N-30D 1 g02-0149.txt ISHARES SAR 02-28-02 iSHARES MSCI SERIES SEMI-ANNUAL REPORT February 28, 2002 [LOGO OMITTED.] iSHARES ------------------------- BARCLAYS GLOBAL INVESTORS THE WAY YOU INVEST NOW. ONLY BETTER. iSHARES, INC. -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to present the semi-annual report for the iShares MSCI Index Funds (the "Funds"). This report covers the semi-annual period from September 1, 2001 through February 28, 2002. The semi-annual report contains important information about the performance of your investment, a manager's discussion and analysis for each Fund from the Funds' Investment Adviser, Barclays Global Fund Advisors, as well as other important financial information. Each Fund seeks to provide exposure to a particular country's or region's stock market by tracking the performance of a Morgan Stanley Capital International ("MSCI") Index. The Investment Adviser's discussion contains information about performance and tracking for each of the Funds. GROWTH ACTIVITY The Funds continue to be an efficient way to invest in selected foreign equity markets. As of February 28, 2002, net assets of the twenty-two iShares MSCI Index Funds totaled almost $1.7 billion. Because the value of total net assets fluctuates with the performance of the respective foreign equity markets, we believe that the number of shares outstanding offers a better indicator of the Funds' attractiveness to investors. As of February 28, 2002, shares outstanding were 166.9 million, up from 152.3 million at August 31, 2001. The sustained increase in shares outstanding shows the growing acceptance of iShares among investors as a way to access foreign equity markets. NEW FUND On October 26, 2001, the iShares MSCI Pacific ex-Japan Index Fund commenced operations. The financial statements and manager's discussion and analysis for this Fund are contained in this report. INTERNATIONAL PERFORMANCE Although the performance review for each Fund contained in this report addresses some of the specific issues that affected the performance of the Fund's particular market, a number of trends had a global impact over the reporting period. The economic slowdown that the United States experienced during this period also continued to take its toll in Europe and Asia. In Europe, economies generally continued to slide. By year-end, Germany appeared to be approaching recession, and France and Italy appeared to be close behind. In the United Kingdom, however, economic conditions were markedly better -- the United Kingdom ended the year with one of the strongest rates of growth of any of the major industrial countries. In Asia, Japan found itself in its fourth recession in a decade. The country has, in effect, been in a prolonged slump for the entire decade, alleviated periodically by massive injections of government spending. As it became more apparent that the global economy was slowing, investors increasingly favored stocks considered relatively "defensive," such as consumer staples, utilities and financials. Conversely, information-technology and telecommunications stocks were among the worst performers on a sector basis, as demand for technology and telecommunications products and services declined on a worldwide basis. ELECTRONIC DELIVERY OF FINANCIAL REPORTS iShares is pleased to announce the availability of electronic delivery of financial reports and other regulatory documents or communications. Please contact your broker to sign up. We thank you for your continued support of and confidence in iShares, Inc. and hope the Funds will continue to meet your investment needs. Sincerely, /S/ GARRETT F. BOUTON Garrett F. Bouton Chairman and President iShares, Inc. 1 -------------------------------------------------------------------------------- INTRODUCTION In this section, the Investment Adviser discusses the performance of the iShares MSCI Index Funds (each, a "Fund", and collectively, the "Funds"). This section provides an overview of how each Fund seeks to track its respective underlying index and identifies some of the key factors that contributed to the Funds' performance against their benchmarks during the period. Each Fund invests in a representative sample of the underlying securities in a corresponding MSCI Index using an 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 investing that attempts to capture index returns by investing in a representative sample of securities in an index. This investment approach helps the adviser maximize the liquidity and float of a Fund's portfolio, while at the same time attempting to match the overall risk and return characteristics of the relevant index. 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. The Funds, like all investment companies, incur such expenses, and these expenses negatively impact the performance of the Funds, as compared to their benchmark MSCI Indices. CONSTRAINTS ON PORTFOLIO MANAGEMENT: The Investment Adviser is subject to a number of constraints when managing the MSCI Index Funds' portfolios. Since the MSCI Indices are not bound by these same constraints, these constraints may impact the Adviser's ability to track the benchmark MSCI Indices. 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 a single issuer. As an example, Samsung Electronics had a weighting of 28.55% in the MSCI South Korea Index as of February 28, 2002. Because of the "Single Issuer Rule", however, the iShares MSCI South Korea Index Fund could not hold more than 25% in Samsung Electronics. The "5/50 RULE" generally precludes the sum of all of the securities weighted over 5% in a Fund's portfolio from exceeding 50% of a Fund's total assets. 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 82.1% as of February 28, 2002; 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: The term "revenue differential", refers to differences between the way the Funds and the MSCI Indices record dividend accruals/ reinvestments. The Funds record dividend revenues on the "ex" dates of the underlying stocks. Prior to January 1, 2001, for developed markets, MSCI used 2 iSHARES, INC. -------------------------------------------------------------------------------- smoothed dividends as opposed to actual dividends by allocating annual dividend revenues evenly over a 12-month period. Separately, the Funds might have different dividend rates versus the Indices due to portfolio sampling or different withholding taxes. Finally, while the sole source of revenues for the MSCI Indices is dividends, the Funds receive interest on uninvested cash and, in the case of most Funds, revenues from the lending of portfolio securities. EFFECT OF UNINVESTED ASSETS: 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 is the principal "unequitized" assets of the Funds. 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 there can be a short period of rising market where the uninvested assets in a Fund have a negative impact on return. This could cause the effect of uninvested assets to worsen a loss for the period. 3 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ------------- AUSTRALIA -------------
iSHARES MSCI AUSTRALIA INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- 4.63% 3.30% 4.04% 0.40% 0.23% 1.04% 2.03% 1.91% 2.55% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/29/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI AUSTRALIA INDEX Consumer Discretionary 9.91% Consumer Staples 8.42% Energy 2.51% Financials 47.37% Health Care 3.07% Industrials 6.37% Information Technology 0.05% Materials 19.15% Telecommunication Services 2.33% Utilities 0.82% PERFORMANCE REVIEW The total return of the iShares MSCI Australia Index Fund (the "Australia Fund") was 3.69% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was also 3.69%. SIGNIFICANT PERFORMANCE FACTORS The Australia Fund performed in line with its benchmark over the reporting period. The negative impact of expenses, which subtracted 0.42 percentage points from the Fund's return, was fully offset by the positive impact of security sampling and uninvested assets, which contributed 0.39 and 0.03 percentage points respectively. 4 iSHARES, INC. -------------------------------------------------------------------------------- ----------------------- AUSTRALIA (CONTINUED) ----------------------- KEY MARKET CONDITIONS Except for a brief decline in September and some weakness in February, the MSCI Australia Index was on an upward trajectory for most of the reporting period. Australian equities were weakened at the start of September by pessimism about the world economy. The market dropped still further after the events of September 11. Yet many Australian stocks showed resilience in the following weeks and kept up their strength into the new year. The Australian market's rally was sparked by growing optimism that the U.S., European and Asian economies, Australia's chief export markets, could recover quickly in 2002. Mining and natural resource companies were among the Australian market's better performers during the reporting period. Shares of BHP Billiton Ltd. (9.03% of the Index as of February 28, 2002), for example, rose after the company reported better-than-expected results, even in the recessionary climate. Investors were also encouraged by signs that Australia's own economy remained strong. One of its strongest engines was the housing market, which was bolstered by low interest rates and government grants to first-time home buyers. Toward the end of the reporting period, Australia's rally lost momentum as weak corporate results undermined investors' confidence. Companies as diverse as mining concern Rio Tinto (2.57% of the Index as of February 28, 2002) and insurer AMP (4.34% of the Index as of February 28, 2002) said that their business outlook over at least the near term was still uncertain. 5 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ---------- AUSTRIA ----------
iSHARES MSCI AUSTRIA INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (7.59)% (7.97)% (8.06)% (3.54)% (3.58)% (3.10)% (3.97)% (3.86)% (2.86)% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/27/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI AUSTRIA INDEX Energy 16.62% Financials 20.05% Industrials 18.66% Materials 21.42% Telecommunication Services 14.66% Utilities 8.59% PERFORMANCE REVIEW The total return of the iShares MSCI Austria Index Fund (the "Austria Fund") was -5.87% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -4.66% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Austria Fund underperformed the benchmark by 1.21 percentage points over the reporting period, due to the combined impact of security sampling, expenses and uninvested assets. These factors subtracted 0.71, 0.42 and 0.08 percentage points respectively from the Fund's returns. 6 iSHARES, INC. -------------------------------------------------------------------------------- --------------------- AUSTRIA (CONTINUED) --------------------- As discussed in the Introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the Single Issuer and 5/50 Rules, for example, the Austria Fund was obligated to significantly underweight such large cap names as Oest Elektrizitats (8.59% of the Index as of February 28, 2002), which caused 0.18% underperformance in December and then another 0.20% underperformance in January, as well as Mayr Melnhof Karton (7.61% of the Index as of February 28, 2002), resulting in 0.18% underperformance in January and 0.14% underperformance in February. KEY MARKET CONDITIONS The Austrian equity market fared significantly better than many other European markets over the six months ended February 28, 2002. Austria's market owed much of its resilience to its large contingent of old economy stocks, which investors sought out as the prospects for more growth-oriented companies such as technology firms appeared to dim. Basic materials stocks, including steel producers Voest-Alpine and Boehler-Uddeholm and brick maker Weinerberger (all three among the Fund's 10 largest holdings as of February 28, 2002), benefited from investors' cautious mood. After the events of September 11, however, many Austrian stocks, like others across the globe, declined in value for a time as investors sought to determine how severe and widespread the impact of the attacks would be. In Austria, transportation stocks such as Flughafen Wien, which operates the Vienna Airport, were among the hardest hit. Yet investors' initial concerns about Flughafen Wien, one of the Fund's 10 largest holdings as of February 28, 2002, proved to be largely unfounded; in mid-October, Flughafen Wien reported that traffic through the Vienna airport fell less than 4% in September. Continued growth in air traffic to and from eastern Europe helped to offset declines in the company's other markets and buoy its share price. Growth opportunities in eastern and central Europe also helped drive up shares of Erste Bank, the Fund's second largest holding as of February 28, 2002. The bank and its investors also reaped the benefits of successful restructuring efforts. Restructuring also boosted Telekom Austria, another of the Fund's 10 largest holdings. Its shares rose sharply over the reporting period as some investors speculated that the success of Telekom's cost cutting measures made it an attractive acquisition target. 7 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ----------- BELGIUM -----------
iSHARES MSCI BELGIUM INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (15.03)% (15.05)% (16.06)% (0.25)% (0.32)% 1.36% 1.71% 1.73% 3.67% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/27/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI BELGIUM INDEX Consumer Discretionary 2.11% Consumer Staples 11.71% Financials 61.87% Health Care 7.09% Industrials 1.15% Information Technology 0.54% Materials 5.75% Utilities 9.78% PERFORMANCE REVIEW The total return of the iShares MSCI Belgium Index Fund (the "Belgium Fund") was -9.40% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -11.66% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Belgium Fund outperformed its benchmark by 2.26 percentage points over the reporting period. This was due to the positive impact of security sampling, which contributed 2.65 percentage points to the Fund's returns, and of uninvested assets, which contributed 0.03 percentage points. Those factors were partially offset by the negative impact of expenses, which subtracted 0.42 percentage points from the Fund's returns. 8 iSHARES, INC. -------------------------------------------------------------------------------- ---------------------- BELGIUM (CONTINUED) ---------------------- As discussed in the Introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the Single Issuer and 5/50 Rules, for example, the Belgium Fund was obligated to underweight Belgium's largest stock, Fortis. In December 2001, Fortis' Belgian and Dutch lines merged, effectively increasing Fortis' weighting in the MSCI Belgium Index to 39% from 23%. Due to IRS diversification requirements, the Belgium Fund was limited to holding no more than 25% of Fortis, which since the merger had been under-performing the market. As a result, the Fund outperformed its benchmark by 0.21% in December, 0.80% in January and 0.41% in February. KEY MARKET CONDITIONS Like other equity markets around the world, the Belgian stock market faced a difficult environment over the six months ended February 28, 2002. The global economic slowdown was already weighing on the shares of many Belgian companies as the reporting period began on September 1, 2001. The terrorist attacks that occurred only 10 days later in the United States drove Belgium's market down even further. The country's numerous financial services firms faced some of the most intense selling pressure in the first few days after the events of September 11, as investors tried to assess the impact on the insurance operations of companies such as Fortis. (As of February 28, 2002, Fortis was the Fund's largest holding at 22.61% of net assets.) Within weeks, however, the Belgian market began to recover along with others around the world. Investors grew more optimistic that the U.S. and European economies would soon pull out of their slump. But Belgium's relatively low percentage of technology stocks, which led the rally elsewhere, meant that the Belgian market lagged a number of its neighbors over the autumn. In addition, it soon became clear that the economic downturn was still having a significant and lasting impact on Belgian corporations. In November, for example, Fortis reported that its 2001 earnings were likely to be lower than it had originally anticipated but that it would still post a profit for the year, an announcement that sent its shares lower. In February 2002, however, Fortis surprised many investors by announcing that it would, in fact, post a loss for 2001 rather than a profit. Fortis shares dropped sharply after the announcement. The news also cast a shadow over Belgium's numerous other financial-services stocks, including Dexia (the Fund's second-largest holding as of February 28, 2002). 9 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- BRAZIL --------- iSHARES MSCI BRAZIL INDEX FUND PERFORMANCE AS OF 2/28/02 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION** ----------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- -------- -------- -------- (16.09)% (12.73)% (14.58)% (19.43)% (14.31)% (17.03)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to 06/29/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (07/11/00) for the NAV and Index returns and from the first day of trading on the exchange (07/14/00) for the Market return. Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI BRAZIL INDEX Consumer Discretionary 0.66% Consumer Staples 11.45% Energy 27.33% Financials 18.31% Industrials 2.5% Materials 11.66% Telecommunication Services 17.78% Utilities 10.31% PERFORMANCE REVIEW The total return of the iShares MSCI Brazil Index Fund (the "Brazil Fund") was 17.59% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned 17.91% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Brazil Fund underperformed its benchmark by 0.32 percentage points over the reporting period. The Fund's expenses, which subtracted 0.50 percentage points from its returns, were partially offset by the positive impact of small security misweights and uninvested assets, which contributed 0.18 percentage points. 10 iSHARES, INC. -------------------------------------------------------------------------------- -------------------- BRAZIL (CONTINUED) -------------------- KEY MARKET CONDITIONS Brazil's equity market was quite volatile over the reporting period, reflecting major swings in market sentiment. The market was driven down sharply in September as investors worried that Argentina's economic crisis would spill over into Brazil. The September 11 attacks on the United States put further pressure on the MSCI Brazil Index, which posted a double-digit decline for September. Many Brazilian companies were also hit hard by the economic slowdown around the world and by high interest rates and electricity rationing at home. Petrobras (26.98% of the Index as of February 28, 2002), for example, had to struggle not only with declining oil prices on the world market but also with a 15% cut in domestic petrol prices mandated by the government. From October through December, however, market sentiment toward Brazil improved significantly. Even as Argentina's crisis worsened, the resilience of Brazil's economy gave many investors cause for optimism. The banking sector was at the forefront of the rally. Companies such as Banco Itau and Banco Bradesco (7.69% and 7.40% of the Index as of February 28, 2002) benefited from lending at the same high interest rates that proved to be such a burden for most other Brazilian companies. In fact, both banks reported record earnings in 2001. Itau and Bradesco also profited from hedging their currency exposure as Brazil's REAL depreciated sharply versus the U.S. dollar over the first nine months of 2001. Fluctuations in the REAL'S value also had a major impact on returns for U.S. dollar based investors in Brazil. As the country's economic situation appeared to improve in the fourth quarter, the REAL appreciated rapidly versus the dollar. In December alone, the MSCI Brazil Index rose 3.89% in local currency terms and 13.78% when translated into U.S. dollar returns a difference of nearly 10 percentage points. The REAL weakened in January, however, when Argentina devalued its currency. Although Brazil's equity market also dropped that month, it ended the reporting period on a high note, Brazilian stocks rallied in February when the country's central bank surprised many investors by cutting interest rates. 11 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- CANADA ---------
iSHARES MSCI CANADA INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (10.17)% (9.16)% (9.89)% 4.91% 4.88% 5.53% 8.16% 7.96% 8.88% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/29/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI CANADA INDEX Consumer Discretionary 7.51% Consumer Staples 2.78% Energy 14.57% Financials 33.34% Health Care 2.72% Industrials 8.10% Information Technology 9.30% Materials 14.40% Telecommunication Services 2.28% Utilities 5.00% PERFORMANCE REVIEW The total return of the iShares MSCI Canada Index Fund (the "Canada Fund") was -0.19% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was 0.20%. SIGNIFICANT PERFORMANCE FACTORS The Canada Fund underperformed its benchmark by 0.39 percentage points over the reporting period. This was due to the negative impact of expenses, which subtracted 0.42 percentage points from the Fund's returns. That factor was partially offset by the positive impact of security sampling and uninvested assets, which contributed 0.02 and 0.01 percentage points respectively. 12 iSHARES, INC. -------------------------------------------------------------------------------- --------------------- CANADA (CONTINUED) --------------------- KEY MARKET CONDITIONS The Canadian equity market entered the reporting period on a weak note. At the time there was growing evidence that the United States and Canadian economies, as well as many others, were rapidly cooling off and might be headed for a recession. Canada's market was also weighed down by continued financial woes at Nortel Networks, one of the largest stocks in the MSCI Canada Index as of February 28, 2002. The events of September 11 created still more pessimism and uncertainty. Investors responded to these concerns by selling off shares of many Canadian companies, particularly manufacturers and others that export much of their goods to the United States. Mining stocks such as Alcan and Barrick Gold, (3.50% and 2.89% of the Index as of February 28, 2002) were weak, too, reflecting a significant decline in the price of aluminum and gold. The price of crude oil also dropped sharply, resulting in poor results for Canada's many oil and gas companies. By late October, however, the Canadian stock market followed Wall Street's lead and staged a rebound. Investors were encouraged by the aggressive interest rate cuts imposed by Canada's central bank after September 11. Many of them also believed the economic outlook for the United States and Canada was much brighter than previously thought. The rally was fairly short lived. Many Canadian stocks began to lose steam in December and weakened in January and February. During this period a variety of companies announced disappointing results. The Royal Bank of Canada and the Canadian Imperial Bank (6.47% and 3.60% of the Index as of February 28, 2002), among others, reported that their profits had declined sharply in late 2001. Shares of several Canadian banks (the largest sector in the MSCI Canada Index as of February 28, 2002) were also depressed by concerns relating to the collapse of Enron. 13 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ------- EMU ------- iSHARES MSCI EMU INDEX FUND PERFORMANCE AS OF 2/28/02 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION** ----------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- -------- -------- -------- (19.88)% (20.65)% (19.80)% (23.01)% (21.82)% (22.71)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to 06/20/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (07/26/00) for the NAV and Index returns and from the first day of trading on the exchange (07/31/00) for the Market return. Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI EMU INDEX Consumer Discretionary 12.25% Consumer Staples 7.42% Energy 12.62% Financials 24.83% Health Care 5.57% Industrials 6.78% Information Technology 9.98% Materials 6.66% Telecommunications Services 7.94% Utilities 5.95% PERFORMANCE REVIEW The total return of the iShares MSCI EMU Index Fund (the "EMU Fund") was -7.44% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -7.22% over the same period. SIGNIFICANT PERFORMANCE FACTORS The EMU Fund underperformed its benchmark by 0.22 percentage points over the reporting period. This was due to the impact of expenses and uninvested assets, which subtracted 0.42 and 0.03 percentage points respectively from the Fund's returns. Those factors were partially offset by the positive impact of security sampling, which contributed 0.23 percentage points. 14 iSHARES, INC. -------------------------------------------------------------------------------- ----------------- EMU (CONTINUED) ----------------- KEY MARKET CONDITIONS Many of the stocks that make up the MSCI EMU Index faced challenging economic conditions and more specific problems during the reporting period. Slowing growth in the United States and in much of Europe had a ripple effect across sectors. For example, slackening demand for crude oil depressed the profits and stocks of energy company Royal Dutch Petroleum Company (5.35% of the Index as of February 28, 2002). Slowing economic growth and weak equity markets also weighed on the results of many European financial companies. The events of September 11 added to their difficulties. Shares of the Dutch insurer ING (1.96% of the Index as of February 28, 2002), for one, plunged in mid-October after the company announced that its liability for claims related to September 11 would be 12 times higher than it had originally estimated. All other large insurance companies such as Fortis, Assicurazioni Generali, Muench Rueck, Allianz, Aegon and Axa (1.06%, 1.25%, 0.97%, 1.62%, 0.99% and 1.28% of the Index as of February 28, 2002), had a negative affect on the benchmark. The events of September 11 had an indirect but significant impact on many other industries represented in the MSCI EMU Index. After such a difficult September, most European markets bounced back in October and November. The rally was driven by growing expectations that the economic slowdown in the United States, Europe and elsewhere would be less severe than anticipated. This optimism lifted cyclical stocks and technology-related issues in particular. Toward the end of the reporting period, however, the rally began to fade due to a variety of factors. The collapse of the Enron Corporation in the United States led to a more cautious mood in some quarters. The economic crisis in Argentina also undermined confidence in European firms that have significant exposure to Latin America. Nonetheless, many investors remained optimistic that the United States and European economies would fully recover in 2002, creating a positive backdrop for European equities. 15 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- FRANCE ---------
iSHARES MSCI FRANCE INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (18.44)% (19.29)% (18.07)% 6.55% 6.33% 6.81% 9.00% 8.47% 9.25% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/20/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI FRANCE INDEX Consumer Discretionary 17.00% Consumer Staples 11.68% Energy 16.69% Financials 14.82% Health Care 13.56% Industrials 6.04% Information|Technology 8.06% Materials 5.79% Telecommunication Services 2.37% Utilities 3.99% PERFORMANCE REVIEW The total return of the iShares MSCI France Index Fund (the "France Fund") was -8.45% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -8.00% over the same period. SIGNIFICANT PERFORMANCE FACTORS The France Fund underperformed its benchmark by 0.45 percentage points over the reporting period. This was due to the impact of expenses, which subtracted 0.42 percentage points from the Fund's returns, and of security sampling, which subtracted 0.05. These factors were partially offset by the positive impact of uninvested assets, which contributed 0.02 percentage points to the Fund's returns. 16 iSHARES, INC. -------------------------------------------------------------------------------- -------------------- FRANCE (CONTINUED) -------------------- KEY MARKET CONDITIONS French equities were depressed by a number of factors over the reporting period. Slowing economic growth around the world and at home posed the biggest challenge for most French corporations. Lower demand and prices for crude oil reduced the profits of TotalFinaElf, the Fund's largest stock as of February 28, 2002, and drove down its share price over much of the reporting period. French financial services companies including Societe Generale (3.13% of the Index as of February 28, 2002) also reported disappointing results attributable to the combined impact of the global economic downturn, the financial crisis in Argentina and fallout from the Enron collapse. The September 11 terrorist attacks on the United States added to the difficulties that financial-service firms and many other French companies were facing. Like others in Europe, the French stock market fell sharply immediately after the attacks occurred. Although most French stocks soon recovered, the events of September 11 had a more lasting negative impact on French insurers such as AXA (4.53% of the Index as of February 28, 2002) and tourism companies such as Club Mediteranee In December, for example, AXA announced that its losses related to the World Trade Center attacks would amount to some $600 million, $50 million more than the company had initially calculated in September. AXA's shares plummeted by 9% after the announcement. Amid the global economic downturn and general uncertainty, investors tended to favor companies that offered slow but steady growth so called "defensive stocks" rather than more speculative investments. Beneficiaries of this trend in France included the supermarket operator Carrefour, cosmetics maker L'Oreal and pharmaceutical manufacturer Aventis (all among the Fund's 10 largest holdings as of February 28, 2002). Shares of all three companies were on an upswing after they announced better than expected 2001 results as the reporting period came to a close. 17 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ---------- GERMANY ----------
iSHARES MSCI GERMANY INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (22.63)% (22.63)% (23.01)% 2.59% 2.60% 2.94% 4.27% 4.08% 4.84% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/20/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI GERMANY INDEX Consumer Discretionary 16.45% Consumer Staples 1.34% Financials 23.60% Health Care 5.14% Industrials 15.46% Information Technology 9.23% Materials 11.86% Telecommunication Services 6.46% Utilities 10.46% PERFORMANCE REVIEW The total return of the iShares MSCI Germany Index Fund (the "Germany Fund") was -6.58% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -6.42% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Germany Fund underperformed its benchmark by 0.16 percentage points over the reporting period. The negative impact of expenses, which subtracted 0.42 percentage points from the Fund's returns, was partially offset by the positive impact of security sampling and uninvested assets. These factors contributed 0.14 and 0.12 percentage points respectively to the fund's returns. 18 iSHARES, INC. -------------------------------------------------------------------------------- --------------------- GERMANY (CONTINUED) --------------------- KEY MARKET CONDITIONS The German equity market was buffeted by poor economic conditions over the reporting period and by the fallout from the terrorist attacks on the United States. The events of September 11 had an immediate and dramatic impact on the German equity market. Many stocks dropped to new lows for 2001 in the days following the attacks. Although they generally began to recover within weeks, the financial impact that September 11 would have on some German companies was not fully apparent until weeks, even months later. Insurers Allianz and Munich Re (7.91% and 4.75% of the Index as of February 28, 2002), for example, ultimately raised their estimates of claims related to September 11 by hundreds of millions of dollars before the year was over. Unsurprisingly, Allianz and Munich Re were among Germany's weaker stocks over the reporting period. On the whole, however, the financial repercussions of September 11 only added to the pressure on economies and corporations that already existed before the attacks. The global slowdown affected German exporters such as DaimlerChrysler (8.24% of the Index as of February 28, 2002) whose shares were depressed by internal problems at its Chrysler division. By late October, market sentiment had improved significantly. Investors began to favor shares of cyclical firms and higher growth companies, especially those in the technology sector. Software maker SAP (6.71% of the Index and the Fund's sixth largest holding as of February 28, 2002) was just one beneficiary of this trend. Its shares got another boost when, in early January 2002, the company announced better than expected results for 2001. By the end of the reporting period, however, investors' optimism had waned somewhat, reflecting concerns that an economic recovery might take longer than expected. 19 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ------------ HONG KONG ------------
iSHARES MSCI HONG KONG INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (25.75)% (25.52)% (25.10)% (7.09)% (7.05)% (4.82)% (3.23)% (3.53)% (0.85)% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/22/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI HONG KONG INDEX Consumer Discretionary 6.38% Financials 49.27% Industrials 23.10% Information Technology 0.34% Materials 0.73% Telecommunications Services 2.26% Utilities 17.92% PERFORMANCE REVIEW The total return of the iShares MSCI Hong Kong Index Fund (the "Hong Kong Fund") was -2.27% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was -2.29%. SIGNIFICANT PERFORMANCE FACTORS The Hong Kong Fund outperformed its benchmark by 0.02 percentage points over the reporting period. This was due to the positive impact of security sampling, which contributed 0.52 percentage points to the Fund's returns. However, that factor was partially offset by expenses, which subtracted 0.42 percentage points, and by the impact of uninvested assets, which subtracted 0.08 percentage points. 20 iSHARES, INC. -------------------------------------------------------------------------------- ------------------------ HONG KONG (CONTINUED) ------------------------ KEY MARKET CONDITIONS The decline in Hong Kong's stock market over the reporting period reflected investors' concerns about economic conditions around the world and in the territory itself. As in other markets, these concerns were exacerbated by the events of September 11. Although several of Hong Kong's key export markets including the United States, Japan and Germany were quite weak during late 2001, the Chinese economy was robust. The mainland's continued expansion helped to sustain Hong Kong's economy and stock market somewhat during the reporting period. In Hong Kong itself, however, economic conditions remained fairly poor. Despite efforts by the Hong Kong government to prop up real-estate values, property prices in the territory continued to decline. As a result, the profits and shares of companies such as Sun Hung Kai Properties (9.70% of the Index as of February 28, 2002) declined significantly in 2001. Many of Hong Kong's financial service firms also saw their share prices drop in late 2001. Trading losses in other stock markets around the world drove down profits at a number of the territory's banks. Loan growth to both consumers and businesses also dwindled, even though interest rates in the territory fell to a record low in 2001. On the whole, however, banking stocks, especially those of smaller firms, outperformed other segments of the Hong Kong market during the reporting period. A number of analysts attributed their relative strength to speculation that merger and acquisition activity in the sector was about to pick up. 21 PERFORMANCE REVIEW -------------------------------------------------------------------------------- -------- ITALY --------
iSHARES MSCI ITALY INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (23.04)% (22.80)% (22.79)% 7.72% 7.52% 7.77% 8.39% 8.59% 8.33% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/20/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI ITALY INDEX Consumer Discretionary 8.23% Consumer Staples 0.76% Energy 17.74% Financials 38.51% Health Care 1.11% Industrials 3.65% Information Technology 0.53% Materials 0.56% Telecommunications Services 22.37% Utilities 6.54% PERFORMANCE REVIEW The total return of the iShares MSCI Italy Index Fund (the "Italy Fund") was -12.09% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -11.86% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Italy Fund underperformed its benchmark by 0.23 percentage points over the reporting period due to the negative impact of expenses and uninvested assets. These factors subtracted 0.42 and 0.05 percentage points respectively from the Fund's returns. Security sampling had a positive impact, however, contributing 0.24 percentage points. 22 iSHARES, INC. -------------------------------------------------------------------------------- ------------------- ITALY (CONTINUED) ------------------- As discussed in the Introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the Single Issuer and 5/50 Rules, for example, the Italy Fund was obligated to underweight the telecommunications sector of the MSCI Italy Index. This sector underperformed during the reporting period. As a result, security sampling made a positive contribution to the Fund's performance. KEY MARKET CONDITIONS As the reporting period began, the Italian equity market faced a generally bleak economic outlook. That outlook worsened just days later, when the events of September 11 took place. Like equity markets around the world, Italy's stock market initially plummeted after the events. Within days of September 11, however, the market rebounded as it became clear to investors that most Italian companies would not suffer direct financial consequences from the events of September 11. Insurer Assicurazioni Generali, for example, said that it had little exposure to claims related to September 11, unlike a number of its European competitors. (Assicurazioni Generali was the Fund's second largest holding and 11.68% of the Index as of February 28, 2002.) The company also reported better than expected 2001 profits in November. Nonetheless, the Italian equity market ultimately underperformed many of its neighbors over the reporting period. It fell behind during October in particular, when many investors began to anticipate an economic recovery in 2002. The newfound optimism led many to favor technology stocks, which Italy does not have in as much abundance as some of its neighbors. The Italian market continues to be dominated by the banking, energy and insurance industries, which collectively made up more than half of the Index as of February 28, 2002. In addition, a number of Italy's largest companies continued to face significant obstacles during the reporting period. In December, for example, Italian Prime Minister Silvio Berlusconi ruled out full privatization of oil and natural gas producer ENI, (the Fund's largest holding and 17.74% of the Index as of February 28, 2002). The move led to declines in ENI's stock, which was already depressed by lower demand for oil and petrochemicals. Some analysts interpreted the Prime Minister's statement as a signal that the Italian government was not committed to fully privatizing other large companies, including electric utility Enel. Telecom Italia (13.93% of the Index as of February 28, 2002) remained depressed. These factors contributed to the underperformance of the overall Italian market during the reporting period. 23 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- JAPAN ---------
