-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KEvi92ktn7Rye7gw96aHFEXeoCjv37kdu8hpHXMY8RhARLwPJEC7R4tsyQeMXvmr wsCr4pLm3O/jmy9/ZPqN9A== 0001193125-04-189595.txt : 20041108 0001193125-04-189595.hdr.sgml : 20041108 20041108170209 ACCESSION NUMBER: 0001193125-04-189595 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 43 CONFORMED PERIOD OF REPORT: 20040831 FILED AS OF DATE: 20041108 DATE AS OF CHANGE: 20041108 EFFECTIVENESS DATE: 20041108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISHARES INC CENTRAL INDEX KEY: 0000930667 IRS NUMBER: 510396525 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-09102 FILM NUMBER: 041126474 BUSINESS ADDRESS: STREET 1: 45 FREEMON STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 6179377264 MAIL ADDRESS: STREET 1: 45 FREEMON STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 FORMER COMPANY: FORMER CONFORMED NAME: WEBS INDEX FUND INC DATE OF NAME CHANGE: 19970211 FORMER COMPANY: FORMER CONFORMED NAME: FOREIGN FUND INC DATE OF NAME CHANGE: 19950524 N-CSR 1 dncsr.htm FORM N-CSR FOR ISHARES, INC. Form N-CSR for iShares, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM N-CSR

 


 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number 811-09102

 


 

iShares, Inc.

(Exact name of registrant as specified in charter)

 


 

c/o: Investors Bank & Trust Company

200 Clarendon Street; Boston, MA 02116

(Address of principal executive offices) (Zip code)

 

Corporation Trust Incorporated

300 East Lombard Street; Baltimore, Maryland 21202

(Name and address of agent for service)

 

Registrant’s telephone number, including area code: 1-800-474-2737

 

Date of fiscal year end: August 31, 2004

 

Date of reporting period: August 31, 2004

 



Item 1. Reports to Stockholders

 

 

2004 ANNUAL REPORT TO SHAREHOLDERS | AUGUST 31, 2004

 

LOGO

 

iSHAR E S M S C I S E R I E S

 

iSHARES MSCI AUSTRIA INDEX FUND

 

iSHARES MSCI BELGIUM INDEX FUND

 

Electronic delivery of this document may be

available to you. See inside for details.

 

iSHARES MSCI EMU INDEX FUND

   

iSHARES MSCI FRANCE INDEX FUND

   

iSHARES MSCI GERMANY INDEX FUND

   

iSHARES MSCI ITALY INDEX FUND

   

iSHARES MSCI NETHERLANDS INDEX FUND

   

iSHARES MSCI SPAIN INDEX FUND

   

iSHARES MSCI SWEDEN INDEX FUND

   

iSHARES MSCI SWITZERLAND INDEX FUND

   

iSHARES MSCI UNITED KINGDOM INDEX FUND

   


LOGO

 

Dear iShares Shareholder:

 

Electronic delivery is the easiest, most convenient way to receive reporting on your iShares holdings. In addition, it’s a way we can all care for our environment. To that end, we are pleased to offer shareholder reports and prospectuses online.

 

To sign up for electronic delivery, please follow these simple steps:

 

1. Go to www.icsdelivery.com.

 

2. From the main page, select the first letter of your brokerage firm’s name.

 

3. Select your brokerage institution from the list that follows. If your brokerage firm is not listed, electronic delivery may not be available. Please contact your brokerage firm or financial adviser.

 

4. Fill out the appropriate information and provide the e-mail address where you would like your information sent.

 

Your information and email address will be kept confidential and only used to deliver documents to you. If at any time you are not satisfied, you can cancel electronic delivery at www.icsdelivery.com and once again receive physical delivery of your materials. If you have any questions, please contact your financial adviser or brokerage firm.

 

Once you have enrolled, you will no longer receive prospectuses and shareholder reports in the mail. Instead, you will receive e-mail notifications announcing that the shareholder report or prospectus has been posted on the iShares website at www.iShares.com.


TABLE OF CONTENTS

 

Shareholder Letter

   1

Managers’ Discussion & Analysis

   2

Shareholder Expenses

   24

Schedules of Investments

   26

iShares MSCI Austria Index Fund

   26

iShares MSCI Belgium Index Fund

   30

iShares MSCI EMU Index Fund

   34

iShares MSCI France Index Fund

   42

iShares MSCI Germany Index Fund

   47

iShares MSCI Italy Index Fund

   52

iShares MSCI Netherlands Index Fund

   57

iShares MSCI Spain Index Fund

   61

iShares MSCI Sweden Index Fund

   66

iShares MSCI Switzerland Index Fund

   71

iShares MSCI United Kingdom Index Fund

   76

Financial Statements

   83

Financial Highlights

   91

Notes to the Financial Statements

   102

Report of Independent Registered Public Accounting Firm

   111

Tax Information (Unaudited)

   112

Supplemental Information (Unaudited)

   113

Director Information (Unaudited)

   119

iShares Family of Funds

   122


To Our Shareholders:

 

European equity markets generally delivered positive returns during the 12-month reporting period ended August 31, 2004. Unlike Japanese and U.S. economic indicators, which generally failed to meet analysts’ forecasts, Europe exceeded expectations, particularly toward the end of the reporting period. Activity in Europe through the first eight months of 2004 generally was stronger than expected, largely thanks to an increase in export orders for many European markets. However, threats to continued export growth appeared late in the reporting period, including a U.S. recovery that became less robust in recent months, surging oil prices, and a strong euro.

 

Aside from export levels, many European markets appeared to offer good value relative to other areas of the world. Although the profits of European companies have largely kept up with their U.S. counterparts, many European equities trade at a discount when compared to equities in the U.S. and other markets. Of course, while these signs are encouraging, there is no guarantee that European markets will outperform other regions, or that more challenging investment conditions will not return.

 

As market conditions change, we encourage you to talk with your financial adviser about what blend of investments or asset allocation can best help you meet your financial goals. One trait many successful investors share is the ability to stay focused on their personal financial goals while ignoring market swings. Regardless of market conditions, a sound, disciplined investment plan is essential.

 

On behalf of the iShares® family of funds, we thank you for making the iShares Funds a part of your portfolio. We look forward to meeting your investment needs in the year ahead.

 

LOGO


Lee T. Kranefuss

President and Chairman of the Board of Directors

iShares, Inc.

 

SHAREHOLDER LETTER

  1


Managers’ Discussion & Analysis

 

iSHARES® MSCI AUSTRIA INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
62.70%    64.50 %   63.77 %   14.37 %   14.54 %   14.09 %   7.06 %   7.19 %   7.95 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
62.70%    64.50 %   63.77 %   95.67 %   97.16 %   93.28 %   78.21 %   80.10 %   91.35 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

Certain sectors and markets performed exceptionally well based on market conditions during the one-year period. Investors should not expect that such exceptional returns will be repeated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
AUSTRIA
INDEX
FUND


   MSCI
AUSTRIA
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,101    $ 10,231

4/30/1996

   $ 10,009    $ 10,298

5/31/1996

   $ 10,577    $ 10,859

6/30/1996

   $ 9,881    $ 10,196

7/31/1996

   $ 9,698    $ 9,972

8/31/1996

   $ 9,661    $ 10,066

9/30/1996

   $ 9,420    $ 9,774

10/31/1996

   $ 9,457    $ 9,842

11/30/1996

   $ 9,569    $ 10,074

12/31/1996

   $ 9,727    $ 10,229

1/31/1997

   $ 9,420    $ 9,815

2/28/1997

   $ 9,401    $ 9,841

3/31/1997

   $ 9,689    $ 9,950

4/30/1997

   $ 9,318    $ 9,540

5/31/1997

   $ 9,782    $ 10,056

6/30/1997

   $ 9,736    $ 9,953

7/31/1997

   $ 10,488    $ 10,571

8/31/1997

   $ 9,764    $ 9,922

9/30/1997

   $ 10,377    $ 10,655

10/31/1997

   $ 10,145    $ 10,410

11/30/1997

   $ 9,373    $ 9,707

12/31/1997

   $ 9,829    $ 10,389

1/31/1998

   $ 10,042    $ 10,741

2/28/1998

   $ 10,535    $ 11,506

3/31/1998

   $ 11,083    $ 12,085

4/30/1998

   $ 11,928    $ 13,119

5/31/1998

   $ 12,532    $ 13,867

6/30/1998

   $ 11,780    $ 12,868

7/31/1998

   $ 11,900    $ 13,071

8/31/1998

   $ 9,975    $ 10,763

9/30/1998

   $ 9,018    $ 9,627

10/31/1998

   $ 10,024    $ 10,814

11/30/1998

   $ 9,442    $ 10,261

12/31/1998

   $ 9,649    $ 10,426

1/31/1999

   $ 9,027    $ 9,802

2/28/1999

   $ 9,402    $ 10,346

3/31/1999

   $ 9,314    $ 10,315

4/30/1999

   $ 9,738    $ 10,754

5/31/1999

   $ 8,741    $ 9,409

6/30/1999

   $ 9,018    $ 9,829

7/31/1999

   $ 9,037    $ 9,886

8/31/1999

   $ 9,108    $ 9,900

9/30/1999

   $ 8,659    $ 9,378

10/31/1999

   $ 8,499    $ 9,263

11/30/1999

   $ 8,080    $ 8,849

12/31/1999

   $ 8,649    $ 9,476

1/31/2000

   $ 7,941    $ 8,645

2/29/2000

   $ 7,622    $ 8,242

3/31/2000

   $ 7,861    $ 8,450

4/30/2000

   $ 7,422    $ 8,009

5/31/2000

   $ 7,741    $ 8,292

6/30/2000

   $ 8,031    $ 8,573

7/31/2000

   $ 7,941    $ 8,570

8/31/2000

   $ 7,695    $ 8,331

9/30/2000

   $ 7,705    $ 8,372

10/31/2000

   $ 7,264    $ 7,916

11/30/2000

   $ 7,013    $ 7,614

12/31/2000

   $ 7,735    $ 8,343

1/31/2001

   $ 7,956    $ 8,589

2/28/2001

   $ 8,498    $ 9,147

3/31/2001

   $ 8,106    $ 8,710

4/30/2001

   $ 8,277    $ 8,914

5/31/2001

   $ 7,855    $ 8,359

6/30/2001

   $ 7,785    $ 8,260

7/31/2001

   $ 8,227    $ 8,740

8/31/2001

   $ 8,342    $ 8,821

9/30/2001

   $ 7,424    $ 7,960

10/31/2001

   $ 6,965    $ 7,493

11/30/2001

   $ 7,455    $ 8,084

12/31/2001

   $ 7,536    $ 8,153

1/31/2002

   $ 7,506    $ 8,114

2/28/2002

   $ 7,852    $ 8,410

3/31/2002

   $ 8,403    $ 9,030

4/30/2002

   $ 9,056    $ 9,777

5/31/2002

   $ 9,168    $ 9,858

6/30/2002

   $ 9,249    $ 9,973

7/31/2002

   $ 8,372    $ 9,035

8/31/2002

   $ 8,352    $ 9,025

9/30/2002

   $ 7,893    $ 8,489

10/31/2002

   $ 7,985    $ 8,615

11/30/2002

   $ 7,985    $ 8,594

12/31/2002

   $ 8,837    $ 9,625

1/31/2003

   $ 9,126    $ 9,817

2/28/2003

   $ 9,188    $ 9,960

3/31/2003

   $ 9,312    $ 10,119

4/30/2003

   $ 10,148    $ 10,896

5/31/2003

   $ 10,902    $ 11,460

6/30/2003

   $ 11,129    $ 11,822

7/31/2003

   $ 11,088    $ 11,742

8/31/2003

   $ 10,954    $ 11,684

9/30/2003

   $ 11,532    $ 12,362

10/31/2003

   $ 11,996    $ 13,041

11/30/2003

   $ 12,905    $ 13,995

12/31/2003

   $ 14,004    $ 15,106

1/31/2004

   $ 15,259    $ 16,432

2/29/2004

   $ 15,886    $ 16,840

3/31/2004

   $ 16,587    $ 17,603

4/30/2004

   $ 16,670    $ 17,705

5/31/2004

   $ 16,754    $ 17,801

6/30/2004

   $ 17,695    $ 18,829

7/31/2004

   $ 17,905    $ 19,165

8/31/2004

   $ 17,821    $ 19,135

 

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

 

2

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Austria Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Austrian equity market, as measured by the MSCI Austria Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 62.70%, while the Index returned 63.77%.

 

The Austrian market posted the strongest gains of any of the MSCI country funds during the reporting period. Generally improving economic conditions both in the U.S. and in Europe contributed to the strong market performance. Because the countries that make up the European Union account for the bulk of Austria’s exports, their economic health is vital to Austria’s export market. Export demand grew during the reporting period, in turn benefiting many Austrian companies.

