ 100.00% $40,521,628 ======= =========== - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $40,674,784. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,617,733 Excess of tax cost over value (2,770,889) ----------- $ (153,156) =========== See accompanying notes to financial statements. 54 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI TAIWAN INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.77% APPLIANCES & HOUSEHOLD DURABLES 0.32% 680,000 Sampo Corporation* $ 334,271 ----------- AUTOMOBILES 1.22% 680,000 China Motor Company 691,668 850,000 Yulon Motor Company Limited 570,258 ----------- 1,261,926 ----------- BANKING 13.22% 1,870,000 Chang Hwa Commercial Bank 1,127,377 3,910,000 China Development Industrial Bank* 4,122,152 2,380,000 Chinatrust Commercial Bank* 1,905,766 2,040,000 First Commercial Bank 1,589,365 2,040,000 Hua Nan Commercial Bank 1,652,435 1,870,000 International Commercial Bank of China 1,595,672 2,040,000 United World Chinese Commercial Bank 1,734,426 ----------- 13,727,193 ----------- BUILDING MATERIALS & COMPONENTS 1.90% 1,190,000 Asia Cement Corporation 610,728 1,360,000 Taiwan Cement Corporation 685,361 680,000 Taiwan Glass Industrial Corporation 672,747 ----------- 1,968,836 ----------- CHEMICALS 7.10% 170,000 China Synthetic Rubber Corporation 87,247 2,210,000 Formosa Plastics Corporation 3,320,637 1,530,000 Hualon Corporation* 122,040 3,060,000 Nan Ya Plastic Corporation 3,840,965 ----------- 7,370,889 ----------- CONSTRUCTION & HOUSING 0.37% 680,000 BES Engineering Corporation* 103,014 510,000 Continental Engineering Corporation* 214,438 680,000 Ever Fortune Industrial Company* 67,695 ----------- 385,147 ----------- DATA PROCESSING & REPRODUCTION 5.82% 2,380,000 Acer Incorporated 1,420,127 850,000 Compal Electronics Incorporated 1,340,238 1,020,000 Quanta Computer Incorporated 3,279,641 ----------- 6,040,006 ----------- ELECTRICAL & ELECTRONICS 1.18% 340,000 Lite-On Electronics Incorporated 217,592 170,000 Microelectronics Technology Incorporated* 373,164 1,020,000 Teco Electric & Machinery Company Limited 630,700 ----------- 1,221,456 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- ELECTRONIC COMPONENTS, INSTRUMENTS 47.41% 1,530,000 Advanced Semiconductor Engineering Incorporated* $ 1,480,569 850,000 Asustek Computer Incorporated 3,771,062 510,000 Delta Electronics Incorporated 1,821,147 850,000 Hon Hai Precision Industry Company 5,282,115 1,700,000 Mosel Vitelic Incorporated* 1,208,842 680,000 Ritek Corporation* 1,618,797 340,000 Systex Corporation* 646,468 6,970,000 Taiwan Semiconductor Manufacturing Company* 19,394,033 6,460,000 United Microelectronics Company* 10,585,253 2,040,000 Winbond Electronics Corporation* 2,213,758 850,000 Yageo Corporation* 1,198,330 ----------- 49,220,374 ----------- FINANCIAL SERVICES 0.48% 1,530,000 Chung Hsing Bills Finance Corporation 501,407 ----------- FOOD & HOUSEHOLD PRODUCTS 1.11% 340,000 Lien Hwa Industrial Corporation 101,963 1,700,000 Uni-President Enterprises Company 1,051,167 ----------- 1,153,130 ----------- FOREST PRODUCTS & PAPER 0.13% 340,000 Chung Hwa Pulp Corporation* 132,447 ----------- INDUSTRIAL COMPONENTS 2.13% 510,000 Cheng Shin Rubber Industries Company 357,922 1,870,000 Pacific Electric Wire & Cable Company Limited* 763,147 340,000 Shihlin Electric & Engineering Corporation 218,643 1,870,000 Walsin Lihwa Corporation 872,994 ----------- 2,212,706 ----------- INSURANCE 5.97% 3,230,000 Cathay Life Insurance Company 6,191,374 ----------- MERCHANDISING 0.42% 340,000 Aurora Corporation* 249,127 510,000 Far East Department Stores Limited 184,480 ----------- 433,607 ----------- METALS - STEEL 3.44% 5,100,000 China Steel Corporation 3,390,014 510,000 Tung Ho Steel Enterprise* 185,268 ----------- 3,575,282 ----------- MULTI-INDUSTRY 0.96% 2,380,000 Tatung Company Limited 1,000,711 ----------- REAL ESTATE 0.44% 1,020,000 Cathay Construction Corporation 315,350 850,000 Pacific Construction Company* 143,222 ----------- 458,572 ----------- See accompanying notes to financial statements. 55 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI TAIWAN INDEX FUND (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) RECREATION, OTHER CONSUMER GOODS 1.07% 510,000 Kinpo Electronics Incorporated $ 386,304 680,000 Pou Chen Corporation* 725,305 ------------ 1,111,609 ------------ TEXTILES & APPAREL 3.71% 1,870,000 Far Eastern Textile Limited 1,474,262 2,210,000 Formosa Chemical & Fibre Corporation 2,042,943 340,000 Nien Hsing Textile Corporation Limited* 334,271 ------------ 3,851,476 ------------ TRANSPORTATION - SHIPPING 1.21% 1,190,000 Evergreen Marine Corporation* 820,436 1,020,000 Yang Ming Marine Transport 435,183 ------------ 1,255,619 ------------ WHOLESALE & INTERNATIONAL TRADE 0.16% 680,000 Taiwan Tea Corporation* 165,033 ------------ TOTAL COMMON STOCK - BASKET (Cost $124,576,885) 103,573,071 ------------ COMMON STOCK - NON-BASKET 0.23% AUTOMOBILES 0.02% 35,125 Yulon Motor Company Limited 23,565 ------------ BANKING 0.02% 1,600 Chinatrust Commercial Bank* 1,281 4,000 First Commercial Bank 3,116 11,200 United World Chinese Commercial Bank 9,522 ------------ 13,919 ------------ BUILDING MATERIALS & COMPONENTS 0.00% 600 Asia Cement Corporation 308 400 Taiwan Cement Corporation 202 ------------ 510 ------------ CHEMICALS 0.03% 5,250 China Synthetic Rubber Corporation 2,694 400 Formosa Chemical & Fibre Corporation 370 5,950 Formosa Plastics Corporation 8,940 16,000 Nan Ya Plastic Corporation 20,083 ------------ 32,087 ------------ CONSTRUCTION & HOUSING 0.01% 15,600 Continental Engineering Corporation* 6,559 ------------ NO. OF SHARES SECURITY VALUE ------ -------- ----- ELECTRONIC COMPONENTS, INSTRUMENTS 0.09% 4,100 Advanced Semiconductor Engineering Incorporated* $ 3,968 17,250 Delta Electronics Incorporated 61,598 4,000 Hon Hai Precision Industry Company 24,857 2,800 Mosel Vitelic Incorporated* 1,991 ------------ 92,414 ------------ FOOD & HOUSEHOLD PRODUCTS 0.00% 3,150 Lien Hwa Industrial Corporation 945 600 Uni-President Enterprises Company 371 ------------ 1,316 ------------ FOREST PRODUCTS & PAPER 0.00% 3,120 Chung Hwa Pulp Corporation* 1,215 ------------ INDUSTRIAL COMPONENTS 0.01% 5,250 Cheng Shin Rubber Industries Company 3,685 7,000 Pacific Electric Wire & Cable Company Limited* 2,857 ------------ 6,542 ------------ METALS - STEEL 0.02% 31,200 China Steel Corporation 20,739 ------------ MULTI-INDUSTRY 0.00% 400 Tatung Company Limited 168 ------------ REAL ESTATE 0.00% 10,400 Pacific Construction Company* 1,752 ------------ RECREATION, OTHER CONSUMER GOODS 0.01% 10,400 Pou Chen Corporation* 11,093 ------------ TEXTILES & APPAREL 0.00% 4,000 Far Eastern Textile Limited 3,154 ------------ TRANSPORTATION - SHIPPING 0.02% 29,120 Evergreen Marine Corporation* 20,077 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $312,114) 235,110 ------------ TOTAL INVESTMENTS (COST $124,888,999)+ 100.00% $103,808,181 ======= ============ - ---------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $126,735,421. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,306,267 Excess of tax cost over value (24,233,507) ------------ $(22,927,240) ============ See accompanying notes to financial statements. 56 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI UNITED KINGDOM INDEX FUND - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 0.81% 258,874 BAE Systems Plc $ 1,097,720 ------------ BANKING 17.38% 125,788 Abbey National Plc 2,117,218 130,831 Barclays Plc 3,968,310 203,770 Halifax Group Plc 2,057,282 466,211 HSBC Holdings Plc 6,192,953 464,612 Lloyds TSB Group Plc 4,395,921 214,635 Royal Bank of Scotland Group Plc 4,705,435 ------------ 23,437,119 ------------ BEVERAGES & TOBACCO 3.72% 199,506 British American Tobacco Plc 1,602,034 162,565 Cadbury Schweppes Plc 1,057,448 232,183 Diageo Plc 2,352,515 ------------ 5,011,997 ------------ BROADCASTING & PUBLISHING 3.84% 144,607 British Sky Broadcasting Group Plc* 2,002,240 205,451 Granada Plc 571,901 78,105 Pearson Plc 1,706,660 90,405 Reed International Plc 904,914 ------------ 5,185,715 ------------ BUILDING MATERIALS & COMPONENTS 1.42% 36,900 Blue Circle Industries Plc 260,117 80,319 Hanson Plc 521,298 60,229 Novar Plc 169,828 58,548 RMC Group Plc 657,817 45,100 Wolseley Plc 307,025 ------------ 1,916,085 ------------ BUSINESS & PUBLIC SERVICES 7.48% 23,124 AWG Plc 194,107 88,437 BAA Plc 835,470 22,837 BTG Plc* 403,488 50,061 Capita Group Plc 346,935 235,504 Chubb Plc 506,104 43,665 CMG Plc 474,854 69,987 De La Rue Plc 429,005 52,767 Exel Plc 730,616 131,528 Hays Plc 667,754 74,743 Kidde Plc* 84,624 33,169 Logica Plc 660,187 35,875 London Bridge Software Holdings Plc 170,750 16,564 Misys Plc 143,461 38,663 Railtrack Group Plc 510,237 107,010 Rentokil Initial Plc 316,784 74,866 Reuters Group Plc 1,152,138 173,799 Sage Group Plc 729,451 42,517 SEMA Group Plc 335,739 21,525 United Utilities Plc 180,995 103,771 WPP Group Plc 1,215,312 ------------ 10,088,011 ------------ CHEMICALS 0.70% 42,722 BOC Group Plc 630,968 41,656 Imperial Chemical Industries Plc 309,715 ------------ 940,683 ------------ NO. OF SHARES SECURITY VALUE ------ -------- ----- CONSTRUCTION & HOUSING 0.63% 24,518 AMEC Plc $ 144,455 43,009 Barratt Developments Plc 213,390 24,313 Berkeley Group (The) Plc 296,839 63,755 Taylor Woodrow Plc 189,425 ------------ 844,109 ------------ DATA PROCESSING & REPRODUCTION 0.04% 23,575 Psion Plc 52,363 ------------ ELECTRICAL & ELECTRONICS 1.32% 243,909 Marconi Plc 1,639,341 19,885 Pace Micro Technology Plc 146,269 ------------ 1,785,610 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 0.67% 85,895 ARM Holdings Plc* 384,048 53,546 Electrocomponents Plc 525,160 ------------ 909,208 ------------ ENERGY SOURCES 7.07% 1,153,863 BP Amoco Plc 9,535,961 ------------ FINANCIAL SERVICES 2.82% 65,805 Amvescap Plc 1,305,020 39,524 Provident Financial Plc 455,474 26,568 Schroders Plc 452,165 82,533 3i Group Plc 1,595,100 ------------ 3,807,759 ------------ FOOD & HOUSEHOLD PRODUCTS 1.65% 131,159 Tate & Lyle Plc 472,927 235,094 Unilever Plc 1,753,023 ------------ 2,225,950 ------------ HEALTH & PERSONAL CARE 14.68% 144,320 Astrazeneca Plc 6,554,730 20,500 Celltech Group Plc* 394,721 431,484 GlaxoSmithKline Plc 11,855,375 78,351 Nycomed Amersham Plc 610,231 73,103 Smith and Nephew Plc 347,413 6,068 SSL International Plc 44,635 ------------ 19,807,105 ------------ INDUSTRIAL COMPONENTS 0.28% 70,315 Balfour Beatty Plc 151,109 46,330 BBA Group Plc 230,034 ------------ 381,143 ------------ INSURANCE 4.08% 171,462 CGNU Plc 2,485,361 350,837 Legal & General Group Plc 877,931 156,538 Prudential Corporation Plc 2,142,602 ------------ 5,505,894 ------------ LEISURE & TOURISM 2.89% 25,297 Airtours Plc 106,083 82,779 Bass Plc 863,205 49,651 Carlton Communications Plc 370,232 205,451 Compass Group Plc* 1,635,697 84,665 Hilton Group Plc 272,311 66,215 P&O Princess Cruises Plc* 350,969 114,185 Rank Group Plc 303,028 ------------ 3,901,525 ------------ See accompanying notes to financial statements. 57 FEBRUARY 28, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- ISHARES MSCI UNITED KINGDOM INDEX FUND (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET (CONTINUED) MACHINERY & ENGINEERING 1.15% 82,656 GKN Plc $ 959,679 58,425 Smiths Group Plc 589,865 ------------ 1,549,544 ------------ MERCHANDISING 3.91% 46,986 Boots Company Plc 423,549 157,194 Dixons Group Plc 586,074 78,843 Great Universal Stores Plc 622,022 59,819 Kingfisher Plc 426,208 267,894 Marks & Spencer Plc 938,912 89,790 Sainsbury Plc 498,591 469,573 Tesco Plc 1,777,821 ------------ 5,273,177 ------------ METALS - NON FERROUS 1.40% 102,418 Rio Tinto Plc 1,883,398 ------------ METALS - STEEL 0.18% 230,010 Corus Group Plc 238,855 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 1.13% 131,733 Bunzl Plc 863,543 122,180 Pilkington Plc 212,345 117,547 Rexam Plc 448,004 ------------ 1,523,892 ------------ MULTI-INDUSTRY 0.55% 53,177 IMI Plc 205,932 34,317 Johnson Matthey Plc 528,611 ------------ 734,543 ------------ REAL ESTATE 2.57% 36,900 British Land Company Plc 269,830 79,376 Canary Wharf Finance Plc* 591,596 123,000 Great Portland Estates Plc 496,728 136,407 Hammerson 992,552 53,341 Land Securities Plc 670,093 73,636 Slough Estates Plc 441,814 ------------ 3,462,613 ------------ RECREATION, OTHER CONSUMER GOODS 0.35% 66,174 EMI Group Plc 465,761 ------------ TELECOMMUNICATIONS 11.66% 559,281 British Telecommunications Plc 4,597,911 4,110,660 Vodafone Airtouch Plc 11,131,331 ------------ 15,729,242 ------------ NO. OF SHARES SECURITY VALUE ------ -------- ----- TRANSPORTATION - AIRLINES 0.27% 63,837 British Airways Plc $ 370,360 ------------ TRANSPORTATION - ROAD & RAIL 0.21% 262,523 Stagecoach Holdings Plc 281,138 ------------ TRANSPORTATION - SHIPPING 0.21% 66,215 Peninsular & Oriental Steam Navigation Company Plc 286,983 ------------ UTILITIES - ELECTRICAL & GAS 4.93% 342,924 BG Plc 1,315,634 451,123 Centrica Plc 1,529,039 86,182 International Power Plc 298,321 291,961 Lattice Group Plc* 541,108 200,736 National Grid Group Plc 1,696,596 184,869 Scottish Power Plc 1,273,190 ------------ 6,653,888 ------------ TOTAL COMMON STOCK - BASKET (Cost $151,759,561) 134,887,351 ------------ COMMON STOCK - NON-BASKET 0.00% BUILDING MATERIALS & COMPONENTS 0.00% 12 Blue Circle Industries Plc 85 ------------ BUSINESS & PUBLIC SERVICES 0.00% 3,052,368 AWG Plc - Redemption Shares** 4,402 ------------ HEALTH & PERSONAL CARE 0.00% 17 GlaxoSmithKline Plc 467 ------------ MACHINERY & ENGINEERING 0.00% 49,082 Smiths Group Contingent Rights - LOC (Cash)** -- 4,268 Smiths Group Contingent Rights - LOC (Loan Notes)** -- ------------ -- ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $4,843) 4,954 ------------ TOTAL INVESTMENTS (COST $151,764,404)+ 100.00% $134,892,305 ======= ============ - ---------- * Non-income producing security. **Fair valued security. + Aggregate cost for Federal income tax purposes is $154,061,241. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,652,941 Excess of tax cost over value (23,821,877) ------------ $(19,168,936) See accompanying notes to financial statements. 58 (THIS PAGE INTENTIONALLY LEFT BLANK.) FEBRUARY 28, 2001 STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) ISHARES, INC. - --------------------------------------------------------------------------------