iSHARES MSCI JAPAN INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ------- -------- -------- ------- -------- ------- (28.79)% (29.06)% (28.57)% (8.10)% (8.23)% (7.21)% (10.14)% (10.44)% (9.31)% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/22/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI JAPAN INDEX Consumer Discretionary 25.05% Consumer Staples 5.15% Energy 0.93% Financials 13.52% Health Care 6.49% Industrials 15.61% Information Technology 16.96% Materials 6.78% Telecommunication Services 4.05% Utilities 5.46% PERFORMANCE REVIEW The total return of the iShares MSCI Japan Index Fund (the "Japan Fund") was -17.64% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was -17.14%. SIGNIFICANT PERFORMANCE FACTORS The Japan Fund underperformed its benchmark by 0.50 percentage points over the reporting period. This was due to expenses, which subtracted 0.42 percentage points from the Fund's returns, and to the negative impact of security sampling, which subtracted 0.08 percentage points. 24 iSHARES, INC. -------------------------------------------------------------------------------- ------------------- JAPAN (CONTINUED) ------------------- KEY MARKET CONDITIONS Japan's equity market posted the biggest decline among major developed markets during the reporting period. Concerns about Japan's seemingly chronic economic problems drove the stock market down, as they have for some time. Investors also worried about the economic slowdown in the United States, Japan's main export market, and elsewhere in the world. The events of September 11 added to those concerns. A variety of sectors performed poorly in this environment. Japan's banking stocks (5.77% of the Index as of February 28, 2002) continued to be depressed by a rise in bad loans as the country's business climate worsened. Many of the country's financial service companies were also hit by investment losses as the Japanese market and many others around the world sank in September. Market sentiment improved somewhat in October, as investors began to anticipate a quick recovery in the U.S. economy. Good results from companies such as Sony (3.25% of the Index as of February 28, 2002) also helped to lift the market. Besides strong sales of products such as PlayStation 2, Sony was helped by the weakness of the Japanese yen versus the U.S. dollar and several other currencies. This trend also benefited the Japanese automobile industry, another bright spot in late 2001. Automakers such as Toyota and Honda (respectively 4.84% and 2.02% of the Index as of February 28, 2002) reported strong U.S. sales for 2001 despite the weakened economy. In January and February, however, the market again sank. In general, investors responded coolly to the government's new set of initiatives to stimulate the economy. There were also renewed worries that the global economic downturn might persist longer than many observers had expected. 25 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ----------- MALAYSIA -----------
iSHARES MSCI MALAYSIA INDEX FUND PERFORMANCE AS OF 2/28/02 --------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- ------------------------------ NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ------- -------- -------- ------- -------- ------- 3.82% 7.51% 5.29% (16.83)% (17.03)% (16.01)% (11.86)% (12.26)% (10.73)% --------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to 06/22/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI MALAYSIA INDEX Consumer Discretionary 18.44% Consumer Staples 11.37% Energy 0.49% Financials 26.79% Industrials 15.38% Information Technology 1.95% Materials 2.59% Telecommunication Services 9.15% Utilities 13.84% PERFORMANCE REVIEW The total return of the iShares MSCI Malaysia Index Fund (the "Malaysia Fund") was 7.10% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was 7.16%. SIGNIFICANT PERFORMANCE FACTORS The Malaysia Fund underperformed its benchmark by 0.06 percentage points over the reporting period due to the impact of expenses, which subtracted 0.42 percentage points from the Fund's return. That factor was partially offset by the positive impact of security sampling, which contributed 0.36 percentage points. 26 iSHARES, INC. -------------------------------------------------------------------------------- ---------------------- MALAYSIA (CONTINUED) ---------------------- KEY MARKET CONDITIONS Malaysia's stock market went through two distinct phases during the reporting period, one weak, one stronger. In September, October and November, the MSCI Malaysia Index was generally depressed. Deteriorating economic conditions in some of Malaysia's major export markets, including the United States, cast a shadow over the country's manufacturing sector during that time. Although consumer confidence and spending stayed surprisingly high in the United States, the demand for electronics and electrical components such as semiconductors, key exports for Malaysia, remained depressed. In addition, the events of September 11 heightened the concerns many investors in Malaysia already had about the global economy. The terrorist attacks also fell heavily on tourism related companies, which comprise a large segment of the Malaysian stock market. As of February 28, 2002, the hotels, restaurants and leisure sector made up nearly 13% of the MSCI Malaysia Index. Around mid-November, the Malaysian market began to shake off some of these concerns. Investors became more optimistic that the U.S. economy would soon emerge from recession. The rally was also driven by successful restructuring efforts at a number of Malaysian corporations. These trends put the MSCI Malaysia Index on its upward path during most of December, January and February. Toward the end of the reporting period, however, some investors did become more concerned about the stability of Malaysia's currency, the ringgit. Just as Argentina was devaluing its currency, Malaysia's prime minister warned that the ringgit might have to go the same route if the Japanese yen continued to decline in value. Although such a devaluation might make Malaysia's goods more competitive in world markets, the talk of devaluation undermined some investors' confidence in the Malaysian market. 27 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- MEXICO ---------
iSHARES MSCI MEXICO INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- 13.11% 14.65% 16.21% 7.17% 7.30% 10.17% 10.48% 10.03% 13.69% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/29/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI MEXICO INDEX Consumer Discretionary 21.83% Consumer Staples 10.22% Energy 0.65% Financials 5.80% Industrials 2.97% Materials 15.20% Telecommunication Services 43.33% PERFORMANCE REVIEW The total return of the iShares MSCI Mexico Index Fund (the "Mexico Fund") was 4.12% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was 6.12%. SIGNIFICANT PERFORMANCE FACTORS The Mexico Fund underperformed its benchmark by 2.00 percentage points over the reporting period. This was due to the negative impact of security sampling, expenses and uninvested assets, which subtracted 1.52, 0.42 and 0.06 percentage points respectively from the Fund's returns. The large security sampling is due to the relatively high level of concentration of the MSCI Mexico Index and the resulting misweights the Fund carries in order to comply with IRS diversification rules. 28 iSHARES, INC. -------------------------------------------------------------------------------- -------------------- MEXICO (CONTINUED) -------------------- KEY MARKET CONDITIONS Mexico's equity market overcame a number of unfavorable trends to post a gain over the reporting period. The most significant challenge it faced was the economic slowdown around the world and particularly in the United States, its main export market. The events of September 11 created still more uncertainty and briefly pushed the MSCI Mexico Index down. The decline proved to be short lived, though; by early October, the Index had nearly returned to its pre September 11 level. It continued to trend upward for much of the reporting period. The resilience of Mexico's market in late 2001 surprised some observers, given the economic crisis unfolding in Argentina around the same time. In the past, similar crisis prompted investors to sell off stocks across Latin America, including those in Mexico. Yet this time investors appeared to be differentiating between Mexico and Argentina. Indeed, while Argentina was grappling with its economic crisis, the U.S. credit rating agency, Standard & Poor's, deemed Mexico's economic and political position strong enough to raise the country's sovereign debt to investment grade. S&P concurrently boosted the credit ratings of several other Mexican companies, including Kimberly Clark de Mexico and Coca Cola Femsa (3.20% and 1.32% of the Index as of February 28, 2002). Investors responded positively to these upgrades, which reduced the cost of borrowing for Mexico and for the upgraded corporations. Investors also favored Mexico's large telecommunications companies, Telefonos de Mexico and America Movil (29.24% and 14.09% of the Index as of February 28, 2002) during the reporting period. As Mexico's largest and most liquid stock, Telmex is often viewed as a proxy for the overall market. As such, it benefited from growing optimism about Mexico in late 2001. Telmex and America Movil also continued to enjoy a near monopoly position in the Mexican telecommunications market. Despite a new tax on some telecom services, challenges from would be U.S. competitors and some disappointing results, the two companies remained popular with many investors. 29 PERFORMANCE REVIEW -------------------------------------------------------------------------------- -------------- NETHERLANDS --------------
iSHARES MSCI NETHERLANDS INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (21.43)% (22.00)% (19.47)% 0.50% 0.24% 2.53% 4.85% 4.22% 6.61% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/27/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI NETHERLANDS INDEX Consumer Discretionary 15.43% Consumer Staples 16.98% Energy 31.07% Financials 24.11% Industrials 3.71% Information Technology 2.92% Materials 3.62% Telecommunications Services 2.16% PERFORMANCE REVIEW The total return of the iShares MSCI Netherlands Index Fund (the "Netherlands Fund") was -10.33% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was -10.23% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Netherlands Fund underperformed its benchmark by 0.10 percentage points over the reporting period due to the negative impact of expenses, which subtracted 0.42 percentage points from the Fund's returns. That factor was partially offset by the positive impact of security sampling and uninvested assets, which contributed 0.26 and 0.06 percentage points respectively to the Fund's returns. 30 iSHARES, INC. -------------------------------------------------------------------------------- ------------------------- NETHERLANDS (CONTINUED) ------------------------- KEY MARKET CONDITIONS The global economic slowdown weighed heavily on many Dutch corporations and their stocks over the reporting period. Shares of the Netherlands' largest company, Royal Dutch Petroleum, (31.08% of the Index as of February 28, 2002) were weak as demand for crude oil and petrochemicals slowed along with the global economy. The company was also forced to cut its forecasts for production growth over the next few years. Royal Dutch said that yields from some of its more mature fields were declining faster than it had expected and new sources were not yet ready to take up the slack. Investors responded to this news by selling down shares of Royal Dutch. The economic slowdown was also reflected in the results of the Netherlands' large financial service companies. The banking group ABN Amro (6.93% of the Index as of February 28, 2002) reported disappointing results in late 2001 from both its investment and retail banking operations. It also had to set aside large sums to cover potentially bad loans in a number of sectors, especially the airline industry after September 11. The events that occurred that day had an even larger and more direct impact on Dutch insurers such as ING Groep and Aegon (11.41% and 5.77% of the Index as of February 28, 2002). Shares of ING Groep plunged in mid-October after the company announced that its liability for claims related to September 11th would be 12 times higher than it had originally estimated. One of the bright spots amid this generally gloomy picture was Unilever (9.52% of the Index as of February 28, 2002), the consumer staples giant. In February it announced better than expected profits for 2001. Those kind of results helped make Unilever one of the better performing stocks on the Dutch equity market. Companies that rely on consumers making bigger ticket purchases did not fare as well. Electronics maker Philips Electronics (9.53% of the Index as of February 28, 2002), for example, posted a heavy loss for the fourth quarter of 2001 as sales of televisions and other electronics declined. Like many other Dutch stocks, shares of Philips Electronics remained weak as the reporting period ended. 31 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ------------------- PACIFIC EX-JAPAN ------------------- iSHARES MSCI PACIFIC EX-JAPAN INDEX FUND PERFORMANCE AS OF 2/28/02 -------------------------------------------------------------------------------- TOTAL RETURNS -------------------------------------------------------------------------------- SINCE INCEPTION* --------------------------------------- NAV MARKET INDEX -------- ---------- ---------- 9.44% 9.77% 9.69% -------------------------------------------------------------------------------- * Since inception total return periods are calculated from inception date (10/26/01) for the NAV and Index returns and from the first day of trading on the exchange (10/26/01) for the Market return. Total return represents the change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI PACIFIC EX-JAPAN INDEX Consumer Discretionary 9.24% Consumer Staples 5.36% Energy 1.54% Financials 47.94% Health Care 2.01% Industrials 11.51% Information Technology 1.16% Materials 12.23% Telecommunication Services 4.09% Utilities 4.92% PERFORMANCE REVIEW The total return of the iShares MSCI Pacific ex-Japan Index Fund (the "Pacific ex-Japan Fund") was 9.44% from October 26, 2001 (its inception date) through February 28, 2002. The total return of the corresponding MSCI Index over the same time period was 9.69%. SIGNIFICANT PERFORMANCE FACTORS The Pacific ex-Japan Fund underperformed its benchmark over the reporting period. This was due to the negative impact of expenses, security sampling and uninvested assets, which lowered the Pacific ex-Japan Fund's return by 0.20, 0.03 and 0.02 percentage points, respectively. 32 iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------ PACIFIC EX-JAPAN (CONTINUED) ------------------------------ KEY MARKET CONDITIONS The Pacific ex-Japan Fund benefited from a timely debut. In the months prior to its commencement of operations on October 26, 2001, Pacific Rim equities were generally weak. Their losses widened considerably in September, when concerns about a global recession and the terrorist attacks on the United States weighed heavily on investor sentiment. These concerns began to lift in October. By the Pacific ex-Japan Fund's inception date later that month, a rally was in full swing across much of the Asia-Pacific region. During this time Australian equities, which made up 61.16% of the Index's holdings as of February 28, 2002, were especially strong. The rally in that market was sparked by growing optimism that Australia's chief export markets in North America and Europe would recover quickly in 2002. Investors were also encouraged by signs that Australia's own economy remained healthy. One of its strongest engines was the housing market (12.14% of the Index as of February 28, 2002), which was bolstered by low interest rates and government grants to first-time home buyers. This trend helped to bolster the profits and shares of many Australian banks. The metals and mining sector (9.26% of the Index as of February 28, 2002) performed well too. The Pacific ex-Japan Fund's performance also reflected some strength in its Hong Kong and Singapore holdings (respectively 23.8% and 13.11% of the Index as of February 28, 2002). These markets also rallied in late 2001, but lingering concerns about their economies suppressed the gains. Hong Kong's numerous property companies continued to grapple with depressed real-estate prices. Singapore's manufacturers also faced an uncertain outlook as global demand for electronics remained low. Toward the end of the reporting period, the rally across the Asia-Pacific region lost momentum. Weak corporate results undermined investors' confidence even as it appeared that the U.S. and European economies might be emerging from recession. 33 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ------------ SINGAPORE ------------
iSHARES MSCI SINGAPORE INDEX FUND PERFORMANCE AS OF 2/28/02 -------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------------- ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- ----------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- -------- -------- -------- ------- -------- ------- (15.77)% (13.64)% (16.44)% (12.67)% (12.27)% (11.63)% (11.15)% (11.29)% (10.35)% -------------------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to 06/22/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI SINGAPORE INDEX Consumer Discretionary 9.74% Consumer Staples 1.62% Financials 54.63% Health Care 0.40% Industrials 15.29% Information Technology 8.01% Telecommunication Services 10.31% PERFORMANCE REVIEW The total return of the iShares MSCI Singapore Index Fund (the "Singapore Fund") was 2.69% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was 2.82%. SIGNIFICANT PERFORMANCE FACTORS The Singapore Fund underperformed its benchmark by 0.13 percentage points over the reporting period due to the impact of expenses, which subtracted 0.42 percentage points from the Fund's return. That factor was partially offset by the positive impact of security sampling and uninvested assets, which contributed 0.25 and 0.04 percentage points respectively. 34 iSHARES, INC. -------------------------------------------------------------------------------- ----------------------- SINGAPORE (CONTINUED) ----------------------- KEY MARKET CONDITIONS The relative lack of diversity in Singapore's economy and equity market proved to be a liability over the reporting period. Singapore's economy depends heavily on exports of electronics and other goods. As global demand for these products declined in 2001, so did the fortunes of many companies in Singapore. The downturn in the manufacturing sector sent a ripple effect through Singapore's economy, depressing the profits of its numerous banks and financial-service companies. (As of February 28, 2002, banking stocks alone accounted for 40% of the MSCI Singapore Index.) The combined weight of slowing loan growth and a decline in the value of equity investments led to poor results at companies such as DBS Group Holdings (14.95% of the Index as of February 28, 2002). In telecommunications sector, Singapore Telecom and equipment maker Datacraft (10.31% and 0.98% of the Index as of February 28, 2002) were also down for the period. The events of September 11 aggravated the economic downturn around the world and in Singapore. They also caused more acute problems for Singapore's travel related companies. Shares of Singapore Airlines (one of the 10 largest holdings in the MSCI Singapore Index as of February 28, 2002) dropped sharply as air traffic plummeted in the wake of September 11, however, the company managed to rebound in later months driving up the performance of the underlying index. Singapore's broader equity market recovered somewhat in late 2001 and early 2002 in response to signs that the U.S. economy might be rebounding. Anticipating a pick-up in demand for electronics, investors drove up shares of manufacturing companies. This rally and a decline in interest rates also improved the outlook for Singapore's banks and other areas of its economy. Singapore's market lost strength as the reporting period ended, however. Although many investors continued to expect a rapid recovery in the United States and other economies, disappointing corporate results led to further equity declines. 35 PERFORMANCE REVIEW -------------------------------------------------------------------------------- -------------- SOUTH KOREA -------------- iSHARES MSCI SOUTH KOREA INDEX FUND PERFORMANCE AS OF 2/28/02 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION** ----------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* ------ -------- -------- ----- -------- -------- 48.89% 55.70% 49.64% 1.74% 4.85% (0.62)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to 06/29/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (05/10/00) for the NAV and Index returns and from the first day of trading on the exchange (05/12/00) for the Market return. Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI SOUTH KOREA INDEX Consumer Discretionary 10.47% Consumer Staples 2.01% Energy 0.50% Financials 20.61% Health Care 0.77% Industrials 5.19% Information Technology 36.28% Materials 9.27% Telecommunication Services 11.92% Utilities 2.98% PERFORMANCE REVIEW The total return of the iShares MSCI South Korea Index Fund (the "South Korea Fund") was 57.36% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was 58.07%. SIGNIFICANT PERFORMANCE FACTORS The South Korea Fund underperformed its benchmark by 0.71 percentage points over the reporting period. This was due to the impact of expenses, security sampling and uninvested assets, which subtracted 0.50, 0.15, and 0.06 percentage points respectively from the Fund's return. 36 iSHARES, INC. -------------------------------------------------------------------------------- ------------------------- SOUTH KOREA (CONTINUED) ------------------------- KEY MARKET CONDITIONS The MSCI South Korea Index posted a very strong gain over the six months ended February 28, 2002. The Index didn't begin the reporting period on a very solid footing, however. The combined impact of the global economic slowdown and the terrorist attacks on the United States pushed the South Korean market down sharply. All told, the MSCI South Korea Index declined 14.15% in local currency terms in September. It then rebounded in October, but by the end of that month it still had not returned to its pre September 11 level. Within days, however, the Index had made up that remaining ground, and then some ultimately rising by 23.19% in November alone. The rally was driven by the strength of South Korea's economy and by investors' optimistic outlook for many of its companies. Unlike a number of economies around the world, South Korea continued to grow in the second half of 2001. At the same time, the restructuring efforts of many South Korean companies began to yield results. A number of banks, for example, wrote off a significant percentage of the bad debts that had been on their books for years. Other South Korean companies managed to achieve good results despite the economic downturn in some of their most important markets. Net profits at Hyundai Motor (3.39% of the Index as of February 28, 2002) rose by a record 75% in 2001, driven largely by sales of sport utility vehicles in the United States and at home. The strong domestic economy couldn't pull South Korea's semiconductor industry out of its slump, however. Profits at the market giant, Samsung Electronics (28.55% of the Index as of February 28, 2002), continued to fall sharply along with worldwide demand for chips. Those results as weak as they were, nonetheless exceeded some investors' expectations and helped to drive up Samsung's shares in late 2001 and early 2002. As the reporting period ended, the stock was also benefiting from Samsung's more positive forecasts for the industry. 37 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- SPAIN ---------
iSHARES MSCI SPAIN INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ------ -------- ------- (18.61)% (18.75)% (19.70)% 7.35% 7.21% 7.71% 10.74% 10.53% 11.27% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/27/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI SPAIN INDEX Consumer Discretionary 3.98% Consumer Staples 2.59% Energy 6.09% Financials 37.90% Health Care 0.58% Industrials 3.48% Information Technology 1.49% Materials 0.78% Telecommunications Services 26.91% Utilities 16.20% PERFORMANCE REVIEW The total return of the iShares MSCI Spain Index Fund (the "Spain Fund") was -7.13% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -7.04% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Spain Fund underperformed its benchmark by 0.09 percentage points over the reporting period due to expenses, which subtracted 0.42 percentage points from the Fund's returns. That factor was offset, however, by the positive effect of security sampling and the impact of uninvested assets, which contributed 0.31 and 0.02 percentage points respectively to the Fund's returns over the reporting period. 38 iSHARES, INC. -------------------------------------------------------------------------------- ------------------- SPAIN (CONTINUED) ------------------- As discussed in the Introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. Due to the Single Issuer Rule, the Spain Fund was obligated to underweight Telefonica over the reporting period. Due to the 5/50 Rule, the Fund also underweighted the banking, energy, telecommunications and utilities sectors and overweighted other areas of the market. The stocks that the Fund overweighted generally outperformed those that the Fund underweighted over the reporting period. As a result, security sampling had a positive impact on the Fund's performance during this time. KEY MARKET CONDITIONS The Spanish equity market was hit by a series of unfavorable developments over the six months ended February 28, 2002. The events of September 11 led to a rapid drop in the Spanish stock market soon after the reporting period began. The direct financial repercussions of September 11 proved to be fairly short lived or non-existent for most Spanish companies, however, and the market quickly recovered. A more acute concern for many Spanish firms was the economic crisis in Argentina. After years of recession, the country reached a crisis point in late 2001. As the situation worsened, investors began to fear that the Argentine government would devalue the Argentine peso, which had been pegged to the U.S. dollar on a one-to-one basis since 1992. Those concerns were realized in January, when Argentina's government devalued its currency by nearly 30%. The move was a blow to Spanish banks in particular, which had invested heavily in Argentina and other Latin American countries in recent years. Shares of Spain's two largest banks, Banco Bilbao Vizcaya Argentaria and Banco Santander Central (18.85% and 18.00% of the Index as of February 28, 2002), fell sharply as the likelihood of corporate defaults and bankruptcies among its Argentine debtors increased. Several of Spain's other leading companies were hurt by additional measures Argentina instituted to stabilize its economy. The government's plans to impose a 20% tax on petroleum exports threatened to erode the profits at Repsol YPF, (6.09% of the Index as of February 28, 2002). The government also instituted a price cap on the rates utilities such as Telefonica and Endesa (both among the Index's 10 largest holdings as of February 28, 2002) could charge in Argentina. These developments weighed heavily on shares of Repsol, Telefonica and Endesa, among others, over the reporting period. A number of these companies continued to benefit from relatively healthy economic conditions at home, however. As many of the world's economies were contracting over the second half of 2001, Spain's economy continued to grow, albeit more slowly than in prior years. The strength of domestic demand therefore helped to offset weakness in many Spanish companies' foreign markets. 39 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- SWEDEN ---------
iSHARES MSCI SWEDEN INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (23.28)% (23.99)% (25.29)% 1.65% 1.31% 3.79% 6.42% 5.36% 8.26% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/27/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI SWEDEN INDEX Consumer Discretionary 12.51% Consumer Staples 1.75% Financials 23.71% Health Care 2.02% Industrials 24.12% Information Technology 24.93% Materials 6.72% Telecommunications Services 4.24% PERFORMANCE REVIEW The total return of the iShares MSCI Sweden Index Fund (the "Sweden Fund") was 0.31% for the six-month period ended February 28, 2002. The corresponding MSCI Index returned -1.08% over the same period. SIGNIFICANT PERFORMANCE FACTORS The Sweden Fund outperformed its benchmark by 1.39 percentage points over the reporting period. This was due to the positive impact of security sampling, which contributed 1.80 percentage points to the Fund's returns, and the impact of uninvested assets, which contributed 0.01 percentage points. Those factors were partially offset by the Fund's expenses, which subtracted 0.42 percentage points from its returns over the reporting period. 40 iSHARES, INC. -------------------------------------------------------------------------------- -------------------- SWEDEN (CONTINUED) -------------------- As discussed in the Introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. To comply with the Single Issuer and 5/50 Rules, for example, the Sweden Fund was obligated to underweight Ericsson (24.47% of the Index as of February 28, 2002) over the reporting period. At the same time, the portfolio was overweighted in other securities, which outperformed Ericsson. This differential is reflected in the positive impact that security sampling had on the Fund's returns over the reporting period. KEY MARKET CONDITIONS Sweden was the best-performing major European market over the six months ended February 28, 2002. A variety of stocks helped to offset the negative impact of Ericsson, Sweden's largest company. It posted heavy losses for the fourth quarter of 2001 and said the outlook for most of its divisions remained unfavorable. Although the terrorist attacks on the United States forced the Swedish market down in mid-September, the uncertainty caused by September 11th led to dramatically higher demand for security services worldwide. That trend lifted shares of Securitas, one of the world's biggest providers of security services and one of the Index's 10 largest holdings as of February 28, 2002. The company also benefited from being selected to distribute new Euro notes and coins upon their introduction throughout the European Union in early 2002. Other strong performers included Electrolux, SKF, Swedish Match and Svenska Cellulosa (4.71%, 3.51%, 1.75% and 4.65% of the Index as of February 28, 2002). Swedish companies that derive most of their profits at or close to home were also somewhat sheltered from the global economic slowdown. Shares of the banking group Nordea (9.03% of the Index as of February 28, 2002), for example, rose in February when the company reported that its profits had increased by 105% in the fourth quarter of 2001. The company said those results were due largely to higher returns from its investments in Sweden and other Scandinavian equity markets as they recovered in late 2001. 41 PERFORMANCE REVIEW -------------------------------------------------------------------------------- -------------- SWITZERLAND --------------
iSHARES MSCI SWITZERLAND INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (20.49)% (21.20)% (16.98)% 3.14% 2.96% 5.00% 2.98% 2.35% 4.76% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/20/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI SWITZERLAND INDEX Consumer Discretionary 3.46% Consumer Staples 18.81% Financials 29.28% Health Care 37.19% Industrials 3.62% Information Technology 0.83% Materials 5.20% Telecommunications Service 1.61% PERFORMANCE REVIEW The total return of the iShares MSCI Switzerland Index Fund (the "Switzerland Fund") was -5.44% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was -3.84%. SIGNIFICANT PERFORMANCE FACTORS The Fund underperformed its benchmark by 1.60 percentage points over the reporting period. This was due to the negative impact of security sampling, which subtracted 1.33 percentage points from the Switzerland Fund's returns, and of expenses, which subtracted 0.42 percentage points. Those factors were partially offset by the positive impact of uninvested assets, which contributed 0.15 percentage points. 42 iSHARES, INC. -------------------------------------------------------------------------------- -------------------------- SWITZERLAND (CONTINUED) -------------------------- As discussed in the Introduction, portfolio management constraints can restrict the Investment Adviser's ability to optimize a Fund's portfolio. As of February 28, 2002, individual stocks with weightings of 5% or greater collectively made up more than 80% of the MSCI Switzerland Index. To comply with the 5/50 Rule, the Switzerland Fund regularly underweights some of these stocks so that collectively they make up no more than 50% of the Fund's assets, and overweights other stocks. During the reporting period, the underweighted stocks generally performed better than the overweighted stocks. As a result, security sampling had a negative impact on the Fund's performance relative to its benchmark over the reporting period. KEY MARKET CONDITIONS The Swiss equity market outperformed a number of its European neighbors from September through February, though it still posted a loss. As in the past, many investors viewed the Swiss stock market as a haven when signs of a worldwide recession began to emerge in mid-2001. The cautious mood helped to boost the stocks of companies such as Nestle (18.81% of the Index as of February 28, 2002). Shares of pharmaceutical maker Novartis (23.57% of the Index as of February 28, 2002) also performed well in late 2001, especially after the company reported good results in the United States even as the U.S. economy was slowing. In the past, many investors considered Switzerland's numerous insurers to be "recession proof" as well. But the events of September 11 overshadowed their defensive qualities and led to sharp declines in their shares. September 11 fell especially heavy on re-insurer Swiss Reinsurance Co. (5.68% of the Index as of February 28, 2002). The company was one of the chief insurers of the World Trade Center and said it was likely to face additional claims from the airline industry, among others. As of February 2002, Swiss Reinsurance Co. was estimating that it would pay out $1.7 billion for claims related to the collapse of the World Trade Center buildings alone. Other Swiss companies with insurance arms, including Zurich Financial Services (3.49% of the Index as of February 28, 2002), faced similar losses. Unsurprisingly, the shares of Swiss Reinsurance Co., Zurich Financial Services and other insurers were among the weakest on the Swiss equity market over the reporting period. 43 PERFORMANCE REVIEW -------------------------------------------------------------------------------- --------- TAIWAN --------- iSHARES MSCI TAIWAN INDEX FUND PERFORMANCE AS OF 2/28/02 -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- ONE YEAR SINCE INCEPTION** ----------------------------------- ---------------------------------- NAV MARKET INDEX* NAV MARKET INDEX* -------- -------- ---------- ---------- ---------- --------- (12.20)% (8.17)% (10.49)% (27.90)% (26.42)% (27.27)% -------------------------------------------------------------------------------- * Index returns reflect performance of the MSCI Standard Index up to 06/22/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (06/21/00) for the NAV and Index returns and from the first day of trading on the exchange (06/23/00) for the Market return. Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI TAIWAN INDEX Consumer Discretionary 2.86% Consumer Staples 1.28% Financials 14.76% Industrials 4.84% Information Technology 65.16% Materials 11.10% PERFORMANCE REVIEW The total return of the iShares MSCI Taiwan Index Fund (the "Taiwan Fund") was 18.98% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was 19.65%. SIGNIFICANT PERFORMANCE FACTORS The Taiwan Fund underperformed its benchmark by 0.67 percentage points over the reporting period. This was due to the negative impact of expenses, uninvested assets and security sampling, which subtracted 0.50, 0.10 and 0.08 percentage points respectively from the Fund's return. 44 iSHARES, INC. -------------------------------------------------------------------------------- --------------------- TAIWAN (CONTINUED) --------------------- KEY MARKET CONDITIONS Reversing a long slump, Taiwan's equity market staged a significant rally in late 2001 and early 2002. That rally did not begin until nearly a month into the reporting period, however. Like equity markets in other countries, Taiwan's stock exchange dropped precipitously after the events of September 11. Furthermore, the market did not snap back as quickly as some others did. In large part, this reflected persistent concerns about the semiconductor industry (36.51% of the Index as of February 28, 2002), the largest sector in the MSCI Taiwan Index. With demand for electronics and related components still low, the outlook for companies such as Taiwan Semiconductor Manufacturing Corporation (TSMC) and United Microelectronics Corporation (UMC) (16.82% and 10.38% of the Index as of February 28, 2002) seemed poor. It wasn't long before the outlook seemed much brighter, though. In October both TSMC and UMC announced upbeat forecasts for the semiconductor industry. The optimism was supported by positive economic news from the United States and Europe. In addition, investors responded positively to Taiwan's impending entry into the World Trade Organization. Record low interest rates also helped to buoy the market. Although Taiwan's rally was strong, it remained fairly narrow throughout the reporting period. Investors focused most of their attention on the two large semiconductor companies to the exclusion of many other stocks. 45 PERFORMANCE REVIEW -------------------------------------------------------------------------------- ----------------- UNITED KINGDOM -----------------
