0000935069-01-500640.txt : 20011128 0000935069-01-500640.hdr.sgml : 20011128 ACCESSION NUMBER: 0000935069-01-500640 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010831 FILED AS OF DATE: 20011107 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: 1940 Act SEC FILE NUMBER: 001-11653 FILM NUMBER: 1777163 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 800-810-93 FORMER COMPANY: FORMER CONFORMED NAME: FOREIGN FUND INC DATE OF NAME CHANGE: 19950524 FORMER COMPANY: FORMER CONFORMED NAME: WEBS INDEX FUND INC DATE OF NAME CHANGE: 19970211 N-30D 1 g01-1331.txt ISHARES ANNUAL REPORT iShares MSCI Series ANNUAL REPORT August 31, 2001 (LOGO) iShares BARCLAYS GLOBAL INVESTORS THE WAY YOU INVEST NOW. [GRAPHIC OMITTED] ONLY BETTER. iSHARES, INC. -------------------------------------------------------------------------------- INTRODUCTION In this section, the Investment Advisor 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 Morgan Stanley Capital International ("MSCI") (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 27.22% in the MSCI Spain Index as of September 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 Mexico Index was 75.60% as of September 28, 2001, so the iShares MSCI Mexico 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 1 iSHARES, INC. -------------------------------------------------------------------------------- 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, 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%). 2 (THIS PAGE INTENTIONALLY LEFT BLANK.) 3 PERFORMANCE REVIEW -------------------------------------------------------------------------------- AUSTRALIA iSHARES MSCI AUSTRALIA INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ---------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (4.77)% (3.71)% (5.69)% 0.91% 1.08% 1.57% 1.54% 1.67% 2.13% ------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (4.77)% (3.71)% (5.69)% 4.64% 5.50% 8.11% 8.70% 9.45% 12.25% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 29, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI AUSTRALIA INDEX FUND Consumer Discretionary 12.16% Consumer Staples 8.96% Energy 2.67% Financials 46.48% Health Care 3.42% Industrials 6.20% Information Technology 0.08% Materials 16.99% Telecommunication Services 2.29% Utilities 0.75% PERFORMANCE REVIEW The total return of the iShares MSCI Australia Index Fund (the "Australia Fund") was -4.77% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -5.69% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Australia Fund outperformed the benchmark by 0.92 percentage points over the reporting period, primarily due to the positive impact of revenue differential, portfolio sampling and effect of uninvested assets, which contributed 1.10, 0.60 and 0.06 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses, which subtracted 0.84 percentage points from the Fund's returns. 4 iSHARES, INC. -------------------------------------------------------------------------------- AUSTRALIA (CONTINUED) KEY MARKET CONDITIONS Australia's equity market was weak in absolute terms during the year ended August 31, 2001, although it performed fairly well relative to other international markets. Two main factors weighed on Australian equities over this period: the lengthy correction in media and telecommunications stocks and the slowdown in economies around the world, particularly the United States. General pessimism toward media and telecommunications sectors depressed shares of Australia's two largest companies, News Corporation Limited and Telstra Corporation Limited, over much of the reporting period. News Corp. also reported disappointing results in late 2001, citing a drop-off in advertising sales in the United States, among other factors. The slowdown in the United States and other economies had negative consequences for a wide range of other Australian companies. Real estate company Lend-Lease, for example, issued several profit warnings over the reporting period, leading to significant declines in its share price. The company said that losses on its property investments in the United States played a large role in its shortfalls. Shares of Australian exporters also declined as it became apparent that the U.S. and other major world economies were decelerating. Australia's domestic-oriented companies fared better. Westpac Banking Corporation and National Australia Bank both posted record profits in late 2000, reflecting strong demand for financial services at home. Eventually, however, they too faced a more difficult environment. The country's GDP contracted by 0.6% in the fourth quarter of 2000, prompting the Australian Federal Reserve Board to lower interest rates in an effort to forestall recession. The rate cuts helped Australian equities to recover somewhat in 2001. They were also buoyed by continued cost-cutting efforts on the part of many companies and merger-and-acquisition activity in mining and other industries. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI AUSTRALIA INDEX FUND VS. THE MSCI AUSTRALIA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Austrlaia Index Fund MSCI Australia Index 3/12/96 $10,000 $10,000 8/31/96 $10,388 $10,383 2/28/97 $11,048 $11,054 8/31/97 $11,035 $10,990 2/28/98 $10,799 $10,880 8/31/98 $ 8,486 $ 8,724 2/28/99 $10,607 $10,994 8/31/99 $11,208 $11,471 2/29/00 $11,361 $11,778 8/31/00 $11,415 $11,902 2/28/01 $10,774 $11,188 6/29/01** $11,234 $11,598 8/31/01 $10,870 $11,225 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 29, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 29, 2001 and the new Provisional Index thereafter. 5 PERFORMANCE REVIEW -------------------------------------------------------------------------------- AUSTRIA iSHARES MSCI AUSTRIA INDEX FUND PERFORMANCE AS OF 8/31/01
-------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ------------------------------------ NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ 8.41% 8.20% 5.88% (2.89)% (2.80)% (2.61)% (3.26)% (3.06)% (2.25) -------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ 8.41% 8.20% 5.88% (13.66)% (13.23)% (12.37)% (16.58)% (15.60)% (11.74)% -------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 27, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI AUSTRIA INDEX FUND Consumer Staples 12.60% Energy 16.26% Financials 16.68% Industrials 19.61% Materials 20.66% Telecommunication Services 9.32% Utilities 4.87% PERFORMANCE REVIEW The total return of the iShares MSCI Austria Index Fund (the "Austria Fund") was 8.41% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned 5.88% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Austria Fund outperformed the benchmark by 2.53 percentage points over the reporting period, primarily due to the positive impact of portfolio sampling and the effect of uninvested assets, which contributed 3.78 and 0.15 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses and revenue differential, which subtracted 0.84 and 0.56 percentage points, respectively, from the Fund's returns. 6 iSHARES, INC. -------------------------------------------------------------------------------- AUSTRIA (CONTINUED) As stated in the introduction, certain regulations can restrict the Investment Adviser's ability to optimize a Fund's portfolio. While the Index was more than 75% concentrated in stocks greater than 5% of total assets, to comply with the 5/50 Rule, the Austria Fund was obligated to underweight many stocks including Wienerberger, Generali and Telekom Austria during the reporting period. These underweightings were largely responsible for the Fund's positive variance from the Index. KEY MARKET CONDITIONS Once regarded as its Achilles' heel, the "old economy" orientation of the Austrian market proved to be a distinct advantage during the year ended August 31, 2001. Dominated by companies in comparatively slow-growing sectors such as utilities, energy, beverages and tobacco, the Austrian market was largely left behind in the late 1990s as markets with larger technology, media and telecommunications components rose to new heights. As investors made a decisive shift away from more-speculative stocks in 2000, however, Austria's equity market began to outperform. Slowing growth in the United States and many European economies helped drive investors toward stocks regarded as having defensive qualities, such as Austria Tabakwerke. Given the Austrian equity market's limited liquidity, even modest inflows of capital translated into significant gains. (As of May 2001, Austria's market capitalization was just $30 billion -- making it the smallest developed European market.) It was not just investors who expressed newfound interest in Austrian companies; a number of foreign corporations were also looking to buy. In June 2001, U.K. tobacco company Gallaher announced that it was seeking to acquire the recently privatized Austria Tabakwerke. The deal helped drive up shares of Austria Tabakwerke as well as other potential acquisition targets. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI AUSTRIA INDEX FUND VS. THE MSCI AUSTRIA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Austria Index Fund MSCI Austria Index 3/12/96 $10,000 $10,000 8/31/96 $ 9,661 $10,073 2/28/97 $ 9,401 $ 9,848 8/31/97 $ 9,764 $ 9,928 2/28/98 $10,535 $11,513 8/31/98 $ 9,975 $10,770 2/28/99 $ 9,403 $10,353 8/31/99 $ 9,108 $ 9,906 2/29/00 $ 7,622 $ 8,247 8/31/00 $ 7,695 $ 8,336 2/28/01 $ 8,497 $ 9,153 6/27/01** $ 8,036 $ 8,535 8/31/01 $ 8,342 $ 8,826 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 27, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 27, 2001 and the new Provisional Index thereafter. 7 PERFORMANCE REVIEW -------------------------------------------------------------------------------- BELGIUM iSHARES MSCI BELGIUM INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (8.72)% (11.31)% (7.68)% 3.07% 2.79% 5.99% 3.72% 3.79% 6.39% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (8.72)% (11.31)% (7.68)% 16.32% 14.78% 33.76% 22.15% 22.51% 40.40% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 27, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI BELGIUM INDEX FUND Consumer Discretionary 3.93% Consumer Staples 12.73% Financials 53.79% Health Care 6.89% Industrials 3.38% Information Technology 1.04% Materials 8.66% Utilities 9.58% PERFORMANCE REVIEW The total return of the iShares MSCI Belgium Index Fund (the "Belgium Fund") was -8.72% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -7.68% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Belgium Fund underperformed the benchmark by 1.04 percentage points over the reporting period, due to the negative impact of expenses, revenue differential and effect of uninvested assets, which subtracted 0.84, 0.69 and 0.03 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of portfolio sampling, which added 0.52 percentage points to the Fund's returns. 8 iSHARES, INC. -------------------------------------------------------------------------------- BELGIUM (CONTINUED) KEY MARKET CONDITIONS Like other European markets, Belgium was pressured by the global economic slowdown during the year ended August 31, 2001. Belgium's export-oriented companies, as well as those with significant operations in the United States, faced an especially challenging environment. In May, for example, insurance company Fortis reported lower results after having posted record profits in the first quarter of 2000. Fortis -- Belgium's largest company by market capitalization -- said that significantly lower revenues from its primary insurance business as well as its venture-capital investments were to blame for the decline. Although the global economic slowdown weighed on many other Belgian companies, the market was largely spared from the other major trend affecting international markets over the reporting period: a sharp correction in technology, media and telecommunications (TMT) stocks. Unlike telecom-heavy European markets such as Sweden and Finland, Belgium did not bear the brunt of investors' pessimism toward TMT stocks. To the contrary, Belgium's large percentage of "old economy" companies in sectors such as banking, insurance, and utilities attracted investors looking for defensive investments. Stocks in these sectors were also boosted by declining interest rates in both the United States and Europe over the reporting period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI BELGIUM INDEX FUND VS. THE MSCI BELGIUM INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Belgium Index Fund MSCI Belgium Index 3/12/96 $10,000 $10,000 8/31/96 $10,501 $10,496 2/28/97 $11,204 $11,595 8/31/97 $11,474 $11,662 2/28/98 $13,161 $13,768 8/31/98 $15,996 $17,633 2/28/99 $16,752 $19,637 8/31/99 $15,836 $18,184 2/29/00 $12,328 $14,178 8/31/00 $13,382 $15,209 2/28/01 $13,025 $14,777 6/27/01** $11,402 $13,129 8/31/01 $12,215 $14,040 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 27, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 27, 2001 and the new Provisional Index thereafter. 9 PERFORMANCE REVIEW -------------------------------------------------------------------------------- BRAZIL (FREE) iSHARES MSCI BRAZIL (FREE) INDEX FUND PERFORMANCE AS OF 8/31/01 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ------------------------------------ ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* ------ -------- -------- ------- --------- -------- (38.52)% (40.72)% (35.60)% (36.31)% (33.32)% (33.78)% -------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ----------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* ------ -------- -------- ------- --------- -------- (38.52)% (40.72)% (35.60)% (40.35)% (36.78)% (37.55)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 29, 2001 and the new MSCI Provisional Index thereafter. Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI BRAZIL (FREE) INDEX FUND Consumer Discretionary 1.23% Consumer Staples 12.40% Energy 26.30% Financials 16.82% Industrials 3.50% Materials 10.40% Telecommunication Services 19.41% Utilities 9.94% PERFORMANCE REVIEW The total return of the iShares MSCI Brazil (Free) Index Fund (the "Brazil Fund") was -38.52% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -35.60% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Brazil Fund underperformed the benchmark during the reporting period by 2.92 percentage points, due to the negative impact of portfolio sampling, expenses and revenue differential, which subtracted 2.15, 0.99 and 0.04 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of effect of uninvested assets, which added 0.26 percentage points to the Fund's returns. 10 iSHARES, INC. -------------------------------------------------------------------------------- BRAZIL (FREE) (CONTINUED) As stated in the introduction, certain regulations 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 during the reporting period. These stocks outperformed the market, accounting for much of the Fund's negative variance from the MSCI Brazil Index. KEY MARKET CONDITIONS Brazil's equity market suffered a severe decline over the year ended August 31, 2001. Economic trends outside its borders played a major role in the downturn. As one of the world's most liquid emerging markets, Brazil often bore the brunt of investors' pessimism as the global economic outlook deteriorated. Much of the selling was concentrated on Brazil's large percentage of liquid telecommunications stocks, which were also depressed by a global correction in that sector. When sentiment improved, however, stocks such as Telemar tended to lead the market rebound. In addition to slowing growth in the United States and other developed countries, a major debt crisis in Argentina also cast a long shadow over the Brazilian equity market during the reporting period. Investors' concern that the crisis would spill over into Brazil drove down the value of Brazil's currency, the REAL. The currency's weakness helped to kindle inflation in Brazil, leading the nation's policy makers to increase interest rates even as other central banks around the world lowered them. The real's weakness also weighed on the results of many leading Brazilian companies. Long-distance operator Embratel, for example, said the currency's decline was a major reason why its first quarter 2001 results did not meet analysts' expectations. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI BRAZIL (FREE) INDEX FUND VS. THE MSCI BRAZIL (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Brazil (Free) Index Fund MSCI Brazil (Free) Index 7/11/00 $10,000 $10,000 7/31/00 $9,466 $9,457 8/31/00 $9,703 $9,697 12/31/00** $8,259 $8,481 2/28/01 $8,360 $8,619 6/29/01*** $7,296 $7,505 8/31/01 $5,965 $6,245 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** The Index changed from being based on the reinvestment of gross dividends to being based on the reinvestment of net dividends, effective December 31, 2000. *** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 29, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 29, 2001 and the new Provisional Index thereafter. 11 PERFORMANCE REVIEW -------------------------------------------------------------------------------- CANADA iSHARES MSCI CANADA INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (34.95)% (35.12)% (39.51)% 8.87% 8.83% 9.55% 8.96% 8.73% 9.70% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (34.95)% (35.12)% (39.51)% 52.93% 52.71% 57.82% 60.01% 57.95% 66.04% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 29, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI CANADA INDEX FUND Consumer Discretionary 6.83% Consumer Staples 2.56% Energy 12.29% Financials 35.07% Health Care 2.18% Industrials 11.47% Information Technology 9.78% Materials 12.56% Telecommunication Services 2.65% Utilities 4.61% PERFORMANCE REVIEW The total return of the iShares MSCI Canada Index Fund (the "Canada Fund") was -34.95% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -39.51% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Canada Fund outperformed the benchmark by 4.56 percentage points over the reporting period, primarily due to the positive impact of portfolio sampling, revenue differential and effect of uninvested assets, which contributed 4.98, 0.30, and 0.12 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses, which subtracted 0.84 percentage points from the Fund's returns. 12 iSHARES, INC. -------------------------------------------------------------------------------- CANADA (CONTINUED) As stated in the introduction, certain regulations 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. In September alone, the underweighting of Nortel accounted for over a 250 basis point variance to the Index. In addition, overweighted stocks resulting from the Nortel underweighting created another 200 basis point difference from the Index. These under and overweightings were largely responsible for the Fund's overall positive variance from the Index during the reporting period. KEY MARKET CONDITIONS Canada's equity market posted a sharp decline over the year ended August 31, 2001. The severe correction in one stock, Nortel Networks, played a major role in the overall market's weak performance. Like many telecommunications stocks worldwide, Nortel's shares spent most of the reporting period falling sharply. As a bellwether of the optical-networking industry, the company's stock reflected investors' growing doubts about the near- to medium-term prospects for the sector. Those doubts were realized when, in October 2000, the company announced that its revenues would not meet analysts' expectations. The news led to a major sell-off in its shares. Nortel again disappointed investors when it warned that its first-quarter results would also be weak. By June 2001, the company's stock price had fallen nearly 90% from the highs it had reached in mid-2000. Although Nortel's decline was especially severe, Canada's other telecommunications- and technology-related companies faced sharp declines in their share prices as well. The sell-off in telecommunications- and technology-related shares contrasted vividly with the comparatively good performance of many old-economy firms. Shares of Canada's leading banks, for example, posted gains after they reported good earnings and after interest rates in Canada, the United States and Europe fell. Companies in the energy and mining industries -- particularly gold producers -- also benefited from rising commodity prices and investors' general concernS about the slowing global economy. (These areas are traditionally regarded as bulwarks against recession.) The weakness of the Canadian dollar relative to the U.S. dollar was another advantage for Canadian metals producers, as it made their goods more competitive on the global market. Both trends helped to boost shares in these sectors, though the Canadian dollar's weakness ultimately reduced returns for U.S.-dollar based investors. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI CANADA INDEX FUND VS. THE MSCI CANADA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Canada Index Fund MSCI Canada Index 3/12/96 $10,000 $10,000 8/31/96 $10,463 $10,521 2/28/97 $12,569 $12,713 8/31/97 $13,445 $13,745 2/28/98 $14,322 $14,679 8/31/98 $10,529 $10,921 2/28/99 $12,717 $13,205 8/31/99 $14,711 $15,203 2/29/00 $18,943 $21,132 8/31/00 $24,597 $27,448 2/28/01 $17,779 $18,463 6/29/01** $16,963 $17,595 8/31/01 $16,001 $16,604 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 29, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 29, 2001 and the new Provisional Index thereafter. 13 PERFORMANCE REVIEW -------------------------------------------------------------------------------- EMU iSHARES MSCI EMU INDEX FUND PERFORMANCE AS OF 8/31/01 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ---------------------------------- --------------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* -------- -------- ------- -------- -------- -------- (24.51)% (24.21)% (24.25)% (26.58)% (24.59)% (26.38)% -------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ---------------------------------- --------------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* -------- -------- ------- -------- -------- -------- (24.51)% (24.21)% (24.25)% (28.91)% (26.38)% (28.63)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 20, 2001 and the new MSCI Provisional Index thereafter. Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI EMU INDEX FUND Austria 0.43% Belgium 2.57% Finland 4.72% France 28.72% Germany 20.32% Greece 0.98% Ireland 2.77% Italy 11.38% Netherlands 17.70% Portugal 1.14% Spain 9.27% PERFORMANCE REVIEW The total return of the iShares MSCI EMU Index Fund (the "EMU Fund") was -24.51% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -24.25% over the same period. SIGNIFICANT PERFORMANCE FACTORS The EMU Fund underperformed the benchmark by 0.26 percentage points due to the negative impact of expenses and revenue differential, which subtracted 0.84 and 0.23 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of portfolio sampling and effect of uninvested assets, which added 0.63 and 0.18 percentage points, respectively, to the Fund's returns. 14 iSHARES, INC. -------------------------------------------------------------------------------- EMU (CONTINUED) KEY MARKET CONDITIONS EMU markets generally trended downward over the year ended August 31, 2001. The decline reflected growing concern among investors that the global economy might be headed for a protracted downturn. With the U.S., European and Asian economies decelerating in tandem, investors revisited value-oriented stocks and those perceived to have defensive qualities. The cautious mood worked to the advantage of markets with a large contingent of "old economy" stocks, such as Austria and Belgium. At the other end of the spectrum were markets dominated by growth-oriented issues. Finland, for example, posted steep declines over the period as sentiment toward telecommunications bellwether Nokia worsened. In addition to telecom equipment manufacturers such as Nokia, telecom service providers such as France Telecom and Deutsche Telekom were also weak for much of the reporting period. As investors became increasingly concerned about the high level of debt that many of these companies had accumulated to acquire licenses for third-generation wireless telephone networks. These worries led to sharp share-price declines across the sector. By late summer 2001, the outlook for EMU economies was still uncertain. On the one hand, economic growth appeared to be slowing; on the other hand, inflation was exceeding the medium-term target rate of the European Central Bank (the "ECB"). Faced with these conflicting demands, the ECB apparently came down on the side of stimulating growth. Following the lead of the U.S. Federal Reserve Board's lead, it lowered interest rates, thereby helping to support shares in the financial sector and other areas. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI EMU INDEX FUND VS. THE MSCI EMU INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI EMU Index Fund MSCI EMU Index 7/26/00 $10,000 $10,000 7/31/00 $9,668 $9,657 8/31/00 $9,418 $9,422 2/28/01 $8,213 $8,256 6/20/01** $7,330 $7,349 8/31/01 $7,109 $7,137 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 20, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 20, 2001 and the new Provisional Index thereafter. 15 PERFORMANCE REVIEW -------------------------------------------------------------------------------- FRANCE iSHARES MSCI FRANCE INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (25.86)% (25.85)% (25.50)% 11.72% 11.98% 12.21% 11.63% 11.20% 11.83% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (25.86)% (25.85)% (25.50)% 74.05% 76.12% 77.92% 82.66% 78.57% 84.51% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 20, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI FRANCE INDEX FUND Consumer Discretionary 19.01% Consumer Staples 11.82% Energy 15.58% Financials 15.21% Health Care 12.22% Industrials 6.47% Information Technology 7.57% Materials 5.01% Telecommunication Services 2.62% Utilities 4.49% PERFORMANCE REVIEW The total return of the iShares MSCI France Index Fund (the "France Fund") was -25.86% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -25.50% over the same period. SIGNIFICANT PERFORMANCE FACTORS The France Fund underperformed the benchmark during the reporting period by 0.36 percentage points, due to the negative impact of expenses and revenue differential, which subtracted 0.84 and 0.31 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of portfolio sampling and effect of uninvested assets, which added 0.65 and 0.14 percentage points, respectively, to the Fund's returns. 16 iSHARES, INC. -------------------------------------------------------------------------------- FRANCE (CONTINUED) KEY MARKET CONDITIONS France's equity market was generally weak over the reporting period, as French corporations grappled with decelerating growth both at home and abroad. Slower economic growth in the United States, Europe and Asia cast doubts on the near-term prospects of French exporters such as L'OREAL and luxury-goods maker LMVH, leading to weakness in their share prices over spring and summer 2001. French telecommunications stocks were weaker still. Shares of France Telecom, one of the market's largest stocks, were depressed by investors' concerns about the debt the company had accumulated to acquire next-generation wireless licenses. These concerns were offset in part by strong revenues from France Telecom's newly acquired Orange wireless division, but the positive results were not enough to alleviate all investor worries. Likewise, shares of telecom equipment manufacturer Alcatel posted a succession of declines as demand for its products waned. A cyclical downturn also weighed on the shares of French technology firms, including information-technology consultant Cap Gemini Ernst & Young, software maker Dassault Systemes and chipmaker STMicroelectronics. These stocks were among the most volatile on the French market over the reporting period. Given the economic uncertainty, stocks regarded as defensive investments, including banks and consumer-staples companies, tended to outperform in France. Shares of French banks were also boosted by the decision of both the U.S. Federal Reserve Board and the European Central Bank to cut interest rates in 2001. Nonetheless, several of France's leading banks, including BNP Paribas and Societe Generale, reported lower profits as a result of the economic downturn in the United States, Europe and Asia. French companies in a number of other sectors announced similar disappointments as the reporting period drew to a close. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI FRANCE INDEX FUND VS. THE MSCI FRANCE INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI France Index Fund MSCI France Index 3/12/96 $10,000 $10,000 8/31/96 $10,495 $10,371 2/28/97 $12,177 $12,210 8/31/97 $12,237 $12,194 2/28/98 $14,880 $14,933 8/31/98 $16,492 $16,500 2/28/99 $18,010 $18,103 8/31/99 $19,957 $19,836 2/29/00 $24,561 $24,763 8/31/00 $24,637 $24,768 2/28/01 $20,505 $20,720 6/20/01** $18,648 $18,811 8/31/01 $18,266 $18,451 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 20, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 20, 2001 and the new Provisional Index thereafter. 17 PERFORMANCE REVIEW -------------------------------------------------------------------------------- GERMANY iSHARES MSCI GERMANY INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (24.87)% (24.95)% (24.77)% 5.72% 5.93% 6.29% 5.97% 5.76% 6.58% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (24.87)% (24.95)% (24.77)% 32.09% 33.37% 35.65% 37.37% 35.78% 41.77% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 20, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI GERMANY INDEX FUND Consumer Discretionary 15.83% Consumer Staples 1.43% Financials 26.70% Health Care 5.86% Industrials 14.28% Information Technology 8.36% Materials 11.38% Telecommunication Services 6.71% Utilities 9.45% PERFORMANCE REVIEW The total return of the iShares MSCI Germany Index Fund (the "Germany Fund") was -24.87% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -24.77% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Germany Fund underperformed the benchmark during the reporting period by 0.10 percentage points, primarily as a result of the negative impact of expenses and revenue differential, which subtracted 0.84 and 0.01 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of portfolio sampling and effect of uninvested assets, which added 0.60 and 0.15 percentage points, respectively, to the Fund's returns. 18 iSHARES, INC. -------------------------------------------------------------------------------- GERMANY (CONTINUED) KEY MARKET CONDITIONS Slower economic conditions over the year ended August 31, 2001 presented a challenging environment for many German companies and for their investors. Decelerating growth in the United States, and the accompanying decline in consumer spending there, fell heavily on many German exporters. Companies such as automaker DaimlerChrysler and chemicals manufacturer BASF, for example, cited weak sales in the U.S. when announcing uninspiring early 2001 results. That explanation was by no means universal, however. Carmaker Volkswagen, for one, announced that its profits rose 57% in early 2001 as strong international sales offset declining growth in its home market. Volkswagen's strength contrasted sharply with that of many German telecommunications and technology companies. Shares of electronics maker Siemens and chip maker Infineon were especially hard hit as their industries went through a major cyclical downturn. Nonetheless, Germany's sizeable share of "old economy" companies meant that it was less affected by this downturn than some of its European neighbors. While the Finnish and Swedish stock markets sank along with their previously high-performers Nokia and Ericsson, the German market was supported by its banks, utilities and insurance companies. Many investors rotated to these sectors from more growth-oriented areas as economic activity in Europe and the U.S. slowed. Eventually, however, even German stocks regarded as having defensive qualities felt the impact of decelerating global growth. HypoVereinsbank (Germany's second-largest bank) reported disappointing second quarter 2001 profits, as did several other German corporations. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI GERMANY INDEX FUND VS. THE MSCI GERMANY INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Germany Index Fund MSCI Germany Index 3/12/96 $10,000 $10,000 8/31/96 $10,399 $10,451 2/28/97 $11,291 $11,476 8/31/97 $12,533 $12,778 2/28/98 $14,661 $15,107 8/31/98 $15,752 $16,102 2/28/99 $16,117 $16,643 8/31/99 $16,862 $17,112 2/29/00 $21,975 $22,837 8/31/00 $18,286 $18,845 2/28/01 $16,587 $17,232 6/20/01** $14,505 $15,003 8/31/01 $13,737 $14,177 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 20, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 20, 2001 and the new Provisional Index thereafter. 19 PERFORMANCE REVIEW -------------------------------------------------------------------------------- HONG KONG iSHARES MSCI HONG KONG INDEX FUND PERFORMANCE AS OF 8/31/01
-------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (30.88)% (31.38)% (29.86)% (4.02)% (3.71)% (1.33)% (3.11)% (3.23)% (0.47)% -------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (30.88)% (31.38)% (29.86)% (18.53)% (17.21)% (6.45)% (15.91)% (16.39)% (2.57)% -------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 22, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI HONG KONG INDEX FUND Consumer Discretionary 6.62% Financials 53.49% Industrials 22.37% Materials 0.50% Technology Hardware & Equipment 0.41% Telecommunications 1.78% Utilities 14.83% PERFORMANCE REVIEW The total return of the iShares MSCI Hong Kong Index Fund (the "Hong Kong Fund") was -30.88% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -29.86% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Hong Kong Fund underperformed the benchmark during the reporting period by 1.02 percentage points, as a result of the negative impact of expenses, portfolio sampling and revenue differential, which subtracted 0.84, 0.39 and 0.12 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of effect of uninvested assets, which added 0.33 percentage points to the Fund's returns. 20 iSHARES, INC. -------------------------------------------------------------------------------- HONG KONG (CONTINUED) KEY MARKET CONDITIONS The absolute performance of Hong Kong's stock market was, like that of many other international markets, weak over the year ended August 31, 2001. Hong Kong's companies did profit somewhat from healthy demand in China, whose economy remained robust even as the U.S., European and Japanese economies decelerated. The interest-rate cuts that the U.S. Federal Reserve Board implemented to jump-start the U.S. economy also helped to support Hong Kong's large contingent of real-estate stocks. (Hong Kong's interest rates are pegged to those of the U.S.) The strength of these stocks was offset in part by continued declines for technology- and telecommunications-related companies such as Pacific Century Cyberworks Limited. A cyclical downturn in these areas led to severe declines in many stocks. As the reporting period progressed, the impact of slowing global growth made itself felt on the Hong Kong market. The uncertain environment led many investors to decrease their positions in export-oriented companies in favor of more defensive shares such as banks. Still others shifted their capital out of Hong Kong altogether and into more developed markets. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI HONG KONG INDEX FUND VS. THE MSCI HONG KONG INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Hong Kong Index Fund MSCI Hong Kong Index 3/12/96 $10,000 $10,000 8/31/96 $10,322 $10,415 2/28/97 $11,868 $12,190 8/31/97 $12,159 $12,645 2/28/98 $9,197 $9,871 8/31/98 $5,567 $6,108 2/28/99 $7,630 $8,761 8/31/99 $10,606 $11,932 2/29/00 $12,116 $14,505 8/31/00 $12,167 $13,891 2/28/01 $11,068 $12,711 6/22/01** $9,313 $10,733 8/31/01 $8,409 $9,743 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 22, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 22, 2001 and the new Provisional Index thereafter. 21 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ITALY iSHARES MSCI ITALY INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (18.61)% (19.50)% (19.49)% 12.06% 11.98% 12.12% 11.77% 11.96% 11.68% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (18.61)% (19.50)% (19.49)% 76.71% 76.13% 77.17% 83.98% 85.30% 83.08% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 20, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI ITALY INDEX FUND Consumer Discretionary 8.93% Consumer Staples 0.76% Energy 15.57% Financials 42.76% Health Care 1.02% Industrials 3.66% Information Technology 0.39% Materials 0.74% Telecommunication Services 20.15% Utilities 6.02% PERFORMANCE REVIEW The total return of the iShares MSCI Italy Index Fund (the "Italy Fund") was -18.61% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -19.49% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Italy Fund outperformed the benchmark by 0.88 percentage points, due to the positive impact of pricing differences, the effect of uninvested assets, and portfolio sampling, which contributed 1.80, 0.17, and 0.04 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses and revenue differential, which subtracted 0.84 and 0.29 percentage points, respectively, from the Fund's returns. 22 iSHARES, INC. -------------------------------------------------------------------------------- ITALY (CONTINUED) The pricing variance of 1.80 was caused due to pricing methodology differences between the MSCI Index and the Fund. In addition, the Fund experienced slight over-performance in the over-weighted merchandise sector during November 2000. KEY MARKET CONDITIONS Over the year ended August 31, 2001, Italy's equity market continued to be weighed down by many of the same factors that had depressed it in the prior six months. A prolonged downturn in the telecommunications sector was one of the main factors pressuring the market. Stocks such as Telecom Italia and Telecom Italia Mobile, two of Italy's largest stocks, were weakened by investors' doubts about the near-term prospects for the telecommunications sector. The transition to next-generation wireless technology has proceeded at a slower pace than many investors expected, resulting in lower growth forecasts for companies such as Telecom Italia Mobile. Growth-oriented stocks in general remained out of favor with investors in Italy's market over the reporting period. With economic growth slowing in Europe as well as the United States, Asia and other regions, investors sought out the perceived safety of banking, insurance and energy stocks. Financial service firms also benefited from declining interest rates over the summer. By August 2001, there were indications that some investors believed that the growth stock correction had run its course. They argued that technology and telecommunications shares in particular had fallen so low that they were due for a rebound. The renewed interest drew some capital away from Italy's other sectors and boosted shares of its more growth-oriented stocks as the reporting period ended. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI ITALY INDEX FUND VS. THE MSCI ITALY INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Italy Index Fund MSCI Italy Index 3/12/96 $10,000 $10,000 8/31/96 $10,411 $10,333 2/28/97 $11,151 $11,102 8/31/97 $12,845 $12,862 2/28/98 $17,250 $17,297 8/31/98 $18,968 $19,129 2/28/99 $21,328 $21,666 8/31/99 $19,943 $19,963 2/29/00 $24,734 $24,638 8/31/00 $22,605 $22,740 2/28/01 $21,018 $20,899 6/20/01** $18,099 $17,978 8/31/01 $18,398 $18,308 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 20, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 20, 2001 and the new Provisional Index thereafter. 23 PERFORMANCE REVIEW -------------------------------------------------------------------------------- JAPAN iSHARES MSCI JAPAN INDEX FUND PERFORMANCE AS OF 8/31/01
--------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (34.37)% (34.42)% (34.45)% (7.92)% (7.75)% (7.07)% (7.79)% (7.99)% (6.96)% --------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS --------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (34.37)% (34.42)% (34.45)% (33.81)% (33.22)% (30.70)% (35.87)% (36.54)% (32.64)% --------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 22, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI JAPAN INDEX FUND Consumer Discretionary 22.91% Consumer Staples 5.33% Energy 1.02% Financials 17.56% Health Care 6.29% Industrials 15.98% Information Technology 14.62% Materials 6.10% Telecommunication Services 4.24% Utilities 5.95% PERFORMANCE REVIEW The total return of the iShares MSCI Japan Index Fund (the "Japan Fund") was -34.37% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -34.45% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Japan Fund outperformed the benchmark during the reporting period by 0.08 percentage points, due to the positive impact of portfolio sampling, revenue differential and effect of uninvested assets, which contributed 0.64, 0.17 and 0.11 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses, which subtracted 0.84 percentage points from the Fund's returns. 24 iSHARES, INC. -------------------------------------------------------------------------------- JAPAN (CONTINUED) KEY MARKET CONDITIONS Japan's equity market was depressed by a host of cyclical and structural economic problems over the year ended August 31, 2001. Like stock markets around the world, Japan's fell as investors became increasingly alarmed about the extent of a global economic slowdown. A fall-off in the U.S. economy, particularly in consumer demand, had widespread implications for many Japanese companies. European consumer markets were also generally weak, creating a more difficult environment for export-oriented companies such as Sony Corporation. These external pressures only added to the concerns investors already had about Japan's domestic economy. Successive attempts to revive consumer demand have failed, and many investors feel that policy makers are still reluctant to address the nation's deep-rooted structural problems. The lack of clarity regarding nonperforming loans at Japan's banks is an especially thorny issue. Some investors have seen cause for optimism in the new government of Prime Minister Junichiro Koizumi, who has pledged to institute reforms. Yet Koizumi clearly faces opposition from Japan's more traditional political factions, casting some doubt on whether he will be able to push through reforms and revive the economy. Despite the rather pessimistic investment climate, small capitalization Japanese companies managed to stage a rally during part of the reporting period. The surge was apparently driven by investors attracted to the depressed valuations of these stocks. Sentiment toward Japan's larger companies, however, remained decidedly poor. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI JAPAN INDEX FUND VS. THE MSCI JAPAN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iSHARES MSCI Japan Index Fund MSCI Japan Index 3/12/96 $10,000 $10,000 8/31/96 $ 9,689 $ 9,720 2/28/97 $ 8,060 $ 8,117 8/31/97 $ 8,529 $ 8,596 2/28/98 $ 7,366 $ 7,438 8/31/98 $ 5,682 $ 5,785 2/28/99 $ 6,867 $ 7,031 8/31/99 $ 8,986 $ 9,409 2/29/00 $10,297 $10,742 8/31/00 $ 9,772 $10,277 2/28/01 $ 7,417 $ 7,815 6/22/01** $ 7,304 $ 7,662 8/31/01 $ 6,413 $ 6,736 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 22, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 22, 2001 and the new Provisional Index thereafter. 25 PERFORMANCE REVIEW -------------------------------------------------------------------------------- MALAYSIA (FREE) iSHARES MSCI MALAYSIA (FREE) INDEX FUND PERFORMANCE AS OF 8/31/01