 

The ten largest holdings in the Fund represented almost 82% of the Fund’s net assets as of August 31, 2004. Among the ten largest holdings, Wienerberger AG (4.71% of the net assets of the Fund as of August 31, 2004) performed well, as did the Class A shares of Oesterreichische Elektrizitaetswirtschafts AG (4.80% of the net assets of the Fund as of August 31, 2004).

 

VA Technologie AG (4.42% of the net assets of the Fund as of August 31, 2004) enjoyed triple digit gains during the reporting period.

 

Additionally, several companies among the Fund’s ten largest holdings continued to benefit from their expansion into the emerging, potentially higher growth central and eastern European markets, including Hungary, the Czech Republic and Slovenia. Notably, Erste Bank der Oesterreichischen Sparkassen AG, the largest Fund holding at 20.22% of net assets as of August 31, 2004, and Bank Austria Creditanstalt AG (4.96% of the net assets of the Fund as of August 31, 2004), also posted strong gains during the reporting period.

 

MANAGERS DISCUSSION & ANALYSIS

  3


Managers’ Discussion & Analysis

 

iSHARES® MSCI BELGIUM INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
42.88%    44.41 %   41.85 %   1.18 %   1.19 %   (1.32 )%   6.31 %   6.40 %   6.45 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
42.88%    44.41 %   41.85 %   6.05 %   6.10 %   (6.44 )%   67.95 %   69.20 %   69.84 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

Certain sectors and markets performed exceptionally well based on market conditions during the one-year period. Investors should not expect that such exceptional returns will be repeated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
BELGIUM
INDEX
FUND


   MSCI
BELGIUM
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 9,759    $ 9,806

4/30/1996

   $ 9,966    $ 10,059

5/31/1996

   $ 10,288    $ 10,220

6/30/1996

   $ 10,322    $ 10,267

7/31/1996

   $ 10,456    $ 10,382

8/31/1996

   $ 10,501    $ 10,479

9/30/1996

   $ 10,543    $ 10,612

10/31/1996

   $ 10,676    $ 10,768

11/30/1996

   $ 10,915    $ 11,088

12/31/1996

   $ 10,895    $ 11,133

1/31/1997

   $ 11,070    $ 11,401

2/28/1997

   $ 11,204    $ 11,576

3/31/1997

   $ 11,365    $ 11,745

4/30/1997

   $ 11,407    $ 11,863

5/31/1997

   $ 11,877    $ 12,151

6/30/1997

   $ 12,318    $ 12,404

7/31/1997

   $ 12,437    $ 12,581

8/31/1997

   $ 11,474    $ 11,643

9/30/1997

   $ 12,090    $ 12,319

10/31/1997

   $ 11,906    $ 12,241

11/30/1997

   $ 12,002    $ 12,364

12/31/1997

   $ 12,185    $ 12,642

1/31/1998

   $ 12,596    $ 13,115

2/28/1998

   $ 13,161    $ 13,745

3/31/1998

   $ 14,122    $ 14,901

4/30/1998

   $ 15,017    $ 15,920

5/31/1998

   $ 15,831    $ 16,883

6/30/1998

   $ 16,616    $ 18,117

7/31/1998

   $ 17,518    $ 19,014

8/31/1998

   $ 15,997    $ 17,603

9/30/1998

   $ 15,692    $ 17,253

10/31/1998

   $ 16,675    $ 18,458

11/30/1998

   $ 16,953    $ 19,055

12/31/1998

   $ 18,483    $ 21,206

1/31/1999

   $ 17,675    $ 20,532

2/28/1999

   $ 16,753    $ 19,604

3/31/1999

   $ 15,884    $ 18,488

4/30/1999

   $ 15,527    $ 17,891

5/31/1999

   $ 14,910    $ 16,896

6/30/1999

   $ 15,049    $ 17,096

7/31/1999

   $ 15,110    $ 17,279

8/31/1999

   $ 15,837    $ 18,153

9/30/1999

   $ 15,364    $ 17,603

10/31/1999

   $ 15,295    $ 17,527

11/30/1999

   $ 14,861    $ 17,013

12/31/1999

   $ 15,886    $ 18,182

1/31/2000

   $ 12,969    $ 14,788

2/29/2000

   $ 12,329    $ 14,154

3/31/2000

   $ 12,378    $ 14,183

4/30/2000

   $ 11,905    $ 13,785

5/31/2000

   $ 12,624    $ 14,303

6/30/2000

   $ 13,541    $ 15,266

7/31/2000

   $ 13,629    $ 15,444

8/31/2000

   $ 13,382    $ 15,183

9/30/2000

   $ 12,897    $ 14,566

10/31/2000

   $ 12,573    $ 14,355

11/30/2000

   $ 12,249    $ 13,865

12/31/2000

   $ 13,329    $ 15,119

1/31/2001

   $ 13,005    $ 14,734

2/28/2001

   $ 13,025    $ 14,752

3/31/2001

   $ 11,787    $ 13,423

4/30/2001

   $ 11,727    $ 13,308

5/31/2001

   $ 11,108    $ 12,692

6/30/2001

   $ 11,351    $ 13,071

7/31/2001

   $ 11,848    $ 13,653

8/31/2001

   $ 12,215    $ 14,016

9/30/2001

   $ 11,139    $ 12,867

10/31/2001

   $ 10,901    $ 12,633

11/30/2001

   $ 10,922    $ 12,609

12/31/2001

   $ 11,598    $ 13,213

1/31/2002

   $ 11,108    $ 12,469

2/28/2002

   $ 11,067    $ 12,382

3/31/2002

   $ 11,442    $ 12,607

4/30/2002

   $ 12,035    $ 13,193

5/31/2002

   $ 12,326    $ 13,425

6/30/2002

   $ 12,243    $ 13,173

7/31/2002

   $ 10,827    $ 11,377

8/31/2002

   $ 10,859    $ 11,453

9/30/2002

   $ 9,099    $ 9,552

10/31/2002

   $ 9,786    $ 10,372

11/30/2002

   $ 10,213    $ 10,804

12/31/2002

   $ 10,512    $ 11,110

1/31/2003

   $ 10,017    $ 10,500

2/28/2003

   $ 8,964    $ 9,298

3/31/2003

   $ 8,900    $ 9,195

4/30/2003

   $ 10,459    $ 10,853

5/31/2003

   $ 11,597    $ 11,919

6/30/2003

   $ 11,576    $ 11,902

7/31/2003

   $ 11,807    $ 12,176

8/31/2003

   $ 11,755    $ 11,973

9/30/2003

   $ 12,450    $ 12,703

10/31/2003

   $ 13,135    $ 13,314

11/30/2003

   $ 13,598    $ 13,783

12/31/2003

   $ 14,828    $ 15,033

1/31/2004

   $ 15,567    $ 15,718

2/29/2004

   $ 16,147    $ 16,389

3/31/2004

   $ 15,305    $ 15,503

4/30/2004

   $ 15,305    $ 15,569

5/31/2004

   $ 15,737    $ 15,951

6/30/2004

   $ 16,238    $ 16,434

7/31/2004

   $ 16,022    $ 16,222

8/31/2004

   $ 16,795    $ 16,983

 

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

 

4

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Belgium Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Belgian equity market, as measured by the MSCI Belgium Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 42.88%, while the Index returned 41.85%.

 

Regulatory restraints, such as those imposed by the Securities and Exchange Commission and the Internal Revenue Service, can restrict the Fund’s ability to hold a given index constituent at its index weight, resulting in differences between a fund’s holdings and the securities in its underlying index. One such constraint, the 5/50 Rule, precludes the sum of all the securities weighted 5% or more in a fund’s portfolio from exceeding 50% of a fund’s total assets. As of August 31, 2004, nearly 73% of the Index was represented by securities each having a weighting of 5% or more of the Index. To comply with the 5/50 Rule, the Fund was obligated to underweight several of the Index’s largest weighted constituents and to overweight others. The combined effect of all the misweights in the Fund had a net positive impact on the Fund’s return relative to the Index’s return during the reporting period.

 

The Belgian market posted strong gains during the reporting period; thanks largely to strength among its financial sector and growing export levels. With more than half of its stock market represented by financial stocks, Belgium’s overall market performance in recent history has been largely determined by the direction of the financial sector. During the reporting period, this relationship had a positive effect on the Belgian market. Financial stocks largely posted gains during the reporting period as conditions improved for the sector. Corporate earnings levels and equity valuations rose, investor activity increased, and interest rates remained low.

 

Within the Fund, the ten largest holdings accounted for more than 80% of net assets as of August 31, 2004. Fortis and Dexia Group, the Fund’s two largest holdings at 24.29% and 12.36% of net assets as of August 31, 2004, respectively, gained during the reporting period. KBC Bankverzekeringsholdings SA (4.96% of the net assets of the Fund as of August 31, 2004) and Groupe Bruxelles Lambert SA (4.89% of the net assets of the Fund as of August 31, 2004) also posted gains during the reporting period.

 

The vast majority of Belgium’s export trade is within Europe. As economic conditions in Europe improved during the reporting period, so did demand for Belgium’s exports. Pharmaceutical and chemical conglomerates UCB SA (4.75% of the net assets of the Fund as of August 31, 2004) and Solvay SA (4.81% of the net assets of the Fund as of August 31, 2004) benefited from the improved conditions, as did food chain Delhaize Group (4.89% of the net assets of the Fund as of August 31, 2004).

 

MANAGERS’ DISCUSSION & ANALYSIS

  5


Managers’ Discussion & Analysis

 

iSHARES® MSCI EMU INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

    Cumulative Total Returns

 
Year Ended 8/31/04

    Inception to 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
20.07%    20.53 %   20.61 %   (6.41 )%   (6.21 )%   (6.08 )%   (23.81 )%   (23.14 )%   (22.69 )%

 

Total returns for the periods since inception are calculated from the inception date of the Fund (7/25/00). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (7/31/00), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
EMU
INDEX
FUND


   MSCI
EMU
INDEX


7/25/2000

   $ 10,000    $ 10,000

7/31/2000

   $ 9,668    $ 9,657

8/31/2000

   $ 9,418    $ 9,422

9/30/2000

   $ 8,932    $ 8,952

10/31/2000

   $ 8,806    $ 8,840

11/30/2000

   $ 8,496    $ 8,523

12/31/2000

   $ 9,072    $ 9,108

1/31/2001

   $ 9,121    $ 9,159

2/28/2001

   $ 8,213    $ 8,256

3/31/2001

   $ 7,594    $ 7,631

4/30/2001

   $ 8,232    $ 8,248

5/31/2001

   $ 7,689    $ 7,712

6/30/2001

   $ 7,381    $ 7,405

7/31/2001

   $ 7,383    $ 7,408

8/31/2001

   $ 7,109    $ 7,137

9/30/2001

   $ 6,190    $ 6,203

10/31/2001

   $ 6,477    $ 6,498

11/30/2001

   $ 6,794    $ 6,830

12/31/2001

   $ 6,989    $ 7,031

1/31/2002

   $ 6,610    $ 6,649

2/28/2002

   $ 6,581    $ 6,621

3/31/2002

   $ 6,967    $ 7,009

4/30/2002

   $ 6,846    $ 6,892

5/31/2002

   $ 6,859    $ 6,901

6/30/2002

   $ 6,667    $ 6,700

7/31/2002

   $ 5,720    $ 5,751

8/31/2002

   $ 5,766    $ 5,800

9/30/2002

   $ 4,789    $ 4,820

10/31/2002

   $ 5,407    $ 5,443

11/30/2002

   $ 5,756    $ 5,800

12/31/2002

   $ 5,479    $ 5,525

1/31/2003

   $ 5,296    $ 5,344

2/28/2003

   $ 5,074    $ 5,122

3/31/2003

   $ 4,919    $ 4,964

4/30/2003

   $ 5,712    $ 5,770

5/31/2003

   $ 6,112    $ 6,169

6/30/2003

   $ 6,197    $ 6,253

7/31/2003

   $ 6,345    $ 6,410

8/31/2003

   $ 6,345    $ 6,410

9/30/2003

   $ 6,353    $ 6,428

10/31/2003

   $ 6,823    $ 6,905

11/30/2003

   $ 7,171    $ 7,265

12/31/2003

   $ 7,802    $ 7,909

1/31/2004

   $ 7,932    $ 8,046

2/29/2004

   $ 8,079    $ 8,199

3/31/2004

   $ 7,756    $ 7,877

4/30/2004

   $ 7,650    $ 7,770

5/31/2004

   $ 7,729    $ 7,845

6/30/2004

   $ 7,945    $ 8,063

7/31/2004

   $ 7,641    $ 7,752

8/31/2004

   $ 7,619    $ 7,731

 

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

 

6

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Emu Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the European Monetary Union (“EMU”) equity markets, as measured by the MSCI EMU Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 20.07%, while the Index returned 20.61%.