iSHARES MSCI UNITED KINGDOM INDEX FUND PERFORMANCE AS OF 2/28/02 ------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ ONE YEAR FIVE YEARS SINCE INCEPTION** ------------------------------ --------------------------- --------------------------- NAV MARKET INDEX* NAV MARKET INDEX* NAV MARKET INDEX* ----- -------- -------- ----- -------- -------- ----- -------- ------- (12.80)% (13.78)% (11.84)% 2.70% 2.59% 3.06% 6.53% 6.10% 7.12% ------------------------------------------------------------------------------------------ * Index returns reflect performance of the MSCI Standard Index up to 06/20/01 and the new MSCI Provisional Index thereafter. ** Since inception total return periods are calculated from inception date (03/12/96) for the NAV and Index returns and from the first day of trading on the exchange (03/18/96) for the Market return.
Average annual total return represents the average annual change in value of an investment over the periods indicated. A Fund's per share net asset value or "NAV" is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV per share of the Fund, and the Market return is based on the market price per share of the Fund. Market and NAV returns assume that dividends and capital gains distributions have been reinvested in the Fund at market price and net asset value, respectively. The price used to calculate "market" returns ("Market Price") is the price of the last reported trade for shares of the Fund on any national securities exchange or other major U.S. market. The Market Price of the Fund may be at, above or below its NAV. The NAV of the Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of the Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand. MARKET PRICE AND NAV MAY BE CALCULATED AT DIFFERENT TIMES, AND THIS TIMING DIFFERENCE IS ONE OF THE REASONS THAT NAV AND MARKET PRICE RETURNS MAY DIFFER. 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. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future results. [PIE CHART OMITTED.] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: SECTOR BREAKOUT MSCI UNITED KINGDOM INDEX Consumer Discretionary 9.78% Consumer Staples 9.73% Energy 16.17% Financials 24.41% Health Care 15.44% Industrials 5.17% Information Technology 0.97% Materials 4.09% Telecommunications Services 10.21% Utilities 4.03% PERFORMANCE REVIEW The total return of the iShares MSCI United Kingdom Index Fund (the "United Kingdom Fund") was -6.06% for the six-month period ended February 28, 2002. The total return of the corresponding MSCI Index was -5.76% over the same period. SIGNIFICANT PERFORMANCE FACTORS The United Kingdom Fund underperformed its benchmark by 0.30 percentage points over the reporting period. This was primarily due to expenses and the negative impact of uninvested assets, which subtracted 0.42 and 0.02 percentage points respectively from the Fund's returns. Those factors were partially offset by the positive impact of security sampling, which contributed 0.14 percentage points. 46 iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------- UNITED KINGDOM (CONTINUED) ----------------------------- KEY MARKET CONDITIONS The United Kingdom equity market began the reporting period on a weak note. It declined still further after the events of September 11th shook investors' confidence. Unsurprisingly, the United Kingdom's insurance providers were among the most affected by September 11. Its impact on the market was so severe, in fact, that by the end of the reporting period the MSCI United Kingdom Index had still not returned to its pre-September 11 levels. During this time many of the United Kingdom's large multinationals faced a difficult operating environment abroad. The profits and shares of energy giants BP and Shell Transport (11.18% and 4.11% of the Index as of February 28, 2002), for example, dropped sharply as the global economic slowdown lowered demand for crude oil and petrochemicals. The slowdown weighed on the United Kingdom's banks as well. Many of them also had to contend with the economic crisis in Argentina, the collapse of the Enron Corporation and the financial repercussions of September 11. Shares of the United Kingdom's large pharmaceutical makers also came under pressure during the reporting period. Companies such as GlaxoSmithKline (9.10% of the Index as of February 28, 2002) face potentially major drops in profits as their patents on top-selling drugs expire or are successfully challenged by generic producers. As their shares were on the way down, those of telecommunications firm Vodafone (7.79% of the Index as of February 28, 2002) were on the way up. Investors drove up the price of Vodafone's stock in late 2001 as the company made efforts to reduce its high debt levels. Unfortunately, those gains could not offset weakness in the stock before and after its late 2001 rally. Other telecommunications stocks, including BT and Cable & Wireless (1.90% and 0.52% of the Index as of February 28, 2002), posted even weaker returns. In general, domestically oriented United Kingdom firms and their stocks performed well over the reporting period. One exception was Railtrack, which went into bankruptcy in October. Even as European countries including Germany slipped into recession, the United Kingdom economy continued to expand. The main driver was consumer spending, which helped boost shares of retailers like Marks & Spencer (0.92% of the Index as of February 28, 2002). 47 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------- iSHARES MSCI AUSTRALIA INDEX FUND ------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% BANKS 31.25% 344,960 Australia and New Zealand Banking Group Limited $ 3,285,361 305,120 Commonwealth Bank of Australia 5,096,480 378,272 National Australia Bank Limited 6,988,499 426,976 Westpac Banking Corporation Limited 3,642,854 ----------- 19,013,194 ----------- BEVERAGES 3.70% 37,024 BRL Hardy Limited 213,039 107,232 Coca-Cola Amatil Limited 323,373 499,008 Foster's Group Limited 1,195,208 153,344 Southcorp Limited 520,848 ----------- 2,252,468 ----------- CHEMICALS 0.44% 67,040 Orica Limited 269,581 ----------- COMMERCIAL SERVICES & SUPPLIES 2.03% 236,448 Brambles Industries Limited 1,110,696 93,376 Computershare Limited 125,322 ----------- 1,236,018 ----------- CONSTRUCTION & ENGINEERING 0.33% 36,608 Leighton Holdings Limited 199,364 ----------- CONSTRUCTION MATERIALS 2.19% 136,160 Boral Limited 283,252 228,832 CSR Limited 760,713 97,184 James Hardie Industries NV 290,965 ----------- 1,334,930 ----------- CONTAINERS & PACKAGING 1.02% 158,688 Amcor Limited 620,258 ----------- DIVERSIFIED FINANCIALS 2.69% 24,160 Australian Stock Exchange Limited 161,505 48,448 Macquarie Bank Limited 811,537 96,576 Suncorp-Metway Limited 663,039 ----------- 1,636,081 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.34% 534,240 Telstra Corporation Limited 1,422,997 ----------- ELECTRIC UTILITIES 0.11% 19,872 Energy Developments Limited 63,599 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.05% 179,296 ERG Limited 29,154 ----------- FOOD & DRUG RETAILING 4.21% 216,736 Coles Myer Limited 977,823 253,440 Woolworths Limited 1,585,608 ----------- 2,563,431 ----------- FOOD PRODUCTS 0.54% 144,864 Futuris Corporation Limited 132,359 241,088 Goodman Fielder Limited 194,141 ----------- 326,500 ----------- GAS UTILITIES 0.71% 86,880 Australian Gas Light Company Limited 431,791 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- HEALTH CARE EQUIPMENT & SUPPLIES 0.41% 12,672 Cochlear Limited $ 246,888 ----------- HEALTH CARE PROVIDERS & SERVICES 1.26% 196,224 Mayne Group Limited 579,384 53,248 Sonic Healthcare Limited 188,833 ----------- 768,217 ----------- HOTELS, RESTAURANTS & LEISURE 0.97% 65,856 Aristocrat Leisure Limited 195,471 125,728 TAB Limited 179,126 37,440 TABCORP Holdings Limited 216,418 ----------- 591,015 ----------- INDUSTRIAL CONGLOMERATES 2.58% 186,304 Pacific Dunlop Limited 108,672 88,032 Wesfarmers Limited 1,460,146 ----------- 1,568,818 ----------- INSURANCE 6.19% 272,896 AMP Limited 2,644,110 341,504 Insurance Australia Group Limited 571,161 136,064 QBE Insurance Group Limited 547,983 ----------- 3,763,254 ----------- MEDIA 8.38% 122,080 John Fairfax Holdings Limited 227,998 357,440 The News Corporation Limited 2,251,029 466,592 The News Corporation Limited - Preferred Ordinary 2,454,310 32,896 Publishing & Broadcasting Limited 162,796 ----------- 5,096,133 ----------- METALS & MINING 15.07% 903,136 BHP Billiton Limited 5,496,484 46,368 Iluka Resources Limited 114,937 416,704 M.I.M. Holdings Limited 282,645 66,464 Newcrest Mining Limited 156,105 114,816 OneSteel Limited 86,887 75,872 Rio Tinto Limited 1,566,722 33,856 Sons of Gwalia Limited 117,092 271,520 WMC Limited 1,345,523 ----------- 9,166,395 ----------- MULTILINE RETAIL 0.57% 98,976 David Jones Limited 57,733 168,032 Harvey Norman Holdings Limited 291,440 ----------- 349,173 ----------- OIL & GAS 2.50% 147,040 Origin Energy Limited 230,742 150,720 Santos Limited 471,478 113,952 Woodside Petroleum Limited 821,567 ----------- 1,523,787 ----------- PAPER & FOREST PRODUCTS 0.37% 80,768 PaperlinX Limited 223,888 ----------- PHARMACEUTICALS 1.40% 38,592 CSL Limited 852,627 ----------- See accompanying notes to financial statements. 48 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------------ iSHARES MSCI AUSTRALIA INDEX FUND (CONCLUDED) ------------------------------------------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) REAL ESTATE 7.23% 107,040 AMP Diversified Property Trust $ 138,688 222,400 BT Office Trust 175,648 106,528 Colonial First State Property Trust Group 115,478 278,144 Deutsche Office Trust 188,087 236,800 Gandel Retail Trust 138,127 455,200 General Property Trust 643,829 104,832 Lend Lease Corporation Limited 640,172 147,616 Mirvac Group 297,178 187,456 Stockland Trust Group 418,992 102,560 Westfield Holdings Limited 867,393 463,328 Westfield Trust 777,302 ----------- 4,400,894 ----------- TRANSPORTATION INFRASTRUCTURE 1.46% 375,776 Macquarie Infrastructure Group 671,156 104,032 Transurban Group* 216,953 ----------- 888,109 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $58,193,775) 60,838,564 ----------- TOTAL INVESTMENTS (COST $58,193,775)+ 100.00% $60,838,564 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $59,680,462. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $6,687,126 Excess of tax cost over value (5,529,024) ----------- $ 1,158,102 =========== See accompanying notes to financial statements. 49 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------- iSHARES MSCI AUSTRIA INDEX FUND ----------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIRLINES 2.31% 29,274 Austrian Airlines $ 249,415 ----------- BANKS 15.97% 31,598 Erste Bank der oesterreichischen Sparkassen 1,722,434 ----------- BEVERAGES 4.78% 11,270 BBAG Oesterreichische Brau-Beteiligungs 515,685 ----------- BUILDING PRODUCTS 4.73% 32,508 Wienerberger 509,510 ----------- CHEMICALS 1.80% 3,164 Lenzing 193,764 ----------- COMMERCIAL SERVICES & SUPPLIES 4.55% 21,952 BWT 490,270 ----------- CONSTRUCTION MATERIALS 2.93% 48,706 RHI 316,393 ----------- CONTAINERS & PACKAGING 5.06% 9,436 Mayr-Melnhof Karton 546,033 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 14.29% 191,912 Telekom Austria* 1,540,475 ----------- ELECTRIC UTILITIES 4.69% 6,622 Oesterreichische Elektrizitaetswirtschafts - Class A 505,199 ----------- INSURANCE 3.29% 2,366 Generali Holding Vienna 354,787 ----------- MACHINERY 4.97% 20,538 VA Technologie 535,612 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- METALS & MINING 9.55% 12,726 Boehler-Uddeholm $ 508,556 18,942 Voest-Alpine 521,024 ----------- 1,029,580 ----------- OIL & GAS 16.35% 20,930 OMV 1,763,327 ----------- TRANSPORTATION INFRASTRUCTURE 4.73% 18,186 Flughafen Wien 510,454 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $11,204,771) 10,782,938 ----------- COMMON AND PREFERRED STOCK - NON-BASKET 0.00% CHEMICALS 0.00% 2 Lenzing 122 ----------- TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $121) 122 ----------- TOTAL INVESTMENTS (COST $11,204,892)+ 100.00% $10,783,060 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $11,627,422. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 708,051 Excess of tax cost over value (1,552,413) ----------- $ (844,362) =========== See accompanying notes to financial statements. 50 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------- iSHARES MSCI BELGIUM INDEX FUND ----------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% BANKS 22.83% 107,016 Dexia $1,603,250 13,986 KBC Bankverzekeringsholding 430,431 ---------- 2,033,681 ---------- BEVERAGES 4.76% 15,687 Interbrew 424,028 ---------- BUILDING PRODUCTS 1.25% 882 Glaverbel 111,385 ----------- CHEMICALS 4.81% 6,447 Solvay 428,555 ---------- DISTRIBUTORS 1.80% 1,029 D'Ieteren 160,300 ---------- DIVERSIFIED FINANCIALS 32.40% 13,419 Algmene Maatschappij voor Nijverheidskredit NV 435,035 90,846 Fortis B 2,015,569 7,896 Groupe Bruxelles Lambert 435,404 ---------- 2,886,008 ---------- ELECTRIC UTILITIES 9.35% 4,200 Electrabel 833,025 ---------- ELECTRICAL EQUIPMENT 1.67% 4,179 Bekaert NV 149,180 ---------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.75% 1,638 Barco NV 66,435 ---------- FOOD & DRUG RETAILING 7.13% 5,649 Colruyt NV 210,109 9,576 Delhaize Le Lion 424,919 ---------- 635,028 ---------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- HEALTH CARE EQUIPMENT & SUPPLIES 2.10% 4,326 Omega Pharma $ 187,469 ---------- INSURANCE 1.92% 5,649 Gevaert NV 171,068 ---------- LEISURE EQUIPMENT & PRODUCTS 1.95% 14,301 Agfa Gevaert NV 174,046 ---------- MARINE 0.48% 861 Compagnie Maritime Belge 42,674 ---------- METALS & MINING 2.13% 4,599 Umicore 189,792 ---------- PHARMACEUTICALS 4.67% 10,374 UCB 415,911 ---------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $10,706,973) 8,908,585 ---------- TOTAL INVESTMENTS (COST $10,706,973)+ 100.00% $8,908,585 ======= ========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $10,966,954. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 193,030 Excess of tax cost over value (2,251,399) ----------- $(2,058,369) =========== See accompanying notes to financial statements. 51 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------- iSHARES MSCI BRAZIL INDEX FUND --------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AEROSPACE & DEFENSE 2.43% 356,700 Empresa Brasileira de Aeronautica Pfd $ 1,955,122 ----------- BANKS 16.28% 627,669,000 Banco Bradesco Pfd 3,671,824 74,046,000 Banco Itau Pfd 6,277,745 64,329,000 Unibanco - Uniao de Bancos Brasileiros 3,140,368 ----------- 13,089,937 ----------- BEVERAGES 8.67% 34,317,000 Companhia de Bebidas das Americas Pfd 6,968,140 ----------- BUILDING PRODUCTS 0.38% 14,760,000 Duratex Pfd 309,592 ----------- CHEMICALS 0.55% 1,968,000 Copene Petroquimica do Nordeste Pfd A 438,816 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 14.07% 109,101,000 Brasil Telecom Participacoes 857,916 365,064,000 Brasil Telecom Participacoes Pfd 2,934,131 115,128,000 Embratel Participacoes 512,927 343,170,000 Embratel Participacoes Pfd 1,272,886 55,842,000 Tele Norte Leste Participacoes 729,094 330,255,000 Tele Norte Leste Participacoes Pfd 5,004,924 ----------- 11,311,878 ----------- ELECTRIC UTILITIES 11.02% 140,466,000 Centrais Eletricas Brasileiras 2,500,878 75,645,000 Centrais Eletricas Brasileiras Pfd B Shares 1,157,923 231,855,000 Companhia Paranaense de Energia-Copel Pfd B 1,769,135 168,756,000 Companhia Energetica de Minas Gerais Pfd 2,618,258 15,498,000 Eletropaulo Metropolitana Pfd 438,858 236,406,000 Tractebel Energia 375,804 ----------- 8,860,856 ----------- FOOD & DRUG RETAILING 1.50% 50,922,000 Companhia Brasileira de Distribuicao Grupo Pao de Acucar Pfd 1,206,456 ----------- FOOD PRODUCTS 0.75% 1,107,000 Sadia Pfd 600,661 ----------- HOUSEHOLD PRODUCTS 0.20% 43,788,000 Bombril Cirio Pfd 163,346 ----------- MEDIA 0.45% 1,230,000 Globo Cabo Pfd* 359,771 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- METALS & MINING 8.34% 55,719,000 Companhia Siderurgica Nacional $ 1,038,561 147,600 Companhia Vale do Rio Doce Pfd A 3,754,133 108,240,000 Gerdau Pfd 1,202,157 209,100 Usinas Siderurgicas de Minas Gerais Pfd A 710,000 ----------- 6,704,851 ----------- OIL & GAS 25.77% 97,047,000 Companhia Brasileira de Petroleo Ipiranga Pfd 559,491 295,200 Petroleo Brasileiro 7,283,018 541,200 Petroleo Brasileiro Pfd 12,870,420 ----------- 20,712,929 ----------- PAPER & FOREST PRODUCTS 2.92% 738,000 Aracruz Celulose Pfd B 1,532,938 22,017,000 Votorantim Celulose e Papel Pfd* 816,654 ----------- 2,349,592 ----------- TEXTILES & APPAREL 0.52% 6,273,000 Companhia de Tecidos Norte de Minas Pfd 414,858 ----------- TOBACCO 1.41% 172,200 Souza Cruz 1,131,454 ----------- WIRELESS TELECOMMUNICATION SERVICES 4.74% 358,791,000 Tele Celular Sul Participacoes Pfd 494,307 423,120,000 Tele Centro Oeste Celular Participacoes Pfd 871,710 405,039,000 Tele Nordeste Celular Participacoes Pfd 516,815 386,097,000 Telemig Celular Participacoes Pfd 597,395 416,847,000 Telesp Celular Participacoes Pfd 1,327,054 ----------- 3,807,281 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $81,911,991) 80,385,540 ----------- TOTAL INVESTMENTS (COST $81,911,991)+ 100.00% $80,385,540 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $82,810,666. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,565,090 Excess of tax cost over value (3,990,216) ----------- $(2,425,126) =========== See accompanying notes to financial statements. 52 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------- iSHARES MSCI CANADA INDEX FUND --------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 98.94% AEROSPACE & DEFENSE 3.13% 79,032 Bombardier Incorporated - Class B $ 696,979 16,344 CAE Incorporated 102,882 ----------- 799,861 ----------- AUTO COMPONENTS 1.72% 6,360 Magna International Incorporated - Class A 437,926 ----------- BANKS 19.18% 37,680 Bank of Montreal 845,657 38,832 Bank of Nova Scotia 1,198,722 28,416 Canadian Imperial Bank of Commerce 926,243 14,376 National Bank of Canada 270,496 52,440 Royal Bank of Canada 1,657,359 ----------- 4,898,477 ----------- BEVERAGES 0.53% 7,200 Molson Incorporated - Class A 134,621 ----------- BIOTECHNOLOGY 0.36% 5,112 QLT Incorporated* 91,121 ----------- BUILDING PRODUCTS 0.35% 4,824 Royal Group Technologies Limited* 90,407 ----------- CHEMICALS 1.82% 8,736 Agrium Incorporated 86,897 6,432 NOVA Chemicals Corporation 135,735 3,936 Potash Corporation of Saskatchewan Incorporated 242,685 ----------- 465,317 ----------- COMMUNICATIONS EQUIPMENT 4.83% 245,928 Nortel Networks Corporation 1,233,855 ----------- COMPUTERS & PERIPHERALS 0.80% 17,352 ATI Technologies Incorporated* 204,936 ----------- DIVERSIFIED FINANCIALS 3.82% 12,144 Brascan Corporation - Class A 238,717 11,112 C. I. Fund Management Incorporated 82,137 7,968 Investors Group Incorporated 141,035 11,904 Power Corporation of Canada 294,540 9,216 Power Financial Corporation 219,702 ----------- 976,131 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.26% 3,360 Aliant Incorporated 61,776 20,304 BCE Incorporated 423,670 8,352 TELUS Corporation 91,094 ----------- 576,540 ----------- ELECTRIC UTILITIES 0.68% 12,768 TransAlta Corporation 173,397 ----------- ELECTRICAL EQUIPMENT 0.49% 4,752 Ballard Power Systems Incorporated* 125,071 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- ELECTRONIC EQUIPMENT & INSTRUMENTS 2.37% 14,448 Celestica Incorporated* $ 474,366 9,864 Onex Corporation 131,868 ----------- 606,234 ----------- ENERGY EQUIPMENT & SERVICES 0.46% 4,008 Precision Drilling Corporation* 117,405 ----------- FOOD & DRUG RETAILING 2.22% 3,984 George Weston Limited 264,441 8,376 Loblaw Companies Limited 301,734 ----------- 566,175 ----------- GAS UTILITIES 3.31% 12,024 Enbridge Incorporated 337,152 36,792 TransCanada PipeLines Limited 509,057 ----------- 846,209 ----------- HEALTH CARE PROVIDERS & SERVICES 0.54% 10,560 MDS Incorporated - Class B 137,882 ----------- HOTELS, RESTAURANTS & LEISURE 1.14% 5,952 Fairmont Hotels & Resorts Incorporated 150,275 1,752 Four Seasons Hotels Incorporated 87,605 3,312 Intrawest Corporation 52,988 ----------- 290,868 ----------- IT CONSULTING & SERVICES 0.40% 15,360 CGI Group Incorporated* 102,911 ----------- INSURANCE 9.30% 12,168 Canada Life Financial Corporation 302,361 10,176 Clarica Life Insurance Company 321,865 936 Fairfax Financial Holdings Limited 108,417 36,960 Manulife Financial Corporation 955,961 33,072 Sun Life Financial Services of Canada Incorporated 687,617 ----------- 2,376,221 ----------- INTERNET SOFTWARE & SERVICES 0.18% 2,856 BCE Emergis Incorporated 46,280 ----------- MARINE 0.25% 5,952 CP Ships Limited 64,955 ----------- MEDIA 4.13% 3,072 Quebecor Incorporated - Class B 41,088 6,816 Quebecor World Incorporated 162,488 10,368 Rogers Communications Incorporated - Class B* 149,914 13,488 Shaw Communications Incorporated - Class B 253,452 14,592 Thomson Corporation 446,991 ----------- 1,053,933 ----------- METALS & MINING 10.87% 22,080 Alcan Incorporated 892,558 41,328 Barrick Gold Corporation 741,818 4,200 Cameco Corporation 115,176 5,688 Dofasco Incorporated 99,544 See accompanying notes to financial statements. 53 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------------------- iSHARES MSCI CANADA INDEX FUND (CONCLUDED) -------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) METALS & MINING (continued) 6,024 Falconbridge Limited $ 64,727 3,960 Fording Incorporated 71,204 13,776 Inco Limited* 255,858 11,736 Noranda Incorporated 122,517 25,488 Placer Dome Incorporated 295,149 13,464 Teck Cominco Limited - Class B 119,158 ----------- 2,777,709 ----------- MULTILINE RETAIL 0.53% 5,688 Canadian Tire Corporation - Class A 88,626 5,328 Hudson's Bay Company 47,485 ----------- 136,111 ----------- OIL & GAS 14.09% 11,664 Alberta Energy Company Limited 493,239 8,808 Canadian Natural Resources Limited 256,637 9,456 Husky Energy Incorporated 99,010 10,560 Imperial Oil Limited 298,142 9,120 Nexen Incorporated 206,898 19,920 PanCanadian Energy Corporation 574,198 3,744 Penn West Petroleum Limited* 91,914 17,136 Petro-Canada 402,955 5,664 Rio Alto Exploration Limited* 56,128 5,208 Shell Canada Limited 160,671 17,184 Suncor Energy Incorporated 572,336 10,248 Talisman Energy Incorporated 387,054 ----------- 3,599,182 ----------- PAPER & FOREST PRODUCTS 1.64% 30,024 Abitibi-Consolidated Incorporated 256,172 14,640 Domtar Incorporated 162,413 ----------- 418,585 ----------- PHARMACEUTICALS 1.84% 9,888 Biovail Corporation* 470,458 ----------- REAL ESTATE 1.08% 6,288 Brookfield Properties Corporation 114,904 10,128 TrizecHahn Corporation 161,530 ----------- 276,434 ----------- ROAD & RAIL 3.91% 14,856 Canadian National Railway Company 747,568 12,504 CP Railway Limited 250,548 ----------- 998,116 ----------- SOFTWARE 0.71% 6,456 Cognos Incorporated* 162,879 4,080 Descartes Systems Group Incorporated* 19,199 ----------- 182,078 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $30,634,119) 25,275,406 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - NON-BASKET 1.06% BANKS 0.00% 8 Royal Bank of Canada $ 253 ----------- GAS UTILITIES 1.05% 9,912 Westcoast Energy Incorporated 269,036 ----------- HOTELS, RESTAURANTS & LEISURE 0.00% 18 Fairmont Hotels & Resorts Incorporated 454 ----------- INSURANCE 0.00% 22 Manulife Financial Corporation 569 20 Sun Life Financial Services of Canada Incorporated 416 ----------- 985 ----------- MARINE 0.00% 18 CP Ships Limited 196 ----------- METALS & MINING 0.00% 2 Alcan Incorporated 81 4 Fording Incorporated 72 ----------- 153 ----------- OIL & GAS 0.00% 13 PanCanadian Energy Corporation 375 ----------- PHARMACEUTICALS 0.00% 2 Biovail Corporation* 95 ----------- ROAD & RAIL 0.00% 12 CP Railway Limited 240 ----------- TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $232,158) 271,787 ----------- TOTAL INVESTMENTS (COST $30,866,277)+ 100.00% $25,547,193 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $31,813,396. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 2,176,074 Excess of tax cost over value (8,442,277) ----------- $(6,266,203) =========== See accompanying notes to financial statements. 54 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------ iSHARES MSCI EMU INDEX FUND ------------------------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.99% AUSTRIA 0.38% BANKS 0.08% 1,326 Erste Bank der oesterreichischen Sparkassen $ 72,281 ----------- BUILDING PRODUCTS 0.00% 102 Wienerberger 1,599 ----------- COMMERCIAL SERVICES & SUPPLIES 0.01% 612 BWT 13,668 ----------- CONSTRUCTION MATERIALS 0.02% 2,584 RHI 16,786 ----------- CONTAINERS & PACKAGING 0.03% 442 Mayr-Melnhof Karton 25,577 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.02% 1,734 Telekom Austria* 13,919 ----------- ELECTRIC UTILITIES 0.04% 476 Oesterreichische Elektrizitaetswirtschafts - Class A 36,314 ----------- MACHINERY 0.04% 1,224 VA Technologie 31,921 ----------- METALS & MINING 0.05% 408 Boehler-Uddeholm 16,304 986 Voest-Alpine 27,121 ----------- 43,425 ----------- OIL & GAS 0.08% 850 OMV 71,611 ----------- TRANSPORTATION INFRASTRUCTURE 0.01% 476 Flughafen Wien 13,361 ----------- TOTAL AUSTRIA (Cost $351,993) 340,462 ----------- BELGIUM 2.90% BANKS 0.61% 28,084 Dexia 420,738 3,978 KBC Bankverzekeringsholding 122,426 ----------- 543,164 ----------- BEVERAGES 0.20% 6,460 Interbrew 174,617 ----------- CHEMICALS 0.11% 1,462 Solvay 97,184 ----------- DISTRIBUTORS 0.04% 204 D'Ieteren 31,780 ----------- DIVERSIFIED FINANCIALS 1.16% 38,284 Fortis B 849,394 3,332 Groupe Bruxelles Lambert 183,734 ----------- 1,033,128 ----------- ELECTRIC UTILITIES 0.30% 1,326 Electrabel 262,998 ----------- ELECTRICAL EQUIPMENT 0.03% 816 Bekaert NV 29,129 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- BELGIUM (continued) ELECTRONIC EQUIPMENT & INSTRUMENTS 0.02% 442 Barco NV $ 17,927 ----------- FOOD & DRUG RETAILING 0.14% 1,190 Colruyt NV 44,261 1,904 Delhaize Le Lion 84,487 ----------- 128,748 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.02% 374 Omega Pharma 16,207 ----------- LEISURE EQUIPMENT & PRODUCTS 0.04% 3,298 Agfa Gevaert NV 40,137 ----------- MARINE 0.02% 340 Compagnie Maritime Belge 16,851 ----------- METALS & MINING 0.04% 952 Umicore 39,287 ----------- PHARMACEUTICALS 0.17% 3,706 UCB 148,580 ----------- TOTAL BELGIUM (Cost $2,725,629) 2,579,737 ----------- FINLAND 6.57% BEVERAGES 0.05% 1,836 Hartwall Oyj ABP 45,991 ----------- BUILDING PRODUCTS 0.07% 3,400 Uponor Oyj 60,877 ----------- COMMUNICATIONS EQUIPMENT 5.06% 211,956 Nokia Oyj 4,504,592 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.10% 19,482 Sonera Oyj 90,998 ----------- FOOD & DRUG RETAILING 0.03% 3,400 Kesko Oyj - B Shares 30,586 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.02% 374 Instrumentarium Oyj 18,100 ----------- IT CONSULTING & SERVICES 0.10% 3,400 TietoEnator Oyj 86,463 ----------- INSURANCE 0.09% 10,200 Sampo Oyj - A Shares 79,317 ----------- LEISURE EQUIPMENT & PRODUCTS 0.02% 544 Amer Group Plc 15,528 ----------- MACHINERY 0.09% 476 KCI Konecranes International 13,875 170 Kone Oyj - B Shares 14,705 3,400 Metso Oyj 38,232 714 Wartsila Oyj 13,976 ----------- 80,788 ----------- METALS & MINING 0.07% 3,400 Outokumpu Oyj 39,702 6,800 Rautaruukki Oyj 26,468 ----------- 66,170 ----------- See accompanying notes to financial statements. 55 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) ----------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) FINLAND (continued) OIL & GAS 0.02% 2,822 Fortum Oyj $ 14,402 ----------- PAPER & FOREST PRODUCTS 0.85% 30,600 Stora Enso Oyj 397,024 10,200 UPM-Kymmene Oyj 362,616 ----------- 759,640 ----------- TOTAL FINLAND (Cost $8,332,502) 5,853,452 ----------- FRANCE 28.20% AEROSPACE & DEFENSE 0.33% 12,750 European Aeronautic Defence and Space Company 160,685 2,686 Thales 87,473 2,040 Zodiac 40,585 ----------- 288,743 ----------- AIRLINES 0.07% 3,706 Air France 60,265 ----------- AUTO COMPONENTS 0.38% 5,644 Compagnie Generale des Etablissements Michelin - Class B 214,317 3,060 Valeo 127,815 ----------- 342,132 ----------- AUTOMOBILES 0.61% 7,106 PSA Peugeot Citroen 309,170 5,372 Renault 233,494 ----------- 542,664 ----------- BANKS 2.80% 35,156 BNP Paribas* 1,704,432 13,396 Societe Generale - Class A 792,567 ----------- 2,496,999 ----------- BEVERAGES 0.18% 2,074 Pernod-Ricard 161,457 ----------- BUILDING PRODUCTS 0.56% 3,230 Compagnie de Saint-Gobain 501,501 ----------- CHEMICALS 0.62% 3,876 L'Air Liquide 547,488 ----------- COMMERCIAL SERVICES & SUPPLIES 0.07% 1,768 Societe BIC 59,642 ----------- COMMUNICATIONS EQUIPMENT 0.78% 48,620 Alcatel 674,986 340 Sagem 20,513 ----------- 695,499 ----------- CONSTRUCTION & ENGINEERING 0.17% 2,414 Vinci 147,208 ----------- CONSTRUCTION MATERIALS 0.61% 476 Imerys 50,066 5,746 Lafarge 494,531 ----------- 544,597 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- FRANCE (continued) DIVERSIFIED TELECOMMUNICATION SERVICES 0.46% 15,368 France Telecom $ 404,771 ----------- ELECTRICAL EQUIPMENT 0.46% 8,738 Alstom 104,529 6,120 Schneider Electric 307,032 ----------- 411,561 ----------- ENERGY EQUIPMENT & SERVICES 0.11% 782 Technip - Coflexip 98,350 ----------- FOOD & DRUG RETAILING 1.25% 22,304 Carrefour 1,007,066 1,632 Etablissements Economiques du Casino Guichard-Perrachon 107,214 ----------- 1,114,280 ----------- FOOD PRODUCTS 0.71% 5,474 Groupe Danone 629,740 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.14% 3,740 Essilor International 125,939 ----------- HOTELS, RESTAURANTS & LEISURE 0.57% 8,330 Accor 305,863 646 Club Mediterranee 27,492 4,488 Sodexho Alliance 177,796 ----------- 511,151 ----------- HOUSEHOLD DURABLES 0.13% 4,284 Thomson Multimedia* 111,130 ----------- INSURANCE 1.28% 61,030 Axa 1,137,615 ----------- IT CONSULTING & SERVICES 0.55% 2,686 Altran Technologies 127,551 850 Atos Origin* 61,980 4,454 Cap Gemini 295,302 ----------- 484,833 ----------- MEDIA 2.14% 5,032 Lagardere S.C.A. 204,745 3,400 Publicis Groupe 89,757 5,066 Societe Television Francaise 1 117,963 38,488 Vivendi Universal 1,494,111 ----------- 1,906,576 ----------- METALS & MINING 0.30% 8,330 Arcelor* 115,284 2,992 Pechiney - Class A 153,987 ----------- 269,271 ----------- MULTI-UTILITIES 1.12% 35,802 Suez 997,167 ----------- MULTILINE RETAIL 0.35% 2,992 Pinault-Printemps-Redoute 312,891 ----------- OIL & GAS 4.63% 28,050 TotalFinaElf 4,122,217 ----------- PERSONAL PRODUCTS 1.19% 15,198 L'Oreal 1,062,190 ----------- See accompanying notes to financial statements. 56 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) ----------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) FRANCE (continued) PHARMACEUTICALS 3.68% 29,784 Aventis $ 2,209,132 16,286 Sanofi-Synthelabo 1,069,205 ----------- 3,278,337 ----------- REAL ESTATE 0.10% 1,734 Unibail (Union du Credit-Bail Immobilier) 89,992 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.73% 21,828 STMicroelectronics NV 647,042 ----------- SOFTWARE 0.20% 2,584 Business Objects* 100,580 1,700 Dassault Systemes 78,155 ----------- 178,735 ----------- SPECIALTY RETAIL 0.18% 3,264 Castorama Dubois Investissement 160,927 ----------- TEXTILES & APPAREL 0.52% 9,996 LVMH Moet Hennessy Louis Vuitton 466,901 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.22% 6,868 Bouygues 196,042 ----------- TOTAL FRANCE (Cost $30,368,512) 25,105,853 ----------- GERMANY 20.53% AIR FREIGHT & COURIERS 0.20% 13,600 Deutsche Post 177,043 ----------- AIRLINES 0.12% 6,800 Deutsche Lufthansa 104,991 ----------- AUTO COMPONENTS 0.08% 5,100 Continental 74,641 ----------- AUTOMOBILES 2.58% 37,400 DaimlerChrysler 1,501,370 272 Porsche 116,468 11,560 Volkswagen 553,352 3,944 Volkswagen - Preferred 122,813 ----------- 2,294,003 ----------- BANKS 2.01% 16,150 Bayerische Hypo-und Vereinsbank 493,818 22,100 Deutsche Bank 1,297,976 ----------- 1,791,794 ----------- BIOTECHNOLOGY 0.11% 6,222 QIAGEN* 97,143 ----------- BUILDING PRODUCTS 0.04% 1,700 Buderus 39,247 ----------- CHEMICALS 2.16% 24,684 BASF 948,416 30,600 Bayer 975,357 ----------- 1,923,773 ----------- CONSTRUCTION MATERIALS 0.08% 1,496 Heidelberger Zement 67,935 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- GERMANY (continued) DIVERSIFIED FINANCIALS 0.20% 408 Deutsche Boerse $ 16,481 2,312 Marshcollek, Lautenschlaeger-und Partner 119,150 4,352 WCM Beteiligungs-und Grundbesitz* 39,338 ----------- 174,969 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.33% 83,708 Deutsche Telekom 1,188,898 ----------- ELECTRIC UTILITIES 1.49% 26,996 E.On 1,325,632 ----------- ELECTRICAL EQUIPMENT 0.02% 884 SGL Carbon* 16,669 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.11% 2,516 Epcos 97,367 ----------- FOOD PRODUCTS 0.04% 3,400 Kamps 31,615 ---------- HEALTH CARE PROVIDERS & SERVICES 0.12% 1,530 Fresenius Medical Care 79,087 680 Fresenius Medical Care-Preferred 26,586 ----------- 105,673 ----------- HOTELS, RESTAURANTS & LEISURE 0.22% 6,800 Preussag 194,101 ----------- INDUSTRIAL CONGLOMERATES 2.46% 37,502 Siemens 2,196,078 ----------- INSURANCE 2.60% 6,596 Allianz 1,483,230 3,400 Muenchener Rueckversicherungs- Gesellschaft 829,340 ----------- 2,312,570 ----------- MACHINERY 0.35% 4,386 Linde 199,212 3,400 MAN 80,405 1,700 MAN - Preferred 33,526 ----------- 313,143 ----------- MEDIA 0.03% 3,400 ProSiebenSat.1 Media 25,939 ----------- METALS & MINING 0.26% 15,300 ThyssenKrupp 229,612 ----------- MULTI-UTILITIES 0.70% 15,538 RWE 558,164 2,448 RWE - Preferred 69,072 ----------- 627,236 ----------- MULTILINE RETAIL 0.26% 1,700 KarstadtQuelle 59,010 5,100 Metro 169,794 ----------- 228,804 ----------- See accompanying notes to financial statements. 57 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------ iSHARES MSCI EMU INDEX FUND (CONTINUED) ------------------------------------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) GERMANY (continued) PERSONAL PRODUCTS 0.25% 1,530 Beiersdorf $ 167,544 1,020 Wella 52,434 ----------- 219,978 ----------- PHARMACEUTICALS 0.74% 3,400 Altana 171,485 2,822 Merck KGaA 82,993 6,800 Schering 406,259 ----------- 660,737 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.39% 3,400 Aixtron 58,818 12,818 Infineon Technologies 293,702 ----------- 352,520 ----------- SOFTWARE 1.41% 9,112 SAP 1,238,368 680 Software 18,169 ----------- 1,256,537 ----------- SPECIALTY RETAIL 0.03% 1,258 Douglas Holding 31,328 ----------- TEXTILES & APPAREL 0.14% 1,700 Adidas-Salomon 110,196 680 Hugo Boss - Preferred 14,675 ----------- 124,871 ----------- TOTAL GERMANY (Cost $22,851,406) 18,284,847 ----------- GREECE 0.87% BANKS 0.41% 85,000 National Bank of Greece ADR 365,500 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.46% 54,400 Hellenic Telecommunications Organization ADR 408,544 ----------- TOTAL GREECE (Cost $935,895) 774,044 ----------- IRELAND 2.29% AIRLINES 0.15% 21,760 Ryanair Holdings Plc* 130,812 ----------- BANKS 0.97% 38,930 Allied Irish Banks Plc 434,389 44,268 Bank of Ireland 428,857 ----------- 863,246 ----------- CONSTRUCTION MATERIALS 0.44% 23,460 CRH Plc 390,628 ----------- CONTAINERS & PACKAGING 0.12% 47,838 Jefferson Smurfit Group Plc 109,654 ----------- FOOD PRODUCTS 0.09% 1,564 Greencore Group Plc 4,302 5,814 Kerry Group Plc - A Shares 77,195 ----------- 81,497 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- IRELAND (continued) HOUSEHOLD DURABLES 0.04% 49,708 Waterford Wedgwood Plc $ 33,107 ----------- INDUSTRIAL CONGLOMERATES 0.04% 3,400 DCC Plc 33,821 ----------- INSURANCE 0.14% 11,424 Irish Life & Permanent Plc 126,483 ----------- MEDIA 0.03% 20,400 Independent News & Media Plc 30,880 ----------- PHARMACEUTICALS 0.23% 14,688 Elan Corporation Plc* 203,277 ----------- REAL ESTATE 0.04% 5,542 Green Property Plc 35,953 ----------- TOTAL IRELAND (Cost $2,635,861) 2,039,358 ----------- ITALY 10.65% AIRLINES 0.03% 34,000 Alitalia SpA* 25,145 ----------- AUTOMOBILES 0.23% 10,200 Fiat SpA 129,253 5,100 Fiat SpA - Pfd 46,452 3,400 Fiat SpA - RNC 28,968 ----------- 204,673 ----------- BANKS 2.26% 68,000 Banca Nazionale del Lavoro 139,400 36,448 Banca di Roma SpA 85,437 42,500 Banca Monte dei Paschi di Siena SpA 106,792 17,000 Banca Popolare di Milano SpA 63,671 162,928 IntesaBci SpA 379,099 34,000 IntesaBci SpA - RNC 56,466 24,582 Mediobanca SpA 264,510 38,216 Sanpaulo IMI SpA 388,077 136,000 UniCredito Italiano SpA 529,366 ----------- 2,012,818 ----------- CONSTRUCTION MATERIALS 0.06% 6,664 Italcementi SpA 50,667 ----------- DIVERSIFIED FINANCIALS 0.27% 11,900 Banca Fideuram SpA 79,978 64,192 Bipop-Carire SpA 84,731 10,200 Mediolanum SpA 77,552 ----------- 242,261 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.44% 103,700 Telecom Italia SpA 853,029 83,300 Telecom Italia SpA - RNC 432,316 ----------- 1,285,345 ----------- ELECTRIC UTILITIES 0.57% 91,256 Enel SpA 510,705 ----------- ELECTRICAL EQUIPMENT 0.06% 34,000 Pirelli SpA 50,878 ----------- FOOD & DRUG RETAILING 0.03% 8,500 La Rinascente SpA 28,747 ----------- See accompanying notes to financial statements. 58 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) ----------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) ITALY (continued) FOOD PRODUCTS 0.07% 18,700 Parmalat Finanziaria SpA $ 57,907 ----------- GAS UTILITIES 0.09% 8,500 Italgas SpA 80,140 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.14% 6,800 Luxottica Group SpA 119,813 ----------- HOTELS, RESTAURANTS & LEISURE 0.06% 5,100 Autogrill SpA 51,525 ----------- INSURANCE 1.57% 13,600 Alleanza Assicurazioni SpA 131,636 44,064 Assicurazioni Generali SpA 1,091,214 15,300 Riunione Adriatica di Sicurta SpA 178,661 ----------- 1,401,511 ----------- INTERNET SOFTWARE & SERVICES 0.05% 5,916 Tiscali SpA* 47,692 ----------- MEDIA 0.48% 6,800 Arnoldo Mondadori Editore SpA 43,055 3,400 Gruppo Editoriale L'Espresso SpA 10,528 27,200 Mediaset SpA 219,510 204,000 Seat Pagine Gialle SpA* 154,575 ----------- 427,668 ----------- MULTI-UTILITIES 0.05% 6,800 ACEA SpA 39,997 ----------- OIL & GAS 1.92% 124,576 ENI SpA 1,706,845 ----------- TEXTILES & APPAREL 0.12% 4,760 Benetton Group SpA 57,601 6,800 Bulgari SpA 52,231 ----------- 109,832 ----------- TRANSPORTATION INFRASTRUCTURE 0.28% 34,000 Concessioni e Costruzioni Autostrade SpA 247,626 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.87% 165,274 Telecom Italia Mobile SpA 777,693 ----------- TOTAL ITALY (Cost $11,494,167) 9,479,488 ----------- NETHERLANDS 17.23% AIR FREIGHT & COURIERS 0.34% 14,654 TPG 301,420 ----------- AIRLINES 0.04% 2,584 Koninklijke Luchtvaart Maatschappij 35,471 ----------- BANKS 1.18% 60,350 ABN AMRO Holding 1,050,813 ----------- BEVERAGES 0.37% 8,126 Heineken 330,986 ----------- CHEMICALS 0.59% 12,002 Akzo Nobel 529,454 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- NETHERLANDS (continued) COMMERCIAL SERVICES & SUPPLIES 0.09% 3,774 Buhrmann $ 43,580 3,536 Vedior 39,761 ----------- 83,341 ----------- DIVERSIFIED FINANCIALS 2.01% 75,106 ING Groep 1,785,887 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.34% 64,090 Koninklijke KPN* 306,009 ----------- FOOD & DRUG RETAILING 0.68% 26,214 Koninklijke Ahold 604,276 ----------- FOOD PRODUCTS 1.81% 6,086 Koninklijke Numico 135,554 25,364 Unilever 1,474,319 ----------- 1,609,873 ----------- HOUSEHOLD DURABLES 1.69% 57,460 Philips Electronics 1,500,988 ----------- INSURANCE 0.99% 40,630 Aegon 884,223 ----------- IT CONSULTING & SERVICES 0.04% 12,444 Getronics 32,399 ----------- MACHINERY 0.06% 1,020 IHC Caland 52,143 ----------- MEDIA 0.98% 28,220 Elsevier 361,263 8,534 VNU 252,455 11,934 Wolters Kluwer - CVA 257,034 ----------- 870,752 ----------- OFFICE ELECTRONICS 0.04% 3,128 Oce 31,927 ----------- OIL & GAS 5.44% 93,874 Royal Dutch Petroleum Company 4,843,512 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.42% 18,462 ASML Holding* 378,470 ----------- SPECIALTY RETAIL 0.04% 3,434 Koninklijke Vendex KBB 38,614 ----------- TRADING COMPANIES & DISTRIBUTORS 0.08% 3,944 Hagemeyer 68,946 ----------- TOTAL NETHERLANDS (Cost $18,888,914) 15,339,504 ----------- PORTUGAL 1.12% BANKS 0.35% 76,534 Banco Comercial Portugues SA 266,787 4,284 Banco Espirito Santo SA 42,614 ----------- 309,401 ----------- CONSTRUCTION MATERIALS 0.06% 3,162 Cimentos de Portugal SGPS SA 55,358 ----------- See accompanying notes to financial statements. 