-------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (13.22)% (15.62)% (11.58)% (15.86)% (16.63)% (14.67)% (13.93)% (14.77)% (12.69)% -------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (13.22)% (15.62)% (11.58)% (57.83)% (59.74)% (54.75)% (56.03)% (58.22)% (52.43)% -------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 22, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI MALAYSIA (FREE) INDEX FUND Consumer Discretionary 16.10% Consumer Staples 10.95% Energy 0.56% Financials 25.49% Industrials 17.87% Information Technology 1.49% Materials 2.87% Telecommunication Services 10.58% Utilities 14.09% PERFORMANCE REVIEW The total return of the iShares MSCI Malaysia Index Fund (the "Malaysia Fund") was -13.22% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -11.58% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Malaysia Fund underperformed the benchmark by 1.64 percentage points over the reporting period, due to the negative impact of portfolio sampling, expenses and revenue differential, which subtracted 1.00, 0.84 and 0.28 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of effect of uninvested assets, which added 0.48 percentage points to the Fund's returns. 26 iSHARES, INC. -------------------------------------------------------------------------------- MALAYSIA (FREE) (CONTINUED) KEY MARKET CONDITIONS Malaysia's equity market was generally quite weak over the reporting period, mirroring the performance of most other emerging and developed markets around the world. The general decline in global economic activity took its toll on the profits of Malaysian exporters in particular. For a time, however, the Malaysian market enjoyed a somewhat better footing than many other Asian markets. Malaysia's status as a net exporter of crude oil served it well as oil prices rose in late 2000. With a relatively small technology component, Malaysia's equity market was also slightly less vulnerable to the correction in that sector over the reporting period. The downturn had an indirect, but no less profound, impact on Malaysia's manufacturing sector, however. Companies involved in producing technology-related goods were especially hard hit. Over time, Malaysia's modest advantages were eroded by economic and political concerns. In the spring of 2001, the country's domestic political situation deteriorated, leading to declines in its stock market. The uncertainty drove some foreign capital out of the country, although the market subsequently stabilized. Investors who remained tended to favor stocks regarded as defensive investments, such as British American Tobacco (Malaysia) ("BAT") and Malaysia International Shipping. BAT shares rose still further in July 2001, when the company reported that its first-half 2001 profits had risen by 39%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI MALAYSIA (FREE) INDEX FUND VS. THE MSCI MALAYSIA (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Malaysia (Free) Index Fund MSCI Malaysia (Free) Index 3/12/96 $10,000 $10,000 8/31/96 $10,428 $10,512 2/28/97 $11,834 $12,172 8/31/97 $6,237 $6,385 2/28/98 $4,877 $4,890 8/31/98 $1,648 $1,657 2/28/99 $2,428 $2,852 8/31/99 $4,711 $5,050 2/29/00 $6,304 $6,737 5/31/00** $5,958 $6,352 8/31/00 $5,068 $5,380 12/31/00*** $4,297 $4,591 2/28/01 $4,537 $4,841 6/22/01**** $3,709 $3,990 8/31/01 $4,397 $4,757 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** The Index changed from being based on the reinvestment of net dividends to being based on the reinvestment of gross dividends, effective May 31, 2000. *** The Index changed from being based on the reinvestment of gross dividends to being based on the reinvestment of net dividends, effective December 31, 2000. **** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 22, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 22, 2001 and the new Provisional Index thereafter. 27 PERFORMANCE REVIEW -------------------------------------------------------------------------------- MEXICO (FREE) iSHARES MSCI MEXICO (FREE) INDEX FUND PERFORMANCE AS OF 8/31/01
-------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (7.02)% (7.01)% (2.96)% 8.47% 8.43% 11.55% 10.65% 9.88% 13.77% -------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (7.02)% (7.01)% (2.96)% 50.16% 49.90% 72.70% 74.08% 62.27% 102.67% -------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 29, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI MEXICO (FREE) INDEX FUND Consumer Staples 11.35% Consumer Discretionary 18.30% Energy 1.43% Financials 5.91% Industrials 5.66% Materials 17.04% Telecommunication Services 40.31% PERFORMANCE REVIEW The total return of the iShares MSCI Mexico (Free) Index Fund (the "Mexico Fund") was -7.02% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -2.96% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Mexico Fund underperformed the benchmark during the reporting period by 4.06 percentage points, due to the negative impact of portfolio sampling and expenses, which subtracted 3.51 and 0.84 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of uninvested assets and revenue differential, which added 0.23 and 0.06 percentage points, respectively, to the Fund's returns. 28 iSHARES, INC. -------------------------------------------------------------------------------- MEXICO (FREE) (CONTINUED) As stated in the introduction, certain regulations can restrict the 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. Also, due to the 5/50 Rule, the Mexico Fund was underweighted in several securities including Cemex and Banamex Accival (Banacci), and, therefore, it was overweighted in poorly-performing stocks, especially in the metal and multi-industry sectors. These misweightings were responsible for the Fund's negative variance from the Index during the reporting period. KEY MARKET CONDITIONS Mexico was one of the better-performing emerging markets over the year ended August 31, 2001, despite investors' widespread concerns about the global economy. Although the market's performance was fairly weak in absolute terms, its relative returns benefited from several factors. Rising oil prices in late 2000 helped to bolster sentiment toward Mexico, a net exporter of oil. Investors reasoned that the trend would help strengthen Mexico's financial position. The country's banks also benefited from lower interest rates in the United States and at home, which led investors to increase their shares. Merger-and-acquisition activity was yet another factor fueling Mexican banking stocks. In May, U.S. financial giant Citicorp announced plans to acquire Banacci, Mexico's second-largest bank at a significant premium. That news resulted in strong performance for the market in Mexico for May and also led investors to seek out other potential acquisition targets in the country's market. Toward the latter half of the reporting period, however, the combined weight of the U.S. economic slowdown and a debt crisis in Argentina put pressure on Mexico's equity market. Given the extent to which Mexico relies on exports to the U.S., decelerating economic growth there left investors pessimistic about the near-term prospects for many Mexican companies. The debt crisis in Argentina also weighed on Mexican equities, as investors worried that the crisis would, among other things, saddle Mexican banks with nonperforming loans in Argentina. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI MEXICO (FREE) INDEX FUND VS. THE MSCI MEXICO (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Mexico (Free) Index Fund MSCI Mexico (Free) Index 3/12/96 $10,000 $10,000 8/31/96 $11,592 $11,736 2/28/97 $12,820 $13,254 8/31/97 $15,675 $16,321 2/28/98 $15,311 $16,136 8/31/98 $ 8,750 $ 9,159 2/28/99 $12,108 $13,071 8/31/99 $14,604 $16,055 2/29/00 $19,632 $22,171 8/31/00 $18,723 $20,885 12/31/00** $15,169 $17,261 2/28/01 $16,025 $18,507 6/29/01*** $18,614 $21,581 8/31/01 $17,408 $20,267 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** The Index changed from being based on the reinvestment of gross dividends to being based on the reinvestment of net dividends, effective December 31, 2000. *** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 29, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 29, 2001 and the new Provisional Index thereafter. 29 PERFORMANCE REVIEW -------------------------------------------------------------------------------- NETHERLANDS iSHARES MSCI NETHERLANDS INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (19.83)% (20.50)% (17.18)% 5.87% 5.91% 8.29% 7.41% 6.71% 9.38% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (19.83)% (20.50)% (17.18)% 33.03% 33.30% 48.90% 47.91% 42.54% 63.40% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 27, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI NETHERLANDS INDEX FUND Consumer Discretionary 11.80% Consumer Staples 16.75% Energy 24.44% Financials 29.45% Industrials 8.35% Information Technology 3.32% Materials 5.01% Telecommunication Services 0.88% PERFORMANCE REVIEW The total return of the iShares MSCI Netherlands Index Fund (the "Netherlands Fund") was -19.83% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -17.18% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Netherlands Fund underperformed the benchmark by 2.65 percentage points over the reporting period, due to the negative impact of portfolio sampling, expenses and revenue differential, which subtracted 1.67, 0.84 and 0.26 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of effect of uninvested assets, which added 0.12 percentage points to the Fund's returns. 30 iSHARES, INC. -------------------------------------------------------------------------------- NETHERLANDS (CONTINUED) As stated in the introduction, certain regulations can restrict the Investment Adviser's ability to optimize a Fund's portfolio. As of August 31, 2001, the sum of all the securities with weightings of 5% or greater in the MSCI Netherlands Index was greater than 80%, with Royal Dutch/Shell Group currently accounting for more than 30% of the Index. Because of the need to comply with the Single Issuer and 5/50 Rules, the Netherlands Fund underweighted certain positions that generally outperformed the benchmark, and overweighted others that generally underperformed the benchmark. As a result, portfolio sampling was the primary reason the Fund underperformed compared to the Index. KEY MARKET CONDITIONS In concert with many equity markets around the world, the Netherlands posted a weak performance over the year ended August 31, 2001. Slowing economic growth in the United States as well as Europe, Asia and virtually every other region put pressure on corporate profits and equity performance. Leading Dutch multinationals, such as Philips Electronics, were especially sensitive to investors' worries that U.S. consumer spending would decline significantly. Given the uncertainties, investors tended to favor the Netherlands' more defensive shares, such as those in the food and household products sector as well as insurers and financial services companies. The latter were also boosted by declining interest rates in Europe and the United States. In addition, energy giant Royal Dutch/Shell Group (the Index's largest stock) attracted investors as the price of crude oil rose in late 2000. Some of the increase dissipated in 2001, but higher natural-gas prices helped to pick up the slack for Royal Dutch/Shell. In May, the company said that its first-quarter profits rose by 23%, driving up the share price. On a relative basis, therefore, the Dutch equity market performed significantly better than its more growth-oriented European neighbors. With only modest telecommunications and technology sectors, the Netherlands was less affected by the cyclical downturns in those areas than such markets as Finland and Sweden. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI NETHERLANDS INDEX FUND VS. THE MSCI NETHERLANDS INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Netherlands Index Fund MSCI Netherlands Index 3/12/96 $10,000 $10,000 8/31/96 $11,118 $10,974 2/28/97 $12,934 $12,949 8/31/97 $14,236 $14,680 2/28/98 $16,810 $17,273 8/31/98 $16,715 $16,824 2/28/99 $16,958 $17,573 8/31/99 $18,216 $18,862 2/29/00 $18,076 $19,157 8/31/00 $18,450 $19,730 2/28/01 $16,882 $18,215 6/27/01** $15,093 $16,570 8/31/01 $14,791 $16,340 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 27, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 27, 2001 and the new Provisional Index thereafter. 31 PERFORMANCE REVIEW -------------------------------------------------------------------------------- SINGAPORE (FREE) iSHARES MSCI SINGAPORE (FREE) INDEX FUND PERFORMANCE AS OF 8/31/01
--------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (27.89)% (30.10)% (28.10)% (12.41)% (12.88)% (11.23)% (12.51)% (13.16)% (11.67)% --------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS --------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (27.89)% (30.10)% (28.10)% (48.45)% (49.84)% (44.87)% (51.92)% (53.71)% (49.31)% --------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 22, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI SINGAPORE (FREE) INDEX FUND Consumer Discretionary 6.94% Consumer Staples 2.50% Financials 50.99% Health Care 1.08% Industrials 16.00% Information Technology 11.57% Telecommunication Services 10.92% PERFORMANCE REVIEW The total return of the iShares MSCI Singapore (Free) Index Fund (the "Singapore Fund") was -27.89% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -28.10% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Singapore Fund outperformed the benchmark by 0.21 percentage points over the reporting period, due to the positive impact of portfolio sampling and effect of uninvested assets, which contributed 1.08 and 0.11 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses and revenue differential, which subtracted 0.84 and 0.14 percentage points, respectively, from the Fund's returns. 32 iSHARES, INC. -------------------------------------------------------------------------------- SINGAPORE (FREE) (CONTINUED) As stated in the introduction, certain regulations can restrict the Investment Adviser's ability to optimize a Fund's portfolio. Due to the 5/50 Rule, the portfolio managers of the Singapore Fund were obligated to underweight Singapore Telecom and UOB Bank. These underweightings were largely responsible for the Fund's positive variance from the Index during the reporting period. KEY MARKET CONDITIONS Singapore's export-oriented economy proved to be a liability for its equity market during the year ended August 31, 2001. A major cyclical downturn in demand for technology and telecommunications led investors to sell off stocks such as Chartered Semiconductor Manufacturing. Not only did personal computer sales fall into a slump, but demand for third generation wireless phones was weaker than many investors had expected. These trends created a very difficult environment for companies that manufacture chips for these applications. As a result, investors withdrew more money from these stocks and instead favored companies that they believed would be better able to withstand a prolonged economic slowdown. Singapore's banks and real-estate companies were among the beneficiaries of this trend. They also had the advantage of declining interest rates. Lower interest rates were not enough, however, to keep Singapore from falling into a recession in 2001. Unsurprisingly, this only served to worsen sentiment toward the equity market. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SINGAPORE (FREE) INDEX FUND VS. THE MSCI SINGAPORE (FREE) INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Singapore (Free) Index Fund MSCI Singapore (Free) Index 3/12/96 $10,000 $10,000 8/31/96 $ 9,327 $ 9,196 2/28/97 $ 9,720 $ 9,670 8/31/97 $ 7,137 $ 6,961 2/28/98 $ 5,687 $ 5,978 8/31/98 $ 2,763 $ 3,108 2/28/99 $ 4,914 $ 5,246 8/31/99 $ 6,756 $ 7,274 2/29/00 $ 6,361 $ 6,951 8/31/00 $ 6,669 $ 7,051 2/28/01 $ 5,862 $ 6,238 6/22/01** $ 4,896 $ 5,138 8/31/01 $ 4,808 $ 5,069 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 22, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 22, 2001 and the new Provisional Index thereafter. 33 PERFORMANCE REVIEW -------------------------------------------------------------------------------- SOUTH KOREA iSHARES MSCI SOUTH KOREA INDEX FUND PERFORMANCE AS OF 8/31/01 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ---------------------------------- --------------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* -------- -------- ------- -------- -------- -------- (26.49)% (28.59)% (28.49)% (27.45)% (25.98)% (30.06)% -------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ---------------------------------- --------------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* -------- -------- ------- -------- -------- -------- (26.49)% (28.59)% (28.49)% (34.43)% (32.45)% (37.45)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 29, 2001 and the new MSCI Provisional Index thereafter. Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI SOUTH KOREA INDEX FUND Consumer Discretionary 8.97% Consumer Staples 2.20% Energy 0.65% Financials 19.04% Health Care 0.80% Industrials 5.63% Information Technology 31.92% Materials 9.29% Telecommunication Services 16.41% Utilities 5.09% PERFORMANCE REVIEW The total return of the iShares MSCI South Korea Index Fund (the "South Korea Fund") was -26.49% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -28.49% over the same period. SIGNIFICANT PERFORMANCE FACTORS The South Korea Fund outperformed the benchmark by 2.00 percentage points over the reporting period, due to the positive impact of portfolio sampling, revenue differential and effect of uninvested assets, which contributed 2.42, 0.41 and 0.16 percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses, which subtracted 0.99 percentage points from the Fund's returns. 34 iSHARES, INC. -------------------------------------------------------------------------------- SOUTH KOREA (CONTINUED) As stated in the introduction, certain regulations 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. Additionally, the Fund underweighted several stocks in the financial services sector and overweighted Samsung Display and SK Telecom. While compliance with Single Issuer restrictions generally had a positive effect on performance as a result of the telecommunications, media, technology downturn, Samsung Electronics, which outperformed the market over the period, continued to be underweighted in the Fund during part of this period due to the volatility of the security. KEY MARKET CONDITIONS South Korea was among the world's most volatile markets during the year ended August 31, 2001. With technology stocks composing a large percentage of its total market capitalization, the country was acutely affected by the cyclical downturn in demand for technology products, particularly semiconductors. Investors responded by selling off shares of companies such as market heavyweight Samsung Electronics in late 2000. Telecommunications stocks such as SK Telecom were also weighed down by general pessimism toward that sector. With the start of the new calendar year, however, sentiment improved significantly. In January alone, the MSCI South Korea Index rose 26.6% in local-currency terms. Investors apparently were heartened by the U.S. Federal Reserve Board's decision to lower interest rates, a move that many thought would jumpstart the U.S. economy and stimulate technology spending on a global basis. But the recovery was short-lived. As the reporting period ended, the South Korean equity market posted further declines. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SOUTH KOREA INDEX FUND VS. THE MSCI SOUTH KOREA INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI South Korea Index Fund MSCI South Korea Index 5/10/00 $10,000 $10,000 5/31/00 $ 9,455 $ 9,437 8/31/00 $ 8,920 $ 8,748 12/31/00** $ 5,909 $ 5,583 2/28/01 $ 6,930 $ 6,608 6/29/01*** $ 6,955 $ 6,590 8/31/01 $ 6,557 $ 6,255 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** The Index changed from being based on the reinvestment of gross dividends to being based on the reinvestment of net dividends, effective December 31, 2000. *** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 29, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 29, 2001 and the new Provisional Index thereafter. 35 PERFORMANCE REVIEW -------------------------------------------------------------------------------- SPAIN iSHARES MSCI SPAIN INDEX FUND PERFORMANCE AS OF 8/31/01
-------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (11.17)% (11.33)% (16.05)% 12.78% 12.89% 13.30% 13.27% 13.23% 13.88% -------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (11.17)% (11.33)% (16.05)% 82.45% 83.41% 86.67% 97.86% 97.10% 103.78% -------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 27, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI SPAIN INDEX FUND Consumer Discretionary 9.77% Consumer Staples 3.33% Energy 4.72% Financials 30.00% Health Care 2.75% Industrials 6.32% Information Technology 2.15% Materials 1.92% Telecommunication Services 19.57% Utilities 19.47% PERFORMANCE REVIEW The total return of the iShares MSCI Spain Index Fund (the "Spain Fund") was -11.17% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -16.05% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Spain Fund outperformed the benchmark by 4.88 percentage points over the reporting period, due to the positive impact of portfolio sampling and effect of uninvested assets, which contributed 5.61 and 0.31 and percentage points, respectively, to the Fund's returns. These factors were partially offset by the negative impact of expenses and revenue differential, which subtracted 0.84 and 0.20 percentage points, respectively, from the Fund's returns. 36 iSHARES, INC. -------------------------------------------------------------------------------- SPAIN (CONTINUED) As stated in the introduction, regulatory requirements can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the 5/50 Rule, Fund managers were obligated to underweight or overweight several sectors in the Spain Fund, including banking, energy, telecommunications and utilities. For example, because Spain's two largest banks, Banco Bilbao Vizcaya Argentaria (BBVA) and Banco Santander Central Hispano (BSCH), comprise over 35% of the Index, the portfolio is approximately 10% underweight in these issues. Similarly, Single Issuer constraints on Telefonica contributed to misweighting compared to the benchmark. These underweightings in underperforming companies were the primary reason for the Fund's positive variance from the Index over the reporting period. KEY MARKET CONDITIONS Spain's equity market felt the negative repercussions of a worldwide decline in economic activity over the year ended August 31, 2001. During this time many investors became increasingly concerned about just how extensive and protracted the downturn would be. These worries affected the performance of Spanish equities. Relative to other European stock markets, however, Spain was fairly healthy. It was buoyed by the performance of several Spanish firms which continued to post solid profits despite the more challenging economic environment. In many cases, this resilience owed much to successful expansion into Latin America. That region presented many Spanish companies with growth opportunities even as Spain's domestic economy and Europe as a whole became less robust. Good results in Latin America helped to shore up profits for Spain's two largest banks, BBVA and BSCH, for example. Their aggressive expansion into Latin America proved rewarding in late 2000, as demand for financial services continued to expand in the region. Investors' expectations that European and U.S. interest rates would decline also helped to support Spanish banking stocks as well as shares of utilities and other companies that are sensitive to interest rates. The extensive Latin American exposure of many Spanish companies became more of a liability in 2001, however. A debt crisis in Argentina depressed equity markets in Latin America and cast a shadow over many foreign companies with ties to the region. These concerns weighed on shares of BBVA, BSCH and other Spanish companies over the spring and summer of 2001. As the reporting period ended, it was still unclear just how Argentina's crisis would be definitively resolved and whether its impact would be as far-reaching as some investors feared. The outlook for Spain's domestic economy and that of Europe also remained hazy. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SPAIN INDEX FUND VS. THE MSCI SPAIN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Spain Index Fund MSCI Spain Index 3/12/96 $10,000 $10,000 8/31/96 $10,845 $10,917 2/28/97 $12,893 $13,066 8/31/97 $15,092 $15,379 2/28/98 $20,478 $21,053 8/31/98 $20,009 $20,589 2/28/99 $24,389 $24,970 8/31/99 $22,686 $23,707 2/29/00 $24,902 $27,540 8/31/00 $22,275 $24,275 2/28/01 $22,579 $23,591 6/27/01** $19,724 $20,307 8/31/01 $19,786 $20,378 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 27, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 27, 2001 and the new Provisional Index thereafter. 37 PERFORMANCE REVIEW -------------------------------------------------------------------------------- SWEDEN iSHARES MSCI SWEDEN INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (46.99)% (47.92)% (48.62)% 4.83% 4.73% 7.73% 6.95% 5.79% 9.27% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (46.99)% (47.92)% (48.62)% 26.62% 26.03% 45.09% 44.51% 36.01% 62.49% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 27, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI SWEDEN INDEX FUND Consumer Discretionary 11.16% Consumer Staples 1.03% Financials 27.28% Health Care 2.23% Industrials 21.74% Information Technology 24.18% Materials 5.72% Telecommunication Services 6.66% PERFORMANCE REVIEW The total return of the iShares MSCI Sweden Index Fund (the "Sweden Fund") was -46.99% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -48.62% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Sweden Fund outperformed the benchmark by 1.63 percentage points over the reporting period, due to the positive impact of portfolio sampling and effect of uninvested assets, which contributed 2.40 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 subtracted 0.84 and 0.14 percentage points, respectively, from the Fund's returns. 38 iSHARES, INC. -------------------------------------------------------------------------------- SWEDEN (CONTINUED) As stated in the introduction, regulations 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 during the first half of the reporting period. As an example, in September 2000, Ericsson's weight in the Index was 43.65%, while in the Fund that weight was capped at 25%. Ericsson's impact on the benchmark Index in the reporting period was -75.59%, while its impact on the Fund's return was -47.91%. KEY MARKET CONDITIONS Swedish equities were very weak over the year ended August 31, 2001. Two main factors were responsible: a major decline in market sentiment toward the telecommunications sector and the overall slowdown in the global economy. The weakness of the Swedish krona further reduced returns for U.S. dollar-based investors. Besides the general pessimism toward telecom companies, shares of Ericsson -- the largest stock in both the MSCI Sweden Index and the Fund's portfolio -- were also depressed by company-specific disappointments. In October 2000, Ericsson's stock fell sharply when the company cut its profit forecast for the fourth quarter of 2000. It said that the revision was due largely to continued weakness in its wireless handset business. Just how weak that unit was only became apparent later: Ericsson's wireless handset division eventually posted a loss of more than $1 billion for the fourth quarter. Ericsson's shares again fell sharply in March of 2001 when the company said it would post a loss for the first quarter after having previously expected to break even. Investors responded positively to Ericsson's efforts to stem the losses, which included a decision to outsource production of its mobile phones. As the reporting period ended, however, sentiment toward Ericsson was again generally poor, casting a shadow over other Swedish stocks. The uncertain economic environment posed another challenge for Swedish corporations, investors and policy makers. The slowdown in global economic activity weighed on industrial activity in Sweden at the same time as domestic inflation was accelerating. In early July of 2001, the Swedish Central Bank attempted to remedy the latter problem by raising interest rates a quarter of a percentage point. The bank said it was concerned that Swedish inflation would exceed its target rate of 2% in 2002 and 2003. Whether the move succeeded in quelling inflation remained to be seen as the reporting period ended. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SWEDEN INDEX FUND VS. THE MSCI SWEDEN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Sweden Index Fund MSCI Sweden Index 3/12/96 $10,000 $10,000 8/31/96 $11,413 $11,200 2/28/97 $13,357 $13,344 8/31/97 $14,847 $14,856 2/28/98 $16,353 $16,596 8/31/98 $15,659 $16,093 2/28/99 $16,748 $17,416 8/31/99 $19,590 $20,846 2/29/00 $31,615 $37,492 8/31/00 $27,260 $31,626 2/28/01 $18,896 $21,515 6/27/01** $14,949 $16,763 8/31/01 $14,451 $16,249 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 27, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 27, 2001 and the new Provisional Index thereafter. 39 PERFORMANCE REVIEW -------------------------------------------------------------------------------- SWITZERLAND iSHARES MSCI SWITZERLAND INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (16.08)% (16.89)% (14.39)% 4.20% 4.53% 5.89% 4.31% 3.81% 5.97% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (16.08)% (16.89)% (14.39)% 22.84% 24.83% 33.10% 26.03% 22.63% 37.35% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 20, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI SWITZERLAND INDEX FUND Consumer Discretionary 5.13% Consumer Staples 11.82% Financials 29.21% Health Care 32.36% Industrials 7.35% Information Technology 0.79% Materials 11.07% Telecommunication Services 2.27% PERFORMANCE REVIEW The total return of the iShares MSCI Switzerland Index Fund (the "Switzerland Fund") was -16.08% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -14.39% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Switzerland Fund underperformed the benchmark by 1.69 percentage points over the reporting period, due to the negative impact of expenses, revenue differential and portfolio sampling, which subtracted 0.84, 0.59 and 0.45 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of effect of uninvested assets, which added 0.19 percentage points to the Fund's returns. 40 iSHARES, INC. -------------------------------------------------------------------------------- SWITZERLAND (CONTINUED) KEY MARKET CONDITIONS The defensive qualities of Switzerland's equity market served it well over the year ended August 31, 2001 as the Swiss stock market's decline was less severe than in many other countries. As it became more apparent that economic growth in many countries around the world was declining, investors rotated into defensive areas such as insurance, banking, consumer staples, health and personal care stocks. These sectors, which account for a large part of the Swiss stock market, were among the better-performing areas in Europe during the reporting period. A number of large Swiss companies also reported better-than-expected earnings, which helped to drive up their stocks. Shares of pharmaceutical maker Novartis, for example, rose over the spring after it outperformed analysts' forecasts. The company -- Switzerland's largest -- said that strong demand for its osteoporosis, asthma and hypertension drugs boosted itS first-half 2001 profits by 10%. Switzerland's other large multinational, Nestle, also beat expectations over the first half of 2001, citing strong sales in the emerging markets. Despite evidence that these and other Swiss companies have been faring comparatively well, Switzerland was not immune to downturns in other sectors and markets. In August 2001, for example, United Bank of Switzerland (UBS) reported that its profits had dropped 26% from those in the second quarter. The company, Switzerland's biggest bank, said that losses in its private equity business were largely responsible for the disappointing results. Thus, while the defensive characteristics of many Swiss companies helped to support their equities over the reporting period, those with indirect exposure to declining global capital and consumer markets did not perform as well. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI SWITZERLAND INDEX FUND VS. THE MSCI SWITZERLAND INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Switzerland Index Fund MSCI Switzerland Index 3/12/96 $10,000 $10,000 8/31/96 $10,260 $10,319 2/28/97 $10,210 $10,347 8/31/97 $11,972 $11,998 2/28/98 $15,124 $16,271 8/31/98 $14,515 $15,609 2/28/99 $15,019 $16,706 8/31/98 $14,727 $15,974 2/29/00 $13,569 $14,310 8/31/00 $15,016 $16,045 2/28/01 $14,987 $15,910 6/20/01** $12,988 $13,993 8/31/01 $12,603 $13,735 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 20, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 20, 2001 and the new Provisional Index thereafter. 41 PERFORMANCE REVIEW -------------------------------------------------------------------------------- TAIWAN iSHARES MSCI TAIWAN INDEX FUND PERFORMANCE AS OF 8/31/01 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ---------------------------------- --------------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* -------- -------- ------- -------- -------- -------- (45.09)% (47.44)% (44.46)% (45.51)% (46.02)% (45.08)% -------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION ---------------------------------- --------------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* -------- -------- ------- -------- -------- -------- (45.09)% (47.44)% (44.46)% (45.51)% (51.96)% (51.20)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 22, 2001 and the new MSCI Provisional Index thereafter. Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI TAIWAN INDEX FUND Consumer Discretionary 5.32% Consumer Staples 1.65% Financials 16.09% Industrials 5.66% Information Technology 62.02% Materials 9.26% PERFORMANCE REVIEW The total return of the iShares MSCI Taiwan Index Fund (the "Taiwan Fund") was -45.09% for the one-year period ended August 31, 2001. The corresponding MSCI Index returned -44.46% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Taiwan Fund underperformed the benchmark by 0.63 percentage points over the reporting period, due to the negative impact of expenses, revenue differential and portfolio sampling, which subtracted 0.99, 0.16 and 0.13 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of effect of uninvested assets, which added 0.65 percentage points to the Fund's returns. 42 iSHARES, INC. -------------------------------------------------------------------------------- TAIWAN (CONTINUED) KEY MARKET CONDITIONS Taiwan's equity market was among the weakest in the world over the year ended August 31, 2001. The cyclical downturn in demand for electronic components and instruments, especially semiconductors, was largely to blame; stocks in this sector comprise a large proportion of the MSCI Taiwan Index. To the detriment of firms such as United Microelectronics Company and Taiwan Semiconductor Manufacturing Company, demand for semiconductors declined sharply on two important fronts: The market for personal computers declined at the same time as demand for next-generation wireless telephones proved to be much weaker than expected. Companies that produce chips for these applications were thus deeply out of favor with most investors. The impact of the semiconductor slump was felt far and wide in Taiwan's economy and its equity market, but there were a few pockets of better performance. Taiwan's financial sector, for example, gained some momentum from declining interest rates both at home and abroad. The U.S. Federal Reserve Board moved aggressively to cut interest rates in 2001. Taiwan's central bank also loosened its monetary policy, a move that helped to bolster financial shares. In addition, sentiment toward Taiwan's semiconductor industry improved, albeit sporadically, over the second and third quarters of 2001. Some investors and economists reasoned that much of the bad news was already priced into Taiwan's semiconductor stocks, and argued that these issues were now undervalued ahead of an anticipated recovery. As the reporting period ended, however, it remained unclear just when such a recovery might materialize. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI TAIWAN INDEX FUND VS. THE MSCI TAIWAN INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI Taiwan Index Fund MSCI Taiwan Index 6/21/00 $10,000 $10,000 6/30/00 $ 9,638 $ 9,604 8/31/00 $ 8,790 $ 8,785 12/31/00** $ 5,469 $ 5,441 2/28/01 $ 6,540 $ 6,523 6/22/01*** $ 5,351 $ 5,354 8/31/01 $ 4,826 $ 4,880 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** The Index changed from being based on the reinvestment of gross dividends to being based on the reinvestment of net dividends, effective December 31, 2000. *** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 22, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 22, 2001 and the new Provisional Index thereafter. 43 PERFORMANCE REVIEW -------------------------------------------------------------------------------- UNITED KINGDOM iSHARES MSCI UNITED KINGDOM INDEX FUND PERFORMANCE AS OF 8/31/01
------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (16.20)% (16.21)% (15.37)% 7.06% 7.30% 7.67% 8.36% 8.10% 9.00% ------------------------------------------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURNS ------------------------------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION --------------------------------- ---------------------------------- ----------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ------- ------- ------ ------- ------- ------ ------- ------- ------ (16.20)% (16.21)% (15.37)% 40.63% 42.23% 44.70% 55.26% 53.02% 60.30% ------------------------------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to June 20, 2001 and the new MSCI Provisional Index thereafter.