ISHARES MSCI ISHARES MSCI ISHARES MSCI ISHARES MSCI AUSTRALIA AUSTRIA BELGIUM BRAZIL (FREE) INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------ ASSETS Investments, at value .................................. $48,317,520 $11,851,611 $10,750,938 $15,238,713 Cash and foreign currency (at value) ................... 103,815 19,598 13,018 383,012 Cash collateral for securities loaned .................. 2,185,598 -- 874,521 -- Dividends receivable ................................... 169,546 -- 33,463 119,173 Interest receivable .................................... 544 41 175 272 Receivable from investment adviser ..................... -- 2,554 -- -- Receivable for securities sold ......................... -- 590,463 -- 24,553 Assets for in-kind redemptions ......................... -- -- -- -- Receivable for Fund shares sold ........................ -- -- -- -- Deferred organization cost ............................. 1,066 780 338 -- Prepaid expenses ....................................... 447 88 110 -- ----------- ----------- ----------- ----------- Total assets ....................................... 50,778,536 12,465,135 11,672,563 15,765,723 ----------- ----------- ----------- ----------- LIABILITIES Payable for securities purchased ....................... -- 593,141 -- -- Payable for Fund shares redeemed ....................... -- -- -- -- Liability for in-kind subscriptions -- -- -- -- Payable for securities loaned .......................... 2,185,598 -- 874,521 -- Payable for foreign withholding tax .................... -- -- -- -- Advisory fee payable ................................... 8,305 -- 716 4,813 Administration fee payable ............................. 5,818 1,331 1,272 1,906 Distribution fee payable ............................... 9,695 2,216 2,120 3,176 Custody fee payable .................................... 9,451 3,172 2,529 5,550 Accrued expenses ....................................... 16,008 4,982 4,891 8,242 ----------- ----------- ----------- ----------- Total liabilities .................................. 2,234,875 604,842 886,049 23,687 ----------- ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ........................ 5,200 1,400 840 950 Paid-in capital ........................................ 54,853,339 14,172,890 14,192,771 19,369,990 Accumulated net investment income/(loss) ............... 505,738 (37,374) (196,829) 202,156 Accumulated net realized gain/(loss) on investments .... (3,268,599) (1,758,868) (1,755,038) (788,998) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (3,552,017) (517,755) (1,455,230) (3,042,062) ----------- ----------- ----------- ----------- Net Assets ............................................. $48,543,661 $11,860,293 $10,786,514 $15,742,036 =========== =========== =========== =========== Shares of common stock issued and outstanding .......... 5,200,030 1,400,030 840,030 950,000 =========== =========== =========== =========== Net Asset Value Per Share .............................. $ 9.34 $ 8.47 $ 12.84 $ 16.57 =========== =========== =========== =========== ISHARES MSCI ISHARES MSCI ISHARES MSCI ISHARES MSCI CANADA EMU FRANCE GERMANY INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------- ASSETS Investments, at value .................................. $19,096,081 $52,986,484 $74,525,881 $160,747,825 Cash and foreign currency (at value) ................... 60,766 48,271 158,576 570,475 Cash collateral for securities loaned .................. -- -- 3,207,173 56,156,441 Dividends receivable ................................... 12,677 64,574 152,765 276,603 Interest receivable .................................... 78 117 1,690 9,439 Receivable from investment adviser ..................... -- -- -- -- Receivable for securities sold ......................... -- -- -- -- Assets for in-kind redemptions ......................... -- -- -- -- Receivable for Fund shares sold ........................ -- -- -- -- Deferred organization cost ............................. 736 -- 2,025 1,923 Prepaid expenses ....................................... 182 165 747 1,207 ----------- ----------- ----------- ------------ Total assets ....................................... 19,170,520 53,099,611 78,048,857 217,763,913 ----------- ----------- ----------- ------------ LIABILITIES Payable for securities purchased ....................... -- -- -- -- Payable for Fund shares redeemed ....................... -- -- -- -- Liability for in-kind subscriptions .................... -- -- -- -- Payable for securities loaned .......................... -- -- 3,207,173 56,156,441 Payable for foreign withholding tax .................... -- -- -- -- Advisory fee payable ................................... 481 13,816 10,820 29,154 Administration fee payable ............................. 2,030 6,376 9,073 18,857 Distribution fee payable ............................... 3,382 10,627 15,118 31,427 Custody fee payable .................................... 7,182 20,346 9,945 13,050 Accrued expenses ....................................... 9,240 20,120 26,491 54,137 ----------- ----------- ----------- ------------ Total liabilities .................................. 22,315 71,285 3,278,620 56,303,066 ----------- ----------- ----------- ------------ NET ASSETS Capital stock, $0.001 par value ........................ 1,600 800 3,401 8,701 Paid-in capital ........................................ 22,709,789 61,714,097 72,286,749 192,218,751 Accumulated net investment income/(loss) ............... (23,310) (95,619) (413,893) (172,068) Accumulated net realized gain/(loss) on investments .... (344,961) (128,269) 1,952,376 (3,181,857) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (3,194,913) (8,462,683) 941,604 (27,412,680) ----------- ----------- ----------- ------------ Net Assets ............................................. $19,148,205 $53,028,326 $74,770,237 $161,460,847 =========== =========== =========== ============ Shares of common stock issued and outstanding .......... 1,600,030 800,000 3,401,000 8,701,000 =========== =========== =========== ============ Net Asset Value Per Share .............................. $ 11.97 $ 66.29 $ 21.98 $ 18.56 =========== =========== =========== ============ ISHARES MSCI ISHARES MSCI ISHARES MSCI HONG KONG ITALY JAPAN INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ASSETS Investments, at value .................................. $67,805,321 $40,189,668 $572,278,953 Cash and foreign currency (at value) ................... 528,469 24,356 712,537 Cash collateral for securities loaned .................. 6,990,673 12,698,982 61,076,004 Dividends receivable ................................... -- -- 186,461 Interest receivable .................................... 1,771 5,019 10,991 Receivable from investment adviser ..................... -- -- -- Receivable for securities sold ......................... -- 385,513 -- Assets for in-kind redemptions ......................... -- -- -- Receivable for Fund shares sold ........................ -- -- -- Deferred organization cost ............................. 534 1,021 4,249 Prepaid expenses ....................................... 482 377 5,120 ----------- ----------- ------------ Total assets ....................................... 75,327,250 53,304,936 634,274,315 ----------- ----------- ------------ LIABILITIES Payable for securities purchased ....................... -- 244,671 -- Payable for Fund shares redeemed ....................... -- -- -- Liability for in-kind subscriptions .................... -- -- -- Payable for securities loaned .......................... 6,990,673 12,698,982 61,076,004 Payable for foreign withholding tax .................... -- -- -- Advisory fee payable ................................... 10,742 9,342 108,651 Administration fee payable ............................. 7,962 5,459 65,781 Distribution fee payable ............................... 13,271 9,098 109,664 Custody fee payable .................................... 9,423 8,744 59,166 Accrued expenses ....................................... 24,946 15,548 199,895 ----------- ----------- ------------ Total liabilities .................................. 7,057,017 12,991,844 61,619,161 ----------- ----------- ------------ NET ASSETS Capital stock, $0.001 par value ........................ 5,701 1,950 54,601 Paid-in capital ........................................ 63,125,329 39,814,295 666,594,503 Accumulated net investment income/(loss) ............... (29,238) (212,564) (4,191,899) Accumulated net realized gain/(loss) on investments .... (5,015,249) 1,113,465 (1,151,910) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ 10,183,690 (404,054) (88,650,141) ----------- ----------- ------------ Net Assets ............................................. $68,270,233 $40,313,092 $572,655,154 =========== =========== ============ Shares of common stock issued and outstanding .......... 5,701,000 1,950,030 54,601,000 =========== =========== ============ Net Asset Value Per Share .............................. $ 11.98 $ 20.67 $ 10.49 =========== =========== ============
See accompanying notes to financial statements. 60 and 61 FEBRUARY 28, 2001 STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) (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 .................................. $ 93,814,229 $32,660,986 $35,541,375 $64,444,857 Cash and foreign currency (at value) ................... 384,745 109,059 37,250 463,917 Cash collateral for securities loaned .................. -- 5,651,719 -- 1,425,000 Dividends receivable ................................... 52,540 314 7,020 16,748 Interest receivable .................................... 980 2,124 55 1,437 Receivable from investment adviser ..................... -- -- -- -- Receivable for securities sold ......................... -- -- -- -- Assets for in-kind redemptions ......................... -- -- -- -- Receivable for Fund shares sold ........................ -- -- -- -- Deferred organization cost ............................. 570 577 482 683 Prepaid expenses ....................................... 649 363 368 553 ------------ ----------- ----------- ----------- Total assets ....................................... 94,253,713 38,425,142 35,586,550 66,353,195 ------------ ----------- ----------- ----------- LIABILITIES Payable for securities purchased ....................... -- -- -- -- Payable for Fund shares redeemed ....................... -- -- -- -- Liability for in-kind subscriptions .................... -- -- -- -- Payable for securities loaned .......................... -- 5,651,719 -- 1,425,000 Payable for foreign withholding tax .................... -- -- -- -- Advisory fee payable ................................... 14,348 1,927 5,417 8,684 Administration fee payable ............................. 10,985 4,056 4,202 7,572 Distribution fee payable ............................... 18,302 6,757 7,001 12,619 Custody fee payable .................................... 16,299 12,726 5,510 8,383 Accrued expenses ....................................... 35,462 12,418 14,547 25,762 ------------ ----------- ----------- ----------- Total liabilities .................................. 95,396 5,689,603 36,677 1,488,020 ------------ ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ........................ 17,700 2,300 1,651 9,900 Paid-in capital ........................................ 91,688,328 34,352,946 38,190,728 67,749,885 Accumulated net investment income/(loss) ............... 142,264 12,394 (12,341) (454,297) Accumulated net realized gain/(loss) on investments .... (11,777,941) 133,216 (651,450) 1,580,688 Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ 14,087,966 (1,765,317) (1,978,715) (4,021,001) ------------ ----------- ----------- ----------- Net Assets ............................................. $ 94,158,317 $32,735,539 $35,549,873 $64,865,175 ============ =========== =========== =========== Shares of common stock issued and outstanding .......... 17,700,030 2,300,030 1,651,000 9,900,030 ============ =========== =========== =========== Net Asset Value Per Share .............................. $ 5.32 $ 14.23 $ 21.53 $ 6.55 ============ =========== =========== =========== ISHARES MSCI ISHARES MSCI ISHARES MSCI ISHARES MSCI SOUTH KOREA SPAIN SWEDEN SWITZERLAND INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------ ASSETS Investments, at value .................................. $19,048,313 $31,176,896 $16,421,450 $40,521,628 Cash and foreign currency (at value) ................... 25,791 130,481 79,397 7,824 Cash collateral for securities loaned .................. -- 2,760,500 1,990,027 -- Dividends receivable ................................... 9,817 77,810 -- 181,364 Interest receivable .................................... 97 1,125 576 22 Receivable from investment adviser ..................... -- -- -- -- Receivable for securities sold ......................... -- 1,432,066 -- 204,023 Assets for in-kind redemptions ......................... -- 3,667,834 -- 5,737,066 Receivable for Fund shares sold ........................ -- -- -- -- Deferred organization cost ............................. -- 843 549 1,297 Prepaid expenses ....................................... -- 320 142 422 ----------- ----------- ----------- ----------- Total assets ....................................... 19,084,018 39,247,875 18,492,141 46,653,646 ----------- ----------- ----------- ----------- LIABILITIES Payable for securities purchased ....................... -- 1,515,820 -- 120,022 Payable for Fund shares redeemed ....................... -- 3,675,052 -- 5,751,598 Liability for in-kind subscriptions .................... -- -- -- -- Payable for securities loaned .......................... -- 2,760,500 1,990,027 -- Payable for foreign withholding tax .................... 3,190 -- -- -- Advisory fee payable ................................... 4,703 4,809 1,215 7,757 Administration fee payable ............................. 2,285 4,209 2,073 5,468 Distribution fee payable ............................... 3,809 7,015 3,455 9,113 Custody fee payable .................................... 4,904 10,507 8,715 6,702 Accrued expenses ....................................... 18,835 12,030 7,931 14,756 ----------- ----------- ----------- ----------- Total liabilities .................................. 37,726 7,989,942 2,013,416 5,915,416 ----------- ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ........................ 1,350 1,275 975 2,626 Paid-in capital ........................................ 22,795,897 33,543,120 22,539,076 41,615,175 Accumulated net investment income/(loss) ............... (85,115) 72,495 (83,041) (130,554) Accumulated net realized gain/(loss) on investments .... (932,192) (439,219) (1,967,616) (879,155) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (2,733,648) (1,919,738) (4,010,669) 130,138 ----------- ----------- ----------- ----------- Net Assets ............................................. $19,046,292 $31,257,933 $16,478,725 $40,738,230 =========== =========== =========== =========== Shares of common stock issued and outstanding .......... 