59 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------------- iSHARES MSCI EMU INDEX FUND (CONTINUED) ----------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) PORTUGAL (continued) DIVERSIFIED FINANCIALS 0.05% 20,842 BPI - SGPS SA $ 44,168 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.31% 38,522 Portugal Telecom SGPS SA 271,563 ----------- ELECTRIC UTILITIES 0.18% 84,150 Electricidade de Portugal SA 162,317 ----------- FOOD & DRUG RETAILING 0.03% 3,536 Jeronimo Martins SGPS SA 25,386 ----------- INDUSTRIAL CONGLOMERATES 0.03% 43,146 Sonae SGPS SA 30,603 ----------- TRANSPORTATION INFRASTRUCTURE 0.11% 22,100 Brisa-Auto Estradas de Portugal SA 96,727 ----------- TOTAL PORTUGAL (Cost $1,285,692) 995,523 ----------- SPAIN 9.25% BANKS 3.40% 136,068 Banco Bilbao Vizcaya Argentaria SA 1,570,061 182,308 Banco Santander Central Hispano SA 1,453,922 ----------- 3,023,983 ----------- BIOTECHNOLOGY 0.06% 6,018 Zeltia SA* 50,128 ----------- COMMERCIAL SERVICES & SUPPLIES 0.08% 10,710 Amadeus Global Travel Distribution SA* 71,054 ----------- CONSTRUCTION & ENGINEERING 0.21% 2,346 Actividades de Construccion y Servicios SA 62,399 2,142 Fomento de Construcciones y Contratas SA 46,320 6,358 Groupo Dragados SA 78,918 ----------- 187,637 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.45% 187,034 Telefonica SA* 2,180,796 ----------- ELECTRIC UTILITIES 1.32% 39,032 Endesa SA 585,429 33,252 Iberdrola SA 418,490 11,220 Union Fenosa SA 172,264 ----------- 1,176,183 ----------- GAS UTILITIES 0.12% 6,154 Gas Natural SDG SA 107,313 ----------- HOTELS, RESTAURANTS & LEISURE 0.11% 4,726 NH Hoteles SA* 46,397 6,324 Sol Melia SA 42,722 7,922 TelePizza SA* 9,730 ----------- 98,849 ----------- INSURANCE 0.05% 6,732 Corporacion Mapfre SA 46,584 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- SPAIN (continued) INTERNET SOFTWARE & SERVICES 0.14% 16,626 Terra Networks SA* $ 123,678 ----------- MEDIA 0.05% 1,598 Promotora de Informaciones SA 14,900 7,480 Telefonica Publicidad e Informacion SA 28,727 ----------- 43,627 ----------- METALS & MINING 0.08% 2,142 Acerinox SA 72,907 ----------- OIL & GAS 0.57% 41,072 Repsol YPF SA 507,671 ----------- REAL ESTATE 0.07% 1,938 Metrovacesa SA 28,246 4,760 Vallehermoso SA 33,268 ----------- 61,514 ----------- SPECIALTY RETAIL 0.21% 9,690 Industria de Diseno Textil SA* 189,928 ----------- TOBACCO 0.24% 12,886 Altadis SA 213,448 ----------- TRANSPORTATION INFRASTRUCTURE 0.06% 5,304 Autopistas Concesionaria Espanola SA 49,090 ----------- WATER UTILITIES 0.03% 2,652 Sociedad General de Aguas de Barcelona SA 29,821 ----------- TOTAL SPAIN (Cost $10,018,506) 8,234,211 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $109,889,077) 89,026,479 ----------- COMMON AND PREFERRED STOCK - NON-BASKET 0.01% FRANCE 0.00% ENERGY EQUIPMENT & SERVICES 0.00% 11 Technip - Coflexip 1,383 ----------- TOTAL FRANCE (Cost $807) 1,383 ----------- GERMANY 0.00% DIVERSIFIED FINANCIALS 0.00% 4 WCM Beteiligungs-und Grundbesitz* 36 ----------- TOTAL GERMANY (Cost $0) 36 ----------- ITALY 0.00% ELECTRIC UTILITIES 0.00% 16 Enel SpA 90 ----------- TOTAL ITALY (Cost $133) 90 ----------- NETHERLANDS 0.00% DIVERSIFIED TELECOMMUNICATION SERVICES 0.00% 11 Koninklijke KPN* 53 ----------- TOTAL NETHERLANDS (Cost $0) 53 ----------- See accompanying notes to financial statements. 60 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------------- iSHARES MSCI EMU INDEX FUND (CONCLUDED) ----------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - NON-BASKET (CONTINUED) PORTUGAL 0.01% BANKS 0.01% 17 Banco Comercial Portugues SA $ 59 4,284 Banco Espirito Santo SA - Bonus Rights 10,042 ----------- 10,101 ----------- TOTAL PORTUGAL (Cost $11,510) 10,101 ----------- SPAIN 0.00% REAL ESTATE 0.00% 17 Metrovacesa SA 248 ----------- SPECIALTY RETAIL 0.00% 7 Industria de Diseno Textil SA* 137 ----------- TOTAL SPAIN (Cost $131) 385 ----------- TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $12,581) 12,048 ----------- TOTAL INVESTMENTS (COST $109,901,658)+ 100.00% $89,038,527 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $113,800,386. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,423,012 Excess of tax cost over value (26,184,871) ------------ $(24,761,859) ============ See accompanying notes to financial statements. 61 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------- iSHARES MSCI FRANCE INDEX FUND --------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.99% AEROSPACE & DEFENSE 1.12% 28,528 European Aeronautic Defence and Space Company $ 359,530 5,968 Thales 194,356 4,160 Zodiac 82,761 ----------- 636,647 ----------- AIRLINES 0.22% 7,872 Air France 128,011 ----------- AUTO COMPONENTS 1.34% 12,800 Compagnie Generale des Etablissements Michelin - Class B 486,048 6,672 Valeo 278,688 ----------- 764,736 ----------- AUTOMOBILES 2.09% 15,536 PSA Peugeot Citroen 675,946 11,984 Renault 520,886 ----------- 1,196,832 ----------- BANKS 9.92% 79,968 BNP Paribas* 3,877,006 30,320 Societe Generale - Class A 1,793,866 ----------- 5,670,872 ----------- BEVERAGES 0.62% 4,560 Pernod-Ricard 354,987 ----------- BUILDING PRODUCTS 2.00% 7,344 Compagnie de Saint-Gobain 1,140,254 ----------- CHEMICALS 2.25% 9,120 L'Air Liquide 1,288,207 ----------- COMMERCIAL SERVICES & SUPPLIES 0.20% 3,312 Societe BIC 111,727 ----------- COMMUNICATIONS EQUIPMENT 2.78% 109,872 Alcatel 1,525,340 1,040 Sagem 62,745 ----------- 1,588,085 ----------- CONSTRUCTION & ENGINEERING 0.57% 5,344 Vinci 325,882 ----------- CONSTRUCTION MATERIALS 2.11% 800 Imerys 84,145 13,040 Lafarge 1,122,290 ----------- 1,206,435 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.60% 34,752 France Telecom 915,317 ----------- ELECTRICAL EQUIPMENT 1.95% 21,776 Alstom 260,498 16,976 Schneider Electric 851,663 ----------- 1,112,161 ----------- ENERGY EQUIPMENT & SERVICES 0.36% 1,648 Technip-Coflexip 207,265 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- FOOD & DRUG RETAILING 4.39% 50,048 Carrefour $ 2,259,757 3,808 Etablissements Economiques du Casino Guichard-Perrachon 250,167 ----------- 2,509,924 ----------- FOOD PRODUCTS 2.57% 12,768 Groupe Danone 1,468,856 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.56% 9,440 Essilor International 317,878 ----------- HOTELS, RESTAURANTS & LEISURE 1.89% 18,816 Accor 690,891 1,040 Club Mediterranee 44,259 8,736 Sodexho Alliance 346,085 ----------- 1,081,235 ----------- HOUSEHOLD DURABLES 0.42% 9,344 Thomson Multimedia* 242,390 ----------- INSURANCE 4.54% 139,200 Axa 2,594,724 ----------- IT CONSULTING & SERVICES 1.97% 5,904 Altran Technologies 280,365 1,952 Atos Origin* 142,335 10,640 Cap Gemini 705,437 ----------- 1,128,137 ----------- MEDIA 7.59% 11,824 Lagardere S.C.A. 481,101 7,664 Publicis Groupe 202,323 11,856 Societe Television Francaise 1 276,069 87,008 Vivendi Universal 3,377,665 ----------- 4,337,158 ----------- METALS & MINING 1.41% 34,400 Arcelor* 476,083 6,416 Pechiney - Class A 330,207 ----------- 806,290 ----------- MULTI-UTILITIES 3.99% 81,840 Suez 2,279,429 ----------- MULTILINE RETAIL 1.23% 6,704 Pinault-Printemps-Redoute 701,076 ----------- OIL & GAS 16.36% 63,632 TotalFinaElf 9,351,334 ----------- PERSONAL PRODUCTS 4.14% 33,856 L'Oreal 2,366,201 ----------- PHARMACEUTICALS 12.90% 66,960 Aventis 4,966,543 36,656 Sanofi-Synthelabo 2,406,531 ----------- 7,373,074 ----------- REAL ESTATE 0.38% 4,160 Unibail (Union du Credit-Bail Immobilier) 215,898 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 2.58% 49,664 STMicroelectronics NV 1,472,178 ----------- See accompanying notes to financial statements. 62 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------------------- iSHARES MSCI FRANCE INDEX FUND (CONCLUDED) -------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) SOFTWARE 0.74% 6,048 Business Objects* $ 235,412 4,112 Dassault Systemes 189,043 ----------- 424,455 ----------- SPECIALTY RETAIL 0.62% 7,136 Castorama Dubois Investissement 351,831 ----------- TEXTILES & APPAREL 1.82% 22,240 LVMH Moet Hennessy Louis Vuitton 1,038,803 ----------- WIRELESS TELECOMMUNICATION SERVICES 0.76% 15,120 Bouygues 431,589 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $66,416,698) 57,139,878 ----------- COMMON STOCK - NON-BASKET 0.01% AUTO COMPONENTS 0.00% 8 Valeo 334 ----------- BEVERAGES 0.00% 4 Pernod-Ricard 311 ----------- CHEMICALS 0.00% 2 L'Air Liquide 283 ----------- COMMERCIAL SERVICES & SUPPLIES 0.00% 10 Societe BIC 337 ----------- CONSTRUCTION MATERIALS 0.00% 14 Imerys 1,473 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- FOOD PRODUCTS 0.00% 8 Groupe Danone $ 920 ----------- MEDIA 0.00% 10 Lagardere S.C.A. 407 8 Publicis Groupe 211 ----------- 618 ----------- METALS & MINING 0.00% 11 Arcelor* 152 ----------- MULTI-UTILITIES 0.00% 10 Suez 279 ----------- PERSONAL PRODUCTS 0.00% 2 L'Oreal 140 ----------- PHARMACEUTICALS 0.00% 6 Sanofi-Synthelabo 394 ----------- SPECIALTY RETAIL 0.00% 2 Castorama Dubois Investissement 99 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $6,017) 5,340 ----------- TOTAL INVESTMENTS (COST $66,422,715)+ 100.00% $57,145,218 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $66,568,188. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,877,276 Excess of tax cost over value (14,300,246) ------------ $ (9,422,970) ============ See accompanying notes to financial statements. 63 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ---------------------------------- iSHARES MSCI GERMANY INDEX FUND ---------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIR FREIGHT & COURIERS 1.05% 88,946 Deutsche Post $ 1,157,891 ------------ AIRLINES 0.95% 67,600 Deutsche Lufthansa 1,043,733 ------------ AUTO COMPONENTS 0.56% 42,432 Continental 621,010 ------------ AUTOMOBILES 12.91% 219,960 DaimlerChrysler 8,829,983 2,600 Porsche 1,113,293 69,160 Volkswagen 3,310,539 31,200 Volkswagen - Preferred 971,543 ------------ 14,225,358 ------------ BANKS 9.85% 100,152 Bayerische Hypo-und Vereinsbank 3,062,341 132,600 Deutsche Bank 7,787,856 ------------ 10,850,197 ------------ BIOTECHNOLOGY 0.52% 36,998 QIAGEN* 577,644 ------------ BUILDING PRODUCTS 0.22% 10,400 Buderus 240,097 ------------ CHEMICALS 9.81% 142,402 BASF 5,471,410 167,414 Bayer 5,336,221 ------------ 10,807,631 ------------ CONSTRUCTION MATERIALS 0.31% 7,514 Heidelberger Zement 341,220 ------------ DIVERSIFIED FINANCIALS 1.12% 7,800 Deutsche Boerse 315,076 13,390 Marshcollek, Lautenschlaeger-und Partner 690,058 25,012 WCM Beteiligungs-und Grundbesitz* 226,084 ------------ 1,231,218 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 6.63% 514,800 Deutsche Telekom 7,311,665 ------------ ELECTRIC UTILITIES 4.63% 103,974 E.On 5,105,617 ------------ ELECTRICAL EQUIPMENT 0.07% 4,212 SGL Carbon* 79,424 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 0.41% 11,700 Epcos 452,779 ------------ FOOD PRODUCTS 0.15% 18,200 Kamps 169,233 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- HEALTH CARE PROVIDERS & SERVICES 1.17% 10,400 Fresenius Medical Care $ 537,587 8,684 Fresenius Medical Care - Preferred 339,518 10,400 Gehe 413,805 ------------ 1,290,910 ------------ HOTELS, RESTAURANTS & LEISURE 0.94% 36,400 Preussag 1,039,010 ------------ INDUSTRIAL CONGLOMERATES 11.88% 223,600 Siemens 13,093,781 ------------ INSURANCE 12.47% 40,248 Allianz 9,050,491 19,240 Muenchener Rueckversicherungs- Gesellschaft 4,693,089 ------------ 13,743,580 ------------ MACHINERY 1.97% 28,002 Linde 1,271,850 19,500 MAN 461,145 22,360 MAN - Preferred 440,972 ------------ 2,173,967 ------------ MEDIA 0.19% 26,858 ProSiebenSat.1 Media 204,902 ------------ METALS & MINING 1.13% 82,706 ThyssenKrupp 1,241,198 ------------ MULTI-UTILITIES 4.29% 108,758 RWE 3,906,859 28,990 RWE - Preferred 817,969 ------------ 4,724,828 ------------ MULTILINE RETAIL 1.83% 19,448 KarstadtQuelle 675,070 40,274 Metro 1,340,841 ------------ 2,015,911 ------------ PERSONAL PRODUCTS 1.32% 10,010 Beiersdorf 1,096,156 7,020 Wella 360,867 ------------ 1,457,023 ------------ PHARMACEUTICALS 4.31% 24,674 Altana 1,244,478 8,398 Merck KGaA 246,979 54,600 Schering 3,262,020 ------------ 4,753,477 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 1.74% 13,000 Aixtron 224,894 73,840 Infineon Technologies 1,691,914 ------------ 1,916,808 ------------ See accompanying notes to financial statements. 64 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------------------- iSHARES MSCI GERMANY INDEX FUND (CONCLUDED) --------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) SOFTWARE 6.62% 52,624 SAP $ 7,151,875 5,200 Software 138,940 ------------ 7,290,815 ------------ TEXTILES & APPAREL 0.95% 11,700 Adidas-Salomon 758,410 13,208 Hugo Boss 285,044 ------------ 1,043,454 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $158,307,484) 110,204,381 ------------ TOTAL INVESTMENTS (COST $158,307,484)+ 100.00% $110,204,381 ======= ============ -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $160,975,079. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,852,782 Excess of tax cost over value (52,623,480) ------------ $(50,770,698) ============ See accompanying notes to financial statements. 65 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------ iSHARES MSCI HONG KONG INDEX FUND ------------------------------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.99% AIRLINES 1.85% 800,000 Cathay Pacific Airways Limited $ 1,200,108 ----------- BANKS 11.38% 1,060,000 Bank of East Asia Limited 2,018,258 490,000 Hang Seng Bank Limited 5,371,636 ----------- 7,389,894 ----------- CONSTRUCTION MATERIALS 0.73% 300,000 Cheung Kong Infrastructure Holdings Limited 473,119 ----------- DISTRIBUTORS 2.49% 1,200,000 Li & Fung Limited 1,615,530 ----------- DIVERSIFIED FINANCIALS 9.80% 800,000 Hong Kong Exchanges & Clearing Limited 1,123,178 600,000 Swire Pacific Limited - Class A 3,261,831 900,000 Wharf Holdings Limited 1,979,024 ----------- 6,364,033 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.31% 6,200,000 Pacific Century CyberWorks Limited* 1,502,442 ----------- ELECTRIC UTILITIES 10.46% 850,000 CLP Holdings Limited 3,422,102 900,000 Hongkong Electric Holdings Limited 3,369,533 ----------- 6,791,635 ----------- ELECTRICAL EQUIPMENT 2.22% 1,250,000 Johnson Electric Holdings Limited 1,442,437 ----------- GAS UTILITIES 5.38% 2,500,000 Hong Kong & China Gas Company Limited 3,493,903 ----------- HOTELS RESTAURANTS & LEISURE 1.06% 800,000 Shangri-La Asia Limited 687,241 ----------- INDUSTRIAL CONGLOMERATES 17.56% 1,400,000 Hutchison Whampoa Limited 11,398,459 ----------- MEDIA 2.25% 1,000,000 SCMP Group Limited 564,153 200,000 Television Broadcasts Limited 897,517 ----------- 1,461,670 ----------- REAL ESTATE 28.02% 900,000 Cheung Kong Holdings Limited 7,500,673 1,200,000 Hang Lung Properties Limited 1,192,415 500,000 Henderson Land Development Company Limited 1,948,893 600,000 Hysan Development Company Limited 611,593 1,000,000 New World Development Company Limited 814,176 1,200,000 Sino Land Company Limited 407,729 800,000 Sun Hung Kai Properties Limited 5,718,462 ----------- 18,193,941 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- ROAD & RAIL 2.20% 1,050,000 MTR Corporation Limited $ 1,427,051 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.45% 150,000 ASM Pacific Technology Limited 290,411 ----------- SPECIALTY RETAIL 1.83% 400,000 Esprit Holdings Limited 682,112 1,000,000 Giordano International Limited 509,661 ----------- 1,191,773 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $68,431,096) 64,923,647 ----------- COMMON STOCK - NON-BASKET 0.01% BANKS 0.00% 100 Bank of East Asia Limited 191 ----------- DIVERSIFIED FINANCIALS 0.00% 276,000 Peregrine Investment Holdings Limited*/** -- ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.00% 883 Pacific Century CyberWorks Limited* 214 ----------- ELECTRIC UTILITIES 0.00% 200 CLP Holdings Limited 805 ----------- GAS UTILITIES 0.00% 330 Hong Kong & China Gas Company Limited 461 ----------- INDUSTRIAL CONGLOMERATES 0.01% 800 Hutchison Whampoa Limited 6,513 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $405,492) 8,184 ----------- TOTAL INVESTMENTS (COST $68,836,588)+ 100.00% $64,931,831 ======= =========== -------------- * Non-income producing security. ** Fair valued security. + Aggregate cost for Federal income tax purposes is $69,913,835. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 5,358,823 Excess of tax cost over value (10,340,827) ------------ $ (4,982,004) ============ See accompanying notes to financial statements. 66 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------- iSHARES MSCI ITALY INDEX FUND --------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIRLINES 0.39% 160,160 Alitalia SpA* $ 118,447 ----------- AUTOMOBILES 2.11% 34,333 Fiat SpA 435,065 13,650 Fiat SpA-Pfd 124,327 9,750 Fiat SpA-RNC 83,070 ----------- 642,462 ----------- BANKS 20.75% 230,750 Banca Nazionale del Lavoro 473,037 112,125 Banca di Roma SpA 262,831 126,607 Banca Monte dei Paschi di Siena SpA 318,133 61,399 Banca Popolare di Milano SpA 229,961 475,449 IntesaBci SpA 1,106,269 136,500 IntesaBci SpA-RNC 226,693 77,129 Mediobanca SpA 829,932 131,599 Sanpaolo IMI SpA 1,336,366 395,161 UniCredito Italiano SpA 1,538,123 ----------- 6,321,345 ----------- CHEMICALS 0.33% 57,928 Snia SpA 100,213 ----------- CONSTRUCTION MATERIALS 0.38% 15,275 Italcementi SpA 116,138 ----------- DIVERSIFIED FINANCIALS 2.51% 39,494 Banca Fideuram SpA 265,434 198,341 Bipop-Carire SpA 261,801 31,200 Mediolanum SpA 237,218 ----------- 764,453 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 13.06% 1,755 e.Biscom SpA* 58,065 303,862 Telecom Italia SpA 2,499,548 273,481 Telecom Italia SpA-RNC 1,419,329 ----------- 3,976,942 ----------- ELECTRIC UTILITIES 4.70% 256,061 Enel SpA 1,433,020 ----------- ELECTRICAL EQUIPMENT 0.61% 123,500 Pirelli SpA 184,807 ----------- FOOD & DRUG RETAILING 0.22% 20,202 La Rinascente SpA 68,324 ----------- FOOD PRODUCTS 0.86% 84,422 Parmalat Finanziaria SpA 261,423 ----------- GAS UTILITIES 0.98% 31,603 Italgas SpA 297,961 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 1.20% 20,800 Luxottica Group SpA 366,487 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- HOTELS, RESTAURANTS & LEISURE 0.62% 18,837 Autogrill SpA $ 190,309 ----------- INSURANCE 15.54% 75,439 Alleanza Assicurazioni SpA 730,181 134,602 Assicurazioni Generali SpA 3,333,323 57,330 Riunione Adriatica di Sicurta SpA 669,453 ----------- 4,732,957 ----------- INTERNET SOFTWARE & SERVICES 0.60% 22,659 Tiscali SpA* 182,668 ----------- MEDIA 5.15% 24,323 Arnoldo Mondadori Editore SpA 154,004 27,547 Gruppo Editoriale L'Espresso SpA 85,303 91,013 Mediaset SpA 734,496 784,602 Seat Pagine Gialle SpA* 594,509 ----------- 1,568,312 ----------- MULTI-UTILITIES 0.50% 25,857 ACEA SpA 152,087 ----------- OIL & GAS 17.04% 378,911 ENI SpA 5,191,549 ----------- TEXTILES & APPAREL 0.96% 11,817 Benetton Group SpA 142,998 19,669 Bulgari SpA 151,078 ----------- 294,076 ----------- TRANSPORTATION INFRASTRUCTURE 3.37% 140,868 Concessioni e Costruzioni Autostrade SpA 1,025,957 ----------- WIRELESS TELECOMMUNICATION SERVICES 8.12% 525,642 Telecom Italia Mobile SpA 2,473,395 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $36,835,973) 30,463,332 ----------- TOTAL INVESTMENTS (COST $36,835,973)+ 100.00% $30,463,332 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $37,040,321. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,527,794 Excess of tax cost over value (8,104,783) ----------- $(6,576,989) =========== See accompanying notes to financial statements. 67 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------- iSHARES MSCI JAPAN INDEX FUND -------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIR FREIGHT & COURIERS 0.35% 94,000 Yamato Transport Company Limited $ 1,485,597 ------------ AIRLINES 0.23% 188,000 All Nippon Airways Company Limited* 483,258 188,000 Japan Airlines Company Limited 505,735 ------------ 988,993 ------------ AUTO COMPONENTS 2.10% 282,000 Bridgestone Corporation 3,550,682 188,000 Denso Corporation 2,865,832 94,000 Stanley Electric Company Limited 709,434 28,200 Toyoda Gosei Company Limited 347,693 94,000 Toyota Industries Corporation 1,373,211 ------------ 8,846,852 ------------ AUTOMOBILES 8.09% 197,400 Honda Motor Company Limited 7,891,575 846,000 Nissan Motor Company Limited 5,518,834 808,400 Toyota Motor Corporation 20,659,279 ------------ 34,069,688 ------------ BANKS 5.77% 752,000 Asahi Bank Limited 393,350 188,000 Ashikaga Bank Limited* 217,747 188,000 Bank of Fukuoka Limited 587,215 376,000 Bank of Yokohama Limited 1,236,241 188,000 Chiba Bank Limited 629,359 470,000 Daiwa Bank Holdings Incorporated 400,374 94,000 Gunma Bank Limited 420,041 188,000 Hokuriku Bank Limited* 266,916 282,000 Joyo Bank Limited 760,710 1,222 Mitsubishi Tokyo Financial Group Incorporated 7,378,113 1,880 Mizuho Holdings Incorporated 3,554,194 94,000 Seventy-Seven Bank Limited 351,907 282,000 Shizuoka Bank Limited 1,656,282 1,128,000 Sumitomo Mitsui Banking Corporation 4,180,743 94,000 Suruga Bank Limited 476,936 846 UFJ Holdings Incorporated 1,795,360 ------------ 24,305,488 ------------ BEVERAGES 0.96% 94,000 Asahi Breweries Limited 726,994 18,800 Coca-Cola West Japan Company Limited 304,143 9,400 Ito En Limited 315,382 282,000 Kirin Brewery Company Limited 1,814,325 94,000 Sapporo Breweries Limited 232,498 94,000 Takara Shuzo Company Limited 639,895 ------------ 4,033,237 ------------ BUILDING PRODUCTS 0.83% 282,000 Asahi Glass Company Limited 1,567,779 94,000 Nippon Sheet Glass Company Limited 271,130 94,000 Tostem Inax Holding Corporation 1,260,826 94,000 Toto Limited 396,159 ------------ 3,495,894 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- CHEMICALS 4.05% 470,000 Asahi Kasei Corporation $ 1,397,796 94,000 Daicel Chemical Industries Limited 260,594 188,000 Dainippon Ink & Chemicals Incorporated 283,774 188,000 Denki Kagaku Kogyo Kabushiki Kaisha 398,969 94,000 Ishihara Sangyo Kaisha Limited* 133,458 94,000 JSR Corporation 660,968 94,000 Kaneka Corporation 564,035 94,000 Kuraray Company Limited 566,142 564,000 Mitsubishi Chemical Corporation 1,209,550 94,000 Mitsubishi Gas Chemical Company Incorporated 163,661 188,000 Mitsubishi Rayon Company Limited 495,901 188,000 Mitsui Chemicals Incorporated 701,005 94,000 Nippon Kayaku Company Limited 328,026 94,000 Nippon Sanso Corporation 254,272 94,000 Nippon Shokubai Company Limited 366,658 94,000 Nissan Chemical Industries Limited 457,971 103,400 Shin-Etsu Chemical Company Limited 3,925,066 282,000 Showa Denko K.K.* 364,551 94,000 Sumitomo Bakelite Company Limited 583,000 376,000 Sumitomo Chemical Company Limited 1,402,010 282,000 Teijin Limited 948,253 470,000 Toray Industries Incorporated 1,134,392 188,000 Tosoh Corporation 453,757 ------------ 17,053,809 ------------ COMMERCIAL SERVICES & SUPPLIES 1.64% 940 Bellsystem24 Incorporated 304,495 18,800 Benesse Corporation 390,540 188,000 Dai Nippon Printing Company Limited 1,808,003 94,000 Secom Company Limited 4,179,339 9,400 Trans Cosmos Incorporated 218,449 ------------ 6,900,826 ------------ COMMUNICATIONS EQUIPMENT 0.23% 28,200 Matsushita Communication Industrial Company Limited 960,897 ------------ COMPUTERS & PERIPHERALS 2.60% 564,000 Fujitsu Limited 3,696,080 470,000 NEC Corporation 3,417,224 1,034,000 Toshiba Corporation 3,824,622 ------------ 10,937,926 ------------ CONSTRUCTION & ENGINEERING 1.00% 28,200 Daito Trust Construction Company Limited 398,477 94,000 JGC Corporation 634,276 282,000 Kajima Corporation 701,707 94,000 Nishimatsu Construction Company Limited 249,355 188,000 Obayashi Corporation 483,258 94,000 Okumura Corporation 268,321 188,000 Shimizu Corporation 615,311 282,000 Taisei Corporation 625,847 94,000 Toda Corporation 223,366 ------------ 4,199,918 ------------ See accompanying notes to financial statements. 68 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONTINUED) ------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) CONSTRUCTION MATERIALS 0.12% 94,000 Sumitomo Osaka Cement Company Limited $ 120,112 282,000 Taiheiyo Cement Corporation 404,588 ------------ 524,700 ------------ CONTAINERS & PACKAGING 0.61% 282,000 OJI Paper Company Limited 1,354,948 94,000 Toyo Seikan Kaisha Limited 1,209,550 ------------ 2,564,498 ------------ DIVERSIFIED FINANCIALS 5.12% 18,800 Acom Company Limited 1,031,138 9,400 Aeon Credit Service Company Limited 467,103 14,100 Aiful Corporation 703,815 47,000 Credit Saison Company Limited 907,865 470,000 Daiwa Securities Group Incorporated 2,848,272 188,000 Mitsui Trust Holdings Incorporated 255,677 470,000 Nikko Cordial Corporation 1,808,705 658,000 Nomura Holding Incorporated 7,522,810 28,200 Orix Corporation 2,151,481 28,200 Promise Company Limited 1,190,585 282,000 Sumitomo Trust & Banking Company Limited 948,253 28,200 Takefuji Corporation 1,717,392 ------------ 21,553,096 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 0.93% 1,222 Nippon Telegraph & Telephone Corporation 3,899,077 ------------ ELECTRIC UTILITIES 4.58% 216,200 Chubu Electric Power Company Incorporated 3,554,194 253,800 Kansai Electric Power Company Incorporated 3,624,224 141,000 Kyushu Electric Power Company Incorporated 2,002,922 159,800 Tohoku Electric Power Company Incorporated 2,080,117 423,000 Tokyo Electric Power Company Incorporated 7,996,936 ------------ 19,258,393 ------------ ELECTRICAL EQUIPMENT 2.39% 188,000 Fuji Electric Company Limited 379,301 94,000 Fujikura Limited 312,572 188,000 Furukawa Electric Company Limited 856,940 94,000 Hitachi Cable Limited 358,931 94,000 Kinden Corporation 333,645 9,400 Mabuchi Motor Company Limited 864,667 188,000 Matsushita Electric Works Limited 1,397,796 564,000 Mitsubishi Electric Corporation 2,027,155 47,000 Nitto Denko Corporation 1,264,338 188,000 Sumitomo Electric Industries Limited 1,194,097 94,000 Ushio Incorporated 1,057,829 ------------ 10,047,271 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 6.12% 94,000 Alps Electric Company Limited 850,618 94,000 Citizen Watch Company Limited 468,507 NO. OF SHARES SECURITY VALUE ------ ----------- ----- ELECTRONIC EQUIPMENT & INSTRUMENTS (CONTINUED) 94,000 Dainippon Screen Manufacturing Company Limited $ 334,347 9,400 Hirose Electric Company Limited 672,909 940,000 Hitachi Limited 5,984,532 37,600 Hoya Corporation 2,472,483 9,400 Keyence Corporation 1,724,416 56,400 Kyocera Corporation 3,379,996 84,600 Murata Manufacturing Company Limited 5,259,645 9,400 Nidec Corporation 607,585 188,000 Oki Electric Industry Company Limited 397,564 94,000 Omron Corporation 1,173,024 37,600 TDK Corporation 1,708,261 94,000 Yokogawa Electric Corporation 745,257 ------------ 25,779,144 ------------ FOOD & DRUG RETAILING 0.87% 18,800 FamilyMart Company Limited 302,036 18,800 Lawson Incorporated 459,376 94,000 Seven-Eleven Japan Company Limited 2,886,905 ------------ 3,648,317 ------------ FOOD PRODUCTS 1.43% 188,000 Ajinomoto Company Incorporated 1,573,398 9,400 Ariake Japan Company Limited 278,154 18,800 Katokichi Company Limited 252,165 94,000 Kikkoman Corporation 460,781 94,000 Meiji Dairies Corporation 217,045 94,000 Meiji Seika Kaisha Limited 315,382 94,000 Nichirei Corporation 228,283 94,000 Nippon Meat Packers Incorporated 814,796 94,000 Nisshin Seifun Group Incorporated 514,866 28,200 Nissin Food Products Company Limited 486,770 94,000 Snow Brand Milk Products Company Limited 88,504 94,000 Yakult Honsha Company Limited 771,246 ------------ 6,001,390 ------------ GAS UTILITIES 0.98% 752,000 Osaka Gas Company Limited 1,713,880 940,000 Tokyo Gas Company Limited 2,423,314 ------------ 4,137,194 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 0.49% 94,000 Olympus Optical Company Limited 1,246,777 65,800 Terumo Corporation 799,975 ------------ 2,046,752 ------------ HEALTH CARE PROVIDERS & SERVICES 0.07% 18,800 Suzuken Company Limited 288,690 ------------ HOTELS, RESTAURANTS & LEISURE 0.40% 18,800 Namco Limited 315,382 18,800 Oriental Land Company Limited 1,074,687 9,400 Saizeriya Company Limited 309,060 ------------ 1,699,129 ------------ See accompanying notes to financial statements. 69 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONTINUED) ------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) HOUSEHOLD DURABLES 8.95% 94,000 Casio Computer Company Limited $ 347,693 188,000 Daiwa House Industry Company Limited 928,586 658,000 Matsushita Electric Industrial Company Limited 7,970,245 37,600 Nintendo Company Limited 5,467,558 65,800 Pioneer Corporation 1,258,719 18,800 Sanrio Company Limited 134,160 564,000 Sanyo Electric Company Limited 2,406,456 28,200 Sega Corporation* 440,411 188,000 Sekisui Chemical Company Limited 455,162 188,000 Sekisui House Limited 1,212,359 282,000 Sharp Corporation 3,371,567 300,800 Sony Corporation 13,666,086 ------------ 37,659,002 ------------ HOUSEHOLD PRODUCTS 0.95% 188,000 Kao Corporation 3,533,121 18,800 Uni-Charm Corporation 462,186 ------------ 3,995,307 ------------ INDUSTRIAL CONGLOMERATES 0.07% 282,000 Ube Industries Limited 276,047 ------------ INSURANCE 1.34% 376,000 Mitsui Sumitomo Insurance Company Limited 1,626,781 376,000 Tokio Marine & Fire Insurance Company Limited 2,700,064 282,000 Yasuda Fire & Marine Insurance Company Limited 1,312,804 ------------ 5,639,649 ------------ INTERNET SOFTWARE & SERVICES 0.21% 65,800 Softbank Corporation 886,511 ------------ IT CONSULTING & SERVICES 0.67% 18,800 CSK Corporation 405,993 9,400 Fujitsu Support & Service Incorporated 150,667 9,400 Itochu Techno-Science Corporation 315,382 9,400 Meitec Corporation 222,664 470 NTT Data Corporation 1,559,350 9,400 TIS Incorporated 169,632 ------------ 2,823,688 ------------ LEISURE EQUIPMENT & PRODUCTS 1.89% 188,000 Fuji Photo Film Company Limited 5,928,339 28,200 Konami Corporation 521,539 94,000 Konica Corporation 559,821 28,200 Shimano Incorporated 332,521 94,000 Yamaha Corporation 604,072 ------------ 7,946,292 ------------ MACHINERY 3.80% 94,000 Amada Company Limited 441,113 94,000 Daikin Industries Limited 1,580,422 94,000 Ebara Corporation 504,330 37,600 Fanuc Limited 1,921,793 9,400 Fuji Machine Manufacturing Company Limited 143,292 94,000 Hino Motors Limited* 274,642 282,000 Hitachi Zosen Corporation* 124,327 NO. OF SHARES SECURITY VALUE ------ ----------- ----- MACHINERY (CONTINUED) 376,000 Ishikawajima-Harima Heavy Industries Company Limited $ 516,974 470,000 Kawasaki Heavy Industries Limited 403,886 282,000 Komatsu Limited 922,967 376,000 Kubota Corporation 1,045,186 94,000 Minebea Company Limited 538,748 1,034,000 Mitsubishi Heavy Industries Limited 2,827,902 282,000 Mitsui Engineering & Shipbuilding Company Limited* 252,868 94,000 NGK Insulators Limited 608,989 188,000 NSK Limited 740,340 188,000 NTN Corporation 407,398 18,800 SMC Corporation 2,090,372 188,000 Sumitomo Heavy Industries Limited 109,576 28,200 THK Company Limited 531,022 ------------ 15,986,147 ------------ MARINE 0.54% 94,000 Kamigumi Company Limited 351,908 188,000 Kawasaki Kisen Kaisha Limited 216,342 282,000 Mitsui O.S.K. Lines Limited 543,665 376,000 Nippon Yusen Kabushiki Kaisha 1,182,858 ------------ 2,294,773 ------------ MEDIA 0.79% 9,400 Asatsu-Dk Incorporated 185,436 94 Fuji Television Network Incorporated 463,591 9,400 Toho Company Limited 105,010 84,600 Toho Company Limited - Bonus Shares* 945,092 188,000 Toppan Printing Company Limited 1,614,138 ------------ 3,313,267 ------------ METALS & MINING 1.74% 94,000 Dowa Mining Company Limited 387,028 846,000 Kawasaki Steel Corporation 935,610 282,000 Mitsubishi Materials Corporation 438,304 188,000 Mitsui Mining & Smelting Company Limited 634,978 1,974,000 Nippon Steel Corporation 2,979,623 1,034,000 NKK Corporation* 842,189 1,034,000 Sumitomo Metal Industries Limited* 394,052 188,000 Sumitomo Metal Mining Company Limited 720,673 ------------ 7,332,457 ------------ MULTILINE RETAIL 2.28% 94,000 Aeon Company Limited 1,896,507 188,000 Daiei Incorporated* 143,292 94,000 Daimaru Incorporated 280,964 94,000 Isetan Company Limited 767,032 94,000 Ito-Yokado Company Limited 3,771,941 94,000 Marui Company Limited 983,374 94,000 Mitsukoshi Limited 236,010 94,000 Seiyu Limited* 203,699 94,000 Takashimaya Company Limited 479,044 94,000 Uny Company Limited 828,844 ------------ 9,590,707 ------------ OFFICE ELECTRONICS 3.14% 282,000 Canon Incorporated 9,882,907 188,000 Ricoh Company Limited 3,336,447 ------------ 13,219,354 ------------ See accompanying notes to financial statements. 70 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONTINUED) ------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) OIL & GAS 0.82% 282,000 Japan Energy Corporation $ 343,478 470,000 Nippon Mitsubishi Oil Corporation 2,001,868 94,000 Teikoku Oil Company Limited 380,706 94,000 TonenGeneral Sekiyu K.K. 706,624 ------------ 3,432,676 ------------ PAPER & FOREST PRODUCTS 0.37% 94,000 Mitsubishi Paper Mills Limited 139,077 282 Nippon Unipac Holding 1,413,951 ------------ 1,553,028 ------------ PERSONAL PRODUCTS 0.35% 9,400 Aderans Company Limited 284,476 188,000 Kanebo Limited* 302,036 94,000 Shiseido Company Limited 882,227 ------------ 1,468,739 ------------ PHARMACEUTICALS 6.35% 94,000 Banyu Pharmaceutical Company Limited 1,236,241 94,000 Chugai Pharmaceutical Company Limited 973,540 94,000 Daiichi Pharmaceutical Company Limited 1,770,073 94,000 Eisai Company Limited 2,261,760 94,000 Fujisawa Pharmaceutical Company Limited 1,973,772 94,000 Kyowa Hakko Kogyo Company Limited 459,376 94,000 Sankyo Company Limited 1,373,211 94,000 Shionogi & Company Limited 1,368,997 94,000 Taisho Pharmaceutical Company Limited 1,403,415 282,000 Takeda Chemical Industries Limited 11,442,257 94,000 Yamanouchi Pharmaceutical Company Limited 2,451,410 ------------ 26,714,052 ------------ REAL ESTATE 1.07% 282,000 Mitsubishi Estate Company Limited 1,972,367 282,000 Mitsui Fudosan Company Limited 2,094,586 94,000 Sumitomo Realty & Development Company Limited 445,328 ------------ 4,512,281 ------------ ROAD & RAIL 2.99% 282 Central Japan Railway Company 1,531,956 1,034 East Japan Railway Company 3,940,519 188,000 Keihin Electric Express Railway Company Limited 747,364 188,000 Keio Electric Railway Company Limited 799,342 564,000 Kinki Nippon Railway Company Limited 1,715,285 282,000 Nippon Express Company Limited 1,000,934 282,000 Tobu Railway Company Limited 697,493 282,000 Tokyu Corporation 809,176 376 West Japan Railway Company 1,326,150 ------------ 12,568,219 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- SEMICONDUCTOR EQUIPMENT & PRODUCTS 2.80% 28,200 Advantest Corporation $ 1,858,577 94,000 Nikon Corporation 849,916 37,600 Rohm Company Limited 5,436,652 56,400 Tokyo Electron Limited 3,645,507 ------------ 11,790,652 ------------ SOFTWARE 0.64% 9,400 Capcom Company Limited 212,128 9,400 Fuji Soft ABC Incorporated 280,262 9,400 Hitachi Software Engineering Company Limited 304,143 9,400 Nippon System Development Company Limited 284,476 9,400 Oracle Corporation Japan 575,976 47,000 Trend Micro Incorporated* 1,046,591 ------------ 2,703,576 ------------ SPECIALTY RETAIL 0.53% 18,800 Aoyama Trading Company Limited 154,530 9,400 Autobacs Seven Company Limited 201,240 9,400 Fast Retailing Company Limited 165,769 9,400 Fast Retailing Company Limited - Bonus Shares* 169,281 9,400 Paris Miki Incorporated 196,675 18,800 Shimachu Company Limited 245,843 9,400 Shimamura Company Limited 531,022 9,400 Yamada Denki Company Limited 568,952 ------------ 2,233,312 ------------ TEXTILES & APPAREL 0.26% 94,000 Gunze Limited 303,441 94,000 Nisshinbo Industries Incorporated 340,669 188,000 Toyobo Company Limited 236,010 9,400 World Company Limited 210,723 ------------ 1,090,843 ------------ TOBACCO 0.38% 282 Japan Tobacco Incorporated 1,601,494 ------------ TRADING COMPANIES & DISTRIBUTORS 1.86% 470,000 Itochu Corporation 1,281,898 470,000 Marubeni Corporation* 351,205 376,000 Mitsubishi Corporation 2,610,155 470,000 Mitsui & Company Limited 2,619,989 188,000 Sumitomo Corporation 970,730 ------------ 7,833,977 ------------ WIRELESS TELECOMMUNICATION SERVICES 3.25% 1,316 NTT DoCoMo Incorporated 13,668,896 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $625,729,267) 420,861,722 ------------ See accompanying notes to financial statements. 71 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------- iSHARES MSCI JAPAN INDEX FUND (CONCLUDED) ------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON STOCK - NON-BASKET 0.00% DIVERSIFIED FINANCIALS 0.00% 8,000 Mitsui Trust Holdings Incorporated $ 10,880 ------------ OIL & GAS 0.00% 500 Nippon Mitsubishi Oil Corporation 2,130 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.00% 52 Tokyo Electron Limited 3,361 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $32,570) 16,371 ------------ TOTAL INVESTMENTS (COST $625,761,837)+ 100.00% $420,878,093 ======= ============ -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $628,120,443. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,606,120 Excess of tax cost over value (211,848,470) ------------ $(207,242,350) ============= See accompanying notes to financial statements. 