Total returns represent the iShares Fund's change in value during the periods noted above. A Fund's "net asset value" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate "market" returns is the price of the last reported trade for shares of each Fund on any national securities exchange or other major U.S. market. Market price and NAV may be calculated at different times, and this timing difference is one of the reasons that NAV and market returns may differ. Also, market price returns do not include brokers' commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at net asset value. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. An Index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the management, administration, distribution, transaction or other expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance is no guarantee of future results. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC SECTOR BREAKOUT --------------- iSHARES MSCI UNITED KINGDOM INDEX FUND Consumer Discretionary 10.13% Consumer Staples 9.21% Energy 14.89% Financials 25.88% Health Care 13.93% Industrials 5.94% Information Technology 1.27% Materials 3.50% Telecommunication Services 10.93% Utilities 4.32% PERFORMANCE REVIEW The total return of the iShares MSCI United Kingdom Index Fund (the "U.K. Fund") was -16.20% over the one-year period ended August 31, 2001. The corresponding MSCI Index returned -15.37% over the same period. SIGNIFICANT PERFORMANCE FACTORS The United Kingdom Fund underperformed the benchmark during the reporting period by 0.83 percentage points, due to the negative impact of expenses and portfolio sampling, which subtracted 0.84 and 0.26 percentage points, respectively, from the Fund's returns. These factors were partially offset by the positive impact of effect of uninvested assets and revenue differential, which added 0.25 and 0.02 percentage points, respectively, to the Fund's returns. 44 iSHARES, INC. -------------------------------------------------------------------------------- UNITED KINGDOM (CONTINUED) KEY MARKET CONDITIONS A number of factors combined to drive the U.K. equity market lower over the year ended August 31, 2001. Chief among these was the global economic slowdown. Concerns that U.S. consumer spending in particular would slow led investors to tread cautiously. As it turned out, consumer spending in both the U.S. and the U.K. remained surprisingly robust, though investors continued to worry that a serious decline was just around the corner. So, apparently, did the Bank of England. Initially more restrained than the U.S. Federal Reserve Board in lowering interest rates earlier in 2001, the Bank eventually ended up cutting rates four times through late August. The move came despite a mixed economic picture as the U.K. manufacturing sector tipped into recession over the summer of 2001. In addition, many companies announced job cuts even as the country's unemployment rate fell to a 26-year low in July. Perhaps for that reason, U.K. consumers continued to spend, and investors saw some cause for optimism in that news. Overall, however, caution was the watchword. Given the lack of certainty regarding the economy and corporate profits, investors tended to favor U.K. stocks in sectors that are traditionally regarded as defensive, such as banks. These stocks also rose as interest rates declined. At the other end of the spectrum were technology- and telecommunications-related companies, which continued to grapple with a cyclical downturn. The U.K.'s technology sector was hit particularly hard after telecom-equipment maker Marconi issued a profit warning in early July. The company then took the unusual -- and, to many investors, alarming -- step of suspending trading in its shares. When it resumed, Marconi's shares dropped as much as 54% and sent ripples that drove down numerous other U.K. stocks. The technology sector regained some ground in August, as investors bought up depressed shares. Overall, however, an air of pessimism continued to cloud the market. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE iSHARES MSCI UNITED KINGDOM INDEX FUND VS. THE MSCI UNITED KINGDOM INDEX* [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC iShares MSCI United Kingdom Index Fund MSCI United Kingdom Index 3/12/96 $10,000 $10,000 8/31/96 $11,040 $11,078 2/28/97 $12,767 $12,996 8/31/97 $14,405 $14,601 2/28/98 $17,432 $17,851 8/31/98 $16,564 $16,742 2/28/99 $18,581 $18,971 8/31/99 $19,102 $19,461 2/29/00 $18,007 $18,552 8/31/00 $18,528 $18,941 2/28/01 $16,727 $17,134 6/20/01** $15,737 $16,238 8/31/01 $15,526 $16,030 ------------------------ Past performance is not predictive of future performance ------------------------ ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Fund at NAV and reflects all expenses of the Fund. Investors should note that the Fund is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. ** On May 31, 2001, and prior to its complete implementation, MSCI began calculating a provisional index series. The Fund restructured its portfolio to benchmark its relevant provisional index on June 20, 2001. The index performance shown in the graph reflects the former index (Standard Index) up to June 20, 2001 and the new Provisional Index thereafter. 45 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI AUSTRALIA INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% BANKS 29.43% 334,366 Australia and New Zealand Banking Group Limited $ 2,970,554 294,469 Commonwealth Bank of Australia 4,545,422 362,483 National Australia Bank Limited 6,330,113 409,324 Westpac Banking Corporation Limited 2,994,023 ----------- 16,840,112 ----------- BEVERAGES 4.15% 33,914 BRL Hardy Limited 193,551 103,881 Coca-Cola Amatil Limited 289,326 471,665 Foster's Group Limited 1,282,655 145,235 Southcorp Limited 611,149 ----------- 2,376,681 ----------- CHEMICALS 0.28% 64,945 Orica Limited 159,327 ----------- COMMERCIAL SERVICES & SUPPLIES 2.44% 226,393 Brambles Industries Limited++ 1,176,537 90,458 Computershare Limited 217,921 ----------- 1,394,458 ----------- CONTAINERS & PACKAGING 0.89% 149,358 Amcor Limited++ 507,513 ----------- CONSTRUCTION & ENGINEERING 0.33% 35,464 Leighton Holdings Limited 186,354 ----------- CONSTRUCTION MATERIALS 2.24% 138,229 Boral Limited 252,298 225,463 CSR Limited 764,928 94,147 James Hardie Industries Limited 262,463 ----------- 1,279,689 ----------- DIVERSIFIED FINANCIALS 2.82% 23,405 Australian Stock Exchange Limited 156,596 41,602 Macquarie Bank Limited 847,253 87,544 Suncorp-Metway Limited++ 611,335 ----------- 1,615,184 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.29% 517,545 Telstra Corporation Limited 1,309,420 ----------- ELECTRIC UTILITIES 0.11% 19,251 Energy Developments Limited 65,809 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.08% 152,334 ERG Limited 43,269 ----------- FOOD & DRUG RETAILING 4.30% 276,613 Coles Myer Limited 1,027,219 253,704 Woolworths Limited 1,431,500 ----------- 2,458,719 ----------- FOOD PRODUCTS 0.51% 140,337 Futuris Corporation Limited 138,777 233,554 Goodman Fielder Limited 152,333 ----------- 291,110 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- GAS UTILITIES 0.64% 84,165 Australian Gas Light Company Limited $ 369,218 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.51% 12,276 Cochlear Limited 292,710 ----------- HEALTH CARE PROVIDERS & SERVICES 0.83% 94,054 Mayne Nickless Limited++ 309,400 38,781 Sonic Healthcare Limited 166,577 ----------- 475,977 ----------- HOTELS RESTAURANTS & LEISURE 1.01% 63,798 Aristocrat Leisure Limited++ 241,951 121,799 TAB Limited 165,291 36,270 TABCORP Holdings Limited 171,454 ----------- 578,696 ----------- INDUSTRIAL CONGLOMERATES 2.37% 180,482 Pacific Dunlop Limited 66,454 85,064 Wesfarmers Limited++ 1,292,958 ----------- 1,359,412 ----------- INSURANCE 6.68% 261,640 AMP Limited 2,707,588 330,832 NRMA Insurance Group Limited 569,038 96,627 QBE Insurance Group Limited++ 543,836 ----------- 3,820,462 ----------- MEDIA 10.46% 118,265 John Fairfax Holdings Limited 240,121 346,270 The News Corporation Limited 2,764,855 417,694 The News Corporation Limited - Preferred Ordinary 2,823,455 31,868 Publishing & Broadcasting Limited 157,568 ----------- 5,985,999 ----------- METALS & MINING 13.27% 877,703 BHP Billiton Limited 4,302,781 44,919 Iluka Resources Limited 95,218 423,026 M.I.M. Holdings Limited 238,088 58,993 Newcrest Mining Limited 129,831 434,496 Normandy Mining Limited 237,687 111,228 OneSteel Limited 60,027 73,563 Rio Tinto Limited 1,303,606 21,917 Sons of Gwalia Limited 84,964 259,749 WMC Limited 1,139,067 ----------- 7,591,269 ----------- MULTILINE RETAIL 0.69% 95,883 David Jones Limited 55,982 156,333 Harvey Norman Holdings Limited 337,477 ----------- 393,459 ----------- OIL & GAS 2.67% 142,445 Origin Energy Limited 239,763 146,010 Santos Limited 491,067 110,391 Woodside Petroleum Limited 797,822 ----------- 1,528,652 ----------- PAPER & FOREST PRODUCTS 0.31% 78,244 PaperlinX Limited 175,614 ----------- See accompanying notes to financial statements. 46 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI AUSTRALIA INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) PHARMACEUTICALS 2.08% 37,386 CSL Limited $ 905,831 37,851 FH Faulding & Company Limited 284,309 ----------- 1,190,140 ----------- REAL ESTATE 7.55% 81,468 AMP Diversified Property Trust 109,702 228,005 BT Office Trust 188,291 103,199 Colonial First State Property Trust Group 116,165 269,452 Deutsche Office Trust 197,007 229,400 Gandel Retail Trust 139,971 425,568 General Property Trust 615,584 101,556 Lend Lease Corporation Limited 566,236 143,003 Mirvac Group 300,126 169,198 Stockland Trust Group 388,032 106,175 Westfield Holdings Limited 948,635 437,813 Westfield Trust 750,744 ----------- 4,320,493 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- TRANSPORTATION INFRASTRUCTURE 1.06% 214,861 Macquarie Infrastructure Group $ 369,339 105,648 Transurban Group* 238,955 ----------- 608,294 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $56,239,965) 57,218,040 ----------- TOTAL INVESTMENTS (COST $56,239,965)+ 100.00% $57,218,040 ======= =========== -------------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $57,733,163. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,435,534 Excess of tax cost over value (4,950,657) ----------- $ (515,123) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 47 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI AUSTRIA INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIRLINES 2.17% 23,618 Austrian Airlines $ 248,873 ----------- BANKS 13.64% 29,400 Erste Bank der oesterreichischen Sparkassen 1,561,551 ----------- BEVERAGES 2.43% 6,860 BBAG Oesterreichische Brau-Beteiligungs 278,864 ----------- BUILDING PRODUCTS 4.60% 32,004 Wienerberger 527,082 ----------- CHEMICALS 1.05% 1,694 Lenzing 120,013 ----------- COMMERCIAL SERVICES & SUPPLIES 3.07% 12,334 BWT 351,251 ----------- CONSTRUCTION MATERIALS 4.83% 29,288 RHI++ 553,387 ----------- CONTAINERS & PACKAGING 4.95% 11,522 Mayr-Melnhof Karton 566,764 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 9.32% 162,904 Telekom Austria AG*++ 1,066,947 ----------- ELECTRIC UTILITIES 4.87% 6,258 Oesterreichische Elektrizitaetswirtschafts - Class A 558,299 ----------- INSURANCE 3.04% 2,366 Generali Holding Vienna 348,181 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- MACHINERY 4.89% 18,844 VA Technologie $ 559,753 ----------- METALS & MINING 9.83% 13,188 Boehler-Uddeholm 578,272 18,256 Voest-Alpine 547,262 ----------- 1,125,534 ----------- OIL & GAS 16.26% 19,152 OMV 1,861,546 ----------- TOBACCO 10.17% 15,162 Austria Tabakwerke 1,164,517 ----------- TRANSPORTATION INFRASTRUCTURE 4.88% 16,772 Flughafen Wien 558,691 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $11,306,584) 11,451,253 ----------- TOTAL INVESTMENTS (COST $11,306,584)+ 100.00% $11,451,253 ======= =========== ----------------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $11,531,814. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 923,320 Excess of tax cost over value (1,003,881) ----------- $ (80,561) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 48 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI BELGIUM INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% BANKS 21.62% 107,016 Dexia $ 1,699,284 11,886 KBC Bankverzekeingsholding 438,583 ----------- 2,137,867 ----------- BEVERAGES 4.55% 18,102 Interbrew 449,902 ----------- BUILDING PRODUCTS 0.94% 1,155 Glaverbel 93,169 ----------- CHEMICALS 4.67% 8,064 Solvay 461,495 ----------- DISTRIBUTORS 1.46% 819 D'Ieteren 144,257 ----------- DIVERSIFIED FINANCIALS 30.51% 7,287 Algmene Maatschappij voor Nijverheidskredit NV 291,919 81,522 Fortis B 2,270,507 8,127 Groupe Bruxelles Lambert++ 454,026 ----------- 3,016,452 ----------- ELECTRIC UTILITIES 9.58% 4,200 Electrabel 946,950 ----------- ELECTRICAL EQUIPMENT 1.55% 4,200 Bekaert NV 153,755 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 1.04% 2,625 Barco NV 102,821 ----------- FOOD & DRUG RETAILING 8.18% 8,106 Colruyt NV 339,235 8,085 Delhaize Le Lion 469,307 ----------- 808,542 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- HEALTH CARE EQUIPMENT & SUPPLIES 2.06% 4,326 Omega Pharma SA $ 204,149 ---------- INSURANCE 1.66% 5,649 Gevaert NV 164,209 ---------- LEISURE EQUIPMENT & PRODUCTS 2.47% 17,892 Agfa Gevaert NV 243,796 ---------- MARINE 0.89% 1,680 Compagnie Maritime Belge 88,514 ---------- METALS & MINING 3.99% 9,429 Umicore++ 394,260 ---------- PHARMACEUTICALS 4.83% 11,256 UCB 477,504 ---------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $10,969,717) 9,887,642 ---------- TOTAL INVESTMENTS (COST $10,969,717)+ 100.00% $9,887,642 ======= ========== ---------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $11,247,024. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 194,599 Excess of tax cost over value (1,553,981) ----------- $(1,359,382) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 49 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI BRAZIL (FREE) INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AEROSPACE & DEFENSE 3.20% 67,500 Empresa Brasileira de Aeronautica $ 441,886 ----------- BANKS 16.82% 147,400,000 Banco Bradesco Pfd 664,484 16,675,000 Banco Itau Pfd 1,147,509 13,000,000 Unibanco - Uniao de Bancos Brasileiros 514,700 ----------- 2,326,693 ----------- BEVERAGES 9.08% 6,650,000 Companhia de Bebidas das Americas Pfd 1,256,488 ----------- BUILDING PRODUCTS 0.30% 2,475,000 Duratex Pfd 41,234 ----------- CHEMICALS 0.37% 300,000 Copene Petroquimica do Nordeste Pfd A 51,509 ----------- DIVERSIFIED TELECOMMUNICATIONS SERVICES 13.05% 18,950,000 Brasil Telecom Participacoes 101,770 67,200,000 Brasil Telecom Participacoes Pfd 392,505 21,275,000 Embratel Participacoes 97,576 69,250,000 Embratel Participacoes Pfd 293,179 16,650,000 Tele Norte Leste Participacoes 169,698 68,925,000 Tele Norte Leste Participacoes Pfd 751,123 ----------- 1,805,851 ----------- ELECTRIC UTILITIES 9.94% 30,975,000 Centrais Electricas Brasileiras 443,194 18,125,000 Centrais Electricas Brasileiras Pfd B Shares 227,362 46,950,000 Centrais Geradoras do Sul do Brasil 71,594 31,250,000 Cia. Paranaense de Energia-Copel 224,789 29,725,000 Companhia Energetica de Minas Gerais Pfd* 322,652 3,150,000 Electropaulo Metro Politana 85,338 ----------- 1,374,929 ----------- FOOD & DRUG RETAILING 1.52% 10,800,000 Companhia Brasileira de Distribuicao Grupo Pao de Acucar Pfd 209,565 ----------- FOOD PRODUCTS 0.48% 150,000 Sadia 66,445 ----------- HOUSEHOLD PRODUCTS 0.19% 7,325,000 Bombril Cirio Pfd 26,417 ----------- MEDIA 0.62% 250,000 Globo Cabo Pfd* 85,261 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- METALS & MINING 7.34% 9,775,000 Companhia Siderurgica Nacional $ 136,413 32,500 Companhia Vale do Rio Doce Pfd A 653,567 20,225,000 Gerdau SA 130,816 42,500 Usinas Siderurgicas de Minas Gerais Pfd A 94,963 ----------- 1,015,759 ----------- OIL & GAS 26.30% 13,500,000 Companhia Brasileira de Petroleo Ipiranga Pfd 71,443 62,500 Petroleo Brasileiro 1,411,211 100,000 Petroleo Brasileiro Pfd 2,156,017 ----------- 3,638,671 ----------- PAPER & FOREST PRODUCTS 2.69% 150,000 Aracruz Celulose Pfd B 259,898 3,850,000 Votorantim Celulose e Papel Pfd 112,436 ----------- 372,334 ----------- TEXTILES & APPAREL 0.61% 1,475,000 Companhia de Tecidos Norte de Minas 83,840 ----------- TOBACCO 1.13% 35,000 Souza Cruz 156,135 ----------- WIRELESS TELECOMMUNICATIONS SERVICES 6.36% 74,200,000 Tele Celular Sul Participacoes Pfd 95,695 82,500,000 Tele Centro Oeste Celular Participacoes Pfd 168,169 73,325,000 Tele Nordeste Celular Participacoes Pfd 84,506 71,125,000 Telemig Celular Participacoes SA Pfd 96,748 84,725,000 Telesp Celular Participacoes Pfd 435,083 ----------- 880,201 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $20,935,462) 13,833,218 ----------- TOTAL INVESTMENTS (COST $20,935,462)+ 100.00% $13,833,218 ======= =========== ---------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $21,345,052. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 6,331 Excess of tax cost over value (7,518,165) ----------- $(7,511,834) =========== See accompanying notes to financial statements. 50 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI CANADA INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AEROSPACE & DEFENSE 4.41% 86,994 Bombardier Incorporated - Class B $ 1,122,431 18,387 CAE Incorporated 150,052 ----------- 1,272,483 ----------- AUTO COMPONENTS 1.40% 6,561 Magna International Incorporated - Class A 402,311 ----------- BANKS 20.14% 44,469 Bank of Montreal 1,191,979 42,471 Bank of Nova Scotia 1,321,996 31,941 Canadian Imperial Bank of Commerce 1,131,463 16,173 National Bank of Canada 307,789 57,996 Royal Bank of Canada 1,856,126 ----------- 5,809,353 ----------- BEVERAGES 0.45% 4,050 Molson Incorporated - Class A 130,506 ----------- BIOTECHNOLOGY 0.39% 5,751 QLT Incorporated* 111,970 ----------- BUILDING PRODUCTS 0.32% 5,427 Royal Group Technologies Limited* 92,778 ----------- CHEMICALS 1.82% 9,828 Agrium Incorporated 104,614 7,236 NOVA Chemicals Corporation 141,630 4,428 Potash Corporation of Saskatchewan Incorporated 279,517 ----------- 525,761 ----------- COMMUNICATIONS EQUIPMENT 5.82% 269,784 Nortel Networks Corporation 1,679,515 ----------- COMPUTERS & PERIPHERALS 0.62% 19,521 ATI Technologies Incorporated* 178,826 ----------- DIVERSIFIED FINANCIALS 3.53% 12,987 Brascan Corporation - Class A 236,683 12,501 C. I. Fund Management Incorporated 98,227 8,964 Investors Group Incorporated 133,006 13,392 Power Corporation of Canada 317,068 10,368 Power Financial Corporation 232,429 ----------- 1,017,413 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.65% 3,780 Aliant Incorporated 80,106 22,410 BCE Incorporated 553,708 9,396 TELUS Corporation 131,232 ----------- 765,046 ----------- ELECTRIC UTILITIES 0.80% 14,364 TransAlta Corporation++ 229,346 ----------- ELECTRICAL EQUIPMENT 0.91% 5,346 Ballard Power Systems Incorporated* 100,360 6,993 C-MAC Industries Incorporated* 163,084 ----------- 263,444 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- ELECTRONIC EQUIPMENT & INSTRUMENTS 2.39% 15,066 Celestica Incorporated* $ 548,950 11,097 Onex Corporation 141,102 ----------- 690,052 ----------- ENERGY EQUIPMENT & SERVICES 0.38% 4,509 Precision Drilling Corporation* 110,536 ----------- FOOD & DRUG RETAILING 2.11% 4,482 George Weston Limited 291,022 9,423 Loblaw Companies Limited 318,538 ----------- 609,560 ----------- GAS UTILITIES 3.81% 13,149 Enbridge Incorporated 345,839 40,284 TransCanada PipeLines Limited 507,026 10,422 Westcoast Energy Incorporated 247,086 ----------- 1,099,951 ----------- HEALTH CARE PROVIDERS & SERVICES 0.46% 10,773 MDS Incorporated - Class B 132,048 ----------- HOTEL RESTAURANT & LEISURE 0.59% 1,971 Four Seasons Hotels Incorporated 99,408 3,726 Intrawest Corporation 70,140 ----------- 169,548 ----------- INSURANCE 10.23% 13,689 Canada Life Financial Corporation 402,696 11,448 Clarica Life Insurance Company 351,320 1,053 Fairfax Financial Holdings Limited* 157,261 40,932 Manulife Financial Corporation 1,204,115 35,883 Sun Life Financial Services of Canada 835,904 ----------- 2,951,296 ----------- INTERNET SOFTWARE & SERVICES 0.22% 2,781 BCE Emergis Incorporated* 62,075 ----------- IT CONSULTING & SERVICES 0.28% 14,769 CGI Group Incorporated* 80,986 ----------- MEDIA 4.22% 3,456 Quebecor Incorporated - Class B 50,165 7,668 Quebecor World Incorporated 198,860 11,664 Rogers Communications Incorporated - Class B 161,781 15,174 Shaw Communications Incorporated - Class B 308,453 15,984 Thomson Corporation 496,503 ----------- 1,215,762 ----------- METALS & MINING 9.42% 24,462 Alcan Incorporated 890,833 33,615 Barrick Gold Corporation++ 538,890 4,725 Cameco Corporation 108,516 6,399 Dofasco Incorporated 104,029 6,777 Falconbridge Limited 72,138 13,527 Franco-Nevada Mining Corporation Limited 176,101 15,498 Inco Limited* 258,150 13,203 Noranda Incorporated 138,410 27,918 Placer Dome Incorporated 309,239 15,147 Teck Cominco Limited - Class B 119,214 ----------- 2,715,520 ----------- See accompanying notes to financial statements. 51 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI CANADA INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) MULTILINE RETAIL 0.62% 6,399 Canadian Tire Corporation - Class A $ 109,395 5,994 Hudson's Bay Company 68,714 ----------- 178,109 ----------- OIL & GAS 11.91% 12,798 Alberta Energy Company Limited 431,389 11,151 Anderson Exploration Limited 189,914 5,076 Canadian Hunter Exploration Limited* 97,420 9,909 Canadian Natural Resources Limited 270,402 10,638 Husky Energy Incorporated 109,461 11,880 Imperial Oil Limited 319,207 10,260 Nexen Incorporated 258,800 4,212 Penn West Petroleum Limited* 88,310 18,765 Petro-Canada++ 472,000 6,372 Rio Alto Exploration Limited* 77,692 5,859 Shell Canada Limited 155,008 18,927 Suncor Energy Incorporated 523,939 11,529 Talisman Energy Incorporated 442,164 ----------- 3,435,706 ----------- PAPER & FOREST PRODUCTS 1.32% 33,777 Abitibi-Consolidated Incorporated 266,058 12,312 Domtar Incorporated 114,455 ----------- 380,513 ----------- PHARMACEUTICALS 1.33% 8,343 Biovail Corporation* 384,238 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- REAL ESTATE 1.17% 6,480 Brookfield Properties Corporation $ 128,170 11,394 TrizecHahn Corporation 210,224 ----------- 338,394 ----------- ROAD & RAIL 5.83% 16,308 Canadian National Railway Company 708,984 26,865 Canadian Pacific Limited 973,144 ----------- 1,682,128 ----------- SOFTWARE 0.45% 7,263 Cognos Incorporated* 103,784 4,590 Descartes Systems Group Incorporated* 26,946 ----------- 130,730 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $33,670,333) 28,845,904 ----------- TOTAL INVESTMENTS (COST $33,670,333)+ 100.00% $28,845,904 ======= =========== ---------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $34,371,353. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,034,860 Excess of tax cost over value (7,560,309) ----------- $(5,525,449) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 52 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI EMU INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AUSTRIA 0.43% BANKS 0.07% 1,248 Erste Bank der oesterreichischen Sparkassen $ 66,286 ----------- BEVERAGES 0.01% 320 BBAG Oesterreichische Brau-Beteiligungs 13,008 ----------- BUILDING PRODUCTS 0.00% 96 Wienerberger 1,581 ----------- CHEMICALS 0.01% 128 Lenzing 9,068 ----------- COMMERCIAL SERVICES & SUPPLIES 0.02% 576 BWT 16,403 ----------- CONSTRUCTION MATERIALS 0.02% 704 RHI 13,302 ----------- CONTAINERS & PACKAGING 0.02% 416 Mayr-Melnhof Karton 20,463 ----------- ELECTRIC UTILITIES 0.04% 448 Oesterreichische Elektrizitaetswirtschafts - Class A 39,968 ----------- MACHINERY 0.02% 512 VA Technologie 15,209 ----------- METALS & MINING 0.05% 384 Boehler-Uddeholm 16,838 928 Voest Alpine 27,819 ----------- 44,657 ----------- OIL & GAS 0.09% 800 OMV 77,759 ----------- TOBACCO 0.06% 768 Austria Tabakwerke 58,986 ----------- TRANSPORTATION INFRASTRUCTURE 0.02% 448 Flughafen Wien 14,923 ----------- TOTAL AUSTRIA (Cost $359,606) 391,613 ----------- BELGIUM 2.57% BANKS 0.62% 26,432 Dexia 419,708 3,744 KBC Bankverzekeingsholding 138,150 ----------- 557,858 ----------- BEVERAGES 0.17% 6,080 Interbrew 151,111 ----------- BUILDING PRODUCTS 0.02% 256 Glaverbel 20,650 ----------- CHEMICALS 0.09% 1,376 Solvay 78,747 ----------- DISTRIBUTORS 0.04% 192 D'Ieteren 33,819 ----------- DIVERSIFIED FINANCIALS 0.84% 20,992 Fortis B 584,658 3,136 Groupe Bruxelles Lambert 175,197 ----------- 759,855 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- BELGIUM (continued) ELECTRIC UTILITIES 0.31% 1,248 Electrabel $ 281,379 ----------- ELECTRICAL EQUIPMENT 0.03% 768 Bekaert NV 28,115 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.02% 416 Barco NV 16,295 ----------- FOOD & DRUG RETAILING 0.17% 1,120 Colruyt NV 46,872 1,792 Delhaize Le Lion 104,019 ----------- 150,891 ----------- LEISURE EQUIPMENT & PRODUCTS 0.04% 3,104 Agfa Gevaert NV 42,295 ----------- MARINE 0.02% 320 Compagnie Maritime Belge 16,860 ----------- METALS & MINING 0.04% 896 Umicore 37,465 ----------- PHARMACEUTICALS 0.16% 3,488 UCB 147,968 ----------- TOTAL BELGIUM (Cost $2,223,606) 2,323,308 ----------- FINLAND 4.72% BEVERAGES 0.06% 2,688 Hartwall Oyj ABP 51,277 ----------- BUILDING PRODUCTS 0.06% 3,200 Uponor Oyj 51,161 ----------- CHEMICALS 0.03% 3,200 Kemira Oyj 25,086 ----------- COMMUNICATIONS EQUIPMENT 3.49% 201,600 Nokia Oyj 3,155,380 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.07% 16,000 Sonera Oyj 64,678 ----------- FOOD & DRUG RETAILING 0.03% 3,200 Kesko Oyj - B Shares 26,889 ----------- FOOD PRODUCTS 0.01% 6,400 Raisio Group PLC 6,570 ----------- INSURANCE 0.09% 9,600 Sampo Oyj - A Shares 82,410 ----------- IT CONSULTING & SERVICES 0.07% 3,200 TietoEnator Oyj 67,003 ----------- MACHINERY 0.03% 3,200 Metso Oyj 28,952 ----------- METALS & MINING 0.06% 3,200 Outokumpu Oyj 28,051 6,400 Rautaruukki Oyj 24,127 ----------- 52,178 ----------- PAPER & FOREST PRODUCTS 0.72% 28,800 Stora Enso Oyj 336,180 9,600 UPM-Kymmene Oyj 315,250 ----------- 651,430 ----------- TOTAL FINLAND (Cost $8,096,079) 4,263,014 ----------- See accompanying notes to financial statements. 53 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) FRANCE 28.72% AEROSPACE & DEFENSE 0.38% 12,000 European Aeronautic Defence and Space Company $ 205,152 2,528 Thales 93,533 192 Zodiac 43,952 ----------- 342,637 ----------- AIRLINES 0.06% 3,488 Air France 57,445 ----------- AUTO COMPONENTS 0.33% 5,312 Compagnie Generale des Etablissements Michelin - Class B 166,235 2,880 Valeo 128,455 ----------- 294,690 ----------- AUTOMOBILES 0.64% 7,680 PSA Peugeot Citroen 365,917 5,056 Renault 208,745 ----------- 574,662 ----------- BANKS 2.52% 16,736 BNP Paribas 1,535,497 12,608 Societe Generale - Class A 742,159 ----------- 2,277,656 ----------- BEVERAGES 0.17% 1,952 Pernod-Ricard 148,859 ----------- BUILDING PRODUCTS 0.52% 3,040 Compagnie de Saint-Gobain 466,698 ----------- CHEMICALS 0.57% 3,648 L'Air Liquide 515,301 ----------- COMMERCIAL SERVICES & SUPPLIES 0.07% 1,664 Societe BIC 66,827 ----------- COMMUNICATIONS EQUIPMENT 0.80% 45,760 Alcatel 707,076 320 Sagem 14,869 ----------- 721,945 ----------- CONSTRUCTION & ENGINEERING 0.16% 2,272 Vinci SA 144,059 ----------- CONSTRUCTION MATERIALS 0.60% 448 Imersys 46,394 5,504 Lafarge 499,232 ----------- 545,626 ----------- DIVERSIFIED FINANCIALS 0.01% 96 Eurazeo 5,581 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.51% 14,464 France Telecom 464,334 ----------- ELECTRICAL EQUIPMENT 0.58% 8,224 Alstom 223,672 5,408 Schneider Electric 299,669 ----------- 523,341 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FRANCE (continued) ENERGY EQUIPMENT & SERVICES 0.17% 416 Coflexip $ 71,422 544 Technip 80,451 ----------- 151,873 ----------- FOOD & DRUG RETAILING 1.37% 20,992 Carrefour 1,116,494 1,536 Casino Guichard-Perrachon 125,647 ----------- 1,242,141 ----------- FOOD PRODUCTS 0.77% 5,152 Groupe Danone 700,605 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.12% 352 Essilor International 105,328 ----------- HOTELS RESTAURANTS & LEISURE 0.62% 7,840 Accor 306,951 608 Club Mediterranee 34,657 4,608 Sodexho Alliance 221,852 ----------- 563,460 ----------- HOUSEHOLD DURABLES 0.13% 4,032 Thomson Multimedia* 114,312 ----------- INSURANCE 1.73% 57,440 Axa 1,567,959 ----------- IT CONSULTING 0.50% 2,528 Altran Technologies 120,792 800 Atos Origin* 63,878 4,192 Cap Gemini 267,322 ----------- 451,992 ----------- MEDIA 2.72% 4,736 Lagardere S.C.A. 221,992 3,200 Publicis 75,869 4,768 Societe Television Francaise 1 138,556 37,024 Vivendi Universal 2,024,676 ----------- 2,461,093 ----------- METALS & MINING 0.26% 2,816 Pechiney - Class A 138,902 8,448 Usinor 94,162 ----------- 233,064 ----------- MULTI-UTILITIES 1.30% 34,400 Suez 1,171,832 ----------- MULTILINE RETAIL 0.42% 2,816 Pinault-Printemps-Redoute 379,102 ----------- OIL & GAS 4.34% 26,560 TotalFinaElf 3,925,468 ----------- PERSONAL PRODUCTS 1.07% 14,304 L'Oreal 969,331 ----------- PHARMACEUTICALS 3.42% 28,384 Aventis 2,075,608 15,456 Sanofi-Synthelabo 1,011,595 ----------- 3,087,203 ----------- REAL ESTATE 0.10% 1,632 Unibail (Union Du Credit-Bail Immobilier) 88,802 ---------- See accompanying notes to financial statements. 54 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) FRANCE (continued) SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.69% 20,544 STMicroelectronics NV $ 625,181 ----------- SOFTWARE 0.14% 2,432 Business Objects* 60,091 1,600 Dassault Systemes 62,672 ----------- 122,763 ----------- SPECIALITY RETAIL 0.19% 3,072 Castorama Dubois Investissement* 171,622 ----------- TEXTILES & APPAREL 0.50% 9,408 LVMH Moet Hennessy Louis Vuitton 456,794 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.24% 6,464 Bouygues 218,375 ----------- TOTAL FRANCE (Cost $29,124,225) 25,957,961 ----------- GERMANY 20.32% AIR FREIGHT & COURIERS 0.21% 12,800 Deutsche Post 189,528 ----------- AIRLINES 0.11% 6,400 Deutsche Lufthansa 99,764 ----------- AUTO COMPONENTS 0.07% 4,800 Continental 63,660 ----------- AUTOMOBILES 2.33% 35,200 DaimlerChrysler 1,533,229 10,880 Volkswagen 480,826 3,200 Volkswagen - Preferred 92,148 ----------- 2,106,203 ----------- BANKS 2.29% 15,200 Bayerische Hypo-und Vereinsbank 633,080 20,800 Deutsche Bank 1,434,105 ----------- 2,067,185 ----------- BIOTECHNOLOGY 0.13% 5,856 QIAGEN* 122,350 ----------- BUILDING PRODUCTS 0.04% 1,600 Buderus 34,664 ----------- CHEMICALS 2.07% 23,232 BASF 949,675 28,800 Bayer 924,821 ----------- 1,874,496 ----------- CONSTRUCTION MATERIALS 0.08% 1,600 Heidelberger Zement 71,945 ----------- DIVERSIFIED FINANCIALS 0.21% 2,176 MLP 139,355 4,096 WCM Beteiligungs-und Grundbesitz* 49,933 ----------- 189,288 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.36% 80,000 Deutsche Telekom 1,231,787 ----------- ELECTRIC UTILITIES 1.54% 25,600 E. On 1,396,461 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- GERMANY (continued) ELECTRONIC EQUIPMENT & INSTRUMENTS 0.12% 2,880 Epcos $ 111,947 ----------- FOOD PRODUCTS 0.02% 3,200 Kamps 20,929 ----------- HEALTH CARE PROVIDERS & SERVICES 0.17% 1,440 Fresenius Medical Care 114,327 640 Fresenius Medical Care - Preferred 36,045 ----------- 150,372 ----------- HOTELS RESTAURANTS & LEISURE 0.22% 6,400 Preussag 202,434 ----------- INDUSTRIAL CONGLOMERATES 2.01% 35,680 Siemans 1,816,995 ----------- INSURANCE 2.94% 6,208 Allianz 1,738,605 3,200 Muenchener Rueckversicherung- Gesellschaft 917,409 ----------- 2,656,014 ----------- MACHINERY 0.32% 1,600 FAG Kugelfischer Georg Schaefer 10,494 4,128 Linde 176,319 3,200 MAN 71,800 1,600 MAN - Preferred 28,051 ----------- 286,664 ----------- MEDIA 0.05% 4,800 EM. TV & Merchandising* 9,462 3,200 ProSiebenSat.1 Media 33,574 ----------- 43,036 ----------- METALS & MINING 0.22% 14,400 ThyssenKrupp 194,906 ----------- MULTI-UTILITIES 0.81% 15,360 RWE 646,023 2,624 RWE - Preferred 83,189 ----------- 729,212 ----------- MULTILINE RETAIL 0.27% 1,600 KarstadtQuelle 54,504 4,800 Metro 191,461 ----------- 245,965 ----------- PERSONAL PRODUCTS 0.25% 1,440 Beiersdorf 174,761 960 Wella 48,399 ----------- 223,160 ----------- PHARMACEUTICALS 0.66% 3,200 Altana 158,134 2,656 Merck KGaA 103,505 6,400 Schering 333,418 ----------- 595,057 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.32% 3,200 Aixtron 66,684 9,600 Infineon Technologies 224,469 ----------- 291,153 ----------- See accompanying notes to financial statements. 55 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) GERMANY (continued) SOFTWARE 1.34% 8,640 SAP $ 1,176,498 640 Software 31,888 ----------- 1,208,386 ----------- SPECIALTY RETAIL 0.04% 1,184 Douglas Holding 34,901 ----------- TEXTILES & APPAREL 0.12% 1,600 Adidas-Salomon 108,368 ----------- TOTAL GERMANY (Cost $21,876,209) 18,366,830 ----------- GREECE 0.98% BANKS 0.52% 80,000 National Bank of Greece ADR 467,200 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.46% 51,200 Hellenic Telecommunications Organization ADR 416,256 ----------- TOTAL GREECE (Cost $888,369) 883,456 ----------- IRELAND 2.77% AIRLINES 0.13% 11,328 Ryanair Holdings Plc* 113,194 ----------- BANKS 0.89% 36,640 Allied Irish Banks Plc 412,718 41,664 Bank of Ireland 395,506 ----------- 808,224 ----------- CONSTRUCTION MATERIALS 0.41% 22,080 CRH Plc 371,062 ----------- CONTAINERS & PACKAGING 0.10% 38,400 Jefferson Smurfit Group Plc 85,462 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.09% 67,744 eircom Plc 82,462 ----------- FOOD PRODUCTS 0.08% 1,472 Greencore Group Plc 3,624 5,472 Kerry Group Plc - A Shares 70,088 ----------- 73,712 ----------- HOTELS RESTAURANTS & LEISURE 0.03% 3,200 Jurys Doyle Hotel Group Plc 27,412 ----------- HOUSEHOLD DURABLES 0.03% 25,600 Waterford Wedgwood Plc 24,418 ----------- INDUSTRIAL CONGLOMERATES 0.03% 3,200 DCC Plc 29,505 ----------- INSURANCE 0.13% 9,600 Irish Life & Permanent Plc 117,728 ----------- MEDIA 0.04% 19,200 Independent News & Media Plc 37,673 ----------- PHARMACEUTICALS 0.77% 13,504 Elan Corporation Plc* 699,219 ----------- REAL ESTATE 0.04% 5,216 Green Property PLC 33,878 ----------- TOTAL IRELAND (Cost $2,544,358) 2,503,949 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- ITALY 11.38% AIRLINES 0.03% 32,000 Alitalia SpA* $ 30,202 ----------- AUTOMOBILES 0.38% 9,600 Fiat SpA 222,463 4,800 Fiat SpA - Pfd 74,474 3,200 Fiat SpA - RNC 44,397 ----------- 341,334 ----------- BANKS 2.61% 64,000 Banc Nazionale del Lavoro 183,831 34,304 Banca di Roma SpA 106,043 40,000 Banca Monte dei Paschi di Siena SpA 124,668 16,000 Banca Popolare di Milano SpA 68,428 153,344 IntesaBci SpA 510,524 32,000 IntesaBci SpA - RNC 68,341 24,000 Mediobanca SpA 292,446 35,968 Sanpaulo IMI SpA 452,067 128,000 UniCredito Italiano SpA 550,445 ----------- 2,356,793 ----------- CONSTRUCTION MATERIALS 0.06% 6,272 Italcementi SpA 51,494 ----------- DIVERSIFIED FINANCIALS 0.43% 11,200 Banca Fideuram SpA 103,979 60,416 Bipop-Carire SpA 170,572 9,600 Mediolanum SpA 108,493 ----------- 383,044 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.30% 97,600 Telecom Italia SpA 809,373 78,400 Telecom Italia SpA - RNC 369,623 ----------- 1,178,996 ----------- ELECTRIC UTILITIES 0.66% 90,240 Enel SpA 597,507 ----------- ELECTRICAL EQUIPMENT 0.07% 32,000 Pirelli SpA 63,050 ----------- FOOD & DRUG RETAILING 0.04% 8,000 La Rinascente SpA 33,778 ----------- FOOD PRODUCTS 0.05% 17,600 Parmalat Finanziaria SpA 49,083 ----------- GAS UTILITIES 0.09% 8,000 Italgas SpA 82,911 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.12% 6,400 Luxottica Group SpA 108,705 ----------- HOTELS RESTAURANTS & LEISURE 0.06% 4,800 Autogrill SpA 52,018 ----------- INSURANCE 1.87% 12,800 Alleanza Assicurazioni SpA 153,483 42,400 Assicurazioni Generali SpA 1,343,825 14,400 Riunione Adriatica di Sicurta SpA 194,042 288 Societa Assicuratrice Industriale SpA - RNC 2,097 ----------- 1,693,447 ----------- INTERNET SOFTWARE & SERVICES 0.04% 5,568 Tiscali SpA* 36,564 ----------- See accompanying notes to financial statements. 56 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) ITALY (continued) MEDIA 0.44% 6,400 Arnoldo Mondadori Editore SpA $ 40,039 3,200 Gruppo Editoriale L'Espresso SpA 10,764 25,600 Mediaset SpA 200,435 192,000 Seat Pagine Gialle SpA* 150,204 ----------- 401,442 ----------- MULTI-UTILITIES 0.05% 6,400 ACEA SpA 45,649 ----------- OIL & GAS 1.77% 120,000 ENI SpA 1,596,635 ----------- TEXTILES & APPAREL 0.15% 4,480 Benetton Group SpA 60,556 6,400 Bulgari SpA 72,550 ----------- 133,106 ----------- TRANSPORTATION INFRASTRUCTURE 0.25% 32,000 Concessioni e Costruzioni Autostrade SpA 223,626 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.91% 160,000 Telecom Italia Mobile SpA 822,354 ----------- TOTAL ITALY (Cost $11,084,932) 10,281,738 ----------- NETHERLANDS 17.70% AIR FREIGHT & COURIERS 0.33% 13,792 TPG 293,796 ----------- AIRLINES 0.02% 896 Koninklijke Luchvaart Maatschappij 13,674 ----------- BANKS 1.16% 56,800 ABN AMRO Holding 1,045,354 ----------- BEVERAGES 0.35% 7,648 Heineken 320,624 ----------- CHEMICALS 0.55% 11,296 Akzo Nobel 499,723 ----------- COMMERCIAL SERVICES & SUPPLIES 0.08% 3,552 Buhrmann 29,524 3,328 Vedior 40,964 ----------- 70,488 ----------- DIVERSIFIED FINANCIALS 2.47% 70,688 ING Groep 2,232,036 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.11% 33,792 Koninklijke KPN 95,773 ----------- FOOD & DRUG RETAILING 0.79% 23,936 Koninklijke Ahold 714,488 ----------- FOOD PRODUCTS 1.82% 5,728 Koniklijke Numico 189,140 23,872 Unilever 1,458,334 ----------- 1,647,474 ----------- HOUSEHOLD DURABLES 1.61% 54,048 Philips Electronics 1,457,201 ----------- INSURANCE 1.28% 38,240 Aegon 1,152,925 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- NETHERLANDS (continued) IT CONSULTING & SERVICES 0.04% 11,712 Getronics $ 33,939 ----------- MACHINERY 0.05% 960 IHC Caland 48,138 ----------- MEDIA 0.92% 26,560 Elsevier 332,712 8,032 VNU 263,759 11,232 Wolters Kluwer - CVA 239,773 ----------- 836,244 ----------- OFFICE ELECTRONICS 0.03% 2,944 Oce 29,551 ----------- OIL & GAS 5.64% 89,952 Royal Dutch Petroleum Company 5,101,289 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.34% 17,376 ASML Holding* 308,741 ----------- SPECIALTY RETAIL 0.04% 3,232 Royal Vendex KBB 34,204 ----------- TRADING COMPANIES & DISTRIBUTORS 0.07% 3,712 Hagemeyer 63,393 ----------- TOTAL NETHERLANDS (Cost $17,935,402) 15,999,055 ----------- PORTUGAL 1.14% BANKS 0.37% 72,032 Banco Comercial Portugues SA* 288,562 4,032 Banco Espirito Santo SA 49,629 ----------- 338,191 ----------- CONSTRUCTION MATERIALS 0.06% 2,976 Cimentos de Portugal SGPS SA 54,041 ----------- DIVERSIFIED FINANCIALS 0.05% 19,616 BPI - SGPS SA 43,657 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.26% 36,256 Portugal Telecom SGPS SA* 231,203 ----------- ELECTRIC UTILITIES 0.23% 79,200 Electricidade de Portugal SA 205,043 ----------- FOOD & DRUG RETAILING 0.02% 3,328 Jeronimo Martins SGPS SA* 23,460 ----------- INDUSTRIAL CONGLOMERATES 0.03% 40,608 Sonae SGPS SA 23,977 ----------- PAPER & FOREST PRODUCTS 0.01% 15,040 Portucel-Empresa Produtora de Pasta e Papel SA 12,296 ----------- TRANSPORTATION INFRASTRUCTURE 0.11% 10,400 Brisa-Auto Estradas de Portugal SA 96,363 ----------- TOTAL PORTUGAL (Cost $1,251,379) 1,028,231 ----------- SPAIN 9.27% BANKS 3.56% 128,064 Banco Bilbao Vizcaya Argentaria SA 1,651,928 171,584 Banco Santander Central Hispano SA 1,563,340 ----------- 3,215,268 ----------- See accompanying notes to financial statements. 57 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI EMU INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) SPAIN (continued) BIOTECHNOLOGY 0.05% 5,664 Zeltia SA* $ 47,799 ----------- COMMERCIAL SERVICES & SUPPLIES 0.11% 10,080 Amadeus Global Travel Distribution SA 77,282 2,080 Prosegur Company de Seguridad SA 24,884 ----------- 102,166 ----------- CONSTRUCTION & ENGINEERING 0.21% 2,208 Actividades de Construccion y Servicios SA 60,533 2,016 Fomento de Construcciones y Contratas SA 45,600 5,984 Groupo Dragados SA 83,712 ----------- 189,845 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.31% 180,160 Telefonica SA* 2,091,534 ----------- ELECTRIC UTILITIES 1.37% 36,736 Endesa SA 609,019 31,296 Iberdrola SA 428,712 10,560 Union Fenosa SA 197,129 ----------- 1,234,860 ----------- FOOD PRODUCTS 0.01% 1,696 Viscofan Industria Navarra de Emvolturas Celulosicas SA 7,503 ----------- GAS UTILITIES 0.12% 5,792 Gas Natural SDG SA 109,280 ----------- HOTELS RESTAURANTS & LEISURE 0.13% 4,448 NH Hoteles* 51,921 5,952 Sol Melia SA 51,364 7,456 TelePizza SA* 12,056 ----------- 115,341 ----------- INSURANCE 0.05% 2,112 Corporacion Mapfre 41,248 ----------- INTERNET SOFTWARE & SERVICES 0.12% 15,648 Terra Networks SA* 110,163 ----------- MEDIA 0.03% 7,040 Telefonica Publicidad e Informacion SA 29,418 ----------- METALS & MINING 0.06% 2,016 Acerinox SA 57,687 ----------- OIL & GAS 0.72% 38,656 Repsol YPF SA 651,383 ----------- PAPER & FOREST PRODUCTS 0.01% 736 Grupo Empresarial Ence SA 10,296 ----------- PHARMACEUTICALS 0.02% 1,216 FAES FARMA SA 14,426 ----------- REAL ESTATE 0.08% 2,880 Inmobiliara Urbis SA* 11,564 1,824 Metrovacesa SA 25,367 4,480 Vallehermoso SA 30,848 ----------- 67,779 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- SPAIN (continued) SPECIALTY RETAIL 0.01% 896 Cortefiel SA $ 6,837 ----------- TOBACCO 0.21% 12,128 Altadis SA 194,451 ----------- TRANSPORTATION INFRASTRUCTURE 0.05% 4,992 Autopistas Concesionaria Espanola SA 48,567 ----------- WATER UTILITIES 0.04% 2,496 Sociedad General de Aguas de Barcelona SA 35,824 ----------- TOTAL SPAIN (Cost $9,521,104) 8,381,675 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $104,905,269) 90,380,830 ----------- COMMON STOCK - NON-BASKET 0.00% GERMANY 0.00% DIVERSIFIED FINANCIALS 0.00% 4 WCM Beteiligungs-und Grundbesitz* 49 ----------- TOTAL GERMANY (Cost $0) 49 ----------- ITALY 0.00% ELECTRIC UTILITIES 0.00% 16 Enel SpA 106 ----------- TOTAL ITALY (Cost $133) 106 ----------- NETHERLANDS 0.00% DIVERSIFIED TELECOMMUNICATION SERVICES 0.00% 11 Koninklijke KPN 31 ----------- TOTAL NETHERLANDS (Cost $0) 31 ----------- PORTUGAL 0.00% BANKS 0.00% 17 Banco Comercial Portugues SA* 68 ----------- TOTAL PORTUGAL (Cost $0) 68 ----------- SPAIN 0.00% PHARMACEUTICALS 0.00% 3 FAES FARMA SA 36 ----------- REAL ESTATE 0.00% 17 Metrovacesa SA 236 ----------- TOTAL SPAIN (Cost $0) 272 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $133) 526 TOTAL INVESTMENTS (COST $104,905,402)+ 100.00% $90,381,356 ======= =========== ----------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $108,771,644. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,860,487 Excess of tax cost over value (20,250,775) ------------ $(18,390,288) ============ See accompanying notes to financial statements. 