1,350,000 1,275,030 975,030 2,626,000 =========== =========== =========== =========== Net Asset Value Per Share .............................. $ 14.11 $ 24.52 $ 16.90 $ 15.51 =========== =========== =========== =========== ISHARES MSCI ISHARES MSCI TAIWAN UNITED KINGDOM INDEX FUND INDEX FUND ------------ -------------- ASSETS Investments, at value .................................. $103,808,181 $134,892,305 Cash and foreign currency (at value) ................... 127,996 297,414 Cash collateral for securities loaned .................. -- -- Dividends receivable ................................... -- 648,080 Interest receivable .................................... -- 259 Receivable from investment adviser ..................... -- -- Receivable for securities sold ......................... -- 1,899,261 Assets for in-kind redemptions ......................... -- -- Receivable for Fund shares sold ........................ -- -- Deferred organization cost ............................. -- 1,224 Prepaid expenses ....................................... 406 1,546 ------------ ------------ Total assets ....................................... 103,936,583 137,740,089 ------------ ------------ LIABILITIES Payable for securities purchased ....................... -- 1,895,190 Payable for Fund shares redeemed ....................... -- -- Liability for in-kind subscriptions .................... -- -- Payable for securities loaned .......................... -- -- Payable for foreign withholding tax .................... 2,153 -- Advisory fee payable ................................... 21,700 31,642 Administration fee payable ............................. 12,346 16,202 Distribution fee payable ............................... 20,577 26,995 Custody fee payable .................................... 50,090 30,869 Accrued expenses ....................................... 54,540 51,704 ------------ ------------ Total liabilities .................................. 161,406 2,052,602 ------------ ------------ NET ASSETS Capital stock, $0.001 par value ........................ 8,500 8,201 Paid-in capital ........................................ 127,311,649 159,547,597 Accumulated net investment income/(loss) ............... (317,880) 580,001 Accumulated net realized gain/(loss) on investments .... (2,146,174) (7,568,882) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (21,080,918) (16,879,430) ------------ ------------ Net Assets ............................................. $103,775,177 $135,687,487 ============ ============ Shares of common stock issued and outstanding .......... 8,500,000 8,201,000 ============ ============ Net Asset Value Per Share .............................. $ 12.21 $ 16.55 ============ ============
See accompanying notes to financial statements. 62 and 63 FOR THE SIX MONTHS ENDED FEBRUARY 28, 2001 STATEMENTS OF OPERATIONS (Unaudited) ISHARES, INC. - --------------------------------------------------------------------------------
ISHARES MSCI ISHARES MSCI ISHARES MSCI ISHARES MSCI AUSTRALIA AUSTRIA BELGIUM BRAZIL (FREE) INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $ 1,011,445 $ -- $ 13,177 $ 294,521 Interest ............................................... 13,541 866 1,935 -- ----------- ---------- --------- ----------- Total investment income .............................. 1,024,986 866 15,112 294,521 ----------- ---------- --------- ----------- EXPENSES: Advisory fees .......................................... 62,650 -- 6,075 17,840 Administration fees .................................... 42,271 7,886 8,788 12,022 Distribution fees ...................................... 70,452 13,143 14,647 20,037 Custodian fees and expenses ............................ 16,720 6,434 4,985 21,080 Transfer agent fees .................................... 5,297 4,204 4,440 5,089 Directors' fees ........................................ 3,564 662 702 1,012 Legal fees ............................................. 8,354 1,589 1,671 3,592 Audit fees ............................................. 2,897 602 446 769 Federal and state registration fees .................... -- 94 -- -- Amortization of deferred organization costs ............ 17,812 13,246 5,787 -- Insurance .............................................. 1,319 185 205 388 Printing ............................................... 1,744 346 253 378 Licensing fees ......................................... 2,975 521 625 843 Amex listing fee ....................................... 286 76 88 34 Miscellaneous expenses ................................. 378 943 507 1,562 ----------- ---------- --------- ----------- Total expenses ....................................... 236,719 49,931 49,219 84,646 Less reimbursements from investment adviser .......... -- (5,771) -- (5,298) ----------- ---------- --------- ----------- Net expenses ......................................... 236,719 44,160 49,219 79,348 ----------- ---------- --------- ----------- Net investment income/(loss) ........................... 788,267 (43,294) (34,107) 215,173 ----------- ---------- --------- ----------- 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 ................ 46,846 (300,863) (68,164) (26,470) Net realized gain/(loss) on investments on in-kind redemptions .................................. 432,349 -- (522,188) -- Net realized gain/(loss) on foreign currency related transactions ................................. (91,632) (2,629) (5,584) (34,228) ----------- ---------- --------- ----------- 387,563 (303,492) (595,936) (60,698) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (4,333,949) 1,466,418 155,075 (2,690,867) ----------- ---------- --------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (3,946,386) 1,162,926 (440,861) (2,751,565) ----------- ---------- --------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(3,158,119) $1,119,632 $(474,968) $(2,536,392) =========== ========== ========= =========== ISHARES MSCI ISHARES MSCI ISHARES MSCI ISHARES MSCI CANADA EMU FRANCE GERMANY INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------ INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $ 92,569 $ 85,560 $ 14,401 $ 440,497 Interest ............................................... 1,899 3,892 20,663 27,752 ----------- ----------- ------------ ------------ Total investment income .............................. 94,468 89,452 35,064 468,249 ----------- ----------- ------------ ------------ EXPENSES: Advisory fees .......................................... 8,419 50,444 91,723 197,865 Administration fees .................................... 13,995 32,568 65,240 116,959 Distribution fees ...................................... 23,326 54,280 108,734 194,931 Custodian fees and expenses ............................ 5,766 12,786 23,042 34,374 Transfer agent fees .................................... 4,814 5,560 6,607 9,917 Directors' fees ........................................ 1,153 2,761 5,440 9,558 Legal fees ............................................. 2,625 7,658 12,956 23,645 Audit fees ............................................. 669 2,658 4,643 8,136 Federal and state registration fees .................... 699 3,343 -- 4,277 Amortization of deferred organization costs ............ 12,583 -- 34,535 32,810 Insurance .............................................. 248 225 2,153 4,306 Printing ............................................... 359 1,539 2,694 5,145 Licensing fees ......................................... 1,051 1,974 4,561 7,503 Amex listing fee ....................................... 78 242 308 566 Miscellaneous expenses ................................. 2,588 6,341 2,710 4,976 ----------- ----------- ------------ ------------ Total expenses 78,373 182,379 365,346 654,968 Less reimbursements from investment adviser -- -- -- -- ----------- ----------- ------------ ------------ Net expenses ......................................... 78,373 182,379 365,346 654,968 ----------- ----------- ------------ ------------ Net investment income/(loss) ........................... 16,095 (92,927) (330,282) (186,719) ----------- ----------- ------------ ------------ 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 ................ 334,366 (126,947) 346,740 (311,790) Net realized gain/(loss) on investments on in-kind redemptions .................................. -- -- 1,682,162 -- Net realized gain/(loss) on foreign currency related transactions ................................. (2,940) (763) 15,134 (12,356) ----------- ----------- ------------ ------------ 331,426 (127,710) 2,044,036 (324,146) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (6,462,177) (6,392,952) (17,315,455) (14,750,462) ----------- ----------- ------------ ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (6,130,751) (6,520,662) (15,271,419) (15,074,608) ----------- ----------- ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(6,114,656) $(6,613,589) $(15,601,701) $(15,261,327) =========== =========== ============ ============ ISHARES MSCI ISHARES MSCI ISHARES MSCI HONG KONG ITALY JAPAN INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $ 633,750 $ 8,571 $ 2,076,176 Interest ............................................... 12,031 22,336 62,521 ----------- ----------- ------------- Total investment income .............................. 645,781 30,907 2,138,697 ----------- ----------- ------------- EXPENSES: Advisory fees .......................................... 82,619 50,499 1,010,946 Administration fees .................................... 52,220 37,859 505,172 Distribution fees ...................................... 87,033 63,099 841,954 Custodian fees and expenses ............................ 19,305 13,545 91,033 Transfer agent fees .................................... 10,973 5,250 29,061 Directors' fees ........................................ 6,690 3,162 42,282 Legal fees ............................................. 10,102 7,764 97,906 Audit fees ............................................. 3,072 2,996 39,161 Federal and state registration fees .................... 918 1,119 -- Amortization of deferred organization costs ............ 9,146 17,391 72,402 Insurance .............................................. 2,097 1,569 22,141 Printing ............................................... 1,718 1,910 20,061 Licensing fees ......................................... 3,608 2,456 37,728 Amex listing fee ....................................... 234 338 2,271 Miscellaneous expenses ................................. 2,697 3,055 16,848 ----------- ----------- ------------- Total expenses 292,432 212,012 2,828,966 Less reimbursements from investment adviser .......... -- -- -- ----------- ----------- ------------- Net expenses ......................................... 292,432 212,012 2,828,966 ----------- ----------- ------------- Net investment income/(loss) ........................... 353,349 (181,105) (690,269) ----------- ----------- ------------- 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 ................ 129,170 82,059 (1,433,855) Net realized gain/(loss) on investments on in-kind redemptions .................................. 846,751 1,196,375 2,282,923 Net realized gain/(loss) on foreign currency related transactions ................................. 137 5,569 (180,526) ----------- ----------- ------------- 976,058 1,284,003 668,542 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (8,582,318) (4,147,416) (193,669,841) ----------- ----------- ------------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (7,606,260) (2,863,413) (193,001,299) ----------- ----------- ------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(7,252,911) $(3,044,518) $(193,691,568) =========== =========== =============
See accompanying notes to financial statements. 64 and 65 FOR THE SIX MONTHS ENDED FEBRUARY 28, 2001 STATEMENTS OF OPERATIONS (Unaudited) (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) ........... $ 777,574 $ 229,593 $ 131,086 $ 408,230 Interest ............................................... 10,555 19,916 2,961 8,315 ------------ ----------- ----------- ------------ Total investment income .............................. 788,129 249,509 134,047 416,545 ------------ ----------- ----------- ------------ EXPENSES: Advisory fees .......................................... 97,441 17,436 36,302 87,824 Administration fees .................................... 69,099 26,746 26,798 54,576 Distribution fees ...................................... 115,165 44,576 44,661 90,959 Custodian fees and expenses ............................ 38,051 30,721 9,846 18,272 Transfer agent fees .................................... 9,658 5,943 4,770 12,680 Directors' fees ........................................ 5,773 2,297 2,334 4,431 Legal fees ............................................. 19,059 5,323 5,803 10,123 Audit fees ............................................. 4,862 1,949 3,156 1,966 Federal and state registration fees .................... 2,419 -- 2,355 2,360 Amortization of deferred organization costs ............ 9,692 9,792 8,201 11,640 Insurance .............................................. 3,133 481 347 2,497 Printing ............................................... 3,326 1,169 1,752 1,317 Licensing fees ......................................... 4,634 1,886 1,660 4,041 Amex listing fee ....................................... 403 179 223 146 Miscellaneous expenses ................................. 4,239 1,278 1,854 2,791 ------------ ----------- ----------- ------------ Total expenses 386,954 149,776 150,062 305,623 Less reimbursements from investment adviser .......... -- -- -- -- ------------ ----------- ----------- ------------ Net expenses ......................................... 386,954 149,776 150,062 305,623 ------------ ----------- ----------- ------------ Net investment income/(loss) ........................... 401,175 99,733 (16,015) 110,922 ------------ ----------- ----------- ------------ 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 ................ (1,043,883) 184,209 (352,109) 510,770 Net realized gain/(loss) on investments on in-kind redemptions .................................. -- 83,610 7,830 2,510,598 Net realized gain/(loss) on foreign currency related transactions ................................. (836) (20,637) (21,559) (10,145) ------------ ----------- ----------- ------------ (1,044,719) 247,182 (365,838) 3,011,223 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (9,983,897) (6,356,173) (2,446,086) (13,623,435) ------------ ----------- ----------- ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (11,028,616) (6,108,991) (2,811,924) (10,612,212) ------------ ----------- ----------- ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(10,627,441) $(6,009,258) $(2,827,939) $(10,501,290) ============ =========== =========== ============ ISHARES MSCI ISHARES MSCI ISHARES MSCI ISHARES MSCI SOUTH KOREA SPAIN SWEDEN SWITZERLAND INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------- ------------ ------------ ------------ INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $ 6,463 $ 282,111 $ -- $ 51,783 Interest ............................................... 1,553 12,156 4,591 2,506 ----------- --------- ----------- --------- Total investment income .............................. 8,016 294,267 4,591 54,289 ----------- --------- ----------- --------- EXPENSES: Advisory fees .......................................... 19,037 39,249 13,596 39,202 Administration fees .................................... 11,126 29,199 15,618 34,705 Distribution fees ...................................... 18,543 48,664 26,029 57,842 Custodian fees and expenses ............................ 13,121 11,138 10,126 15,393 Transfer agent fees .................................... 5,442 5,403 4,526 4,956 Directors' fees ........................................ 1,049 2,457 1,250 2,987 Legal fees ............................................. 11,863 5,750 2,886 7,386 Audit fees ............................................. 1,307 2,308 322 3,318 Federal and state registration fees .................... 1,610 -- -- -- Amortization of deferred organization costs ............ -- 14,379 9,361 22,102 Insurance .............................................. 942 980 750 733 Printing ............................................... 854 1,166 350 2,015 Licensing fees ......................................... 579 2,050 1,073 2,176 Amex listing fee ....................................... 112 141 46 267 Miscellaneous expenses ................................. 397 628 1,525 1,198 ----------- --------- ----------- --------- Total expenses 85,982 163,512 87,458 194,280 Less reimbursements from investment adviser .......... (12,550) -- -- -- ----------- --------- ----------- --------- Net expenses ......................................... 73,432 163,512 87,458 194,280 ----------- --------- ----------- --------- Net investment income/(loss) ........................... (65,416) 130,755 (82,867) (139,991) ----------- --------- ----------- --------- 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 ................ (103,339) (590,422) (1,215,314) (288,662) Net realized gain/(loss) on investments on in-kind redemptions .................................. -- 631,004 (584,374) (266,892) Net realized gain/(loss) on foreign currency related transactions ................................. (4,857) (21,641) (29,715) 8,797 ----------- --------- ----------- --------- (108,196) 18,941 (1,829,403) (546,757) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (2,054,549) 520,489 (5,290,099) 870,462 ----------- --------- ----------- --------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (2,162,745) 539,430 (7,119,502) 323,705 ----------- --------- ----------- --------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(2,228,161) $ 670,185 $(7,202,369) $ 183,714 =========== ========= =========== ========= ISHARES MSCI ISHARES MSCI TAIWAN UNITED KINGDOM INDEX FUND INDEX FUND ------------ -------------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) ........... $ 25,925 $ 1,464,080 Interest ............................................... 23,177 14,861 ------------ ------------ Total investment income .............................. 49,102 1,478,941 ------------ ------------ EXPENSES: Advisory fees .......................................... 63,266 226,854 Administration fees .................................... 54,836 116,942 Distribution fees ...................................... 91,393 194,902 Custodian fees and expenses ............................ 82,505 17,471 Transfer agent fees .................................... 5,183 5,958 Directors' fees ........................................ 4,475 9,727 Legal fees ............................................. 22,737 24,472 Audit fees ............................................. 9,264 13,084 Federal and state registration fees .................... 18,689 -- Amortization of deferred organization costs ............ -- 20,866 Insurance .............................................. 1,116 2,045 Printing ............................................... 4,529 7,125 Licensing fees ......................................... 2,797 7,634 Amex listing fee ....................................... 587 910 Miscellaneous expenses ................................. 2,544 6,882 ------------ ------------ Total expenses 363,921 654,872 Less reimbursements from investment adviser .......... (2,003) -- ------------ ------------ Net expenses ......................................... 361,918 654,872 ------------ ------------ Net investment income/(loss) ........................... (312,816) 824,069 ------------ ------------ 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 ................ (749,206) (2,371,337) Net realized gain/(loss) on investments on in-kind redemptions .................................. -- (3,384,186) Net realized gain/(loss) on foreign currency related transactions ................................. (4,435) (8,464) ------------ ------------ (753,641) (5,763,987) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (17,191,706) (8,697,398) ------------ ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... (17,945,347) (14,461,385) ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $(18,258,163) $(13,637,316) ============ ============
See accompanying notes to financial statements. 66 and 67 STATEMENTS OF CHANGES IN NET ASSETS ISHARES, INC. - --------------------------------------------------------------------------------
ISHARES MSCI ISHARES MSCI ISHARES MSCI AUSTRALIA AUSTRIA BELGIUM INDEX FUND INDEX FUND INDEX FUND ------------------------ ------------------------ -------------------------- For the For the For the six months For the six months For the six months For the ended year ended year ended year 02/28/01 ended 02/28/01 ended 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 (Unaudited) 08/31/00 ----------- ----------- ----------- ----------- ----------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 788,267 $ 1,359,481 $ (43,294) $ 56,386 $ (34,107) $ 173,772 Net realized gain/(loss) on investments and foreign currency related transactions ... 387,563 (2,240,018) (303,492) (1,051,556) (595,936) (472,104) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (4,333,949) 2,071,775 1,466,418 (1,077,240) 155,075 (1,751,697) ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... (3,158,119) 1,191,238 1,119,632 (2,072,410) (474,968) (2,050,029) ----------- ----------- ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (198,401) (1,359,481) -- (56,386) (31,681) (173,772) In excess of net investment income ........ -- (25,516) -- (6,475) -- (185,439) Net realized gains ........................ -- -- -- -- -- -- In excess of net realized gains ........... -- -- -- -- -- -- Return of capital ......................... -- (156,130) -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ........................... (198,401) (1,541,127) -- (62,861) (31,681) (359,211) ----------- ----------- ----------- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 3,891,907 12,114,567 -- 2,349,160 -- 2,142,828 Cost of shares redeemed ................... (13,566,216) (4,147,344) -- (2,249,507) (1,936,534) -- ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . (9,674,309) 7,967,223 -- 99,653 (1,936,534) 2,142,828 ----------- ----------- ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets ... (13,030,829) 7,617,334 1,119,632 (2,035,618) (2,443,183) (266,412) NET ASSETS: Beginning of period ....................... 61,574,490 53,957,156 10,740,661 12,776,279 13,229,697 13,496,109 ----------- ----------- ----------- ----------- ----------- ----------- End of period ............................. $48,543,661 $61,574,490 $11,860,293 $10,740,661 $10,786,514 $13,229,697 =========== =========== =========== =========== =========== =========== Capital Share Transactions: Shares sold ............................... 400,000 1,200,000 -- 300,000 -- 160,000 Shares redeemed ........................... (1,400,000) (400,000) -- (300,000) (160,000) -- ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ......... (1,000,000) 800,000 -- -- (160,000) 160,000 =========== =========== =========== =========== =========== =========== ISHARES MSCI ISHARES MSCI BRAZIL (FREE) CANADA INDEX FUND INDEX FUND -------------------------- ------------------------ For the For the six months For the six months For the ended period ended year 02/28/01 07/11/00*- 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 ----------- ------------ ----------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 215,173 $ 25,270 $ 16,095 $ 573,834 Net realized gain/(loss) on investments and foreign currency related transactions ... (60,698) (416,132) 331,426 4,490,275 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (2,690,867) (351,195) (6,462,177) 2,244,139 ----------- ------------ ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... (2,536,392) (742,057) (6,114,656) 7,308,248 ----------- ------------ ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (4,750) (20,804) -- (573,834) In excess of net investment income ........ -- -- -- (28,480) Net realized gains ........................ -- -- (379,609) (4,490,275) In excess of net realized gains ........... -- (324,901) -- (338,582) Return of capital ......................... -- -- -- (134,421) ----------- ------------ ----------- ----------- Net decrease in net assets from distributions ........................... (4,750) (345,705) (379,609) (5,565,592) ----------- ------------ ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... -- 34,771,580 3,614,275 11,032,592 Cost of shares redeemed ................... -- (15,400,640) -- -- ----------- ------------ ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . -- 19,370,940 3,614,275 11,032,592 ----------- ------------ ----------- ----------- Total increase/(decrease) in net assets ... (2,541,142) 18,283,178 (2,879,990) 12,775,248 NET ASSETS: Beginning of period ....................... 18,283,178 -- 22,028,195 9,252,947 ----------- ------------ ----------- ----------- End of period ............................. $15,742,036 $ 18,283,178 $19,148,205 $22,028,195 =========== ============ =========== =========== Capital Share Transactions: Shares sold ............................... -- 1,750,000 300,000 600,000 Shares redeemed ........................... -- (800,000) -- -- ----------- ------------ ----------- ----------- Net increase/(decrease) in shares ......... -- 950,000 300,000 600,000 =========== ============ =========== =========== ISHARES MSCI ISHARES MSCI EMU FRANCE INDEX FUND INDEX FUND ------------------------ -------------------------- For the For the six months For the six months For the ended period ended year 02/28/01 07/26/00*- 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 ----------- ----------- ------------ ----------- OPERATIONS: Net investment income/(loss) .............. $ (92,927) $ 1,162 $ (330,282) $ 316,313 Net realized gain/(loss) on investments and foreign currency related transactions ... (127,710) (563) 2,044,036 9,085,645 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (6,392,952) (2,069,731) (17,315,455) 7,586,933 ----------- ----------- ------------ ----------- Net increase/(decrease) in net assets resulting from operations ............... (6,613,589) (2,069,132) (15,601,701) 16,988,891 ----------- ----------- ------------ ----------- DISTRIBUTIONS: Net investment income ..................... (3,850) -- -- (316,313) In excess of net investment income ........ -- -- -- (62,610) Net realized gains ........................ -- -- -- (5,551,596) In excess of net realized gains ........... -- -- -- (115,993) Return of capital ......................... -- -- -- (91,967) ----------- ----------- ------------ ----------- Net decrease in net assets from distributions ........................... (3,850) -- -- (6,138,479) ----------- ----------- ------------ ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 17,834,615 43,880,282 4,945,074 15,952,082 Cost of shares redeemed ................... -- -- (9,689,241) (9,571,623) ----------- ----------- ------------ ----------- Net increase/(decrease) in net assets derived from capital share transactions . 17,834,615 43,880,282 (4,744,167) 6,380,459 ----------- ----------- ------------ ----------- Total increase/(decrease) in net assets ... 11,217,176 41,811,150 (20,345,868) 17,230,871 NET ASSETS: Beginning of period ....................... 41,811,150 -- 95,116,105 77,885,234 ----------- ----------- ------------ ----------- End of period ............................. $53,028,326 $41,811,150 $ 74,770,237 $95,116,105 =========== =========== ============ =========== Capital Share Transactions: Shares sold ............................... 250,000 550,000 200,000 600,000 Shares redeemed ........................... -- -- (400,000) (400,000) ----------- ----------- ------------ ----------- Net increase/(decrease) in shares ......... 250,000 550,000 (200,000) 200,000 =========== =========== ============ ===========
See accompanying notes to financial statements. 68 and 69 STATEMENTS OF CHANGES IN NET ASSETS (continued) ISHARES, INC. - --------------------------------------------------------------------------------