 

European markets began to see signs of recovery during the reporting period. Improving economic conditions in the U.S. and Asia, characterized by higher gross domestic product (“GDP”) and consumer spending levels, translated into increased demand for many European markets.

 

Some discouraging factors did weigh on European markets late in the reporting period, including an inconsistent picture of the U.S. economic recovery, surging oil prices and a strong euro, which continued to rise against the U.S. dollar. During the reporting period, however, export demand from the U.S remained high enough to help compensate for the increase in the euro.

 

Although higher oil prices posed a threat to economic growth during the reporting period, higher prices did benefit the share prices of oil companies. Total SA (France), the largest Fund holding at 4.63% of net assets as of August 31, 2004, was a strong performer during the reporting period. Royal Dutch Petroleum Co. (Netherlands) (4.26% of the Fund’s net assets as of August 31, 2004) posted more moderate gains.

 

EMU financial companies generally performed well. ING Groep NV (Netherlands) (1.74% of the net assets of the Fund as of August 31, 2004) was a strong performer during the reporting period. BNP Paribas SA (France) (1.96% of the net assets of the Fund as of August 31, 2004) posted more modest gains.

 

Telecommunications companies participated in a global rebound for their sector. Spanish telephone company Telefonica SA (2.55% of the net assets of the Fund as of August 31, 2004) logged gains during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  7


Managers’ Discussion & Analysis

 

iSHARES® MSCI FRANCE INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
22.44%    22.94 %   22.72 %   (0.37 )%   (0.34 )%   0.11 %   8.26 %   8.33 %   8.47 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
22.44%    22.94 %   22.72 %   (1.85 )%   (1.71 )%   0.56 %   95.89 %   96.97 %   99.33 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
FRANCE
INDEX
FUND


   MSCI
FRANCE
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,596    $ 10,620

4/30/1996

   $ 10,765    $ 10,812

5/31/1996

   $ 10,668    $ 10,692

6/30/1996

   $ 10,998    $ 10,885

7/31/1996

   $ 10,757    $ 10,581

8/31/1996

   $ 10,495    $ 10,363

9/30/1996

   $ 11,072    $ 10,934

10/31/1996

   $ 11,278    $ 11,165

11/30/1996

   $ 11,855    $ 11,757

12/31/1996

   $ 11,938    $ 11,872

1/31/1997

   $ 12,160    $ 12,139

2/28/1997

   $ 12,177    $ 12,201

3/31/1997

   $ 12,523    $ 12,578

4/30/1997

   $ 11,987    $ 12,065

5/31/1997

   $ 11,921    $ 11,966

6/30/1997

   $ 13,001    $ 12,961

7/31/1997

   $ 13,232    $ 13,185

8/31/1997

   $ 12,237    $ 12,184

9/30/1997

   $ 13,478    $ 13,474

10/31/1997

   $ 12,625    $ 12,572

11/30/1997

   $ 12,878    $ 12,838

12/31/1997

   $ 13,307    $ 13,291

1/31/1998

   $ 13,755    $ 13,765

2/28/1998

   $ 14,879    $ 14,921

3/31/1998

   $ 16,435    $ 16,584

4/30/1998

   $ 16,951    $ 17,124

5/31/1998

   $ 17,881    $ 18,013

6/30/1998

   $ 18,447    $ 18,434

7/31/1998

   $ 18,599    $ 18,621

8/31/1998

   $ 16,492    $ 16,487

9/30/1998

   $ 15,467    $ 15,407

10/31/1998

   $ 17,018    $ 16,998

11/30/1998

   $ 18,001    $ 18,065

12/31/1998

   $ 18,734    $ 18,812

1/31/1999

   $ 19,294    $ 19,358

2/28/1999

   $ 18,010    $ 18,089

3/31/1999

   $ 18,389    $ 18,424

4/30/1999

   $ 18,837    $ 18,907

5/31/1999

   $ 18,406    $ 18,468

6/30/1999

   $ 19,200    $ 19,024

7/31/1999

   $ 19,303    $ 19,125

8/31/1999

   $ 19,958    $ 19,821

9/30/1999

   $ 20,010    $ 20,025

10/31/1999

   $ 21,030    $ 21,129

11/30/1999

   $ 21,710    $ 21,827

12/31/1999

   $ 24,348    $ 24,317

1/31/2000

   $ 22,611    $ 22,709

2/29/2000

   $ 24,562    $ 24,744

3/31/2000

   $ 24,820    $ 25,015

4/30/2000

   $ 24,027    $ 24,192

5/31/2000

   $ 24,731    $ 24,843

6/30/2000

   $ 25,711    $ 25,783

7/31/2000

   $ 25,283    $ 25,365

8/31/2000

   $ 24,637    $ 24,749

9/30/2000

   $ 23,061    $ 23,173

10/31/2000

   $ 22,492    $ 22,621

11/30/2000

   $ 21,428    $ 21,570

12/31/2000

   $ 23,108    $ 23,270

1/31/2001

   $ 23,108    $ 23,316

2/28/2001

   $ 20,505    $ 20,704

3/31/2001

   $ 19,077    $ 19,264

4/30/2001

   $ 20,794    $ 20,996

5/31/2001

   $ 19,460    $ 19,636

6/30/2001

   $ 18,676    $ 18,829

7/31/2001

   $ 18,760    $ 18,925

8/31/2001

   $ 18,266    $ 18,437

9/30/2001

   $ 15,919    $ 16,082

10/31/2001

   $ 16,630    $ 16,811

11/30/2001

   $ 17,013    $ 17,206

12/31/2001

   $ 17,565    $ 17,785

1/31/2002

   $ 16,527    $ 16,749

2/28/2002

   $ 16,723    $ 16,962

3/31/2002

   $ 17,593    $ 17,851

4/30/2002

   $ 17,340    $ 17,598

5/31/2002

   $ 17,527    $ 17,760

6/30/2002

   $ 17,041    $ 17,250

7/31/2002

   $ 14,759    $ 14,935

8/31/2002

   $ 14,516    $ 14,698

9/30/2002

   $ 12,290    $ 12,443

10/31/2002

   $ 13,870    $ 14,060

11/30/2002

   $ 14,460    $ 14,654

12/31/2002

   $ 14,058    $ 14,250

1/31/2003

   $ 13,556    $ 13,774

2/28/2003

   $ 12,894    $ 13,099

3/31/2003

   $ 12,401    $ 12,613

4/30/2003

   $ 14,351    $ 14,585

5/31/2003

   $ 15,393    $ 15,612

6/30/2003

   $ 15,629    $ 15,843

7/31/2003

   $ 15,894    $ 16,123

8/31/2003

   $ 15,999    $ 16,242

9/30/2003

   $ 16,055    $ 16,312

10/31/2003

   $ 17,144    $ 17,428

11/30/2003

   $ 18,015    $ 18,327

12/31/2003

   $ 19,627    $ 19,984

1/31/2004

   $ 19,762    $ 20,135

2/29/2004

   $ 20,251    $ 20,647

3/31/2004

   $ 19,512    $ 19,913

4/30/2004

   $ 19,282    $ 19,680

5/31/2004

   $ 19,762    $ 20,133

6/30/2004

   $ 20,232    $ 20,607

7/31/2004

   $ 19,608    $ 19,968

8/31/2004

   $ 19,589    $ 19,934

 

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

 

8

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI France Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the French equity market, as measured by the MSCI France Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 22.44%, while the Index returned 22.72%.

 

During the reporting period, France struggled to emerge from economic slowdown. By June, its jobless rate reached 9.9%, the highest level in more than three years. As the euro continued to appreciate against the U.S. dollar, France’s manufacturers struggled with a weak export market. France’s budget deficit has exceeded the 3% of gross domestic product (“GDP”) limit stipulated by the Treaty on European Union (Maastricht Treaty) for two years running and is on schedule to exceed it in 2004 and 2005.

 

Some positive notes appeared toward the end of the reporting period. Second quarter GDP growth was reported at a healthy 3.2% annual rate, boosted by surprising gains in household consumption, business investments, and exports. After rising for four consecutive months, the unemployment rate fell from 9.9% to 9.8% in July.

 

Among the ten largest holdings in the Fund as of August 31, 2004, Total SA, the Fund’s largest holding at 15.94% of net assets, contributed significantly to Fund performance during the reporting period. Vivendi Universal SA (3.51% of the net assets of the Fund as of August 31, 2004) was also a strong performer during the reporting period. Following the auction of its television and film divisions, the entertainment company reported an improvement in core profits and anticipated decline in debt. In August, it received an additional boost from the French government, which allowed it to switch tax plans, providing access to tax credits over the course of the next five years.

 

In April, France’s largest drug-maker, Aventis SA agreed to merge with Paris-based Sanofi-Synthelabo. The resulting company, Sanofi-Aventis (9.04% of the net assets of the Fund as of August 31, 2004), the world’s third largest pharmaceutical company, performed well during the reporting period.

 

Financial companies Societe Generale (its Class A shares were 3.92% of the net assets of the Fund as of August 31, 2004) and BNP Paribas SA (6.72% of the net assets of the Fund as of August 31, 2004) rose early in the reporting period. However, they retraced some of their gains late in the reporting period.

 

Retailer Carrefour SA (3.76% of the Fund’s net assets as of August 31, 2004) declined during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  9


Managers’ Discussion & Analysis

 

iSHARES® MSCI GERMANY INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

  MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
20.55%   21.00 %   20.50 %   (3.83 )%   (3.64 )%   (3.43 )%   3.93 %   3.99 %   4.36 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

  MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
20.55%   21.00 %   20.50 %   (17.75 )%   (16.93 )%   (15.99 )%   38.68 %   39.29 %   43.65 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
GERMANY
INDEX
FUND


   MSCI
GERMANY
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,181    $ 10,209