58 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI FRANCE INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 99.98% AEROSPACE & DEFENSE 1.29% 26,745 European Aeronautic Defence and Space Company $ 457,234 5,595 Thales++ 207,009 390 Zodiac 89,277 ----------- 753,520 ----------- AIRLINES 0.21% 7,380 Air France 121,543 ----------- AUTO COMPONENTS 1.14% 12,345 Compagnie Generale des Etablissements Michelin - Class B 386,328 6,255 Valeo 278,987 ----------- 665,315 ----------- AUTOMOBILES 2.21% 17,370 PSA Peugeot Citroen 827,601 11,235 Renault 463,856 ----------- 1,291,457 ----------- BANKS 8.77% 37,710 BNP Paribas 3,459,822 28,425 Societe Generale - Class A 1,673,213 ----------- 5,133,035 ----------- BEVERAGES 0.56% 4,275 Pernod-Ricard 326,011 ----------- BUILDING PRODUCTS 1.81% 6,885 Compagnie de Saint Gobain 1,056,979 ----------- CHEMICALS 2.07% 8,550 L'Air Liquide 1,207,737 ----------- COMMERCIAL SERVICES & SUPPLIES 0.21% 3,105 Societe BIC 124,698 ----------- COMMUNICATIONS EQUIPMENT 2.83% 103,710 Alcatel++ 1,602,510 1,065 Sagem++ 49,485 ----------- 1,651,995 ----------- CONSTRUCTION & ENGINEERING 0.54% 5,010 Vinci 317,665 ----------- CONSTRUCTION MATERIALS 2.03% 750 Imerys 77,668 12,225 Lafarge 1,108,850 ----------- 1,186,518 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.80% 32,865 France Telecom 1,055,057 ----------- ELECTRICAL EQUIPMENT 2.41% 19,920 Alstom 541,773 15,690 Schneider Electric++ 869,418 ----------- 1,411,191 ----------- ENERGY EQUIPMENT & SERVICES 0.52% 885 Coflexip 151,943 1,020 Technip 150,845 ----------- 302,788 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FOOD & DRUG RETAILING 4.78% 47,100 Carrefour $ 2,505,092 3,570 Casino Guichard - Perrachon++ 292,030 ----------- 2,797,122 ----------- FOOD PRODUCTS 2.78% 11,970 Groupe Danone 1,627,765 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.45% 885 Essilor International 264,815 ----------- HOTELS RESTAURANTS & LEISURE 2.03% 17,925 Accor 701,798 975 Club Mediterranee 55,577 8,970 Sodexho Alliance 431,861 ----------- 1,189,236 ----------- HOUSEHOLD DURABLES 0.42% 8,760 Thomson Multimedia* 248,355 ----------- INSURANCE 6.06% 129,780 Axa 3,542,648 ----------- IT CONSULTING & SERVICES 1.83% 5,640 Altran Technologies 269,489 1,965 Atos Origin* 156,902 10,110 Cap Gemini++ 644,710 ----------- 1,071,101 ----------- MEDIA 9.41% 11,085 Lagardere S.C.A. 519,590 7,185 Publicis 170,350 11,115 Societe Television Francaise 1 322,998 82,185 Vivendi Universal 4,494,329 ----------- 5,507,267 ----------- METALS & MINING 0.91% 6,210 Pechiney - Class A 306,314 20,430 Usinor++ 227,713 ----------- 534,027 ----------- MULTI-UTILITIES 4.49% 77,100 Suez 2,626,403 ----------- MULTILINE RETAIL 1.43% 6,225 Pinault-Printemps-Redoute 838,037 ----------- OIL & GAS 15.04% 59,535 TotalFinaElf 8,799,048 ----------- PERSONAL PRODUCTS 3.70% 31,980 L'oreal++ 2,167,171 ----------- PHARMACEUTICALS 11.77% 63,195 Aventis 4,621,196 34,605 Sanofi-Synthelabo 2,264,898 ----------- 6,886,094 ----------- REAL ESTATE 0.38% 4,095 Unibail (Union Du Credit - Bail Immobilier) 222,821 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 2.41% 46,380 STMicroelectronics NV++ 1,411,404 ----------- See accompanying notes to financial statements. 59 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI FRANCE INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) SOFTWARE 0.50% 5,670 Business Objects* $ 140,097 3,855 Dassault Systemes++ 151,001 ----------- 291,098 ----------- SPECIALTY RETAIL 0.64% 6,690 Castorama Dubois Investissement* 373,746 ----------- TEXTILES & APPAREL 1.73% 20,850 LVMH Moet Hennessy Louis Vuitton++ 1,012,347 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.82% 14,175 Bouygues 478,878 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $63,221,436) 58,494,892 ----------- COMMON STOCK - NON-BASKET 0.02% AUTO COMPONENTS 0.00% 8 Valeo 357 ----------- BANKS 0.00% 12 BNP Paribas 1,101 ----------- BEVERAGES 0.00% 4 Pernod - Ricard 305 ----------- CHEMICALS 0.00% 2 L'Air Liquide 282 ----------- COMMERCIAL SERVICES & SUPPLIES 0.00% 10 Societe BIC 402 ----------- CONSTRUCTION MATERIALS 0.00% 14 Imerys 1,450 ----------- ELECTRICAL EQUIPMENT 0.00% 12 Alstom 326 8 Schneider Electric 443 ----------- 769 ----------- ENERGY EQUIPMENT & SERVICES 0.01% 12 Coflexip 2,060 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FOOD & DRUG RETAILING 0.00% 14 Carrefour $ 745 ----------- FOOD PRODUCTS 0.00% 8 Groupe Danone 1,088 ----------- INSURANCE 0.00% 10 Axa 273 ----------- MEDIA 0.00% 10 Lagardere S.C.A. 469 8 Publicis 190 2 Vivendi Universal 109 ----------- 768 ----------- MULTI-UTILITIES 0.00% 10 Suez 341 ----------- OIL & GAS 0.01% 14 TotalfinaElf 2,069 ----------- PERSONAL PRODUCTS 0.00% 2 L'oreal 135 ----------- PHARMACEUTICALS 0.00% 6 Sanofi-Synthelabo 393 ----------- SPECIALTY RETAIL 0.00% 2 Castorama Dubois Investissement 112 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $11,970) 12,650 ----------- TOTAL INVESTMENTS (COST $63,233,406)+ 100.00% $58,507,542 ======= =========== ----------------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $63,294,637. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,851,780 Excess of tax cost over value (9,638,875) ----------- $(4,787,095) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 60 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI GERMANY INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIR FREIGHT & COURIERS 1.12% 88,946 Deutsche Post $ 1,317,012 ------------ AIRLINES 0.89% 67,600 Deutsche Lufthansa++ 1,053,755 ------------ AUTO COMPONENTS 0.48% 42,432 Continental 562,759 ------------ AUTOMOBILES 12.22% 219,960 DaimlerChrysler++ 9,580,940 2,600 Porsche 895,135 69,160 Volkswagen 3,056,424 31,200 Volkswagen - Preferred 898,441 ------------ 14,430,940 ------------ BANKS 11.27% 100,152 Bayerische Hypo-und Vereinsbank 4,171,332 132,600 Deutsche Bank 9,142,419 ------------ 13,313,751 ------------ BIOTECHNOLOGY 0.65% 36,998 QIAGEN* 773,004 ------------ BUILDING PRODUCTS 0.19% 10,400 Buderus 225,319 ------------ CHEMICALS 10.04% 142,402 BASF 5,821,091 187,928 Bayer 6,034,714 ------------ 11,855,805 ------------ CONSTRUCTION MATERIALS 0.29% 7,514 Heidelberger Zement 337,872 ------------ DIVERSIFIED FINANCIALS 1.22% 7,800 Deutsche Boerse 280,231 2,990 MLP 192,844 10,400 MLP - Preferred++ 666,037 25,012 WCM Beteiligungs-und Grundbesitz*++ 304,914 ------------ 1,444,026 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 6.71% 514,800 Deutsche Telekom 7,926,547 ------------ ELECTRIC UTILITIES 4.80% 103,974 E.On 5,671,704 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 0.38% 11,700 Epcos 454,783 ------------ FOOD PRODUCTS 0.10% 18,200 Kamps 119,036 ------------ HEALTH CARE PROVIDERS & SERVICES 1.49% 10,400 Fresenius Medical Care++ 825,697 8,684 Fresenius Medical Care - Preferred 489,088 10,400 Gehe++ 445,914 ------------ 1,760,699 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- HOTELS RESTAURANTS & LEISURE 0.97% 36,400 Preussag $ 1,151,346 ------------ INDUSTRIAL CONGLOMERATES 9.64% 223,600 Siemens++ 11,386,774 ------------ INSURANCE 14.21% 40,248 Allianz 11,271,809 19,240 Muenchener Rueckversicherungs- Gesellschaft 5,515,919 ------------ 16,787,728 ------------ MACHINERY 1.52% 23,400 Linde++ 999,480 19,500 MAN 437,530 20,280 MAN - Preferred 355,550 ------------ 1,792,560 ------------ MEDIA 0.24% 26,858 ProSiebenSat.1 Media 281,794 ------------ METALS & MINING 1.05% 4,212 SGL Carbon*++ 119,759 82,706 ThyssenKrupp 1,119,436 ------------ 1,239,195 ------------ MULTI-UTILITIES 4.65% 108,758 RWE 4,574,230 28,990 RWE - Preferred 919,072 ------------ 5,493,302 ------------ MULTILINE RETAIL 1.92% 19,448 KarstadtQuelle 662,494 40,274 Metro++ 1,606,438 ------------ 2,268,932 ------------ PERSONAL PRODUCTS 1.33% 10,010 Beiersdorf 1,214,832 7,020 Wella 353,921 ------------ 1,568,753 ------------ PHARMACEUTICALS 3.72% 24,674 Altana 1,219,310 8,398 Merck KGaA 327,272 54,600 Schering++ 2,844,473 ------------ 4,391,055 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 1.69% 13,000 Aixtron 270,902 73,840 Infineon Technologies++ 1,726,538 ------------ 1,997,440 ------------ SOFTWARE 6.29% 52,624 SAP++ 7,165,744 5,200 Software 259,093 ------------ 7,424,837 ------------ See accompanying notes to financial statements. 61 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI GERMANY INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) TEXTILES & APPAREL 0.92% 11,700 Adidas-Salomon $ 792,442 13,208 Hugo Boss 298,633 ------------ 1,091,075 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $159,973,959) 118,121,803 ------------ TOTAL INVESTMENTS (COST $159,973,959)+ 100.00% $118,121,803 ======= ============ ------------------ * Non-income producing security. + Aggregate cost for Federal income tax purposes is $163,289,945. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,626,617 Excess of tax cost over value (47,794,759) ------------ $(45,168,142) ============ ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 62 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI HONG KONG INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 99.99% AIRLINES 1.32% 632,000 Cathay Pacific Airways Limited++ $ 696,838 ----------- BANKS 12.05% 790,000 Bank of East Asia Limited 1,807,931 402,900 Hang Seng Bank Limited 4,532,741 ----------- 6,340,672 ----------- CONSTRUCTION MATERIALS 0.50% 158,000 Cheung Kong Infrastructure Holdings Limited 262,327 ----------- DISTRIBUTORS 2.30% 948,000 Li & Fung Limited 1,209,339 ----------- DIVERSIFIED FINANCIALS 9.27% 632,000 Hong Kong Exchanges & Clearing Limited++ 794,072 513,500 Swire Pacific Limited - Class A 2,495,147 790,000 Wharf Holdings Limited++ 1,590,169 ----------- 4,879,388 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.78% 4,345,000 Pacific Century CyberWorks Limited++ 935,870 ----------- ELECTRIC UTILITIES 10.00% 632,000 CLP Holdings Limited 2,560,476 711,000 Hongkong Electric Holdings Limited 2,702,781 ----------- 5,263,257 ----------- ELECTRICAL EQUIPMENT 2.15% 948,000 Johnson Electric Holdings Limited 1,130,337 ----------- GAS UTILITIES 4.83% 2,054,000 Hong Kong & China Gas Company Limited 2,541,232 ----------- HOTELS RESTAURANTS & LEISURE 1.21% 790,000 Shangri-La Asia Limited 638,093 ----------- INDUSTRIAL CONGLOMERATES 16.64% 1,027,000 Hutchison Whampoa Limited 8,756,058 ----------- MEDIA 1.72% 632,000 South China Morning Post Holdings Limited 364,625 158,000 Television Broadcasts Limited 541,873 ----------- 906,498 ----------- REAL ESTATE 32.17% 790,000 Amoy Properties Limited++ 855,855 790,000 Cheung Kong Holdings Limited 7,292,495 316,000 Henderson Land Development Company Limited++ 1,442,293 474,000 Hysan Development Company Limited++ 483,128 948,000 New World Development Company Limited 966,255 1,106,000 Sino Land Company Limited 404,126 632,000 Sun Hung Kai Properties Limited 5,489,628 ----------- 16,933,780 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- ROAD & RAIL 2.25% 790,000 MTR Corporation Limited++ $ 1,185,030 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.41% 118,500 ASM Pacific Technology Limited 214,977 ----------- SPECIALTY RETAIL 1.39% 316,000 Esprit Holdings Limited 352,471 790,000 Giordano International Limited 382,350 ----------- 734,821 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $55,529,817) 52,628,517 ----------- COMMON STOCK - NON-BASKET 0.01% BANKS 0.00% 100 Bank of East Asia Limited 229 ----------- DIVERSIFIED FINANCIALS 0.00% 276,000 Peregrine Investment Holdings Limited*/** -- ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.00% 883 Pacific Century CyberWorks Limited 190 ----------- ELECTRIC UTILITIES 0.00% 200 CLP Holdings Limited 810 ----------- GAS UTILITIES 0.00% 330 Hong Kong & China Gas Company Limited 408 ----------- INDUSTRIAL CONGLOMERATES 0.01% 800 Hutchison Whampoa Limited 6,821 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $405,491) 8,458 ----------- TOTAL INVESTMENTS (COST $55,935,308)+ 100.00% $52,636,975 ======= =========== ---------------------- * Non-income producing security. ** Fair valued security. + Aggregate cost for Federal income tax purposes is $56,919,428. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 5,779,636 Excess of tax cost over value (10,062,089) ------------ $ (4,282,453) ============ ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 63 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI ITALY INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIRLINES 0.38% 138,801 Alitalia SpA*++ $ 131,004 ----------- AUTOMOBILES 2.99% 29,783 Fiat SpA++ 690,168 13,650 Fiat SpA-Pfd 211,786 9,750 Fiat SpA-RNC 135,271 ----------- 1,037,225 ----------- BANKS 22.34% 230,750 Banc Nazionale del Lavoro 662,795 112,125 Banca di Roma SpA++ 346,609 113,750 Banca Monte dei Paschi di Siena SpA 354,526 53,989 Banca Popolare di Milano SpA 230,897 506,454 IntesaBci SpA++ 1,686,125 136,500 IntesaBci SpA-RNC 291,515 74,750 Mediobanca SpA++ 910,847 128,050 Sanpaulo IMI SpA 1,609,407 383,500 UniCredito Italiano SpA 1,649,185 ----------- 7,741,906 ----------- CHEMICALS 0.28% 57,928 Snia SpA 95,561 ----------- CONSTRUCTION MATERIALS 0.46% 19,500 Italcementi SpA 160,097 ----------- DIVERSIFIED FINANCIALS 3.56% 39,650 Banca Fideuram SpA 368,103 182,000 Bipop-Carire SpA++ 513,840 31,200 Mediolanum SpA 352,603 ----------- 1,234,546 ----------- DIVERSIFED TELECOMMUNICATION SERVICES 12.17% 1,469 e.Biscom SpA*++ 58,782 337,350 Telecom Italia SpA++ 2,797,562 288,860 Telecom Italia SpA-RNC++ 1,361,854 ----------- 4,218,198 ----------- ELECTRIC UTILITIES 4.77% 249,444 Enel SpA 1,651,645 ----------- ELECTRICAL EQUIPMENT 0.70% 123,500 Pirelli SpA 243,334 ----------- FOOD & DRUG RETAILING 0.25% 20,202 La Rinascente SpA++ 85,297 ----------- FOOD PRODUCTS 0.51% 63,622 Parmalat Finanziaria SpA 177,428 ----------- GAS UTILITIES 0.87% 29,003 Italgas SpA 300,584 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 1.02% 20,800 Luxottica Group SpA 353,292 ----------- HOTELS RESTAURANTS & LEISURE 0.59% 18,837 Autogrill SpA 204,140 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- INSURANCE 16.86% 48,100 Alleanza Assicurazioni SpA $ 576,760 143,520 Assicurazioni Generali SpA 4,548,720 53,300 Riunione Adriatica di Sicurta SpA 718,226 ----------- 5,843,706 ----------- INTERNET SOFTWARE & SERVICES 0.39% 20,306 Tiscali SpA*++ 133,345 ----------- MEDIA 4.14% 18,200 Arnoldo Mondadori Editore SpA 113,862 27,547 Gruppo Editoriale L'Espresso SpA++ 92,662 85,553 Mediaset SpA 669,835 715,000 Seat Pagine Gialle SpA*++ 559,353 ----------- 1,435,712 ----------- MULTI-UTILITIES 0.38% 18,200 ACEA SpA 129,816 ----------- OIL & GAS 15.57% 405,600 ENI SpA 5,396,627 ----------- TEXTILES & APPAREL 1.21% 13,000 Benetton Group SpA++ 175,720 21,554 Bulgari SpA++ 244,334 ----------- 420,054 ----------- TRANSPORTATION INFRASTRUCTURE 2.58% 127,712 Concessioni e Costruzioni Autostrade SpA 892,490 ----------- WIRELESS TELECOMMUNICATION SERVICES 7.98% 538,200 Telecom Italia Mobile SpA++ 2,766,193 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $37,456,897) 34,652,200 ----------- COMMON STOCK - NON-BASKET 0.00% ELECTRIC UTILITIES 0.00% 6 Enel SpA 40 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $55) 40 ----------- TOTAL INVESTMENTS (COST $37,456,952)+ 100.00% $34,652,240 ======= =========== ------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $37,601,950. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,086,717 Excess of tax cost over value (5,036,427) ----------- $(2,949,710) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 64 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI JAPAN INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 99.98% AIR FREIGHT & COURIERS 0.38% 97,000 Yamato Transport Company Limited $ 1,984,749 ------------ AIRLINES 0.23% 194,000 All Nippon Airways Company Limited++ 616,209 194,000 Japan Airlines Company Limited 572,194 ------------ 1,188,403 ------------ AUTO COMPONENTS 1.80% 291,000 Bridgestone Corporation 2,452,611 194,000 Denso Corporation++ 3,374,480 97,000 Stanley Electric Company Limited 701,794 97,000 Toyoda Gosei Company Limited++ 1,164,766 97,000 Toyota Industries Corporation++ 1,797,277 ------------ 9,490,928 ------------ AUTOMOBILES 7.08% 194,000 Honda Motor Company Limited 6,993,488 873,000 Nissan Motor Company Limited 5,091,063 834,200 Toyota Motor Corporation 25,305,340 ------------ 37,389,891 ------------ BANKS 8.22% 776,000 Asahi Bank Limited 1,460,644 194,000 Ashikaga Bank Limited*++ 239,637 194,000 Bank of Fukuoka Limited++ 836,284 388,000 Bank of Yokohama Limited 1,571,497 194,000 Chiba Bank Limited 705,870 485,000 Daiwa Bank Limited++ 611,319 97,000 Gunma Bank Limited 467,863 194,000 Hokuriku Bank Limited* 326,037 291,000 Joyo Bank Limited 865,627 1,261 Mitsubishi Tokyo Financial Group Incorporated++ 10,702,155 1,940 Mizuho Holdings Incorporated++ 8,020,503 97,000 Seventy-Seven Bank Limited 554,262 291,000 Shizuoka Bank Limited 2,376,808 1,164,000 Sumitomo Mitsui Banking Corporation 9,487,669 97,000 Suruga Bank Limited 728,692 873 UFJ Holdings Incorporated*++ 4,438,175 ------------ 43,393,042 ------------ BEVERAGES 1.05% 97,000 Asahi Breweries Limited++ 965,884 19,400 Coca-Cola West Japan Company Limited 433,629 9,700 Ito En Limited++ 498,021 291,000 Kirin Brewery Company Limited 2,232,536 97,000 Sapporo Breweries Limited++ 295,063 97,000 Takara Shuzo Company Limited 1,101,189 ------------ 5,526,322 ------------ BUILDING PRODUCTS 0.91% 291,000 Asahi Glass Company Limited++ 1,657,897 97,000 Inax Corporation 634,956 97,000 Nippon Sheet Glass Company Limited++ 409,991 97,000 Tostem Inax Holding Corporation++ 1,507,920 97,000 Toto Limited++ 595,017 ------------ 4,805,781 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- CHEMICALS 3.55% 485,000 Asahi Kasei Corporation $ 1,854,334 97,000 Daicel Chemical Industries Limited 321,961 194,000 Dainippon Ink & Chemicals Incorporated 423,848 194,000 Denki Kagaku Kogyo Kabushiki Kaisha 445,040 97,000 Ishihara Sangyo Kaisha Limited* 167,094 97,000 JSR Corporation 590,942 97,000 Kaneka Corporation 729,507 97,000 Kuraray Company Limited 634,956 582,000 Mitsubishi Chemical Corporation++ 1,384,026 97,000 Mitsubishi Gas Chemical Company Incorporated 286,097 194,000 Mitsubishi Rayon Company Limited++ 575,455 194,000 Mitsui Chemicals Incorporated++ 609,689 97,000 Nippon Kayaku Company Limited 446,670 97,000 Nippon Sanso Corporation 325,222 97,000 Nippon Shokubai Company Limited 415,697 97,000 Nissan Chemical Industries Limited++ 667,560 97,000 Shin-Etsu Chemical Company Limited 2,999,538 291,000 Showa Denko K.K.* 349,674 97,000 Sumitomo Bakelite Company Limited++ 559,968 388,000 Sumitomo Chemical Company Limited 1,666,048 291,000 Teijin Limited 1,288,660 485,000 Toray Industries Incorporated 1,601,655 194,000 Tosoh Corporation++ 394,504 ------------ 18,738,145 ------------ COMMERCIAL SERVICES & SUPPLIES 1.57% 970 Bellsystem24 Incorporated 355,380 19,400 Benesse Corporation 629,251 194,000 Dai Nippon Printing Company Limited 2,068,703 97,000 Secom Company Limited 4,996,513 9,700 Trans Cosmos Incorporated 246,973 ------------ 8,296,820 ------------ COMMUNICATIONS EQUIPMENT 0.19% 29,100 Matsushita Communication Industrial Company Limited 1,007,453 ------------ COMPUTERS & PERIPHERALS 3.26% 582,000 Fujitsu Limited 5,814,865 485,000 NEC Corporation 5,913,491 1,067,000 Toshiba Corporation 5,460,300 ------------ 17,188,656 ------------ CONSTRUCTION & ENGINEERING 1.15% 29,100 Daito Trust Construction Company Limited 452,376 97,000 JGC Corporation++ 851,771 291,000 Kajima Corporation++ 924,314 97,000 Nishimatsu Construction Company Limited++ 480,089 194,000 Obayashi Corporation 849,326 97,000 Okumura Corporation++ 403,470 194,000 Shimizu Corporation++ 867,258 291,000 Taisei Corporation 877,854 97,000 Toda Corporation 360,271 ------------ 6,066,729 ------------ See accompanying notes to financial statements. 65 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) CONSTRUCTION MATERIALS 0.18% 97,000 Sumitomo Osaka Cement Company Limited $ 186,656 291,000 Taiheiyo Cement Corporation++ 780,043 ------------ 966,699 ------------ CONTAINERS & PACKAGING 0.54% 291,000 OJI Paper Company Limited 1,518,516 97,000 Toyo Seikan Kaisha Limited 1,310,668 ------------ 2,829,184 ------------ DIVERSIFIED FINANCIALS 6.32% 19,400 Acom Company Limited++ 1,732,885 9,700 Aeon Credit Service Company Limited 537,961 14,550 Aiful Corporation 1,313,113 194,000 Chuo Mitsui Trust & Banking Company++ 309,735 48,500 Credit Saison Company Limited 1,120,751 485,000 Daiwa Securities Group Incorporated 4,099,912 485,000 Nikko Cordial Corporation 3,211,462 679,000 Nomura Holding Incorporated 11,525,398 29,100 Orix Corporation++ 2,892,761 29,100 Promise Company Limited 2,274,106 291,000 Sumitomo Trust & Banking Company Limited 1,853,519 29,100 Takefuji Corporation 2,499,071 ------------ 33,370,674 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 1.08% 1,261 Nippon Telegraph & Telephone Corporation 5,721,944 ------------ ELECTRIC UTILITIES 4.86% 223,100 Chubu Electric Power Company Incorporated++ 4,368,077 261,900 Kansai Electric Power Company Incorporated++ 4,489,526 145,500 Kyushu Electric Power Company Incoporated++ 2,518,634 164,900 Tohoku Electric Power Company Incorporated++ 3,034,587 436,500 Tokyo Electric Power Company Incorporated 11,260,493 ------------ 25,671,317 ------------ ELECTRICAL EQUIPMENT 2.10% 194,000 Fuji Electric Company Limited 591,757 97,000 Fujikura Limited 517,583 194,000 Furukawa Electric Company Limited 1,460,645 97,000 Hitachi Cable Limited 412,436 97,000 Kinden Corporation++ 627,621 9,700 Mabuchi Motor Company Limited 872,963 194,000 Matsushita Electric Works Limited++ 1,770,379 582,000 Mitsubishi Electric Corporation 2,225,201 48,500 Nitto Denko Corporation 815,092 194,000 Sumitomo Electric Industries Limited 1,783,421 ------------ 11,077,098 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- ELECTRONIC EQUIPMENT & INSTRUMENTS 5.26% 97,000 Alps Electric Company Limited++ $ 707,500 97,000 Citizen Watch Company Limited 521,659 97,000 Dainippon Screen Manufacturing Company Limited++ 337,448 9,700 Hirose Electric Company Limited 640,662 970,000 Hitachi Limited 7,938,994 38,800 Hoya Corporation 2,054,031 9,700 Keyence Corporation++ 1,399,513 58,200 Kyocera Corporation 3,927,112 87,300 Murata Manufacturing Company Limited 5,281,795 9,700 Nidec Corporation++ 326,037 194,000 Oki Electric Industry Company Limited 575,455 97,000 Omron Corporation 1,375,060 38,800 TDK Corporation 2,021,428 97,000 Yokogawa Electric Corporation++ 655,334 ------------ 27,762,028 ------------ FOOD & DRUG RETAILING 0.82% 19,400 FamilyMart Company Limited 459,712 19,400 Lawson Incorporated 674,896 97,000 Seven-Eleven Japan Company Limited 3,211,462 ------------ 4,346,070 ------------ FOOD PRODUCTS 1.70% 194,000 Ajinomoto Company Incorporated 2,096,416 9,700 Ariake Japan Company Limited 554,262 19,400 Katokichi Company Limited 424,663 97,000 Kikkoman Corporation 649,628 97,000 Meiji Dairies Corporation 380,648 97,000 Meiji Seika Kaisha Limited 501,281 97,000 Nichirei Corporation 391,244 97,000 Nippon Meat Packers Incorporated 1,221,008 97,000 Nisshin Seifun Group Incorporated 729,507 29,100 Nissin Food Products Company Limited 623,545 97,000 Snow Brand Milk Products Company Limited*++ 313,810 97,000 Yakult Honsha Company Limited 1,104,449 ------------ 8,990,461 ------------ GAS UTILITIES 1.09% 776,000 Osaka Gas Company Limited 2,517,003 970,000 Tokyo Gas Company Limited++ 3,260,367 ------------ 5,777,370 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 0.48% 97,000 Olympus Optical Company Limited 1,377,505 67,900 Terumo Corporation 1,146,834 ------------ 2,524,339 ------------ HEALTH CARE PROVIDERS & SERVICES 0.07% 19,400 Suzuken Company Limited 366,791 ------------ HOTEL RESTAURANTS & LEISURE 0.39% 19,400 Namco Limited++ 347,229 19,400 Oriental Land Company Limited 1,385,656 9,700 Saizeriya Company Limited 343,969 ------------ 2,076,854 ------------ See accompanying notes to financial statements. 66 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) HOUSEHOLD DURABLES 8.15% 97,000 Casio Computer Company Limited++ $ 571,379 194,000 Daiwa House Industry Company Limited 1,537,263 679,000 Matsushita Electric Industrial Company Limited 10,292,979 38,800 Nintendo Company Limited 6,139,271 97,000 Pioneer Corporation++ 1,927,692 19,400 Sanrio Company Limited++ 216,814 582,000 Sanyo Electric Company Limited++ 2,616,445 29,100 Sega Corporation*++ 474,383 194,000 Sekisui Chemical Company Limited 668,375 194,000 Sekisui House Limited 1,656,267 291,000 Sharp Corporation++ 3,100,609 310,400 Sony Corporation 13,797,874 ------------ 42,999,351 ------------ HOUSEHOLD PRODUCTS 1.04% 194,000 Kao Corporation 4,923,154 19,400 Uni-Charm Corporation++ 568,934 ------------ 5,492,088 ------------ INDUSTRIAL CONGLOMERATES 0.10% 291,000 Ube Industries Limited 508,617 ------------ INSURANCE 1.65% 194,000 Mitsui Sumitomo Insurance Company Limited 1,185,143 194,000 Sumitomo Marine & Fire Insurance Company Limited++ 1,302,517 388,000 Tokio Marine & Fire Insurance Company Limited 4,091,761 291,000 Yasuda Fire & Marine Insurance Company Limited++ 2,115,163 ------------ 8,694,584 ------------ INTERNET SOFTWARE & SERVICES 0.28% 77,600 Softbank Corporation++ 1,506,290 ------------ IT CONSULTING & SERVICES 0.70% 19,400 CSK Corporation 468,678 9,700 Fujitsu Support & Service Incorporated++ 256,754 9,700 Itochu Techno-Science Corporation++ 672,451 9,700 Meitec Corporation 271,426 485 NTT Data Corporation++ 1,793,202 9,700 TIS Incorporated++ 227,818 ------------ 3,690,329 ------------ LEISURE EQUIPMENT & PRODUCTS 1.73% 194,000 Fuji Photo Film Company Limited 7,205,412 97,000 Konica Corporation 575,455 29,100 Shimano Incorporated 381,218 97,000 Yamaha Corporation 983,816 ------------ 9,145,901 ------------ MACHINERY 3.61% 97,000 Amada Company Limited 511,878 97,000 Daikin Industries Limited 1,558,456 97,000 Ebara Corporation 747,439 38,800 Fanuc Limited 1,600,840 9,700 Fuji Machine Manufacturing Company Limited 130,822 97,000 Hino Motors Limited*++ 383,093 291,000 Hitachi Zosen Corporation* 244,528 NO. OF SHARES SECURITY VALUE --------- -------- ----- MACHINERY (CONTINUED) 388,000 Ishikawajima-Harima Heavy Industries Company Limited++ $ 1,033,536 485,000 Kawasaki Heavy Industries Limited* 762,111 291,000 Komatsu Limited 1,058,804 388,000 Kubota Corporation++ 1,333,490 97,000 Minebea Company Limited 543,666 1,067,000 Mitsubishi Heavy Industries Limited 4,348,515 291,000 Mitsui Engineering & Shipbuilding Company Limited*++ 471,938 97,000 NGK Insulators Limited++ 733,583 194,000 NSK Limited 696,088 194,000 NTN Corporation 482,534 19,400 SMC Corporation 1,767,119 194,000 Sumitomo Heavy Industries Limited* 254,309 29,100 THK Company Limited 376,572 ------------ 19,039,321 ------------ MARINE 0.54% 97,000 Kamigumi Company Limited 449,116 194,000 Kawasaki Kisen Kaisha Limited 321,146 291,000 Mitsui O.S.K. Lines Limited++ 652,889 388,000 Nippon Yusen Kabushiki Kaisha 1,418,260 ------------ 2,841,411 ------------ MEDIA 0.71% 9,700 Asatsu-Dk Incorporated 193,177 97 Fuji Television Network Incorporated 495,576 9,700 Toho Company Limited 1,232,419 194,000 Toppan Printing Company Limited 1,840,477 ------------ 3,761,649 ------------ METALS & MINING 1.49% 97,000 Dowa Mining Company Limited++ 290,988 873,000 Kawasaki Steel Corporation++ 1,027,016 291,000 Mitsubishi Materials Corporation++ 550,187 194,000 Mitsui Mining & Smelting Company Limited 609,689 2,037,000 Nippon Steel Corporation 3,081,047 1,067,000 NKK Corporation* 986,261 1,067,000 Sumitomo Metal Industries Limited 600,723 194,000 Sumitomo Metal Mining Company Limited++ 705,869 ------------- 7,851,780 ------------- MULTILINE RETAIL 2.07% 97,000 Aeon Company Limited 1,919,541 194,000 Daiei Incorporated*++ 384,723 97,000 Daimaru Incorporated 414,882 97,000 Isetan Company Limited 896,601 97,000 Ito-Yokado Company Limited 3,708,668 97,000 Marui Company Limited 1,214,487 97,000 Mitsukoshi Limited++ 336,633 97,000 Mycal Corporation++ 76,619 97,000 Seiyu Limited*++ 298,324 97,000 Takashimaya Company Limited 659,409 97,000 Uny Company Limited 1,035,167 ------------ 10,945,054 ------------ OFFICE ELECTRONICS 2.26% 291,000 Canon Incorporated 8,754,086 194,000 Ricoh Company Limited++ 3,157,666 ------------ 11,911,752 ------------ See accompanying notes to financial statements. 67 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) OIL & GAS 1.02% 291,000 Japan Energy Corporation $ 567,304 485,000 Nippon Mitsubishi Oil Corporation++ 2,897,651 97,000 Showa Shell Sekiyu K. K. 699,349 97,000 Teikoku Oil Company Limited 444,225 97,000 TonenGeneral Sekiyu K.K. 758,850 ------------ 5,367,379 ------------ PAPER & FOREST PRODUCTS 0.34% 97,000 Mitsubishi Paper Mills Limited++ 170,354 291 Nippon Unipac Holding++ 1,601,655 ------------ 1,772,009 ------------ PERSONAL PRODUCTS 0.33% 9,700 Aderans Company Limited 334,188 194,000 Kanebo Limited* 469,493 97,000 Shiseido Company Limited++ 920,239 ------------ 1,723,920 ------------ PHARMACEUTICALS 5.74% 97,000 Banyu Pharmaceutical Company Limited 1,630,184 97,000 Chugai Pharmaceutical Company Limited++ 1,562,531 97,000 Daiichi Pharmaceutical Company Limited 2,265,955 97,000 Eisai Company Limited 2,392,294 97,000 Fujisawa Pharmaceutical Company Limited 1,878,787 97,000 Kyowa Hakko Kogyo Company Limited 596,647 97,000 Sankyo Company Limited 1,996,975 97,000 Shionogi & Company Limited 1,736,146 97,000 Taisho Pharmaceutical Company Limited 1,948,069 291,000 Takeda Chemical Industries Limited 11,957,397 97,000 Yamanouchi Pharmaceutical Company Limited 2,310,785 ------------ 30,275,770 ------------ REAL ESTATE 1.37% 291,000 Mitsubishi Estate Company Limited++ 3,274,224 291,000 Mitsui Fudosan Company Limited 3,264,443 97,000 Sumitomo Realty & Development Company Limited 685,492 ------------ 7,224,159 ------------ ROAD & RAIL 3.46% 291 Central Japan Railway Company 1,785,051 1,067 East Japan Railway Company++ 6,294,139 194,000 Keihin Electric Express Railway Company Limited++ 935,725 194,000 Keio Electric Railway Company Limited 1,062,880 582,000 Kinki Nippon Railway Company Limited++ 2,156,733 291,000 Nippon Express Company Limited++ 1,278,879 291,000 Tobu Railway Company Limited 951,212 291,000 Tokyu Corporation++ 1,699,466 388 West Japan Railway Company++ 2,122,499 ------------ 18,286,584 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- SEMICONDUCTOR EQUIPMENT & PRODUCTS 1.89% 29,100 Advantest Corporation $ 1,648,116 97,000 Nikon Corporation 862,367 38,800 Rohm Company Limited 4,274,341 58,200 Tokyo Electron Limited 3,188,639 ------------ 9,973,463 ------------ SOFTWARE 0.78% 9,700 Capcom Company Limited++ 286,912 9,700 Fuji Soft ABC Incorporated 442,595 9,700 Hitachi Software Engineering Company Limited++ 387,169 29,100 Konami Corporation 916,978 9,700 Nippon System Development Company Limited 492,315 9,700 Oracle Corporation Japan 837,914 48,500 Trend Micro Incorporated* 736,028 ------------ 4,099,911 ------------ SPECIALTY RETAIL 0.67% 19,400 Aoyama Trading Company Limited 247,951 9,700 Autobacs Seven Company Limited 249,418 9,700 Fast Retailing Company Limited++ 1,222,638 9,700 Paris Miki Incorporated 302,399 19,400 Shimachu Company Limited 309,735 9,700 Shimamura Company Limited++ 537,145 9,700 Yamada Denki Company Limited 662,670 ------------ 3,531,956 ------------ TEXTILES & APPAREL 0.29% 97,000 Gunze Limited++ 362,716 97,000 Nisshinbo Industries Incorporated 504,542 194,000 Toyobo Company Limited 334,188 9,700 World Company Limited++ 305,659 ------------ 1,507,105 ------------ TOBACCO 0.39% 291 Japan Tobacco Incorporated 2,058,922 ------------ TRADING COMPANIES & DISTRIBUTORS 1.93% 485,000 Itochu Corporation++ 1,638,334 485,000 Marubeni Corporation*++ 737,658 388,000 Mitsubishi Corporation++ 3,227,764 485,000 Mitsui & Company Limited 3,337,801 194,000 Sumitomo Corporation 1,245,460 ------------ 10,187,017 ------------ WIRELESS TELECOMMUNICATION SERVICES 3.16% 1,358 NTT DoCoMo Incorporated 16,660,476 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $641,425,298) 527,614,546 ------------ See accompanying notes to financial statements. 68 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - NON-BASKET 0.02% HOTELS RESTAURANTS & LEISURE 0.02% 2,910 Saizeriya Company Limited $ 103,191 ------------ OIL & GAS 0.00% 500 Nippon Mitsubishi Oil Corporation 2,987 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.00% 52 Tokyo Electron Limited 2,849 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $106,702) 109,027 ------------ TOTAL INVESTMENTS (COST $641,532,000)+ 100.00% $527,723,573 ======= ============ -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $647,951,236. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 16,958,441 Excess of tax cost over value (137,186,104) ------------- $(120,227,663) ============= ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 69 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI MALAYSIA (FREE) INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 99.85% AIRLINES 0.71% 633,000 Malaysian Airline System $ 569,700 ----------- AUTO COMPONENTS 0.44% 211,000 UMW Holdings 352,592 ----------- AUTOMOBILES 2.41% 422,000 Oriental Holdings 408,674 633,000 Perusahaan Otomobil Nasional 1,116,079 1,055,000 Tan Chong Motor Holdings 416,447 ----------- 1,941,200 ----------- BANKS 20.02% 1,266,000 Commerce Asset-Holding 2,598,632 1,055,000 Hong Leong Bank 960,605 2,743,000 Malayan Banking 8,878,658 3,165,000 Public Bank 2,432,053 1,899,000 RHB Capital 1,279,326 ----------- 16,149,274 ----------- BEVERAGES 0.47% 422,000 Guinness Anchor 377,579 ----------- BUILDING PRODUCTS 0.74% 211,000 Hume Industries (Malaysia) 249,868 84,400 O.Y.L. Industries 348,705 ----------- 598,573 ----------- CHEMICALS 0.71% 211,000 Malaysian Oxygen 577,474 ----------- CONSTRUCTION & ENGINEERING 5.26% 1,055,000 Gamuda 1,188,263 633,000 IJM Corporation 699,632 633,000 Road Builder Holdings 716,289 1,477,000 United Engineers (Malaysia) 1,640,247 ----------- 4,244,431 ----------- CONSTRUCTION MATERIALS 1.10% 3,376,000 Malayan Cement 888,421 ----------- DIVERSIFIED FINANCIALS 4.06% 1,266,000 AMMB Holdings 1,132,737 422,000 Hong Leong Credit 633,000 1,688,000 Malayan United Industries* 213,221 2,954,000 Mulpha International* 283,740 1,477,000 Multi-Purpose Holdings* 343,986 633,000 OSK Holdings 291,513 1,899,000 TA Enterprise 377,301 ----------- 3,275,498 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 10.58% 1,055,000 Technology Resources Industries* 810,684 2,743,000 Telekom Malaysia 7,723,711 ----------- 8,534,395 ----------- ELECTRIC UTILITIES 11.56% 422,000 Malakoff 1,055,000 2,321,000 Tenaga Nasional 6,596,526 1,477,000 YTL Corporation 1,671,342 ----------- 9,322,868 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- FOOD PRODUCTS 6.84% 844,000 Golden Hope Plantations $ 808,463 422,000 Hap Seng Consolidated 230,989 422,000 Highlands & Lowlands 288,737 1,688,000 IOI Corporation 1,625,811 633,000 Kuala Lumpur Kepong 907,855 211,000 Nestle (Malaysia) 1,138,289 422,000 PPB Group 517,505 ----------- 5,517,649 ----------- GAS UTILITIES 2.12% 1,055,000 Petronas Gas 1,707,434 ----------- HOTELS RESTAURANTS & LEISURE 10.65% 844,000 Berjaya Sports Toto 1,097,200 1,055,000 Genting 2,915,132 2,110,000 Magnum Corporation 1,132,737 1,266,000 Resorts World 2,215,500 633,000 Tanjong Public Limited Company 1,232,684 ----------- 8,593,253 ----------- INDUSTRIAL CONGLOMERATES 7.11% 211,000 Hong Leong Industries 344,263 2,110,000 Malaysian Resources Corporation* 838,447 3,376,000 Sime Darby 4,228,884 633,000 Time Engineering* 324,829 ----------- 5,736,423 ----------- MARINE 3.44% 1,477,000 Malaysia International Shipping Corporation 2,779,092 ----------- MEDIA 1.22% 422,000 New Straits Times Press 475,305 211,000 Star Publications (Malaysia) 508,066 ----------- 983,371 ----------- METALS & MINING 0.57% 844,000 Malaysia Mining Corporation 457,537 ----------- OIL & GAS 0.56% 422,000 Petronas Dagangan 455,316 ----------- PAPER & FOREST PRODUCTS 0.49% 211,000 Jaya Tiasa Holdings 146,034 211,000 WTK Holdings 246,537 ----------- 392,571 ----------- REAL ESTATE 1.32% 2,321,000 FACB Resorts* 256,532 844,000 IGB Corporation 253,200 211,000 IOI Properties 272,079 422,000 S P Setia 280,963 ----------- 1,062,774 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 1.49% 211,000 Malaysian Pacific Industries 760,711 211,000 Unisem 441,434 ----------- 1,202,145 ----------- SPECIALTY RETAIL 1.32% 633,000 Courts Mammoth 559,705 211,000 Edaran Otomobil Nasional 508,066 ----------- 1,067,771 ----------- See accompanying notes to financial statements. 70 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI MALAYSIA (FREE) INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) TOBACCO 3.64% 295,400 British American Tobacco (Malaysia) $ 2,720,789 211,000 JT International 216,553 ----------- 2,937,342 ----------- TRANSPORTATION INFRASTRUCTURE 0.61% 844,000 Malaysia Airports Holdings 493,074 ----------- WATER UTILITIES 0.41% 422,000 Puncak Niaga Holdings* 328,716 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $60,325,803) 80,546,473 ----------- COMMON STOCK - NON-BASKET 0.15% AUTOMOBILES 0.06% 46,400 Oriental Holdings 44,935 ----------- DIVERSIFIED FINANCIALS 0.09% 84,400 AMMB Holdings 75,516 ----------- METALS & MINING 0.00% 35,944 Silverstone*/** -- ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $79,599) 120,451 ----------- TOTAL INVESTMENTS (COST $60,405,402)+ 100.00% $80,666,924 ======= =========== --------------- * Non-income producing security. **Fair valued security. + Aggregate cost for Federal income tax purposes is $65,506,344. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $21,017,230 Excess of tax cost over value (5,856,650) ----------- $15,160,580 =========== See accompanying notes to financial statements. 71 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI MEXICO (FREE) INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 99.74% BANKS 5.65% 2,580,000 Grupo Financiero BBVA Bancomer SA de CV - Series O*++ $ 2,168,562 108,000 Grupo Financiero Inbursa SA de CV - Series O*++ 417,527 ----------- 2,586,089 ----------- BEVERAGES 9.60% 40,800 Coca-Cola Femsa SA de CV Sponsored ADR 893,928 582,000 Fomento Economico Mexicano SA de CV - Series UBD 2,275,289 162,000 Grupo Continental SA de CV++ 246,294 408,000 Grupo Modelo SA de CV - Series C++ 974,751 ----------- 4,390,262 ----------- CONSTRUCTION MATERIALS 9.44% 60,000 Apasco SA de CV 306,239 783,000 Cemex SA de CV - Series CPO 4,012,572 ----------- 4,318,811 ----------- CONTAINERS & PACKAGING 0.85% 384,000 Vitro SA de CV - Series A 387,816 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 25.24% 6,333,000 Telefonos de Mexico SA de CV - Series L++ 11,547,057 ----------- ENERGY EQUIPMENT & SERVICES 1.43% 300,000 Tubos de Acero de Mexico SA de CV++ 654,830 ----------- FOOD PRODUCTS 1.75% 327,000 Grupo Bimbo SA de CV - Series A++ 798,990 ----------- INDUSTRIAL CONGLOMERATES 4.36% 378,000 Alfa SA de CV - Series A++ 509,008 519,000 Grupo Carso SA de CV - Series A1*++ 1,487,930 ----------- 1,996,938 ----------- MEDIA 8.63% 402,000 Corporacion Interamericana de Entretenimento SA de CV - Series B*++ 1,331,487 1,200,000 Grupo Televisa SA de CV - Series CPO*++ 2,201,010 1,080,000 TV Azteca SA de CV - Series CPO 415,182 ----------- 3,947,679 ----------- METALS & MINING 1.61% 279,000 Grupo Mexico SA de CV - Series B++ 562,029 180,000 Industrias Penoles SA de CV - Series CP*++ 175,924 ----------- 737,953 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- MULTILINE RETAIL 7.32% 795,000 Controladora Comercial Mexicana SA de CV - Series UBC $ 703,616 149,500 Grupo Sanborns SA de CV - Series B1* 214,302 96,000 Organizacion Soriana SA de CV - Series B* 230,396 909,000 Walmart de Mexico SA de CV - Series V++ 2,201,303 ----------- 3,349,617 ----------- PAPER & FOREST PRODUCTS 5.14% 753,000 Kimberly-Clark de Mexico SA de CV - Series A 2,350,953 ----------- SPECIALTY RETAIL 2.35% 1,287,000 Grupo Elektra SA de CV - Series CPO++ 1,076,169 ----------- TRANSPORTATION INFRASTRUCTURE 1.30% 36,000 Grupo Aeroportuario del Sureste SA de CV Sponsored ADR* 594,000 ----------- WIRELESS TELECOMMUNICATION SERVICES 15.07% 8,160,000 America Movil SA de CV - Series L++ 6,894,152 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $46,176,001) 45,631,316 ----------- COMMON STOCK - NON-BASKET 0.26% INSURANCE 0.26% 285,000 Savia SA de CV - Series A 118,537 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $1,040,748) 118,537 ----------- TOTAL INVESTMENTS (COST $47,216,749)+ 100.00% $45,749,853 ======= =========== -------------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $47,376,625. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 3,028,516 Excess of tax cost over value (4,655,288) ----------- $(1,626,772) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 72 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI NETHERLANDS INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIR FREIGHT & COURIERS 2.84% 32,058 TPG $ 682,897 ----------- AIRLINES 0.85% 13,338 Koninklijke Luchvaart Maatschappij 203,552 ----------- BANKS 5.15% 67,288 ABN AMRO Holding 1,238,377 ----------- BEVERAGES 4.80% 27,508 Heineken 1,153,205 ----------- CHEMICALS 5.01% 27,222 Akzo Nobel 1,204,273 ----------- COMMERCIAL SERVICES & SUPPLIES 1.40% 13,546 Buhrmann 112,592 18,122 Vedior 223,060 ----------- 335,652 ----------- DIVERSIFIED FINANCIALS 16.59% 126,282 ING Groep 3,987,466 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.88% 74,906 Koninklijke KPN 212,299 ----------- FOOD & DRUG RETAILING 4.94% 39,754 Koninklijke Ahold++ 1,186,654 ----------- FOOD PRODUCTS 7.01% 15,080 Koniklijke Numico 497,945 19,422 Unilever 1,186,484 ----------- 1,684,429 ----------- HOUSEHOLD DURABLES 5.09% 45,396 Philips Electronics 1,223,932 ----------- INSURANCE 7.71% 61,490 Aegon 1,853,905 ----------- MACHINERY 2.49% 11,934 IHC Caland 598,413 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- MEDIA 5.91% 52,156 Elsevier $ 653,348 22,152 United Pan-Europe Communications*++ 8,250 9,100 VNU 298,831 21,502 Wolters Kluwer - CVA 459,010 ----------- 1,419,439 ----------- OFFICE ELECTRONICS 1.00% 23,868 Oce 239,582 ----------- OIL & GAS 24.44% 103,610 Royal Dutch Petroleum Company 5,875,852 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 2.32% 31,434 ASML Holding* 558,527 ----------- SPECIALTY RETAIL 0.80% 18,278 Royal Vendex KBB++ 193,433 ----------- TRADING COMPANIES & DISTRIBUTORS 0.77% 10,894 Hagemeyer 186,046 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $28,257,423) 24,037,933 ----------- TOTAL INVESTMENTS (COST $28,257,423)+ 100.00% $24,037,933 ======= =========== --------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $28,369,102. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 204,038 (4,535,207) ---------- $(4,331,169) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 73 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SINGAPORE (FREE) INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AEROSPACE & DEFENSE 4.67% 2,346,000 Singapore Technologies Engineering Limited $ 3,421,671 ----------- AIRLINES 3.89% 414,000 Singapore Airlines Limited 2,852,713 ----------- BANKS 38.85% 1,380,000 DBS Group Holdings Limited++ 10,856,158 1,242,000 Oversea-Chinese Banking Corporation Limited 7,844,961 1,518,000 United Overseas Bank Limited++ 9,762,618 ----------- 28,463,737 ----------- BEVERAGES 2.50% 414,000 Fraser & Neave Limited 1,830,491 ----------- COMMUNICATIONS EQUIPMENT 2.02% 414,000 Datacraft Asia Limited++ 1,482,120 ----------- COMPUTERS & PERIPHERALS 1.51% 103,500 Creative Technology Limited++ 766,667 966,000 GES International Limited++ 341,137 ----------- 1,107,804 ----------- DISTRIBUTORS 0.75% 276,000 Cycle & Carriage Limited 548,355 ----------- DIVERSIFIED FINANCIALS 3.57% 966,000 Keppel Corporation Limited 1,775,022 1,380,000 Singapore Exchange Limited 839,966 ----------- 2,614,988 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 10.92% 6,900,000 Singapore Telecommunications Limited++ 8,003,445 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 4.02% 552,000 OMNI Industries Limited++ 1,103,049 276,000 Venture Manufacturing (Singapore) Limited++ 1,838,415 ----------- 2,941,464 ----------- HEALTH CARE PROVIDERS & SERVICES 1.08% 1,380,000 Parkway Holdings Limited 788,458 ----------- HOTELS RESTAURANTS & LEISURE 1.91% 276,000 Hotel Properties Limited 218,708 138,000 Overseas Union Enterprise Limited 503,187 690,000 United Overseas Land Limited++ 673,557 ----------- 1,395,452 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- INDUSTRIAL CONGLOMERATES 3.23% 276,000 Haw Par Corporation Limited $ 608,579 828,000 NatSteel Limited 456,434 1,518,000 SembCorp Industries Limited 1,298,777 ----------- 2,363,790 ----------- MACHINERY 0.71% 1,104,000 Sembcorp Marine Limited 519,828 ----------- MARINE 1.51% 1,932,000 Neptune Orient Lines Limited* 1,103,842 ----------- MEDIA 4.28% 276,000 Singapore Press Holdings Limited 3,137,984 ----------- REAL ESTATE 8.57% 659,000 Allgreen Properties Limited 389,762 1,656,000 Capitaland Limited++ 1,730,646 690,000 City Developments Limited 2,000,861 414,000 First Capital Corporation Limited 259,121 828,000 Keppel Land Limited 898,605 276,000 Singapore Land Limited 503,980 1,104,000 Wing Tai Holdings Limited 494,470 ----------- 6,277,455 ----------- ROAD & RAIL 1.57% 828,000 Comfort Group Limited 316,176 1,794,000 SMRT Corporation Limited 834,419 ----------- 1,150,595 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 4.02% 966,000 Chartered Semiconductor Manufacturing Limited*++ 2,562,687 414,000 ST Assembly Test Services Limited* 385,116 ----------- 2,947,803 ----------- TRANSPORTATION INFRASTRUCTURE 0.42% 276,000 Sembcorp Logistics Limited 312,214 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $84,188,231) 73,264,199 ----------- TOTAL INVESTMENTS (COST $84,188,231)+ 100.00% $73,264,199 ======= =========== ------------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $84,872,039. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,380,162 Excess of tax cost over value (13,988,002) ------------ $(11,607,840) ============ ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 74 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SOUTH KOREA INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 97.21% AIRLINES 0.43% 38,703 Asiana Airlines* $ 53,321 21,090 Korean Air Company Limited* 106,482 ----------- 159,803 ----------- AUTO COMPONENTS 0.19% 38,190 Hankook Tire Company Limited 72,643 ----------- AUTOMOBILES 4.85% 73,530 Hyundai Motor Company Limited 1,225,980 90,630 Kia Motors Corporation* 604,436 ----------- 1,830,416 ----------- BANKS 9.05% 53,010 H&CB 1,178,461 53,010 Hana Bank 402,503 127,680 Kookmin Bank 1,719,058 61,560 Korea Exchange Bank* 113,723 ----------- 3,413,745 ----------- BEVERAGES 0.44% 4,560 Doosan Corporation* 63,715 2,850 Hite Brewery Company Limited 102,288 ----------- 166,003 ----------- BUILDING PRODUCTS 0.31% 2,280 Kumkang Korea Chemical Company Limited 117,793 ----------- CHEMICALS 1.87% 21,660 Hanwha Chemical Corporation* 49,848 9,120 Honam Petrochemical Corporation 72,103 10,830 Hyosung Corporation 112,327 31,350 LG Chem Limited* 392,642 8,550 Samsung Fine Chemicals Company Limited 76,632 ----------- 703,552 ----------- COMMERCIAL SERVICES & SUPPLIES 0.33% 2,508 Korea Information & Communications Company Limited* 34,749 8,550 S1 Corporation 91,022 ----------- 125,771 ----------- COMPUTERS & PERIPHERALS 0.14% 15,960 Trigem Computer Incorporated 51,222 ----------- CONSTRUCTION & ENGINEERING 0.63% 14,820 Daelim Industrial Company Limited 102,203 15,390 LG Engineering & Construction Company Limited 135,528 ----------- 237,731 ----------- DIVERSIFIED FINANCIALS 5.82% 51,870 Daewoo Securities Company Limited* 324,416 20,520 Daishin Securities Company 194,358 23,370 Dongwon Securities Company Limited* 98,785 49,020 Good Morning Securities Company Limited* 159,243 NO. OF SHARES SECURITY VALUE --------- -------- ----- DIVERSIFIED FINANCIALS (CONTINUED) 38,190 Hyundai Securities Company* $ 221,816 9,120 Kookmin Credit Card Company Limited 260,214 16,530 Korea Technology & Banking Network Corporation 41,406 45,030 LG Investment & Securities Company Limited* 290,800 23,940 Samsung Securities Company Limited* 603,419 ----------- 2,194,457 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 3.92% 37,050 Korea Telecom Corporation 1,479,100 ----------- ELECTRICAL EQUIPMENT 0.47% 13,680 LG Cable Limited 177,760 ----------- ELECTRIC UTILITIES 5.09% 108,300 Korea Electric Power Corporation 1,920,153 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 5.17% 19,950 Daeduck Electronics Company Limited 153,041 1,710 Hankuk Electric Glass Company Limited 80,715 31,350 Samsung Electro Mechanics Company Limited 889,579 19,950 Samsung SDI Company Limited 827,671 ----------- 1,951,006 ----------- FOOD PRODUCTS 1.02% 9,690 Cheil Jedang Corporation 292,027 2,280 Nong Shim Company Limited 92,806 ----------- 384,833 ----------- INSURANCE 1.38% 17,670 Samsung Fire & Marine Insurance Company Limited 520,072 ----------- INTERNET SOFTWARE & SERVICES 0.94% 15,960 Daou Technology Incorporated* 30,983 4,560 Daum Communications Corporation* 116,008 912 NCsoft Corporation 73,888 13,680 Serome Technology Incorporated* 134,926 ----------- 355,805 ----------- HEALTHCARE EQUIPMENT & SUPPLIES 0.10% 16,530 Medison Company Limited* 35,777 ----------- HOTELS RESTAURANTS & LEISURE 0.20% 14,250 Hotel Shilla Company Limited 74,736 ----------- HOUSEHOLD DURABLES 1.88% 9,120 Humax Company Limited 134,926 57,000 LG Electronics Incorporated 575,577 ----------- 710,503 ----------- HOUSEHOLD PRODUCTS 0.35% 6,840 LG Household & Health Care Limited* 131,714 ----------- See accompanying notes to financial statements. 75 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SOUTH KOREA INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) MACHINERY 1.91% 21,660 Hanjin Heavy Industries Company Limited $ 43,744 21,090 Hyundai Heavy Industries Company Limited 381,353 99,180 Samsung Heavy Industries Company Limited* 295,017 ----------- 720,114 ----------- MARINE 0.22% 14,250 Hanjin Shipping Company Limited 45,734 25,650 Hyundai Merchant Marine Company Limited* 38,450 ----------- 84,184 ----------- MEDIA 0.35% 1,710 Cheil Communications Incorporated 130,776 ----------- METALS & MINING 7.36% 5,130 Korea Zinc Company Limited 60,235 37,620 Pohang Iron & Steel Company Limited 2,665,057 9,690 Poongsan Corporation 51,275 ----------- 2,776,567 ----------- MULTILINE RETAIL 1.21% 7,980 Hyundai Department Store Company Limited 95,260 5,130 Shinsegae Company Limited 361,409 ----------- 456,669 ----------- OIL & GAS 0.65% 7,980 S-Oil Corporation 245,178 ----------- PAPER & FOREST PRODUCTS 0.06% 8,550 Hansol Paper Company Limited 21,450 ----------- PERSONAL PRODUCTS 0.39% 2,280 Pacific Corporation 146,348 ----------- PHARMACEUTICALS 0.70% 3,420 Dong-A Pharmaceutical Company Limited 48,456 1,140 Korea Green Cross Corporation 24,049 10,830 LG Chem Investment Limited 55,188 2,850 Yuhan Corporation 137,648 ----------- 265,341 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 25.40% 68,970 Anam Semiconductor Incorporated* 168,173 63,270 Samsung Electronics Company Limited 9,410,020 ----------- 9,578,193 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- SOFTWARE 0.27% 18,810 Haansoft Incorporated* $ 54,332 6,498 HandySoft Corporation 46,796 ----------- 101,128 ----------- TEXTILES & APPAREL 0.29% 21,660 Cheil Industries Incorporated 109,699 ----------- TRADING COMPANIES & DISTRIBUTORS 1.33% 75,240 Samsung Corporation 378,114 21,660 SK Global 121,906 ----------- 500,020 ----------- WIRELESS TELECOMMUNICATION SERVICES 12.49% 42,351 KT Freetel* 1,093,998 20,520 SK Telecom Company Limited 3,614,090 ----------- 4,708,088 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $39,039,058) 36,658,350 ----------- COMMON STOCK - NON-BASKET 2.79% BANKS 2.79% 107,500 Shinhan Bank 1,051,859 ----------- PHARMACEUTICALS 0.00% 167 LG Chem Investment Limited 851 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $999,274) 1,052,710 ----------- TOTAL INVESTMENTS (COST $40,038,332)+ 100.00% $37,711,060 ======= =========== ------------ * Non-income producing security. + Aggregate cost for Federal income tax purposes is $41,727,645. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,046,073 Excess of tax cost over value (5,062,658) ----------- $(4,016,585) =========== See accompanying notes to financial statements. 76 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SPAIN INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% BANKS 29.05% 318,750 Banco Bilbao Vizcaya Argentaria SA $ 4,111,633 413,831 Banco Santander Central Hispano SA 3,770,507 ----------- 7,882,140 ----------- BIOTECHNOLOGY 1.55% 49,725 Zeltia SA*++ 419,630 ----------- BUILDING PRODUCTS 0.59% 29,784 Uralita SA++ 161,252 ----------- COMMERCIAL SERVICES & SUPPLIES 1.77% 57,800 Amadeus Global Travel Distribution SA++ 443,145 3,026 Prosegur Compania de Seguridad SA 36,202 ----------- 479,347 ----------- CONSTRUCTION & ENGINEERING 3.29% 8,500 Actividades de Construccion y Servicios SA 233,031 11,611 Fomento de Construcciones y Contratas SA 262,630 28,390 Grupo Dragados SA 397,157 ----------- 892,818 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 19.57% 457,487 Telefonica SA* 5,311,111 ----------- ELECTRIC UTILITIES 13.90% 78,693 Endesa SA++ 1,304,592 95,489 Iberdrola SA 1,308,068 62,016 Union Fenosa SA 1,157,688 ----------- 3,770,348 ----------- FOOD PRODUCTS 1.18% 19,992 Ebro Puleva SA++ 225,192 21,250 Viscofan Industria Navarra de Envolturas Celulosicas SA 94,008 ----------- 319,200 ----------- GAS UTILITIES 3.93% 56,508 Gas Natural SDG SA++ 1,066,160 ----------- HOTELS RESTAURANTS & LEISURE 3.98% 60,520 NH Hoteles SA* 706,444 18,088 Sol Melia SA 156,095 133,926 TelePizza SA* 216,551 ----------- 1,079,090 ----------- INSURANCE 0.53% 7,327 Corporacion Mapfre 143,100 ----------- INTERNET SOFTWARE & SERVICES 2.15% 82,807 Terra Networks SA* 582,968 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- MEDIA 5.13% 83,453 Promotora de Informaciones SA $ 894,540 118,949 Telefonica Publicidad e Informacion SA++ 497,044 ----------- 1,391,584 ----------- METALS & MINING 1.57% 14,943 Acerinox SA 427,587 ----------- OIL & GAS 4.72% 76,007 Repsol YPF SA++ 1,280,776 ----------- PAPER & FOREST PRODUCTS 0.35% 6,800 Grupo Empresarial Ence SA 95,127 ----------- PHARMACEUTICALS 1.20% 27,472 FAES FARMA SA++ 325,919 ----------- REAL ESTATE 0.42% 1,785 Metrovacesa SA 24,825 13,192 Vallehermoso SA 90,835 ----------- 115,660 ----------- SPECIALTY RETAIL 0.66% 23,426 Cortefiel SA 178,753 ----------- TOBACCO 2.15% 36,397 Altadis SA 583,561 ----------- TRANSPORTATION INFRASTRUCTURE 0.67% 18,734 Autopistas Concesionaria Espanola SA++ 182,262 ----------- WATER UTILITIES 1.64% 30,940 Sociedad General de Aguas de Barcelona SA 444,072 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $31,693,177) 27,132,465 ----------- COMMON STOCK - NON-BASKET 0.00% BIOTECHNOLOGY 0.00% 19,999 Puleva Biotech*/** -- ----------- FOOD PRODUCTS 0.00% 7 Ebro Puleva SA 79 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $94) 79 ----------- TOTAL INVESTMENTS (COST $31,693,271)+ 100.00% $27,132,544 ======= =========== ------------- * Non-income producing security. **Fair valued security. + Aggregate cost for Federal income tax purposes is $31,948,169. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 356,988 Excess of tax cost over value (5,172,613) ----------- $(4,815,625) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 77 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SWEDEN INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIRLINES 0.33% 4,400 SAS AB* $ 34,528 ----------------- AUTO COMPONENTS 0.51% 6,600 Trelleborg AB - B 53,687 ----------------- BANKS 21.01% 192,500 Nordea AB 1,179,015 40,700 Skandinaviska Enskilda Banken AB - A 350,546 45,100 Svenska Handelsbanken AB - A 651,722 3,300 Svenska Handelsbanken AB - B 47,055 ----------- 2,228,338 ----------- BUILDING PRODUCTS 2.38% 22,000 Assa Abloy AB - B 252,646 ----------- COMMERCIAL SERVICES & SUPPLIES 4.25% 28,600 Securitas AB - B++ 450,236 ----------- COMMUNICATIONS EQUIPMENT 23.42% 503,800 Telefonaktiebolaget LM Ericsson AB - B 2,482,985 ----------- CONSTRUCTION & ENGINEERING 2.07% 30,800 Skanska AB - B 219,592 ----------- DIVERSIFIED FINANCIALS 0.61% 7,150 OM AB 64,320 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 6.66% 115,500 Song Networks Holding AB*++ 75,162 11,000 Tele2 AB - B*++ 332,651 71,500 Telia AB++ 298,333 ----------- 706,146 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.77% 2,200 Nobel Biocare AB 81,689 ----------- HEALTH CARE PROVIDERS & SERVICES 1.46% 15,400 Gambro AB - A 98,743 8,800 Gambro AB - B 56,424 ----------- 155,167 ----------- HOUSEHOLD DURABLES 3.38% 26,400 Electrolux AB - B 358,757 ----------- INSURANCE 4.61% 70,400 Skandia Forsakrings AB 488,449 ----------- IT CONSULTING & SERVICES 0.76% 35,200 WM-Data AB - B 81,184 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- MACHINERY 12.71% 7,700 Atlas Copco AB - A $ 159,535 4,400 Atlas Copco AB - B 86,742 24,200 Sandvik AB 504,871 4,400 SKF AB - A 65,267 7,700 SKF AB - B++ 127,481 7,700 Volvo AB - A 114,217 18,700 Volvo AB - B 289,911 ----------- 1,348,024 ----------- MEDIA 1.01% 4,950 Modern Times Group MTG AB - B* 107,533 ----------- METALS & MINING 1.15% 2,200 Hoganas AB - B 34,528 3,300 Sapa AB 47,845 4,400 SSAB Svenskt Stal AB - A 39,581 ----------- 121,954 ----------- PAPER & FOREST PRODUCTS 4.57% 1,485 AssiDoman AB 34,107 4,400 Holmen AB - B 90,742 15,400 Svenska Cellulosa AB - B 359,600 ----------- 484,449 ----------- REAL ESTATE 1.05% 11,000 Drott AB - B 111,059 ----------- SPECIALTY RETAIL 6.26% 34,925 Hennes & Mauritz AB - B 663,446 ----------- TOBACCO 1.03% 22,000 Swedish Match AB 109,480 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $15,872,949) 10,603,669 ----------- TOTAL INVESTMENTS (COST $15,872,949)+ 100.00% $10,603,669 ======= =========== ------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $16,008,241. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 63,237 Excess of tax cost over value (5,467,809) ----------- $(5,404,572) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 78 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SWITZERLAND INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIRLINES 0.40% 2,300 Swissair Group*++ $ 127,533 ----------- BANKS 18.91% 2,280 Banque Cantonale Vaudoise 609,238 36,540 Credit Suisse Group 1,553,240 1,400 Julius Baer Holding Limited 457,133 70,800 UBS AG 3,452,831 ----------- 6,072,442 ----------- BIOTECHNOLOGY 1.72% 600 Serono SA 550,716 ----------- CHEMICALS 7.48% 10,000 Ciba Specialty Chemicals AG 645,557 18,600 Clariant AG 340,998 20 EMS-Chemie Holding AG* 87,592 1,280 Givaudan SA 392,643 600 Lonza AG 367,024 10,860 Syngenta AG* 567,692 ----------- 2,401,506 ----------- COMMERCIAL SERVICES & SUPPLIES 1.90% 9,600 Adecco SA 469,906 860 SGS Societe Generale de Surveillance Holding SA 140,663 ----------- 610,569 ----------- COMMUNICATIONS EQUIPMENT 0.15% 2,000 Ascom Holding AG 47,930 ----------- CONSTRUCTION MATERIALS 3.59% 4,200 Holcim Limited - B 868,133 5,900 Holcim Limited - Registered 286,322 ----------- 1,154,455 ----------- DIVERSIFIED FINANCIALS 1.02% 12,000 Vontobel Holding AG 329,279 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.27% 2,540 Swisscom AG 728,932 ----------- ELECTRICAL EQUIPMENT 2.97% 92,160 ABB Ltd. 955,226 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.64% 3,800 Kudelski SA* 204,332 ----------- FOOD PRODUCTS 11.82% 18,000 Nestle SA 3,796,058 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 1.54% 40 Phonak Holding AG 115,032 800 Sulzer Medica AG 59,913 400 Synthes-Stratec Incorporated 272,722 600 Tecan Group AG 46,372 ----------- 494,039 ----------- NO. OF SHARES SECURITY VALUE --------- -------- ----- HOTELS RESTAURANTS & LEISURE 0.53% 660 Kuoni Reisen Holding AG $ 168,845 ----------- HOUSEHOLD DURABLES 0.18% 160 Forbo Holding AG 59,433 ----------- INSURANCE 9.28% 15,660 Swiss Re 1,557,462 5,040 Zurich Financial Services AG 1,423,737 ----------- 2,981,199 ----------- MACHINERY 2.08% 600 Georg Fischer AG 136,061 240 Schindler Holding AG - Participation Certificates 323,528 100 Schindler Holding AG - Registered 132,107 400 Sulzer AG 76,688 ----------- 668,384 ----------- MEDIA 0.14% 200 PubliGroupe SA 44,335 ----------- MULTILINE RETAIL 0.31% 80 Jelmoli Holding AG - Bearer 98,257 ----------- PHARMACEUTICALS 29.10% 173,200 Novartis AG 6,314,313 8,800 Roche Holding AG - Bearer 711,761 32,400 Roche Holding AG - Genussein 2,319,693 ----------- 9,345,767 ----------- SPECIALTY RETAIL 0.43% 1,000 Charles Voegele Holding AG 53,921 460 Valora Holding AG 83,506 ----------- 137,427 ----------- TEXTILES & APPAREL 3.54% 400 Compagnie Financiere Richemont AG 976,574 2,000 The Swatch Group AG - B 161,764 ----------- 1,138,338 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $36,786,742) 32,115,002 ----------- TOTAL INVESTMENTS (COST $36,786,742)+ 100.00% $32,115,002 ======= =========== ----------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $36,944,899. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 942,990 Excess of tax cost over value (5,772,887) ----------- $(4,829,897) =========== ++ Denotes all or part of security on loan. See accompanying notes to financial statements. 79 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI TAIWAN INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 99.60% AIRLINES 0.35% 738,000 China Airlines $ 388,984 ------------ AUTO COMPONENTS 0.25% 492,000 Cheng Shin Rubber Industry Company Limited 279,270 ------------ AUTOMOBILES 0.58% 492,000 China Motor Company Limited 307,767 738,000 Yulon Motor Company Limited 327,003 ------------ 634,770 ------------ BANKS 11.25% 1,722,000 Bank Sinopac* 745,552 2,214,000 Chang Hwa Commercial Bank 926,507 1,476,000 Chiao Tung Bank 837,811 2,706,000 China Development Industrial Bank* 1,865,126 2,214,000 Chinatrust Commercial Bank 1,481,129 2,214,000 First Commercial Bank 1,199,010 2,214,000 Hua Nan Commercial Bank 1,211,833 1,722,000 International Bank of Taipei 571,008 2,460,000 International Commercial Bank of China 1,403,475 1,476,000 Taishin International Bank* 628,358 2,460,000 United World Chinese Commercial Bank 1,545,960 ------------ 12,415,769 ------------ BUILDING PRODUCTS 0.41% 738,000 Taiwan Glass Industrial Corporation 450,964 ------------ CHEMICALS 6.80% 246,000 China Synthetic Rubber Corporation* 77,654 246,000 Eternal Chemical Company Limited 97,958 3,444,000 Formosa Plastic Corporation 3,640,486 4,674,000 Nan Ya Plastic Corporation 3,587,055 246,000 Taiwan Styrene Monomer Corporation 99,027 ------------ 7,502,180 ------------ COMMERCIAL SERVICES & SUPPLIES 0.20% 246,000 Taiwan Secom 215,864 ------------ COMPUTERS & PERIPHERALS 17.35% 984,000 Acer Communications & Multimedia Incorporated 940,400 3,690,000 Acer Incorporated 1,613,640 246,000 Ambit Microsystems Corporation 915,465 738,000 Arima Computer Corporation 341,964 1,476,000 Asustek Computer Incorporated 5,385,925 1,722,000 CMC Magnetics Corporation 1,326,533 1,722,000 Compal Electronics Incorporated 1,565,908 492,000 Compeq Manufacturing Company Limited* 683,927 246,000 Gigabyte Technology Company Limited 520,070 1,230,000 Inventec Company Limited 780,104 492,000 Lite-On Technology Corporation 361,911 246,000 Micro-Star International Company Limited 616,247 246,000 Prodisc Technology Incorporated 282,120 984,000 Quanta Computer Incorporated 2,194,266 1,476,000 Ritek Corporation 1,615,778 ------------ 19,144,258 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMUNICATIONS EQUIPMENT 0.73% 246,000 Accton Technology Corporation* $ 308,480 246,000 D-Link Corporation 247,211 246,000 Microelectronics Technology Incorporated* 250,061 ------------ 805,752 ------------ CONSTRUCTION & ENGINEERING 0.37% 984,000 BES Engineering Corporation* 74,092 492,000 Continental Engineering Corporation* 160,295 1,230,000 Pacific Construction Company Limited* 173,119 ------------ 407,506 ------------ CONSTRUCTION MATERIALS 0.67% 1,230,000 Asia Cement Corporation 407,863 1,230,000 Taiwan Cement Corporation* 329,496 ------------ 737,359 ------------ DIVERSIFIED FINANCIALS 0.32% 1,476,000 Chung Hsing Bills Finance Corporation 356,924 ------------ ELECTRICAL EQUIPMENT 3.07% 738,000 Delta Electronics Incorporated 1,090,009 2,706,000 Pacific Electric Wire & Cable Company Limited* 630,851 246,000 Phoenixtec Power Company Limited 188,080 492,000 Shihlin Electric & Engineering Corporation 220,851 1,476,000 Teco Electric & Machinery Company Limited 504,396 2,952,000 Walsin Lihwa Corporation 756,594 ------------ 3,390,781 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 6.57% 1,230,000 Hon Hai Precision Industry Company Limited 4,755,430 492,000 Lite-On Electronics Incorporated* 215,152 492,000 Picvue Electronics Limited 184,518 492,000 Synnex Technology International Corporation 622,659 492,000 Wus Printed Circuit Company Limited 210,878 1,722,000 Yageo Corporation* 1,261,703 ------------ 7,250,340 ------------ FOOD & DRUG RETAILING 0.65% 246,000 President Chain Store Corporation 537,880 1,230,000 Taiwan Tea Corporation* 175,613 ------------ 713,493 ------------ FOOD PRODUCTS 1.00% 2,706,000 Uni-President Enterprises Company 1,097,133 ------------ HOUSEHOLD DURABLES 0.22% 984,000 Sampo Corporation 239,374 ------------ INDUSTRIAL CONGLOMERATES 0.67% 3,444,000 Tatung Company Limited 743,058 ------------ See accompanying notes to financial statements. 80 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI TAIWAN INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) INSURANCE 4.29% 2,952,000 Cathay Life Insurance Company Limited $ 3,513,675 1,230,000 Fubon Insurance Company 1,221,807 ------------ 4,735,482 ------------ IT CONSULTING & SERVICES 0.35% 492,000 Systex Corporation* 390,408 ------------ LEISURE EQUIPMENT & PRODUCTS 0.56% 246,000 Giant Manufacturing Company Limited 262,884 246,000 Premier Image Technology Corporation 359,774 ------------ 622,658 ------------ MARINE 0.57% 738,000 Evergreen Marine Corporation 367,611 984,000 Yang Ming Marine Transport 262,172 ------------ 629,783 ------------ METALS & MINING 1.77% 5,166,000 China Steel Corporation 1,840,191 492,000 Tung Ho Steel Enterprise Corporation 117,550 ------------ 1,957,741 ------------ MULTILINE RETAIL 0.14% 738,000 Far Eastern Department Stores Limited 150,678 ------------ OFFICE ELECTRONICS 0.30% 738,000 Kinpo Electronics Incorporated 333,414 ------------ REAL ESTATE 0.20% 984,000 Cathay Construction Corporation 219,427 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 36.41% 2,214,000 Advanced Semiconductor Engineering Incorporated* 1,231,069 2,952,000 Macronix International Company Limited* 2,094,527 2,952,000 Mosel Vitelic Incorporated* 970,321 246,000 Realtek Semiconductor Corporation 776,542 1,476,000 Siliconware Precision Industries Company* 940,400 9,348,000 Taiwan Semiconductor Manufacturing Company Limited* 17,326,151 11,070,000 United Microelectronics Corporation* 12,759,513 492,000 Via Technologies Incorporated 2,393,745 3,198,000 Winbond Electronics Corporation 1,676,334 ------------ 40,168,602 ------------ SPECIALTY RETAIL 0.15% 492,000 Aurora Corporation* 165,995 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- TEXTILES & APPAREL 3.40% 2,214,000 Far Eastern Textile Limited $ 945,743 2,214,000 Formosa Chemicals & Fibre Corporation 1,570,895 738,000 Formosa Taffeta Company Limited 213,727 492,000 Nien Hsing Textile Company Limited* 366,186 984,000 Pou Chen Corporation* 652,580 ------------ 3,749,131 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $146,634,380) 109,897,098 ------------ COMMON STOCK - NON-BASKET 0.40% AIRLINES 0.00% 410 China Airlines 216 ------------ AUTO COMPONENTS 0.00% 436 Cheng Shin Rubber Industry Company Limited 248 ------------ AUTOMOBILES 0.00% 170 China Motor Company Limited 106 350 Yulon Motor Company Limited 155 ------------ 261 ------------ BANKS 0.00% 300 Bank Sinopac* 130 430 Chang Hwa Commercial Bank 180 860 Chiao Tung Bank 488 600 Chinatrust Commercial Bank 401 50 First Commercial Bank 27 600 Hua Nan Commercial Bank 328 520 International Bank of Taipei 172 200 International Commercial Bank of China 114 320 United World Chinese Commercial Bank 201 ------------ 2,041 ------------ BUILDING PRODUCTS 0.00% 189 Taiwan Glass Industrial Corporation 116 ------------ CHEMICALS 0.00% 12,337 China Synthetic Rubber Corporation* 3,894 245 Formosa Plastic Corporation 259 820 Nan Ya Plastic Corporation 629 ------------ 4,782 ------------ COMMERCIAL SERVICES & SUPPLIES 0.00% 900 Taiwan Secom 790 ------------ COMPUTERS & PERIPHERALS 0.01% 213 Acer Incorporated 93 250 Asustek Computer Incorporated 912 500 CMC Magnetics Corporation 385 250 Gigabyte Technology Company Limited 529 330 Prodisc Technology Incorporated 378 750 Quanta Computer Incorporated 1,672 500 Ritek Corporation 547 ------------ 4,516 ------------ See accompanying notes to financial statements. 81 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI TAIWAN INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - NON-BASKET (CONTINUED) COMMUNICATIONS EQUIPMENT 0.00% 350 D-Link Corporation $ 352 200 Microelectronics Technology Incorporated* 203 ------------ 555 ------------ CONSTRUCTION & ENGINEERING 0.01% 23,873 Continental Engineering Corporation* 7,778 10,400 Pacific Construction Company Limited* 1,464 ------------ 9,242 ------------ CONSTRUCTION MATERIALS 0.02% 26,740 Asia Cement Corporation 8,867 31,762 Taiwan Cement Corporation* 8,509 ------------ 17,376 ------------ ELECTRICAL EQUIPMENT 0.01% 50 Delta Electronics Incorporated 74 440 Pacific Electric Wire & Cable Company Limited* 103 630 Phoenixtec Power Company Limited 482 16,080 Shihlin Electric & Engineering Corporation 7,218 92 Teco Electric & Machinery Company Limited 31 779 Walsin Lihwa Corporation 200 ------------ 8,108 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 0.00% 200 Hon Hai Precision Industry Company Limited 773 120 Lite-On Electronics Incorporated* 53 800 Picvue Electronics Limited 300 250 Synnex Technology International Corporation 316 500 Yageo Corporation* 366 ------------ 1,808 ------------ FOOD & DRUG RETAILING 0.00% 350 President Chain Store Corporation 765 ------------ FOOD PRODUCTS 0.00% 36 Uni-President Enterprises Company 15 ------------ HOUSEHOLD DURABLES 0.00% 148 Sampo Corporation 36 ------------ INDUSTRIAL CONGLOMERATES 0.00% 120 Tatung Company Limited 26 ------------ INSURANCE 0.03% 24,967 Cathay Life Insurance Company Limited 29,717 ------------ IT CONSULTING & SERVICES 0.00% 600 Systex Corporation* 476 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- LEISURE EQUIPMENT & PRODUCTS 0.00% 350 Giant Manufacturing Company Limited $ 374 ------------ METALS & MINING 0.00% 670 China Steel Corporation 239 ------------ MULTILINE RETAIL 0.01% 50,160 Far Eastern Department Stores Limited 10,241 ------------ OFFICE ELECTRONICS 0.00% 400 Kinpo Electronics Incorporated 181 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.30% 357 Advanced Semiconductor Engineering Incorporated* 199 80 Mosel Vitelic Incorporated* 26 104,500 Realtek Semiconductor Corporation 329,873 525 Siliconware Precision Industries Company* 335 800 Taiwan Semiconductor Manufacturing Company Limited* 1,483 650 United Microelectronics Corporation* 749 280 Winbond Electronics Corporation 147 ------------ 332,812 ------------ SPECIALTY RETAIL 0.00% 200 Aurora Corporation* 68 ------------ TEXTILES & APPAREL 0.01% 199 Far Eastern Textile Limited 85 152 Formosa Chemicals & Fibre Corporation 108 37,620 Formosa Taffeta Company Limited 10,895 800 Nien Hsing Textile Company Limited* 595 385 Pou Chen Corporation* 255 ------------ 11,938 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $491,889) 436,947 ------------ TOTAL INVESTMENTS (COST $147,126,269)+ 100.00% $110,334,048 ======= ============ ------------------ * Non-income producing security. + Aggregate cost for Federal income tax purposes is $151,939,697. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 552,435 Excess of tax cost over value (42,158,087) ------------ $(41,605,652) ============ See accompanying notes to financial statements. 82 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI UNITED KINGDOM INDEX FUND -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET 99.95% AEROSPACE & DEFENSE 0.64% 126,009 BAE Systems Plc $ 603,161 45,552 Rolls-Royce Plc 144,040 ------------ 747,201 ------------ AIR FREIGHT & COURIERS 0.28% 16,848 Exel Plc 179,375 65,715 Securicor Plc 152,035 ------------ 331,410 ------------ AIRLINES 0.23% 60,723 British Airways Plc 269,521 ------------ AUTO COMPONENTS 0.22% 58,227 GKN Plc 260,554 ------------ BANKS 17.82% 110,682 Abbey National Plc 1,798,096 108,966 Barclays Plc 3,303,353 149,604 Halifax Group Plc 1,855,355 483,834 HSBC Holdings Plc 5,628,446 378,690 Lloyds TSB Group Plc 3,902,704 175,110 Royal Bank of Scotland Group Plc 4,368,749 ------------ 20,856,703 ------------ BEVERAGES 2.15% 213,018 Diageo Plc 2,147,429 49,530 Scottish & Newcastle Plc 374,303 ------------ 2,521,732 ------------ BIOTECHNOLOGY 0.24% 19,500 Celltech Group Plc* 274,928 ------------ BUILDING PRODUCTS 0.16% 1,560 Novar Plc 3,405 116,220 Pilkington Plc 189,649 ------------ 193,054 ------------ CHEMICALS 0.50% 22,542 BOC Group Plc 335,146 39,624 Imperial Chemical Industries Plc 247,141 ------------ 582,287 ------------ COMMERCIAL SERVICES & SUPPLIES 1.64% 58,227 Brambles Industries Plc* 277,023 6,591 BTG Plc* 75,813 36,816 Capita Group Plc 233,899 130,182 Chubb Plc 321,009 125,112 Hays Plc 293,989 71,097 Kidde Plc 82,243 140,049 Rentokil Initial Plc 504,806 25,506 Serco Group Plc 130,967 ------------ 1,919,749 ------------ COMMUNICATIONS EQUIPMENT 0.15% 232,011 Marconi Plc 178,362 ------------ CONSTRUCTION & ENGINEERING 0.19% 23,322 AMEC Plc 157,303 23,361 Balfour Beatty Plc 66,076 ------------ 223,379 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- CONSTRUCTION MATERIALS 0.54% 57,330 Hanson Plc $ 444,059 18,954 RMC Group Plc 188,326 ------------ 632,385 ------------ CONTAINERS & PACKAGING 0.18% 41,808 Rexam Plc 215,281 ------------ DIVERSIFIED FINANCIALS 1.78% 54,132 Amvescap Plc 761,629 21,996 Close Brothers Group Plc 258,432 11,895 Man Group Plc 160,459 12,285 Provident Financial Plc 115,024 8,346 Schroders Plc 104,111 52,260 3i Group Plc 686,018 ------------ 2,085,673 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 3.96% 597,948 British Telecommunications Plc 3,660,105 202,722 Cable & Wireless Plc 976,240 ------------ 4,636,345 ------------ ELECTRIC UTILITIES 2.31% 46,137 International Power Plc* 185,373 141,882 National Grid Group Plc 965,201 57,954 Scottish and Southern Energy Plc 558,174 139,698 Scottish Power Plc 992,897 ------------ 2,701,645 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 0.09% 56,238 Spirent Plc 102,374 ------------ FOOD & DRUG RETAILING 2.71% 73,047 Boots Company Plc 731,087 61,542 Safeway Plc 313,772 85,410 Sainsbury Plc 469,223 438,399 Tesco Plc 1,656,514 ------------ 3,170,596 ------------ FOOD PRODUCTS 2.30% 154,635 Cadbury Schweppes Plc 1,049,715 18,993 Tate & Lyle Plc 75,761 183,066 Unilever Plc 1,561,359 ------------ 2,686,835 ------------ GAS UTILITIES 1.30% 276,939 Centrica Plc 907,842 277,719 Lattice Group Plc 616,332 ------------ 1,524,174 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 0.69% 44,772 Amersham Plc 394,521 69,537 Smith & Nephew Plc 363,108 5,772 SSL International Plc 47,931 ------------ 805,560 ------------ HOTELS RESTAURANTS & LEISURE 2.50% 13,260 Airtours Plc 49,527 177,645 Compass Group Plc 1,352,789 80,535 Hilton Group Plc 284,447 62,985 P & 0 Princess Cruises Plc 338,031 See accompanying notes to financial statements. 83 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI UNITED KINGDOM INDEX FUND (CONTINUED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) HOTELS RESTAURANTS & LEISURE (CONTINUED) 14,274 Rank Group Plc $ 47,258 67,041 Six Continents Plc 716,681 15,600 Whitbread Plc 138,030 ------------ 2,926,763 ------------ HOUSEHOLD DURABLES 0.51% 40,911 Barratt Developments Plc 220,750 9,867 Berkeley Group Plc 105,623 18,915 Pace Micro Technology Plc 93,557 60,645 Taylor Woodrow Plc 172,413 ------------ 592,343 ------------ HOUSEHOLD PRODUCTS 0.70% 53,625 Reckitt Benckiser Plc 815,167 ------------ IT CONSULTING & SERVICES 0.40% 41,535 CMG Plc 151,821 31,551 Logica Plc 319,438 ------------ 471,259 ------------ INDUSTRIAL CONGLOMERATES 0.47% 32,331 FKI Plc 82,068 42,822 Smiths Group Plc 464,608 ------------ 546,676 ------------ INSURANCE 4.82% 153,348 CGNU Plc 2,266,575 333,723 Legal & General Group Plc 813,230 146,133 Prudential Plc 1,841,984 104,325 Royal & Sun Alliance Insurance Group Plc 724,839 ------------ 5,646,628 ------------ INTERNET & CATALOG RETAIL 0.56% 74,997 GUS Plc 656,506 ------------ MACHINERY 0.48% 44,070 BBA Group Plc 180,904 8,463 IMI Plc 27,375 271,128 Invensys Plc 357,877 ------------ 566,156 ------------ MARINE 0.18% 62,985 Peninsular & Oriental Steam Navigation Company Plc 211,955 ------------ MEDIA 4.41% 52,221 British Sky Broadcasting Group Plc* 589,687 47,229 Carlton Communications Plc 215,450 20,280 Daily Mail & General Trust 200,030 62,946 EMI Group Plc 374,343 195,429 Granada Plc 422,370 57,135 Pearson Plc 812,168 85,995 Reed International Plc 757,146 73,125 Reuters Group Plc 824,147 125,931 Telewest Communications Plc* 95,441 13,221 United Business Media Plc 105,090 76,323 WPP Group Plc 761,661 ------------ 5,157,533 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- METALS & MINING 2.12% 168,051 BHP Billiton Plc $ 794,651 218,790 Corus Group Plc 203,107 12,090 Johnson Matthey Plc 175,365 72,501 Rio Tinto Plc 1,304,017 ------------ 2,477,140 ------------ MULTI-UTILITIES 0.24% 30,186 United Utilities Plc 275,844 ------------ MULTILINE RETAIL 1.48% 102,414 Kingfisher Plc 554,840 217,854 Marks & Spencer Plc 854,773 23,283 Next Plc 319,145 ------------ 1,728,758 ------------ OIL & GAS 14.89% 261,066 BG Group Plc 1,083,014 1,249,014 BP Plc 10,589,356 698,217 Shell Transport & Trading Company Plc 5,752,498 ------------ 17,424,868 ------------ PAPER & FOREST PRODUCTS 0.16% 27,963 Bunzl Plc 184,752 ------------ PHARMACEUTICALS 13.00% 119,964 AstraZeneca Plc 5,789,239 355,446 GlaxoSmithKline Plc 9,424,700 ------------ 15,213,939 ------------ REAL ESTATE 1.46% 35,100 British Land Company Plc 254,563 46,878 Canary Wharf Finance Plc* 351,372 40,404 Hammerson Plc 289,807 50,739 Land Securities Plc 662,004 27,768 Slough Estates Plc 147,214 ------------ 1,704,960 ------------ ROAD & RAIL 0.31% 35,841 FirstGroup Plc 186,115 36,777 Railtrack Group Plc 171,771 ------------ 357,886 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.28% 81,705 ARM Holdings Plc* 328,281 ------------ SOFTWARE 0.35% 41,028 Misys Plc 180,319 78,117 Sage Group Plc 235,682 ------------ 416,001 ------------ SPECIALTY RETAIL 0.41% 149,526 Dixons Group Plc 480,406 ------------ TOBACCO 1.35% 126,321 British American Tobacco Plc 1,079,217 41,145 Imperial Tobacco Group Plc 506,690 ------------ 1,585,907 ------------ See accompanying notes to financial statements. 84 AUGUST 31, 2001 PORTFOLIO OF INVESTMENTS iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI UNITED KINGDOM INDEX FUND (CONCLUDED) -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) TRADING COMPANIES & DISTRIBUTORS 0.43% 24,882 Electrocomponents Plc $ 190,201 42,900 Wolseley Plc 319,533 ------------ 509,734 ------------ TRANSPORTATION INFRASTRUCTURE 0.93% 48,204 Associated British Ports Holdings Plc 308,347 84,123 BAA Plc 782,761 ------------ 1,091,108 ------------ WATER UTILITIES 0.46% 21,996 AWG Plc 185,369 32,136 Severn Trent Plc 351,930 ------------ 537,299 ------------ WIRELESS TELECOMMUNICATION SERVICES 6.97% 4,090,437 Vodafone Group Plc 8,158,121 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $137,238,200) 116,985,738 ------------ NO. OF SHARES SECURITY VALUE --------- -------- ----- COMMON STOCK - NON-BASKET 0.05% AUTO COMPONENTS 0.00% 53,350 Ti Automotive Ltd** $ -- ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 0.00% 11 British Telecommunications Plc 67 ------------ MULTILINE RETAIL 0.04% 14 Kingfisher Plc 77 112,671 Woolworths Group Plc 52,706 ------------ 52,783 ------------ WATER UTILITIES 0.01% 6,774,768 AWG Plc - Redemption Shares 9,336 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $59,207) 62,186 ------------ TOTAL INVESTMENTS (COST $137,297,407)+ 100.00% $117,047,924 ======= ============ ---------------- * Non-income producing security. **Fair valued security. + Aggregate cost for Federal income tax purposes is $139,916,536. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 5,431,104 Excess of tax cost over value (28,299,716) ------------ $(22,868,612) ============ See accompanying notes to financial statements. 85 AUGUST 31, 2001 STATEMENTS OF ASSETS AND LIABILITIES 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 cost .................................. $ 56,239,965 $ 11,306,584 $ 10,969,717 $ 20,935,462 ------------ ------------ ------------ ------------ Foreign currency, at cost ............................. $ 34,565 $ 4,108 $ 12,469 $ 25 ------------ ------------ ------------ ------------ Investments, at value ................................. $ 57,218,040 $ 11,451,253 $ 9,887,642 $ 13,833,218 Foreign currency, at value ............................ 34,251 4,093 12,455 23 Cash .................................................. 24,688 12,787 12,222 127,263 Cash collateral for securities loaned (Note 5) ........ 2,830,498 952,050 268,260 -- Dividends receivable .................................. 222,646 3,742 27,763 82,017 Interest receivable ................................... 702 695 458 185 Receivable from investment adviser .................... -- 2,061 2,903 909 Receivable for securities sold ........................ 387,765 -- -- -- Assets for in-kind redemptions ........................ -- -- -- -- Prepaid expenses ...................................... 2,351 475 386 787 ------------ ------------ ------------ ------------ Total assets ....................................... 60,720,941 12,427,156 10,212,089 14,044,402 ------------ ------------ ------------ ------------ LIABILITIES Payable for Fund shares redeemed ...................... -- -- -- -- Payable for securities loaned (Note 5) ................ 2,830,498 952,050 268,260 -- Advisory fee payable .................................. 8,551 -- -- -- Administration fee payable ............................ 7,583 1,478 1,266 1,957 Distribution fee payable .............................. 12,635 2,461 2,109 3,261 Custody fee payable ................................... 15,680 2,001 1,480 10,633 Accrued expenses ...................................... 34,224 21,839 21,293 24,989 Advances under loan arrangement ....................... 500,000 -- -- -- ------------ ------------ ------------ ------------ Total liabilities .................................. 3,409,171 979,829 294,408 40,840 ------------ ------------ ------------ ------------ NET ASSETS Capital stock, $0.001 par value ....................... 6,200 1,400 840 1,250 Paid-in capital ....................................... 64,627,011 14,099,249 13,568,071 23,748,569 Undistributed net investment income/(loss) ............ (49,100) (1,923) (99,277) (190,859) Undistributed net realized gain/(loss) on investments . (8,242,439) (2,796,269) (2,469,406) (2,445,637) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... 970,098 144,870 (1,082,547) (7,109,761) ------------ ------------ ------------ ------------ Net Assets ............................................ $ 57,311,770 $ 11,447,327 $ 9,917,681 $ 14,003,562 ============ ============ ============ ============ Shares of common stock issued and outstanding (Note 4) 6,200,030 1,400,030 840,030 1,250,000 ============ ============ ============ ============ Net Asset Value Per Share ............................. $ 9.24 $ 8.18 $ 11.81 $ 11.20 ============ ============ ============ ============
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI CANADA EMU FRANCE GERMANY INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------- ------------ ------------- ASSETS Investments, at cost .................................. $ 33,670,333 $ 104,905,402 $ 63,233,406 $ 159,973,959 ------------ ------------- ------------ ------------- Foreign currency, at cost ............................. $ 30,940 $ 223,293 $ 21,643 $ 1,482 ------------ ------------- ------------ ------------- Investments, at value ................................. $ 28,845,904 $ 90,381,356 $ 58,507,542 $ 118,121,803 Foreign currency, at value ............................ 30,790 222,989 21,616 1,479 Cash .................................................. 33,926 54,050 67,582 40,057 Cash collateral for securities loaned (Note 5) ........ 757,100 -- 5,995,124 25,126,061 Dividends receivable .................................. 30,337 258,615 80,007 488,054 Interest receivable ................................... 1,098 765 2,878 6,647 Receivable from investment adviser .................... -- -- -- -- Receivable for securities sold ........................ -- -- -- -- Assets for in-kind redemptions ........................ -- -- 3,899,660 -- Prepaid expenses ...................................... 831 2,207 2,990 6,181 ------------ ------------- ------------ ------------- Total assets ....................................... 29,699,986 90,919,982 68,577,399 143,790,282 ------------ ------------- ------------ ------------- LIABILITIES Payable for Fund shares redeemed ...................... -- -- 3,903,038 -- Payable for securities loaned (Note 5) ................ 757,100 -- 5,995,124 25,126,061 Advisory fee payable .................................. 909 16,529 13,144 31,970 Administration fee payable ............................ 3,836 11,994 8,201 15,828 Distribution fee payable .............................. 6,392 19,986 13,667 26,379 Custody fee payable ................................... 11,382 28,197 9,665 11,429 Accrued expenses ...................................... 31,608 63,808 32,634 53,413 Advances under loan arrangement ....................... -- -- -- -- ------------ ------------- ------------ ------------- Total liabilities .................................. 811,227 140,514 9,975,473 25,265,080 ------------ ------------- ------------ ------------- NET ASSETS Capital stock, $0.001 par value ....................... 2,700 1,600 3,001 7,801 Paid-in capital ....................................... 35,237,476 110,971,733 67,265,605 177,379,278 Undistributed net investment income/(loss) ............ -- (17,943) (12,576) (36,766) Undistributed net realized gain/(loss) on investments . (1,526,678) (5,659,327) (3,924,342) (16,976,183) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (4,824,739) (14,516,595) (4,729,762) (41,848,928) ------------ ------------- ------------ ------------- Net Assets ............................................ $ 28,888,759 $ 90,779,468 $ 58,601,926 $ 118,525,202 ============ ============= ============ ============= Shares of common stock issued and outstanding (Note 4) 2,700,030 1,600,000 3,001,000 7,801,000 ============ ============= ============ ============= Net Asset Value Per Share ............................. $ 10.70 $ 56.74 $ 19.53 $ 15.19 ============ ============= ============ =============