ISHARES MSCI ISHARES MSCI ISHARES MSCI GERMANY HONG KONG ITALY INDEX FUND INDEX FUND INDEX FUND -------------------------- -------------------------- --------------------------- For the For the For the six months For the six months For the six months For the ended year ended year ended year 02/28/01 ended 02/28/01 ended 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 (Unaudited) 08/31/00 ------------ ------------ ------------ ------------ ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ (186,719) $ 1,166,529 $ 353,349 $ 2,074,410 $ (181,105) $ 1,002,472 Net realized gain/(loss) on investments and foreign currency related transactions ... (324,146) 16,635,444 976,058 8,930,598 1,284,003 8,103,329 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (14,750,462) (13,766,948) (8,582,318) (771,258) (4,147,416) (2,555,628) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (15,261,327) 4,035,025 (7,252,911) 10,233,750 (3,044,518) 6,550,173 ------------ ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ..................... -- (1,166,529) (366,061) (1,944,477) -- (258,556) In excess of net investment income ........ -- (56,709) -- -- -- -- Net realized gains ........................ -- (15,021,855) -- -- -- (3,803,179) In excess of net realized gains ........... -- (2,419,881) -- -- -- (240,263) Return of capital ......................... -- (324,558) -- (146,976) -- (708,144) ------------ ------------ ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ........................... -- (18,989,532) (366,061) (2,091,453) -- (5,010,142) ------------ ------------ ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 23,234,775 93,602,539 -- 6,699,833 6,480,265 11,166,696 Cost of shares redeemed ................... -- (26,805,867) (3,589,864) (12,563,378) (13,131,072) (20,922,156) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 23,234,775 66,796,672 (3,589,864) (5,863,545) (6,650,807) (9,755,460) ------------ ------------ ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ... 7,973,448 51,842,165 (11,208,836) 2,278,752 (9,695,325) (8,215,429) NET ASSETS: Beginning of period ....................... 153,487,399 101,645,234 79,479,069 77,200,317 50,008,417 58,223,846 ------------ ------------ ------------ ------------ ------------ ------------ End of period ............................. $161,460,847 $153,487,399 $ 68,270,233 $ 79,479,069 $ 40,313,092 $ 50,008,417 ============ ============ ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................... 1,200,000 3,900,000 -- 525,000 300,000 450,000 Shares redeemed ........................... -- (1,200,000) (300,000) (1,050,000) (600,000) (900,000) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ......... 1,200,000 2,700,000 (300,000) (525,000) (300,000) (450,000) ============ ============ ============ ============ ============ ============ ISHARES MSCI ISHARES MSCI JAPAN MALAYSIA (FREE) INDEX FUND INDEX FUND ---------------------------- -------------------------- For the For the six months For the six months For the ended year ended year 02/28/01 ended 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 ------------- ------------- ------------ ----------- OPERATIONS: Net investment income/(loss) .............. $ (690,269) $ (2,753,164) $ 401,175 $ 873,172 Net realized gain/(loss) on investments and foreign currency related transactions ... 668,542 51,817,611 (1,044,719) 3,946,415 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (193,669,841) 9,615,813 (9,983,897) 2,433,278 ------------- ------------- ------------ ----------- Net increase/(decrease) in net assets resulting from operations ............... (193,691,568) 58,680,260 (10,627,441) 7,252,865 ------------- ------------- ------------ ----------- DISTRIBUTIONS: Net investment income ..................... -- -- (263,250) (873,172) In excess of net investment income ........ -- (87,603) -- (13,993) Net realized gains ........................ -- (30,206,630) -- -- In excess of net realized gains ........... -- -- -- -- Return of capital ......................... -- (1,946,368) -- (1,947) ------------- ------------- ------------ ----------- Net decrease in net assets from distributions ........................... -- (32,240,601) (263,250) (889,112) ------------- ------------- ------------ ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 74,837,754 153,087,778 5,843,153 -- Cost of shares redeemed ................... (96,281,240) (105,390,299) -- (2,408,796) ------------- ------------- ------------ ----------- Net increase/(decrease) in net assets derived from capital share transactions . (21,443,486) 47,697,479 5,843,153 (2,408,796) ------------- ------------- ------------ ----------- Total increase/(decrease) in net assets ... (215,135,054) 74,137,138 (5,047,538) 3,954,957 NET ASSETS: Beginning of period ....................... 787,790,208 713,653,070 99,205,855 95,250,898 ------------- ------------- ------------ ----------- End of period ............................. $ 572,655,154 $ 787,790,208 $ 94,158,317 $99,205,855 ============= ============= ============ =========== Capital Share Transactions: Shares sold ............................... 6,600,000 10,200,000 1,050,000 -- Shares redeemed ........................... (9,000,000) (7,200,000) -- (375,000) ------------- ------------- ------------ ----------- Net increase/(decrease) in shares ......... (2,400,000) 3,000,000 1,050,000 (375,000) ============= ============= ============ =========== ISHARES MSCI ISHARES MSCI MEXICO (FREE) NETHERLANDS INDEX FUND INDEX FUND -------------------------- -------------------------- For the For the six months For the six months For the ended year ended year 02/28/01 ended 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 ----------- ---------- ----------- ----------- OPERATIONS: Net investment income/(loss) .............. $ 99,733 $ 92,761 $ (16,015) $ 141,123 Net realized gain/(loss) on investments and foreign currency related transactions ... 247,182 1,034,324 (365,838) (146,007) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (6,356,173) 4,125,540 (2,446,086) 148,944 ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............... (6,009,258) 5,252,625 (2,827,939) 144,060 ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income ..................... (182,502) -- -- (103,829) In excess of net investment income ........ -- -- -- -- Net realized gains ........................ -- (1,016,173) -- (142,337) In excess of net realized gains ........... -- -- -- -- Return of capital ......................... -- -- -- (47,470) ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ........................... (182,502) (1,016,173) -- (293,636) ----------- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 2,900,335 15,769,905 8,911,154 7,236,808 Cost of shares redeemed ................... (4,099,818) (1,309,195) (1,146,618) (8,159,114) ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions . (1,199,483) 14,460,710 7,764,536 (922,306) ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets ... (7,391,243) 18,697,162 4,936,597 (1,071,882) NET ASSETS: Beginning of period ....................... 40,126,782 21,429,620 30,613,276 31,685,158 ----------- ----------- ----------- ----------- End of period ............................. $32,735,539 $40,126,782 $35,549,873 $30,613,276 =========== =========== =========== =========== Capital Share Transactions: Shares sold ............................... 200,000 900,000 400,000 300,000 Shares redeemed ........................... (300,000) (100,000) (50,000) (350,000) ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ......... (100,000) 800,000 350,000 (50,000) =========== =========== =========== ===========
See accompanying notes to financial statements. 70 and 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 six months For the six months For the six months For the ended year ended period ended year 02/28/01 ended 02/28/01 05/10/00*- 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 (Unaudited) 08/31/00 ------------ ------------ ----------- ----------- ------------ ----------- OPERATIONS: Net investment income/(loss) ............ $ 110,922 $ 1,693,940 $ (65,416) $ (34,787) $ 130,755 $ 234,512 Net realized gain/(loss) on investments and foreign currency related transactions ......................... 3,011,223 19,150,160 (108,196) (843,695) 18,941 790,049 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ..... (13,623,435) (22,721,621) (2,054,549) (679,099) 520,489 (2,294,792) ------------ ------------ ----------- ----------- ------------ ----------- Net increase/(decrease) in net assets resulting from operations ............. (10,501,290) (1,877,521) (2,228,161) (1,557,581) 670,185 (1,270,231) ------------ ------------ ----------- ----------- ------------ ----------- DISTRIBUTIONS: Net investment income ................... (570,349) (1,437,747) -- -- -- (230,377) In excess of net investment income ...... -- -- -- -- -- -- Net realized gains ...................... (624,454) (1,615,815) -- -- -- (790,049) In excess of net realized gains ......... -- -- -- -- -- (523,630) Return of capital ....................... -- (274,616) -- -- -- (21,987) ------------ ------------ ----------- ----------- ------------ ----------- Net decrease in net assets from distributions ......................... (1,194,803) (3,328,178) -- -- -- (1,566,043) ------------ ------------ ----------- ----------- ------------ ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ........ -- 1,597,919 7,652,880 19,717,804 1,833,599 6,280,595 Cost of shares redeemed ................. (12,157,894) (21,110,456) -- (4,538,650) (11,158,712) -- ------------ ------------ ----------- ----------- ------------ ----------- Net increase/(decrease) in net assets derived from capital share transactions (12,157,894) (19,512,537) 7,652,880 15,179,154 (9,325,113) 6,280,595 ------------ ------------ ----------- ----------- ------------ ----------- Total increase/(decrease) in net assets . (23,853,987) (24,718,236) 5,424,719 13,621,573 (8,654,928) 3,444,321 NET ASSETS: Beginning of period ..................... 88,719,162 113,437,398 13,621,573 -- 39,912,861 36,468,540 ------------ ------------ ----------- ----------- ------------ ----------- End of period ........................... $ 64,865,175 $ 88,719,162 $19,046,292 $13,621,573 $ 31,257,933 $39,912,861 ============ ============ =========== =========== ============ =========== Capital Share Transactions: Shares sold ............................. -- 200,000 600,000 1,000,000 75,000 225,000 Shares redeemed ......................... (1,800,000) (2,800,000) -- (250,000) (450,000) -- ------------ ------------ ----------- ----------- ------------ ----------- Net increase/(decrease) in shares ....... (1,800,000) (2,600,000) 600,000 750,000 (375,000) 225,000 ============ ============ =========== =========== ============ =========== ISHARES MSCI ISHARES MSCI SWEDEN SWITZERLAND INDEX FUND INDEX FUND -------------------------- ------------------------- For the For the six months For the six months For the ended year ended year 02/28/01 ended 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 ----------- ----------- ----------- ----------- OPERATIONS: Net investment income/(loss) ............ $ (82,867) $ 114,164 $ (139,991) $ 93,151 Net realized gain/(loss) on investments and foreign currency related transactions ......................... (1,829,403) 8,434,356 (546,757) 753,833 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ..... (5,290,099) (2,132,301) 870,462 (303,839) ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ............. (7,202,369) 6,416,219 183,714 543,145 ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income ................... -- (114,164) -- (93,151) In excess of net investment income ...... -- (17,345) -- (17,598) Net realized gains ...................... -- (5,788,656) -- (318,982) In excess of net realized gains ......... -- (127,174) -- -- Return of capital ....................... -- (42,411) -- (22,376) ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ......................... -- (6,089,750) -- (452,107) ----------- ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ........ 6,947,144 9,668,394 3,603,684 11,887,494 Cost of shares redeemed ................. (7,040,366) (6,254,326) (7,734,286) (5,792,803) ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions (93,222) 3,414,068 (4,130,602) 6,094,691 ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets . (7,295,591) 3,740,537 (3,946,888) 6,185,729 NET ASSETS: Beginning of period ..................... 23,774,316 20,033,779 44,685,118 38,499,389 ----------- ----------- ----------- ----------- End of period ........................... $16,478,725 $23,774,316 $40,738,230 $44,685,118 =========== =========== =========== =========== Capital Share Transactions: Shares sold ............................. 375,000 300,000 250,000 750,000 Shares redeemed ......................... (375,000) (225,000) (500,000) (375,000) ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ....... -- 75,000 (250,000) 375,000 =========== =========== =========== =========== ISHARES MSCI ISHARES MSCI TAIWAN UNITED KINGDOM INDEX FUND INDEX FUND --------------------------- --------------------------- For the For the For the six months period six months For the ended ended ended year 02/28/01 06/21/00*- 02/28/01 ended (Unaudited) 08/31/00 (Unaudited) 08/31/00 ------------ ------------ ------------ ------------ OPERATIONS: Net investment income/(loss) ............ $ (312,816) $ 826,900 $ 824,069 $ 1,816,179 Net realized gain/(loss) on investments and foreign currency related transactions ......................... (753,641) (1,139,281) (5,763,987) 8,774,074 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ..... (17,191,706) (3,889,212) (8,697,398) (14,882,373) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............. (18,258,163) (4,201,593) (13,637,316) (4,292,120) ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ................... -- (826,900) -- (1,816,179) In excess of net investment income ...... -- -- -- (169,250) Net realized gains ...................... -- -- (170,017) (5,836,100) In excess of net realized gains ......... -- (258,316) -- (1,530,441) Return of capital ....................... -- (1,144,284) -- (362,073) ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ......................... -- (2,229,500) (170,017) (9,714,043) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ........ 79,366,065 62,919,368 34,593,727 63,726,690 Cost of shares redeemed ................. -- (13,821,000) (31,901,608) (16,319,883) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions 79,366,065 49,098,368 2,692,119 47,406,807 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets . 61,107,902 42,667,275 (11,115,214) 33,400,644 NET ASSETS: Beginning of period ..................... 42,667,275 -- 146,802,701 113,402,057 ------------ ------------ ------------ ------------ End of period ........................... $103,775,177 $ 42,667,275 $135,687,487 $146,802,701 ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................. 5,900,000 3,350,000 2,000,000 3,200,000 Shares redeemed ......................... -- (750,000) (1,800,000) (800,000) ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ....... 5,900,000 2,600,000 200,000 2,400,000 ============ ============ ============ ============ * Commencement of operations.