4/30/1996

   $ 9,781    $ 9,836

5/31/1996

   $ 9,955    $ 9,977

6/30/1996

   $ 10,144    $ 10,179

7/31/1996

   $ 10,197    $ 10,208

8/31/1996

   $ 10,399    $ 10,443

9/30/1996

   $ 10,468    $ 10,510

10/31/1996

   $ 10,560    $ 10,606

11/30/1996

   $ 10,941    $ 11,026

12/31/1996

   $ 10,948    $ 11,060

1/31/1997

   $ 10,880    $ 11,012

2/28/1997

   $ 11,292    $ 11,467

3/31/1997

   $ 12,084    $ 12,309

4/30/1997

   $ 11,642    $ 11,865

5/31/1997

   $ 12,176    $ 12,367

6/30/1997

   $ 12,717    $ 12,912

7/31/1997

   $ 13,891    $ 14,173

8/31/1997

   $ 12,532    $ 12,769

9/30/1997

   $ 13,462    $ 13,751

10/31/1997

   $ 12,540    $ 12,788

11/30/1997

   $ 12,947    $ 13,230

12/31/1997

   $ 13,439    $ 13,777

1/31/1998

   $ 13,815    $ 14,192

2/28/1998

   $ 14,661    $ 15,096

3/31/1998

   $ 15,675    $ 16,111

4/30/1998

   $ 16,236    $ 16,707

5/31/1998

   $ 17,634    $ 18,048

6/30/1998

   $ 18,403    $ 18,804

7/31/1998

   $ 18,887    $ 19,253

8/31/1998

   $ 15,753    $ 16,091

9/30/1998

   $ 15,504    $ 15,881

10/31/1998

   $ 16,110    $ 16,544

11/30/1998

   $ 16,888    $ 17,400

12/31/1998

   $ 17,239    $ 17,832

1/31/1999

   $ 17,465    $ 18,127

2/28/1999

   $ 16,117    $ 16,630

3/31/1999

   $ 15,673    $ 16,180

4/30/1999

   $ 16,663    $ 17,230

5/31/1999

   $ 15,720    $ 16,182

6/30/1999

   $ 16,577    $ 17,082

7/31/1999

   $ 16,444    $ 16,808

8/31/1999

   $ 16,862    $ 17,099

9/30/1999

   $ 16,392    $ 16,869

10/31/1999

   $ 17,340    $ 17,782

11/30/1999

   $ 17,778    $ 18,276

12/31/1999

   $ 20,836    $ 21,406

1/31/2000

   $ 19,912    $ 20,662

2/29/2000

   $ 21,975    $ 22,820

3/31/2000

   $ 21,553    $ 22,453

4/30/2000

   $ 19,666    $ 20,509

5/31/2000

   $ 19,451    $ 19,872

6/30/2000

   $ 19,363    $ 19,813

7/31/2000

   $ 19,275    $ 19,738

8/31/2000

   $ 18,286    $ 18,831

9/30/2000

   $ 17,151    $ 17,846

10/31/2000

   $ 17,338    $ 17,976

11/30/2000

   $ 16,257    $ 16,655

12/31/2000

   $ 17,508    $ 18,069

1/31/2001

   $ 18,026    $ 18,743

2/28/2001

   $ 16,588    $ 17,220

3/31/2001

   $ 14,916    $ 15,417

4/30/2001

   $ 15,899    $ 16,480

5/31/2001

   $ 14,925    $ 15,431

6/30/2001

   $ 14,809    $ 15,325

7/31/2001

   $ 14,818    $ 15,310

8/31/2001

   $ 13,737    $ 14,166

9/30/2001

   $ 11,377    $ 11,759

10/31/2001

   $ 11,956    $ 12,379

11/30/2001

   $ 13,159    $ 13,600

12/31/2001

   $ 13,557    $ 14,034

1/31/2002

   $ 12,987    $ 13,426

2/28/2002

   $ 12,833    $ 13,257

3/31/2002

   $ 13,873    $ 14,346

4/30/2002

   $ 13,457    $ 13,914

5/31/2002

   $ 13,412    $ 13,859

6/30/2002

   $ 13,023    $ 13,448

7/31/2002

   $ 10,889    $ 11,227

8/31/2002

   $ 10,916    $ 11,276

9/30/2002

   $ 8,275    $ 8,530

10/31/2002

   $ 9,424    $ 9,722

11/30/2002

   $ 9,948    $ 10,274

12/31/2002

   $ 9,179    $ 9,485

1/31/2003

   $ 8,941    $ 9,253

2/28/2003

   $ 8,310    $ 8,612

3/31/2003

   $ 7,999    $ 8,287

4/30/2003

   $ 9,875    $ 10,228

5/31/2003

   $ 10,534    $ 10,892

6/30/2003

   $ 11,074    $ 11,445

7/31/2003

   $ 11,678    $ 12,123

8/31/2003

   $ 11,504    $ 11,922

9/30/2003

   $ 11,440    $ 11,835

10/31/2003

   $ 12,804    $ 13,245

11/30/2003

   $ 13,462    $ 13,949

12/31/2003

   $ 14,971    $ 15,538

1/31/2004

   $ 15,138    $ 15,708

2/29/2004

   $ 15,017    $ 15,577

3/31/2004

   $ 14,331    $ 14,841

4/30/2004

   $ 14,405    $ 14,909

5/31/2004

   $ 14,387    $ 14,892

6/30/2004

   $ 14,869    $ 15,397

7/31/2004

   $ 14,146    $ 14,641

8/31/2004

   $ 13,868    $ 14,366

 

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

 

10

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Germany Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the German equity market, as measured by the MSCI Germany Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 20.55%, while the Index returned 20.50%.

 

The German market struggled to recover from economic slowdown during the reporting period. During the last months of 2003, the market rebounded, due largely to unexpected, and encouraging, economic news. In December, figures revealed that Germany’s trade surplus had widened 2% to a record 135 billion euros in 2003 as exports soared, despite the euro’s gains against the U.S. dollar. Over the remaining months, however, unemployment levels rose to 10.6%, dampening consumer spending levels. Because exports typically account for less than 1/3 of the German economy and consumer spending generally represents more than 1/2 of the economy, the positive export growth was unable to offset the weak domestic spending levels. Higher oil prices also weighed on markets, raising energy costs and further hurting sales of automobiles, an important part of the German economy.

 

Despite the weakness in Germany’s domestic economy, the equity market delivered gains during the reporting period. German stocks had more attractive valuations than some of their U.S. counterparts, which helped to draw investors to some German equities. Additionally, for U.S. dollar-based investors, the strong euro relative to the U.S. dollar boosted returns.

 

Among the ten largest holdings in the Fund as of August 31, 2004, energy giants RWE AG (4.35% of the net assets of the Fund as of August 31, 2004) and E. ON AG (8.64% of the net assets of the Fund as of August 31, 2004) logged gains during the reporting period as energy prices rose.

 

Deutsche Telekom AG (8.83% of the net assets of the Fund as of August 31, 2004) and SAP AG (5.98% of the net assets of the Fund as of August 31, 2004) benefited from a rally in technology share prices worldwide, but lost some of their gains late in the reporting period amid investor concerns that customers may be more cautious toward technology spending.

 

Siemens AG (10.85% of the net assets of the Fund as of August 31, 2004) and DaimlerChrysler AG (7.23% of the net assets of the Fund as of August 31, 2004), both declined during the reporting period, struggling with higher oil prices and low consumer spending levels.

 

MANAGERS’ DISCUSSION & ANALYSIS

  11


Managers’ Discussion & Analysis

 

iSHARES® MSCI ITALY INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
25.09%    26.03 %   25.29 %   2.08 %   2.25 %   1.84 %   9.81 %   9.89 %   9.66 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
25.09%    26.03 %   25.29 %   10.86 %   11.77 %   9.55 %   121.06 %   122.35 %   118.53 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iShares
MSCI
Italy
Index
Fund


   MSCI
Italy
Index


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 9,875    $ 9,910

4/30/1996

   $ 11,197    $ 11,263

5/31/1996

   $ 11,226    $ 11,199

6/30/1996

   $ 11,300    $ 11,241

7/31/1996

   $ 10,514    $ 10,408

8/31/1996

   $ 10,411    $ 10,325

9/30/1996

   $ 11,083    $ 10,986

10/31/1996

   $ 10,479    $ 10,378

11/30/1996

   $ 11,272    $ 11,197

12/31/1996

   $ 11,295    $ 11,220

1/31/1997

   $ 12,450    $ 12,409

2/28/1997

   $ 11,151    $ 11,093

3/31/1997

   $ 11,408    $ 11,369

4/30/1997

   $ 11,506    $ 11,529

5/31/1997

   $ 11,438    $ 11,400

6/30/1997

   $ 12,586    $ 12,480

7/31/1997

   $ 13,242    $ 13,199

8/31/1997

   $ 12,845    $ 12,852

9/30/1997

   $ 14,718    $ 14,713

10/31/1997

   $ 13,793    $ 13,821

11/30/1997

   $ 14,256    $ 14,163

12/31/1997

   $ 15,334    $ 15,201

1/31/1998

   $ 16,600    $ 16,586

2/28/1998

   $ 17,249    $ 17,284

3/31/1998

   $ 20,615    $ 20,678

4/30/1998

   $ 20,214    $ 20,255

5/31/1998

   $ 21,241    $ 21,303

6/30/1998

   $ 20,198    $ 20,243

7/31/1998

   $ 22,160    $ 22,270

8/31/1998

   $ 18,966    $ 19,115

9/30/1998

   $ 18,055    $ 18,239

10/31/1998

   $ 19,198    $ 19,424

11/30/1998

   $ 21,253    $ 21,428

12/31/1998

   $ 23,037    $ 23,185

1/31/1999

   $ 21,730    $ 21,972

2/28/1999

   $ 21,325    $ 21,650

3/31/1999

   $ 22,202    $ 22,487

4/30/1999

   $ 21,587    $ 21,811

5/31/1999

   $ 20,481    $ 20,640

6/30/1999

   $ 20,195    $ 20,166

7/31/1999

   $ 19,638    $ 19,517

8/31/1999

   $ 19,941    $ 19,948

9/30/1999

   $ 20,403    $ 20,354

10/31/1999

   $ 19,719    $ 19,725

11/30/1999

   $ 20,098    $ 20,194

12/31/1999

   $ 23,160    $ 23,124

1/31/2000

   $ 21,846    $ 21,937

2/29/2000

   $ 24,732    $ 24,619

3/31/2000

   $ 22,947    $ 23,070

4/30/2000

   $ 21,523    $ 21,562

5/31/2000

   $ 22,494    $ 22,506

6/30/2000

   $ 23,826    $ 24,034

7/31/2000

   $ 23,039    $ 23,025

8/31/2000

   $ 22,604    $ 22,723

9/30/2000

   $ 21,587    $ 21,401

10/31/2000

   $ 21,811    $ 21,907

11/30/2000

   $ 22,441    $ 22,332

12/31/2000

   $ 22,888    $ 22,817

1/31/2001

   $ 23,285    $ 23,215

2/28/2001

   $ 21,017    $ 20,883

3/31/2001

   $ 19,645    $ 19,568

4/30/2001

   $ 20,712    $ 20,624

5/31/2001

   $ 18,953    $ 18,845

6/30/2001

   $ 18,231    $ 18,100

7/31/2001

   $ 18,587    $ 18,466

8/31/2001

   $ 18,398    $ 18,294

9/30/2001

   $ 15,719    $ 15,658

10/31/2001

   $ 16,216    $ 16,149

11/30/2001

   $ 16,567    $ 16,505

12/31/2001

   $ 16,774    $ 16,738

1/31/2002

   $ 16,205    $ 16,158

2/28/2002

   $ 16,174    $ 16,123

3/31/2002

   $ 17,229    $ 17,156

4/30/2002

   $ 17,384    $ 17,289

5/31/2002

   $ 17,064    $ 16,955

6/30/2002

   $ 17,157    $ 17,037

7/31/2002

   $ 15,440    $ 15,312

8/31/2002

   $ 15,668    $ 15,527

9/30/2002

   $ 13,455    $ 13,387

10/31/2002

   $ 14,602    $ 14,497

11/30/2002

   $ 15,988    $ 15,849

12/31/2002

   $ 15,646    $ 15,583

1/31/2003

   $ 15,434    $ 15,348

2/28/2003

   $ 15,858    $ 15,825

3/31/2003

   $ 14,702    $ 14,576

4/30/2003

   $ 16,717    $ 16,562

5/31/2003

   $ 18,605    $ 18,429

6/30/2003

   $ 18,287    $ 18,073

7/31/2003

   $ 18,266    $ 18,026

8/31/2003

   $ 17,672    $ 17,442

9/30/2003

   $ 18,361    $ 18,110

10/31/2003

   $ 19,263    $ 18,996

11/30/2003

   $ 20,811    $ 20,518

12/31/2003

   $ 21,723    $ 21,478

1/31/2004

   $ 22,150    $ 21,917

2/29/2004

   $ 22,368    $ 22,157

3/31/2004

   $ 21,592    $ 21,398

4/30/2004

   $ 21,920    $ 21,697

5/31/2004

   $ 22,117    $ 21,868

6/30/2004

   $ 22,883    $ 22,620

7/31/2004

   $ 22,325    $ 22,068

8/31/2004

   $ 22,106    $ 21,852

 

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

 

12

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Italy Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Italian equity market, as measured by the MSCI Italy Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 25.09%, while the Index returned 25.29%.

 

Italian markets delivered gains during the reporting period against a backdrop of generally improving global economic conditions. Financial stocks, along with their counterparts around the world, benefited from improving valuations and renewed investor activity as economies expanded around the world. Italian telecommunications companies also moved in sync with the telecommunications sector globally, which rebounded from lows experienced in previous reporting periods. Energy companies were helped by rising oil prices during the reporting period.

 

Among the Fund’s largest holdings as of August 31, 2004, financial companies generally performed well. Banks Banca Intesa SpA (4.39% of the net assets of the Fund as of August 31, 2004) and Banco Popolare di Verona e Novara Scrl (2.37% of the net assets of the Fund as of August 31, 2004) both posted gains for the reporting period. Insurer Assicurazioni Generali SpA (8.75% of the net assets of the Fund as of August 31, 2004), the largest financial company in Italy and the fourth largest insurance company in Europe, also delivered solid gains. UniCredito Italiano SpA (4.85% of the net assets of the Fund as of August 31, 2004) was the only security among the Fund’s top ten holdings to decline during the reporting period.

 

The Fund’s largest holdings in telecommunications companies as of August 31, 2004 also performed well during the reporting period. Telecom Italia SpA common shares, Telecom Italia Mobile SpA, and Telecom Italia SpA preferred shares (respectively 8.63%, 7.04%, and 4.60% of the net assets of the Fund as of August 31, 2004) all gained ground during the reporting period.

 

One company, however, had a significant impact on financial markets during the reporting period. In December, the Italian markets were shaken by the collapse of Parmalat, Italy’s largest dairy group. The revelation that the company’s financial crisis, which at first had appeared to be a short-term liquidity problem, was instead the result of nearly a decade of fraud, sent ripples through the financial markets and rattled investor confidence. Although Parmalat was a Fund holding at the time of its collapse, the Fund was fully divested of its holding of Parmalat as of August 31, 2004.