iSHARES MSCI iSHARES MSCI iSHARES MSCI HONG KONG ITALY JAPAN INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------- ASSETS Investments, at cost .................................. $ 55,935,308 $ 37,456,952 $ 641,532,000 ------------ ------------ ------------- Foreign currency, at cost ............................. $ 144,094 $ 26,156 $ 187,314 ------------ ------------ ------------- Investments, at value ................................. $ 52,636,975 $ 34,652,240 $ 527,723,573 Foreign currency, at value ............................ 144,094 26,127 196,637 Cash .................................................. 59,820 37,424 374,130 Cash collateral for securities loaned (Note 5) ........ 4,983,783 7,155,844 84,703,790 Dividends receivable .................................. 172,398 -- 118,993 Interest receivable ................................... 1,032 12,030 18,962 Receivable from investment adviser .................... -- -- -- Receivable for securities sold ........................ -- -- -- Assets for in-kind redemptions ........................ -- -- -- Prepaid expenses ...................................... 2,786 1,592 27,884 ------------ ------------ ------------- Total assets ....................................... 58,000,888 41,885,257 613,163,969 ------------ ------------ ------------- LIABILITIES Payable for Fund shares redeemed ...................... -- -- -- Payable for securities loaned (Note 5) ................ 4,983,783 7,155,844 84,703,790 Advisory fee payable .................................. 13,238 3,692 185,254 Administration fee payable ............................ 7,027 4,561 70,330 Distribution fee payable .............................. 11,712 7,602 117,226 Custody fee payable ................................... 5,013 5,182 33,277 Accrued expenses ...................................... 34,023 26,487 155,359 Advances under loan arrangement ....................... -- -- -- ------------ ------------ ------------- Total liabilities .................................. 5,054,796 7,203,368 85,265,236 ------------ ------------ ------------- NET ASSETS Capital stock, $0.001 par value ....................... 5,926 1,950 58,201 Paid-in capital ....................................... 66,280,392 40,903,485 710,823,557 Undistributed net investment income/(loss) ............ (98) (8,931) (843,085) Undistributed net realized gain/(loss) on investments . (10,041,791) (3,409,875) (68,344,069) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (3,298,337) (2,804,740) (113,795,871) ------------ ------------ ------------- Net Assets ............................................ $ 52,946,092 $ 34,681,889 $ 527,898,733 ============ ============ ============= Shares of common stock issued and outstanding (Note 4) 5,926,000 1,950,030 58,201,000 ============ ============ ============= Net Asset Value Per Share ............................. $ 8.93 $ 17.79 $ 9.07 ============ ============ =============
See accompanying notes to financial statements. 86-87 AUGUST 31, 2001 STATEMENTS OF ASSETS AND LIABILITIES (concluded) iSHARES, INC. --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI MALAYSIA (FREE) MEXICO (FREE) NETHERLANDS SINGAPORE (FREE) INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------ ASSETS Investments, at cost ................................. $ 60,405,402 $ 47,216,749 $ 28,257,423 $ 84,188,231 ------------ ------------ ------------ ------------ Foreign currency, at cost ............................ $ 1,881,863 $ 58,182 $ 51,615 $ 97,930 ------------ ------------ ------------ ------------ Investments, at value ................................ $ 80,666,924 $ 45,749,853 $ 24,037,933 $ 73,264,199 Foreign currency, at value ........................... 1,881,863 57,206 51,606 98,500 Cash ................................................. -- -- 25,635 18,603 Cash collateral for securities loaned (Note 5) ....... -- 12,215,534 1,385,896 18,708,492 Dividends receivable ................................. 52,486 331 106,096 64,933 Interest receivable .................................. 262 9,950 804 13,589 Receivable from investment adviser ................... -- -- -- -- Receivable for securities sold ....................... -- 2,074,416 -- 4,454,864 Prepaid expenses ..................................... 2,850 2,119 1,409 2,245 ------------ ------------ ------------ ------------ Total assets ..................................... 82,604,385 60,109,409 25,609,379 96,625,425 ------------ ------------ ------------ ------------ LIABILITIES Bank Overdraft ....................................... 488,531 26,679 -- -- Payable for securities purchased ..................... -- 1,542,262 -- 3,924,428 Payable for Fund shares redeemed ..................... 1,133,157 -- -- -- Payable for securities loaned (Note 5) ............... -- 12,215,534 1,385,896 18,708,492 Payable for foreign withholding tax .................. -- -- -- -- Advisory fee payable ................................. 15,665 6,398 2,537 16,357 Administration fee payable ........................... 10,072 6,081 3,166 9,371 Distribution fee payable ............................. 16,780 10,135 5,276 15,617 Custody fee payable .................................. 25,592 14,096 2,688 8,875 Accrued expenses ..................................... 37,122 32,717 25,739 38,652 Advances under loan arrangement ...................... -- 200,000 -- 200,000 ------------ ------------ ------------ ------------ Total liabilities ................................ 1,726,919 14,053,902 1,425,302 22,921,792 ------------ ------------ ------------ ------------ NET ASSETS Capital stock, $0.001 par value ...................... 15,825 3,000 1,301 13,800 Paid-in capital ...................................... 84,426,249 48,481,174 31,745,550 90,003,992 Undistributed net investment income/(loss) ........... (2,667) 93,695 32,593 (3,575) Undistributed net realized gain/(loss) on investments (23,823,463) (1,054,495) (3,376,682) (5,394,877) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... 20,261,522 (1,467,867) (4,218,685) (10,915,707) ------------ ------------ ------------ ------------ Net Assets ........................................... $ 80,877,466 $ 46,055,507 $ 24,184,077 $ 73,703,633 ============ ============ ============ ============ Shares of common stock issued and outstanding (Note 4) 15,825,030 3,000,030 1,301,000 13,800,030 ============ ============ ============ ============ Net Asset Value Per Share ............................ $ 5.11 $ 15.35 $ 18.59 $ 5.34 ============ ============ ============ ============
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI SOUTH KOREA SPAIN SWEDEN SWITZERLAND INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------ ------------ ASSETS Investments, at cost ................................. $ 40,038,332 $ 31,693,271 $ 15,872,949 $ 36,786,742 ------------ ------------ ------------ ------------ Foreign currency, at cost ............................ $ 1 $ 1,633 $ 1,593 $ 3,585 ------------ ------------ ------------ ------------ Investments, at value ................................ $ 37,711,060 $ 27,132,544 $ 10,603,669 $ 32,115,002 Foreign currency, at value ........................... 1 1,639 1,665 3,545 Cash ................................................. -- 1,123 -- -- Cash collateral for securities loaned (Note 5) ....... -- 4,069,684 601,020 144,670 Dividends receivable ................................. 4,236 33,880 -- 237,050 Interest receivable .................................. 972 2,150 190 555 Receivable from investment adviser ................... -- -- 2,483 -- Receivable for securities sold ....................... 855,478 268,755 233,580 858,047 Prepaid expenses ..................................... 1,016 1,265 566 1,555 ------------ ------------ ------------ ------------ Total assets ..................................... 38,572,763 31,511,040 11,443,173 33,360,424 ------------ ------------ ------------ ------------ LIABILITIES Bank Overdraft ....................................... 32,354 -- 18,686 29,185 Payable for securities purchased ..................... 701,654 105,220 166,375 756,976 Payable for Fund shares redeemed ..................... -- -- -- -- Payable for securities loaned (Note 5) ............... -- 4,069,684 601,020 144,670 Payable for foreign withholding tax .................. -- -- -- -- Advisory fee payable ................................. 8,074 3,175 -- 4,448 Administration fee payable ........................... 4,417 3,485 1,430 4,218 Distribution fee payable ............................. 7,362 5,808 2,384 7,029 Custody fee payable .................................. 16,654 2,746 1,475 3,460 Accrued expenses ..................................... 34,895 23,369 21,813 26,101 Advances under loan arrangement ...................... -- 100,000 -- -- ------------ ------------ ------------ ------------ Total liabilities ................................ 805,410 4,313,487 813,183 976,087 ------------ ------------ ------------ ------------ NET ASSETS Capital stock, $0.001 par value ...................... 2,850 1,275 825 2,501 Paid-in capital ...................................... 43,812,017 34,126,984 19,425,785 39,671,504 Undistributed net investment income/(loss) ........... (41,734) (11,327) (6,275) 4,641 Undistributed net realized gain/(loss) on investments (3,678,540) (2,357,297) (3,521,005) (2,616,120) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (2,327,240) (4,562,082) (5,269,340) (4,678,189) ------------ ------------ ------------ ------------ Net Assets ........................................... $ 37,767,353 $ 27,197,553 $ 10,629,990 $ 32,384,337 ============ ============ ============ ============ Shares of common stock issued and outstanding (Note 4) 2,850,000 1,275,030 825,030 2,501,000 ============ ============ ============ ============ Net Asset Value Per Share ............................ $ 13.25 $ 21.33 $ 12.88 $ 12.95 ============ ============ ============ ============
iSHARES MSCI iSHARES MSCI TAIWAN UNITED KINGDOM INDEX FUND INDEX FUND ------------- ------------- ASSETS Investments, at cost ................................. $ 147,126,269 $ 137,297,407 ------------- ------------- Foreign currency, at cost ............................ $ 636,394 $ 271,182 ------------- ------------- Investments, at value ................................ $ 110,334,045 $ 117,047,924 Foreign currency, at value ........................... 636,870 270,936 Cash ................................................. 169,059 138,288 Cash collateral for securities loaned (Note 5) ....... -- -- Dividends receivable ................................. 230,471 662,394 Interest receivable .................................. 1,635 2,677 Receivable from investment adviser ................... -- -- Receivable for securities sold ....................... -- -- Prepaid expenses ..................................... 4,196 5,547 ------------- ------------- Total assets ..................................... 111,376,276 118,127,766 ------------- ------------- LIABILITIES Bank Overdraft ....................................... -- -- Payable for securities purchased ..................... 277,252 116,679 Payable for Fund shares redeemed ..................... -- -- Payable for securities loaned (Note 5) ............... -- -- Payable for foreign withholding tax .................. 123,266 -- Advisory fee payable ................................. 23,903 35,285 Administration fee payable ........................... 13,134 15,310 Distribution fee payable ............................. 21,898 25,516 Custody fee payable .................................. 57,062 3,495 Accrued expenses ..................................... 73,533 48,747 Advances under loan arrangement ...................... -- -- ------------- ------------- Total liabilities ................................ 590,048 245,032 ------------- ------------- NET ASSETS Capital stock, $0.001 par value ...................... 12,300 7,801 Paid-in capital ...................................... 164,063,217 150,415,947 Undistributed net investment income/(loss) ........... (11,996) 56,245 Undistributed net realized gain/(loss) on investments (16,486,977) (12,354,419) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (36,790,316) (20,242,840) ------------- ------------- Net Assets ........................................... $ 110,786,228 $ 117,882,734 ============= ============= Shares of common stock issued and outstanding (Note 4) 12,300,000 7,801,000 ============= ============= Net Asset Value Per Share ............................ $ 9.01 $ 15.11 ============= =============
See accompanying notes to financial statements. 88-89 FOR THE YEAR ENDED AUGUST 31, 2001 STATEMENTS OF OPERATIONS 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+ ............................................ $ 1,827,366 $ 269,399 $ 254,373 $ 891,318 Interest .............................................. 9,927 1,336 769 1,044 Securities lending income ............................. 8,905 7,334 6,953 -- ----------- ----------- ----------- ----------- Total investment income ............................. 1,846,198 278,069 262,095 892,362 ----------- ----------- ----------- ----------- EXPENSES: (NOTE 2) Advisory fees ......................................... 113,828 -- -- 9,271 Administration fees ................................... 82,034 16,537 16,152 24,693 Distribution fees ..................................... 136,549 27,523 26,887 41,100 Custodian fees and expenses ........................... 36,150 12,756 10,233 44,180 Transfer agent fees ................................... 10,672 7,960 7,749 6,798 Directors' fees ....................................... 7,119 1,457 1,380 2,276 Professional fees ..................................... 35,282 21,515 20,886 24,011 Federal and state registration fees ................... 191 436 -- 558 Amortization of deferred organization costs ........... 18,878 14,025 6,124 -- Insurance ............................................. 3,807 723 687 229 Printing .............................................. 7,200 1,323 1,053 2,217 Amex listing fee ...................................... -- 40 -- 5 Interest expense ...................................... 263 51 43 66 Miscellaneous expenses ................................ 6,832 2,613 2,475 7,353 ----------- ----------- ----------- ----------- Total expenses ...................................... 458,805 106,959 93,669 162,757 Less reimbursements from investment adviser ......... -- (14,481) (3,325) -- ----------- ----------- ----------- ----------- Net expenses ........................................ 458,805 92,478 90,344 162,757 ----------- ----------- ----------- ----------- Net investment income/(loss) .......................... 1,387,393 185,591 171,751 729,605 ----------- ----------- ----------- ----------- 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 ............... (4,633,392) (1,414,276) (1,316,153) (1,717,337) Net realized gain/(loss) on investments on in-kind redemptions ................................. 432,349 -- (522,188) -- Net realized gain/(loss) on foreign currency related transactions ................................ (116,174) (3,288) (10,082) (217,678) ----------- ----------- ----------- ----------- (4,317,217) (1,417,564) (1,848,423) (1,935,015) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 188,166 2,129,043 527,758 (6,758,566) ----------- ----------- ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (4,129,051) 711,479 (1,320,665) (8,693,581) ----------- ----------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(2,741,658) $ 897,070 $(1,148,914) $(7,963,976) =========== =========== =========== =========== ---------------------------------------------------------------------------------------------------------------------------------- +Net of foreign withholding tax of: ..................... $ 35,601 $ 47,541 $ 44,890 $ 89,715 ----------------------------------------------------------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI CANADA EMU FRANCE GERMANY INDEX FUND INDEX FUND INDEX FUND INDEX FUND ----------- ------------ ------------ ------------ INVESTMENT INCOME: Dividends+ ............................................ $ 262,480 $ 1,117,808 $ 818,838 $ 2,548,255 Interest .............................................. 2,079 8,262 7,864 -- Securities lending income ............................. 4,314 -- 39,498 140,103 ----------- ------------ ------------ ------------ Total investment income ............................. 268,873 1,126,070 866,200 2,688,358 ----------- ------------ ------------ ------------ EXPENSES: (NOTE 2) Advisory fees ......................................... 3,760 86,333 177,550 406,730 Administration fees ................................... 31,647 86,065 115,968 220,636 Distribution fees ..................................... 52,667 143,207 193,060 367,265 Custodian fees and expenses ........................... 21,913 45,552 45,007 67,597 Transfer agent fees ................................... 9,719 10,729 13,024 22,599 Directors' fees ....................................... 2,778 8,280 9,903 19,489 Professional fees ..................................... 24,718 42,393 39,296 59,960 Federal and state registration fees ................... 4,164 15,608 -- 473 Amortization of deferred organization costs ........... 13,319 -- 36,559 34,733 Insurance ............................................. 1,189 2,308 5,692 11,314 Printing .............................................. 2,889 11,271 8,107 15,946 Amex listing fee ...................................... -- 172 -- 132 Interest expense ...................................... 129 406 279 528 Miscellaneous expenses ................................ 8,069 28,853 4,235 6,608 ----------- ------------ ------------ ------------ Total expenses ...................................... 176,961 481,177 648,680 1,234,010 Less reimbursements from investment adviser ......... -- -- -- -- ----------- ------------ ------------ ------------ Net expenses ........................................ 176,961 481,177 648,680 1,234,010 ----------- ------------ ------------ ------------ Net investment income/(loss) .......................... 91,912 644,893 217,520 1,454,348 ----------- ------------ ------------ ------------ 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 ............... (792,641) (5,651,185) (3,819,839) (14,331,600) Net realized gain/(loss) on investments on in-kind redemptions ................................. -- -- 2,988,888 680,615 Net realized gain/(loss) on foreign currency related transactions ................................ (2,548) (6,856) (6,431) (44,546) ----------- ------------ ------------ ------------ (795,189) (5,658,041) (837,382) (13,695,531) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (8,092,003) (12,446,864) (22,986,821) (29,186,710) ----------- ------------ ------------ ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (8,887,192) (18,104,905) (23,824,203) (42,882,241) ----------- ------------ ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(8,795,280) $(17,460,012) $(23,606,683) $(41,427,893) =========== ============ ============ ============ ----------------------------------------------------------------------------------------------------------------------------------- +Net of foreign withholding tax of: ..................... $ 46,320 $ 127,827 $ 28,036 $ 289,529 -----------------------------------------------------------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI HONG KONG ITALY JAPAN INDEX FUND INDEX FUND INDEX FUND ------------ ------------ ------------- INVESTMENT INCOME: Dividends+ ............................................ $ 1,907,614 $ 759,120 $ 4,385,145 Interest .............................................. 3,438 4,408 17,365 Securities lending income ............................. 16,908 113,304 157,326 ------------ ------------ ------------- Total investment income ............................. 1,927,960 876,832 4,559,836 ------------ ------------ ------------- EXPENSES: (NOTE 2) Advisory fees ......................................... 153,909 86,114 2,011,201 Administration fees ................................... 98,077 65,865 942,137 Distribution fees ..................................... 163,260 109,650 1,568,286 Custodian fees and expenses ........................... 37,777 27,595 177,597 Transfer agent fees ................................... 19,733 9,531 50,134 Directors' fees ....................................... 11,155 5,737 78,636 Professional fees ..................................... 36,365 29,849 233,030 Federal and state registration fees ................... 1,738 1,349 3,401 Amortization of deferred organization costs ........... 9,680 18,412 76,651 Insurance ............................................. 5,076 3,464 51,834 Printing .............................................. 7,351 4,249 69,842 Amex listing fee ...................................... 9 48 -- Interest expense ...................................... 241 156 2,402 Miscellaneous expenses ................................ 4,182 6,405 4,290 ------------ ------------ ------------- Total expenses ...................................... 548,553 368,424 5,269,441 Less reimbursements from investment adviser ......... -- -- -- ------------ ------------ ------------- Net expenses ........................................ 548,553 368,424 5,269,441 ------------ ------------ ------------- Net investment income/(loss) .......................... 1,379,407 508,408 (709,605) ------------ ------------ ------------- 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 ............... (4,146,044) (3,209,421) (63,778,905) Net realized gain/(loss) on investments on in-kind redemptions ................................. 842,652 1,196,375 6,939,693 Net realized gain/(loss) on foreign currency related transactions ................................ 43 (10,672) (252,980) ------------ ------------ ------------- (3,303,349) (2,023,718) (57,092,192) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (22,064,345) (6,548,102) (218,815,571) ------------ ------------ ------------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (25,367,694) (8,571,820) (275,907,763) ------------ ------------ ------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(23,988,287) $ (8,063,412) $(276,617,368) ============ ============ ============= ------------------------------------------------------------------------------------------------------------------- +Net of foreign withholding tax of: ..................... $ -- $ 126,703 $ 773,849 -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 90-91 FOR THE YEAR ENDED AUGUST 31, 2001 STATEMENTS OF OPERATIONS (concluded) iSHARES, INC. --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI MALAYSIA (FREE) MEXICO (FREE) NETHERLANDS SINGAPORE (FREE) INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ----------- ----------- ------------ INVESTMENT INCOME: Dividends+ ............................................ $ 1,711,054 $ 693,135 $ 699,730 $ 1,257,649 Interest .............................................. 15,166 1,540 3,793 1,154 Securities lending income ............................. -- 68,004 2,774 47,906 ------------ ----------- ----------- ------------ Total investment income ............................. 1,726,220 762,679 706,297 1,306,709 ------------ ----------- ----------- ------------ EXPENSES: (NOTE 2) Advisory fees ......................................... 179,613 32,399 60,956 153,096 Administration fees ................................... 127,986 58,484 48,662 98,430 Distribution fees ..................................... 213,047 97,341 81,006 163,869 Custodian fees and expenses ........................... 88,643 65,014 20,141 36,634 Transfer agent fees ................................... 14,046 12,524 9,504 18,922 Directors' fees ....................................... 11,292 5,311 4,344 8,311 Professional fees ..................................... 47,357 30,927 27,953 34,999 Federal and state registration fees ................... 741 2,210 844 7,569 Amortization of deferred organization costs ........... 10,263 10,369 8,683 12,323 Insurance ............................................. 6,601 2,684 2,032 5,156 Printing .............................................. 9,182 5,496 3,710 6,994 Amex listing fee ...................................... 55 39 79 -- Interest expenses ..................................... 341 200 108 321 Miscellaneous expenses ................................ 6,684 4,067 4,159 3,977 ------------ ----------- ----------- ------------ Total expenses ...................................... 715,851 327,065 272,181 550,601 Less reimbursements from investment adviser ......... -- -- -- -- ------------ ----------- ----------- ------------ Net expenses ........................................ 715,851 327,065 272,181 550,601 ------------ ----------- ----------- ------------ Net investment income/(loss) .......................... 1,010,369 435,614 434,116 756,108 ------------ ----------- ----------- ------------ 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 ............... (13,090,241) (877,181) (3,131,940) (4,003,423) Net realized gain/(loss) on investments on in-kind redemptions ................................. -- 4,144,841 725,722 2,510,598 Net realized gain/(loss) on foreign currency related transactions ................................ (2,805) (6,083) (35,713) (15,817) ------------ ----------- ----------- ------------ (13,093,046) 3,261,577 (2,441,931) (1,508,642) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (3,810,341) (6,058,723) (4,686,056) (20,518,141) ------------ ----------- ----------- ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (16,903,387) (2,797,146) (7,127,987) (22,026,783) ------------ ----------- ----------- ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(15,893,018) $(2,361,532) $(6,693,871) $(21,270,675) ============ =========== =========== ============ ----------------------------------------------------------------------------------------------------------------------------------- +Net of foreign withholding tax of: ..................... $ -- $ 57,640 $ 110,044 $ -- -----------------------------------------------------------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI SOUTH KOREA SPAIN SWEDEN SWITZERLAND INDEX FUND INDEX FUND INDEX FUND INDEX FUND ----------- ----------- ------------ ------------ INVESTMENT INCOME: Dividends+ ............................................ $ 311,080 $ 542,529 $ 190,770 $ 450,542 Interest .............................................. 3,690 5,701 1,544 2,161 Securities lending income ............................. -- 17,292 10,976 7,873 ----------- ----------- ------------ ------------ Total investment income ............................. 314,770 565,522 203,290 460,576 ----------- ----------- ------------ ------------ EXPENSES: (NOTE 2) Advisory fees ......................................... 22,313 63,808 7,760 72,584 Administration fees ................................... 29,066 51,020 24,633 61,178 Distribution fees ..................................... 48,377 84,938 41,017 101,847 Custodian fees and expenses ........................... 35,746 21,122 17,114 27,094 Transfer agent fees ................................... 7,681 9,819 8,964 10,329 Directors' fees ....................................... 2,795 4,463 1,953 5,420 Professional fees ..................................... 27,327 27,253 20,461 29,804 Federal and state registration fees ................... 6,806 -- -- -- Amortization of deferred organization costs ........... -- 15,221 9,910 23,399 Insurance ............................................. 3,170 2,491 1,400 2,580 Printing .............................................. 4,203 3,221 1,354 4,483 Amex listing fee ...................................... 73 -- -- 70 Interest expenses ..................................... 153 119 48 145 Miscellaneous expenses ................................ 3,868 1,915 3,204 3,203 ----------- ----------- ------------ ------------ Total expenses ...................................... 191,578 285,390 137,818 342,136 Less reimbursements from investment adviser ......... -- -- -- -- ----------- ----------- ------------ ------------ Net expenses ........................................ 191,578 285,390 137,818 342,136 ----------- ----------- ------------ ------------ Net investment income/(loss) .......................... 123,192 280,132 65,472 118,440 ----------- ----------- ------------ ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ............... (2,854,544) (1,945,425) (3,624,400) (2,201,341) Net realized gain/(loss) on investments on in-kind redemptions ................................. -- 631,005 (577,092) (168,745) Net realized gain/(loss) on foreign currency related transactions ................................ (45,822) (26,222) (32,941) 17,104 ----------- ----------- ------------ ------------ (2,900,366) (1,340,642) (4,234,433) (2,352,982) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (1,648,141) (2,121,855) (6,548,770) (3,937,865) ----------- ----------- ------------ ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (4,548,507) (3,462,497) (10,783,203) (6,290,847) ----------- ----------- ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(4,425,315) $(3,182,365) $(10,717,731) $ (6,172,407) =========== =========== ============ ============ ------------------------------------------------------------------------------------------------------------------------------------ +Net of foreign withholding tax of: ..................... $ 65,291* $ 92,312 $ 33,665 $ 77,719 ------------------------------------------------------------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI TAIWAN UNITED KINGDOM INDEX FUND INDEX FUND ------------ ------------ INVESTMENT INCOME: Dividends+ ............................................ $ 614,037 $ 3,354,129 Interest .............................................. 31,806 26,089 Securities lending income ............................. -- -- ------------ ------------ Total investment income ............................. 645,843 3,380,218 ------------ ------------ EXPENSES: (NOTE 2) Advisory fees ......................................... 181,157 432,898 Administration fees ................................... 131,529 210,427 Distribution fees ..................................... 218,895 350,308 Custodian fees and expenses ........................... 198,956 29,537 Transfer agent fees ................................... 7,914 14,855 Directors' fees ....................................... 12,300 17,572 Professional fees ..................................... 56,298 62,196 Federal and state registration fees ................... 27,929 -- Amortization of deferred organization costs ........... -- 22,089 Insurance ............................................. 3,170 8,385 Printing .............................................. 15,721 16,731 Amex listing fee ...................................... 545 96 Interest expenses ..................................... 471 518 Miscellaneous expenses ................................ 11,938 11,424 ------------ ------------ Total expenses ...................................... 866,823 1,177,036 Less reimbursements from investment adviser ......... -- -- ------------ ------------ Net expenses ........................................ 866,823 1,177,036 ------------ ------------ Net investment income/(loss) .......................... (220,980) 2,203,182 ------------ ------------ 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 ............... (15,093,927) (10,498,622) Net realized gain/(loss) on investments on in-kind redemptions ................................. -- (2,792,447) Net realized gain/(loss) on foreign currency related transactions ................................ (18,260) (6,140) ------------ ------------ (15,112,187) (13,297,209) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (33,745,530) (12,060,808) ------------ ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (48,857,717) (25,358,017) ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(49,078,697) $(23,154,835) ============ ============ ----------------------------------------------------------------------------------------------- +Net of foreign withholding tax of: ..................... $ 824,994* $ 365,818 ----------------------------------------------------------------------------------------------- * Includes foreign taxes paid on stock dividends of $3,189 and $531,750 for the iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, respectively. See Note 1.
See accompanying notes to financial statements. 92-93 STATEMENTS OF CHANGES IN NET ASSETS iSHARES, INC. --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI AUSTRALIA AUSTRIA INDEX FUND INDEX FUND ------------------------------- ------------------------------- For the For the For the For the year year year year ended ended ended ended 08/31/01 08/31/00 08/31/01 08/31/00 ------------ ------------ ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 1,387,393 $ 1,359,481 $ (185,591) $ 56,386 Net realized gain/(loss) on investments and foreign currency related transactions ... (4,317,217) (2,240,018) (1,417,564) (1,051,556) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 188,166 2,071,775 2,129,043 (1,077,240) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (2,741,658) 1,191,238 897,070 (2,072,410) ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (1,236,366) (1,359,481) (185,591) (56,386) In excess of net investment income ........ -- (25,516) (4,555) (6,475) Net realized gains ........................ -- -- -- -- In excess of net realized gains ........... -- -- -- -- Return of capital ......................... (140,041) (156,130) (258) -- ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ........................... (1,376,407) (1,541,127) (190,404) (62,861) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 13,421,561 12,114,567 -- 2,349,160 Cost of shares redeemed ................... (13,566,216) (4,147,344) -- (2,249,507) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . (144,655) 7,967,223 -- 99,653 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ... (4,262,720) 7,617,334 706,666 (2,035,618) NET ASSETS: Beginning of period ....................... 61,574,490 53,957,156 10,740,661 12,776,279 ------------ ------------ ------------ ------------ End of period ............................. $ 57,311,770 $ 61,574,490 $ 11,447,327 $ 10,740,661 ============ ============ ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ (49,100) $ (84,138) $ (1,923) $ 5,920 ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................... 1,400,000 1,200,000 -- 300,000 Shares redeemed ........................... (1,400,000) (400,000) -- (300,000) ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ......... -- 800,000 -- -- ============ ============ ============ ============
iSHARES MSCI iSHARES MSCI BELGIUM BRAZIL (FREE) INDEX FUND INDEX FUND -------------------------------- ------------------------------- For the For the For the For the year year year period ended ended ended 07/11/00*- 08/31/01 08/31/00 08/31/01 08/31/00 ------------ ------------ ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 171,751) $ 173,772 $ 729,605 $ 25,270 Net realized gain/(loss) on investments and foreign currency related transactions ... (1,848,423) (472,104) (1,935,015) (416,132) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 527,758 (1,751,697) (6,758,566) (351,195) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (1,148,914) (2,050,029) (7,963,976) (742,057) ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (171,751) (173,772) (694,519) (20,804) In excess of net investment income ........ (54,817) (185,439) -- -- Net realized gains ........................ -- -- -- -- In excess of net realized gains ........... -- -- -- (324,901) Return of capital ......................... -- -- (107,731) -- ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ........................... (226,568) (359,211) (802,250) (345,705) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... -- 2,142,828 4,486,610 34,771,580 Cost of shares redeemed ................... (1,936,534) -- -- (15,400,640) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . (1,936,534) 2,142,828 4,486,610 19,370,940 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ... (3,312,016) (266,412) (4,279,616) 18,283,178 NET ASSETS: Beginning of period ....................... 13,229,697 13,496,109 18,283,178 -- ------------ ------------ ------------ ------------ End of period ............................. $ 9,917,681 $ 13,229,697 $ 14,003,562 $ 18,283,178 ============ ============ ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ (99,277) $ (131,041) $ (190,859) $ (8,267) ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................... -- 160,000 300,000 1,750,000 Shares redeemed ........................... (160,000) -- -- (800,000) ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ......... (160,000) 160,000 300,000 950,000 ============ ============ ============ ============
iSHARES MSCI iSHARES MSCI CANADA EMU INDEX FUND INDEX FUND ------------------------------- ------------------------------- For the For the For the For the year year year period ended ended ended 07/26/00*- 08/31/01 08/31/00 08/31/01 08/31/00 ------------ ------------ ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 91,912 $ 573,834 $ 644,893 $ 1,162 Net realized gain/(loss) on investments and foreign currency related transactions ... (795,189) 4,490,275 (5,658,041) (563) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (8,092,003) 2,244,139 (12,446,864) (2,069,731) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (8,795,280) 7,308,248 (17,460,012) (2,069,132) ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (49,958) (573,834) (644,893) -- In excess of net investment income ........ -- (28,480) (19,828) -- Net realized gains ........................ -- (4,490,275) -- -- In excess of net realized gains ........... (437,259) (338,582) -- -- Return of capital ......................... (94,894) (134,421) (409,529) -- ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ........................... (582,111) (5,565,592) (1,074,250) -- ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 16,237,955 11,032,592 67,502,580 43,880,282 Cost of shares redeemed ................... -- -- -- -- ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 16,237,955 11,032,592 67,502,580 43,880,282 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ... 6,860,564 12,775,248 48,968,318 41,811,150 NET ASSETS: Beginning of period ....................... 22,028,195 9,252,947 41,811,150 -- ------------ ------------ ------------ ------------ End of period ............................. $ 28,888,759 $ 22,028,195 $ 90,779,468 $ 41,811,150 ============ ============ ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ -- $ (39,405) $ (17,943) $ 1,158 ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................... 1,400,000 600,000 1,050,000 550,000 Shares redeemed ........................... -- -- -- -- ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ......... 1,400,000 600,000 1,050,000 550,000 ============ ============ ============ ============
iSHARES MSCI FRANCE INDEX FUND ------------------------------- For the For the year year ended ended 08/31/01 08/31/00 ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 217,520 $ 316,313 Net realized gain/(loss) on investments and foreign currency related transactions ... (837,382) 9,085,645 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (22,986,821) 7,586,933 ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (23,606,683) 16,988,891 ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (142,265) (316,313) In excess of net investment income ........ -- (62,610) Net realized gains ........................ -- (5,551,596) In excess of net realized gains ........... (19) (115,993) Return of capital ......................... (27,369) (91,967) ------------ ------------ Net decrease in net assets from distributions ........................... (169,653) (6,138,479) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 4,945,074 15,952,082 Cost of shares redeemed ................... (17,682,917) (9,571,623) ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . (12,737,843) 6,380,459 ------------ ------------ Total increase/(decrease) in net assets ... (36,514,179) 17,230,871 NET ASSETS: Beginning of period ....................... 95,116,105 77,885,234 ------------ ------------ End of period ............................. $ 58,601,926 $ 95,116,105 =========== ============ Undistributed net investment income (loss) included in net assets at end of period . $ (12,576) $ (83,611) =========== ============ Capital Share Transactions: Shares sold ............................... 200,000 600,000 Shares redeemed ........................... (800,000) (400,000) ------------ ------------ Net increase/(decrease) in shares ......... (600,000) 200,000 =========== ============ * Commencement of operations.