See accompanying notes to financial statements. 72 and 73 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS ISHARES, INC. - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI AUSTRALIA INDEX FUND --------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 .................... $ 9.93 $ 9.99 $ 7.75 $ 10.35 $ 10.15 $ 9.95(1) ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) ........................ 0.13 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 ......... (0.69) (0.04) 2.29 (2.60) 0.47 0.29 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ......................... (0.56) 0.19 2.49 (2.37) 0.64 0.39 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .................... (0.03) (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 ................... (0.03) (0.25) (0.25) (0.23) (0.44) (0.19) ------- ------- ------- ------- ------- ------- Net asset value, end of period .......................... $ 9.34 $ 9.93 $ 9.99 $ 7.75 $ 10.35 $ 10.15 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ............................. (5.62)%(4) 1.84% 32.09% (23.11)% 6.23% 3.88%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................... $48,544 $61,574 $53,957 $34,099 $41,406 $12,177 Ratios of expenses to average net assets (5) ............ 0.84%(3) 0.95% 1.00% 1.05% 1.33% 1.59%(3) Ratios of net investment income/(loss) to average net assets (5) ................................ 2.80%(3) 2.22% 2.03% 2.38% 1.57% 2.18%(3) Portfolio turnover rate (6) ............................. 1.82%(4) 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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ................ $ 7.67 $ 9.13 $ 10.11 $10.51 $10.40 $ 10.91(1) ------- ------- ------- ------ ------ ------- Net investment income/(loss) (+) .................... (0.03) 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 ..... 0.83 (1.46) (0.98) 0.20 0.13 (0.41) ------- ------- ------- ------ ------ ------- Net increase/(decrease) in net assets resulting from operations ..................... 0.80 (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 ...................... $ 8.47 $ 7.67 $ 9.13 $10.11 $10.51 $ 10.40 ======= ======= ======= ====== ====== ======= TOTAL INVESTMENT RETURN (2) ......................... 10.43%(4) (15.51)% (8.69)% 2.16% 1.06% (3.39)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................ $11,860 $10,741 $12,776 $8,085 $4,205 $13,520 Ratios of expenses to average net assets (5) ........ 0.84%(3) 1.16% 1.31% 1.41% 1.68% 1.56%(3) Ratios of net investment income/(loss) to average net assets (5) ............................ (0.82)%(3) 0.51% 1.04% 0.51% (0.22)% 0.87%(3) Portfolio turnover rate (6) ......................... 40.70%(4) 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 ....................... 0.95%(3) 1.20% -- -- 1.69% 1.57% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ................ (0.93)%(3) 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)............. (0.93)%(3) 0.47% -- -- (0.22)% 0.86%(3)
See accompanying notes to financial statements. 74 and 75 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS (continued) ISHARES, INC. - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI BELGIUM INDEX FUND -------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 .................... $ 13.23 $ 16.07 $ 18.40 $ 15.64 $ 14.99 $14.92(1) ------- ------- ------- ------- ------- ------ Net investment income/(loss) (+) ........................ (0.04) 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 ......... (0.31) (2.67) (0.30) 6.09 0.62 0.36 ------- ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations ......................... (0.35) (2.48) (0.22) 6.33 1.39 0.76 ------- ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .................... (0.04) (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 ................... (0.04) (0.36) (2.11) (3.57) (0.74) (0.69) ------- ------- ------- ------- ------- ------ Net asset value, end of period .......................... $ 12.84 $ 13.23 $ 16.07 $ 18.40 $ 15.64 $14.99 ======= ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ............................... (2.67)%(4) (15.50)% (1.00)% 39.42% 9.26% 5.01%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................... $10,787 $13,230 $13,496 $25,765 $32,528 $1,800 Ratios of expenses to average net assets (5) ............ 0.84%(3) 1.13% 1.24% 1.04% 1.24% 2.29%(3) Ratios of net investment income/(loss) to average net assets (5) ............................. (0.58)%(3) 1.36% 0.45% 1.28% 4.63% 5.67%(3) Portfolio turnover rate (6) ............................. 10.83%(4) 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 six months For the ended period 02/28/01 07/11/00*- Unaudited) 08/31/00 ---------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .................... $ 19.25 $ 20.22(1) ------- ------- Net investment income/(loss) (+) ........................ 0.23 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 ......... (2.90) (0.63) ------- ------- Net increase/(decrease) in net assets resulting from operations ......................... (2.67) (0.61) ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .................... (0.01) (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 ................... (0.01) (0.36) ------- ------- Net asset value, end of period .......................... $ 16.57 $ 19.25 ======= ======= TOTAL INVESTMENT RETURN (2) ............................... (13.84)%(4) (2.97)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................... $15,742 $18,283 Ratios of expenses to average net assets (5) ............ 0.99%(3) 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) ............................. 2.68%(3) 0.77%(3) Portfolio turnover rate (6) ............................. 14.76%(4) 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 ........................... 1.06%(3) 1.40%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .................... 2.62%(3) 0.37%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). ISHARES MSCI CANADA INDEX FUND ---------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ................ $ 16.94 $ 13.22 $ 9.90 $13.43 $ 10.60 $ 10.17(1) ------- ------- ------ ------ ------- ------- Net investment income/(loss) (+) .................... 0.01 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 ..... (4.69) 8.08 3.87 (2.89) 2.97 0.43 ------- ------- ------ ------ ------- ------- Net increase/(decrease) in net assets resulting from operations ..................... (4.68) 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 ............... (0.29) (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 ............... (0.29) (5.06) (0.62) (0.71) (0.19) (0.04) ------- ------- ------ ------ ------- ------- Net asset value, end of period ...................... $ 11.97 $ 16.94 $13.22 $ 9.90 $ 13.43 $ 10.60 ======= ======= ====== ====== ======= ======= TOTAL INVESTMENT RETURN (2) ........................... (27.72)%(4) 67.21% 39.71% (21.69)% 28.50% 4.63%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................ $19,148 $22,028 $9,253 $6,932 $24,168 $13,776 Ratios of expenses to average net assets (5) ........ 0.84%(3) 1.17% 1.23% 1.14% 1.35% 1.44%(3) Ratios of net investment income/(loss) to average net assets (5) ......................... 0.17%(3) 4.07% 0.53% 0.46% 0.39% 0.79%(3) Portfolio turnover rate (6) ......................... 22.60%(4) 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).