72 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------- iSHARES MSCI MALAYSIA INDEX FUND ----------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.46% AIRLINES 0.70% 549,000 Malaysian Airline System* $ 520,105 ----------- AUTO COMPONENTS 0.55% 183,000 UMW Holdings 406,934 ----------- AUTOMOBILES 3.02% 549,000 Oriental Holdings 517,216 549,000 Perusahaan Otomobil Nasional 1,386,947 915,000 Tan Chong Motor Holdings 341,921 ----------- 2,246,084 ----------- BANKS 20.77% 1,098,000 Commerce Asset-Holding 2,470,500 915,000 Hong Leong Bank 1,088,368 3,660,000 Malayan Banking 8,331,316 2,928,000 Public Bank 2,573,558 1,647,000 RHB Capital 975,197 ----------- 15,438,939 ----------- BEVERAGES 0.46% 366,000 Guinness Anchor 340,958 ----------- BUILDING PRODUCTS 0.78% 183,000 Hume Industries (Malaysia) 231,158 73,200 O.Y.L. Industries 346,737 ----------- 577,895 ----------- CHEMICALS 0.65% 183,000 Malaysian Oxygen 481,579 ----------- CONSTRUCTION & ENGINEERING 3.47% 915,000 Gamuda 1,252,105 549,000 IJM Corporation 624,126 549,000 Road Builder Holdings 699,253 ----------- 2,575,484 ----------- CONSTRUCTION MATERIALS 0.98% 2,928,000 Malayan Cement 728,147 ----------- DIVERSIFIED FINANCIALS 4.34% 1,098,000 AMMB Holdings 1,340,716 366,000 Hong Leong Credit 640,500 1,464,000 Malayan United Industries* 144,474 2,562,000 Mulpha International* 259,571 1,281,000 Multi-Purpose Holdings* 269,684 549,000 OSK Holdings 260,053 1,647,000 TA Enterprise 312,063 ----------- 3,227,061 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 8.50% 915,000 Technology Resources Industries* 496,026 2,379,000 Telekom Malaysia* 5,822,290 ----------- 6,318,316 ----------- ELECTRIC UTILITIES 10.92% 1,098,000 Malakoff 982,421 2,013,000 Tenaga Nasional 5,562,237 1,281,000 YTL Corporation 1,570,911 ----------- 8,115,569 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- FOOD PRODUCTS 6.96% 732,000 Golden Hope Plantations 685,768 549,000 Hap Seng Consolidated 317,842 366,000 Highlands & Lowlands 260,053 1,464,000 IOI Corporation 1,856,968 549,000 Kuala Lumpur Kepong 794,605 183,000 Nestle (Malaysia) 929,447 366,000 PPB Group 327,474 ----------- 5,172,157 ----------- GAS UTILITIES 2.64% 1,098,000 Petronas Gas 1,964,842 ----------- HOTELS RESTAURANTS & LEISURE 12.81% 732,000 Berjaya Sports Toto 1,175,053 1,098,000 Genting 3,582,947 1,830,000 Magnum Corporation 1,131,711 1,098,000 Resorts World 2,311,579 549,000 Tanjong Public Limited Company 1,321,934 ----------- 9,523,224 ----------- INDUSTRIAL CONGLOMERATES 6.94% 183,000 Hong Leong Industries 291,355 1,830,000 Malaysian Resources Corporation* 573,079 3,111,000 Sime Darby 4,077,047 549,000 TIME Engineering* 219,600 ----------- 5,161,081 ----------- MARINE 3.04% 1,281,000 Malaysia International Shipping Corporation 2,258,605 ----------- MEDIA 1.46% 366,000 New Straits Times Press 529,737 366,000 Star Publications (Malaysia) 558,632 ----------- 1,088,369 ----------- METALS & MINING 0.57% 732,000 Malaysia Mining Corporation 421,863 ----------- OIL & GAS 0.57% 366,000 Petronas Dagangan 419,937 ----------- PAPER & FOREST PRODUCTS 0.39% 183,000 Jaya Tiasa Holdings 95,834 183,000 WTK Holdings 190,705 ----------- 286,539 ----------- REAL ESTATE 1.46% 2,013,000 FACB Resorts* 153,624 732,000 IGB Corporation 217,674 183,000 IOI Properties 240,790 549,000 SP Setia 470,984 ----------- 1,083,072 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 1.64% 183,000 Malaysian Pacific Industries 780,158 183,000 Unisem 438,237 ----------- 1,218,395 ----------- SPECIALTY RETAIL 1.38% 549,000 Courts Mammoth 508,547 183,000 Edaran Otomobil Nasional 520,105 ----------- 1,028,652 ----------- See accompanying notes to financial statements. 73 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ---------------------------------------------- iSHARES MSCI MALAYSIA INDEX FUND (CONCLUDED) ---------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) TOBACCO 3.46% 256,200 British American Tobacco (Malaysia) $ 2,359,737 183,000 JT International 209,005 ----------- 2,568,742 ----------- TRANSPORTATION INFRASTRUCTURE 0.67% 732,000 Malaysia Airports Holdings 500,842 ----------- WATER UTILITIES 0.33% 366,000 Puncak Niaga Holdings* 247,532 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $50,544,594) 73,920,923 ----------- COMMON AND PREFERRED STOCK - NON-BASKET 0.54% AUTOMOBILES 0.00% 400 Oriental Holdings 377 ----------- DIVERSIFIED FINANCIALS 0.00% 400 AMMB Holdings 489 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.34% 915,000 Technology Resources Industries - Rights* 255,237 ----------- ELECTRIC UTILITIES 0.04% 25,620 YTL Corporation 31,418 ----------- FOOD PRODUCTS 0.15% 127,333 PPB Group - Rights 113,930 ----------- METALS & MINING 0.00% 35,944 Silverstone*/** -- ----------- TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $285,923) 401,451 ----------- TOTAL INVESTMENTS (COST $50,830,517)+ 100.00% $74,322,374 ======= =========== -------------- * Non-income producing security. ** Fair valued security. + Aggregate cost for Federal income tax purposes is $55,224,339. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $23,294,467 Excess of tax cost over value (4,196,432) ----------- $19,098,035 =========== See accompanying notes to financial statements. 74 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------- iSHARES MSCI MEXICO INDEX FUND --------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% BANKS 6.22% 5,040,000 Grupo Financiero BBVA Bancomer SA de CV - Series O* $ 5,247,758 1,386,000 Grupo Financiero Inbursa SA de CV - Series O* 1,669,240 ------------ 6,916,998 ------------ BEVERAGES 10.65% 95,200 Coca-Cola Femsa SA de CV Sponsored ADR 2,356,200 1,358,000 Fomento Economico Mexicano SA de CV - Series UBD 5,354,090 490,000 Grupo Continental SA 770,931 1,400,000 Grupo Modelo SA de CV - Series C 3,356,873 ------------ 11,838,094 ------------ CONSTRUCTION MATERIALS 8.37% 182,000 Apasco SA de CV 998,325 1,715,000 Cemex SA de CV - Series CPO 8,305,080 ------------ 9,303,405 ------------ CONTAINERS & PACKAGING 0.79% 896,000 Vitro SA de CV - Series A 882,904 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 25.26% 420,000 Carso Global Telecom - Series A1* 984,069 14,245,000 Telefonos de Mexico SA de CV - Series L 27,106,596 ------------ 28,090,665 ------------ ENERGY EQUIPMENT & SERVICES 1.09% 700,000 Tubos de Acero de Mexico SA 1,210,927 ------------ FOOD PRODUCTS 1.85% 945,000 Grupo Bimbo SA de CV - Series A 2,058,959 ------------ INDUSTRIAL CONGLOMERATES 4.58% 882,000 Alfa SA - Series A 1,417,612 1,029,000 Grupo Carso SA de CV - Series A1* 3,672,787 ------------ 5,090,399 ------------ INSURANCE 0.11% 539,000 Savia SA de CV - Series A* 121,568 ------------ MEDIA 7.76% 938,000 Corporacion Interamericana de Entretenimiento SA de CV - Series B* 2,002,627 2,534,000 Grupo Televisa SA - Series CPO* 5,423,956 2,520,000 TV Azteca SA de CV - Series CPO 1,197,438 ------------ 8,624,021 ------------ METALS & MINING 1.80% 1,001,000 Grupo Mexico SA - Series B 1,392,972 420,000 Industrias Penoles SA de CV - Series CP 606,536 ------------ 1,999,508 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- MULTILINE RETAIL 8.25% 1,855,000 Controladora Comercial Mexicana SA de CV - Series UBC $ 1,263,273 756,000 Grupo Sanborns SA - Series B1* 1,426,993 350,000 Organizacion Soriana SA de CV - Series B* 954,180 1,883,000 Walmart de Mexico SA de CV - Series V 5,525,198 ------------ 9,169,644 ------------ PAPER & FOREST PRODUCTS 4.91% 1,757,000 Kimberly-Clark de Mexico SA de CV - Series A 5,463,273 ------------ SPECIALTY RETAIL 1.80% 2,856,000 Grupo Elektra SA de CV - Series CPO 2,001,248 ------------ TRANSPORTATION INFRASTRUCTURE 1.00% 84,000 Grupo Aeroportuario del Sureste SA de CV Sponsored ADR* 1,113,000 ------------ WIRELESS TELECOMMUNICATION SERVICES 15.56% 19,040,000 America Movil SA de CV - Series L 17,302,458 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $112,437,709) 111,187,071 ------------ COMMON STOCK - NON-BASKET 0.00% DIVERSIFIED TELECOMMUNICATION SERVICES 0.00% 800 Telefonos de Mexico SA de CV - Series L 1,522 ------------ INSURANCE 0.00% 2,100 Savia SA de CV - Series A* 474 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $6,918) 1,996 ------------ TOTAL INVESTMENTS (COST $112,444,627)+ 100.00% $111,189,067 ======= ============ -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $112,920,632. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 3,200,134 Excess of tax cost over value (4,931,699) ----------- $(1,731,565) =========== See accompanying notes to financial statements. 75 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------------- iSHARES MSCI NETHERLANDS INDEX FUND -------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIR FREIGHT & COURIERS 3.05% 32,058 TPG $ 659,406 ----------- AIRLINES 0.85% 13,338 Koninklijke Luchtvaart Maatschappij 183,093 ----------- BANKS 4.74% 58,942 ABN AMRO Holding 1,026,297 ----------- BEVERAGES 4.41% 23,400 Heineken 953,123 ----------- CHEMICALS 4.53% 22,204 Akzo Nobel 979,504 ----------- COMMERCIAL SERVICES & SUPPLIES 1.66% 13,546 Buhrmann 156,422 18,122 Vedior 203,776 ----------- 360,198 ----------- DIVERSIFIED FINANCIALS 12.68% 115,310 ING Groep 2,741,867 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.39% 108,212 Koninklijke KPN* 516,677 ----------- FOOD & DRUG RETAILING 4.44% 41,704 Koninklijke Ahold 961,346 ----------- FOOD PRODUCTS 6.64% 14,846 Koninklijke Numico 330,667 19,032 Unilever 1,106,263 ----------- 1,436,930 ----------- HOUSEHOLD DURABLES 4.90% 40,586 Philips Electronics 1,060,200 ----------- INSURANCE 6.19% 61,490 Aegon 1,338,196 ----------- IT CONSULTING & SERVICES 0.32% 26,390 Getronics 68,708 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- MACHINERY 2.82% 11,934 IHC Caland $ 610,068 ----------- MEDIA 9.03% 56,888 Elsevier 728,261 19,656 VNU 581,468 29,874 Wolters Kluwer - CVA 643,424 ----------- 1,953,153 ----------- OFFICE ELECTRONICS 1.13% 23,868 Oce 243,614 ----------- OIL & GAS 24.32% 101,946 Royal Dutch Petroleum Company 5,259,994 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 4.39% 46,306 ASML Holding* 949,271 ----------- SPECIALTY RETAIL 0.85% 16,458 Koninklijke Vendex KBB 185,065 ----------- TRADING COMPANIES & DISTRIBUTORS 0.66% 8,190 Hagemeyer 143,171 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $27,551,412) 21,629,881 ----------- TOTAL INVESTMENTS (COST $27,551,412)+ 100.00% $21,629,881 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $27,666,358. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 180,646 Excess of tax cost over value (6,217,123) ----------- $(6,036,477) =========== See accompanying notes to financial statements. 76 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------- iSHARES MSCI PACIFIC EX-JAPAN INDEX FUND ------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.99% AUSTRALIA 60.98% BANKS 19.17% 132,314 Australia and New Zealand Banking Group Limited $ 1,260,144 116,585 Commonwealth Bank of Australia 1,947,343 145,152 National Australia Bank Limited 2,681,654 163,499 Westpac Banking Corporation Limited 1,394,933 ----------- 7,284,074 ----------- BEVERAGES 2.23% 13,979 BRL Hardy Limited 80,436 41,391 Coca-Cola Amatil Limited 124,820 185,976 Foster's Group Limited 445,444 58,247 Southcorp Limited 197,842 ----------- 848,542 ----------- CHEMICALS 0.30% 27,951 Orica Limited 112,397 ----------- COMMERCIAL SERVICES & SUPPLIES 1.24% 90,041 Brambles Industries Limited 422,960 36,827 Computershare Limited 49,426 ----------- 472,386 ----------- CONSTRUCTION & ENGINEERING 0.19% 13,468 Leighton Holdings Limited 73,345 ----------- CONSTRUCTION MATERIALS 1.37% 53,312 Boral Limited 110,904 89,558 CSR Limited 297,720 37,128 James Hardie Industries NV 111,160 ----------- 519,784 ----------- CONTAINERS & PACKAGING 0.63% 61,159 Amcor Limited 239,050 ----------- DIVERSIFIED FINANCIALS 1.57% 9,156 Australian Stock Exchange Limited 61,206 17,696 Macquarie Bank Limited 296,420 34,867 Suncorp-Metway Limited 239,378 ----------- 597,004 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.45% 206,234 Telstra Corporation Limited 549,323 ----------- ELECTRIC UTILITIES 0.09% 11,165 Energy Developments Limited 35,733 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.04% 81,886 ERG Limited 13,315 ----------- FOOD & DRUG RETAILING 2.59% 83,678 Coles Myer Limited 377,521 97,167 Woolworths Limited 607,910 ----------- 985,431 ----------- FOOD PRODUCTS 0.32% 54,341 Futuris Corporation Limited 49,650 90,601 Goodman Fielder Limited 72,958 ----------- 122,608 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- AUSTRALIA (continued) GAS UTILITIES 0.44% 33,880 Australian Gas Light Company Limited $ 168,383 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.25% 4,858 Cochlear Limited 94,648 ----------- HEALTH CARE PROVIDERS & SERVICES 0.72% 74,046 Mayne Group Limited 218,633 15,106 Sonic Healthcare Limited 53,570 ----------- 272,203 ----------- HOTELS, RESTAURANTS & LEISURE 0.59% 25,480 Aristocrat Leisure Limited 75,628 47,194 TAB Limited 67,238 13,923 TABCORP Holdings Limited 80,481 ----------- 223,347 ----------- INDUSTRIAL CONGLOMERATES 1.66% 121,331 Pacific Dunlop Limited 70,773 33,705 Wesfarmers Limited 559,049 ----------- 629,822 ----------- INSURANCE 3.76% 104,818 AMP Limited 1,015,589 131,299 Insurance Australia Group Limited 219,596 48,328 QBE Insurance Group Limited 194,636 ----------- 1,429,821 ----------- MEDIA 4.98% 49,497 John Fairfax Holdings Limited 92,441 137,683 The News Corporation Limited 867,078 165,641 The News Corporation Limited - Preferred Ordinary 871,285 12,817 Publishing & Broadcasting Limited 63,429 ----------- 1,894,233 ----------- METALS & MINING 9.30% 347,578 BHP Billiton Limited 2,115,359 22,575 Iluka Resources Limited 55,959 167,678 M.I.M. Holdings Limited 113,734 25,676 Newcrest Mining Limited 60,305 30,548 OneSteel Limited 23,117 29,302 Rio Tinto Limited 605,073 12,334 Sons of Gwalia Limited 42,658 104,230 WMC Limited 516,514 ----------- 3,532,719 ----------- MULTILINE RETAIL 0.29% 63,469 Harvey Norman Holdings Limited 110,083 ----------- OIL & GAS 1.55% 57,568 Origin Energy Limited 90,338 58,156 Santos Limited 181,922 43,953 Woodside Petroleum Limited 316,891 ----------- 589,151 ----------- PAPER & FOREST PRODUCTS 0.23% 31,171 PaperlinX Limited 86,406 ----------- PHARMACEUTICALS 0.86% 14,847 CSL Limited 328,020 ----------- See accompanying notes to financial statements. 77 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------------------ iSHARES MSCI PACIFIC EX-JAPAN INDEX FUND (CONTINUED) ------------------------------------------------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) AUSTRALIA (continued) REAL ESTATE 4.36% 34,461 AMP Diversified Property Trust $ 44,650 79,436 BT Office Trust 62,737 40,257 Colonial First State Property Trust Group 43,639 108,143 Deutsche Office Trust 73,129 87,017 Gandel Retail Trust 50,758 171,010 General Property Trust 241,874 40,950 Lend Lease Corporation Limited 250,067 55,076 Mirvac Group 110,878 69,930 Stockland Trust Group 156,304 39,256 Westfield Holdings Limited 332,005 172,354 Westfield Trust 289,150 ----------- 1,655,191 ----------- TRANSPORTATION INFRASTRUCTURE 0.80% 122,262 Macquarie Infrastructure Group 218,366 40,852 Transurban Group* 85,195 ----------- 303,561 ----------- TOTAL AUSTRALIA (Cost $22,310,112) 23,170,580 ----------- HONG KONG 24.13% AIRLINES 0.39% 98,000 Cathay Pacific Airways Limited 147,013 ----------- BANKS 2.70% 127,400 Bank of East Asia Limited 242,572 71,400 Hang Seng Bank Limited 782,724 ----------- 1,025,296 ----------- CONSTRUCTION MATERIALS 0.17% 42,000 Cheung Kong Infrastructure Holdings Limited 66,237 ----------- DISTRIBUTORS 0.55% 154,000 Li & Fung Limited 207,326 ----------- DIVERSIFIED FINANCIALS 2.26% 98,000 Hong Kong Exchanges & Clearing Limited 137,589 87,500 Swire Pacific Limited - Class A 475,684 112,000 Wharf Holdings Limited 246,279 ----------- 859,552 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.53% 833,000 Pacific Century CyberWorks Limited* 201,860 ----------- ELECTRIC UTILITIES 3.13% 175,000 CLP Holdings Limited 704,550 129,500 Hongkong Electric Holdings Limited 484,838 ----------- 1,189,388 ----------- ELECTRICAL EQUIPMENT 0.49% 161,000 Johnson Electric Holdings Limited 185,786 ----------- GAS UTILITIES 1.18% 322,000 Hong Kong & China Gas Company Limited 450,015 ----------- HOTELS RESTAURANTS & LEISURE 0.22% 98,000 Shangri-La Asia Limited 84,187 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- HONG KONG (continued) INDUSTRIAL CONGLOMERATES 4.35% 203,000 Hutchison Whampoa Limited $ 1,652,777 ----------- MEDIA 0.41% 112,000 SCMP Group Limited 63,185 21,000 Television Broadcasts Limited 94,239 ----------- 157,424 ----------- REAL ESTATE 6.88% 140,000 Cheung Kong Holdings Limited 1,166,771 105,000 Hang Lung Properties Limited 104,336 56,000 Henderson Land Development Company Limited 218,276 56,000 Hysan Development Company Limited 57,082 133,000 New World Development Company Limited 108,285 168,000 Sino Land Company Limited 57,082 126,000 Sun Hung Kai Properties Limited 900,658 ----------- 2,612,490 ----------- ROAD & RAIL 0.43% 119,000 MTR Corporation Limited 161,733 ----------- SPECIALTY RETAIL 0.44% 56,000 Esprit Holdings Limited 95,496 140,000 Giordano International Limited 71,353 ----------- 166,849 ----------- TOTAL HONG KONG (Cost $8,877,911) 9,167,933 ----------- NEW ZEALAND 1.89% CONSTRUCTION MATERIALS 0.14% 40,474 Fletcher Building Limited 52,054 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.77% 137,809 Telecom Corporation of New Zealand Limited 293,660 ----------- ELECTRIC UTILITIES 0.13% 29,799 Contact Energy Limited 50,098 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.07% 5,656 Fisher & Paykel Healthcare Corporation Limited 25,198 ----------- HOTELS, RESTAURANTS & LEISURE 0.12% 18,942 Sky City Entertainment Group Limited 46,176 ----------- HOUSEHOLD DURABLES 0.06% 5,894 Fisher & Paykel Appliances Holdings Limited* 23,286 ----------- INSURANCE 0.12% 21,273 Tower Limited 46,315 ----------- MULTILINE RETAIL 0.15% 20,069 The Warehouse Group Limited 55,755 ----------- PAPER & FOREST PRODUCTS 0.19% 84,791 Carter Holt Harvey Limited 70,563 ----------- TRANSPORTATION INFRASTRUCTURE 0.14% 32,382 Auckland International Airport Limited 55,393 ----------- TOTAL NEW ZEALAND (Cost $681,746) 718,498 ----------- See accompanying notes to financial statements. 78 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------------------ iSHARES MSCI PACIFIC EX-JAPAN INDEX FUND (CONCLUDED) ------------------------------------------------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) SINGAPORE 12.99% AEROSPACE & DEFENSE 0.41% 119,000 Singapore Technologies Engineering Limited $ 157,203 ----------- AIRLINES 0.96% 49,000 Singapore Airlines Limited 363,775 ----------- BANKS 5.80% 98,000 DBS Group Holdings Limited 722,201 91,000 Oversea-Chinese Banking Corporation Limited 630,875 112,000 United Overseas Bank Limited 849,828 ----------- 2,202,904 ----------- BEVERAGES 0.23% 21,000 Fraser & Neave Limited 88,269 ----------- COMMUNICATIONS EQUIPMENT 0.13% 21,000 Datacraft Asia Limited 47,880 ----------- COMPUTERS & PERIPHERALS 0.13% 4,200 Creative Technology Limited 49,522 ----------- DIVERSIFIED FINANCIALS 0.43% 49,000 Keppel Corporation Limited 110,203 77,000 Singapore Exchange Limited 54,222 ----------- 164,425 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 1.37% 588,000 Singapore Telecommunications Limited 519,985 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.30% 14,000 Venture Manufacturing (Singapore) Limited 112,342 ----------- HEALTH CARE PROVIDERS & SERVICES 0.11% 84,000 Parkway Holdings Limited 41,039 ----------- HOTELS, RESTAURANTS & LEISURE 0.28% 14,000 Overseas Union Enterprise Limited 51,968 56,000 United Overseas Land Limited 53,802 ----------- 105,770 ----------- INDUSTRIAL CONGLOMERATES 0.13% 56,000 SembCorp Industries Limited 50,134 ----------- MARINE 0.18% 105,000 Neptune Orient Lines Limited* 68,781 ----------- MEDIA 1.10% 35,000 Singapore Press Holdings Limited 418,418 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- SINGAPORE (continued) REAL ESTATE 0.95% 98,000 Capitaland Limited $ 104,853 42,000 City Developments Limited 155,904 63,000 Keppel Land Limited 60,183 21,000 Singapore Land Limited 38,517 ----------- 359,457 ----------- ROAD & RAIL 0.10% 105,000 SMRT Corporation Limited 39,836 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.38% 56,000 Chartered Semiconductor Manufacturing Limited* 127,780 14,000 ST Assembly Test Services Limited* 17,960 ----------- 145,740 ----------- TOTAL SINGAPORE (Cost $4,402,237) 4,935,480 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $36,272,006) 37,992,491 ----------- COMMON AND PREFERRED STOCK - NON-BASKET 0.01% HONG KONG 0.01% REAL ESTATE 0.01% 2,500 Hang Lung Properties Limited 2,484 ----------- TOTAL HONG KONG (Cost $2,625) 2,484 ----------- NEW ZEALAND 0.00% HEALTH CARE EQUIPMENT & SUPPLIES 0.00% 1 Fisher & Paykel Healthcare Corporation Limited 5 ----------- TOTAL NEW ZEALAND (Cost $6) 5 ----------- TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $2,631) 2,489 ----------- TOTAL INVESTMENTS (COST $36,274,637)+ 100.00% $37,994,980 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $36,307,241. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $2,304,272 Excess of tax cost over value (616,533) ---------- $1,687,739 ========== See accompanying notes to financial statements. 79 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------- iSHARES MSCI SINGAPORE INDEX FUND ----------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AEROSPACE & DEFENSE 4.62% 3,154,000 Singapore Technologies Engineering Limited $ 4,166,538 ----------- AIRLINES 4.10% 498,000 Singapore Airlines Limited 3,697,145 ----------- BANKS 40.40% 1,826,000 DBS Group Holdings Limited 13,456,521 1,494,000 Oversea-Chinese Banking Corporation Limited 10,357,443 1,660,000 United Overseas Bank Limited 12,595,666 ----------- 36,409,630 ----------- BEVERAGES 2.32% 498,000 Fraser & Neave Limited 2,093,237 ----------- COMMUNICATIONS EQUIPMENT 1.26% 498,000 Datacraft Asia Limited 1,135,440 ----------- COMPUTERS & PERIPHERALS 2.03% 116,200 Creative Technology Limited 1,370,118 1,162,000 GES International Limited 463,049 ----------- 1,833,167 ----------- DISTRIBUTORS 0.91% 332,000 Cycle & Carriage Limited 815,547 ----------- DIVERSIFIED FINANCIALS 4.20% 1,162,000 Keppel Corporation Limited 2,613,374 1,660,000 Singapore Exchange Limited 1,168,950 ----------- 3,782,324 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 8.31% 8,466,000 Singapore Telecommunications Limited 7,486,719 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 2.96% 332,000 Venture Manufacturing (Singapore) Limited 2,664,119 ----------- HEALTH CARE PROVIDERS & SERVICES 0.90% 1,660,000 Parkway Holdings Limited 811,016 ----------- HOTELS, RESTAURANTS & LEISURE 2.51% 332,000 Hotel Properties Limited 235,602 332,000 Overseas Union Enterprise Limited 1,232,382 830,000 United Overseas Land Limited 797,423 ----------- 2,265,407 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- INDUSTRIAL CONGLOMERATES 3.36% 332,000 Haw Par Corporation Limited $ 750,303 996,000 NatSteel Limited 641,563 1,826,000 SembCorp Industries Limited 1,634,718 ----------- 3,026,584 ----------- MACHINERY 0.82% 1,494,000 Sembcorp Marine Limited 738,070 ----------- MARINE 1.69% 2,324,000 Neptune Orient Lines Limited* 1,522,354 ----------- MEDIA 4.40% 332,000 Singapore Press Holdings Limited 3,968,994 ----------- REAL ESTATE 10.66% 996,000 Allgreen Properties Limited 614,379 2,822,000 Capitaland Limited 3,019,335 830,000 City Developments Limited 3,080,954 498,000 First Capital Corporation Limited 334,374 996,000 Keppel Land Limited 951,471 498,000 Singapore Land Limited 913,412 1,328,000 Wing Tai Holdings Limited 695,933 ----------- 9,609,858 ----------- ROAD & RAIL 1.33% 3,154,000 SMRT Corporation Limited 1,196,588 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 2.81% 830,000 Chartered Semiconductor Manufacturing Limited* 1,893,881 498,000 ST Assembly Test Services Limited* 638,845 ----------- 2,532,726 ----------- TRANSPORTATION INFRASTRUCTURE 0.41% 332,000 SembCorp Logistics Limited 373,339 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $95,612,685) 90,128,802 ----------- TOTAL INVESTMENTS (COST $95,612,685)+ 100.00% $90,128,802 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $98,605,070. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 6,085,301 Excess of tax cost over value (14,561,569) ----------- $(8,476,268) =========== See accompanying notes to financial statements. 80 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------------- iSHARES MSCI SOUTH KOREA INDEX FUND -------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.91% AIRLINES 0.55% 59,073 Asiana Airlines* $ 185,621 25,230 Korean Air Company Limited 317,305 ----------- 502,926 ----------- AUTO COMPONENTS 0.22% 84,390 Hankook Tire Company Limited 200,473 ----------- AUTOMOBILES 4.49% 110,490 Hyundai Motor Company Limited 3,037,870 120,060 Kia Motors Corporation* 1,038,361 ----------- 4,076,231 ----------- BANKS 13.12% 78,300 Hana Bank 1,168,083 173,130 Kookmin Bank 7,571,740 93,960 Korea Exchange Bank* 364,796 207,060 Shinhan Financial Group Company Limited 2,799,588 ----------- 11,904,207 ----------- BEVERAGES 0.49% 4,350 Doosan Corporation* 78,365 6,090 Hite Brewery Company Limited 363,404 ----------- 441,769 ----------- BUILDING PRODUCTS 0.35% 3,480 Kumkang Korea Chemical Company Limited 312,803 ----------- CHEMICALS 2.31% 33,060 Hanwha Chemical Corporation* 187,038 7,830 Honam Petrochemical Corporation 129,524 16,530 Hyosung Corporation 234,107 49,590 LG Chem Limited 1,393,419 10,440 Samsung Fine Chemicals Company Limited 155,350 ----------- 2,099,438 ----------- COMMERCIAL SERVICES & SUPPLIES 0.30% 3,828 Korea Information & Communications Company Limited* 42,649 15,660 S1 Corporation 225,336 ----------- 267,985 ----------- COMPUTERS & PERIPHERALS 0.40% 32,190 Trigem Computer Incorporated 359,855 ----------- CONSTRUCTION & ENGINEERING 0.61% 22,620 Daelim Industrial Company Limited 273,374 25,230 LG Engineering & Construction Company Limited 279,190 ----------- 552,564 ----------- DIVERSIFIED FINANCIALS 6.35% 69,600 Daewoo Securities Company Limited 516,782 28,710 Daishin Securities Company 539,980 35,670 Dongwon Securities Company Limited 365,079 NO. OF SHARES SECURITY VALUE ------ ----------- ----- DIVERSIFIED FINANCIALS (CONTINUED) 74,820 Good Morning Securities Company Limited* $ 333,438 58,290 Hyundai Securities Company* 616,406 21,141 Kookmin Credit Card Company Limited 862,311 25,230 Korea Technology & Banking Network Corporation 83,471 59,160 LG Investment & Securities Company Limited 922,769 39,150 Samsung Securities Company Limited 1,519,986 ----------- 5,760,222 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 3.11% 38,700 Korea Telecom Corporation 1,704,215 50,373 Korea Telecom Corporation ADR 1,123,318 ----------- 2,827,533 ----------- ELECTRIC UTILITIES 3.02% 165,300 Korea Electric Power Corporation 2,740,641 ----------- ELECTRICAL EQUIPMENT 0.22% 17,400 LG Cable Limited 201,745 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 6.72% 49,590 Daeduck Electronics Company Limited 468,219 2,610 Hankuk Electric Glass Company Limited 170,136 53,940 Samsung Electro Mechanics Company Limited 2,395,703 59,160 Samsung SDI Company Limited 3,069,939 ----------- 6,103,997 ----------- FOOD PRODUCTS 0.99% 16,530 Cheil Jedang Corporation 741,659 2,610 Nong Shim Company Limited 157,716 ----------- 899,375 ----------- HOTELS, RESTAURANTS & LEISURE 0.20% 21,750 Hotel Shilla Company Limited 178,252 ----------- HOUSEHOLD DURABLES 3.51% 20,619 Humax Company Limited 794,296 80,040 LG Electronics Incorporated 2,388,081 ----------- 3,182,377 ----------- HOUSEHOLD PRODUCTS 0.34% 10,440 LG Household & Health Care Limited 307,546 ----------- INSURANCE 1.41% 26,100 Samsung Fire & Marine Insurance Company Limited 1,281,441 ----------- INTERNET SOFTWARE & SERVICES 0.76% 24,360 Daou Technology Incorporated 48,761 5,332 Daum Communications Corporation* 148,816 2,349 NCsoft Corporation* 333,569 23,490 Serome Technology Incorporated 157,913 ----------- 689,059 ----------- See accompanying notes to financial statements. 81 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ------------------------------------------------- iSHARES MSCI SOUTH KOREA INDEX FUND (CONCLUDED) ------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) MACHINERY 1.53% 33,060 Hanjin Heavy Industries Company Limited $ 86,152 30,450 Hyundai Heavy Industries Company Limited 807,308 128,760 Samsung Heavy Industries Company Limited* 498,934 ----------- 1,392,394 ----------- MARINE 0.24% 21,750 Hanjin Shipping Company Limited 121,573 39,150 Hyundai Merchant Marine Company Limited* 96,256 ----------- 217,829 ----------- MEDIA 0.51% 3,480 Cheil Communications Incorporated 460,005 ----------- METALS & MINING 7.59% 5,220 Korea Zinc Company Limited 106,458 57,420 Pohang Iron & Steel Company Limited 6,353,977 14,790 Poongsan Corporation 131,824 ----------- 6,592,259 ----------- MULTILINE RETAIL 1.49% 12,180 Hyundai Department Store Company Limited 391,004 6,960 Shinsegae Company Limited 962,067 ----------- 1,353,071 ----------- OIL & GAS 0.44% 21,750 S-Oil Corporation 395,932 ----------- PAPER & FOREST PRODUCTS 0.07% 13,050 Hansol Paper Company Limited 64,368 ----------- PERSONAL PRODUCTS 0.39% 3,480 Pacific Corporation 352,232 ----------- PHARMACEUTICALS 1.00% 5,220 Dong-A Pharmaceutical Company Limited 92,658 1,740 Green Cross Corporation 40,349 69,600 LG Chem Investment Limited 615,092 3,480 Yuhan Corporation 158,504 ----------- 906,603 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 25.36% 315,810 Anam Semiconductor Incorporated* 1,832,027 81,780 Samsung Electronics Company Limited 21,187,809 ----------- 23,019,836 ----------- SOFTWARE 0.15% 28,710 Haansoft Incorporated* 59,636 9,918 HandySoft Corporation 74,690 ----------- 134,326 ----------- TEXTILES & APPAREL 0.42% 33,060 Cheil Industries Incorporated 379,570 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- TRADING COMPANIES & DISTRIBUTORS 1.30% 105,270 Samsung Corporation $ 894,544 38,280 SK Global 289,146 ----------- 1,183,690 ----------- WIRELESS TELECOMMUNICATION SERVICES 9.95% 69,426 KT Freetel* 2,197,258 34,800 SK Telecom Company Limited 6,834,353 ----------- 9,031,611 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $64,378,382) 90,374,165 ----------- COMMON AND PREFERRED STOCK - NON-BASKET 0.09% BANKS 0.04% 393 Hana Bank 5,863 660 Kookmin Bank 28,863 ----------- 34,726 ----------- CHEMICALS 0.01% 623 Hyosung Corporation 8,826 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 0.03% 630 Korea Telecom Corporation 27,743 11 Korea Telecom Corporation ADR 245 ----------- 27,988 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.00% 41 Daeduck Electronics Company Limited 387 ----------- OIL & GAS 0.00% 220 S-Oil Corporation 4,005 ----------- PHARMACEUTICALS 0.01% 147 Dong-A Pharmaceutical Company Limited 2,609 7 LG Chem Investment Limited 62 162 Yuhan Corporation 7,379 ----------- 10,050 ----------- TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $64,463) 85,982 ----------- TOTAL INVESTMENTS (COST $64,442,845)+ 100.00% $90,460,147 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $66,334,105. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $24,939,178 Excess of tax cost over value (813,136) ----------- $24,126,042 =========== See accompanying notes to financial statements. 82 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------- iSHARES MSCI SPAIN INDEX FUND -------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.95% BANKS 26.45% 215,460 Banco Bilbao Vizcaya Argentaria SA $ 2,486,149 276,852 Banco Santander Central Hispano SA 2,207,919 ----------- 4,694,068 ----------- BIOTECHNOLOGY 1.65% 35,100 Zeltia SA* 292,374 ----------- BUILDING PRODUCTS 0.65% 21,024 Uralita SA 115,658 ----------- COMMERCIAL SERVICES & SUPPLIES 1.75% 42,624 Amadeus Global Travel Distribution SA* 282,784 2,136 Prosegur, Compania de Seguridad SA 27,991 ----------- 310,775 ----------- CONSTRUCTION & ENGINEERING 3.30% 6,000 Actividades de Construccion y Servicios SA 159,588 8,196 Fomento de Construcciones y Contratas SA 177,234 20,040 Grupo Dragados SA 248,745 ----------- 585,567 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 22.11% 336,516 Telefonica SA* 3,923,740 ----------- ELECTRIC UTILITIES 13.26% 55,548 Endesa SA 833,148 67,404 Iberdrola SA 848,307 43,776 Union Fenosa SA 672,108 ----------- 2,353,563 ----------- FOOD PRODUCTS 1.34% 14,112 Ebro Puleva SA 150,751 15,000 Viscofan, Industria Navarra de Envolturas Celulosicas SA 87,579 ----------- 238,330 ----------- GAS UTILITIES 2.86% 29,088 Gas Natural SDG SA 507,235 ----------- HOTELS, RESTAURANTS & LEISURE 3.51% 42,720 NH Hoteles SA* 419,403 12,768 Sol Melia SA 86,254 94,536 TelePizza SA* 116,116 ----------- 621,773 ----------- INSURANCE 0.61% 15,516 Corporacion Mapfre SA 107,368 ----------- INTERNET SOFTWARE & SERVICES 2.15% 51,276 Terra Networks SA* 381,432 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- MEDIA 4.15% 44,376 Promotora de Informaciones SA $ 413,782 83,964 Telefonica Publicidad e Informacion SA 322,464 ----------- 736,246 ----------- METALS & MINING 2.02% 10,548 Acerinox SA 359,021 ----------- OIL & GAS 4.34% 62,352 Repsol YPF SA 770,703 ----------- PAPER & FOREST PRODUCTS 0.37% 4,800 Grupo Empresarial Ence SA 65,724 ----------- PHARMACEUTICALS 1.30% 19,392 FAES FARMA SA 230,973 ----------- REAL ESTATE 0.47% 1,260 Metrovacesa SA 18,364 9,312 Vallehermoso SA 65,082 ----------- 83,446 ----------- SPECIALTY RETAIL 3.18% 28,800 Industria de Diseno Textil SA* 564,491 ----------- TOBACCO 2.40% 25,692 Altadis SA 425,570 ----------- TRANSPORTATION INFRASTRUCTURE 0.69% 13,224 Autopistas Concesionaria Espanola SA 122,391 ----------- WATER UTILITIES 1.39% 21,840 Sociedad General de Aguas de Barcelona SA 245,584 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $22,896,856) 17,736,032 ----------- COMMON STOCK - NON-BASKET 0.05% BIOTECHNOLOGY 0.05% 2,499 Puleva Biotech SA* 9,143 ----------- FOOD PRODUCTS 0.00% 7 Ebro Puleva SA 75 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $83) 9,218 ----------- TOTAL INVESTMENTS (COST $22,896,939)+ 100.00% $17,745,250 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $23,061,198. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 257,049 Excess of tax cost over value (5,572,997) ----------- $(5,315,948) =========== See accompanying notes to financial statements. 83 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------- iSHARES MSCI SWEDEN INDEX FUND --------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 100.00% AIRLINES 0.37% 5,478 SAS AB* $ 39,525 ----------- AUTO COMPONENTS 0.57% 6,600 Trelleborg AB - B 61,182 ----------- BANKS 19.01% 190,894 Nordea AB 994,249 40,700 Skandinaviska Enskilda Banken AB - A 381,177 45,100 Svenska Handelsbanken AB - A 612,028 2,893 Svenska Handelsbanken AB - B 37,877 ----------- 2,025,331 ----------- BUILDING PRODUCTS 2.72% 22,990 Assa Abloy AB - B 290,014 ----------- COMMERCIAL SERVICES & SUPPLIES 4.72% 25,091 Securitas AB - B 502,352 ----------- COMMUNICATIONS EQUIPMENT 23.61% 590,128 Telefonaktiebolaget LM Ericsson AB - B 2,515,287 ----------- CONSTRUCTION & ENGINEERING 2.14% 30,800 Skanska AB - B 228,118 ----------- DIVERSIFIED FINANCIALS 0.55% 5,137 OM AB 58,175 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 4.32% 7,920 Tele2 AB - B* 211,929 71,500 Telia AB 248,039 ----------- 459,968 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 0.85% 2,013 Nobel Biocare AB 90,320 ----------- HEALTH CARE PROVIDERS & SERVICES 1.33% 15,400 Gambro AB - A 90,511 8,800 Gambro AB - B 51,721 ----------- 142,232 ----------- HOUSEHOLD DURABLES 4.63% 27,478 Electrolux AB - B 493,684 ----------- IT CONSULTING & SERVICES 0.52% 22,913 WM-Data AB - B 55,400 ----------- INSURANCE 3.56% 72,820 Skandia Forsakrings AB 379,274 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- MACHINERY 14.32% 8,822 Atlas Copco AB - A $ 208,665 5,313 Atlas Copco AB - B 120,082 21,670 Sandvik AB 522,910 3,608 SKF AB - A 82,063 5,500 SKF AB - B 128,776 7,887 Volvo AB - A 133,788 18,700 Volvo AB - B 328,826 ----------- 1,525,110 ----------- MEDIA 0.99% 4,686 Modern Times Group MTG AB - B* 105,015 ----------- METALS & MINING 1.34% 2,200 Hoganas AB - B 37,214 3,300 Sapa AB 48,882 4,400 SSAB Svenskt Stal AB - A 47,095 913 SSAB Svenskt Stal AB - B 9,205 ----------- 142,396 ----------- PAPER & FOREST PRODUCTS 5.41% 3,300 Holmen AB - B 80,735 15,400 Svenska Cellulosa AB - B 495,236 ----------- 575,971 ----------- REAL ESTATE 0.98% 9,790 Drott AB - B 104,319 ----------- SPECIALTY RETAIL 6.31% 38,764 Hennes & Mauritz AB - B 672,375 ----------- TOBACCO 1.75% 29,172 Swedish Match AB 186,787 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $14,356,714) 10,652,835 ----------- TOTAL INVESTMENTS (COST $14,356,714)+ 100.00% $10,652,835 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $14,475,406. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 458,044 Excess of tax cost over value (4,280,615) ----------- $(3,822,571) =========== See accompanying notes to financial statements. 84 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------------- iSHARES MSCI SWITZERLAND INDEX FUND -------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.96% BANKS 14.18% 2,280 Banque Cantonale Vaudoise $ 341,786 41,760 Credit Suisse Group* 1,443,126 1,400 Julius Baer Holding Limited 402,488 45,760 UBS AG* 2,116,977 ----------- 4,304,377 ----------- BIOTECHNOLOGY 1.49% 600 Serono SA 453,415 ----------- CHEMICALS 9.00% 10,000 Ciba Specialty Chemicals AG 721,662 18,600 Clariant AG 371,040 20 EMS-Chemie Holding AG* 75,100 1,780 Givaudan SA 584,839 600 Lonza AG 378,432 10,860 Syngenta AG* 599,581 ----------- 2,730,654 ----------- COMMERCIAL SERVICES & SUPPLIES 2.44% 9,600 Adecco SA 575,921 860 SGS Societe Generale de Surveillance Holding SA 164,744 ----------- 740,665 ----------- COMMUNICATIONS EQUIPMENT 0.09% 2,000 Ascom Holding AG 25,698 ----------- COMPUTERS & PERIPHERALS 0.39% 2,800 Logitech International SA* 118,036 ----------- CONSTRUCTION MATERIALS 3.73% 4,200 Holcim Limited - B 879,723 5,900 Holcim Limited - Registered 252,699 ----------- 1,132,422 ----------- DIVERSIFIED FINANCIALS 0.78% 12,000 Vontobel Holding AG 237,972 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES 2.44% 2,540 Swisscom AG 739,914 ----------- ELECTRICAL EQUIPMENT 2.16% 92,160 ABB Limited 656,973 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.64% 3,800 Kudelski SA* 193,968 ----------- FOOD PRODUCTS 12.62% 17,340 Nestle SA 3,830,386 ----------- HEALTH CARE EQUIPMENT & SUPPLIES 2.69% 14,340 Phonak Holding AG* 243,992 800 Sulzer Medica AG 62,661 720 Synthes-Stratec Incorporated 473,129 600 Tecan Group AG 35,555 ----------- 815,337 ----------- HOTELS, RESTAURANTS & LEISURE 0.57% 660 Kuoni Reisen Holding AG 172,706 ----------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- HOUSEHOLD DURABLES 0.14% 160 Forbo Holding AG $ 42,995 ----------- INSURANCE 9.61% 16,280 Swiss Re 1,463,805 7,520 Zurich Financial Services AG 1,453,790 ----------- 2,917,595 ----------- MACHINERY 2.22% 600 Georg Fischer AG 103,145 240 Schindler Holding AG - Participation Certificates 352,171 100 Schindler Holding AG - Registered 144,097 400 Sulzer AG 74,748 ----------- 674,161 ----------- MEDIA 0.13% 200 PubliGroupe SA 39,545 ----------- MULTILINE RETAIL 0.21% 80 Jelmoli Holding AG - Bearer 64,304 ----------- PHARMACEUTICALS 28.59% 165,660 Novartis AG 6,293,408 33,920 Roche Holding AG - Genussein 2,383,197 ----------- 8,676,605 ----------- SPECIALTY RETAIL 0.91% 1,000 Charles Voegele Holding AG 31,389 1,460 Valora Holding AG 245,846 ----------- 277,235 ----------- TEXTILES & APPAREL 4.93% 40,000 Compagnie Financiere Richemonte AG 833,138 4,000 The Swatch Group AG - B* 335,015 18,000 The Swatch Group AG - Registered* 328,444 ----------- 1,496,597 ----------- TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $36,075,652) 30,341,560 ----------- COMMON AND PREFERRED STOCK - NON-BASKET 0.04% DIVERSIFIED TELECOMMUNICATION SERVICES 0.04% 2,540 Swisscom AG - Redemption Rights 12,250 ----------- TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $0) 12,250 ----------- TOTAL INVESTMENTS (COST $36,075,652)+ 100.00% $30,353,810 ======= =========== -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $36,233,809. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,133,682 Excess of tax cost over value (7,013,681) ----------- $(5,879,999) =========== See accompanying notes to financial statements. 