 

MANAGERS’ DISCUSSION & ANALYSIS

  13


Managers’ Discussion & Analysis

 

iSHARES® MSCI NETHERLANDS INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
12.28%    12.56 %   11.68 %   (6.45 )%   (6.43 )%   (4.98 )%   3.19 %   3.20 %   4.56 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
12.28%    12.56 %   11.68 %   (28.35 )%   (28.27 )%   (22.55 )%   30.53 %   30.62 %   45.90 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES MSCI
NETHERLANDS
INDEX FUND


   MSCI
NETHERLANDS
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,434    $ 10,398

4/30/1996

   $ 10,471    $ 10,444

5/31/1996

   $ 11,113    $ 10,928

6/30/1996

   $ 11,094    $ 10,953

7/31/1996

   $ 10,911    $ 10,779

8/31/1996

   $ 11,119    $ 10,960

9/30/1996

   $ 11,394    $ 11,239

10/31/1996

   $ 11,548    $ 11,520

11/30/1996

   $ 12,259    $ 12,240

12/31/1996

   $ 12,498    $ 12,528

1/31/1997

   $ 12,422    $ 12,428

2/28/1997

   $ 12,934    $ 12,932

3/31/1997

   $ 13,152    $ 13,243

4/30/1997

   $ 12,960    $ 13,108

5/31/1997

   $ 13,825    $ 13,942

6/30/1997

   $ 14,684    $ 15,036

7/31/1997

   $ 15,581    $ 16,265

8/31/1997

   $ 14,236    $ 14,661

9/30/1997

   $ 15,453    $ 15,949

10/31/1997

   $ 14,795    $ 15,256

11/30/1997

   $ 14,728    $ 15,127

12/31/1997

   $ 15,012    $ 15,506

1/31/1998

   $ 15,219    $ 15,652

2/28/1998

   $ 16,810    $ 17,251

3/31/1998

   $ 17,339    $ 17,797

4/30/1998

   $ 17,927    $ 18,407

5/31/1998

   $ 18,984    $ 19,374

6/30/1998

   $ 18,683    $ 19,044

7/31/1998

   $ 18,923    $ 19,159

8/31/1998

   $ 16,715    $ 16,803

9/30/1998

   $ 15,819    $ 15,822

10/31/1998

   $ 16,730    $ 16,721

11/30/1998

   $ 17,306    $ 17,597

12/31/1998

   $ 18,635    $ 19,107

1/31/1999

   $ 17,204    $ 17,672

2/28/1999

   $ 16,958    $ 17,551

3/31/1999

   $ 17,240    $ 17,732

4/30/1999

   $ 18,447    $ 18,863

5/31/1999

   $ 17,493    $ 17,784

6/30/1999

   $ 17,457    $ 17,836

7/31/1999

   $ 17,927    $ 18,410

8/31/1999

   $ 18,216    $ 18,838

9/30/1999

   $ 17,501    $ 18,154

10/31/1999

   $ 17,890    $ 18,779

11/30/1999

   $ 17,796    $ 18,660

12/31/1999

   $ 19,474    $ 20,423

1/31/2000

   $ 17,121    $ 17,985

2/29/2000

   $ 18,076    $ 19,133

3/31/2000

   $ 18,534    $ 19,693

4/30/2000

   $ 17,742    $ 19,036

5/31/2000

   $ 18,278    $ 19,549

6/30/2000

   $ 19,327    $ 20,634

7/31/2000

   $ 18,519    $ 19,737

8/31/2000

   $ 18,449    $ 19,706

9/30/2000

   $ 17,673    $ 18,946

10/31/2000

   $ 17,391    $ 18,791

11/30/2000

   $ 17,148    $ 18,636

12/31/2000

   $ 17,955    $ 19,588

1/31/2001

   $ 17,940    $ 19,456

2/28/2001

   $ 16,881    $ 18,192

3/31/2001

   $ 15,368    $ 16,547

4/30/2001

   $ 16,293    $ 17,711

5/31/2001

   $ 15,721    $ 17,019

6/30/2001

   $ 15,172    $ 16,588

7/31/2001

   $ 14,976    $ 16,487

8/31/2001

   $ 14,791    $ 16,320

9/30/2001

   $ 12,818    $ 14,127

10/31/2001

   $ 12,842    $ 14,184

11/30/2001

   $ 13,375    $ 14,783

12/31/2001

   $ 13,654    $ 15,161

1/31/2002

   $ 13,216    $ 14,593

2/28/2002

   $ 13,264    $ 14,651

3/31/2002

   $ 14,444    $ 15,927

4/30/2002

   $ 14,308    $ 15,830

5/31/2002

   $ 14,277    $ 15,973

6/30/2002

   $ 13,886    $ 15,483

7/31/2002

   $ 11,501    $ 12,730

8/31/2002

   $ 11,716    $ 12,960

9/30/2002

   $ 9,683    $ 10,652

10/31/2002

   $ 10,831    $ 12,042

11/30/2002

   $ 11,445    $ 12,751

12/31/2002

   $ 10,853    $ 12,065

1/31/2003

   $ 10,089    $ 11,309

2/28/2003

   $ 9,090    $ 10,473

3/31/2003

   $ 8,806    $ 10,169

4/30/2003

   $ 10,065    $ 11,462

5/31/2003

   $ 10,658    $ 12,175

6/30/2003

   $ 10,763    $ 12,268

7/31/2003

   $ 11,340    $ 12,799

8/31/2003

   $ 11,624    $ 13,064

9/30/2003

   $ 11,446    $ 12,890

10/31/2003

   $ 12,047    $ 13,674

11/30/2003

   $ 12,502    $ 14,154

12/31/2003

   $ 13,643    $ 15,454

1/31/2004

   $ 13,684    $ 15,388

2/29/2004

   $ 13,909    $ 15,631

3/31/2004

   $ 13,177    $ 14,850

4/30/2004

   $ 13,177    $ 14,781

5/31/2004

   $ 13,427    $ 15,035

6/30/2004

   $ 13,709    $ 15,350

7/31/2004

   $ 13,044    $ 14,637

8/31/2004

   $ 13,052    $ 14,589

 

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

 

14

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Netherlands Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Dutch equity market, as measured by the MSCI Netherlands Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 12.28%, while the Index returned 11.68%.

 

Regulatory restraints, such as those imposed by the Securities and Exchange Commission and the Internal Revenue Service, can restrict the Fund’s ability to hold a given index constituent at its index weight, resulting in differences between a fund’s holdings and the securities in its underlying index. One such constraint, the Single Issuer Rule, generally prohibits a fund from investing more than 25% of the value of its total assets in the securities of a single issuer. To comply with this Rule, the Fund was obligated to underweight its investment in the Index’s largest constituent, Royal Dutch Petroleum Co. As of August 31, 2004, Royal Dutch Petroleum Co. represented 29.40% of the Index, compared to 24.29% of the Fund’s net assets. Another constraint, the 5/50 Rule, precludes the sum of all the securities weighted 5% or more in a fund’s portfolio from exceeding 50% of a fund’s total assets. As of August 31, 2004, nearly 69% of the Index was represented by securities each having a weighting of 5% or more of the Index. To comply with the 5/50 Rule, the Fund was obligated to underweight several of the Index’s largest weighted constituents and to overweight others. The combined effect of all the misweights in the Fund had a net positive impact on the Fund’s return relative to the Index’s return during the reporting period.

 

The Dutch market began to show signs of recovery during the reporting period. Because the Netherlands has historically depended so heavily on foreign trade, it has been sensitive to the economic strength of its trading partners. As a result, the economic slowdown in the U.S. and major European markets in recent years had a dampening effect on the Dutch economy. By the end of 2003, gross domestic product (“GDP”) had contracted by roughly 0.9% and equity markets languished. However, as the U.S. and some European markets began to experience improved GDP growth and market performance, the economic climate in the Netherlands improved as well. Like the U.S. and some European markets, this growth came in fits and starts during the reporting period. Toward the end of the reporting period, though, export demand and output had both experienced a jump, and consumer confidence rose accordingly during June and July.

 

Financial stocks, which represent a significant percentage of the Dutch market, generally benefited from improved equity valuations and a return of investment to equity markets during the reporting period. ING Groep NV (14.53% of the net assets of the Fund as of August 31, 2004) and ABN AMRO Holding NV (4.90% of the net assets of the Fund as of August 31, 2004) were among the strongest performers of the Fund’s ten largest holdings during the reporting period. AEGON NV (4.01% of the net assets of the Fund as of August 31, 2004), however, suffered declines.

 

Those companies that were heavily dependent on exports generally experienced a volatile period, but ultimately finished the reporting period in negative territory. Unilever NV CVA (10.04% of the net assets of the Fund as of August 31, 2004) and Koninklijke Philips Electronics NV (4.63% of the net assets of the Fund as of August 31, 2004) both suffered declines during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  15


Managers’ Discussion & Analysis

 

iSHARES® MSCI SPAIN INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
24.28%    24.74 %   24.70 %   2.79 %   2.98 %   2.47 %   11.95 %   12.03 %   12.30 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
24.28%    24.74 %   24.70 %   14.77 %   15.80 %   12.99 %   160.35 %   161.91 %   167.49 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iShares
MSCI
Spain
Index
Fund


   MSCI
Spain
Index


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,399    $ 10,413

4/30/1996

   $ 10,715    $ 10,816

5/31/1996

   $ 10,640    $ 10,732

6/30/1996

   $ 11,069    $ 11,183

7/31/1996

   $ 10,663    $ 10,672

8/31/1996

   $ 10,845    $ 10,901

9/30/1996

   $ 11,130    $ 11,169

10/31/1996

   $ 11,484    $ 11,519

11/30/1996

   $ 12,361    $ 12,490

12/31/1996

   $ 13,571    $ 13,757

1/31/1997

   $ 13,363    $ 13,526

2/28/1997

   $ 12,893    $ 13,047

3/31/1997

   $ 13,355    $ 13,576

4/30/1997

   $ 14,119    $ 14,367

5/31/1997

   $ 15,229    $ 15,475

6/30/1997

   $ 16,324    $ 16,606

7/31/1997

   $ 15,437    $ 15,679

8/31/1997

   $ 15,091    $ 15,357

9/30/1997

   $ 17,156    $ 17,561

10/31/1997

   $ 15,622    $ 15,874

11/30/1997

   $ 16,470    $ 16,821

12/31/1997

   $ 16,815    $ 17,252

1/31/1998

   $ 18,172    $ 18,634

2/28/1998

   $ 20,476    $ 21,024

3/31/1998

   $ 23,303    $ 23,822

4/30/1998

   $ 23,834    $ 24,537

5/31/1998

   $ 23,916    $ 24,727

6/30/1998

   $ 23,948    $ 24,824

7/31/1998

   $ 25,166    $ 26,238

8/31/1998

   $ 20,008    $ 20,559

9/30/1998

   $ 19,982    $ 20,151

10/31/1998

   $ 23,004    $ 23,407

11/30/1998

   $ 24,447    $ 25,049

12/31/1998

   $ 25,442    $ 25,860

1/31/1999

   $ 24,940    $ 25,421

2/28/1999

   $ 24,387    $ 24,935

3/31/1999

   $ 23,298    $ 24,011

4/30/1999

   $ 23,324    $ 24,125

5/31/1999

   $ 23,043    $ 24,038

6/30/1999

   $ 23,052    $ 24,157

7/31/1999

   $ 22,176    $ 23,099

8/31/1999

   $ 22,686    $ 23,674

9/30/1999

   $ 22,349    $ 23,335

10/31/1999

   $ 22,340    $ 23,606

11/30/1999

   $ 23,865    $ 25,639

12/31/1999

   $ 24,902    $ 27,110

1/31/2000

   $ 22,890    $ 25,003

2/29/2000

   $ 24,902    $ 27,501

3/31/2000

   $ 25,319    $ 27,451

4/30/2000

   $ 23,510    $ 25,469

5/31/2000

   $ 22,854    $ 24,710

6/30/2000

   $ 23,218    $ 25,394

7/31/2000

   $ 22,615    $ 24,727

8/31/2000

   $ 22,274    $ 24,240

9/30/2000

   $ 22,348    $ 24,483

10/31/2000

   $ 21,280    $ 22,684

11/30/2000

   $ 19,871    $ 21,038

12/31/2000

   $ 21,510    $ 22,810

1/31/2001

   $ 23,526    $ 24,972

2/28/2001

   $ 22,578    $ 23,557

3/31/2001

   $ 21,307    $ 22,245

4/30/2001

   $ 22,201    $ 23,336

5/31/2001

   $ 20,865    $ 21,763

6/30/2001

   $ 19,613    $ 20,230

7/31/2001

   $ 19,318    $ 19,990

8/31/2001

   $ 19,786    $ 20,349

9/30/2001

   $ 17,087    $ 17,864

10/31/2001

   $ 18,107    $ 18,805

11/30/2001

   $ 19,369    $ 20,222

12/31/2001

   $ 19,313    $ 20,203

1/31/2002

   $ 18,154    $ 18,661

2/28/2002

   $ 18,376    $ 18,917

3/31/2002

   $ 18,914    $ 19,331

4/30/2002

   $ 19,499    $ 19,788

5/31/2002

   $ 19,601    $ 19,883

6/30/2002

   $ 18,061    $ 18,062

7/31/2002

   $ 16,206    $ 16,153

8/31/2002

   $ 16,651    $ 16,872

9/30/2002

   $ 14,128    $ 14,140

10/31/2002

   $ 16,002    $ 16,232

11/30/2002

   $ 17,532    $ 17,874

12/31/2002

   $ 16,673    $ 17,050

1/31/2003

   $ 16,944    $ 17,243

2/28/2003

   $ 17,160    $ 17,480

3/31/2003

   $ 16,972    $ 17,345

4/30/2003

   $ 19,293    $ 19,789

5/31/2003

   $ 20,359    $ 20,733

6/30/2003

   $ 20,939    $ 21,398

7/31/2003

   $ 21,276    $ 21,782

8/31/2003

   $ 20,949    $ 21,450

9/30/2003

   $ 21,014    $ 21,367

10/31/2003

   $ 22,277    $ 22,826

11/30/2003

   $ 23,381    $ 23,966

12/31/2003

   $ 26,139    $ 27,016

1/31/2004

   $ 26,555    $ 27,296

2/29/2004

   $ 27,604    $ 28,375

3/31/2004

   $ 26,489    $ 27,186

4/30/2004

   $ 26,149    $ 26,887

5/31/2004

   $ 26,224    $ 26,973

6/30/2004

   $ 26,602    $ 27,349

7/31/2004

   $ 25,988    $ 26,709

8/31/2004

   $ 26,035    $ 26,747

 

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

 

16

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Spain Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Spanish equity market, as measured by the MSCI Spain Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 24.28%, while the Index returned 24.70%.