See accompanying notes to financial statements. 76 and 77 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS (continued) ISHARES, INC. - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI EMU INDEX FUND ----------------------- For the six months For the ended period 02/28/01 07/26/00*- (Unaudited) 08/31/00 ----------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ............................. $ 76.02 $ 80.72(1) ------- ------- Net investment income/(loss) (+) ................................. (0.15) (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 .......................................... (9.57) (4.70) ------- ------- Net increase/(decrease) in net assets resulting from operations .................................. (9.72) (4.70) ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ............................. (0.01) -- 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 ............................ (0.01) -- ------- ------- Net asset value, end of period ................................... $ 66.29 $ 76.02 ======= ======= TOTAL INVESTMENT RETURN (2) ........................................ (12.79)%(4) (5.82)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ............................. $53,028 $41,811 Ratios of expenses to average net assets (5) ..................... 0.84%(3) 0.84%(3) Ratios of net investment income/(loss) to average net assets (5) ...................................... (0.43)%(3) 0.03%(3) Portfolio turnover rate (6) ...................................... 1.58%(4) 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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ......................... $ 26.41 $ 22.90 $ 19.13 $ 14.50 $ 12.73 $ 12.42(1) ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) ............................. (0.09) 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 ...................................... (4.34) 5.21 3.88 4.76 1.95 0.45 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations .............................. (4.43) 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 ............................... $ 21.98 $ 26.41 $ 22.90 $ 19.13 $ 14.50 $ 12.73 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) .................................... (16.77)%(4) 23.45% 21.01% 34.77% 16.60% 4.95%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ......................... $74,770 $95,116 $77,885 $45,922 $14,519 $22,930 Ratios of expenses to average net assets (5) ................. 0.84%(3) 0.96% 1.06% 1.18% 1.52% 1.84%(3) Ratios of net investment income/(loss) to average net assets (5) .................................. (0.76)%(3) 0.36% 0.67% 1.58% 1.17% 2.72%(3) Portfolio turnover rate (6) .................................. 1.63%(4) 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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ....................... $ 20.46 $ 21.17 $ 20.25 $ 16.31 $ 13.64 $ 13.23(1) -------- -------- -------- ------- ------- ------- Net investment income/(loss) (+) ........................... (0.02) 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 .................................... (1.88) 1.64 1.31 3.92 2.77 0.47 -------- -------- -------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ............................ (1.90) 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 ............................. $ 18.56 $ 20.46 $ 21.17 $ 20.25 $ 16.31 $ 13.64 ======== ======== ======== ======= ======= ======= TOTAL INVESTMENT RETURN (2) .................................. (9.29)%(4) 8.44% 7.04% 25.69% 20.51% 4.00%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....................... $161,461 $153,487 $101,645 $72,934 $24,486 $28,664 Ratios of expenses to average net assets (5) ............... 0.84%(3) 0.94% 1.00% 1.08% 1.37% 1.68%(3) Ratios of net investment income/(loss) to average net assets (5) ................................ (0.24)%(3) 0.73% 0.57% 1.43% 0.23% 1.00%(3) Portfolio turnover rate (6) ................................ 0.22%(4) 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. 78 and 79 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS (continued) ISHARES, INC. - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI HONG KONG INDEX FUND ------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 .................. $ 13.24 $ 11.83 $ 6.41 $ 14.73 $ 13.05 $12.83(1) ------- ------- ------- ------- ------- ------ Net investment income/(loss) (+) ...................... 0.06 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 ....... (1.26) 1.42 5.49 (8.27) 2.12 0.27 ------- ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations ....................... (1.20) 1.75 5.78 (7.92) 2.38 0.42 ------- ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .................. (0.06) (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 ................. (0.06) (0.34) (0.36) (0.40) (0.70) (0.20) ------- ------- ------- ------- ------- ------ Net asset value, end of period ........................ $ 11.98 $ 13.24 $ 11.83 $ 6.41 $ 14.73 $13.05 ======= ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ............................. (9.03)%(4) 14.73% 90.51% (54.22)% 17.80% 3.22%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................. $68,270 $79,479 $77,200 $49,973 $25,417 $7,845 Ratios of expenses to average net assets (5) .......... 0.84%(3) 0.94% 1.01% 1.09% 1.43% 1.52%(3) Ratios of net investment income/(loss) to average net assets (5) ........................... 1.01%(3) 2.57% 2.84% 3.76% 1.71% 2.37%(3) Portfolio turnover rate (6) ........................... 13.76%(4) 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 .................. -- -- -- -- 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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 .................. $ 22.23 $ 21.56 $ 22.89 $ 16.66 $ 13.79 $ 13.62(1) ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) ...................... (0.08) 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 ....... (1.48) 2.51 1.05 7.94 3.10 0.31 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ....................... (1.56) 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 ........................ $ 20.67 $ 22.23 $ 21.56 $ 22.89 $ 16.66 $ 13.79 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ............................. (7.02)%(4) 13.35% 5.14% 47.66% 23.37% 4.11%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................. $40,313 $50,008 $58,224 $58,368 $32,495 $35,170 Ratios of expenses to average net assets (5) .......... 0.84%(3) 0.99% 1.03% 1.02% 1.33% 1.43%(3) Ratios of net investment income/(loss) to average net assets (5) ........................... (0.72)%(3) 1.61% 0.70% 0.76% 0.76% 3.69%(3) Portfolio turnover rate (6) ........................... 4.17%(4) 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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 .................. $ 13.82 $ 13.22 $ 8.39 $ 12.61 $ 14.33 $ 14.79(1) -------- -------- -------- -------- -------- -------- Net investment income/(loss) (+) ...................... (0.01) (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 ....... (3.32) 1.21 4.91 (4.19) (1.65) (0.39) -------- -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ....................... (3.33) 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 ........................ $ 10.49 $ 13.82 $ 13.22 $ 8.39 $ 12.61 $ 14.33 ======== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ............................. (24.10)%(4) 8.75% 58.14% (33.38)% (11.97)% (3.11)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................. $572,655 $787,790 $713,653 $201,485 $158,957 $103,164 Ratios of expenses to average net assets (5) .......... 0.84%(3) 0.88% 0.94% 1.04% 1.19% 1.37%(3) Ratios of net investment income/(loss) to average net assets (5) ........................... (0.21)%(3) (0.32)% (0.27)% (0.21)% (0.48)% (1.01)%(3) Portfolio turnover rate (6) ........................... 1.33%(4) 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. 80 and 81 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS (continued) ISHARES, INC. - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI MALAYSIA (FREE) INDEX FUND ------------------------------------------------------------------ For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ........................ $ 5.96 $ 5.59 $ 2.11 $ 8.23 $ 13.80 $13.24(1) ------- ------- ------- ------- ------- ------ Net investment income/(loss) (+) ............................ 0.02 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 ......................... (0.64) 0.37 3.67 (6.10) (5.55) 0.59 ------- ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations ............................. (0.62) 0.42 3.68 (6.04) (5.54) 0.57 ------- ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income ........................ (0.02) (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 ....................... (0.02) (0.05) (0.20) (0.08) (0.03) (0.01) ------- ------- ------- ------- ------- ------ Net asset value, end of period ............................ $ 5.32 $ 5.96 $ 5.59 $ 2.11 $ 8.23 $13.80 ======= ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ................................... (10.48)%(4) 7.57% 185.81% (73.57)% (40.20)% 4.28%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ........................ $94,158 $99,206 $95,251 $35,867 $12,339 $9,318 Ratios of expenses to average net assets (5) ................ 0.84%(3) 0.96% 1.43% 1.09% 1.46% 1.58%(3) Ratios of net investment income/(loss) to average net assets (5) ................................. 0.87%(3) 0.81% 0.33% 1.40% 0.04% (0.35)%(3) Portfolio turnover rate (6) ................................. 4.71%(4) 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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ........................ $ 16.72 $ 13.39 $ 8.11 $ 15.11 $ 11.52 $ 9.95(1) ------- ------- ------- ------- ------- ------ Net investment income/(loss) (+) ............................ 0.04 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 ......................... (2.46) 3.69 5.36 (6.71) 4.07 1.59 ------- ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations ............................. (2.42) 3.75 5.42 (6.62) 4.09 1.59 ------- ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income ........................ (0.07) -- (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 ....................... (0.07) (0.42) (0.14) (0.38) (0.50) (0.02) ------- ------- ------- ------- ------- ------ Net asset value, end of period ............................ $ 14.23 $ 16.72 $ 13.39 $ 8.11 $ 15.11 $11.52 ======= ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ................................... (14.41)%(4) 28.20% 66.92% (44.18)% 35.21% 15.93%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ........................ $32,736 $40,127 $21,430 $ 7,296 $16,627 $5,759 Ratios of expenses to average net assets (5) ................ 0.84%(3) 1.04% 1.26% 1.34% 1.63% 1.75%(3) Ratios of net investment income/(loss) to average net assets (5) ................................. 0.56%(3) 0.35% 0.52% 0.60% 0.14% 0.01%(3) Portfolio turnover rate (6) ................................. 12.41%(4) 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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ........................ $ 23.53 $ 23.45 $ 23.50 $ 21.42 $17.36 $15.91(1) ------- ------- ------- ------- ------ ------ Net investment income/(loss) (+) ............................ (0.01) 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 ......................... (1.99) 0.18 1.60 3.53 4.79 1.54 ------- ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations ............................. (2.00) 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 ............................ $ 21.53 $ 23.53 $ 23.45 $ 23.50 $21.42 $17.36 ======= ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (2) ................................... (8.50)%(4) 1.28% 8.98% 17.41% 28.04% 11.19%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ........................ $35,550 $30,613 $31,685 $22,349 $9,661 $6,962 Ratios of expenses to average net assets (5) ................ 0.84%(3) 1.03% 1.07% 1.12% 1.46% 1.63%(3) Ratios of net investment income/(loss) to average net assets (5) ................................. (0.09)%(3) 0.53% 2.20% 1.00% 0.54% 2.93%(3) Portfolio turnover rate (6) ................................. 15.80%(4) 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. 82 and 83 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS (continued) ISHARES, INC. - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI SINGAPORE (FREE) INDEX FUND ------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ..................... $ 7.58 $ 7.93 $ 3.30 $ 8.66 $ 11.38 $12.24(1) ------- ------- -------- ------- ------- ------ Net investment income/(loss) (+) ......................... 0.01 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 .......... (0.93) (0.21) 4.70 (5.37) (2.67) (0.86) ------- ------- -------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations .......................... (0.92) (0.08) 4.75 (5.30) (2.67) (0.82) ------- ------- -------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income ..................... (0.05) (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 .................... (0.06) (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 .................... (0.11) (0.27) (0.12) (0.06) (0.05) (0.04) ------- ------- -------- ------- ------- ------ Net asset value, end of period ........................... $ 6.55 $ 7.58 $ 7.93 $ 3.30 $ 8.66 $11.38 ======= ======= ======== ======= ======= ====== TOTAL INVESTMENT RETURN (2) .............................. (12.09)%(4) (1.29)% 144.52% (61.29)% (23.48)% (6.73)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ..................... $64,865 $88,719 $113,438 $47,248 $14,722 $9,107 Ratios of expenses to average net assets (5) ............. 0.84%(3) 0.94% 0.97% 1.08% 1.43% 1.56%(3) Ratios of net investment income/(loss) to average net assets (5) .............................. 0.30%(3) 1.60% 0.76% 1.17% 0.03% 0.69%(3) Portfolio turnover rate (6) .............................. 8.18%(4) 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 six months For the ended period 02/28/01 05/10/00*- (Unaudited) 08/31/00 ----------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .................... $ 18.16 $ 20.36(1) ------- ------- Net investment income/(loss) (+) ........................ (0.06) (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 ......... (3.99) (2.16) ------- ------- Net increase/(decrease) in net assets resulting from operations ......................... (4.05) (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 .......................... $ 14.11 $ 18.16 ======= ======= TOTAL INVESTMENT RETURN (2) ............................. (22.30)%(4) (10.81)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................... $19,046 $13,622 Ratios of expenses to average net assets (5) ............ 0.99%(3) 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) ............................. (0.88)%(3) (0.63)%(3) Portfolio turnover rate (6) ............................. 6.47%(4) 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 .......................... 1.16%(3) 1.38%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ................... (1.05)%(3) (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 six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 .................... $ 24.19 $ 25.59 $ 23.84 $ 18.49 $14.09 $13.28(1) ------- ------- ------- ------- ------ ------ Net investment income/(loss) (+) ........................ 0.08 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 ......... 0.25 (0.60) 3.14 5.94 5.33 0.98 ------- ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations ......................... 0.33 (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 .......................... $ 24.52 $ 24.19 $ 25.59 $ 23.84 $18.49 $14.09 ======= ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (2) ............................. 1.36%(4) (1.81)% 13.39% 32.58% 39.15% 8.45%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................... $31,258 $39,913 $36,469 $25,029 $8,321 $4,227 Ratios of expenses to average net assets (5) ............ 0.84%(3) 0.99% 1.04% 1.11% 1.67% 1.76%(3) Ratios of net investment income/(loss) to average net assets (5) ............................. 0.67%(3) 0.57% 0.31% 0.61% 1.04% 2.04%(3) Portfolio turnover rate (6) ............................. 8.77%(4) 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).