85 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- --------------------------------- iSHARES MSCI TAIWAN INDEX FUND --------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.94% AIRLINES 0.26% 894,000 China Airlines $ 407,463 ------------ AUTO COMPONENTS 0.25% 596,000 Cheng Shin Rubber Industry Company Limited 407,463 ------------ AUTOMOBILES 0.51% 596,000 China Motor Company Limited 417,650 894,000 Yulon Motor Company Limited 397,277 ------------ 814,927 ------------ BANKS 8.97% 2,086,000 Bank Sinopac* 822,991 2,682,000 Chang Hwa Commercial Bank 985,552 3,874,000 China Development Financial Holding Corporation* 2,339,519 2,682,000 Chinatrust Commercial Bank 1,856,505 1,788,000 CTB Financial Holding Company Limited* 937,166 2,682,000 First Commercial Bank 1,451,588 2,980,000 Hua Nan Financial Holdings Company Limited* 1,527,987 2,086,000 International Bank of Taipei 730,887 2,384,000 International Commercial Bank of China 1,331,047 1,788,000 Taishin Financial Holdings Company Limited* 751,261 2,980,000 United World Chinese Commercial Bank 1,595,898 ------------ 14,330,401 ------------ BUILDING PRODUCTS 0.33% 894,000 Taiwan Glass Industrial Corporation 527,156 ------------ CHEMICALS 8.48% 298,000 China Synthetic Rubber Corporation* 88,708 298,000 Eternal Chemical Company Limited 181,661 2,682,000 Formosa Chemicals & Fibre Corporation 2,712,178 4,172,000 Formosa Plastic Corporation 5,240,997 5,662,000 Nan Ya Plastic Corporation 5,145,073 298,000 Taiwan Styrene Monomer Corporation 188,452 ------------ 13,557,069 ------------ COMMERCIAL SERVICES & SUPPLIES 0.17% 298,000 Taiwan Secom 265,700 ------------ COMMUNICATIONS EQUIPMENT 1.01% 298,000 Accton Technology Corporation* 814,927 298,000 D-Link Corporation 530,551 298,000 Microelectronics Technology Incorporated* 265,700 ------------ 1,611,178 ------------ COMPUTERS & PERIPHERALS 19.55% 4,768,000 Acer Incorporated 2,770,751 298,000 Ambit Microsystems Corporation 1,213,901 894,000 Arima Computer Corporation 494,049 1,788,000 Asustek Computer Incorporated 8,658,596 1,192,000 Benq Corporation 2,342,914 2,086,000 CMC Magnetics Corporation 1,497,428 2,086,000 Compal Electronics Incorporated 2,733,400 596,000 Compeq Manufacturing Company Limited* 750,412 NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMPUTERS & PERIPHERALS (CONTINUED) 298,000 Gigabyte Technology Company Limited $ 946,503 1,490,000 Inventec Company Limited 1,294,545 596,000 Lite-On Technology Corporation 976,214 298,000 Micro-Star International Company Limited 1,358,211 298,000 Prodisc Technology Incorporated 299,655 1,192,000 Quanta Computer Incorporated 4,108,589 1,788,000 Ritek Corporation 1,803,025 ------------ 31,248,193 ------------ CONSTRUCTION & ENGINEERING 0.24% 1,192,000 BES Engineering Corporation* 87,944 596,000 Continental Engineering Corporation* 178,265 1,192,000 Pacific Construction Company Limited* 119,523 ------------ 385,732 ------------ CONSTRUCTION MATERIALS 0.40% 1,192,000 Asia Cement Corporation 300,504 1,490,000 Taiwan Cement Corporation* 339,553 ------------ 640,057 ------------ DIVERSIFIED FINANCIALS 2.67% 1,788,000 Chung Hsing Bills Finance Corporation 514,422 3,874,000 Fubon Financial Holding Company Limited* 3,752,058 ------------ 4,266,480 ------------ ELECTRICAL EQUIPMENT 1.79% 3,576,000 Pacific Electric Wire & Cable Company Limited* 784,367 298,000 Phoenixtec Power Company Limited 242,780 596,000 Shihlin Electric & Engineering Corporation 276,736 1,788,000 Teco Electric & Machinery Company Limited 713,061 3,576,000 Walsin Lihwa Corporation 845,486 ------------ 2,862,430 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 7.21% 894,000 Delta Electronics Incorporated 1,362,455 1,490,000 Hon Hai Precision Industry Company Limited 6,791,055 596,000 Lite-On Electronics Incorporated* 534,796 596,000 Picvue Electronics Limited 297,109 596,000 Synnex Technology International Corporation 765,691 298,000 Wu's Printed Circuit Company Limited 141,763 2,086,000 Yageo Corporation* 1,622,213 ------------ 11,515,082 ------------ FOOD & DRUG RETAILING 0.44% 298,000 President Chain Store Corporation 547,529 1,192,000 Taiwan Tea Corporation* 149,743 ------------ 697,272 ------------ FOOD PRODUCTS 0.71% 3,278,000 Uni-President Enterprises Company 1,139,200 ------------ HOUSEHOLD DURABLES 0.34% 1,192,000 Sampo Corporation 543,284 ------------ See accompanying notes to financial statements. 86 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------------------- iSHARES MSCI TAIWAN INDEX FUND (CONTINUED) -------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) INDUSTRIAL CONGLOMERATES 1.58% 2,980,000 Far Eastern Textile Limited $ 1,103,547 4,172,000 Tatung Company Limited 1,420,179 ------------ 2,523,726 ------------ INSURANCE 3.25% 3,576,000 Cathay Financial Holding Company Limited* 5,195,157 ------------ IT CONSULTING & SERVICES 0.34% 596,000 Systex Corporation* 541,587 ------------ LEISURE EQUIPMENT & PRODUCTS 0.57% 298,000 Giant Manufacturing Company Limited 257,211 298,000 Premier Image Technology Corporation 657,884 ------------ 915,095 ------------ MARINE 0.48% 894,000 Evergreen Marine Corporation 450,756 1,192,000 Yang Ming Marine Transport 310,691 ------------ 761,447 ------------ METALS & MINING 2.14% 6,258,000 China Steel Corporation 3,280,080 596,000 Tung Ho Steel Enterprise Corporation 144,310 ------------ 3,424,390 ------------ MULTILINE RETAIL 0.10% 894,000 Far Eastern Department Stores Limited 162,985 ------------ OFFICE ELECTRONICS 0.37% 894,000 Kinpo Electronics Incorporated 588,275 ------------ REAL ESTATE 0.17% 1,192,000 Cathay Real Estate Development Company Limited 266,549 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 36.49% 2,980,000 Advanced Semiconductor Engineering Incorporated* 2,385,358 3,576,000 Macronix International Company Limited* 2,658,698 3,576,000 Mosel Vitelic Incorporated* 1,884,518 298,000 Realtek Semiconductor Corporation 1,527,987 1,788,000 Siliconware Precision Industries Company* 1,370,095 11,324,000 Taiwan Semiconductor Manufacturing Company Limited* 26,451,161 13,112,000 United Microelectronics Corporation* 16,695,810 596,000 Via Technologies Incorporated 2,478,735 3,874,000 Winbond Electronics Corporation 2,869,221 ------------ 58,321,583 ------------ SPECIALTY RETAIL 0.12% 596,000 Aurora Corporation* 185,056 ------------ TEXTILES & APPAREL 1.00% 894,000 Formosa Taffeta Company Limited 343,797 596,000 Nien Hsing Textile Company Limited* 393,881 1,192,000 Pou Chen Corporation* 865,860 ------------ 1,603,538 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $168,302,849) 159,708,475 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - NON-BASKET 0.06% AIRLINES 0.00% 410 China Airlines $ 187 ------------ AUTO COMPONENTS 0.00% 436 Cheng Shin Rubber Industry Company Limited 298 ------------ AUTOMOBILES 0.00% 170 China Motor Company Limited 119 350 Yulon Motor Company Limited 156 ------------ 275 ------------ BANKS 0.00% 300 Bank Sinopac* 118 430 Chang Hwa Commercial Bank 158 750 China Development Financial Holding Corporation* 453 657 Chinatrust Commercial Bank 455 860 CTB Financial Holding Company Limited* 451 50 First Commercial Bank 27 600 Hua Nan Financial Holdings Company Limited* 308 520 International Bank of Taipei 182 200 International Commercial Bank of China 112 441 Taishin Financial Holdings Company Limited* 185 320 United World Chinese Commercial Bank 171 ------------ 2,620 ------------ BUILDING PRODUCTS 0.00% 189 Taiwan Glass Industrial Corporation 111 ------------ CHEMICALS 0.00% 12,337 China Synthetic Rubber Corporation* 3,672 152 Formosa Chemicals & Fibre Corporation 154 245 Formosa Plastic Corporation 308 820 Nan Ya Plastic Corporation 745 ------------ 4,879 ------------ COMMERCIAL SERVICES & SUPPLIES 0.00% 900 Taiwan Secom 802 ------------ COMMUNICATIONS EQUIPMENT 0.00% 350 D-Link Corporation 623 200 Microelectronics Technology Incorporated* 178 ------------ 801 ------------ COMPUTERS & PERIPHERALS 0.00% 212 Acer Incorporated 123 250 Asustek Computer Incorporated 1,211 500 CMC Magnetics Corporation 359 250 Gigabyte Technology Company Limited 794 330 Prodisc Technology Incorporated 332 750 Quanta Computer Incorporated 2,585 500 Ritek Corporation 504 ------------ 5,908 ------------ CONSTRUCTION & ENGINEERING 0.01% 23,873 Continental Engineering Corporation* 7,140 10,400 Pacific Construction Company Limited* 1,043 ------------ 8,183 ------------ See accompanying notes to financial statements. 87 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- -------------------------------------------- iSHARES MSCI TAIWAN INDEX FUND (CONCLUDED) -------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - NON-BASKET (CONTINUED) CONSTRUCTION MATERIALS 0.01% 26,740 Asia Cement Corporation $ 6,741 31,762 Taiwan Cement Corporation* 7,238 ------------ 13,979 ------------ ELECTRICAL EQUIPMENT 0.01% 440 Pacific Electric Wire & Cable Company Limited* 97 630 Phoenixtec Power Company Limited 513 16,080 Shihlin Electric & Engineering Corporation 7,466 92 Teco Electric & Machinery Company Limited 37 779 Walsin Lihwa Corporation 184 ------------ 8,297 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 0.00% 50 Delta Electronics Incorporated 76 200 Hon Hai Precision Industry Company Limited 912 120 Lite-On Electronics Incorporated* 108 800 Picvue Electronics Limited 399 250 Synnex Technology International Corporation 321 500 Yageo Corporation* 389 ------------ 2,205 ------------ FOOD & DRUG RETAILING 0.00% 350 President Chain Store Corporation 643 ------------ FOOD PRODUCTS 0.00% 36 Uni-President Enterprises Company 13 ------------ HOUSEHOLD DURABLES 0.00% 148 Sampo Corporation 67 ------------ INDUSTRIAL CONGLOMERATES 0.00% 199 Far Eastern Textile Limited 74 120 Tatung Company Limited 41 ------------ 115 ------------ INSURANCE 0.00% 967 Cathay Financial Holding Company Limited* 1,405 ------------ IT CONSULTING & SERVICES 0.00% 600 Systex Corporation* 545 ------------ LEISURE EQUIPMENT & PRODUCTS 0.00% 350 Giant Manufacturing Company Limited 302 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- MARINE 0.01% 15,000 Evergreen Marine Corporation $ 7,563 30,000 Yang Ming Marine Transport 7,819 ------------ 15,382 ------------ METALS & MINING 0.00% 670 China Steel Corporation 351 ------------ MULTILINE RETAIL 0.01% 50,160 Far Eastern Department Stores Limited 9,145 ------------ OFFICE ELECTRONICS 0.00% 400 Kinpo Electronics Incorporated 263 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.00% 357 Advanced Semiconductor Engineering Incorporated* 286 80 Mosel Vitelic Incorporated* 42 500 Realtek Semiconductor Corporation 2,564 525 Siliconware Precision Industries Company* 402 800 Taiwan Semiconductor Manufacturing Company Limited* 1,869 650 United Microelectronics Corporation* 828 200 Via Technologies Incorporated 832 280 Winbond Electronics Corporation 207 ------------ 7,030 ------------ SPECIALTY RETAIL 0.00% 200 Aurora Corporation* 62 ------------ TEXTILES & APPAREL 0.01% 37,620 Formosa Taffeta Company Limited 14,467 800 Nien Hsing Textile Company Limited* 529 385 Pou Chen Corporation* 280 ------------ 15,276 ------------ TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $137,808) 99,144 ------------ TOTAL INVESTMENTS (COST $168,440,657)+ 100.00% $159,807,619 ======= ============ -------------- * Non-income producing security. + Aggregate cost for Federal income tax purposes is $174,099,587. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 8,770,898 Excess of tax cost over value (23,062,866) ------------ $(14,291,968) ============ See accompanying notes to financial statements. 88 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ----------------------------------------- iSHARES MSCI UNITED KINGDOM INDEX FUND ----------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET 99.93% AEROSPACE & DEFENSE 0.46% 111,342 BAE Systems Plc $ 500,793 17,682 Rolls-Royce Plc 40,265 ------------ 541,058 ------------ AIR FREIGHT & COURIERS 0.28% 18,144 Exel Plc 198,887 70,770 Securicor Plc 132,128 ------------ 331,015 ------------ AIRLINES 0.04% 15,582 British Airways Plc 44,850 ------------ AUTO COMPONENTS 0.22% 62,706 GKN Plc 260,753 ------------ BANKS 18.31% 118,524 Barclays Plc 3,478,537 258,552 HBOS Plc 2,709,807 613,410 HSBC Holdings Plc 6,702,265 404,376 Lloyds TSB Group Plc 3,889,256 188,580 Royal Bank of Scotland Group Plc 4,619,721 ------------ 21,399,586 ------------ BEVERAGES 2.69% 229,404 Diageo Plc 2,725,539 53,340 Scottish & Newcastle Plc 418,715 ------------ 3,144,254 ------------ BIOTECHNOLOGY 0.18% 21,000 Celltech Group Plc* 206,432 ------------ BUILDING PRODUCTS 0.16% 1,680 Novar Plc 3,149 125,160 Pilkington Plc 188,090 ------------ 191,239 ------------ CHEMICALS 0.45% 24,276 BOC Group Plc 358,124 42,672 Imperial Chemical Industries Plc 172,013 ------------ 530,137 ------------ COMMERCIAL SERVICES & SUPPLIES 1.43% 21,000 Amey Plc 107,374 62,706 Brambles Industries Plc 272,283 7,098 BTG Plc* 52,707 39,648 Capita Group Plc 260,203 68,418 Chubb Plc 164,510 13,860 De La Rue Plc 82,531 105,252 Hays Plc 294,015 84,882 Rentokil Initial Plc 320,252 27,468 Serco Group Plc 122,768 ------------ 1,676,643 ------------ COMMUNICATIONS EQUIPMENT 0.05% 249,858 Marconi Plc 61,845 ------------ CONSTRUCTION & ENGINEERING 0.20% 25,116 AMEC Plc 153,819 25,158 Balfour Beatty Plc 81,131 ------------ 234,950 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- CONSTRUCTION MATERIALS 0.63% 33,600 BPB Plc $ 160,393 61,740 Hanson Plc 407,808 20,412 RMC Group Plc 164,563 ------------ 732,764 ------------ CONTAINERS & PACKAGING 0.17% 32,424 Rexam Plc 200,181 ------------ DIVERSIFIED FINANCIALS 1.42% 58,296 Amvescap Plc 703,331 11,088 Close Brothers Group Plc 105,467 12,810 Man Group Plc 187,889 13,230 Provident Financial Plc 121,631 8,988 Schroders Plc 101,002 44,940 3i Group Plc 435,408 ------------ 1,654,728 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 2.57% 643,944 BT Group Plc 2,329,357 218,316 Cable & Wireless Plc 679,329 ------------ 3,008,686 ------------ ELECTRIC UTILITIES 2.01% 49,686 International Power Plc* 126,497 133,728 National Grid Group Plc 874,322 62,412 Scottish and Southern Energy Plc 560,550 130,788 Scottish Power Plc 789,892 ------------ 2,351,261 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS 0.09% 60,564 Spirent Plc 110,075 ------------ FOOD & DRUG RETAILING 2.67% 65,436 Boots Company Plc 590,949 66,276 Safeway Plc 299,033 91,980 Sainsbury Plc 544,128 472,122 Tesco Plc 1,682,779 ------------ 3,116,889 ------------ FOOD PRODUCTS 2.34% 146,832 Cadbury Schweppes Plc 998,937 20,454 Tate & Lyle Plc 97,495 197,148 Unilever Plc 1,634,038 ------------ 2,730,470 ------------ GAS UTILITIES 1.38% 298,242 Centrica Plc 894,287 299,082 Lattice Group Plc 715,964 ------------ 1,610,251 ------------ HEALTH CARE EQUIPMENT & SUPPLIES 0.85% 48,216 Amersham Plc 488,288 74,886 Smith & Nephew Plc 451,479 6,216 SSL International Plc 47,828 ------------ 987,595 ------------ HOTELS, RESTAURANTS & LEISURE 2.29% 164,430 Compass Group Plc 1,120,986 86,730 Hilton Group Plc 273,556 14,280 MyTravel Group Plc 45,041 34,146 P & 0 Princess Cruises Plc 198,014 See accompanying notes to financial statements. 89 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ---------------------------------------------------- iSHARES MSCI UNITED KINGDOM INDEX FUND (CONTINUED) ---------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) HOTELS, RESTAURANTS & LEISURE (CONTINUED) 45,444 Rank Group Plc $ 160,690 72,198 Six Continents Plc 720,945 16,800 Whitbread Plc 151,601 ------------ 2,670,833 ------------ HOUSEHOLD DURABLES 0.40% 17,808 Barratt Developments Plc 116,367 10,626 Berkeley Group Plc 120,235 12,054 Pace Micro Technology Plc 49,741 65,310 Taylor Woodrow Plc 180,592 ------------ 466,935 ------------ HOUSEHOLD PRODUCTS 0.55% 40,614 Reckitt Benckiser Plc 642,803 ------------ IT CONSULTING & SERVICES 0.29% 44,730 CMG Plc 152,788 33,978 Logica Plc 185,025 ------------ 337,813 ------------ INDUSTRIAL CONGLOMERATES 0.46% 34,818 FKI Plc 77,809 46,116 Smiths Group Plc 462,456 ------------ 540,265 ------------ INSURANCE 3.50% 164,388 CGNU Plc 1,668,262 359,394 Legal & General Group Plc 762,490 145,026 Prudential Plc 1,345,619 84,924 Royal & Sun Alliance Insurance Group Plc 313,504 ------------ 4,089,875 ------------ INTERNET & CATALOG RETAIL 0.67% 80,766 GUS Plc 788,224 ------------ MACHINERY 0.47% 47,460 BBA Group Plc 164,462 30,114 IMI Plc 112,872 205,086 Invensys Plc 278,471 ------------ 555,805 ------------ MARINE 0.17% 67,830 Peninsular & Oriental Steam Navigation Company Plc 201,951 ------------ MEDIA 3.93% 56,238 British Sky Broadcasting Group Plc* 571,119 32,382 Carlton Communications Plc 96,640 21,840 Daily Mail & General Trust 209,129 67,788 EMI Group Plc 296,986 210,462 Granada Plc 342,329 61,530 Pearson Plc 678,819 70,308 Reed International Plc 629,975 101,850 Reuters Group Plc 754,857 135,618 Telewest Communications Plc* 34,048 14,238 United Business Media Plc 117,808 82,194 WPP Group Plc 864,939 ------------ 4,596,649 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- METALS & MINING 2.49% 158,172 BHP Billiton Plc $ 894,874 235,620 Corus Group Plc* 273,274 13,020 Johnson Matthey Plc 171,264 78,078 Rio Tinto Plc 1,570,365 ------------ 2,909,777 ------------ MULTI-UTILITIES 0.24% 32,508 United Utilities Plc 277,485 ------------ MULTILINE RETAIL 1.25% 212,100 Marks & Spencer Plc 1,127,979 25,074 Next Plc 337,446 ------------ 1,465,425 ------------ OIL & GAS 16.11% 256,998 BG Group Plc 1,063,232 1,566,600 BP Plc 12,907,029 699,090 Shell Transport & Trading Company Plc 4,864,861 ------------ 18,835,122 ------------ PAPER & FOREST PRODUCTS 0.22% 35,574 Bunzl Plc 253,089 ------------ PHARMACEUTICALS 14.39% 125,328 AstraZeneca Plc 6,338,958 429,702 GlaxoSmithKline Plc 10,477,963 ------------ 16,816,921 ------------ REAL ESTATE 1.28% 39,396 British Land Company Plc 288,917 50,484 Canary Wharf Group Plc* 325,783 12,978 Great Portland Estates Plc 49,378 22,218 Hammerson Plc 172,210 39,900 Land Securities Plc 496,624 30,828 Slough Estates Plc 159,152 ------------ 1,492,064 ------------ ROAD & RAIL 0.12% 38,598 FirstGroup Plc 139,758 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.30% 87,990 ARM Holdings Plc* 352,202 ------------ SOFTWARE 0.34% 44,184 Misys Plc 163,421 79,212 Sage Group Plc 232,198 ------------ 395,619 ------------ SPECIALTY RETAIL 0.90% 118,230 Dixons Group Plc 400,503 87,528 Kingfisher Plc 469,200 121,800 Signet Group Plc 184,764 ------------ 1,054,467 ------------ TOBACCO 1.43% 118,146 British American Tobacco Plc 1,084,516 44,310 Imperial Tobacco Group Plc 587,237 ------------ 1,671,753 ------------ See accompanying notes to financial statements. 90 FEBRUARY 28, 2002 PORTFOLIO OF INVESTMENTS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- ---------------------------------------------------- iSHARES MSCI UNITED KINGDOM INDEX FUND (CONCLUDED) ---------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - BASKET (CONTINUED) TRADING COMPANIES & DISTRIBUTORS 0.52% 30,492 Electrocomponents Plc $ 214,346 46,200 Wolseley Plc 390,111 ------------ 604,457 ------------ TRANSPORTATION INFRASTRUCTURE 0.76% 30,912 Associated British Ports Holdings Plc 194,563 77,532 BAA Plc 700,187 ------------ 894,750 ------------ WATER UTILITIES 0.58% 23,688 AWG Plc* 174,222 29,400 Kelda Group Plc 148,453 34,608 Severn Trent Plc 359,045 ------------ 681,720 ------------ WIRELESS TELECOMMUNICATION SERVICES 7.67% 4,737,768 Vodafone Group Plc 8,962,720 ------------ TOTAL COMMON AND PREFERRED STOCK - BASKET (Cost $142,949,494) 116,824,144 ------------ NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON AND PREFERRED STOCK - NON-BASKET 0.07% AUTO COMPONENTS 0.00% 53,350 Ti Automotive Ltd*/** $ -- ------------ CHEMICALS 0.03% 27,154 Imperial Chemical Industries Plc - Rights* 36,486 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES 0.00% 11 BT Group Plc 40 ------------ ROAD & RAIL 0.03% 36,777 Railtrack Group Plc** 36,412 ------------ SPECIALTY RETAIL 0.00% 14 Kingfisher Plc 75 ------------ WATER UTILITIES 0.00% 3,178,929 AWG Plc - Redemption Shares* 4,272 ------------ TOTAL COMMON AND PREFERRED STOCK - NON-BASKET (Cost $614,935) 77,285 ------------ TOTAL INVESTMENTS (COST $143,564,429)+ 100.00% $116,901,429 ======= ============ -------------- * Non-income producing security. ** Fair valued security. + Aggregate cost for Federal income tax purposes is $146,134,238. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 6,172,366 Excess of tax cost over value (35,405,175) ------------ $(29,232,809) ============ See accompanying notes to financial statements. 91 FEBRUARY 28, 2002 STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI AUSTRALIA AUSTRIA BELGIUM BRAZIL INDEX FUND INDEX FUND INDEX FUND INDEX FUND --------------- --------------- --------------- ---------------- ASSETS Investments, at cost ................................... $58,193,775 $11,204,892 $10,706,973 $ 81,911,991 ----------- ----------- ----------- ------------ Foreign currency, at cost .............................. $ 88,796 $ 2,281 $ 3,251 $ 8 ----------- ----------- ----------- ------------ Investments, at value (including securities on loan*) .. $60,838,564 $10,783,060 $ 8,908,585 $ 80,385,540 Foreign currency, at value ............................. 88,816 2,196 3,255 8 Cash ................................................... 24,111 8,604 15,558 168,514 Cash collateral for securities loaned (Note 5) ......... 2,635,100 3,946,300 80,385 -- Dividends receivable ................................... 186,186 -- 15,646 189,039 Interest receivable .................................... 627 553 82 31 Receivable for securities sold ......................... 267,193 344,812 166,606 1,587,986 Receivable for Fund shares sold ........................ -- -- -- 42,780,835 Prepaid expenses ....................................... -- -- -- -- ----------- ----------- ----------- ------------ Total assets ....................................... 64,040,597 15,085,525 9,190,117 125,111,953 ----------- ----------- ----------- ------------ LIABILITIES Payable for securities purchased ....................... 272,271 337,538 163,610 1,600,675 Liability for in-kind subscriptions .................... -- -- -- 42,448,222 Payable for securities loaned (Note 5) ................. 2,635,100 3,946,300 80,385 -- Payable for foreign withholding tax .................... -- -- -- -- Advisory fee payable ................................... 27,678 4,921 4,289 19,023 Administration fee payable ............................. -- -- -- -- Distribution fee payable ............................... 11,715 2,081 1,726 6,426 Custody fee payable .................................... 3,354 1,536 342 41,691 Accrued expenses ....................................... 6,966 7,256 6,847 6,447 ----------- ----------- ----------- ------------ Total liabilities .................................. 2,957,084 4,299,632 257,199 44,122,484 ----------- ----------- ----------- ------------ NET ASSETS Capital stock, $0.001 par value ........................ 6,400 1,400 840 6,150 Paid-in capital ........................................ 66,428,398 14,099,249 13,568,071 85,775,089 Undistributed net investment income/(loss) ............. 350,649 (41,258) (182,880) 32,436 Undistributed net realized gain/(loss) on investments .. (8,347,207) (2,851,548) (2,654,724) (3,298,551) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ 2,645,273 (421,950) (1,798,389) (1,525,655) ----------- ----------- ----------- ------------ Net Assets ............................................. $61,083,513 $10,785,893 $ 8,932,918 $ 80,989,469 =========== =========== =========== ============ Shares of common stock issued and outstanding (Note 4) . 6,400,030 1,400,030 840,030 6,150,000 =========== =========== =========== ============ Net Asset Value Per Share .............................. $ 9.54 $ 7.70 $ 10.63 $ 13.17 =========== =========== =========== ============ ----------------------------------------------------------------------------------------------------------------------------------- * Securities on loan with market values of: .............. $ 2,475,413 $ 3,893,455 $ 75,479 $ -- ----------------------------------------------------------------------------------------------------------------------------------- iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI CANADA EMU FRANCE GERMANY INDEX FUND INDEX FUND INDEX FUND INDEX FUND -------------- ---------------- --------------- ---------------- ASSETS Investments, at cost ................................... $30,866,277 $109,901,658 $66,422,715 $158,307,484 ----------- ------------ ----------- ------------ Foreign currency, at cost .............................. $ 34,983 $ 143,008 $ 30,255 $ 72,958 ----------- ------------ ----------- ------------ Investments, at value (including securities on loan*) .. $25,547,193 $ 89,038,527 $57,145,218 $110,204,381 Foreign currency, at value ............................. 34,768 143,006 30,255 72,294 Cash ................................................... 16,496 20,940 68,256 161,031 Cash collateral for securities loaned (Note 5) ......... 1,088,453 -- 6,185,593 43,062,506 Dividends receivable ................................... 27,034 148,011 49,808 343,608 Interest receivable .................................... 405 12 1,128 4,822 Receivable for securities sold ......................... 232,337 -- -- -- Receivable for Fund shares sold ........................ -- -- -- -- Prepaid expenses ....................................... -- -- -- -- ----------- ------------ ----------- ------------ Total assets ....................................... 26,946,686 89,350,496 63,480,258 153,848,642 ----------- ------------ ----------- ------------ LIABILITIES Payable for securities purchased ....................... 227,035 -- -- -- Liability for in-kind subscriptions .................... -- -- -- -- Payable for securities loaned (Note 5) ................. 1,088,453 -- 6,185,593 43,062,506 Payable for foreign withholding tax .................... -- -- -- -- Advisory fee payable ................................... 11,497 39,834 24,238 47,789 Administration fee payable ............................. -- -- -- -- Distribution fee payable ............................... 4,868 16,861 10,260 20,232 Custody fee payable .................................... 2,095 13,734 5,467 9,202 Accrued expenses ....................................... 6,704 1,946 6,288 14,557 ----------- ------------ ----------- ------------ Total liabilities .................................. 1,340,652 72,375 6,231,846 43,154,286 ----------- ------------ ----------- ------------ NET ASSETS Capital stock, $0.001 par value ........................ 2,400 1,700 3,201 7,801 Paid-in capital ........................................ 32,029,797 116,342,540 70,722,935 177,335,643 Undistributed net investment income/(loss) ............. 48,766 (221,809) (233,555) (319,038) Undistributed net realized gain/(loss) on investments .. (1,153,550) (5,981,043) (3,965,889) (18,210,103) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ........ (5,321,379) (20,863,267) (9,278,280) (48,119,947) ----------- ------------ ----------- ------------ Net Assets ............................................. $25,606,034 $ 89,278,121 $57,248,412 $110,694,356 =========== ============ =========== ============ Shares of common stock issued and outstanding (Note 4) . 2,400,030 1,700,000 3,201,000 7,801,000 =========== ============ =========== ============ Net Asset Value Per Share .............................. $ 10.67 $ 52.52 $ 17.88 $ 14.19 =========== ============ =========== ============ ---------------------------------------------------------------------------------------------------------------------------------- * Securities on loan with market values of: .............. $ 1,044,146 $ -- $ 5,907,347 $ 41,596,889 ---------------------------------------------------------------------------------------------------------------------------------- iSHARES MSCI iSHARES MSCI iSHARES MSCI HONG KONG ITALY JAPAN INDEX FUND INDEX FUND INDEX FUND ---------------- --------------- --------------- ASSETS Investments, at cost ............................... $ 68,836,588 $36,835,973 $ 625,761,837 ------------ ----------- ------------- Foreign currency, at cost .......................... $ 116,572 $ 4,233 $ 686,596 ------------ ----------- ------------- Investments, at value (including securities on loan*) $ 64,931,831 $30,463,332 $ 420,878,093 Foreign currency, at value ......................... 116,564 4,104 686,724 Cash ............................................... 22,788 29,121 146,276 Cash collateral for securities loaned (Note 5) ..... 5,099,082 13,459,672 78,053,421 Dividends receivable ............................... 44,855 -- 182,995 Interest receivable ................................ 1,537 6,925 12,504 Receivable for securities sold ..................... -- 538,605 -- Receivable for Fund shares sold .................... -- -- -- Prepaid expenses ................................... -- -- -- ------------ ----------- ------------- Total assets ................................... 70,216,657 44,501,759 499,960,013 ------------ ----------- ------------- LIABILITIES Payable for securities purchased ................... -- 506,711 -- Liability for in-kind subscriptions ................ -- -- -- Payable for securities loaned (Note 5) ............. 5,099,082 13,459,672 78,053,421 Payable for foreign withholding tax ................ -- -- -- Advisory fee payable ............................... 30,222 13,499 184,764 Administration fee payable ......................... -- -- -- Distribution fee payable ........................... 12,799 5,716 78,118 Custody fee payable ................................ 11,333 2,369 29,608 Accrued expenses ................................... 12,332 6,350 35,995 ------------ ----------- ------------- Total liabilities .............................. 5,165,768 13,994,317 78,381,906 ------------ ----------- ------------- NET ASSETS Capital stock, $0.001 par value .................... 7,501 1,950 56,401 Paid-in capital .................................... 80,081,211 40,903,485 702,062,128 Undistributed net investment income/(loss) ......... (62,932) (88,792) (1,139,104) Undistributed net realized gain/(loss) on investments (11,070,126) (3,936,464) (74,515,359) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .... (3,904,765) (6,372,737) (204,885,959) ------------ ----------- ------------- Net Assets ......................................... $ 65,050,889 $30,507,442 $ 421,578,107 ============ =========== ============= Shares of common stock issued and outstanding (Note 4) 7,501,000 1,950,030 56,401,000 ============ =========== ============= Net Asset Value Per Share .......................... $ 8.67 $ 15.64 $ 7.47 ============ =========== ============= ----------------------------------------------------------------------------------------------------------------- * Securities on loan with market values of: .......... $ 4,463,373 $12,844,097 $ 73,748,391 -----------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 92-93 FEBRUARY 28, 2002 STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) (concluded) --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI MALAYSIA MEXICO NETHERLANDS PACIFIC EX-JAPAN INDEX FUND INDEX FUND INDEX FUND INDEX FUND ---------------- ---------------- -------------- ---------------- ASSETS Investments, at cost ............................... $ 50,830,517 $112,444,627 $27,551,412 $36,274,637 ------------ ------------ ----------- ----------- Foreign currency, at cost .......................... $ 117,422 $ 80,382 $ 2,906 $ 20,439 ------------ ------------ ----------- ----------- Investments, at value (including securities on loan*) $ 74,322,374 $111,189,067 $21,629,881 37,994,980 Foreign currency, at value ......................... 117,422 80,668 2,811 20,438 Cash ............................................... 163,990 116,056 14,185 72,132 Cash collateral for securities loaned (Note 5) ..... -- 15,567,114 -- -- Dividends receivable ............................... 101,883 334 2,262 48,706 Interest receivable ................................ 31 9,882 -- 4 Receivable for securities sold ..................... -- 853,288 877,398 -- Receivable for Fund shares sold .................... -- 17,501,341 -- 10,904,357 Prepaid expenses ................................... -- -- -- -- ------------ ------------ ----------- ----------- Total assets ................................... 74,705,700 145,317,750 22,526,537 49,040,617 ------------ ------------ ----------- ----------- LIABILITIES Payable for securities purchased ................... -- 847,844 862,403 -- Liability for in-kind subscriptions ................ -- 17,472,254 -- 10,857,430 Payable for securities loaned (Note 5) ............. -- 15,567,114 -- -- Payable for foreign withholding tax ................ -- -- -- -- Advisory fee payable ............................... 34,144 30,958 9,699 8,021 Administration fee payable ......................... -- -- -- -- Distribution fee payable ........................... 14,448 13,110 4,106 -- Custody fee payable ................................ 4,859 24,250 1,618 22,097 Accrued expenses ................................... 8,501 7,174 8,427 15,866 ------------ ------------ ----------- ----------- Total liabilities .............................. 61,952 33,962,704 886,253 10,903,414 ------------ ------------ ----------- ----------- NET ASSETS Capital stock, $0.001 par value .................... 13,725 7,000 1,301 700 Paid-in capital .................................... 74,746,396 113,895,910 31,745,550 35,643,819 Undistributed net investment income/(loss) ......... 107,400 18,010 (77,468) 21,123 Undistributed net realized gain/(loss) on investments (23,715,630) (1,310,582) (4,106,816) 751,093 Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .... 23,491,857 (1,255,292) (5,922,283) 1,720,468 ------------ ------------ ----------- ----------- Net Assets ......................................... $ 74,643,748 $111,355,046 $21,640,284 $38,137,203 ============ ============ =========== =========== Shares of common stock issued and outstanding (Note 4) 13,725,030 7,000,030 1,301,000 700,000 ============ ============ =========== =========== Net Asset Value Per Share .......................... $ 5.44 $ 15.91 $ 16.63 $ 54.48 ============ ============ =========== =========== -------------------------------------------------------------------------------------------------------------------------------- * Securities on loan with market values of: .......... $ -- $ 14,033,017 $ -- $ -- -------------------------------------------------------------------------------------------------------------------------------- iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI SINGAPORE SOUTH KOREA SPAIN SWEDEN INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------- --------------- -------------- -------------- ASSETS Investments, at cost ............................... $ 95,612,685 $64,442,845 $22,896,939 $14,356,714 ------------ ----------- ----------- ----------- Foreign currency, at cost .......................... $ 173,652 $ 1 $ 75,638 $ 8,924 ------------ ----------- ----------- ----------- Investments, at value (including securities on loan*) $ 90,128,802 $90,460,147 $17,745,250 $10,652,835 Foreign currency, at value ......................... 173,757 1 74,774 9,099 Cash ............................................... 34,151 2,318 6,368 9,340 Cash collateral for securities loaned (Note 5) ..... 10,580,494 -- 3,282,378 3,401,101 Dividends receivable ............................... -- 309,841 20,188 -- Interest receivable ................................ 2,767 20 920 574 Receivable for securities sold ..................... -- -- -- 33,952 Receivable for Fund shares sold .................... -- 1,046,855 -- -- Prepaid expenses ................................... 219 -- -- -- ------------ ----------- ----------- ----------- Total assets ................................... 100,920,190 91,819,182 21,129,878 14,106,901 ------------ ----------- ----------- ----------- LIABILITIES Payable for securities purchased ................... -- 1,017,484 -- 31,761 Liability for in-kind subscriptions ................ -- -- -- -- Payable for securities loaned (Note 5) ............. 10,580,494 -- 3,282,378 3,401,101 Payable for foreign withholding tax ................ -- 8,060 -- -- Advisory fee payable ............................... 17,032 47,598 7,883 4,684 Administration fee payable ......................... 10,687 -- -- -- Distribution fee payable ........................... 17,354 16,083 3,335 1,984 Custody fee payable ................................ 24,654 15,635 4,023 752 Accrued expenses ................................... 35,504 3,307 6,244 6,542 ------------ ----------- ----------- ----------- Total liabilities .............................. 10,685,725 1,108,167 3,303,863 3,446,824 ------------ ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value .................... 16,600 4,350 900 825 Paid-in capital .................................... 104,837,440 68,212,592 26,579,522 19,425,785 Undistributed net investment income/(loss) ......... (471,130) (23,629) 56,485 (46,887) Undistributed net realized gain/(loss) on investments (8,664,666) (3,500,824) (3,657,659) (5,015,947) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .... (5,483,779) 26,018,526 (5,153,233) (3,703,699) ------------ ----------- ----------- ----------- Net Assets ......................................... $ 90,234,465 $90,711,015 $17,826,015 $10,660,077 ============ =========== =========== =========== Shares of common stock issued and outstanding (Note 4) 16,600,030 4,350,000 900,030 825,030 ============ =========== =========== =========== Net Asset Value Per Share .......................... $ 5.44 $ 20.85 $ 19.81 $ 12.92 ============ =========== =========== =========== ----------------------------------------------------------------------------------------------------------------------------------- * Securities on loan with market values of: $ 9,888,877 $ -- $ 3,111,146 $ 3,211,370 ----------------------------------------------------------------------------------------------------------------------------------- iSHARES MSCI iSHARES MSCI iSHARES MSCI SWITZERLAND TAIWAN UNITED KINGDOM INDEX FUND INDEX FUND INDEX FUND -------------- -------------- ---------------- ASSETS Investments, at cost ............................... $36,075,652 $168,440,657 $143,564,429 ----------- ------------ ------------ Foreign currency, at cost .......................... $ 39,315 $ 23,174 $ 73,556 ----------- ------------ ------------ Investments, at value (including securities on loan*) $30,353,810 $159,807,619 $116,901,429 Foreign currency, at value ......................... 38,120 23,068 72,689 Cash ............................................... 12,761 75,872 66,418 Cash collateral for securities loaned (Note 5) ..... -- -- -- Dividends receivable ............................... 232,083 -- 488,389 Interest receivable ................................ 206 46 8 Receivable for securities sold ..................... 1,153,147 -- -- Receivable for Fund shares sold .................... -- -- -- Prepaid expenses ................................... -- -- -- ----------- ------------ ------------ Total assets ................................... 31,790,127 159,906,605 117,528,933 ----------- ------------ ------------ LIABILITIES Payable for securities purchased ................... 1,143,491 -- -- Liability for in-kind subscriptions ................ -- -- -- Payable for securities loaned (Note 5) ............. -- -- -- Payable for foreign withholding tax ................ -- -- -- Advisory fee payable ............................... 13,732 89,658 53,621 Administration fee payable ......................... -- -- -- Distribution fee payable ........................... 5,811 31,482 22,689 Custody fee payable ................................ 1,694 31,935 2,989 Accrued expenses ................................... 