See accompanying notes to financial statements. 94-95 STATEMENTS OF CHANGES IN NET ASSETS (continued) iSHARES, INC.
iSHARES MSCI iSHARES MSCI GERMANY HONG KONG INDEX FUND INDEX FUND -------------------------------- -------------------------------- For the For the For the For the year year year year ended ended ended ended 08/31/01 08/31/00 08/31/01 08/31/00 ------------- ------------- ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 1,454,348) $ 1,166,529 $ 1,379,407 $ 2,074,410 Net realized gain/(loss) on investments and foreign currency related transactions ... (13,695,531) 16,635,444 (3,303,349) 8,930,598 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (29,186,710) (13,766,948) (22,064,345) (771,258) ------------- ------------- ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (41,427,893) 4,035,025 (23,988,287) 10,233,750 ------------- ------------- ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (1,454,348) (1,166,529) (1,363,022) (1,944,477) In excess of net investment income ........ (6,871) (56,709) -- -- Net realized gains ........................ -- (15,021,855) -- -- In excess of net realized gains ........... -- (2,419,881) -- -- Return of capital ......................... (13,170) (324,558) (34,163) (146,976) ------------- ------------- ------------ ------------ Net decrease in net assets from distributions ........................... (1,474,389) (18,989,532) (1,397,185) (2,091,453) ------------- ------------- ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 23,234,775 93,602,539 2,442,359 6,699,833 Cost of shares redeemed ................... (15,294,690) (26,805,867) (3,589,864) (12,563,378) ------------- ------------- ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 7,940,085 66,796,672 (1,147,505) (5,863,545) ------------- ------------- ------------ ------------ Total increase/(decrease) in net assets ... (34,962,197) 51,842,165 (26,532,977) 2,278,752 NET ASSETS: Beginning of period ....................... 153,487,399 101,645,234 79,479,069 77,200,317 ------------- ------------- ------------ ------------ End of period ............................. $ 118,525,202 $ 153,487,399 $ 52,946,092 $ 79,479,069 ============= ============= ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ (36,766) $ 14,651 $ (98) $ (16,526) ============= ============= ============ ============ Capital Share Transactions: Shares sold ............................... 1,200,000 3,900,000 225,000 525,000 Shares redeemed ........................... (900,000) (1,200,000) (300,000) (1,050,000) ------------- ------------- ------------ ------------ Net increase/(decrease) in shares ......... 300,000 2,700,000 (75,000) (525,000) ============= ============= ============ ============
iSHARES MSCI iSHARES MSCI ITALY JAPAN INDEX FUND INDEX FUND ------------------------------- --------------------------------- For the For the For the For the year year year year ended ended ended ended 08/31/01 08/31/00 08/31/01 08/31/00 ------------ ------------ ------------- ------------- OPERATIONS: Net investment income/(loss) .............. $ 508,408 $ 1,002,472 $ (709,605) $ (2,753,164) Net realized gain/(loss) on investments and foreign currency related transactions ... (2,023,718) 8,103,329 (57,092,192) 51,817,611 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (6,548,102) (2,555,628) (218,815,571) 9,615,813 ------------ ------------ ------------- ------------- Net increase/(decrease) in net assets resulting from operations ............... (8,063,412) 6,550,173 (276,617,368) 58,680,260 ------------ ------------ ------------- ------------- DISTRIBUTIONS: Net investment income ..................... (475,208) (258,556) -- -- In excess of net investment income ........ -- -- -- (87,603) Net realized gains ........................ -- (3,803,179) -- (30,206,630) In excess of net realized gains ........... (136,605) (240,263) -- -- Return of capital ......................... (496) (708,144) -- (1,946,368) ------------ ------------ ------------- ------------- Net decrease in net assets from distributions ........................... (612,309) (5,010,142) -- (32,240,601) ------------ ------------ ------------- ------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 6,480,265 11,166,696 132,566,184 153,087,778 Cost of shares redeemed ................... (13,131,072) (20,922,156) (115,840,291) (105,390,299) ------------ ------------ ------------- ------------- Net increase/(decrease) in net assets derived from capital share transactions . (6,650,807) (9,755,460) 16,725,893 47,697,479 ------------ ------------ ------------- ------------- Total increase/(decrease) in net assets ... (15,326,528) (8,215,429) (259,891,475) 74,137,138 NET ASSETS: Beginning of period ....................... 50,008,417 58,223,846 787,790,208 713,653,070 ------------ ------------ ------------- ------------- End of period ............................. $ 34,681,889 $ 50,008,417 $ 527,898,733 $ 787,790,208 ============ ============ ============= ============= Undistributed net investment income (loss) included in net assets at end of period . $ (8,931) $ (31,459) $ (843,085) $ (3,501,630) ============ ============ ============= ============= Capital Share Transactions: Shares sold ............................... 300,000 450,000 12,000,000 10,200,000 Shares redeemed ........................... (600,000) (900,000) (10,800,000) (7,200,000) ------------ ------------ ------------- ------------- Net increase/(decrease) in shares ......... (300,000) (450,000) 1,200,000 3,000,000 ============ ============ ============= =============
iSHARES MSCI iSHARES MSCI MALAYSIA (FREE) MEXICO (FREE) INDEX FUND INDEX FUND ------------------------------- ------------------------------ For the For the For the For the year year year year ended ended ended ended 08/31/01 08/31/00 08/31/01 08/31/00 ------------ ------------ ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 1,010,369 $ 873,172 $ 435,614 $ 92,761 Net realized gain/(loss) on investments and foreign currency related transactions ... (13,093,046) 3,946,415 3,261,577 1,034,324 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (3,810,341) 2,433,278 (6,058,723) 4,125,540 ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (15,893,018) 7,252,865 (2,361,532) 5,252,625 ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (1,010,369) (873,172) (430,999) -- In excess of net investment income ........ (4,201) (13,993) -- -- Net realized gains ........................ -- -- (84,506) (1,016,173) In excess of net realized gains ........... -- -- -- -- Return of capital ......................... (3,031) (1,947) -- -- ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ........................... (1,017,601) (889,112) (515,505) (1,016,173) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 13,144,103 -- 24,223,072 15,769,905 Cost of shares redeemed ................... (14,561,873) (2,408,796) (15,417,310) (1,309,195) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . (1,417,770) (2,408,796) 8,805,762 14,460,710 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ... (18,328,389) 3,954,957 5,928,725 18,697,162 NET ASSETS: Beginning of period ....................... 99,205,855 95,250,898 40,126,782 21,429,620 ------------ ------------ ------------ ------------ End of period ............................. $ 80,877,466 $ 99,205,855 $ 46,055,507 $ 40,126,782 ============ ============ ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ (2,667) $ 4,339 $ 93,695 $ 95,163 ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................... 2,550,000 -- 1,600,000 900,000 Shares redeemed ........................... (3,375,000) (375,000) (1,000,000) (100,000) ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ......... (825,000) (375,000) 600,000 800,000 ============ ============ ============ ============
iSHARES MSCI NETHERLANDS INDEX FUND -------------------------------- For the For the year year ended ended 08/31/01 08/31/00 ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 434,116 $ 141,123 Net realized gain/(loss) on investments and foreign currency related transactions ... (2,441,931) (146,007) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (4,686,056) 148,944 ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (6,693,871) 144,060 ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (369,484) (103,829) In excess of net investment income ........ -- -- Net realized gains ........................ -- (142,337) In excess of net realized gains ........... -- -- Return of capital ......................... -- (47,470) ------------ ------------ Net decrease in net assets from distributions ........................... (369,484) (293,636) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 8,911,154 7,236,808 Cost of shares redeemed ................... (8,276,998) (8,159,114) ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 634,156 (922,306) ------------ ------------ Total increase/(decrease) in net assets ... (6,429,199) (1,071,882) NET ASSETS: Beginning of period ....................... 30,613,276 31,685,158 ------------ ------------ End of period ............................. $ 24,184,077 $ 30,613,276 ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ 32,593 $ 3,674 ============ ============ Capital Share Transactions: Shares sold ............................... 400,000 300,000 Shares redeemed ........................... (400,000) (350,000) ------------ ------------ Net increase/(decrease) in shares ......... -- (50,000) ============ ============
See accompanying notes to financial statements. 96-97 STATEMENTS OF CHANGES IN NET ASSETS (concluded) iSHARES, INC.
iSHARES MSCI iSHARES MSCI SINGAPORE (FREE) SOUTH KOREA INDEX FUND INDEX FUND ------------------------------- ------------------------------- For the For the For the For the year year year period ended ended ended 05/10/00*- 08/31/01 08/31/00 08/31/01 08/31/00 ------------ ------------- ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 756,108 $ 1,693,940 $ 123,192 $ (34,787) Net realized gain/(loss) on investments and foreign currency related transactions ... (1,508,642) 19,150,160 (2,900,366) (843,695) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (20,518,141) (22,721,621) (1,648,141) (679,099) ------------ ------------- ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (21,270,675) (1,877,521) (4,425,315) (1,557,581) ------------ ------------- ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (748,996) (1,437,747) (99,405) -- In excess of net investment income ........ -- -- -- -- Net realized gains ........................ -- (1,615,815) -- -- In excess of net realized gains ........... (632,262) -- -- -- Return of capital ......................... (255,146) (274,616) (196,995) -- ------------ ------------- ------------ ------------ Net decrease in net assets from distributions ........................... (1,636,404) (3,328,178) (296,400) -- ------------ ------------- ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 20,049,443 1,597,919 28,867,495 19,717,804 Cost of shares redeemed ................... (12,157,893) (21,110,456) -- (4,538,650) ------------ ------------- ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . 7,891,550 (19,512,537) 28,867,495 15,179,154 ------------ ------------- ------------ ------------ Total increase/(decrease) in net assets ... (15,015,529) (24,718,236) 24,145,780 13,621,573 NET ASSETS: Beginning of period ....................... 88,719,162 113,437,398 13,621,573 -- ------------ ------------- ------------ ------------ End of period ............................. $ 73,703,633 $ 88,719,162 $ 37,767,353 $ 13,621,573 ============ ============= ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ (3,575) $ 5,130 $ (41,734) $ (19,699) ============ ============= ============ ============ Capital Share Transactions: Shares sold ............................... 3,900,000 200,000 2,100,000 1,000,000 Shares redeemed ........................... (1,800,000) (2,800,000) -- (250,000) ------------ ------------- ------------ ------------ Net increase/(decrease) in shares ......... 2,100,000 (2,600,000) 2,100,000 750,000 ============ ============= ============ ============
iSHARES MSCI iSHARES MSCI SPAIN SWEDEN INDEX FUND INDEX FUND ------------------------------- -------------------------------- For the For the For the For the year year year year ended ended ended ended 08/31/01 08/31/00 08/31/01 08/31/00 ------------- ------------ ------------ ------------ OPERATIONS: Net investment income/(loss) .............. $ 280,132 $ 234,512 $ 65,472 $ 114,164 Net realized gain/(loss) on investments and foreign currency related transactions ... (1,340,642) 790,049 (4,234,433) 8,434,356 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (2,121,855) (2,294,792) (6,548,770) (2,132,301) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ............... (3,182,365) (1,270,231) (10,717,731) 6,416,219 ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ..................... (206,976) (230,377) (38,632) (114,164) In excess of net investment income ........ -- -- -- (17,345) Net realized gains ........................ -- (790,049) -- (5,788,656) In excess of net realized gains ........... -- (523,630) -- (127,174) Return of capital ......................... (854) (21,987) (969) (42,411) ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ........................... (207,830) (1,566,043) (39,601) (6,089,750) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 1,833,599 6,280,595 6,947,144 9,668,394 Cost of shares redeemed ................... (11,158,712) -- (9,334,138) (6,254,326) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions . (9,325,113) 6,280,595 (2,386,994) 3,414,068 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ... (12,715,308) 3,444,321 (13,144,326) 3,740,537 NET ASSETS: Beginning of period ....................... 39,912,861 36,468,540 23,774,316 20,033,779 ------------ ------------ ------------ ------------ End of period ............................. $ 27,197,553 $ 39,912,861 $ 10,629,990 $ 23,774,316 ============ ============ ============ ============ Undistributed net investment income (loss) included in net assets at end of period . $ (11,327) $ (58,260) $ (6,275) $ (174) ============ ============ ============ ============ Capital Share Transactions: Shares sold ............................... 75,000 225,000 375,000 300,000 Shares redeemed ........................... (450,000) -- (525,000) (225,000) ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ......... (375,000) 225,000 (150,000) 75,000 ============ ============ ============ ============
iSHARES MSCI iSHARES MSCI SWITZERLAND TAIWAN INDEX FUND INDEX FUND ------------------------------- -------------------------------- For the For the For the For the year year year period ended ended ended 06/21/00*- 08/31/01 08/31/00 08/31/01 08/31/00 ------------ ------------ ------------- ------------ OPERATIONS: Net investment income/(loss) .............. $ 118,440 $ 93,151 $ (220,980) $ (17,526) Net realized gain/(loss) on investments and foreign currency related transactions ... (2,352,982) 753,833 (15,112,187) (1,139,281) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (3,937,865) (303,839) (33,745,530) (3,044,786) ------------ ------------ ------------- ------------ Net increase/(decrease) in net assets resulting from operations ............... (6,172,407) 543,145 (49,078,697) (4,201,593) ------------ ------------ ------------- ------------ DISTRIBUTIONS: Net investment income ..................... (118,440) (93,151) -- (826,900) In excess of net investment income ........ (21,900) (17,598) -- -- Net realized gains ........................ -- (318,982) -- -- In excess of net realized gains ........... (94,754) -- -- (258,316) Return of capital ......................... -- (22,376) -- (1,144,284) ------------ ------------ ------------- ------------ Net decrease in net assets from distributions ........................... (235,094) (452,107) -- (2,229,500) ------------ ------------ ------------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 3,603,684 11,887,494 117,197,650 62,919,368 Cost of shares redeemed ................... (9,496,964) (5,792,803) -- (13,821,000) ------------ ------------ ------------- ------------ Net increase/(decrease) in net assets derived from capital share transactions . (5,893,280) 6,094,691 117,197,650 49,098,368 ------------ ------------ ------------- ------------ Total increase/(decrease) in net assets ... (12,300,781) 6,185,729 68,118,953 42,667,275 NET ASSETS: Beginning of period ....................... 44,685,118 38,499,389 42,667,275 -- ------------ ------------ ------------- ------------ End of period ............................. $ 32,384,337 $ 44,685,118 $ 110,786,228 $ 42,667,275 ============ ============ ============= ============ Undistributed net investment income (loss) included in net assets at end of period . $ 4,641 $ 9,437 $ (11,996) $ (5,064) ============ ============ ============= ============ Capital Share Transactions: Shares sold ............................... 250,000 750,000 9,700,000 3,350,000 Shares redeemed ........................... (625,000) (375,000) -- (750,000) ------------ ------------ ------------- ------------ Net increase/(decrease) in shares ......... (375,000) 375,000 9,700,000 2,600,000 ============ ============ ============= ============
iSHARES MSCI UNITED KINGDOM INDEX FUND --------------------------------- For the For the year year ended ended 08/31/01 08/31/00 ------------- ------------- OPERATIONS: Net investment income/(loss) .............. $ 2,203,182 $ 1,816,179 Net realized gain/(loss) on investments and foreign currency related transactions ... (13,297,209) 8,774,074 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (12,060,808) (14,882,373) ------------- ------------- Net increase/(decrease) in net assets resulting from operations ............... (23,154,835) (4,292,120) ------------- ------------- DISTRIBUTIONS: Net investment income ..................... (1,945,352) (1,816,179) In excess of net investment income ........ -- (169,250) Net realized gains ........................ -- (5,836,100) In excess of net realized gains ........... (229,522) (1,530,441) Return of capital ......................... -- (362,073) ------------- ------------- Net decrease in net assets from distributions ........................... (2,174,874) (9,714,043) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .......... 37,757,581 63,726,690 Cost of shares redeemed ................... (41,347,839) (16,319,883) ------------- ------------- Net increase/(decrease) in net assets derived from capital share transactions . (3,590,258) 47,406,807 ------------- ------------- Total increase/(decrease) in net assets ... (28,919,967) 33,400,644 NET ASSETS: Beginning of period ....................... 146,802,701 113,402,057 ------------- ------------- End of period ............................. $ 117,882,734 $ 146,802,701 ============= ============= Undistributed net investment income (loss) included in net assets at end of period . $ 56,245 $ (244,068) ============= ============= Capital Share Transactions: Shares sold ............................... 2,200,000 3,200,000 Shares redeemed ........................... (2,400,000) (800,000) ------------- ------------- Net increase/(decrease) in shares ......... (200,000) 2,400,000 ============= ============= * Commencement of operations.
See accompanying notes to financial statements. 98-99 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI AUSTRALIA INDEX FUND --------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 --------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 9.93 $ 9.99 $ 7.75 $ 10.35 $ 10.15 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.24 0.23 0.20 0.23 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 ................... (0.71) (0.04) 2.29 (2.60) 0.47 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (0.47) 0.19 2.49 (2.37) 0.64 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.20) (0.22) (0.19) (0.23) (0.16) Dividends in excess of net investment income ...................... -- (0.01) (0.00)* (0.00)* (0.04) Distributions from net realized gains ............................. -- -- -- -- (0.04) Distributions in excess of net realized gains ..................... -- -- -- -- -- Return of capital ................................................. (0.02) (0.02) (0.06) -- (0.20) ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.22) (0.25) (0.25) (0.23) (0.44) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 9.24 $ 9.93 $ 9.99 $ 7.75 $ 10.35 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (1) ......................................... (4.77)% 1.84% 32.09% (23.11)% 6.23% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $57,312 $61,574 $53,957 $34,099 $41,406 Ratios of expenses to average net assets (2) ...................... 0.84% 0.95% 1.00% 1.05% 1.33% Ratios of net investment income/(loss) to average net assets (2) .. 2.54% 2.22% 2.03% 2.38% 1.57% Portfolio turnover rate (3) ....................................... 23.23% 36.20% 13.83% 1.49% 5.30% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .............................. -- -- -- -- 1.57% (3) Excludes portfolio securities received or delivered as a result of procesing capital share transactions in Creation Unit(s).
iSHARES MSCI AUSTRIA INDEX FUND --------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 7.67 $ 9.13 $ 10.11 $10.51 $10.40 ------- ------- ------- ------ ------ Net investment income/(loss) (+) .................................. 0.13 0.04 0.10 0.06 (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 ................... 0.52 (1.46) (0.98) 0.20 0.13 ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations 0.65 (1.42) (0.88) 0.26 0.11 ------- ------- ------- ------ ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.13) (0.04) (0.07) (0.04) -- Dividends in excess of net investment income ...................... (0.01) (0.00)* (0.01) (0.01) -- Distributions from net realized gains ............................. -- -- -- (0.61) -- Distributions in excess of net realized gains ..................... -- -- -- (0.00)* -- Return of capital ................................................. (0.00)* -- (0.02) (0.00)* -- ------- ------- ------- ------ ------ Total dividends and distributions ............................. (0.14) (0.04) (0.10) (0.66) -- ------- ------- ------- ------ ------ Net asset value, end of period .................................... $ 8.18 $ 7.67 $ 9.13 $10.11 $10.51 ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (1) ......................................... 8.41% (15.51)% (8.69)% 2.16% 1.06% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $11,447 $10,741 $12,776 $8,085 $4,205 Ratios of expenses to average net assets (2) ...................... 0.84% 1.16% 1.31% 1.41% 1.68% Ratios of net investment income/(loss) to average net assets (2) .. 1.69% 0.51% 1.04% 0.51% (0.22)% Portfolio turnover rate (3) ....................................... 65.98% 33.65% 49.95% 36.14% 28.47% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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 ..................................... 0.97% 1.20% -- -- 1.69% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .............................. 1.55% 0.47% -- -- (0.22)% (3) Excludes portfolio securities received or delivered as a result of procesing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 100-101 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI BELGIUM INDEX FUND ----------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 13.23 $ 16.07 $ 18.40 $ 15.64 $ 14.99 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.19 0.19 0.08 0.24 0.77 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (1.34) (2.67) (0.30) 6.09 0.62 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (1.15) (2.48) (0.22) 6.33 1.39 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.20) (0.17) -- (0.27) (0.33) Dividends in excess of net investment income ...................... (0.07) (0.19) (0.01) (1.21) (0.28) Distributions from net realized gains ............................. -- -- (1.19) (1.99) (0.12) Distributions in excess of net realized gains ..................... -- -- -- -- -- Return of capital ................................................. -- -- (0.91) (0.10) (0.01) ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.27) (0.36) (2.11) (3.57) (0.74) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 11.81 $ 13.23 $ 16.07 $ 18.40 $ 15.64 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (8.72)% (15.50)% (1.00)% 39.42% 9.26% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $ 9,918 $13,230 $13,496 $25,765 $32,528 Ratios of expenses to average net assets (5) ...................... 0.84% 1.13% 1.24% 1.04% 1.24% Ratios of net investment income/(loss) to average net assets (5) .. 1.60% 1.36% 0.45% 1.28% 4.63% Portfolio turnover rate (6) ....................................... 36.15% 53.27% 62.99% 50.46% 16.83% * 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 .................................... 0.87% -- -- -- 1.24% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ............................. 1.57% -- -- -- 4.63% (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 For the year period ended 07/11/00*- 08/31/01 08/31/00 -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 19.25 $ 20.22(1) ------- ------- Net investment income/(loss) (+) .................................. 0.68 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 ................... (8.09) (0.63) ------- ------- Net increase/(decrease) in net assets resulting from operations (7.41) (0.61) ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.56) (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 ................................................. (0.08) -- ------- ------- Total dividends and distributions ............................. (0.64) (0.36) ------- ------- Net asset value, end of period .................................... $ 11.20 $ 19.25 ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (38.52)% (2.97)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $14,004 $18,283 Ratios of expenses to average net assets (5) ...................... 0.99% 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) .. 4.44% 0.77%(3) Portfolio turnover rate (6) ....................................... 43.20% 63.61%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements ..................................... -- 1.40%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .............................. -- 0.37%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI CANADA INDEX FUND -------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 16.94 $ 13.22 $ 9.90 $ 13.43 $ 10.60 ------- ------- ------ ------- ------- Net investment income/(loss) (+) .................................. 0.05 0.70 0.07 0.07 0.05 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (5.92) 8.08 3.87 (2.89) 2.97 ------- ------- ------ ------- ------- Net increase/(decrease) in net assets resulting from operations (5.87) 8.78 3.94 (2.82) 3.02 ------- ------- ------ ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.02) (0.52) (0.08) (0.13) (0.05) Dividends in excess of net investment income ...................... -- (0.03) (0.01) (0.00)** (0.00)** Distributions from net realized gains ............................. -- (4.08) (0.53) (0.58) (0.14) Distributions in excess of net realized gains ..................... (0.31) (0.31) -- -- -- Return of capital ................................................. (0.04) (0.12) -- -- -- ------- ------- ------ ------- ------- Total dividends and distributions ............................. (0.37) (5.06) (0.62) (0.71) (0.19) ------- ------- ------ ------- ------- Net asset value, end of period .................................... $ 10.70 $ 16.94 $13.22 $ 9.90 $ 13.43 ======= ======= ====== ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (34.95)% 67.21% 39.71% (21.69)% 28.50% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $28,889 $22,028 $9,253 $ 6,932 $24,168 Ratios of expenses to average net assets (5) ...................... 0.84% 1.17% 1.23% 1.14% 1.35% Ratios of net investment income/(loss) to average net assets (5) .. 0.44% 4.07% 0.53% 0.46% 0.39% Portfolio turnover rate (6) ....................................... 63.49% 64.03% 11.66% 3.70% 11.02% * 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements .............................. -- 4.05% -- -- 0.39% (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. 102-103 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI EMU INDEX FUND ---------------------- For the For the year period ended 07/26/00*- 08/31/01 08/31/00 -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 76.02 $ 80.72(1) ------- ------- Net investment income/(loss) (+) .................................. 0.72 (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 ................... (19.32) (4.70) ------- ------- Net increase/(decrease) in net assets resulting from operations (18.60) (4.70) ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.41) -- Dividends in excess of net investment income ...................... (0.01) -- Distributions from net realized gains ............................. -- -- Distributions in excess of net realized gains ..................... -- -- Return of capital ................................................. (0.26) -- ------- ------- Total dividends and distributions ............................. (0.68) -- ------- ------- Net asset value, end of period .................................... $ 56.74 $ 76.02 ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (24.51)% (5.82)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $90,779 $41,811 Ratios of expenses to average net assets (5) ...................... 0.84% 0.84%(3) Ratios of net investment income/(loss) to average net assets (5) .. 1.13% 0.03%(3) Portfolio turnover rate (6) ....................................... 23.64% 0.00%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- 1.57%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- (0.70)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI FRANCE INDEX FUND ----------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 26.41 $ 22.90 $ 19.13 $ 14.50 $ 12.73 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.06 0.10 0.14 0.30 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 ................... (6.89) 5.21 3.88 4.76 1.95 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (6.83) 5.31 4.02 5.06 2.12 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.04) (0.09) (0.10) (0.19) (0.15) Dividends in excess of net investment income ...................... -- (0.02) (0.02) (0.03) -- Distributions from net realized gains ............................. -- (1.64) (0.05) (0.13) (0.20) Distributions in excess of net realized gains ..................... (0.00)** (0.03) -- (0.01) -- Return of capital ................................................. (0.01) (0.02) (0.08) (0.07) -- ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.05) (1.80) (0.25) (0.43) (0.35) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 19.53 $ 26.41 $ 22.90 $ 19.13 $ 14.50 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (25.86)% 23.45% 21.01% 34.77% 16.60% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $58,602 $95,116 $77,885 $45,922 $14,519 Ratios of expenses to average net assets (5) ...................... 0.84% 0.96% 1.06% 1.18% 1.52% Ratios of net investment income/(loss) to average net assets (5) .. 0.28% 0.36% 0.67% 1.58% 1.17% Portfolio turnover rate (6) ....................................... 13.70% 17.43% 0.00% 5.65% 7.13% * 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 1.17% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI GERMANY INDEX FUND --------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 20.46 $ 21.17 $ 20.25 $ 16.31 $ 13.64 -------- -------- -------- ------- ------- Net investment income/(loss) (+) .................................. 0.18 0.18 0.12 0.29 0.03 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (5.26) 1.64 1.31 3.92 2.77 -------- -------- -------- ------- ------- Net increase/(decrease) in net assets resulting from operations (5.08) 1.82 1.43 4.21 2.80 -------- -------- -------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.19) (0.16) (0.10) (0.17) (0.03) Dividends in excess of net investment income ...................... (0.00)** (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)** -- Return of capital ................................................. (0.00)** (0.04) (0.01) (0.08) (0.02) -------- -------- -------- ------- ------- Total dividends and distributions ............................. (0.19) (2.53) (0.51) (0.27) (0.13) -------- -------- -------- ------- ------- Net asset value, end of period .................................... $ 15.19 $ 20.46 $ 21.17 $ 20.25 $ 16.31 ======== ======== ======== ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (24.87)% 8.44% 7.04% 25.69% 20.51% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $118,525 $153,487 $101,645 $72,934 $24,486 Ratios of expenses to average net assets (5) ...................... 0.84% 0.94% 1.00% 1.08% 1.37% Ratios of net investment income/(loss) to average net assets (5) .. 0.99% 0.73% 0.57% 1.43% 0.23% Portfolio turnover rate (6) ....................................... 20.11% 56.38% 13.67% 0.64% 9.04% * 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 0.22% (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. 104-105 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI HONG KONG INDEX FUND --------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 13.24 $ 11.83 $ 6.41 $ 14.73 $ 13.05 ------- -------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.23 0.33 0.29 0.35 0.26 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (4.30) 1.42 5.49 (8.27) 2.12 ------- -------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (4.07) 1.75 5.78 (7.92) 2.38 ------- -------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.23) (0.32) (0.31) (0.28) (0.21) Dividends in excess of net investment income ...................... -- -- (0.05) (0.00)* (0.01) Distributions from net realized gains ............................. -- -- -- -- (0.34) Distributions in excess of net realized gains ..................... -- -- -- -- (0.00)* Return of capital ................................................. (0.01) (0.02) -- (0.12) (0.14) ------- -------- ------- ------- ------- Total dividends and distributions ............................. (0.24) (0.34) (0.36) (0.40) (0.70) ------- -------- ------- ------- ------- Net asset value, end of period .................................... $ 8.93 $ 13.24 $ 11.83 $ 6.41 $ 14.73 ======= ======== ======= ======= ======= TOTAL INVESTMENT RETURN (1) ......................................... (30.88)% 14.73% 90.51% (54.22)% 17.80% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $52,946 $ 79,479 $77,200 $49,973 $25,417 Ratios of expenses to average net assets (2) ...................... 0.84% 0.94% 1.01% 1.09% 1.43% Ratios of net investment income/(loss) to average net assets (2) .. 2.11% 2.57% 2.84% 3.76% 1.71% Portfolio turnover rate (3) ....................................... 43.45% 21.30% 42.89% 21.50% 22.90% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 1.71% (3) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI ITALY INDEX FUND -------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 22.23 $ 21.56 $ 22.89 $ 16.66 $ 13.79 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.24 0.39 0.17 0.18 0.12 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (4.37) 2.51 1.05 7.94 3.10 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (4.13) 2.90 1.22 8.12 3.22 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.24) (0.12) (0.06) (0.18) (0.11) Dividends in excess of net investment income ...................... -- -- -- (1.02) (0.24) Distributions from net realized gains ............................. -- (1.69) (2.24) (0.69) -- Distributions in excess of net realized gains ..................... (0.07) (0.11) -- -- -- Return of capital ................................................. (0.00)* (0.31) (0.25) -- -- ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.31) (2.23) (2.55) (1.89) (0.35) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 17.79 $ 22.23 $ 21.56 $ 22.89 $ 16.66 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (1) ......................................... (18.61)% 13.35% 5.14% 47.66% 23.37% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $34,682 $50,008 $58,224 $58,368 $32,495 Ratios of expenses to average net assets (2) ...................... 0.84% 0.99% 1.03% 1.02% 1.33% Ratios of net investment income/(loss) to average net assets (2) .. 1.16% 1.61% 0.70% 0.76% 0.76% Portfolio turnover rate (3) ....................................... 20.10% 39.85% 7.89% 8.16% 13.70% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 0.76% (3) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI JAPAN INDEX FUND ----------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 13.82 $ 13.22 $ 8.39 $ 12.61 $ 14.33 -------- -------- -------- -------- -------- Net investment income/(loss) (+) .................................. (0.01) (0.05) (0.03) (0.02) (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 ................... (4.74) 1.21 4.91 (4.19) (1.65) -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations (4.75) 1.16 4.88 (4.21) (1.71) -------- -------- -------- -------- -------- 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 .................................... $ 9.07 $ 13.82 $ 13.22 $ 8.39 $ 12.61 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (1) ......................................... (34.37)% 8.75% 58.14% (33.38)% (11.97)% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $527,899 $787,790 $713,653 $201,485 $158,957 Ratios of expenses to average net assets (2) ...................... 0.84% 0.88% 0.94% 1.04% 1.19% Ratios of net investment income/(loss) to average net assets (2) .. (0.11)% (0.32)% (0.27)% (0.21)% (0.48)% Portfolio turnover rate (3) ....................................... 21.17% 21.93% 0.00% 0.00% 12.90% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- (0.48)% (3) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 106-107 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI MALAYSIA (FREE) INDEX FUND ----------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 5.96 $ 5.59 $ 2.11 $ 8.23 $ 13.80 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.06 0.05 0.01 0.06 0.01 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .. (0.85) 0.37 3.67 (6.10) (5.55) ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (0.79) 0.42 3.68 (6.04) (5.54) ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.06) (0.05) (0.01) (0.05) (0.00)* Dividends in excess of net investment income ...................... (0.00)* (0.00)* -- -- (0.01) Distributions from net realized gains ............................. -- -- -- -- -- Distributions in excess of net realized gains ..................... -- -- -- -- -- Return of capital ................................................. (0.00)* (0.00)* (0.19) (0.03) (0.02) ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.06) (0.05) (0.20) (0.08) (0.03) ------- ------- ------- ------- ------- Net asset value, end of period .................................. $ 5.11 $ 5.96 $ 5.59 $ 2.11 $ 8.23 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (1) ......................................... (13.22)% 7.57% 185.81% (73.57)% (40.20)% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $80,877 $99,206 $95,251 $35,867 $12,339 Ratios of expenses to average net assets (2) ...................... 0.84% 0.96% 1.43% 1.09% 1.46% Ratios of net investment income/(loss) to average net assets (2) .. 1.19% 0.81% 0.33% 1.40% 0.04% Portfolio turnover rate (3) ....................................... 37.34% 17.56% 7.24% 2.11% 0.00% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 0.04% (3) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI MEXICO (FREE) INDEX FUND ------------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 16.72 $ 13.39 $ 8.11 $ 15.11 $ 11.52 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.17 0.06 0.06 0.09 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 .. (1.36) 3.69 5.36 (6.71) 4.07 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (1.19) 3.75 5.42 (6.62) 4.09 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.15) -- (0.06) (0.09) (0.01) Dividends in excess of net investment income ...................... -- -- (0.01) -- (0.01) Distributions from net realized gains ............................. (0.03) (0.42) -- (0.29) (0.44) Distributions in excess of net realized gains ..................... -- -- (0.01) -- -- Return of capital ................................................. -- -- (0.06) -- (0.04) ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.18) (0.42) (0.14) (0.38) (0.50) ------- ------- ------- ------- ------- Net asset value, end of period .................................. $ 15.35 $ 16.72 $ 13.39 $ 8.11 $ 15.11 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (1) ......................................... (7.02)% 28.20% 66.92% (44.18)% 35.21% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $46,056 $40,127 $21,430 $ 7,296 $16,627 Ratios of expenses to average net assets (2) ...................... 0.84% 1.04% 1.26% 1.34% 1.63% Ratios of net investment income/(loss) to average net assets (2) .. 1.12% 0.35% 0.52% 0.60% 0.14% Portfolio turnover rate (3) ....................................... 33.96% 23.97% 18.36% 14.05% 22.80% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- 0.35% -- -- 0.13% (3) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
iSHARES MSCI NETHERLANDS INDEX FUND --------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 23.53 $ 23.45 $ 23.50 $ 21.42 $17.36 ------- ------- ------- ------- ------ Net investment income/(loss) (+) .................................. 0.28 0.13 0.53 0.25 0.11 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .. (4.94) 0.18 1.60 3.53 4.79 ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations (4.66) 0.31 2.13 3.78 4.90 ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.28) (0.08) (0.43) (0.16) (0.10) Dividends in excess of net investment income ...................... -- -- (0.01) -- (0.01) Distributions from net realized gains ............................. -- (0.11) (1.42) (1.47) (0.71) Distributions in excess of net realized gains ..................... -- -- (0.24) -- -- Return of capital ................................................. -- (0.04) (0.08) (0.07) (0.02) ------- ------- ------- ------- ------ Total dividends and distributions ............................. (0.28) (0.23) (2.18) (1.70) (0.84) ------- ------- ------- ------- ------ Net asset value, end of period .................................. $ 18.59 $ 23.53 $ 23.45 $ 23.50 $21.42 ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (1) ......................................... (19.83)% 1.28% 8.98% 17.41% 28.04% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $24,184 $30,613 $31,685 $22,349 $9,661 Ratios of expenses to average net assets (2) ...................... 0.84% 1.03% 1.07% 1.12% 1.46% Ratios of net investment income/(loss) to average net assets (2) .. 1.34% 0.53% 2.20% 1.00% 0.54% Portfolio turnover rate (3) ....................................... 34.70% 21.64% 32.13% 15.81% 12.68% * Less than one cent per share. + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 0.53% (3) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 108-109 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI SINGAPORE (FREE) INDEX FUND ------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 7.58 $ 7.93 $ 3.30 $ 8.66 $ 11.38 ------- ------- -------- ------- ------- Net investment income/(loss) (+) .................................. 0.07 0.13 0.05 0.07 (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 ................... (2.16) (0.21) 4.70 (5.37) (2.67) ------- ------- -------- ------- ------- Net increase/(decrease) in net assets resulting from operations (2.09) (0.08) 4.75 (5.30) (2.67) ------- ------- -------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.07) (0.11) (0.05) (0.04) (0.00)** Dividends in excess of net investment income ...................... -- -- (0.06) (0.01) (0.01) Distributions from net realized gains ............................. -- (0.14) -- -- (0.02) Distributions in excess of net realized gains ..................... (0.06) -- -- -- -- Return of capital ................................................. (0.02) (0.02) (0.01) (0.01) (0.02) ------- ------- -------- ------- ------- Total dividends and distributions ............................. (0.15) (0.27) (0.12) (0.06) (0.05) ------- ------- -------- ------- ------- Net asset value, end of period .................................... $ 5.34 $ 7.58 $ 7.93 $ 3.30 $ 8.66 ======= ======= ======== ======= ======= TOTAL INVESTMENT RETURN (2) ....................................... (27.89)% (1.29)% 144.52% (61.29)% (23.48)% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $73,704 $88,719 $113,438 $47,248 $14,722 Ratios of expenses to average net assets (5) ...................... 0.84% 0.94% 0.97% 1.08% 1.43% Ratios of net investment income/(loss) to average net assets (5) .. 1.15% 1.60% 0.76% 1.17% 0.03% Portfolio turnover rate (6) ....................................... 32.10% 52.06% 25.31% 67.17% 13.40% * 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 0.03% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). (7) Excludes foreign taxes paid on stock dividends. See Note 1.
iSHARES MSCI SOUTH KOREA INDEX FUND ------------------------ For the For the year period ended 05/10/00*- 08/31/01 08/31/00 -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 18.16 $ 20.36(1) ------- ------- Net investment income/(loss) (+) .................................. 0.09 (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 ................... (4.90) (2.16) ------- ------- Net increase/(decrease) in net assets resulting from operations (4.81) (2.20) ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.03) -- Dividends in excess of net investment income ...................... -- -- Distributions from net realized gains ............................. -- -- Distributions in excess of net realized gains ..................... -- -- Return of capital ................................................. (0.07) -- ------- ------- Total dividends and distributions ............................. (0.10) -- ------- ------- Net asset value, end of period .................................... $ 13.25 $ 18.16 ======= ======= TOTAL INVESTMENT RETURN (2) ....................................... (26.49)% (10.81)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $37,767 $13,622 Ratios of expenses to average net assets (5) ...................... 0.99%(7) 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) .. 0.64% (0.63)%(3) Portfolio turnover rate (6) ....................................... 39.46% 55.13%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- 1.38%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- (1.02)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). (7) Excludes foreign taxes paid on stock dividends. See Note 1.
iSHARES MSCI SPAIN INDEX FUND ------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 24.19 $ 25.59 $ 23.84 $ 18.49 $ 14.09 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.19 0.15 0.09 0.16 0.19 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (2.89) (0.60) 3.14 5.94 5.33 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (2.70) (0.45) 3.23 6.10 5.52 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.16) (0.14) (0.07) (0.12) (0.12) 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) Distributions in excess of net realized gains ..................... -- (0.32) -- -- -- Return of capital ................................................. (0.00)** (0.01) (0.04) (0.06) (0.09) ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.16) (0.95) (1.48) (0.75) (1.12) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 21.33 $ 24.19 $ 25.59 $ 23.84 $ 18.49 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ....................................... (11.17)% (1.81)% 13.39% 32.58% 39.15% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $27,198 $39,913 $36,469 $25,029 $ 8,321 Ratios of expenses to average net assets (5) ...................... 0.84% 0.99% 1.04% 1.11% 1.67% Ratios of net investment income/(loss) to average net assets (5) .. 0.82% 0.57% 0.31% 0.61% 1.04% Portfolio turnover rate (6) ....................................... 25.64% 39.42% 16.58% 9.10% 19.21% * 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 1.04% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). (7) Excludes foreign taxes paid on stock dividends. See Note 1.
See accompanying notes to financial statements. 110-111 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI SWEDEN INDEX FUND ----------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 24.38 $ 22.26 $ 18.39 $ 18.32 $14.67 ------- ------- ------- ------- ------ Net investment income/(loss) (+) .................................. 0.07 0.14 0.10 0.10 (0.03) Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (11.52) 8.38 4.52 0.95 4.45 ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations (11.45) 8.52 4.62 1.05 4.42 ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.05) (0.12) (0.09) (0.08) -- Dividends in excess of net investment income ...................... -- (0.02) (0.01) (0.01) -- Distributions from net realized gains ............................. -- (6.09) (0.62) (0.86) (0.77) Distributions in excess of net realized gains ..................... -- (0.13) (0.01) (0.01) -- Return of capital ................................................. (0.00)** (0.04) (0.02) (0.02) -- ------- ------- ------- ------- ------ Total dividends and distributions ............................. (0.05) (6.40) (0.75) (0.98) (0.77) ------- ------- ------- ------- ------ Net asset value, end of period .................................... $ 12.88 $ 24.38 $ 22.26 $ 18.39 $18.32 ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ......................................... (46.99)% 39.15% 25.09% 5.48% 30.10% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $10,630 $23,774 $20,034 $13,791 $8,243 Ratios of expenses to average net assets (5) ...................... 0.84% 1.03% 1.13% 1.17% 1.64% Ratios of net investment income/(loss) to average net assets (5) .. 0.40% 0.46% 0.49% 0.48% (0.19)% Portfolio turnover rate (6) ....................................... 42.82% 90.13% 33.44% 10.88% 13.71% * 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- (0.19)% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). (7) Excludes foreign taxes paid on stock dividends. See Note 1.
iSHARES MSCI SWITZERLAND INDEX FUND ------------------------------------------------------ For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 15.54 $ 15.39 $ 15.55 $ 13.79 $ 12.29 ------- ------- ------- ------- ------- Net investment income/(loss) (+) .................................. 0.04 0.04 0.04 (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 ................... (2.54) 0.27 0.19 3.01 2.11 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (2.50) 0.31 0.23 3.01 2.07 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.04) (0.03) (0.03) -- -- Dividends in excess of net investment income ...................... (0.01) (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 ..................... (0.04) -- (0.14) -- -- Return of capital ................................................. -- (0.01) (0.01) (0.03) (0.00)** ------- ------- ------- ------- ------- Total dividends and distributions ............................. (0.09) (0.16) (0.39) (1.25) (0.57) ------- ------- ------- ------- ------- Net asset value, end of period .................................... $ 12.95 $ 15.54 $ 15.39 $ 15.55 $ 13.79 ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ......................................... (16.08)% 1.96% 1.47% 21.24% 16.69% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $32,384 $44,685 $38,499 $29,163 $13,805 Ratios of expenses to average net assets (5) ...................... 0.84% 1.01% 1.09% 1.15% 1.52% Ratios of net investment income/(loss) to average net assets (5) .. 0.29% 0.23% 0.24% (0.03)% (0.29)% Portfolio turnover rate (6) ....................................... 33.68% 34.87% 35.10% 43.09% 48.05% * 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- (0.29)% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). (7) Excludes foreign taxes paid on stock dividends. See Note 1.
iSHARES MSCI TAIWAN INDEX FUND ------------------------ For the For the year period ended 06/21/00*- 08/31/01 08/31/00 -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 16.41 $ 19.59(1) -------- ------- Net investment income/(loss) (+) .................................. (0.03) (0.01) Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (7.37) (2.31) -------- ------- Net increase/(decrease) in net assets resulting from operations (7.40) (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 .................................... $ 9.01 $ 16.41 ======== ======= TOTAL INVESTMENT RETURN (2) ......................................... (45.09)% (12.10)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $110,786 $42,667 Ratios of expenses to average net assets (5) ...................... 0.99%(7) 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) .. (0.23)% (0.28)%(3) Portfolio turnover rate (6) ....................................... 29.84% 51.68%(4) * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized. (4) Not Annualized. (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements -- 1.60%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- (0.89)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). (7) Excludes foreign taxes paid on stock dividends. See Note 1.