See accompanying notes to financial statements. 84 and 85 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS (continued ISHARES, INC. - ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI SWEDEN INDEX FUND -------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ................ $ 24.38 $ 22.26 $ 18.39 $ 18.32 $14.67 $13.22(1) ------- ------- ------- ------- ------ ------ Net investment income/(loss) (+) .................... (0.08) 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 ..... (7.40) 8.38 4.52 0.95 4.45 1.67 ------- ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations ..................... (7.48) 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 ...................... $ 16.90 $ 24.38 $ 22.26 $ 18.39 $18.32 $14.67 ======= ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (2) ........................... (30.68)%(4) 39.15% 25.09% 5.48% 30.10% 14.13%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................ $16,479 $23,774 $20,034 $13,791 $8,243 $4,400 Ratios of expenses to average net assets (5) ........ 0.84%(3) 1.03% 1.13% 1.17% 1.64% 1.75%(3) Ratios of net investment income/(loss) to average net assets (5) ......................... (0.80)%(3) 0.46% 0.49% 0.48% (0.19)% 3.05%(3) Portfolio turnover rate (6) ......................... 21.18%(4) 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). ISHARES MSCI SWITZERLAND INDEX FUND ------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ............ $ 15.54 $ 15.39 $ 15.55 $ 13.79 $ 12.29 $12.07(1) ------- ------- ------- ------- ------- ------ Net investment income/(loss) (+) ................ (0.05) 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 . 0.02 0.27 0.19 3.01 2.11 0.24 ------- ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations ................. (0.03) 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 .................. $ 15.51 $ 15.54 $ 15.39 $ 15.55 $ 13.79 $12.29 ======= ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ....................... (0.19)%(4) 1.96% 1.47% 21.24% 16.69% 2.60%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ............ $40,738 $44,685 $38,499 $29,163 $13,805 $6,158 Ratios of expenses to average net assets (5) .... 0.84%(3) 1.01% 1.09% 1.15% 1.52% 1.82%(3) Ratios of net investment income/(loss) to average net assets (5) ..................... (0.61)%(3) 0.23% 0.24% (0.03)% (0.29)% 1.39%(3) Portfolio turnover rate (6) ..................... 16.15%(4) 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 six months For the ended period 02/28/01 06/21/00*- (Unaudited) 08/31/00 ----------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................... $ 16.41 $ 19.59(1) -------- ------- Net investment income/(loss) (+) ....................... (0.05) 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 ........ (4.15) (2.79) -------- ------- Net increase/(decrease) in net assets resulting from operations ........................ (4.20) (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 ......................... $ 12.21 $ 16.41 ======== ======= TOTAL INVESTMENT RETURN (2) .............................. (25.59)%(4) (12.10)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................... $103,775 $42,667 Ratios of expenses to average net assets (5) ........... 0.99%(3) 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) ............................ (0.86)%(3) 13.31%(3) Portfolio turnover rate (6) ............................ 2.50%(4) 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 ............ 1.00%(3) 1.60%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ................... (0.86)%(3) 12.70%(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. 86 and 87 FEBRUARY 28, 2001 FINANCIAL HIGHLIGHTS (concluded) - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
ISHARES MSCI UNITED KINGDOM INDEX FUND ------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year period 02/28/01 ended ended ended ended 03/12/96*- (Unaudited) 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 ................ $ 18.35 $ 20.25 $ 18.48 $ 16.50 $ 13.15 $ 12.14(1) -------- -------- -------- ------- ------- ------- Net investment income/(loss) (+) .................... 0.09 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 ..... (1.87) (0.85) 2.40 2.12 3.62 1.06 -------- -------- -------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations .............. (1.78) (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 ............... (0.02) (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 ............... (0.02) (1.32) (1.07) (0.51) (0.65) (0.26) -------- -------- -------- ------- ------- ------- Net asset value, end of period ...................... $ 16.55 $ 18.35 $ 20.25 $ 18.48 $ 16.50 $ 13.15 ======== ======== ======== ======= ======= ======= TOTAL INVESTMENT RETURN (2) ........................... (9.72)%(4) (3.00)% 15.33% 14.98% 30.48% 10.41%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................ $135,687 $146,803 $113,402 $62,846 $29,721 $15,790 Ratios of expenses to average net assets (5) ........ 0.84%(3) 0.94% 0.97% 1.03% 1.38% 1.61%(3) Ratios of net investment income/(loss) to average net assets (5) ......................... 1.06%(3) 1.39% 2.16% 1.90% 2.47% 3.62%(3) Portfolio turnover rate (6) ......................... 14.95%(4) 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. 88 NOTES TO FINANCIAL STATEMENTS (Unaudited) ISHARES, INC. - -------------------------------------------------------------------------------- GENERAL iShares, Inc. (formerly WEBS Index Fund, Inc.) (the "Fund") was incorporated under the laws of the State of Maryland on September 1, 1994, and seventeen of its portfolios (each portfolio, an "iShares MSCI Index Fund") 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 additional iShares MSCI Index Funds were established, but have not commenced operations: 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. 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"). As of December 31, 2000 the MSCI Indices utilized by the Funds reflect the reinvestment of net dividends. (Prior to December 31, 2000 the MSCI Indices utilized by the iShares MSCI Brazil (Free) Index Fund, iShares MSCI Mexico (Free) Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund reflected the reinvestment of gross dividends). The MSCI Index utilized by the iShares MSCI Malaysia (Free) Index Fund reflected the reinvestment of gross dividends from May 31, 2000 to December 31, 2000. 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, DTC. 89 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) - -------------------------------------------------------------------------------- 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 is 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 Index 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 $ --
90 ISHARES, INC. - -------------------------------------------------------------------------------- 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", such iShares MSCI Index Funds 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 91 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) - -------------------------------------------------------------------------------- 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. Such period expires on March 11, 2001. 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 were 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 Index Fund and iShares MSCI Taiwan Index Fund. The expense ratio of each of these three iShares MSCI Index 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 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 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 iShares MSCI 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 iShares MSCI 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 iShares MSCI 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. 92 ISHARES, INC. - -------------------------------------------------------------------------------- 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 November 1, 2000 each iShares MSCI Index Fund no longer pays a fee for the use of such MSCI indices. Prior to November 1, 2000 each iShares 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 Co. ("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 pursuant to the Fund's Rule 12b-1 Distribution Plan. The Chase Manhattan Bank ("Chase") serves as global custodian and securities lending agent to each of the iShares MCSI Index Funds. 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%). 93 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) - -------------------------------------------------------------------------------- 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 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 Board of Directors meetings. FOREIGN CURRENCY At February 28, 2001, each iShares MSCI Index Fund's cash balances included the following amount of foreign currency:
ISHARES MSCI INDEX FUND COST VALUE ----------------------- -------- -------- iShares MSCI Australia Index Fund $ 80,913 $ 78,058 iShares MSCI Austria Index Fund $ 8,856 $ 8,811 iShares MSCI Belgium Index Fund $ 3,876 $ 3,752 iShares MSCI Brazil (Free) Index Fund $ 19 $ 18 iShares MSCI Canada Index Fund $ 28,544 $ 28,123 iShares MSCI EMU Index Fund $ 12,496 $ 12,631 iShares MSCI France Index Fund $ 62,523 $ 62,954 iShares MSCI Germany Index Fund $340,727 $350,081 iShares MSCI Hong Kong Index Fund $467,858 $467,858 iShares MSCI Italy Index Fund $ 12,003 $ 11,939 iShares MSCI Japan Index Fund $224,006 $222,832 iShares MSCI Malaysia (Free) Index Fund $215,175 $215,169 iShares MSCI Mexico (Free) Index Fund $103,431 $103,079 iShares MSCI Netherlands Index Fund $ 7,736 $ 7,696 iShares MSCI Singapore (Free) Index Fund $353,602 $352,974 iShares MSCI South Korea Index Fund $ 1 $ 1 iShares MSCI Spain Index Fund $ 82,902 $ 81,092 iShares MSCI Sweden Index Fund $ 64,284 $ 64,414 iShares MSCI Switzerland Index Fund $ 5,735 $ 5,961 iShares MSCI Taiwan Index Fund $120,715 $120,616 iShares MSCI United Kingdom Index Fund $133,952 $133,035
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. 94 ISHARES, INC. - -------------------------------------------------------------------------------- The market values of securities on loan to broker/dealers at February 28, 2001, 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 $ 2,185,598 $ 2,092,107 iShares MSCI Austria Index Fund $ -- $ -- iShares MSCI Belgium Index Fund $ 874,521 $ 841,781 iShares MSCI Brazil (Free) Index Fund $ -- $ -- iShares MSCI Canada Index Fund $ -- $ -- iShares MSCI EMU Index Fund $ -- $ -- iShares MSCI France Index Fund $ 3,207,173 $ 2,969,503 iShares MSCI Germany Index Fund $56,156,441 $53,299,528 iShares MSCI Hong Kong Index Fund $ 6,990,673 $ 6,407,408 iShares MSCI Italy Index Fund $12,698,982 $11,975,801 iShares MSCI Japan Index Fund $61,076,004 $57,167,540 iShares MSCI Malaysia (Free) Index Fund $ -- $ -- iShares MSCI Mexico (Free) Index Fund $ 5,651,719 $ 4,672,551 iShares MSCI Netherlands Index Fund $ -- $ -- iShares MSCI Singapore (Free) Index Fund $ 1,425,000 $ 1,312,050 iShares MSCI South Korea Index Fund $ -- $ -- iShares MSCI Spain Index Fund $ 2,760,500 $ 2,591,660 iShares MSCI Sweden Index Fund $ 1,990,027 $ 1,912,403 iShares MSCI Switzerland Index Fund $ -- $ -- 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 Malaysia Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund which are offered in Creation Units solely for cash in 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. 95 NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued) - -------------------------------------------------------------------------------- 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 Malaysia Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund which are offered in Creation Units solely for cash in 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 Malaysia (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 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. 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 six months ended February 28, 2001:
PURCHASES OF SALES OF ISHARES MSCI INDEX FUND SECURITIES SECURITIES ----------------------- ------------- ----------- iShares MSCI Australia Index Fund $ 2,804,413 $ 1,028,449 iShares MSCI Austria Index Fund $ 4,359,631 $ 4,448,829 iShares MSCI Belgium Index Fund $ 1,274,962 $ 1,617,420 iShares MSCI Brazil (Free) Index Fund $ 2,352,390 $ 2,819,903 iShares MSCI Canada Index Fund $ 4,325,805 $ 4,652,027 iShares MSCI EMU Index Fund $ 751,607 $ 699,928 iShares MSCI France Index Fund $ 1,432,574 $ 1,702,557 iShares MSCI Germany Index Fund $ 374,724 $ 351,928 iShares MSCI Hong Kong Index Fund $ 9,688,185 $10,623,023 iShares MSCI Italy Index Fund $ 2,090,163 $ 2,458,580 iShares MSCI Japan Index Fund $ 8,921,385 $ 9,298,953 iShares MSCI Malaysia (Free) Index Fund $10,664,305 $ 4,375,112 iShares MSCI Mexico (Free) Index Fund $ 4,740,974 $ 4,422,958 iShares MSCI Netherlands Index Fund $ 5,719,097 $ 5,698,201 iShares MSCI Singapore (Free) Index Fund $ 6,032,927 $ 9,433,021 iShares MSCI South Korea Index Fund $ 8,648,558 $ 997,979 iShares MSCI Spain Index Fund $ 3,829,579 $ 3,345,070 iShares MSCI Sweden Index Fund $ 4,799,104 $ 4,443,878 iShares MSCI Switzerland Index Fund $ 7,426,958 $ 7,972,345 iShares MSCI Taiwan Index Fund $81,679,104 $ 1,799,800 iShares MSCI United Kingdom Index Fund $24,239,718 $23,316,557
96 ISHARES, INC. - -------------------------------------------------------------------------------- FOREIGN INCOME TAXES For the six months ended February 28, 2001, 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 $ 20,132 iShares MSCI Austria Index Fund $ -- iShares MSCI Belgium Index Fund $ 2,326 iShares MSCI Brazil (Free) Index Fund $ 43,765 iShares MSCI Canada Index Fund $ 16,336 iShares MSCI EMU Index Fund $ 8,257 iShares MSCI France Index Fund $ 2,559 iShares MSCI Germany Index Fund $ 48,944 iShares MSCI Hong Kong Index Fund $ -- iShares MSCI Italy Index Fund $ 1,512 iShares MSCI Japan Index Fund $366,384 iShares MSCI Malaysia (Free) Index Fund $ -- iShares MSCI Mexico (Free) Index Fund $ 19,136 iShares MSCI Netherlands Index Fund $ 8,571 iShares MSCI Singapore (Free) Index Fund $ -- iShares MSCI South Korea Index Fund $ 5,097 iShares MSCI Spain Index Fund $ 49,462 iShares MSCI Sweden Index Fund $ -- iShares MSCI Switzerland Index Fund $ 9,138 iShares MSCI Taiwan Index Fund $ 8,882 iShares MSCI United Kingdom Index Fund $163,777 MARKET AND PORTFOLIO RISKS An investment in an iShares MSCI Index Fund 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 an iShares MSCI Index Fund 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 an 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. 97 NOTES TO FINANCIAL STATEMENTS (Unaudited) (concluded) - -------------------------------------------------------------------------------- MALAYSIAN CAPITAL RESTRICTIONS In response to various capital controls imposed by the Malaysian Government in September 1998, sales of Creation Units of the iShares MSCI Malaysia (Free) Index Fund (the "Malaysia Fund") were suspended, and the Fund announced that it could not effect redemptions of Creation Units of Malaysia Fund shares on an "in-kind" basis. Since April 1, 1999, the Fund has used a foreign exchange rate of 3.8 ringgits per U.S. dollar, the official exchange fixed by the Malaysian authorities, in computing the Malaysia Fund's net asset value per share. The Fund may use different exchange rates for computing the Malaysia Fund's net asset value in the future. The Malaysian capital controls have been revised several times since they were announced. Currently, repatriations of capital by foreign investors such as the Malaysia Fund are generally subject to a levy of 10% of the amount attributable to "profit" as determined pursuant to the relevant Malaysian regulations if the profit is repatriated twelve months or less from realization of the profits. Since May 12, 2000, the Fund has offered to redeem Creation Units of the Malaysia Fund for U.S. dollars, and since May 26, 2000, Creation Units of the Malaysia Fund have been offered for U.S. dollars. The Fund continues to explore the possibility of resuming sales and redemptions of Creation Units of the Malaysia Fund 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 that patent or a related patent. The patentholder has counterclaimed, alleging infringement of the related patent by the AMEX and, in January 2001, filed a separate action for infringement of such patent by a number of other parties, including the Fund's investment adviser and distributor. The Fund is not a party to either action. The Fund believes that is has valid defenses to any potential claim of infringement of these patents. 98 (THIS PAGE INTENTIONALLY LEFT BLANK.) (THIS PAGE INTENTIONALLY LEFT BLANK.) [GRAPHICS OMITTED] iShares BARCLAYS GLOBAL INVESTORS 45 Fremont Street San Francisco, CA 94105 www.ishares.com 1-800-iSHARES 1-800-474-2737 iShares are distributed by SEI Investments Distribution Co. Barclays Global Fund Advisors serves as an adviser to iShares and is a subsidiary of Barclays Global Investors, N.A., neither of which is affiliated with SEI. 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. (C)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-009-01000 NOT FDIC INSURED HAVE NO BANK GUARANTEE MAY LOSE VALUE -----END PRIVACY-ENHANCED MESSAGE-----