5,912 -- 7,013 ----------- ------------ ------------ Total liabilities .............................. 1,170,640 153,075 86,312 ----------- ------------ ------------ NET ASSETS Capital stock, $0.001 par value .................... 2,501 14,900 8,401 Paid-in capital .................................... 39,671,504 187,170,827 159,050,912 Undistributed net investment income/(loss) ......... (124,513) (664,677) 522,839 Undistributed net realized gain/(loss) on investments (3,195,693) (18,134,376) (15,473,345) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .... (5,734,312) (8,633,144) (26,666,186) ----------- ------------ ------------ Net Assets $30,619,487 $159,753,530 $117,442,621 =========== ============ ============ Shares of common stock issued and outstanding (Note 4) 2,501,000 14,900,000 8,401,000 =========== ============ ============ Net Asset Value Per Share ........................... $ 12.24 $ 10.72 $ 13.98 =========== ============ ============ -------------------------------------------------------------------------------------------------------------- * Securities on loan with market values of: $ -- $ -- $ -- --------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 94-95 FOR THE SIX MONTHS ENDED FEBRUARY 28, 2002 STATEMENTS OF OPERATIONS (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI AUSTRALIA AUSTRIA BELGIUM BRAZIL INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------- ------------- ------------ INVESTMENT INCOME: Dividends+ ......................................... $ 894,378 $ -- $ 10,736 $ 328,029 Interest ........................................... 1,039 393 109 -- Securities lending income .......................... 2,760 3,155 1,863 -- ---------- --------- --------- ---------- Total investment income .......................... 898,177 3,548 12,708 328,029 ---------- --------- --------- ---------- EXPENSES: (NOTE 2) Advisory fees ...................................... 100,150 7,220 7,457 39,315 Administration fees ................................ 29,879 5,345 4,722 8,478 Distribution fees .................................. 72,151 12,763 11,163 26,448 Custodian fees and expenses ........................ 11,214 4,629 1,642 14,318 Transfer agent fees ................................ 4,907 3,491 3,464 2,103 Directors' fees .................................... 2,774 497 439 783 Professional fees .................................. 13,903 7,302 7,132 8,067 Federal and state registration fees ................ 431 -- -- 2,524 Insurance .......................................... 1,379 290 238 478 Printing ........................................... 2,358 422 373 665 Amex listing fee ................................... 183 33 29 52 Interest expense ................................... 1,187 85 115 133 Miscellaneous expenses ............................. 1,911 806 735 1,370 ---------- --------- --------- ---------- Total expenses ................................... 242,427 42,883 37,509 104,734 ---------- --------- --------- ---------- Net investment income/(loss) ....................... 655,750 (39,335) (24,801) 223,295 ---------- --------- --------- ---------- 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 ............ (79,200) (55,761) (182,649) (836,782) Net realized gain/(loss) on investments on in-kind redemptions .............................. -- -- -- -- Net realized gain/(loss) on foreign currency related transactions ............................. (25,568) 482 (2,669) (16,132) ---------- --------- --------- ---------- (104,768) (55,279) (185,318) (852,914) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .... 1,675,175 (566,820) (715,842) 5,584,106 ---------- --------- --------- ---------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................ 1,570,407 (622,099) (901,160) 4,731,192 ---------- --------- --------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................................. $2,226,157 $(661,434) $(925,961) $4,954,487 ========== ========= ========= ========== ----------------------------------------------------------------------------------------------------------------------------------- + Net of foreign withholding tax of: ................. $ 10,911 $ -- $ 1,895 $ 42,262 ----------------------------------------------------------------------------------------------------------------------------------- iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI CANADA EMU FRANCE GERMANY INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------ ------------- ------------- ------------- INVESTMENT INCOME: Dividends+ ......................................... $ 174,625 $ 151,431 $ -- $ 137,711 Interest ........................................... -- 1,588 -- 1,050 Securities lending income .......................... 2,750 -- 4,246 21,741 --------- ----------- ----------- ----------- Total investment income .......................... 177,375 153,019 4,246 160,502 --------- ----------- ----------- ----------- EXPENSES: (NOTE 2) Advisory fees ...................................... 38,233 154,657 92,038 195,463 Administration fees ................................ 13,064 44,181 28,356 55,230 Distribution fees .................................. 31,134 106,216 67,031 131,778 Custodian fees and expenses ........................ 4,012 18,033 9,498 14,274 Transfer agent fees ................................ 4,078 2,468 6,266 10,359 Directors' fees .................................... 1,214 4,103 2,634 5,130 Professional fees .................................. 9,380 17,774 13,521 20,783 Federal and state registration fees ................ -- -- -- -- Insurance .......................................... 499 1,342 1,815 3,760 Printing ........................................... 1,031 3,488 2,239 4,361 Amex listing fee ................................... 80 271 174 338 Interest expense ................................... 207 699 449 874 Miscellaneous expenses ............................. 1,677 3,653 1,204 424 --------- ----------- ----------- ----------- Total expenses ................................... 104,609 356,885 225,225 442,774 --------- ----------- ----------- ----------- Net investment income/(loss) ....................... 72,766 (203,866) (220,979) (282,272) --------- ----------- ----------- ----------- 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 ............ (96,304) (310,287) (23,655) (319,987) Net realized gain/(loss) on investments on in-kind redemptions .............................. 472,940 -- -- (907,285) Net realized gain/(loss) on foreign currency related transactions ............................. (3,508) (11,429) (17,892) (6,648) --------- ----------- ----------- ----------- 373,128 (321,716) (41,547) (1,233,920) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .... (496,640) (6,346,672) (4,548,518) (6,271,019) --------- ----------- ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................ (123,512) (6,668,388) (4,590,065) (7,504,939) --------- ----------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................................. $ (50,746) $(6,872,254) $(4,811,044) $(7,787,211) ========= =========== =========== =========== ----------------------------------------------------------------------------------------------------------------------------------- + Net of foreign withholding tax of: ................. $ 30,816 $ 18,258 $ 19,550 $ 12,242 ----------------------------------------------------------------------------------------------------------------------------------- iSHARES MSCI iSHARES MSCI iSHARES MSCI HONG KONG ITALY JAPAN INDEX FUND INDEX FUND INDEX FUND ------------- ------------- ------------- INVESTMENT INCOME: Dividends+ ......................................... $ 555,302 $ 8,659 $ 1,608,884 Interest ........................................... 290 328 958 Securities lending income .......................... 7,176 38,814 107,321 ----------- ----------- ------------ Total investment income .......................... 562,768 47,801 1,717,163 ----------- ----------- ------------ EXPENSES: (NOTE 2) Advisory fees ...................................... 96,909 46,463 902,498 Administration fees ................................ 27,994 16,132 266,690 Distribution fees .................................. 70,995 37,995 599,161 Custodian fees and expenses ........................ 9,128 6,176 44,537 Transfer agent fees ................................ 10,638 4,384 37,957 Directors' fees .................................... 2,596 1,499 24,810 Professional fees .................................. 13,350 10,213 78,415 Federal and state registration fees ................ 970 -- 4,985 Insurance .......................................... 1,658 976 16,463 Printing ........................................... 2,207 1,274 21,088 Amex listing fee ................................... 171 99 1,635 Interest expense ................................... 442 255 4,229 Miscellaneous expenses ............................. 1,484 2,196 10,714 ----------- ----------- ------------ Total expenses ................................... 238,542 127,662 2,013,182 ----------- ----------- ------------ Net investment income/(loss) ....................... 324,226 (79,861) (296,019) ----------- ----------- ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ............ (1,028,275) (524,052) (2,646,827) Net realized gain/(loss) on investments on in-kind redemptions .............................. -- -- (3,372,597) Net realized gain/(loss) on foreign currency related transactions ............................. (60) (2,537) (151,866) ----------- ----------- ------------ (1,028,335) (526,589) (6,171,290) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .... (606,428) (3,567,997) (91,090,088) ----------- ----------- ------------ Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................ (1,634,763) (4,094,586) (97,261,378) ----------- ----------- ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................................. $(1,310,537) $(4,174,447) $(97,557,397) =========== =========== ============ -------------------------------------------------------------------------------------------------------------- + Net of foreign withholding tax of: ................. $ -- $ 1,528 $ 283,921 --------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. 96-97 FOR THE SIX MONTHS ENDED FEBRUARY 28, 2002 STATEMENTS OF OPERATIONS (Unaudited) (concluded) iSHARES, INC. --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI MALAYSIA MEXICO NETHERLANDS PACIFIC EX-JAPAN INDEX FUND INDEX FUND INDEX FUND INDEX FUND* ------------ ------------- ------------- ---------------- INVESTMENT INCOME: Dividends+ ............................................... $ 818,596 $ 216,386 $ 30,548 $ 197,847 Interest ................................................. 1,598 -- 337 68 Securities lending income ................................ -- 46,375 828 -- ----------- ----------- ----------- ----------- Total investment income ................................ 820,194 262,761 31,713 197,915 ----------- ----------- ----------- ----------- EXPENSES: (NOTE 2) Advisory fees ............................................ 118,675 62,138 30,181 10,886 Administration fees ...................................... 37,136 20,157 11,301 7,172 Distribution fees ........................................ 88,802 52,811 26,707 -- Custodian fees and expenses .............................. 19,315 21,503 4,345 2,178 Transfer agent fees ...................................... 9,327 5,033 4,031 1,364 Directors' fees .......................................... 3,456 1,875 1,050 650 Professional fees ........................................ 15,972 11,346 8,908 4,872 Federal and state registration fees ...................... -- -- -- 5,952 Insurance ................................................ 1,779 1,242 855 6,861 Printing ................................................. 2,938 1,594 892 552 Amex listing fee ......................................... 228 124 69 43 Interest expense ......................................... 589 482 179 111 Miscellaneous expenses ................................... 159 (861) 1,216 1,151 ----------- ----------- ----------- ----------- Total expenses ......................................... 298,376 177,444 89,734 41,792 ----------- ----------- ----------- ----------- Net investment income/(loss) ............................. 521,818 85,317 (58,021) 156,123 ----------- ----------- ----------- ----------- 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 .................. 107,698 (1,294,441) (734,205) 43,494 Net realized gain/(loss) on investments on in-kind redemptions .................................... -- 1,038,984 -- 707,836 Net realized gain/(loss) on foreign currency related transactions ................................... 135 (630) 4,071 (237) ----------- ----------- ----------- ----------- 107,833 (256,087) (730,134) 751,093 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .......... 3,230,335 212,575 (1,703,598) 1,720,468 ----------- ----------- ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ...................... 3,338,168 (43,512) (2,433,732) 2,471,561 ----------- ----------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $ 3,859,986 $ 41,805 $(2,491,753) $ 2,627,684 =========== =========== =========== =========== ------------------------------------------------------------------------------------------------------------------------------------ + Net of foreign withholding tax of: ....................... $ -- $ 18,033 $ 5,391 $ 1,161 ------------------------------------------------------------------------------------------------------------------------------------ iSHARES MSCI iSHARES MSCI iSHARES MSCI iSHARES MSCI SINGAPORE SOUTH KOREA SPAIN SWEDEN INDEX FUND INDEX FUND INDEX FUND INDEX FUND ------------- -------------- ------------- ------------- INVESTMENT INCOME: Dividends+ ............................................... $ 406,177 $ 300,558 $ 157,074 $ -- Interest ................................................. 232 520 611 78 Securities lending income ................................ 26,443 -- 7,163 2,501 ----------- ------------ ----------- ----------- Total investment income ................................ 432,852 301,078 164,848 2,579 ----------- ------------ ----------- ----------- EXPENSES: (NOTE 2) Advisory fees ............................................ 78,593 132,793 31,334 8,518 Administration fees ...................................... 56,394 24,489 13,298 5,348 Distribution fees ........................................ 90,597 71,458 28,880 12,854 Custodian fees and expenses .............................. 20,219 28,260 4,650 2,892 Transfer agent fees ...................................... 19,006 2,258 4,609 3,755 Directors' fees .......................................... 5,173 2,259 1,234 496 Professional fees ........................................ 22,938 12,215 9,432 7,284 Federal and state registration fees ...................... 1,365 4,644 -- -- Insurance ................................................ 2,025 578 771 337 Printing ................................................. 4,397 1,920 1,049 421 Amex listing fee ......................................... 341 149 81 33 Interest expense ......................................... 1,045 385 292 85 Miscellaneous expenses ................................... 2,314 1,565 1,406 1,168 ----------- ------------ ----------- ----------- Total expenses ......................................... 304,407 282,973 97,036 43,191 ----------- ------------ ----------- ----------- Net investment income/(loss) ............................. 128,445 18,105 67,812 (40,612) ----------- ------------ ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments .................. (3,265,216) 196,447 (558,239) $(1,494,698) Net realized gain/(loss) on investments on in-kind redemptions .................................... -- -- (732,413) -- Net realized gain/(loss) on foreign currency related transactions ................................... (4,573) (18,731) (9,710) (244) ----------- ------------ ----------- ----------- (3,269,789) 177,716 (1,300,362) (1,494,942) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .......... 5,431,928 28,345,766 (591,151) 1,565,641 ----------- ------------ ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ...................... 2,162,139 28,523,482 (1,891,513) 70,699 ----------- ------------ ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $ 2,290,584 $ 28,541,587 $(1,823,701) $ 30,087 =========== ============ =========== =========== ----------------------------------------------------------------------------------------------------------------------------------- + Net of foreign withholding tax of: ....................... $ -- $ 69,044** $ 28,534 $ -- ----------------------------------------------------------------------------------------------------------------------------------- iSHARES MSCI iSHARES MSCI iSHARES MSCI SWITZERLAND TAIWAN UNITED KINGDOM INDEX FUND INDEX FUND INDEX FUND ------------- ------------- -------------- INVESTMENT INCOME: Dividends+ ............................................... $ 10,931 $ (17,207) $ 2,798,987 Interest ................................................. 174 3,420 8,258 Securities lending income ................................ 359 -- -- ----------- ------------ ----------- Total investment income ................................ 11,464 (13,787) 2,807,245 ----------- ------------ ----------- EXPENSES: (NOTE 2) Advisory fees ............................................ 47,918 292,241 224,373 Administration fees ...................................... 16,167 59,755 61,785 Distribution fees ........................................ 38,129 161,337 146,557 Custodian fees and expenses .............................. 5,841 80,718 7,279 Transfer agent fees ...................................... 4,386 2,068 8,493 Directors' fees .......................................... 1,502 5,528 5,736 Professional fees ........................................ 10,221 21,635 22,505 Federal and state registration fees ...................... -- 5,092 2,064 Insurance ................................................ 936 2,534 3,245 Printing ................................................. 1,277 4,698 4,876 Amex listing fee ......................................... 99 364 378 Interest expense ......................................... 256 942 978 Miscellaneous expenses ................................... 1,381 1,982 4,162 ----------- ------------ ----------- Total expenses ......................................... 128,113 638,894 492,431 ----------- ------------ ----------- Net investment income/(loss) ............................. (116,649) (652,681) 2,314,814 ----------- ------------ ----------- 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 .................. (578,564) (1,649,287) (3,147,588) Net realized gain/(loss) on investments on in-kind redemptions .................................... -- -- -- Net realized gain/(loss) on foreign currency related transactions ................................... (1,009) 1,888 28,662 ----------- ------------ ----------- (579,573) (1,647,399) (3,118,926) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .......... (1,056,123) 28,157,172 (6,423,346) ----------- ------------ ----------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ...................... (1,635,696) 26,509,773 (9,542,272) ----------- ------------ ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $(1,752,345) $ 25,857,092 $(7,227,458) =========== ============ =========== -------------------------------------------------------------------------------------------------------------------- + Net of foreign withholding tax of: ....................... $ -- $ 48,755** $ 129,039 -------------------------------------------------------------------------------------------------------------------- * For the period October 26, 2001 (commencement of operations) through February 28, 2002. ** Includes foreign taxes paid on stock dividends of $8,060 and $43,193 for the iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, respectively. See Note 1.
See accompanying notes to financial statements. 98-99 STATEMENTS OF CHANGES IN NET ASSETS iSHARES, INC. --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI AUSTRALIA AUSTRIA BELGIUM INDEX FUND INDEX FUND INDEX FUND -------------------------- ------------------------- ----------------------- For the For the For the six months For the six months For the six months For the ended year ended year ended year 02/28/02 ended 02/28/02 ended 02/28/02 ended (Unaudited) 08/31/01 (Unaudited) 08/31/01 (Unaudited) 08/31/01 ----------- ------------ ----------- ----------- ---------- ----------- OPERATIONS: Net investment income/(loss) ......... $ 655,750 $ 1,387,393 $ (39,335) $ 185,591 $ (24,801) $ 171,751 Net realized gain/(loss) on investments and foreign currency related transactions ............... (104,768) (4,317,217) (55,279) (1,417,564) (185,318) (1,848,423) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .. 1,675,175 188,166 (566,820) 2,129,043 (715,842) 527,758 ----------- ------------ ----------- ----------- ---------- ----------- Net increase/(decrease) in net assets resulting from operations ... 2,226,157 (2,741,658) (661,434) 897,070 (925,961) (1,148,914) ----------- ------------ ----------- ----------- ---------- ----------- Undistributed net investment income included in the price of Capital Shares issued or redeemed .......... 6,013 89,256 -- -- -- (1,658) ----------- ------------ ----------- ----------- ---------- ----------- DISTRIBUTIONS: Net investment income ................... (256,001) (1,236,366) -- (185,591) (58,802) (171,751) In excess of net investment income ...... -- -- -- (4,555) -- (54,817) Net realized gains ...................... -- -- -- -- -- -- In excess of net realized gains ......... -- -- -- -- -- -- Return of capital ....................... -- (140,041) -- (258) -- -- ----------- ------------ ----------- ----------- ---------- ----------- Net decrease in net assets from distributions ......................... (256,001) (1,376,407) -- (190,404) (58,802) (226,568) ----------- ------------ ----------- ----------- ---------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ........ 1,795,574 13,148,099 -- -- -- -- Cost of shares redeemed ................. -- (13,382,010) -- -- -- (1,934,876) ----------- ------------ ----------- ----------- ---------- ----------- Net increase/(decrease) in net assets derived from capital share transactions .......................... 1,795,574 (233,911) -- -- -- (1,934,876) ----------- ------------ ----------- ----------- ---------- ----------- Total increase/(decrease) in net assets . 3,771,743 (4,262,720) (661,434) 706,666 (984,763) (3,312,016) NET ASSETS: Beginning of period ..................... 57,311,770 61,574,490 11,447,327 10,740,661 9,917,681 13,229,697 ----------- ------------ ----------- ----------- ---------- ----------- End of period ........................... $61,083,513 $ 57,311,770 $10,785,893 $11,447,327 $8,932,918 $ 9,917,681 =========== ============ =========== =========== ========== =========== Undistributed net investment income (loss) included in net assets at end of period ........................ $ 350,649 $ (49,100) $ (41,258) $ (1,923) $ (182,880) $ (99,277) =========== ============ =========== =========== ========== =========== Capital Share Transactions: Shares sold ............................. 200,000 1,400,000 -- -- -- -- Shares redeemed ......................... -- (1,400,000) -- -- -- (160,000) ----------- ------------ ----------- ----------- ---------- ----------- Net increase/(decrease) in shares ....... 200,000 -- -- -- -- (160,000) =========== ============ =========== =========== ========== =========== iSHARES MSCI iSHARES MSCI iSHARES MSCI BRAZIL CANADA EMU INDEX FUND INDEX FUND INDEX FUND --------------------------- -------------------------- --------------------------- For the For the For the six months For the six months For the six months For the ended year ended year ended year 02/28/02 ended 02/28/02 ended 02/28/02 ended (Unaudited) 08/31/01 (Unaudited) 08/31/01 (Unaudited) 08/31/01 ----------- ----------- ----------- ----------- ----------- ------------ OPERATIONS: Net investment income/(loss) ......... $ 223,295 $ 729,605 $ 72,766 $ 91,912 $ (203,866) $ 644,893 Net realized gain/(loss) on investments and foreign currency related transactions ............... (852,914) (1,935,015) 373,128 (795,189) (321,716) (5,658,041) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .. 5,584,106 (6,758,566) (496,640) (8,092,003) (6,346,672) (12,446,864) ----------- ----------- ----------- ----------- ----------- ------------ Net increase/(decrease) in net assets resulting from operations ... 4,954,487 (7,963,976) (50,746) (8,795,280) (6,872,254) (17,460,012) ----------- ----------- ----------- ----------- ----------- ------------ Undistributed net investment income included in the price of Capital Shares issued or redeemed .......... 298,959 124,481 (670) 92,157 6,013 429,359 ----------- ----------- ----------- ----------- ----------- ------------ DISTRIBUTIONS: Net investment income ................... -- (694,519) (24,000) (49,958) -- (644,893) In excess of net investment income ...... -- -- -- -- -- (19,828) Net realized gains ...................... -- -- -- -- -- -- In excess of net realized gains ......... -- -- -- (437,259) -- -- Return of capital ....................... -- (107,731) -- (94,894) -- (409,529) ----------- ----------- ----------- ----------- ----------- ------------ Net decrease in net assets from distributions ......................... -- (802,250) (24,000) (582,111) -- (1,074,250) ----------- ----------- ----------- ----------- ----------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ........ 61,732,461 4,362,129 -- 16,145,798 5,364,894 67,073,221 Cost of shares redeemed ................. -- -- (3,207,309) -- -- -- ----------- ----------- ----------- ----------- ----------- ------------ Net increase/(decrease) in net assets derived from capital share transactions .......................... 61,732,461 4,362,129 (3,207,309) 16,145,798 5,364,894 67,073,221 ----------- ----------- ----------- ----------- ----------- ------------ Total increase/(decrease) in net assets . 66,985,907 (4,279,616) (3,282,725) 6,860,564 (1,501,347) 48,968,318 NET ASSETS: Beginning of period ..................... 14,003,562 18,283,178 28,888,759 22,028,195 90,779,468 41,811,150 ----------- ----------- ----------- ----------- ----------- ------------ End of period ........................... $80,989,469 $14,003,562 $25,606,034 $28,888,759 $89,278,121 $ 90,779,468 =========== =========== =========== =========== =========== ============ Undistributed net investment income (loss) included in net assets at end of period ........................ $ 32,436 $ (190,859) $ 48,766 $ -- $ (221,809) $ (17,943) =========== =========== =========== =========== =========== ============ Capital Share Transactions: Shares sold ............................. 4,900,000 300,000 -- 1,400,000 100,000 1,050,000 Shares redeemed ......................... -- -- (300,000) -- -- -- ----------- ----------- ----------- ----------- ----------- ------------ Net increase/(decrease) in shares ....... 4,900,000 300,000 (300,000) 1,400,000 100,000 1,050,000 =========== =========== =========== =========== =========== ============ iSHARES MSCI FRANCE INDEX FUND ----------------------------- For the six months For the ended year 02/28/02 ended (Unaudited) 08/31/01 ----------- ------------ OPERATIONS: Net investment income/(loss) ......... $ (220,979) $ 217,520 Net realized gain/(loss) on investments and foreign currency related transactions ............... (41,547) (837,382) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies .. (4,548,518) (22,986,821) ----------- ------------ Net increase/(decrease) in net assets resulting from operations ... (4,811,044) (23,606,683) ----------- ------------ Undistributed net investment income included in the price of Capital Shares issued or redeemed .......... (81) (45,191) ----------- ------------ DISTRIBUTIONS: Net investment income ................... -- (142,265) In excess of net investment income ...... -- -- Net realized gains ...................... -- -- In excess of net realized gains ......... -- (19) Return of capital ....................... -- (27,369) ----------- ------------ Net decrease in net assets from distributions ......................... -- (169,653) ----------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ........ 3,457,611 4,945,074 Cost of shares redeemed ................. -- (17,637,726) ----------- ------------ Net increase/(decrease) in net assets derived from capital share transactions .......................... 3,457,611 (12,692,652) ----------- ------------ Total increase/(decrease) in net assets . (1,353,514) (36,514,179) NET ASSETS: Beginning of period ..................... 58,601,926 95,116,105 ----------- ------------ End of period ........................... $57,248,412 $ 58,601,926 =========== ============ Undistributed net investment income (loss) included in net assets at end of period ........................ $ (233,555) $ (12,576) =========== ============ Capital Share Transactions: Shares sold ............................. 200,000 200,000 Shares redeemed ......................... -- (800,000) ----------- ------------ Net increase/(decrease) in shares ....... 200,000 (600,000) =========== ============
See accompanying notes to financial statements. 100-101 STATEMENTS OF CHANGES IN NET ASSETS (continued) iSHARES, INC. --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI iSHARES MSCI GERMANY HONG KONG ITALY INDEX FUND INDEX FUND INDEX FUND ----------------------------- ----------------------------- --------------------------- For the For the For the six months For the six months For the six months For the ended year ended year ended year 02/28/02 ended 02/28/02 ended 02/28/02 ended (Unaudited) 08/31/01 (Unaudited) 08/31/01 (Unaudited) 08/31/01 ------------ ------------ ------------ ------------ ----------- ------------ OPERATIONS: Net investment income/(loss) ...... $ (282,272) $ 1,454,348 $ 324,226 $ 1,379,407 $ (79,861) $ 508,408 Net realized gain/(loss) on investments and foreign currency related transactions ............ (1,233,920) (13,695,531) (1,028,335) (3,303,349) (526,589) (2,023,718) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies (6,271,019) (29,186,710) (606,428) (22,064,345) (3,567,997) (6,548,102) ------------ ------------ ------------ ------------ ----------- ------------ Net increase/(decrease) in net assets resulting from operations (7,787,211) (41,427,893) (1,310,537) (23,988,287) (4,174,447) (8,063,412) ------------ ------------ ------------ ------------ ----------- ------------ Undistributed net investment income included in the price of Capital Shares issued or redeemed ....... 6,949 (156,509) 84,080 13,700 -- (1,915) ------------ ------------ ------------ ------------ ----------- ------------ DISTRIBUTIONS: Net investment income ............. -- (1,454,348) (387,060) (1,363,022) -- (475,208) In excess of net investment income -- (6,871) -- -- -- -- Net realized gains ................ -- -- -- -- -- -- In excess of net realized gains ... -- -- -- -- -- (136,605) Return of capital ................. -- (13,170) -- (34,163) -- (496) ------------ ------------ ------------ ------------ ----------- ------------ Net decrease in net assets from distributions ................... -- (1,474,389) (387,060) (1,397,185) -- (612,309) ------------ ------------ ------------ ------------ ----------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .. 8,624,868 23,229,591 13,718,314 2,395,228 -- 6,479,761 Cost of shares redeemed ........... (8,675,452) (15,132,997) -- (3,556,433) -- (13,128,653) ------------ ------------ ------------ ------------ ----------- ------------ Net increase/(decrease) in net assets derived from capital share transactions .................... (50,584) 8,096,594 13,718,314 (1,161,205) -- (6,648,892) ------------ ------------ ------------ ------------ ----------- ------------ Total increase/(decrease) in net assets .......................... (7,830,846) (34,962,197) 12,104,797 (26,532,977) (4,174,447) (15,326,528) NET ASSETS: Beginning of period ............... 118,525,202 153,487,399 52,946,092 79,479,069 34,681,889 50,008,417 ------------ ------------ ------------ ------------ ----------- ------------ End of period ..................... $110,694,356 $118,525,202 $ 65,050,889 $ 52,946,092 $30,507,442 $ 34,681,889 ============ ============ ============ ============ =========== ============ Undistributed net investment income (loss) included in net assets at end of period ................... $ (319,038) $ (36,766) $ (62,932) $ (98) $ (88,792) $ (8,931) ============ ============ ============ ============ =========== ============ Capital Share Transactions: Shares sold ....................... 600,000 1,200,000 1,575,000 225,000 -- 300,000 Shares redeemed ................... (600,000) (900,000) -- (300,000) -- (600,000) ------------ ------------ ------------ ------------ ----------- ------------ Net increase/(decrease) in shares . -- 300,000 1,575,000 (75,000) -- (300,000) ============ ============ ============ ============ =========== ============ iSHARES MSCI iSHARES MSCI JAPAN MALAYSIA INDEX FUND INDEX FUND ------------------------------ ----------------------------- For the For the six months For the six months For the ended year ended year 02/28/02 ended 02/28/02 ended (Unaudited) 08/31/01 (Unaudited) 08/31/01 ------------- ------------- ----------- ------------ OPERATIONS: Net investment income/(loss) ...... $ (296,019) $ (709,605) $ 521,818 $ 1,010,369 Net realized gain/(loss) on investments and foreign currency related transactions ............ (6,171,290) (57,092,192) 107,833 (13,093,046) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies (91,090,088) (218,815,571) 3,230,335 (3,810,341) ------------- ------------- ----------- ------------ Net increase/(decrease) in net assets resulting from operations (97,557,397) (276,617,368) 3,859,986 (15,893,018) ------------- ------------- ----------- ------------ Undistributed net investment income included in the price of Capital Shares issued or redeemed ....... (112,449) 191,307 (49,579) (142,105) ------------- ------------- ----------- ------------ DISTRIBUTIONS: Net investment income ............. -- -- (411,751) (1,010,369) In excess of net investment income -- -- -- (4,201) Net realized gains ................ -- -- -- -- In excess of net realized gains ... -- -- -- -- Return of capital ................. -- -- -- (3,031) ------------- ------------- ----------- ------------ Net decrease in net assets from distributions ................... -- -- (411,751) (1,017,601) ------------- ------------- ----------- ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .. 30,884,598 131,888,867 -- 13,044,226 Cost of shares redeemed ........... (39,535,378) (115,354,281) (9,632,374) (14,319,891) ------------- ------------- ----------- ------------ Net increase/(decrease) in net assets derived from capital share transactions .................... (8,650,780) 16,534,586 (9,632,374) (1,275,665) ------------- ------------- ----------- ------------ Total increase/(decrease) in net assets .......................... (106,320,626) (259,891,475) (6,233,718) (18,328,389) NET ASSETS: Beginning of period ............... 527,898,733 787,790,208 80,877,466 99,205,855 ------------- ------------- ----------- ------------ End of period ..................... $ 421,578,107 $ 527,898,733 $74,643,748 $ 80,877,466 ============= ============= =========== ============ Undistributed net investment income (loss) included in net assets at end of period ................... $ (1,139,104) $ (843,085) $ 107,400 $ (2,667) ============= ============= =========== ============ Capital Share Transactions: Shares sold ....................... 3,600,000 12,000,000 -- 2,550,000 Shares redeemed ................... (5,400,000) (10,800,000) (2,100,000) (3,375,000) ------------- ------------- ----------- ------------ Net increase/(decrease) in shares . (1,800,000) 1,200,000 (2,100,000) (825,000) ============= ============= =========== ============ iSHARES MSCI iSHARES MSCI iSHARES MSCI PACIFIC MEXICO NETHERLANDS EX-JAPAN INDEX FUND INDEX FUND INDEX FUND ----------------------------- ----------------------------- ------------- For the For the For the six months For the six months For the period ended year ended year 10/26/01*- 02/28/02 ended 02/28/02 ended 02/28/02 (Unaudited) 08/31/01 (Unaudited) 08/31/01 (Unaudited) ------------ ------------ ----------- ----------- ----------- OPERATIONS: Net investment income/(loss) ...... $ 85,317 $ 435,614 $ (58,021) $ 434,116 $ 156,123 Net realized gain/(loss) on investments and foreign currency related transactions ............ (256,087) 3,261,577 (730,134) (2,441,931) 751,093 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies 212,575 (6,058,723) (1,703,598) (4,686,056) 1,720,468 ------------ ------------ ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations 41,805 (2,361,532) (2,491,753) (6,693,871) 2,627,684 ------------ ------------ ----------- ----------- ----------- Undistributed net investment income included in the price of Capital Shares issued or redeemed ....... 185,222 85,413 -- (115,695) 57,825 ------------ ------------ ----------- ----------- ----------- DISTRIBUTIONS: Net investment income ............. (161,002) (430,999) (52,040) (369,484) (135,000) In excess of net investment income -- -- -- -- -- Net realized gains ................ -- (84,506) -- -- -- In excess of net realized gains ... -- -- -- -- -- Return of capital ................. -- -- -- -- -- ------------ ------------ ----------- ----------- ----------- Net decrease in net assets from distributions ................... (161,002) (515,505) (52,040) (369,484) (135,000) ------------ ------------ ----------- ----------- ----------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares .. 75,103,102 24,022,185 -- 8,897,360 41,178,548 Cost of shares redeemed ........... (9,869,588) (15,301,836) -- (8,147,509) (5,591,854) ------------ ------------ ----------- ----------- ---- ------- Net increase/(decrease) in net assets derived from capital share transactions .................... 65,233,514 8,720,349 -- 749,851 35,586,694 ------------ ------------ ----------- ----------- ----------- Total increase/(decrease) in net assets .......................... 65,299,539 5,928,725 (2,543,793) (6,429,199) 38,137,203 NET ASSETS: Beginning of period ............... 46,055,507 40,126,782 24,184,077 30,613,276 -- ------------ ------------ ----------- ----------- ----------- End of period ..................... $111,355,046 $ 46,055,507 $21,640,284 $24,184,077 $38,137,203 ============ ============ =========== =========== =========== Undistributed net investment income (loss) included in net assets at end of period ................... $ 18,010 $ 93,695 $ (77,468) $ 32,593 $ 21,123 ============ ============ =========== =========== =========== Capital Share Transactions: Shares sold ....................... 4,700,000 1,600,000 -- 400,000 800,000 Shares redeemed ................... (700,000) (1,000,000) -- (400,000) (100,000) ------------ ------------ ----------- ----------- ----------- Net increase/(decrease) in shares . 4,000,000 600,000 -- -- 700,000 ============ ============ =========== =========== =========== * Commencement of operations.