 

The Spanish market performed well during the reporting period as the country’s economy began to recover from the economic slowdown that had weighed down most global markets in recent years. Spain was dealt an additional blow on March 11, 2004, when Islamic terrorists bombed the Madrid train station, killing more than 200 people. The bombings had far reaching political effects, turning the national election on March 14 in favor of the Socialist candidate, Jose Luis Rodriguez Zapatero.

 

The Fund’s largest holding at 23.21% of the net assets of the Fund as of August 31, 2004, Telefonica SA, saw strong gains early in the reporting period, thanks to a worldwide rebound in the telecommunications sector, but it retraced some of those gains as the sector contracted later in the reporting period.

 

Also among the Fund’s ten largest holdings as of August 31, 2004, utility company Union Fenosa SA (2.62% of the net assets of the Fund as of August 31, 2004) was a top performer, benefiting from higher energy prices during the reporting period.

 

Cigarette maker Altadis SA (3.40% of the net assets of the Fund as of August 31, 2004) also performed well, although it suffered a slight loss in late February on news that its net profit in 2003 fell 33%, as it took a charge for restructuring its French and Spanish operations. Altadis SA countered the drop in revenue with an increased dividend, mitigating the stock’s price decline.

 

In addition, a number of Spanish companies, particularly banks and utilities, have substantial holdings in Latin America. In general, these companies benefited from strong gains in Latin American markets during the reporting period. Two such companies in the Fund are Banco Bilbao Vizcaya Argentaria SA (12.56% of the net assets of the Fund as of August 31, 2004) and the utility company Endesa SA (4.96% of the net assets of the Fund as of August 31, 2004).

 

MANAGERS’ DISCUSSION & ANALYSIS

  17


Managers’ Discussion & Analysis

 

iSHARES® MSCI SWEDEN INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
35.81%    36.50 %   36.55 %   (0.17 )%   0.00 %*   0.71 %   8.15 %   8.21 %   9.50 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
35.81%    36.50 %   36.55 %   (0.83 )%   (0.02 )%   3.61 %   94.27 %   95.16 %   115.83 %

* Rounds to less than 0.01%.

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

Certain sectors and markets performed exceptionally well based on market conditions during the one-year period. Investors should not expect that such exceptional returns will be repeated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
SWEDEN
INDEX
FUND


   MSCI
SWEDEN
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,424    $ 10,452

4/30/1996

   $ 10,446    $ 10,338

5/31/1996

   $ 10,976    $ 10,797

6/30/1996

   $ 11,127    $ 10,941

7/31/1996

   $ 10,651    $ 10,491

8/31/1996

   $ 11,413    $ 11,192

9/30/1996

   $ 11,856    $ 11,655

10/31/1996

   $ 12,354    $ 12,163

11/30/1996

   $ 13,163    $ 12,980

12/31/1996

   $ 13,233    $ 13,086

1/31/1997

   $ 13,474    $ 13,390

2/28/1997

   $ 13,357    $ 13,335

3/31/1997

   $ 13,926    $ 13,963

4/30/1997

   $ 12,929    $ 12,795

5/31/1997

   $ 13,840    $ 13,796

6/30/1997

   $ 15,001    $ 14,996

7/31/1997

   $ 15,710    $ 15,697

8/31/1997

   $ 14,848    $ 14,845

9/30/1997

   $ 16,614    $ 16,619

10/31/1997

   $ 14,872    $ 14,951

11/30/1997

   $ 15,237    $ 15,300

12/31/1997

   $ 14,689    $ 14,777

1/31/1998

   $ 14,997    $ 15,157

2/28/1998

   $ 16,354    $ 16,584

3/31/1998

   $ 17,524    $ 17,749

4/30/1998

   $ 18,564    $ 18,625

5/31/1998

   $ 19,051    $ 19,192

6/30/1998

   $ 18,816    $ 19,072

7/31/1998

   $ 18,564    $ 18,985

8/31/1998

   $ 15,661    $ 16,081

9/30/1998

   $ 14,290    $ 14,681

10/31/1998

   $ 15,133    $ 15,618

11/30/1998

   $ 16,478    $ 17,102

12/31/1998

   $ 16,314    $ 16,840

1/31/1999

   $ 17,091    $ 17,835

2/28/1999

   $ 16,750    $ 17,404

3/31/1999

   $ 17,211    $ 17,747

4/30/1999

   $ 17,809    $ 18,752

5/31/1999

   $ 17,322    $ 18,351

6/30/1999

   $ 18,749    $ 20,117

7/31/1999

   $ 19,638    $ 20,927

8/31/1999

   $ 19,590    $ 20,831

9/30/1999

   $ 19,573    $ 20,697

10/31/1999

   $ 21,113    $ 23,072

11/30/1999

   $ 22,829    $ 25,548

12/31/1999

   $ 26,742    $ 30,268

1/31/2000

   $ 26,259    $ 30,490

2/29/2000

   $ 31,615    $ 37,466

3/31/2000

   $ 30,885    $ 35,628

4/30/2000

   $ 30,082    $ 35,265

5/31/2000

   $ 29,252    $ 33,709

6/30/2000

   $ 28,649    $ 33,165

7/31/2000

   $ 27,445    $ 31,990

8/31/2000

   $ 27,260    $ 31,604

9/30/2000

   $ 24,509    $ 27,478

10/31/2000

   $ 22,385    $ 25,628

11/30/2000

   $ 19,534    $ 23,109

12/31/2000

   $ 20,394    $ 23,825

1/31/2001

   $ 22,049    $ 25,678

2/28/2001

   $ 18,896    $ 21,499

3/31/2001

   $ 14,893    $ 16,704

4/30/2001

   $ 17,141    $ 19,188

5/31/2001

   $ 16,213    $ 18,133

6/30/2001

   $ 15,274    $ 17,140

7/31/2001

   $ 15,374    $ 17,258

8/31/2001

   $ 14,451    $ 16,238

9/30/2001

   $ 12,039    $ 13,507

10/31/2001

   $ 13,071    $ 14,654

11/30/2001

   $ 15,068    $ 16,861

12/31/2001

   $ 15,528    $ 17,312

1/31/2002

   $ 14,160    $ 15,693

2/28/2002

   $ 14,496    $ 16,063

3/31/2002

   $ 15,001    $ 16,623

4/30/2002

   $ 13,576    $ 14,962

5/31/2002

   $ 13,441    $ 14,805

6/30/2002

   $ 13,082    $ 14,422

7/31/2002

   $ 11,164    $ 12,312

8/31/2002

   $ 11,085    $ 12,247

9/30/2002

   $ 9,200    $ 10,176

10/31/2002

   $ 10,693    $ 11,816

11/30/2002

   $ 12,230    $ 13,519

12/31/2002

   $ 10,908    $ 12,066

1/31/2003

   $ 10,748    $ 11,899

2/28/2003

   $ 10,680    $ 11,826

3/31/2003

   $ 10,419    $ 11,542

4/30/2003

   $ 12,589    $ 13,909

5/31/2003

   $ 13,146    $ 14,510

6/30/2003

   $ 13,237    $ 14,607

7/31/2003

   $ 14,077    $ 15,542

8/31/2003

   $ 14,305    $ 15,806

9/30/2003

   $ 14,782    $ 16,337

10/31/2003

   $ 16,020    $ 17,736

11/30/2003

   $ 16,566    $ 18,351

12/31/2003

   $ 17,914    $ 19,851

1/31/2004

   $ 18,573    $ 20,602

2/29/2004

   $ 19,531    $ 21,677

3/31/2004

   $ 19,127    $ 21,268

4/30/2004

   $ 19,127    $ 21,204

5/31/2004

   $ 19,451    $ 21,548

6/30/2004

   $ 20,017    $ 22,214

7/31/2004

   $ 19,127    $ 21,234

8/31/2004

   $ 19,427    $ 21,584

 

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

 

18

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Sweden Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Swedish equity market, as measured by the MSCI Sweden Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 35.81%, while the Index returned 36.55%.

 

Sweden’s market delivered one of the strongest returns in Europe during the reporting period, thanks largely to healthy economic conditions. Although unemployment remained high, the economy remained fundamentally sound, with healthy gross domestic product (“GDP”) growth and a surplus in the external accounts. During the second half of the reporting period, export levels increased sharply, suggesting the economy was on track for GDP growth of roughly 2.8% for 2004.

 

A large contributor to Sweden’s market performance during the reporting period was its largest weighting as of August 31, 2004, cellular phone maker Telefonaktiebolaget LM Ericsson. Its Class B shares, which represented 21.78% of the net assets of the Fund as of August 31, 2004, returned nearly 60% during the reporting period as the telecommunications industry, particularly cellular telecommunications, around the world demonstrated continued strength.

 

Sweden’s increase in export activity was reflected in the strong performance of carmaker Volvo AB (whose Class B shares represented 4.20% of the net assets of the Fund as of August 31, 2004), which posted strong gains, and, to a lesser extent, of clothing retailer Hennes & Mauritz AB (whose Class B shares made up 6.74% of the net assets of the Fund as of August 31, 2004), which enjoyed more modest gains during the reporting period.

 

Higher equity valuations, lower interest rates and improving economic environment helped boost the share prices of financial companies, including Nordea AB (9.19% of the net assets of the Fund as of August 31, 2004) and Skandinaviska Enskilda Banken AB, whose Class A shares represented 3.70% of the net assets of the Fund as of August 31, 2004.

 

MANAGERS’ DISCUSSION & ANALYSIS

  19


Managers’ Discussion & Analysis

 

iSHARES® MSCI SWITZERLAND INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
19.56%    19.17 %   18.90 %   (0.61 )%   (0.67 )%   0.11 %   4.30 %   4.29 %   5.74 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
19.56%    19.17 %   18.90 %   (3.00 )%   (3.33 )%   0.54 %   42.86 %   42.70 %   60.51 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES MSCI
SWITZERLAND
INDEX FUND


   MSCI
SWITZERLAND
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,298    $ 10,352