See accompanying notes to financial statements. 112-113 AUGUST 31, 2001 FINANCIAL HIGHLIGHTS (concluded) -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI UNITED KINGDOM INDEX FUND ----------------------------------------------------------- For the For the For the For the For the year year year year year ended ended ended ended ended 08/31/01 08/31/00 08/31/99 08/31/98 08/31/97 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .............................. $ 18.35 $ 20.25 $ 18.48 $ 16.50 $ 13.15 -------- -------- -------- ------- ------- Net investment income/(loss) (+) .................................. 0.26 0.27 0.44 0.37 0.38 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (3.23) (0.85) 2.40 2.12 3.62 -------- -------- -------- ------- ------- Net increase/(decrease) in net assets resulting from operations (2.97) (0.58) 2.84 2.49 4.00 -------- -------- -------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .............................. (0.25) (0.23) (0.36) (0.29) (0.32) Dividends in excess of net investment income ...................... -- (0.02) (0.01) (0.04) (0.06) Distributions from net realized gains ............................. -- (0.84) (0.60) (0.11) (0.17) Distributions in excess of net realized gains ..................... (0.02) (0.19) (0.02) -- -- Return of capital ................................................. -- (0.04) (0.08) (0.07) (0.10) -------- -------- -------- ------- ------- Total dividends and distributions ............................. (0.27) (1.32) (1.07) (0.51) (0.65) -------- -------- -------- ------- ------- Net asset value, end of period .................................... $ 15.11 $ 18.35 $ 20.25 $ 18.48 $ 16.50 ======== ======== ======== ======= ======= TOTAL INVESTMENT RETURN (1) ......................................... (16.20)% (3.00)% 15.33% 14.98% 30.48% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .............................. $117,883 $146,803 $113,402 $62,846 $29,721 Ratios of expenses to average net assets (2) ...................... 0.84% 0.94% 0.97% 1.03% 1.38% Ratios of net investment income/(loss) to average net assets (2) .. 1.57% 1.39% 2.16% 1.90% 2.47% Portfolio turnover rate (3) ....................................... 30.08% 32.83% 13.24% 2.83% 1.84% + Based on average shares outstanding throughout the period. (1) 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. (2) 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% Ratios of net investment income/(loss) to average net assets before waivers/reimbursements -- -- -- -- 2.47% (3) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 114 NOTES TO FINANCIAL STATEMENTS iSHARES, INC. -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES iShares, Inc. (the "Company"), is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company was incorporated under the laws of the State of Maryland on September 1, 1994. As of August 31, 2001, the Company offers 21 investment portfolios (each, a "Fund", collectively, the "Funds"). The Funds offered by the Company as of August 31, 2001 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 The investment objective of each Fund is to seek to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the aggregate in particular markets, as represented by a particular equity securities index compiled by Morgan Stanley Capital International Inc. ("MSCI"). The investment adviser utilizes a "passive" or index approach to try to achieve each Fund's investment objective. Each of the Funds is classified as a non-diversified fund under the 1940 Act, except for the iShares MSCI Japan and iShares MSCI United Kingdom Index Funds, which are classified as diversified funds. Non-diversified funds generally hold stocks in fewer companies than diversified funds and may be more susceptible to the risks associated with these particular companies, or to a single economic, political or regulatory occurrence. Each Fund invests in the securities of foreign issuers of a single country or region, which may involve certain considerations and risks not typically associated with those of domestic origin. Such risks include, but are not limited to: generally less liquid and less efficient securities markets; generally greater price volatility; exchange rate fluctuations and exchange controls; imposition of restrictions on the expatriation of funds or other assets; less publicly available information about issuers; the imposition of taxes; higher transaction and custody costs; settlement delays and risk of loss; difficulties in enforcing contracts; less liquidity and smaller market capitalizations; lesser regulation of securities markets; different accounting and disclosure standards; governmental interference; higher inflation; social, economic and political uncertainties; the risk of expropriation; and the risk of war. The following significant accounting policies are consistently followed by the Company in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") for investment companies. The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions. Actual results could differ from those estimates. Certain prior year amounts in the financial statements have been reclassified to be consistent with the current year presentation. 115 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- SECURITY VALUATION Portfolio securities for which market prices are readily available are valued using the official closing prices of the primary exchange on which they are traded. The methodology used to determine such closing prices varies among markets. Such prices are generally the same as those used by MSCI in calculating the benchmark indices used by the Funds. Other portfolio securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith in accordance with procedures adopted by the Company's Board of Directors. SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES Security transactions are accounted for on trade date. Dividend income is recognized on the ex-dividend date, and interest income is accrued daily. Realized gains and losses on investment transactions are determined using the specific identification method. Common expenses incurred by the Company are allocated among the Funds based on the ratio of average net assets of each Fund to the combined net assets, or other appropriate method. Other expenses, directly related to a specific Fund, are charged to that Fund. FOREIGN CURRENCY TRANSLATION The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the prevailing rates of exchange on the valuation date. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate 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 for the exchange rate for the MSCI Mexico (Free) Index, which is as of 3:00 p.m. Eastern time). However, the Company may use a different exchange rate from the rate used by MSCI in the event that the investment adviser concludes that such rate is more appropriate. Each Fund does not isolate the effect of fluctuations in foreign exchange rates from the effect of fluctuations in the market prices of securities. Such fluctuations are reflected by the Funds as a component of realized and unrealized gains and losses from investments for financial reporting purposes. FOREIGN TAXES South Korea and Taiwan levy a tax at a rate of 16.5% and 20.0%, respectively, based on the par value of stock dividends received by the iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, respectively. These taxes are paid by the Funds receiving the stock dividends and are disclosed in their respective Statements of Operations. EQUALIZATION The Funds use the accounting practice of equalization. This accounting method is used to keep the continuing shareholders' per share equity in undistributed net investment income from being affected by the continuous sales and redemptions of capital stock. Equalization is calculated on a per share basis whereby a portion of the proceeds from sales and costs of repurchases of capital stock is applied to undistributed net investment income. DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders from net investment income, if any, including any net foreign currency gains, are declared and distributed at least annually by each Fund. Distributions of net realized gains, if any, generally are declared and distributed once a year. Distributions are determined on a tax basis and may differ from net investment income and net realized capital gains for financial reporting purposes. In addition, the Company intends to distribute, at least annually, amounts representing the dividend yield on the underlying portfolio securities of each Fund, net of expenses, as if the Fund owned the 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 shares of the Funds. FEDERAL INCOME TAXES Each Fund is treated as a separate entity for federal income tax purposes. It is the policy of each Fund to qualify as a regulated investment company, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to annually distribute all of its net income and any net gains (taking into account any capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income and excise taxes. Accordingly, no provision for federal income taxes was required for the period ended August 31, 2001. 116 iSHARES, INC. -------------------------------------------------------------------------------- From November 1, 2000 to August 31, 2001, certain of the Funds incurred net foreign exchange losses and net realized capital losses. As permitted by tax regulations, the following Funds have elected to defer those losses and treat them as arising in the year ending August 31, 2002. NET FOREIGN EXCHANGE NET REALIZED CAPITAL iSHARES MSCI INDEX FUND LOSSES LOSSES ----------------------- -------------------- -------------------- Australia $ 8,681 $ 3,506,198 Austria 1,921 1,679,007 Belgium 2,155 1,677,678 Brazil (Free) 190,859 1,941,883 Canada -- 825,657 EMU 6,312 1,803,939 France 876 3,863,111 Germany 36,767 13,573,336 Hong Kong 98 4,971,970 Italy 8,932 3,264,876 Japan 253,067 61,794,499 Malaysia (Free) 2,664 10,068,186 Mexico (Free) -- 894,617 Netherlands 15,860 3,204,119 Singapore (Free) 3,276 4,711,069 South Korea 41,733 1,432,687 Spain 11,329 2,082,122 Sweden 6,275 3,259,157 Switzerland -- 2,457,965 Taiwan 11,995 11,673,550 United Kingdom -- 9,779,858 At August 31, 2001, certain of the Funds had tax basis net capital loss carryforwards. Such losses may be applied against any net realized taxable gains in each succeeding year or until their respective expiration date, whichever occurs first. iSHARES MSCI INDEX FUND 2007 2008 2009 -------------------------- ---------- -------- ---------- Australia $ 674,889 $630,985 $1,971,994 Austria 4,273 551,208 336,553 Belgium -- 94,675 450,543 Brazil -- -- 94,163 EMU -- -- 443 Germany -- -- 86,860 Hong Kong 4,085,707 -- -- Japan -- -- 2,959,030 Malaysia (Free) 8,654,333 -- -- Netherlands -- -- 60,885 South Korea -- -- 556,540 Spain -- -- 20,276 Sweden -- -- 126,557 If any of the Funds own shares in certain foreign investment entities, referred to, under U.S. tax law code, as "passive foreign investment companies", such 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. For the year ended August 31, 2001, each Fund reclassified certain amounts to paid-in-capital 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 Funds that commenced operations on March 12, 1996, based on the original net assets of each of these Funds. Such organization costs were deferred and amortized ratably on the reverse sum of the years digits method over a period of sixty months from the commencement of operations. Such period expired on March 11, 2001. 117 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- Certain 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. All other organization expenses of these Funds were paid by the investment adviser. 2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES Pursuant to an Investment Advisory Agreement with the Company, Barclays Global Fund Advisors ("BGFA") manages the investment of each Fund's assets. BGFA is a California corporation indirectly owned by Barclays Bank PLC. Under this agreement, BGFA is responsible for placing purchase and sale orders, providing continuous supervision of the investment portfolio of each Fund, and the general management of the Company's affairs. For its investment management services to each Fund, except for the iShares MSCI Brazil (Free), iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, BGFA is entitled to an annual investment advisory fee on the aggregate net assets of the Funds, other than the iShares MSCI Brazil (Free), South Korea and Taiwan Funds, as follows: ADVISORY FEE AVERAGE DAILY NET ASSETS --------- ------------------------ 0.59% First $7 billion 0.54 Over $7 billion, up to and including $11 billion 0.49 Over $11 billion For its investment management services to the iShares MSCI Brazil (Free), iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, BGFA is entitled to an annual investment advisory fee on the aggregate net assets of these three Funds as follows: ADVISORY FEE AVERAGE DAILY NET ASSETS --------- ------------------------ 0.74% First $2 billion 0.69 Over $2 billion, up to and including $4 billion 0.64 Over $4 billion The investment advisory fee paid to BGFA with respect to each Fund is reduced by the aggregate of such Fund's fees and expenses (other than the investment advisory fee, distribution fees, litigation expenses, taxes, extraordinary expenses and expenses incurred in connection with the execution of portfolio securities transactions). BGFA has agreed to reimburse the Company to the extent that the expenses of any Fund (as set forth in the foregoing proviso) exceeds the investment advisory fee (as stated in the above tables) with respect to such Fund. Under the investment advisory agreement, and based on current asset levels, the expense ratio is generally fixed at 0.84% of the average daily net assets for each Fund, except for the iShares MSCI Brazil (Free), iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, where the expense ratio is generally fixed at 0.99% of average daily net assets. Barclays Global Investors, N.A. ("BGI") has a license agreement with MSCI for the use of the relevant MSCI indices. Under a sub-license agreement between BGI and the Funds, the fees for the use of such MSCI indices are paid directly by BGI to MSCI. From time to time, BGI may pay other small expenses on behalf of the Funds. PFPC Inc. (the "Administrator") acts as administration and accounting services agent of the Company, pursuant to an Administration and Accounting Services Agreement with the Company. The Administrator is responsible for certain clerical, recordkeeping and bookkeeping services. For its services to the Company, the Administrator is paid aggregate fees equal to each Fund's allocable portion of 0.15% per annum of the average aggregate daily net assets of the Company up to $3 billion; plus 0.10% per annum of the average aggregate daily net assets of the Company between $3 billion and $4.5 billion and 0.095% of the average aggregate daily net assets of the Company in excess of $4.5 billion. The Administrator receives a minimum monthly fee of 0.05% of the aggregate average daily net assets of the Company plus $131,250 for the Funds. The Administrator pays Morgan Stanley & Co. Incorporated a fee of 0.05% of the average daily net assets of the Company for sub-administration services. PFPC Inc., an affiliate of the Administrator, serves as transfer agent and dividend disbursement agent for the Funds. SEI Investments Distribution Co. (the "Distributor") serves as each Fund's underwriter and distributor of the shares of each Fund, pursuant to a Distribution Agreement with the Company. The Company has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Company's Plan, the Distributor is entitled to receive a distribution fee from each Fund, not to exceed 0.25% of the average daily net assets of such Fund, for distribution-related services. 118 iSHARES, INC. -------------------------------------------------------------------------------- The Chase Manhattan Bank (the "Custodian") serves as global custodian and securities lending agent to each of the Funds. For its custody services to each Fund, the Custodian is paid per annum fees based on the aggregate net assets of each Fund as follows:
CUSTODIAN CUSTODIAN iSHARES MSCI INDEX FUND FEE iSHARES MSCI INDEX FUND FEE ----------------------- --------- ----------------------- --------- Australia 0.05% Malaysia (Free) 0.07% Austria 0.06 Mexico (Free) 0.15 Belgium 0.05 Netherlands 0.04 Brazil (Free) 0.20 Singapore (Free) 0.05 Canada 0.02 South Korea 0.15 France 0.05 Spain 0.05 Germany 0.04 Sweden 0.05 Hong Kong 0.04 Switzerland 0.05 Italy 0.05 Taiwan 0.20 Japan 0.026 United Kingdom 0.01
The Custodian is paid a per annum fee for the iShares MSCI EMU Index Fund based on the aggregate net assets of the Fund's investments in each of Austria, Belgium, France, Germany, Italy, Netherlands and Spain at the fees applicable to these countries, plus fees at rates of 0.06%, 0.40%, 0.06% and 0.20% for aggregate net assets of the Fund's investments in each of Finland, Greece, Ireland and Portugal, respectively. The Custodian also receives certain fees for each transaction of each Fund and is reimbursed for certain out-of-pocket expenses. For its services in connection with lending portfolio securities of the Funds, the Custodian receives 40% of the net investment income earned on the collateral for securities loaned from each Fund. As a result of using an index approach to investing, the iShares MSCI United Kingdom Index Fund held shares of Barclays PLC, with a current market value of $3,303,353 as of August 31, 2001. Barclays PLC is an affiliate of BGFA, the Fund's investment adviser. The Company pays each director 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 Company reimburses the directors for travel and out-of-pocket expenses incurred in connection with their attendance at Board of Directors meetings. 3. INVESTMENT PORTFOLIO TRANSACTIONS Purchases and sales of investments (excluding in-kind transactions and short-term securities) for the year ended August 31, 2001, were as follows: iSHARES MSCI INDEX FUND PURCHASES SALES -------------------------- ------------ ------------ Australia $ 13,949,608 $ 12,576,901 Austria 7,226,605 7,265,126 Belgium 3,890,564 4,218,646 Brazil (Free) 10,813,763 7,013,006 Canada 13,633,709 14,025,317 EMU 13,544,002 13,858,041 France 10,899,436 10,569,657 Germany 29,779,192 29,419,874 Hong Kong 28,257,815 29,027,373 Italy 8,794,026 9,061,615 Japan 132,155,967 132,465,684 Malaysia (Free) 31,843,010 32,828,850 Mexico (Free) 13,495,043 13,259,899 Netherlands 11,058,252 11,217,117 Singapore (Free) 21,654,103 24,677,721 South Korea 36,445,090 7,787,099 Spain 9,060,760 8,613,174 Sweden 7,583,632 7,099,987 Switzerland 13,595,062 14,093,296 Taiwan 142,934,391 25,605,281 United Kingdom 42,023,712 48,012,335 119 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- In-kind transactions for the year ended August 31, 2001 were as follows: IN-KIND IN-KIND iSHARES MSCI INDEX FUND PURCHASES SALES -------------------------- ------------ ------------ Australia $ 13,325,205 $ 13,495,056 Belgium -- 1,921,108 Canada 16,190,957 -- EMU 67,155,213 -- France 4,918,886 17,589,519 Germany 23,103,731 15,192,266 Hong Kong 2,427,710 3,583,192 Italy 6,414,175 12,903,580 Japan 132,136,534 115,306,719 Mexico (Free) 23,758,648 15,236,256 Netherlands 8,846,259 8,244,088 Singapore (Free) 20,002,201 11,813,453 Spain 1,810,602 11,067,215 Sweden 6,930,764 9,312,982 Switzerland 3,574,921 9,460,490 United Kingdom 43,547,282 41,171,136 4. iSHARES TRANSACTIONS The Company's authorized shares are 10.9 billion shares of $.001 par value capital stock. The following number of shares are authorized to each Fund currently in operation: iSHARES MSCI INDEX FUND AUTHORIZED SHARES -------------------------- ----------------- Australia 127,800,000 Austria 19,800,000 Belgium 136,200,000 Brazil (Free) 500,000,000 Canada 340,200,000 EMU 500,000,000 France 340,200,000 Germany 382,200,000 Hong Kong 191,400,000 Italy 63,600,000 Japan 2,124,600,000 Malaysia (Free) 127,800,000 Mexico (Free) 255,000,000 Netherlands 255,000,000 Singapore (Free) 191,400,000 South Korea 200,000,000 Spain 127,800,000 Sweden 63,600,000 Switzerland 318,625,000 Taiwan 200,000,000 United Kingdom 943,200,000 120 iSHARES, INC. -------------------------------------------------------------------------------- The Company issues and redeems shares ("iShares") of each Fund only in aggregations of a specified number of iShares (each, a "Creation Unit") at net asset value. Except when aggregated in Creation Units, iShares are not redeemable. Transactions in iShares for each Fund are disclosed in detail in the Statements of Changes in Net Assets. The consideration for purchase of Creation Units of a Fund is generally the in-kind deposit of a designated portfolio of equity securities constituting a portfolio sampling 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 Funds may include securities that are not in its respective MSCI Index in the Basket Securities. Non-Basket Securities may also be held by a Fund as a result of corporate actions, odd share lots, or as a result of rebalancing of the Basket Securities. 5. LOANS OF PORTFOLIO SECURITIES Each Fund may lend its investment securities to approved borrowers such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, letters of credit issued by banks approved by BGFA, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each Fund is required to have a value equal to at least 105% of the market value of the loaned securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The risks to the Funds of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. As of August 31, 2001, certain of the Funds had loaned securities which were collateralized by cash. The market values of the securities on loan at August 31, 2001, and the cash collateral received were as follows: VALUE OF CASH iSHARES MSCI INDEX FUND SECURITIES COLLATERAL -------------------------- ----------- ----------- Australia $ 2,633,309 $ 2,830,498 Austria 896,272 952,050 Belgium 252,730 268,260 Canada 711,425 757,100 France 5,582,293 5,995,124 Germany 24,084,259 25,126,061 Hong Kong 4,509,201 4,983,783 Italy 6,635,576 7,155,844 Japan 80,645,831 84,703,790 Mexico (Free) 11,375,173 12,215,534 Netherlands 1,274,250 1,385,896 Singapore (Free) 17,700,115 18,708,492 Spain 3,898,078 4,069,684 Sweden 569,398 601,020 Switzerland 127,540 144,670 121 NOTES TO FINANCIAL STATEMENTS (concluded) -------------------------------------------------------------------------------- 6. BORROWINGS As of June 25, 2001, the Company entered into a Line of Credit Agreement with The Chase Manhattan Bank for $25,000,000. Each Fund may borrow under the credit agreement solely for temporary or emergency purposes. Each Fund pays a commitment fee of 0.15% per annum based upon each Fund's pro rata share of the average daily unused amount of the aggregate commitment. Amounts borrowed under the agreement bear interest at a rate per annum equal to the Federal Funds Rate plus 0.50% per annum. As of August 31, 2001, the outstanding advances under this agreement were as follows: AVERAGE ADVANCES AVERAGE NUMBER OF DAYS OUTSTANDING INTEREST OUTSTANDING iSHARES MSCI INDEX FUND DURING THE PERIOD RATE DURING THE PERIOD ----------------------- ----------------- ------- ----------------- Australia $500,000 4.0938% 1 Mexico (Free) 200,000 4.1875 1 Singapore (Free) 200,000 4.1875 1 Spain 100,000 4.1875 1 7. POSSIBLE CLAIM A United States patentholder has notified the Company that it believes that the manner of the Company's operation results in the Company, possibly in conjunction with others, engaging in acts of infringement of such patent and has suggested that the Company 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 Funds, do not infringe the patent or a related patent. The patentholder 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 Company's investment adviser and distributor. The Company is not party to either action. The Company believes that it has valid defenses to any potential claim of infringement of these patents. In July 2001, the patentholder and others filed an action against the AMEX, the Company's investment adviser and its parent corporation, and the Company's Chairman, President and Chief Executive Officer alleging misappropriation of trade secrets and related claims for activities with respect to exchange traded funds. The Company is not a party to this action either. 8. NEW ACCOUNTING PRONOUNCEMENT In November 2000, the American Institute of Certified Public Accountants issued a revised Audit and Accounting Guide, Audits of Investment Companies, which is effective for fiscal years beginning after December 15, 2000. The requirements of the new audit guide are not expected to have a material impact on the net assets of the Funds, or on the presentation of the Funds' financial statements. 122 REPORT OF INDEPENDENT ACCOUNTANTS iSHARES, INC. -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of iSHARES, Inc. In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the various funds comprising the iShares MSCI Index Fund Series (comprised of the iShares MSCI Australia Index Fund, the iShares MSCI Austria Index Fund, the iShares MSCI Belgium Index Fund, the iShares MSCI Brazil (Free) Index Fund, the iShares MSCI Canada Index Fund, the iShares MSCI EMU Index Fund, the iShares MSCI France Index Fund, the iShares MSCI Germany Index Fund, the iShares MSCI Hong Kong Index Fund, the iShares MSCI Italy Index Fund, the iShares MSCI Japan Index Fund, the iShares MSCI Malaysia (Free) Index Fund, the iShares MSCI Mexico (Free) Index Fund, the iShares MSCI Netherlands Index Fund, the iShares MSCI Singapore (Free) Index Fund, the iShares MSCI South Korea Index Fund, the iShares MSCI Spain Index Fund, the iShares MSCI Sweden Index Fund, the iShares MSCI Switzerland Index Fund, the ishares MSCI Taiwan Index Fund, and the iShares MSCI United Kingdom Index Fund, collectively, the "Funds") at August 31, 2001, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at August 31, 2001 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. The financial statements of the Funds as of August 31, 2000 and for the periods then ended were audited by other auditors, whose report dated October 13, 2000 expressed an unqualified opinion on those statements. PricewaterhouseCoopers LLP San Francisco, California October 15, 2001 123 iSHARES, INC. -------------------------------------------------------------------------------- FEDERAL TAXATION NOTICE (UNAUDITED) The Funds paid the following foreign taxes during the year ended August 31, 2001 which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code. In addition, each of the Funds earned the following foreign source income and is designating the following distributions as long-term capital gain distributions:
FOREIGN SOURCE LONG-TERM iSHARES MSCI INDEX FUND INCOME FOREIGN TAXES CAPITAL GAINS DISTRIBUTIONS -------------------------- -------------- ------------- --------------------------- Australia $1,905,134 $ 35,601 $ -- Austria 317,758 47,541 -- Belgium 384,569 44,890 -- Brazil (Free) 981,033 89,715 -- Canada 309,569 46,320 96,252 EMU 1,265,474 127,827 -- France 848,724 28,036 19 Germany 2,832,283 289,529 -- Hong Kong 1,890,821 -- -- Italy 888,031 126,703 136,605 Japan 5,134,729 773,849 -- Malaysia (Free) 1,711,054 -- -- Mexico (Free) 750,775 57,640 -- Netherlands 811,866 110,044 -- Singapore (Free) 1,258,264 -- 566,626 South Korea 376,371 65,291 -- Spain 639,347 92,312 -- Sweden 225,024 33,665 -- Switzerland 529,777 77,719 94,754 Taiwan 1,493,131 824,477 -- United Kingdom 3,738,153 365,818 9,534
Shareholders will receive more detailed information along with Form 1099-DIV in January 2002. 124 SUPPLEMENTAL INFORMATION (UNAUDITED) iSHARES, INC. -------------------------------------------------------------------------------- The charts below present information about the differences between the daily closing price on secondary markets for shares of each Fund and that Fund's net asset value. Net asset value, or "NAV", is the price per share at which each Fund issues and redeems shares. NAV is calculated in accordance with the standard formula for valuing mutual fund shares. NAV for each Fund is calculated every day the New York Stock Exchange is open as of the close of regular trading (normally 4:00 p.m. Eastern time), 8:30 a.m. (Eastern time) or 5:00 p.m. (Eastern time). The "Closing Price" of each Fund is the price of the last reported trade on any national securities exchange, such as AMEX, or any regional U.S. Exchange, or National Association of Securities Dealers Automated Quotation System (NASDAQ). Each Fund's Closing Price may be below, at, or above its NAV. The NAV of each Fund will fluctuate with changes in the value of its portfolio holdings. The trading price of each Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand and other factors. Premiums or discounts are the differences (generally expressed as a percentage) between the NAV and Closing Price of a Fund on a given day. A premium is the amount that a Fund is trading above the reported NAV, expressed as a percentage of the NAV. A discount is the amount that a Fund is trading below the reported NAV, expressed as a percentage of the NAV. One reason for differences is that timing discrepancies can exist between the NAV and Closing Price of a Fund. Trading activity varies and it is important to note that the date/time of the last trade (which is recorded as the Closing Price) may not take place at the time when the Funds normally calculate NAV. Each Fund normally trades on its respective stock exchange until 4:00 p.m. (Eastern time). Price discovery, the constant flow of information among investors, corporations and financial institutions, causes market prices to change and evolve throughout the trading day, even after non-U.S. markets are closed. Price discovery between the time that each Fund calculates its NAV and the date/time of the last trade may contribute to any difference between the NAV and Closing Price of each Fund. The following information is provided to show the frequency distributions of premiums and discounts for each of the Funds included in this report. The information shown for each Fund (except for the iShares MSCI Brazil (Free) and iShares MSCI EMU Index Funds) is for the four most recently completed calendar quarters as of August 31, 2001, the date of this report. The information shown for the iShares MSCI Brazil (Free) and iShares MSCI EMU Index Funds is for each full calendar quarter completed after the inception dates of these Funds as of August 31, 2001. THE VERTICAL COLUMN OF EACH CHART SHOWS THE PREMIUM OR DISCOUNT EXPRESSED AS A PERCENTAGE OF NAV. THE HORIZONTAL COLUMN INDICATES THE NUMBER OF TRADING DAYS IN THE PERIOD COVERED BY EACH CHART. EACH BAR IN THE CHART SHOWS THE NUMBER OF TRADING DAYS IN WHICH THE FUND TRADED WITHIN THE PREMIUM/DISCOUNT RANGE INDICATED. ALL DATA PRESENTED HERE REPRESENTS PAST PERFORMANCE, WHICH CANNOT BE USED TO PREDICT FUTURE RESULTS. 125 SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- iSHARES MSCI AUSTRALIA INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 1 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 7 GT2.0%_LT2.5% 4 GT1.5%_LT2.0% 14 GT1.0%_LT1.5% 29 GT0.5%_LT1.0% 54 LT0.5%_GTneg0.5% 93 LTneg0.5%_GTneg1.0% 34 LTneg1.0%_GTneg1.5% 13 LTneg1.5%_GTneg2.0% 1 LTneg2.0%_GTneg2.5% 1 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 1 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI AUSTRIA INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 0 GT2.0%_LT2.5% 0 GT1.5%_LT2.0% 9 GT1.0%_LT1.5% 25 GT0.5%_LT1.0% 21 LT0.5%_GTneg0.5% 97 LTneg0.5%_GTneg1.0% 47 LTneg1.0%_GTneg1.5% 29 LTneg1.5%_GTneg2.0% 17 LTneg2.0%_GTneg2.5% 4 LTneg2.5%_GTneg3.0% 1 LTneg3.0%_GTneg3.5% 1 LTneg3.5%_GTneg4.0% 1 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 126 iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI BELGIUM INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 1 GT3.0%_LT3.5% 2 GT2.5%_LT3.0% 0 GT2.0%_LT2.5% 2 GT1.5%_LT2.0% 12 GT1.0%_LT1.5% 12 GT0.5%_LT1.0% 31 LT0.5%_GTneg0.5% 68 LTneg0.5%_GTneg1.0% 43 LTneg1.0%_GTneg1.5% 33 LTneg1.5%_GTneg2.0% 28 LTneg2.0%_GTneg2.5% 15 LTneg2.5%_GTneg3.0% 5 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI BRAZIL (FREE) INDEX FUND PERIOD COVERED: OCTOBER 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 2 GT5.0%_LT5.5% 1 GT4.5%_LT5.0% 2 GT4.0%_LT4.5% 2 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 4 GT2.5%_LT3.0% 8 GT2.0%_LT2.5% 5 GT1.5%_LT2.0% 9 GT1.0%_LT1.5% 19 GT0.5%_LT1.0% 33 LT0.5%_GTneg0.5% 55 LTneg0.5%_GTneg1.0% 16 LTneg1.0%_GTneg1.5% 17 LTneg1.5%_GTneg2.0% 6 LTneg2.0%_GTneg2.5% 4 LTneg2.5%_GTneg3.0% 1 LTneg3.0%_GTneg3.5% 1 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 2 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 1 LTneg6.0% 0 127 SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- iSHARES MSCI CANADA INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 0 GT2.0%_LT2.5% 5 GT1.5%_LT2.0% 13 GT1.0%_LT1.5% 24 GT0.5%_LT1.0% 53 LT0.5%_GTneg0.5% 115 LTneg0.5%_GTneg1.0% 24 LTneg1.0%_GTneg1.5% 15 LTneg1.5%_GTneg2.0% 2 LTneg2.0%_GTneg2.5% 1 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI EMU INDEX FUND PERIOD COVERED: OCTOBER 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 1 GT5.0%_LT5.5% 1 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 2 GT2.0%_LT2.5% 1 GT1.5%_LT2.0% 8 GT1.0%_LT1.5% 35 GT0.5%_LT1.0% 61 LT0.5%_GTneg0.5% 72 LTneg0.5%_GTneg1.0% 3 LTneg1.0%_GTneg1.5% 5 LTneg1.5%_GTneg2.0% 0 LTneg2.0%_GTneg2.5% 0 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 128 iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI FRANCE INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 1 GT2.5%_LT3.0% 0 GT2.0%_LT2.5% 1 GT1.5%_LT2.0% 1 GT1.0%_LT1.5% 10 GT0.5%_LT1.0% 35 LT0.5%_GTneg0.5% 160 LTneg0.5%_GTneg1.0% 34 LTneg1.0%_GTneg1.5% 10 LTneg1.5%_GTneg2.0% 0 LTneg2.0%_GTneg2.5% 0 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI GERMANY INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 1 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 0 GT2.0%_LT2.5% 1 GT1.5%_LT2.0% 6 GT1.0%_LT1.5% 11 GT0.5%_LT1.0% 45 LT0.5%_GTneg0.5% 143 LTneg0.5%_GTneg1.0% 30 LTneg1.0%_GTneg1.5% 12 LTneg1.5%_GTneg2.0% 3 LTneg2.0%_GTneg2.5% 0 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 129 SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- iSHARES MSCI HONG KONG INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 1 GT4.5%_LT5.0% 1 GT4.0%_LT4.5% 1 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 2 GT2.5%_LT3.0% 2 GT2.0%_LT2.5% 5 GT1.5%_LT2.0% 14 GT1.0%_LT1.5% 27 GT0.5%_LT1.0% 30 LT0.5%_GTneg0.5% 78 LTneg0.5%_GTneg1.0% 25 LTneg1.0%_GTneg1.5% 23 LTneg1.5%_GTneg2.0% 16 LTneg2.0%_GTneg2.5% 16 LTneg2.5%_GTneg3.0% 3 LTneg3.0%_GTneg3.5% 2 LTneg3.5%_GTneg4.0% 2 LTneg4.0%_GTneg4.5% 1 LTneg4.5%_GTneg5.0% 1 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 1 LTneg6.0% 0 iSHARES MSCI ITALY INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 1 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 3 GT2.0%_LT2.5% 4 GT1.5%_LT2.0% 6 GT1.0%_LT1.5% 12 GT0.5%_LT1.0% 29 LT0.5%_GTneg0.5% 128 LTneg0.5%_GTneg1.0% 48 LTneg1.0%_GTneg1.5% 7 LTneg1.5%_GTneg2.0% 7 LTneg2.0%_GTneg2.5% 4 LTneg2.5%_GTneg3.0% 3 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 130 iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI JAPAN INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 1 GT3.0%_LT3.5% 2 GT2.5%_LT3.0% 3 GT2.0%_LT2.5% 7 GT1.5%_LT2.0% 2 GT1.0%_LT1.5% 13 GT0.5%_LT1.0% 39 LT0.5%_GTneg0.5% 113 LTneg0.5%_GTneg1.0% 39 LTneg1.0%_GTneg1.5% 22 LTneg1.5%_GTneg2.0% 3 LTneg2.0%_GTneg2.5% 6 LTneg2.5%_GTneg3.0% 1 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 1 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI MALAYSIA (FREE) INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 1 GT3.5%_LT4.0% 2 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 3 GT2.0%_LT2.5% 6 GT1.5%_LT2.0% 6 GT1.0%_LT1.5% 5 GT0.5%_LT1.0% 22 LT0.5%_GTneg0.5% 57 LTneg0.5%_GTneg1.0% 24 LTneg1.0%_GTneg1.5% 14 LTneg1.5%_GTneg2.0% 10 LTneg2.0%_GTneg2.5% 27 LTneg2.5%_GTneg3.0% 17 LTneg3.0%_GTneg3.5% 18 LTneg3.5%_GTneg4.0% 13 LTneg4.0%_GTneg4.5% 13 LTneg4.5%_GTneg5.0% 8 LTneg5.0%_GTneg5.5% 5 LTneg5.5%_GTneg6.0% 1 LTneg6.0% 0 131 SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- iSHARES MSCI MEXICO (FREE) INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 1 GT2.5%_LT3.0% 2 GT2.0%_LT2.5% 11 GT1.5%_LT2.0% 17 GT1.0%_LT1.5% 20 GT0.5%_LT1.0% 50 LT0.5%_GTneg0.5% 83 LTneg0.5%_GTneg1.0% 34 LTneg1.0%_GTneg1.5% 21 LTneg1.5%_GTneg2.0% 10 LTneg2.0%_GTneg2.5% 3 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI NETHERLANDS INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 1 GT2.5%_LT3.0% 3 GT2.0%_LT2.5% 0 GT1.5%_LT2.0% 2 GT1.0%_LT1.5% 12 GT0.5%_LT1.0% 48 LT0.5%_GTneg0.5% 119 LTneg0.5%_GTneg1.0% 38 LTneg1.0%_GTneg1.5% 16 LTneg1.5%_GTneg2.0% 9 LTneg2.0%_GTneg2.5% 3 LTneg2.5%_GTneg3.0% 1 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 132 iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SINGAPORE (FREE) INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 1 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 0 GT3.0%_LT3.5% 1 GT2.5%_LT3.0% 0 GT2.0%_LT2.5% 2 GT1.5%_LT2.0% 1 GT1.0%_LT1.5% 7 GT0.5%_LT1.0% 12 LT0.5%_GTneg0.5% 63 LTneg0.5%_GTneg1.0% 34 LTneg1.0%_GTneg1.5% 32 LTneg1.5%_GTneg2.0% 34 LTneg2.0%_GTneg2.5% 23 LTneg2.5%_GTneg3.0% 12 LTneg3.0%_GTneg3.5% 17 LTneg3.5%_GTneg4.0% 9 LTneg4.0%_GTneg4.5% 1 LTneg4.5%_GTneg5.0% 1 LTneg5.0%_GTneg5.5% 2 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI SOUTH KOREA INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 3 GT4.0%_LT4.5% 5 GT3.5%_LT4.0% 5 GT3.0%_LT3.5% 7 GT2.5%_LT3.0% 12 GT2.0%_LT2.5% 16 GT1.5%_LT2.0% 20 GT1.0%_LT1.5% 23 GT0.5%_LT1.0% 25 LT0.5%_GTneg0.5% 64 LTneg0.5%_GTneg1.0% 26 LTneg1.0%_GTneg1.5% 12 LTneg1.5%_GTneg2.0% 11 LTneg2.0%_GTneg2.5% 3 LTneg2.5%_GTneg3.0% 7 LTneg3.0%_GTneg3.5% 5 LTneg3.5%_GTneg4.0% 2 LTneg4.0%_GTneg4.5% 1 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 1 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 133 SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- iSHARES MSCI SPAIN INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 1 GT3.0%_LT3.5% 1 GT2.5%_LT3.0% 0 GT2.0%_LT2.5% 0 GT1.5%_LT2.0% 3 GT1.0%_LT1.5% 3 GT0.5%_LT1.0% 40 LT0.5%_GTneg0.5% 127 LTneg0.5%_GTneg1.0% 49 LTneg1.0%_GTneg1.5% 21 LTneg1.5%_GTneg2.0% 5 LTneg2.0%_GTneg2.5% 2 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI SWEDEN INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 1 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 1 GT3.5%_LT4.0% 2 GT3.0%_LT3.5% 1 GT2.5%_LT3.0% 1 GT2.0%_LT2.5% 2 GT1.5%_LT2.0% 4 GT1.0%_LT1.5% 15 GT0.5%_LT1.0% 41 LT0.5%_GTneg0.5% 94 LTneg0.5%_GTneg1.0% 45 LTneg1.0%_GTneg1.5% 22 LTneg1.5%_GTneg2.0% 10 LTneg2.0%_GTneg2.5% 4 LTneg2.5%_GTneg3.0% 6 LTneg3.0%_GTneg3.5% 1 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 1 LTneg4.5%_GTneg5.0% 1 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 134 iSHARES, INC. -------------------------------------------------------------------------------- iSHARES MSCI SWITZERLAND INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 1 GT3.5%_LT4.0% 1 GT3.0%_LT3.5% 0 GT2.5%_LT3.0% 1 GT2.0%_LT2.5% 1 GT1.5%_LT2.0% 10 GT1.0%_LT1.5% 28 GT0.5%_LT1.0% 50 LT0.5%_GTneg0.5% 103 LTneg0.5%_GTneg1.0% 29 LTneg1.0%_GTneg1.5% 16 LTneg1.5%_GTneg2.0% 8 LTneg2.0%_GTneg2.5% 1 LTneg2.5%_GTneg3.0% 0 LTneg3.0%_GTneg3.5% 3 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 iSHARES MSCI TAIWAN INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 2 GT5.0%_LT5.5% 2 GT4.5%_LT5.0% 2 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 7 GT3.0%_LT3.5% 10 GT2.5%_LT3.0% 17 GT2.0%_LT2.5% 26 GT1.5%_LT2.0% 24 GT1.0%_LT1.5% 20 GT0.5%_LT1.0% 25 LT0.5%_GTneg0.5% 59 LTneg0.5%_GTneg1.0% 14 LTneg1.0%_GTneg1.5% 14 LTneg1.5%_GTneg2.0% 13 LTneg2.0%_GTneg2.5% 2 LTneg2.5%_GTneg3.0% 5 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 2 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 1 LTneg6.0% 0 135 SUPPLEMENTAL INFORMATION (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- iSHARES MSCI UNITED KINGDOM INDEX FUND PERIOD COVERED: JULY 1, 2000 THROUGH JUNE 30, 2001 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Premiums/Discounts Number of Days GT6.0% 0 GT5.5%_LT6.0% 0 GT5.0%_LT5.5% 0 GT4.5%_LT5.0% 0 GT4.0%_LT4.5% 0 GT3.5%_LT4.0% 1 GT3.0%_LT3.5% 2 GT2.5%_LT3.0% 2 GT2.0%_LT2.5% 6 GT1.5%_LT2.0% 20 GT1.0%_LT1.5% 42 GT0.5%_LT1.0% 40 LT0.5%_GTneg0.5% 107 LTneg0.5%_GTneg1.0% 23 LTneg1.0%_GTneg1.5% 5 LTneg1.5%_GTneg2.0% 1 LTneg2.0%_GTneg2.5% 1 LTneg2.5%_GTneg3.0% 2 LTneg3.0%_GTneg3.5% 0 LTneg3.5%_GTneg4.0% 0 LTneg4.0%_GTneg4.5% 0 LTneg4.5%_GTneg5.0% 0 LTneg5.0%_GTneg5.5% 0 LTneg5.5%_GTneg6.0% 0 LTneg6.0% 0 136 (LOGO) iShares 45 Fremont Street www.ishares.com 1-800-iSHARES BARCLAYS GLOBAL INVESTORS San Francisco, CA 1-800-474-2737 [GRAPHIC OMITTED] 94105 iShares are distributed by SEI Investments Distribution Co. Barclays Global Fund Advisors serves as an adviser to iShares and is a subsidiary of Barclays Global Investors, N.A., neither of which is affiliated with SEI. PFPC serves as administrator and transfer agent for the iShares MSCI Series. The Chase Manhattan Bank acts as custodian and securities lending agent. iShares are not sponsored, endorsed, issued, sold or promoted by Morgan Stanley Capital International Inc. Nor does this company make any representation regarding the advisability of investing in iShares. (C)2001 Barclays Global Investors. All rights reserved. ishares is a registered trademark of Barclays Global Investors, N.A. All other trademarks, servicemarks or registered trademarks are the property of their respective owners. This report is intended for the Funds' shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus. NOT FDIC INSURED HAVE NO BANK GUARANTEE MAY LOSE VALUE BGI-F-005-01000 (8/01)