See accompanying notes to financial statements. 102-103 STATEMENTS OF CHANGES IN NET ASSETS (concluded) iSHARES, INC. --------------------------------------------------------------------------------
iSHARES MSCI iSHARES MSCI SINGAPORE SOUTH KOREA INDEX FUND INDEX FUND -------------------------------------- ------------------------------------ For the For the six months For the six months For the ended year ended year 02/28/02 ended 02/28/02 ended (Unaudited) 08/31/01 (Unaudited) 08/31/01 --------------- --------------- ------------- ------------- OPERATIONS: Net investment income/(loss) .......... $ 128,445 $ 756,108 $ 18,105 $ 123,192 Net realized gain/(loss) on investments and foreign currency related transactions ................ (3,269,789) (1,508,642) 177,716 (2,900,366) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... 5,431,928 (20,518,141) 28,345,766 (1,648,141) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations .... 2,290,584 (21,270,675) 28,541,587 (4,425,315) ------------ ------------ ------------ ------------ Undistributed net investment income included in the price of Capital Shares issued or redeemed ........... 55,036 255,605 4,041 196,369 ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ................. (596,000) (748,996) -- (99,405) In excess of net investment income .... -- -- -- -- Net realized gains .................... -- -- -- -- In excess of net realized gains ....... -- (632,262) -- -- Return of capital ..................... -- (255,146) -- (196,995) ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ....................... (596,000) (1,636,404) -- (296,400) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ...... 14,781,212 19,756,633 24,398,034 28,671,126 Cost of shares redeemed ............... -- (12,120,688) -- -- ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions ........................ 14,781,212 7,635,945 24,398,034 28,671,126 ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets 16,530,832 (15,015,529) 52,943,662 24,145,780 NET ASSETS: Beginning of period ................... 73,703,633 88,719,162 37,767,353 13,621,573 ------------ ------------ ------------ ------------ End of period ......................... $ 90,234,465 $ 73,703,633 $ 90,711,015 $ 37,767,353 ============ ============ ============ ============ Undistributed net investment income (loss) included in net assets at end of period ........................... $ (471,130) $ (3,575) $ (23,629) $ (41,734) ============ ============ ============ ============ Capital Share Transactions: Shares sold ........................... 2,800,000 3,900,000 1,500,000 2,100,000 Shares redeemed ....................... -- (1,800,000) -- -- ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ..... 2,800,000 2,100,000 1,500,000 2,100,000 ============ ============ ============ ============ iSHARES MSCI iSHARES MSCI SPAIN SWEDEN INDEX FUND INDEX FUND ------------------------------------ ------------------------------------ For the For the six months For the six months For the ended year ended year 02/28/02 ended 02/28/02 ended (Unaudited) 08/31/01 (Unaudited) 08/31/01 ------------- ------------- -------------- ------------- OPERATIONS: Net investment income/(loss) .......... $ 67,812 $ 280,132 $ (40,612) $ 65,472 Net realized gain/(loss) on investments and foreign currency related transactions ................ (1,300,362) (1,340,642) (1,494,942) (4,234,433) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... (591,151) (2,121,855) 1,565,641 (6,548,770) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations .... (1,823,701) (3,182,365) 30,087 (10,717,731) ------------ ------------ ------------ ------------ Undistributed net investment income included in the price of Capital Shares issued or redeemed ........... (44,594) (77,460) -- -- ------------ ------------ ------------ ------------ DISTRIBUTIONS: Net investment income ................. -- (206,976) -- (38,632) In excess of net investment income .... -- -- -- -- Net realized gains .................... -- -- -- -- In excess of net realized gains ....... -- -- -- -- Return of capital ..................... -- (854) -- (969) ------------ ------------ ------------ ------------ Net decrease in net assets from distributions ....................... -- (207,830) -- (39,601) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ...... -- 1,833,599 -- 6,947,144 Cost of shares redeemed ............... (7,503,243) (11,081,252) -- (9,334,138) ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets derived from capital share transactions ........................ (7,503,243) (9,247,653) -- (2,386,994) ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets (9,371,538) (12,715,308) 30,087 (13,144,326) NET ASSETS: Beginning of period ................... 27,197,553 39,912,861 10,629,990 23,774,316 ------------ ------------ ------------ ------------ End of period ......................... $ 17,826,015 $ 27,197,553 $ 10,660,077 $ 10,629,990 ============ ============ ============ ============ Undistributed net investment income (loss) included in net assets at end of period ........................... $ 56,485 $ (11,327) $ (46,887) $ (6,275) ============ ============ ============ ============ Capital Share Transactions: Shares sold ........................... -- 75,000 -- 375,000 Shares redeemed ....................... (375,000) (450,000) -- (525,000) ------------ ------------ ------------ ------------ Net increase/(decrease) in shares ..... (375,000) (375,000) -- (150,000) ============ ============ ============ ============ iSHARES MSCI iSHARES MSCI SWITZERLAND TAIWAN INDEX FUND INDEX FUND ------------------------------------ --------------------------------------- For the For the six months For the six months For the ended year ended year 02/28/02 ended 02/28/02 ended (Unaudited) 08/31/01 (Unaudited) 08/31/01 ------------- -------------- --------------- --------------- OPERATIONS: Net investment income/(loss) .......... $ (116,649) $ 118,440 $ (652,681) $ (220,980) Net realized gain/(loss) on investments and foreign currency related transactions ................ (579,573) (2,352,982) (1,647,399) (15,112,187) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... (1,056,123) (3,937,865) 28,157,172 (33,745,530) ------------ ------------ ------------- ------------- Net increase/(decrease) in net assets resulting from operations .... (1,752,345) (6,172,407) 25,857,092 (49,078,697) ------------ ------------ ------------- ------------- Undistributed net investment income included in the price of Capital Shares issued or redeemed ........... -- (9,105) 4,467 223,684 ------------ ------------ ------------- ------------- DISTRIBUTIONS: Net investment income ................. (12,505) (118,440) -- -- In excess of net investment income .... -- (21,900) -- -- Net realized gains .................... -- -- -- -- In excess of net realized gains ....... -- (94,754) -- -- Return of capital ..................... -- -- -- -- ------------ ------------ ------------- ------------- Net decrease in net assets from distributions ....................... (12,505) (235,094) -- -- ------------ ------------ ------------- ------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ...... -- 3,599,542 23,105,743 116,973,966 Cost of shares redeemed ............... -- (9,483,717) -- -- ------------ ------------ ------------- ------------- Net increase/(decrease) in net assets derived from capital share transactions ........................ -- (5,884,175) 23,105,743 116,973,966 ------------ ------------ ------------- ------------- Total increase/(decrease) in net assets (1,764,850) (12,300,781) 48,967,302 68,118,953 NET ASSETS: Beginning of period ................... 32,384,337 44,685,118 110,786,228 42,667,275 ------------ ------------ ------------- ------------- End of period ......................... $ 30,619,487 $ 32,384,337 $ 159,753,530 $ 110,786,228 ============ ============ ============= ============= Undistributed net investment income (loss) included in net assets at end of period ........................... $ (124,513) $ 4,641 $ (664,677) $ (11,996) ============ ============ ============= ============= Capital Share Transactions: Shares sold ........................... -- 250,000 2,600,000 9,700,000 Shares redeemed ....................... -- (625,000) -- -- ------------ ------------ ------------- ------------- Net increase/(decrease) in shares ..... -- (375,000) 2,600,000 9,700,000 ============ ============ ============= ============= iSHARES MSCI UNITED KINGDOM INDEX FUND --------------------------------------- For the six months For the ended year 02/28/02 ended (Unaudited) 08/31/01 --------------- ------------- OPERATIONS: Net investment income/(loss) .......... $ 2,314,814 $ 2,203,182 Net realized gain/(loss) on investments and foreign currency related transactions ................ (3,118,926) (13,297,209) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ... (6,423,346) (12,060,808) ------------- ------------- Net increase/(decrease) in net assets resulting from operations .... (7,227,458) (23,154,835) ------------- ------------- Undistributed net investment income included in the price of Capital Shares issued or redeemed ........... 19,118 (220,113) ------------- ------------- DISTRIBUTIONS: Net investment income ................. (1,848,220) (1,945,352) In excess of net investment income .... -- -- Net realized gains .................... -- -- In excess of net realized gains ....... -- (229,522) Return of capital ..................... -- -- ------------- ------------- Net decrease in net assets from distributions ....................... (1,848,220) (2,174,874) ------------- ------------- CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares ...... 8,616,447 37,621,726 Cost of shares redeemed ............... -- (40,991,871) ------------- ------------- Net increase/(decrease) in net assets derived from capital share transactions ........................ 8,616,447 (3,370,145) ------------- ------------- Total increase/(decrease) in net assets (440,113) (28,919,967) NET ASSETS: Beginning of period ................... 117,882,734 146,802,701 ------------- ------------- End of period ......................... $ 117,442,621 $ 117,882,734 ============= ============= Undistributed net investment income (loss) included in net assets at end of period ........................... $ 522,839 $ 56,245 ============= ============= Capital Share Transactions: Shares sold ........................... 600,000 2,200,000 Shares redeemed ....................... -- (2,400,000) ------------- ------------- Net increase/(decrease) in shares ..... 600,000 (200,000) ============= =============
See accompanying notes to financial statements. 104-105 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS iSHARES, INC. ------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI AUSTRALIA INDEX FUND ---------------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ........ $ 9.24 $ 9.93 $ 9.99 $ 7.75 $ 10.35 $ 10.15 ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) ............ 0.10 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 ........................ 0.24 (0.71) (0.04) 2.29 (2.60) 0.47 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ............. 0.34 (0.47) 0.19 2.49 (2.37) 0.64 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ........ (0.04) (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 ....... (0.04) (0.22) (0.25) (0.25) (0.23) (0.44) ------- ------- ------- ------- ------- ------- Net asset value, end of period .............. $ 9.54 $ 9.24 $ 9.93 $ 9.99 $ 7.75 $ 10.35 ======= ======= ======= ======== ======= ======= TOTAL INVESTMENT RETURN (1) ................... 3.69%(3) (4.77)% 1.84% 32.09% (23.11)% 6.23% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ........ $61,084 $57,312 $61,574 $53,957 $34,099 $41,406 Ratios of expenses to average net assets (4) 0.84%(2) 0.84% 0.95% 1.00% 1.05% 1.33% Ratios of net investment income/(loss) to average net assets (4) .................... 2.27%(2) 2.54% 2.22% 2.03% 2.38% 1.57% Portfolio turnover rate (5) ................. 2.29% 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) Annualized (3) Not Annualized (4) 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% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). iSHARES MSCI AUSTRIA INDEX FUND -------------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ........ $ 8.18 $ 7.67 $ 9.13 $ 10.11 $10.51 $10.40 ------- ------- ------- ------- ------ ------ Net investment income/(loss) (+) ............ (0.03) 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 ........................ (0.45) 0.52 (1.46) (0.98) 0.20 0.13 ------- ------- ------- ------- ------ ------ Net increase/(decrease) in net assets resulting from operations ............. (0.48) 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 .............. $ 7.70 $ 8.18 $ 7.67 $ 9.13 $10.11 $10.51 ======= ======= ======= ======= ====== ====== TOTAL INVESTMENT RETURN (1) ................... (5.87)%(3) 8.41% (15.51)% (8.69)% 2.16% 1.06% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ........ $10,786 $11,447 $10,741 $12,776 $8,085 $4,205 Ratios of expenses to average net assets (4) 0.84%(2) 0.84% 1.16% 1.31% 1.41% 1.68% Ratios of net investment income/(loss) to average net assets (4) .................... (0.77)%(2) 1.69% 0.51% 1.04% 0.51% (0.22)% Portfolio turnover rate (5) ................. 21.70% 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) Annualized (3) Not Annualized (4) 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)% (5) 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 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI BELGIUM INDEX FUND ----------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 .. $11.81 $13.23 $ 16.07 $ 18.40 $ 15.64 $ 14.99 ------ ------ ------- ------- ------- ------- Net investment income/(loss) (+) ...... (0.03) 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 ... (1.08) (1.34) (2.67) (0.30) 6.09 0.62 ------ ------ ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (1.11) (1.15) (2.48) (0.22) 6.33 1.39 ------ ------ ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .. (0.07) (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 . (0.07) (0.27) (0.36) (2.11) (3.57) (0.74) ------ ------ ------- ------- ------- ------- Net asset value, end of period ........ $10.63 $11.81 $ 13.23 $ 16.07 $ 18.40 $ 15.64 ====== ====== ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ............. (9.40)%(4) (8.72)% (15.50)% (1.00)% 39.42% 9.26% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .. $8,933 $9,918 $13,230 $13,496 $25,765 $32,528 Ratios of expenses to average net assets (5) .......................... 0.84%(3) 0.84% 1.13% 1.24% 1.04% 1.24% Ratios of net investment income/(loss) to average net assets (5) ........... (0.56)%(3) 1.60% 1.36% 0.45% 1.28% 4.63% Portfolio turnover rate (6) ........... 7.01% 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 INDEX FUND ----------------------------------- For the six months For the For the ended year period 02/28/02 ended 07/11/00* (Unaudited) 08/31/01 08/31/00 ----------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .. $ 11.20 $ 19.25 $ 20.22(1) ------- ------- ------- Net investment income/(loss) (+) ...... 0.12 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 ... 1.85 (8.09) (0.63) ------- ------- ------- Net increase/(decrease) in net assets resulting from operations 1.97 (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 ........ $ 13.17 $ 11.20 $ 19.25 ======= ======= ======= TOTAL INVESTMENT RETURN (2) ............. 17.59%(4) (38.52)% (2.97)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .. $80,989 $14,004 $18,283 Ratios of expenses to average net assets (5) .......................... 0.99%(3) 0.99% 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) ........... 2.11%(3) 4.44% 0.77%(3) Portfolio turnover rate (6) ........... 7.99% 43.20% 63.61% * 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 six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 .. $ 10.70 $ 16.94 $ 13.22 $ 9.90 $ 13.43 $ 10.60 ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) ...... 0.03 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 ... (0.05) (5.92) 8.08 3.87 (2.89) 2.97 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations (0.02) (5.87) 8.78 3.94 (2.82) 3.02 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .. (0.01) (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 . (0.01) (0.37) (5.06) (0.62) (0.71) (0.19) ------- ------- ------- ------- ------- ------- Net asset value, end of period ........ $ 10.67 $ 10.70 $ 16.94 $ 13.22 $ 9.90 $ 13.43 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ............. (0.19)%(4) (34.95)% 67.21% 39.71% (21.69)% 28.50% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .. $25,606 $28,889 $22,028 $ 9,253 $ 6,932 $24,168 Ratios of expenses to average net assets (5) .......................... 0.84%(3) 0.84% 1.17% 1.23% 1.14% 1.35% Ratios of net investment income/(loss) to average net assets (5) ........... 0.58%(3) 0.44% 4.07% 0.53% 0.46% 0.39% Portfolio turnover rate (6) ........... 3.32% 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. 108-109 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI EMU INDEX FUND ----------------------------------------- For the six months For the For the ended year period 02/28/02 ended 07/26/00*- (Unaudited) 08/31/01 08/31/00 ------------- ----------- ------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ........ $ 56.74 $ 76.02 $ 80.72(1) ------- ------- ------- Net investment income/(loss) (+) ............ (0.13) 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 ......... (4.09) (19.32) (4.70) ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ...... (4.22) (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 .............. $ 52.52 $ 56.74 $ 76.02 ======= ======= ======= TOTAL INVESTMENT RETURN (2) ................... (7.44)%(4) (24.51)% (5.82)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .......... $89,278 $90,779 $41,811 Ratios of expenses to average net assets (5) ................................ 0.84%(3) 0.84% 0.84%(3) Ratios of net investment income/(loss) to average net assets (5) ................. (0.48)%(3) 1.13% 0.03%(3) Portfolio turnover rate (6) ................. 1.41% 23.64% 0.00% * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (1) Net asset value per share on commencement of operations. (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized (4) Not Annualized (5) Includes voluntary waivers of the listing fee through December 31, 1996 and reimbursements from the Adviser commencing with the year ended August 31, 2000. If such waivers/reimbursements had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers/reimbursements ........ -- -- 1.57%(3) Ratios of net investment income/(loss) to average net assets before waivers/reimbursements ............... -- -- (0.70)%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). iSHARES MSCI FRANCE INDEX FUND -------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ........ $ 19.53 $ 26.41 $ 22.90 $ 19.13 $ 14.50 $ 12.73 ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) ............ (0.07) 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 ......... (1.58) (6.89) 5.21 3.88 4.76 1.95 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ...... (1.65) (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 .............. $ 17.88 $ 19.53 $ 26.41 $ 22.90 $ 19.13 $ 14.50 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ................... (8.45)%(4) (25.86)% 23.45% 21.01% 34.77% 16.60% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .......... $57,248 $58,602 $95,116 $77,885 $45,922 $14,519 Ratios of expenses to average net assets (5) ................................ 0.84%(3) 0.84% 0.96% 1.06% 1.18% 1.52% Ratios of net investment income/(loss) to average net assets (5) ................. (0.82)%(3) 0.28% 0.36% 0.67% 1.58% 1.17% Portfolio turnover rate (6) ................. 1.12% 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 six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ........ $ 15.19 $ 20.46 $ 21.17 $ 20.25 $ 16.31 $ 13.64 -------- -------- -------- -------- ------- ------- Net investment income/(loss) (+) ............ (0.04) 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 ......... (0.96) (5.26) 1.64 1.31 3.92 2.77 -------- -------- -------- -------- ------- ------- Net increase/(decrease) in net assets resulting from operations ...... (1.00) (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 .............. $ 14.19 $ 15.19 $ 20.46 $ 21.17 $ 20.25 $ 16.31 ======== ======== ======== ======== ======= ======= TOTAL INVESTMENT RETURN (2) ................... (6.58)%(4) (24.87)% 8.44% 7.04% 25.69% 20.51% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .......... $110,694 $118,525 $153,487 $101,645 $72,934 $24,486 Ratios of expenses to average net assets (5) ................................ 0.84%(3) 0.84% 0.94% 1.00% 1.08% 1.37% Ratios of net investment income/(loss) to average net assets (5) ................. (0.54)%(3) 0.99% 0.73% 0.57% 1.43% 0.23% Portfolio turnover rate (6) ................. 0.20% 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. 110-111 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI HONG KONG INDEX FUND --------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ....... $ 8.93 $ 13.24 $ 11.83 $ 6.41 $ 14.73 $ 13.05 ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) ........... 0.05 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 ....................... (0.25) (4.30) 1.42 5.49 (8.27) 2.12 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ............ (0.20) (4.07) 1.75 5.78 (7.92) 2.38 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ....... (0.06) (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 ...... (0.06) (0.24) (0.34) (0.36) (0.40) (0.70) ------- ------- ------- ------- ------- ------- Net asset value, end of period ............. $ 8.67 $ 8.93 $ 13.24 $ 11.83 $ 6.41 $ 14.73 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (1) .................. (2.27)%(3) (30.88)% 14.73% 90.51% (54.22)% 17.80% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....... $65,051 $52,946 $79,479 $77,200 $49,973 $25,417 Ratios of expenses to average net assets (4) 0.84%(2) 0.84% 0.94% 1.01% 1.09% 1.43% Ratios of net investment income/(loss) to average net assets (4) ................... 1.14%(2) 2.11% 2.57% 2.84% 3.76% 1.71% Portfolio turnover rate (5) ................ 7.85% 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) Annualized (3) Not Annualized (4) 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% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). iSHARES MSCI ITALY INDEX FUND ----------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ....... $ 17.79 $ 22.23 $ 21.56 $ 22.89 $ 16.66 $ 13.79 ------- ------- -------- -------- -------- -------- Net investment income/(loss) (+) ........... (0.04) 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 ....................... (2.11) (4.37) 2.51 1.05 7.94 3.10 ------- ------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ............ (2.15) (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 ............. $ 15.64 $ 17.79 $ 22.23 $ 21.56 $ 22.89 $ 16.66 ======= ======= ======== ======== ======== ======== TOTAL INVESTMENT RETURN (1) .................. (12.09)%(3) (18.61)% 13.35% 5.14% 47.66% 23.37% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....... $30,507 $34,682 $ 50,008 $ 58,224 $ 58,368 $ 32,495 Ratios of expenses to average net assets (4) 0.84%(2) 0.84% 0.99% 1.03% 1.02% 1.33% Ratios of net investment income/(loss) to average net assets (4) ................... (0.53)%(2) 1.16% 1.61% 0.70% 0.76% 0.76% Portfolio turnover rate (5) ................ 4.04% 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) Annualized (3) Not Annualized (4) 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% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). iSHARES MSCI JAPAN INDEX FUND ----------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ....... $ 9.07 $ 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 ....................... (1.60) (4.74) 1.21 4.91 (4.19) (1.65) -------- -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ............ (1.60) (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 ............. $ 7.47 $ 9.07 $ 13.82 $ 13.22 $ 8.39 $ 12.61 ======== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (1) .................. (17.64)%(3) (34.37)% 8.75% 58.14% (33.38)% (11.97)% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ....... $421,578 $527,899 $787,790 $713,653 $201,485 $158,957 Ratios of expenses to average net assets (4) 0.84%(2) 0.84% 0.88% 0.94% 1.04% 1.19% Ratios of net investment income/(loss) to average net assets (4) ................... (0.12)%(2) (0.11)% (0.32)% (0.27)% (0.21)% (0.48)% Portfolio turnover rate (5) ................ 0.73% 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) Annualized (3) Not Annualized (4) 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)% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 112-113 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI MALAYSIA INDEX FUND ----------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 .......... $ 5.11 $ 5.96 $ 5.59 $ 2.11 $ 8.23 $ 13.80 -------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) 0.04 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 ........... 0.32 (0.85) 0.37 3.67 (6.10) (5.55) -------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ........ 0.36 (0.79) 0.42 3.68 (6.04) (5.54) -------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .......... (0.03) (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 ......... (0.03) (0.06) (0.05) (0.20) (0.08) (0.03) -------- ------- ------- ------- ------- ------- Net asset value, end of period .............. $ 5.44 $ 5.11 $ 5.96 $ 5.59 $ 2.11 $ 8.23 ======== ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (1) ..................... 7.10%(3) (13.22)% 7.57% 185.81% (73.57)% (40.20)% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ............ $ 74,644 $80,877 $99,206 $95,251 $35,867 $12,339 Ratios of expenses to average net assets (4) .. 0.84%(2) 0.84% 0.96% 1.43% 1.09% 1.46% Ratios of net investment income/(loss) to average net assets (4) ...................... 1.47%(2) 1.19% 0.81% 0.33% 1.40% 0.04% Portfolio turnover rate (5) ................... 2.45% 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) Annualized (3) Not Annualized (4) 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% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). iSHARES MSCI MEXICO INDEX FUND -------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 .......... $ 15.35 $ 16.72 $ 13.39 $ 8.11 $15.11 $ 11.52 -------- ------- ------- ------- ------ ------- Net investment income/(loss) (+) 0.03 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 ........... 0.60 (1.36) 3.69 5.36 (6.71) 4.07 -------- ------- ------- ------- ------ ------- Net increase/(decrease) in net assets resulting from operations ........ 0.63 (1.19) 3.75 5.42 (6.62) 4.09 -------- ------- ------- ------- ------ ------- LESS DISTRIBUTIONS Dividends from net investment income .......... (0.07) (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 ......... (0.07) (0.18) (0.42) (0.14) (0.38) (0.50) -------- ------- ------- ------- ------ ------- Net asset value, end of period .............. $ 15.91 $ 15.35 $ 16.72 $ 13.39 $ 8.11 $ 15.11 ======== ======= ======= ======= ====== ======= TOTAL INVESTMENT RETURN (1) ..................... 4.12%(3) (7.02)% 28.20% 66.92% (44.18)% 35.21% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ............ $111,355 $46,056 $40,127 $21,430 $7,296 $16,627 Ratios of expenses to average net assets (4) .. 0.84%(2) 0.84% 1.04% 1.26% 1.34% 1.63% Ratios of net investment income/(loss) to average net assets (4) ...................... 0.40%(2) 1.12% 0.35% 0.52% 0.60% 0.14% Portfolio turnover rate (5) ................... 4.65% 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) Annualized (3) Not Annualized (4) 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% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). iSHARES MSCI NETHERLANDS INDEX FUND -------------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 .......... $ 18.59 $ 23.53 $ 23.45 $ 23.50 $ 21.42 $17.36 ------- ------- ------- ------- ------- ------ Net investment income/(loss) (+) (0.04) 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 ........... (1.88) (4.94) 0.18 1.60 3.53 4.79 ------- ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations ........ (1.92) (4.66) 0.31 2.13 3.78 4.90 ------- ------- ------- ------- ------- ------ LESS DISTRIBUTIONS Dividends from net investment income .......... (0.04) (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 ......... (0.04) (0.28) (0.23) (2.18) (1.70) (0.84) ------- ------- ------- ------- ------- ------ Net asset value, end of period .............. $ 16.63 $ 18.59 $ 23.53 $ 23.45 $ 23.50 $21.42 ======= ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (1) ..................... (10.33)%(3) (19.83)% 1.28% 8.98% 17.41% 28.04% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ............ $21,640 $24,184 $30,613 $31,685 $22,349 $9,661 Ratios of expenses to average net assets (4) .. 0.84%(2) 0.84% 1.03% 1.07% 1.12% 1.46% Ratios of net investment income/(loss) to average net assets (4) ...................... (0.54)%(2) 1.34% 0.53% 2.20% 1.00% 0.54% Portfolio turnover rate (5) ................... 8.23% 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) Annualized (3) Not Annualized (4) 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% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 114-115 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI iSHARES MSCI PACIFIC EX-JAPAN SINGAPORE INDEX FUND INDEX FUND ------------ ------------------------------------------------------------------ For the For the period six months For the For the For the For the For the 10/26/01*- ended year year year year year 2/28/02 02/28/02 ended ended ended ended ended (Unaudited) (Unaudited) 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 ....... $ 50.03(1) $ 5.34 $ 7.58 $ 7.93 $ 3.30 $ 8.66 $ 11.38 -------- -------- -------- -------- -------- -------- -------- Net investment income/(loss)(+) ............ 0.35 0.01 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 ........ 4.37 0.13 (2.16) (0.21) 4.70 (5.37) (2.67) -------- -------- -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ............ 4.72 0.14 (2.09) (0.08) 4.75 (5.30) (2.67) -------- -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income ....... (0.27) (0.04) (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 ...... (0.27) (0.04) (0.15) (0.27) (0.12) (0.06) (0.05) -------- -------- -------- -------- -------- -------- -------- Net asset value, end of period ............. $ 54.48 $ 5.44 $ 5.34 $ 7.58 $ 7.93 $ 3.30 $ 8.66 ======== ======== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ................ 9.44%(4) 2.69%(4) (27.89)% (1.29)% 144.52% (61.29)% (23.48)% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ......... $ 38,137 $ 90,234 $ 73,704 $ 88,719 $113,438 $ 47,248 $ 14,722 Ratios of expenses to average net assets (5) 0.50%(3) 0.84%(3) 0.84% 0.94% 0.97% 1.08% 1.43% Ratios of net investment income/(loss) to average net assets (5) ................... 1.86%(3) 0.35%(3) 1.15% 1.60% 0.76% 1.17% 0.03% Portfolio turnover rate (6) ................ 0.58% 6.81% 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 six months For the For the ended year period 02/28/02 ended 05/10/00*- (Unaudited) 08/31/01 08/31/00 ----------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ....... $ 13.25 $ 18.16 $ 20.36(1) -------- -------- -------- Net investment income/(loss) (+) ........... 0.01 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 ........ 7.59 (4.90) (2.16) -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ............ 7.60 (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 ............. $ 20.85 $ 13.25 $ 18.16 ======== ======== ======== TOTAL INVESTMENT RETURN (2) ................ 57.36%(4) (26.49)% (10.81)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ......... $ 90,711 $ 37,767 $ 13,622 Ratios of expenses to average net assets (5) 0.99%(3)(7) 0.99%(7) 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) ................... 0.06%(3) 0.64% (0.63)%(3) Portfolio turnover rate (6) ................ 11.22% 39.46% 55.13% * 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 ............. -- -- 1.38%(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 six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ....... $ 21.33 $ 24.19 $ 25.59 $ 23.84 $ 18.49 $ 14.09 -------- -------- -------- -------- -------- -------- Net investment income/(loss) (+) ........... 0.06 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 ........ (1.58) (2.89) (0.60) 3.14 5.94 5.33 -------- -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ............ (1.52) (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 ............. $ 19.81 $ 21.33 $ 24.19 $ 25.59 $ 23.84 $ 18.49 ======== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ................ (7.13)%(4) (11.17)% (1.81)% 13.39% 32.58% 39.15% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ......... $ 17,826 $ 27,198 $ 39,913 $ 36,469 $ 25,029 $ 8,321 Ratios of expenses to average net assets (5) 0.84%(3) 0.84% 0.99% 1.04% 1.11% 1.67% Ratios of net investment income/(loss) to average net assets (5) ................... 0.59%(3) 0.82% 0.57% 0.31% 0.61% 1.04% Portfolio turnover rate (6) ................ 5.64% 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. 116-117 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS (continued) iSHARES, INC. -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI SWEDEN INDEX FUND -------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 .......... $ 12.88 $ 24.38 $ 22.26 $ 18.39 $ 18.32 $14.67 ------- ------- ------- ------- ------- ------ Net investment income/(loss) (+) .............. (0.05) 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 .......................... 0.09 (11.52) 8.38 4.52 0.95 4.45 ------- ------- ------- ------- ------- ------ Net increase/(decrease) in net assets resulting from operations ............... 0.04 (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 ................ $ 12.92 $ 12.88 $ 24.38 $ 22.26 $ 18.39 $18.32 ======= ======= ======= ======= ======= ====== TOTAL INVESTMENT RETURN (2) ..................... 0.31%(4) (46.99)% 39.15% 25.09% 5.48% 30.10% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .......... $10,660 $10,630 $23,774 $20,034 $13,791 $8,243 Ratios of expenses to average net assets (5) .. 0.84%(3) 0.84% 1.03% 1.13% 1.17% 1.64% Ratios of net investment income/(loss) to average net assets (5) ...................... (0.79)%(3) 0.40% 0.46% 0.49% 0.48% (0.19)% Portfolio turnover rate (6) ................... 13.23% 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 six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 .......... $ 12.95 $ 15.54 $ 15.39 $ 15.55 $ 13.79 $ 12.29 ------- ------- ------- ------- ------- ------- Net investment income/(loss) (+) .............. (0.05) 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 .......................... (0.65) (2.54) 0.27 0.19 3.01 2.11 ------- ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ............... (0.70) (2.50) 0.31 0.23 3.01 2.07 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income .......... (0.01) (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 ......... (0.01) (0.09) (0.16) (0.39) (1.25) (0.57) ------- ------- ------- ------- ------- ------- Net asset value, end of period ................ $ 12.24 $ 12.95 $ 15.54 $ 15.39 $ 15.55 $ 13.79 ======= ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN (2) ..................... (5.44)%(4) (16.08)% 1.96% 1.47% 21.24% 16.69% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .......... $30,619 $32,384 $44,685 $38,499 $29,163 $13,805 Ratios of expenses to average net assets (5) .. 0.84%(3) 0.84% 1.01% 1.09% 1.15% 1.52% Ratios of net investment income/(loss) to average net assets (5) ...................... (0.76)%(3) 0.29% 0.23% 0.24% (0.03)% (0.29)% Portfolio turnover rate (6) ................... 7.23% 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 six months For the For the ended year period 02/28/02 ended 06/21/00*- (Unaudited) 08/31/01 08/31/00 ------------- -------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .......... $ 9.01 $ 16.41 $ 19.59(1) -------- -------- ------- Net investment income/(loss) (+) .............. (0.05) (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 .......................... 1.76 (7.37) (2.31) ------ -------- ------- Net increase/(decrease) in net assets resulting from operations ............... 1.71 (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 ................ $ 10.72 $ 9.01 $ 16.41 ======== ======== ======= TOTAL INVESTMENT RETURN (2) ..................... 18.98%(4) (45.09)% (12.10)%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .......... $159,754 $110,786 $42,667 Ratios of expenses to average net assets (5) .. 0.99%(3)(7) 0.99%(7) 0.99%(3) Ratios of net investment income/(loss) to average net assets (5) ...................... 1.01%(3) (0.23)% (0.28)%(3) Portfolio turnover rate (6) ................... 2.77% 29.84% 51.68% * 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. 118-119 FEBRUARY 28, 2002 FINANCIAL HIGHLIGHTS (concluded) -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
iSHARES MSCI UNITED KINGDOM INDEX FUND -------------------------------------------------------------------- For the six months For the For the For the For the For the ended year year year year year 02/28/02 ended ended ended ended ended (Unaudited) 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 ........ $ 15.11 $ 18.35 $ 20.25 $ 18.48 $ 16.50 $ 13.15 -------- ------- -------- -------- ------- ------- Net investment income/(loss) (+) ............ 0.28 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 ......... (1.19) (3.23) (0.85) 2.40 2.12 3.62 -------- ------- -------- -------- ------- ------- Net increase/(decrease) in net assets resulting from operations ...... (0.91) (2.97) (0.58) 2.84 2.49 4.00 -------- ------- -------- -------- ------- ------- LESS DISTRIBUTIONS Dividends from net investment income ........ (0.22) (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 ....... (0.22) (0.27) (1.32) (1.07) (0.51) (0.65) -------- ------- -------- -------- ------- ------- Net asset value, end of period .............. $ 13.98 $ 15.11 $ 18.35 $ 20.25 $ 18.48 $ 16.50 ======== ======== ======== ======== ======= ======= TOTAL INVESTMENT RETURN (1) ................... (6.06)%(3) (16.20)% (3.00)% 15.33% 14.98% 30.48% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ........ $117,443 $117,883 $146,803 $113,402 $62,846 $29,721 Ratios of expenses to average net assets (4) 0.84%(2) 0.84% 0.94% 0.97% 1.03% 1.38% Ratios of net investment income/(loss) to average net assets (4) .................... 3.95%(2) 1.57% 1.39% 2.16% 1.90% 2.47% Portfolio turnover rate (5) ................. 12.75% 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) Annualized (3) Not Annualized (4) 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% (5) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 120 NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 February 28, 2002, the Company offers 22 investment portfolios (each, a "Fund", collectively, the "Funds"). The Funds offered by the Company as of February 28, 2002 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 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 Index Fund EWM iShares MSCI Mexico Index Fund EWW iShares MSCI Netherlands Index Fund EWN iShares MSCI Pacific ex-Japan Index Fund EPP iShares MSCI Singapore 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. 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. 121 NOTES TO FINANCIAL STATEMENTS (Unaudited)(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 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 February 28, 2002. 122 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 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 2,664 10,068,186 Mexico -- 894,617 Netherlands 15,860 3,204,119 Singapore 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 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. 123 NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued) -------------------------------------------------------------------------------- 2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES Barclays Global Fund Advisors ("BGFA") acts as investment adviser to the Company and is responsible for the investment management of each Fund. BGFA is a California corporation indirectly owned by Barclays Bank PLC. BGFA serves as investment adviser to each Fund pursuant to an Advisory Agreement between the Company and BGFA dated December 28, 2001 (except the Advisory Agreement applicable to the iShares MSCI Singapore Index Fund ("Singapore Index Fund") is dated May 8, 2000). Under these agreements, 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, iShares MSCI Pacific ex-Japan, 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, Pacific ex-Japan, South Korea and Taiwan Index 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, 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 For its investment management services to the iShares MSCI Pacific ex-Japan Index Fund, BGFA is entitled to an annual investment advisory fee on the aggregate net assets of the Fund of 0.50% per annum. Under the Advisory Agreement, except for the Singapore Index Fund, BGFA is responsible for all of the expenses of each of the Funds, other than interest, taxes, brokerage commissions and other expenses connected with the executions of portfolio transactions, extraordinary expenses, distribution fees and advisory fees. Prior to December 28, 2001 and pursuant to the prior advisory agreement, the investment advisory fee paid to BGFA with respect to each Fund was reduced by the aggregate of such Fund's fees and expenses (subject to the exceptions in the prior sentence). BGFA also agreed to reimburse each Fund to the extent that the expenses of any Fund (subject to the same exceptions) exceeded the investment advisory fee as stated in the above advisory fee tables. These fee reduction and reimbursement provisions still apply to the Singapore Index Fund. 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. 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. 124 iSHARES, INC. -------------------------------------------------------------------------------- JPMorgan Chase 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 0.07% Austria 0.06 Mexico 0.15 Belgium 0.05 Netherlands 0.04 Brazil 0.20 Singapore 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. For its services to the iShares MSCI Pacific ex-Japan Index Fund, the Custodian is paid a per annum fee based on the aggregate net assets of each of the Fund's investments in Australia, Hong Kong and Singapore at the fees applicable to these countries, plus a fee at the rate of 0.04% for the aggregate net assets of the Fund's investments in New Zealand. 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. At the Board of Directors meeting held on February 28, 2002, the Board approved the motion to consolidate service providers for the Company. As a result, Investors Bank & Trust Company was named as the new combined Administrator and Custodian for the Funds, to replace PFPC Inc. and JPMorgan Chase Bank. 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 $3,478,537 as of February 28, 2002. Barclays PLC is an affiliate of BGFA, the Fund's investment adviser. The Company pays each director not affiliated with BGFA an annual retainer and 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 six months ended February 28, 2002, were as follows: iSHARES MSCI INDEX FUND PURCHASES SALES -------------------------- ------------- ----------- Australia $ 1,568,194 $ 1,324,789 Austria 2,257,870 2,303,800 Belgium 639,651 719,746 Brazil 64,064,451 2,251,140 Canada 1,022,268 847,867 EMU 1,216,423 1,229,138 France 613,968 823,417 Germany 208,979 592,806 Hong Kong 4,628,429 4,461,202 Italy 1,263,102 1,360,029 Japan 3,521,228 4,538,053 Malaysia 1,771,687 11,454,270 Mexico 2,486,277 2,308,698 Netherlands 1,829,680 1,801,485 Pacific ex-Japan 174,596 149,492 Singapore 5,406,466 5,061,747 125 NOTES TO FINANCIAL STATEMENTS (Unaudited) (concluded) -------------------------------------------------------------------------------- iSHARES MSCI INDEX FUND PURCHASES SALES -------------------------- ----------- ----------- South Korea $30,770,173 $ 6,562,107 Spain 1,318,413 1,317,776 Sweden 1,372,880 1,394,417 Switzerland 2,212,232 2,332,325 Taiwan 26,562,709 3,599,027 United Kingdom 14,992,406 15,797,124 In-kind transactions for the six months ended February 28, 2002 were as follows: IN-KIND IN-KIND iSHARES MSCI INDEX FUND PURCHASES SALES -------------------------- ------------ ---------- Australia $ 1,795,651 $ -- Canada -- 3,203,058 EMU 5,361,520 -- France 3,422,414 -- Germany 8,592,100 8,647,475 Hong Kong 13,762,328 -- Japan 30,924,115 39,658,030 Mexico 75,200,601 9,894,844 Pacific ex-Japan 41,131,469 5,617,198 Singapore 14,779,375 -- Spain -- 7,502,189 United Kingdom 8,557,829 -- 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 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 127,800,000 Mexico 255,000,000 Netherlands 255,000,000 Pacific ex-Japan 500,000,000 Singapore 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 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. 126 iSHARES, INC. -------------------------------------------------------------------------------- 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 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 February 28, 2002, certain of the Funds had loaned securities which were collateralized by cash. The market values of the securities on loan at February 28, 2002, and the cash collateral received are disclosed in the Statements of Assets and Liabilities. 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 February 28, 2002, there were no outstanding advances under this agreement.
AVERAGE ADVANCES AVERAGE NUMBER OF DAYS OUTSTANDING INTEREST OUTSTANDING iSHARES MSCI INDEX FUND DURING THE PERIOD RATE DURING THE PERIOD -------------------------- ----------------- -------- ----------------- Australia $320,833 4.0938% 18 Belgium 100,000 2.3750 7 Mexico 150,000 3.2115 13 Singapore 200,000 4.1875 6 Spain 100,000 4.1875 6
7. LEGAL PROCEEDINGS A United States patentholder named MOPEX, Inc. has asked the judge overseeing an ongoing action in the U.S. District Court for the Northern District of Illinois for leave to amend its complaint to add the Company, along with seven other parties, as a defendant. If such leave is granted, there would be a total of twenty defendants, including the Company's investment adviser, other exchange traded funds, various fund service providers and market makers, and the Chicago Stock Exchange, Inc. In the action, the plaintiff alleges that the actions of the parties, which may in the near future include the Company, infringed their patent. In addition, the plaintiff alleges that the parties engaged in a "conspiracy" amongst themselves to infringe their patent. Although this is the only case to which MOPEX has sought to add the Company as a named party, this action is one of three involving related issues. If the Company should be added as a party to the action, the Company believes that it has valid defenses to all claims raised by the patentholder. However, if named as a party, a resolution of this case may impose increased costs on the Company, thus raising its expense ratio and potentially adversely affecting its performance. 8. CHANGE IN INDEPENDENT ACCOUNTANTS As a result of the resignation of Ernst & Young LLP ("E&Y") as the Funds' independent accountants, the Audit Committee and the Board of Directors of the Funds voted to appoint PricewaterhouseCoopers LLP as the independent accountants for the Funds' year ended August 31, 2001. During the two previous years, the audit reports of E&Y contained no adverse opinion or disclaimer of opinion; nor were its reports qualified nor modified as to uncertainty, audit scope, or accounting principle. Further, in connection with its audits for the two previous years, there were no disagreements between the Funds and E&Y on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which if not resolved to the satisfaction of E&Y would have caused it to make reference to the disagreements in its report on the financial statements for such years. 127 RESULTS OF SPECIAL SHAREHOLDERS MEETING (Unaudited) iSHARES, INC. -------------------------------------------------------------------------------- A special meeting of the shareholders of iShares, Inc. (the "Company") was held on December 19, 2001. At the meeting, the following matters were voted upon by the shareholders. Shareholders of the iShares MSCI Singapore Index Fund did not approve Proposals 2, 3 and 4. Proposals 3 and 4 did not pass in the iShares MSCI South Korea Index Fund and the iShares MSCI Mexico Index Fund. All other proposals were approved and the results of voting are presented below. PROPOSAL 1* ----------- To elect the six nominees specified below as Directors of the Company, each of whom will serve until his respective successor is elected and qualified. VOTES VOTES VOTES FOR AGAINST ABSTAINING ---------- --------- ---------- Nathan Most 80,031,635 1,585,430 585,419 Richard K. Lyons 80,087,104 1,528,981 586,397 George G.C. Parker 80,206,531 1,411,377 584,576 John B. Carroll 80,213,590 1,399,965 588,928 Garrett F. Bouton 80,212,728 1,398,467 591,287 W. Allen Reed 80,227,345 1,398,033 577,105 Messrs. Most, Carroll and Reed previously served as Directors of the Company and were reelected. Messrs. Lyons, Parker and Bouton were newly elected. PROPOSAL 2 ---------- To approve a new advisory agreement with Barclays Global Fund Advisors in order to effect a change to the fee structure. VOTES VOTES VOTES iSHARES MSCI INDEX FUND FOR AGAINST ABSTAINING ----------------------- ---------- -------- ---------- Australia 5,218,230 13,528 8,087 Austria 787,639 6,543 1,001 Belgium 460,728 5,727 2,259 Brazil 626,687 1,360 6,695 Canada 1,605,768 24,185 5,550 EMU 848,710 8,509 3,008 France 1,595,574 7,704 4,173 Germany 4,143,547 164,659 15,410 Hong Kong 2,927,240 53,951 45,619 Italy 1,166,484 21,570 352 Japan 30,508,180 639,114 266,321 Malaysia 9,322,460 510,931 46,642 Mexico 1,530,313 59,645 48,721 Netherlands 657,984 8,001 2,143 Singapore 6,262,054 4,186,435 82,725 South Korea 1,496,477 3,741 1,027 Spain 846,086 4,570 1,670 Sweden 451,301 2,276 3,448 Switzerland 1,392,729 8,876 2,472 Taiwan 8,500,275 14,525 8,966 United Kingdom 4,052,606 127,633 9,967 128 iSHARES, INC. -------------------------------------------------------------------------------- PROPOSAL 3 ---------- To approve a change to the Company's fundamental investment policy to permit each Index Fund to invest 25% or more of its total assets in a single issuer.
VOTES VOTES VOTES BROKER iSHARES MSCI INDEX FUND FOR AGAINST ABSTAINING NON-VOTES** -------------------------- ---------- ---------- ---------- ----------- Australia 4,566,084 128,417 8,164 537,180 Austria 592,395 11,192 1,066 190,530 Belgium 331,114 12,409 1,727 123,464 Brazil 473,313 6,389 7,485 147,555 Canada 1,119,723 78,272 6,105 431,402 EMU 577,349 30,209 1,914 250,755 France 1,089,533 60,793 5,363 451,762 Germany 3,013,609 375,738 13,837 920,432 Hong Kong 2,074,258 164,613 15,969 771,970 Italy 813,326 7,666 1,715 365,699 Japan 21,565,829 1,542,923 227,835 8,077,028 Malaysia 6,780,543 640,697 42,149 2,416,645 Mexico 742,809 151,704 49,759 694,407 Netherlands 455,089 13,140 1,265 198,634 Singapore 2,941,417 4,267,886 71,331 3,250,579 South Korea 894,759 15,352 927 590,207 Spain 593,328 14,664 2,440 241,894 Sweden 317,304 11,441 2,460 125,821 Switzerland 968,175 21,306 4,625 409,971 Taiwan 6,527,685 156,952 8,941 1,830,188 United Kingdom 2,962,892 200,830 10,764 1,015,718
PROPOSAL 4 ---------- To approve a change to the Company's fundamental investment policy with respect to industry concentration.
VOTES VOTES VOTES BROKER iSHARES MSCI INDEX FUND FOR AGAINST ABSTAINING NON-VOTES** -------------------------- ---------- --------- ---------- ----------- Australia 4,565,354 129,127 8,184 537,180 Austria 597,765 4,457 2,431 190,530 Belgium 337,214 6,462 1,574 123,464 Brazil 474,421 5,281 7,485 147,555 Canada 1,130,487 66,818 6,795 431,402 EMU 584,673 22,872 1,927 250,755 France 1,090,283 57,340 8,066 451,762 Germany 3,031,995 352,206 18,983 920,432 Hong Kong 2,100,329 133,296 21,215 771,970 Italy 812,824 8,346 1,537 365,699 Japan 21,766,135 1,274,909 295,543 8,077,028 Malaysia 6,840,531 575,134 47,723 2,416,645 Mexico 751,103 142,806 50,363 694,407 Netherlands 455,508 12,709 1,277 198,634 Singapore 3,036,902 4,163,488 80,245 3,250,579 South Korea 896,094 13,479 1,465 590,207 Spain 595,518 12,274 2,640 241,894 Sweden 321,027 6,788 3,389 125,821 Switzerland 971,210 18,605 4,291 409,971 Taiwan 6,531,233 152,645 9,700 1,830,188 United Kingdom 2,965,577 195,398 13,512 1,015,718
129 RESULTS OF SPECIAL SHAREHOLDERS MEETING (Unaudited)(concluded) -------------------------------------------------------------------------------- PROPOSAL 5 ---------- To approve a change of the iShares MSCI Japan Index Fund from diversified to non-diversified.
VOTES VOTES VOTES BROKER FOR AGAINST ABSTAINING NON-VOTES** ---------- --------- ---------- ----------- 21,869,940 1,323,934 142,714 8,077,028
PROPOSAL 6 -------------- To approve a change of the iShares MSCI United Kingdom Index Fund from diversified to non-diversified.
VOTES VOTES VOTES BROKER FOR AGAINST ABSTAINING NON-VOTES** ---------- --------- ---------- ----------- 2,971,281 190,578 12,627 1,015,718 * DENOTES COMPANY-WIDE PROPOSAL AND VOTING RESULTS. ** BROKER NON-VOTES ARE PROXIES RECEIVED BY THE FUND FROM BROKERS OR NOMINEES, WHO NEITHER HAS RECEIVED INSTRUCTIONS FROM THE BENEFICIAL OWNER OR OTHER PERSONS ENTITLED TO VOTE, NOR HAS DISCRETIONARY POWER TO VOTE ON A PARTICULAR MATTER.
130 (THIS PAGE INTENTIONALLY LEFT BLANK.) (THIS PAGE INTENTIONALLY LEFT BLANK.) [LOGO OMITTED] iSHARES ------- BARCLAYS GLOBAL INVESTORS 45 Fremont Street San Francisco, CA 94105 www.ishares.com 1-800-iSHARES 1-800-474-2737 iShares are distributed by SEI Investments Distribution Co. Barclays Global Fund Advisors serves as an adviser to iShares and is a subsidiary of Barclays Global Investors, N.A., neither of which is affiliated with SEI. PFPC serves as administrator and transfer agent for the iShares MSCI Series. The JPMorgan Chase 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)2002 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-009-02000 (2/02)