4/30/1996

   $ 10,025    $ 9,946

5/31/1996

   $ 9,751    $ 9,612

6/30/1996

   $ 10,207    $ 10,089

7/31/1996

   $ 9,876    $ 9,886

8/31/1996

   $ 10,260    $ 10,314

9/30/1996

   $ 9,959    $ 10,065

10/31/1996

   $ 9,909    $ 10,035

11/30/1996

   $ 10,093    $ 10,120

12/31/1996

   $ 9,951    $ 9,919

1/31/1997

   $ 10,159    $ 10,215

2/28/1997

   $ 10,210    $ 10,342

3/31/1997

   $ 10,769    $ 10,943

4/30/1997

   $ 11,044    $ 11,207

5/31/1997

   $ 11,879    $ 12,044

6/30/1997

   $ 12,781    $ 13,026

7/31/1997

   $ 13,064    $ 13,220

8/31/1997

   $ 11,972    $ 11,992

9/30/1997

   $ 12,944    $ 13,219

10/31/1997

   $ 12,675    $ 13,139

11/30/1997

   $ 12,927    $ 13,550

12/31/1997

   $ 13,456    $ 14,307

1/31/1998

   $ 13,838    $ 14,852

2/28/1998

   $ 15,123    $ 16,262

3/31/1998

   $ 15,583    $ 16,614

4/30/1998

   $ 15,627    $ 16,527

5/31/1998

   $ 16,530    $ 17,235

6/30/1998

   $ 16,391    $ 17,238

7/31/1998

   $ 17,294    $ 18,498

8/31/1998

   $ 14,515    $ 15,601

9/30/1998

   $ 12,770    $ 14,247

10/31/1998

   $ 14,973    $ 16,315

11/30/1998

   $ 15,570    $ 17,120

12/31/1998

   $ 15,915    $ 17,674

1/31/1999

   $ 15,589    $ 17,260

2/28/1999

   $ 15,019    $ 16,698

3/31/1999

   $ 14,935    $ 16,511

4/30/1999

   $ 15,057    $ 16,467

5/31/1999

   $ 14,235    $ 15,635

6/30/1999

   $ 14,254    $ 15,378

7/31/1999

   $ 14,739    $ 15,984

8/31/1999

   $ 14,728    $ 15,966

9/30/1999

   $ 14,785    $ 15,928

10/31/1999

   $ 15,015    $ 16,217

11/30/1999

   $ 14,862    $ 16,093

12/31/1999

   $ 15,398    $ 16,433

1/31/2000

   $ 13,848    $ 14,628

2/29/2000

   $ 13,560    $ 14,302

3/31/2000

   $ 14,604    $ 15,458

4/30/2000

   $ 14,096    $ 14,928

5/31/2000

   $ 14,852    $ 15,748

6/30/2000

   $ 15,369    $ 16,354

7/31/2000

   $ 15,388    $ 16,406

8/31/2000

   $ 15,017    $ 16,037

9/30/2000

   $ 14,341    $ 15,153

10/31/2000

   $ 14,418    $ 15,285

11/30/2000

   $ 14,959    $ 15,925

12/31/2000

   $ 16,302    $ 17,395

1/31/2001

   $ 15,964    $ 17,027

2/28/2001

   $ 14,988    $ 15,902

3/31/2001

   $ 13,616    $ 14,337

4/30/2001

   $ 13,790    $ 14,689

5/31/2001

   $ 13,490    $ 14,508

6/30/2001

   $ 12,959    $ 13,973

7/31/2001

   $ 13,287    $ 13,750

8/31/2001

   $ 12,603    $ 13,728

9/30/2001

   $ 11,766    $ 13,096

10/31/2001

   $ 11,844    $ 13,091

11/30/2001

   $ 12,116    $ 13,315

12/31/2001

   $ 12,238    $ 13,577

1/31/2002

   $ 11,625    $ 12,826

2/28/2002

   $ 11,917    $ 13,201

3/31/2002

   $ 12,783    $ 14,049

4/30/2002

   $ 13,153    $ 14,427

5/31/2002

   $ 13,601    $ 14,998

6/30/2002

   $ 13,085    $ 14,402

7/31/2002

   $ 11,420    $ 12,671

8/31/2002

   $ 11,284    $ 12,654

9/30/2002

   $ 10,486    $ 11,825

10/31/2002

   $ 10,729    $ 12,226

11/30/2002

   $ 11,138    $ 12,532

12/31/2002

   $ 10,836    $ 12,207

1/31/2003

   $ 10,465    $ 11,790

2/28/2003

   $ 9,879    $ 11,165

3/31/2003

   $ 9,821    $ 11,101

4/30/2003

   $ 10,943    $ 12,361

5/31/2003

   $ 11,412    $ 13,121

6/30/2003

   $ 11,412    $ 13,106

7/31/2003

   $ 11,880    $ 13,623

8/31/2003

   $ 11,949    $ 13,499

9/30/2003

   $ 12,378    $ 14,085

10/31/2003

   $ 12,739    $ 14,397

11/30/2003

   $ 13,384    $ 15,165

12/31/2003

   $ 14,433    $ 16,368

1/31/2004

   $ 14,756    $ 16,795

2/29/2004

   $ 14,835    $ 16,885

3/31/2004

   $ 14,512    $ 16,466

4/30/2004

   $ 14,600    $ 16,678

5/31/2004

   $ 14,786    $ 16,811

6/30/2004

   $ 14,805    $ 16,817

7/31/2004

   $ 14,306    $ 16,245

8/31/2004

   $ 14,286    $ 16,050

 

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

 

20

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Switzerland Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Swiss equity market, as measured by the MSCI Switzerland Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 19.56%, while the Index returned 18.90%.

 

Regulatory restraints, such as those imposed by the Securities and Exchange Commission and the Internal Revenue Service, can restrict the Fund’s ability to hold a given index constituent at its index weight, resulting in differences between a fund’s holdings and the securities in its underlying index. One such constraint, the 5/50 Rule, precludes the sum of all the securities weighted 5% or more in a fund’s portfolio from exceeding 50% of a fund’s total assets. As of August 31, 2004, approximately 72% of the Index was represented by securities each having a weighting of 5% or more of the Index. To comply with the 5/50 Rule, the Fund was obligated to underweight several of the Index’s largest weighted constituents and to overweight others. The combined effect of all the misweights in the Fund had a net positive impact on the Fund’s return relative to the Index’s return during the reporting period.

 

Like many of its European neighbors, Switzerland attempted to revive itself from economic slowdown during the reporting period. Because exports account for about 2/3 of gross domestic product, and about 2/3 of its exports are bought by the Euro region, Sweden’s economic prosperity is largely dependent on the fiscal health of its European neighbors and, to a lesser extent, of the United States. Early in the reporting period, Swiss leading economic indicators rose to top their highest levels in more than 2-1/2 years. The levels proved difficult to sustain, however, as the global economy struggled with recovery.

 

The ten largest holdings in the Fund represented roughly 71% of its net assets as of August 31, 2004. Among the Fund’s ten largest holdings, cement company Holcim Ltd. (whose registered shares represented 3.95% of the net assets of the Fund as of August 31, 2004) was a top performer during the reporting period.

 

Pharmaceutical company Novartis AG (the Fund’s largest holding at 19.59% of net assets as of August 31, 2004) in July announced a profit in excess of analysts’ expectations, and delivered gains for the reporting period.

 

Nestle SA, whose registered shares represented 11.53% of the net assets of the Fund as of August 31, 2004, got off to a strong start in the reporting period, but finished in negative territory. The company, which is the world’s largest food company, declined late in the reporting period.

 

Financial giant UBS AG (whose registered shares represented 8.94% of the Fund’s net assets as of August 31, 2004) gained during the reporting period, but fellow financial companies Credit Suisse Group (4.59% of the net assets of the Fund as of August 31, 2004), Zurich Financial Services AG (4.21% of the net assets of the Fund as of August 31, 2004) and Swiss Reinsurance Co. (3.85% of the net assets of the Fund as of August 31, 2004) all experienced losses during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  21


Managers’ Discussion & Analysis

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
24.77%    26.59 %   25.90 %   (1.94 )%   (1.86 )%   (1.21 )%   6.70 %   6.83 %   7.37 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
24.77%    26.59 %   25.90 %   (9.32 )%   (8.98 )%   (5.92 )%   73.21 %   75.05 %   82.77 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
UNITED
KINGDOM
INDEX
FUND


   MSCI
UNITED
KINGDOM
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,206    $ 10,183

4/30/1996

   $ 10,371    $ 10,381

5/31/1996

   $ 10,470    $ 10,503

6/30/1996

   $ 10,412    $ 10,441

7/31/1996

   $ 10,478    $ 10,514

8/31/1996

   $ 11,041    $ 11,059

9/30/1996

   $ 11,284    $ 11,315

10/31/1996

   $ 11,788    $ 11,851

11/30/1996

   $ 12,418    $ 12,527

12/31/1996

   $ 12,827    $ 12,961

1/31/1997

   $ 12,413    $ 12,580

2/28/1997

   $ 12,768    $ 12,973

3/31/1997

   $ 12,970    $ 13,110

4/30/1997

   $ 13,173    $ 13,352

5/31/1997

   $ 13,806    $ 13,962

6/30/1997

   $ 13,974    $ 14,156

7/31/1997

   $ 14,616    $ 14,819

8/31/1997

   $ 14,405    $ 14,576

9/30/1997

   $ 15,584    $ 15,841

10/31/1997

   $ 14,990    $ 15,239

11/30/1997

   $ 15,051    $ 15,314

12/31/1997

   $ 15,501    $ 15,892

1/31/1998

   $ 16,314    $ 16,664

2/28/1998

   $ 17,432    $ 17,820

3/31/1998

   $ 18,358    $ 18,762

4/30/1998

   $ 18,358    $ 18,802

5/31/1998

   $ 17,659    $ 18,108

6/30/1998

   $ 18,088    $ 18,387

7/31/1998

   $ 17,782    $ 18,019

8/31/1998

   $ 16,564    $ 16,714

9/30/1998

   $ 16,178    $ 16,373

10/31/1998

   $ 17,110    $ 17,371

11/30/1998

   $ 17,854    $ 18,148

12/31/1998

   $ 18,356    $ 18,721

1/31/1999

   $ 18,194    $ 18,528

2/28/1999

   $ 18,581    $ 18,939

3/31/1999

   $ 19,256    $ 19,529

4/30/1999

   $ 20,030    $ 20,285

5/31/1999

   $ 18,905    $ 19,162

6/30/1999

   $ 18,941    $ 19,212

7/31/1999

   $ 19,157    $ 19,504

8/31/1999

   $ 19,102    $ 19,428

9/30/1999

   $ 18,744    $ 19,114

10/31/1999

   $ 19,263    $ 19,673

11/30/1999

   $ 19,404    $ 19,916

12/31/1999

   $ 20,584    $ 21,052

1/31/2000

   $ 18,661    $ 19,124

2/29/2000

   $ 18,007    $ 18,520

3/31/2000

   $ 19,420    $ 19,885

4/30/2000

   $ 18,642    $ 19,055

5/31/2000

   $ 18,094    $ 18,412

6/30/2000

   $ 18,238    $ 18,584

7/31/2000

   $ 18,334    $ 18,710

8/31/2000

   $ 18,528    $ 18,909

9/30/2000

   $ 17,983    $ 18,391

10/31/2000

   $ 18,094    $ 18,521

11/30/2000

   $ 17,054    $ 17,432

12/31/2000

   $ 18,182    $ 18,624

1/31/2001

   $ 17,808    $ 18,317

2/28/2001

   $ 16,727    $ 17,105

3/31/2001

   $ 15,898    $ 16,333

4/30/2001

   $ 16,848    $ 17,358

5/31/2001

   $ 16,323    $ 16,780

6/30/2001

   $ 15,747    $ 16,190

7/31/2001

   $ 15,656    $ 16,143

8/31/2001

   $ 15,526    $ 16,003

9/30/2001

   $ 14,396    $ 14,914

10/31/2001

   $ 14,673    $ 15,184

11/30/2001

   $ 14,910    $ 15,435

12/31/2001

   $ 15,284    $ 15,813

1/31/2002

   $ 14,679    $ 15,156

2/28/2002

   $ 14,585    $ 15,081

3/31/2002

   $ 15,253    $ 15,787

4/30/2002

   $ 15,295    $ 15,826

5/31/2002

   $ 15,096    $ 15,620

6/30/2002

   $ 14,460    $ 14,960

7/31/2002

   $ 13,479    $ 13,953

8/31/2002

   $ 13,323    $ 13,808

9/30/2002

   $ 11,956    $ 12,379

10/31/2002

   $ 12,874    $ 13,349

11/30/2002

   $ 13,250    $ 13,751

12/31/2002

   $ 12,954    $ 13,454

1/31/2003

   $ 12,035    $ 12,505

2/28/2003

   $ 11,843    $ 12,304

3/31/2003

   $ 11,822    $ 12,292

4/30/2003

   $ 13,018    $ 13,570

5/31/2003

   $ 13,808    $ 14,403

6/30/2003

   $ 13,915    $ 14,527

7/31/2003

   $ 13,990    $ 14,617

8/31/2003

   $ 13,883    $ 14,517

9/30/2003

   $ 14,363    $ 15,031

10/31/2003

   $ 15,325    $ 16,052

11/30/2003

   $ 15,762    $ 16,528

12/31/2003

   $ 16,936    $ 17,767

1/31/2004

   $ 16,870    $ 17,713

2/29/2004

   $ 17,630    $ 18,522

3/31/2004

   $ 17,211    $ 18,088

4/30/2004

   $ 17,068    $ 17,961

5/31/2004

   $ 17,432    $ 18,352

6/30/2004

   $ 17,421    $ 18,356

7/31/2004

   $ 17,244    $ 18,173

8/31/2004

   $ 17,321    $ 18,277

 

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

 

22

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI United Kingdom Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the British equity market, as measured by the MSCI United Kingdom Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 24.77%, while the Index returned 25.90%.

 

The United Kingdom was one of the fastest growing European economies during the reporting period. A broad-based recovery led to ever increasing consumer spending and fears of the economy becoming overheated. In response, the Bank of England in late 2003 began a course of raising interest rates in small, deliberate steps. By August 2004, the slowest manufacturing growth in six months, combined with weakening retail sales levels suggested that the interest rate tightening was achieving its desired effect, and reduced the likelihood of the Bank of England raising the benchmark interest rate to 5.25%, as most economists had predicted.

 

BP PLC, the largest Fund holding at 10.01% of net assets as of August 31, 2004, was a strong performer during the reporting period.

 

Vodafone Group PLC (7.89% of the net assets of the Fund as of August 31, 2004) moved in step with its telecommunications counterparts around the world, posting strong gains during the first half of the reporting period, and then retracing some of those gains to finish the reporting period with more modest gains.

 

As markets improved and equity valuations rose, financial companies also generally performed well. Barclays PLC (an affiliate of the Fund’s investment adviser and 3.09% of the net assets of the Fund as of August 31, 2004) and Lloyds TSB Group PLC (2.16% of the net assets of the Fund as of August 31, 2004) gained during the reporting period, as did HSBC Holdings PLC (8.84% of the net assets of the Fund as of August 31, 2004).

 

Pharmaceutical companies showed mixed results during the reporting period. AstraZeneca PLC (3.98% of the net assets of the Fund as of August 31, 2004) posted positive returns for the reporting period. GlaxoSmithKline PLC (6.22% of the net assets of the Fund as of August 31, 2004) lost ground for the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  23


Shareholder Expenses

 

iSHARES®, INC.

 

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

 

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from March 1, 2004 to August 31, 2004.

 

Actual Expenses

 

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

 

Hypothetical Example for Comparison Purposes

 

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

 

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

 

iShares MSCI Index Fund


   Beginning
Account Value
(March 1, 2004)


  

Ending
Account Value

(August 31, 2004)


   Annualized
Expense Ratio


    Expenses Paid
During Period*
(March 1 to
August 31, 2004)


Austria

                          

Actual

   $ 1,000.00    $ 1,121.80    0.74 %   $ 3.95

Hypothetical (5% return before expenses)

     1,000.00      1,021.40    0.74       3.76
Belgium                           

Actual

     1,000.00      1,040.20    0.74       3.79

Hypothetical (5% return before expenses)

     1,000.00      1,021.39    0.74       3.76
EMU                           

Actual

     1,000.00      943.00    0.75       3.66

Hypothetical (5% return before expenses)

     1,000.00      1,021.35    0.75       3.81
France                           

Actual

     1,000.00      967.30    0.75       3.71

Hypothetical (5% return before expenses)

     1,000.00      1,021.37    0.75       3.81

 

24

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Shareholder Expenses (Continued)

 

iSHARES®, INC.

 

iShares MSCI Index Fund


   Beginning
Account Value
(March 1, 2004)


   Ending
Account Value
(August 31, 2004)


   Annualized
Expense Ratio


    Expenses Paid
During Period*
(March 1 to
August 31, 2004)


Germany                           

Actual

   $ 1,000.00    $ 923.40    0.77 %   $ 3.72

Hypothetical (5% return before expenses)

     1,000.00      1,021.28    0.77       3.91
Italy                           

Actual

     1,000.00      988.30    0.81       4.05

Hypothetical (5% return before expenses)

     1,000.00      1,021.04    0.81       4.11
Netherlands                           

Actual

     1,000.00      938.40    0.74       3.61

Hypothetical (5% return before expenses)

     1,000.00      1,021.43    0.74       3.76
Spain                           

Actual

     1,000.00      943.20    0.76       3.71

Hypothetical (5% return before expenses)

     1,000.00      1,021.34    0.76       3.86
Sweden                           

Actual

     1,000.00      994.70    0.97       4.86

Hypothetical (5% return before expenses)

     1,000.00      1,020.24    0.97       4.93
Switzerland                           

Actual

     1,000.00      963.00    0.75       3.70

Hypothetical (5% return before expenses)

     1,000.00      1,021.35    0.75       3.81
United Kingdom                           

Actual

     1,000.00      982.50    0.73       3.64

Hypothetical (5% return before expenses)

     1,000.00      1,021.47    0.73       3.71

* Expenses are calculated using each Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days), and divided by the number of days in the year (366 days).

 

SHAREHOLDER EXPENSES

  25


Schedule of Investments

 

iSHARES® MSCI AUSTRIA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS 99.88%

             

AIRLINES – 0.64%

             

Austrian Airlines AG1

     28,648    $ 368,700
           

              368,700

BANKS – 25.17%

             

Bank Austria Creditanstalt AG

     45,356      2,871,812

Erste Bank der Oesterreichischen Sparkassen AG2

     307,904      11,708,584
           

              14,580,396

BUILDING MATERIALS – 4.71%

             

Wienerberger Baustoffindustrie AG2

     75,276      2,726,191
           

              2,726,191

CHEMICALS – 2.31%

             

Lenzing AG

     6,596      1,337,089
           

              1,337,089

ELECTRIC – 4.80%

             

Oesterreichische Elektrizitaetswirtschafts AG Class A

     15,368      2,781,899
           

              2,781,899

ENGINEERING & CONSTRUCTION – 8.48%

             

Flughafen Wien AG

     40,903      2,346,781

VA Technologie AG1,2

     39,406      2,562,121
           

              4,908,902

ENVIRONMENTAL CONTROL – 0.53%

             

BWT AG

     13,770      307,249
           

              307,249

FOREST PRODUCTS & PAPER – 3.89%

             

Mayr-Melnhof Karton AG

     17,052      2,255,109
           

              2,255,109

INSURANCE – 2.03%

             

Generali Holding Vienna AG

     38,726      1,177,534
           

              1,177,534

IRON & STEEL – 8.94%

             

Boehler-Uddeholm AG

     28,764      2,405,034

Voest-Alpine AG

     56,508      2,769,629
           

              5,174,663

MANUFACTURING – 2.32%

             

RHI AG1,2

     62,254      1,345,187
           

              1,345,187

Security


   Shares or
Principal


   Value

OIL & GAS – 12.63%

             

OMV AG2

     32,028    $ 7,316,864
           

              7,316,864

REAL ESTATE – 7.11%

             

CA Immobilien Anlagen AG1,2

     60,240      1,444,427

Immofinanz Immobilien Anlage AG1

     330,276      2,673,220
           

              4,117,647

TELECOMMUNICATIONS – 16.32%

             

Telekom Austria AG2

     676,430      9,453,752
           

              9,453,752
           

TOTAL COMMON STOCKS
(Cost: $45,906,899)

            57,851,182

SHORT-TERM INVESTMENTS – 10.78%

             

FLOATING RATE NOTES – 2.78%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 27,233      27,230

1.52%, 10/12/043,4

     22,694      22,694

1.56%, 09/15/043,4

     45,389      45,389

1.64%, 03/15/053,4

     22,694      22,704

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     34,042      34,041

1.38%, 11/22/043

     11,347      11,347

1.40%, 10/29/043

     45,389      45,389

CC USA Inc.

             

1.45%, 05/04/053,4

     45,389      45,383

1.61%, 07/29/053,4

     45,389      45,376

Den Danske Bank NY

             

1.51%, 08/12/053

     45,389      45,376

1.56%, 08/26/053

     45,389      45,375

Depfa Bank PLC

             

1.27%, 06/15/053

     45,389      45,389

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     37,673      37,663

Five Finance Inc.

             

1.42%, 04/29/053,4

     36,311      36,309

Gemini Securitization Corp.

             

1.53%, 09/09/043

     22,694      22,687

 

26

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRIA INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

HBOS Treasury Services PLC

             

1.24%, 04/01/053

   $ 29,049    $ 29,047

1.58%, 04/22/053

     45,389      45,389

K2 USA LLC

             

1.45%, 06/10/053,4

     45,389      45,384

1.57%, 09/27/043,4

     49,020      49,019

1.61%, 07/25/053,4

     22,694      22,690

Links Finance LLC

             

1.55%, 04/15/053,4

     45,389      45,383

1.68%, 04/25/053

     45,389      45,408

Nationwide Building Society

             

1.59%, 07/28/053

     45,389      45,389

1.63%, 12/09/043,4

     37,673      37,504

Nordea Bank PLC

             

2.11%, 06/07/053

     45,389      45,382

Northern Rock PLC

             

1.56%, 01/13/053,4

     43,119      43,119

Permanent Financing PLC

             

1.52%, 03/10/053

     45,389      45,389

1.53%, 12/10/043

     22,694      22,694

1.55%, 06/10/053

     20,425      20,425

Sigma Finance Inc.

             

1.52%, 10/07/043

     45,389      45,388

1.57%, 11/15/043

     45,389      45,388

1.59%, 09/15/053

     34,042      34,045

Tango Finance Corp.

             

1.52%, 04/07/053,4

     16,658      16,657

1.56%, 01/18/053,4

     19,971      19,970

1.59%, 07/25/053,4

     45,389      45,385

1.66%, 05/17/053,4

     37,673      37,671

1.70%, 02/25/053,4

     25,418      25,415

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     11,243      11,224

1.48%, 06/15/053,4

     22,694      22,690

1.56%, 09/15/043,4

     22,694      22,694

1.56%, 07/15/053,4

     34,042      34,036

White Pine Finance LLC

             

1.46%, 07/05/053

     22,694      22,690

1.55%, 04/15/053,4

     34,042      34,037

1.55%, 07/11/053

     11,347      11,346

1.56%, 11/15/043,4

     27,233      27,233

Security


  

Shares or

Principal


   Value

1.57%, 06/15/053,4

   $ 18,609    $ 18,609

1.58%, 03/29/053

     19,517      19,515

1.58%, 08/26/053,4

     22,694      22,690

1.68%, 05/20/053

     20,425      20,423
           

              1,611,680

MONEY MARKET FUNDS – 2.18%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     708,658      708,658

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     499,276      499,276

BlackRock Temp Cash Money Market Fund3

     22,913      22,913

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares3

     30,510      30,510
           

              1,261,357

COMMERCIAL PAPER – 1.99%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

     22,694      22,688

1.51%, 09/02/043

     20,425      20,424

1.54%, 09/14/043

     22,694      22,682

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     9,078      9,075

1.53%, 09/16/043

     22,330      22,316

1.54%, 09/15/043

     22,694      22,681

1.54%, 09/22/043

     11,347      11,337

Barton Capital Corp.

             

1.53%, 09/08/043

     22,694      22,688

1.53%, 09/09/043

     53,010      52,992

1.53%, 09/13/043

     32,678      32,661

1.53%, 09/14/043

     11,347      11,341

1.54%, 09/17/043

     13,617      13,607

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     22,694      22,688

1.53%, 09/15/043

     9,078      9,072

Cantabric Finance LLC

             

1.55%, 09/17/043

     9,078      9,072

Corporate Asset Funding

             

1.42%, 09/03/043

     13,617      13,616

 

SCHEDULES OF INVESTMENTS

  27


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRIA INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

CRC Funding LLC

             

1.42%, 09/03/043

   $ 22,694    $ 22,693

Delaware Funding Corp.

             

1.50%, 09/09/043

     22,694      22,687

1.53%, 09/10/043

     36,311      36,297

1.53%, 09/20/043

     15,432      15,420

Edison Asset Securitization

             

1.07%, 09/21/043

     22,694      22,681

1.45%, 11/09/043

     45,389      45,263

1.52%, 09/08/043

     45,389      45,375

1.59%, 12/02/043

     45,389      45,204

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     13,617      13,616

1.53%, 09/07/043

     22,694      22,689

1.53%, 09/17/043

     13,617      13,607

1.53%, 09/21/043

     11,347      11,338

1.53%, 09/22/043

     22,694      22,674

1.54%, 09/14/043

     34,042      34,022

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     22,694      22,537

GIRO Funding US Corp.

             

1.54%, 09/09/043

     22,694      22,687

1.55%, 10/15/043

     29,764      29,707

Grampian Funding LLC

             

1.26%, 10/22/043

     45,389      45,308

1.44%, 10/27/043

     45,389      45,287

1.59%, 11/30/043

     22,694      22,604

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     11,347      11,347

1.53%, 09/20/043

     11,347      11,338

1.53%, 09/23/043

     15,886      15,871

1.54%, 09/15/043

     27,233      27,217

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     31,631      31,631

1.51%, 09/08/043

     18,156      18,150

1.52%, 09/09/043

     11,347      11,343

1.53%, 09/21/043

     22,694      22,675

Receivables Capital Corp.

             

1.54%, 09/14/043

     13,617      13,609

Scaldis Capital LLC

             

1.48%, 09/01/043

     24,964      24,964

Sydney Capital Corp.

             

1.25%, 10/22/043

     15,105      15,079

1.55%, 09/16/043

     13,617      13,608

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     18,156      18,145

1.54%, 09/23/043

     11,347      11,337

Windmill Funding Corp.

             

1.52%, 09/09/043

     11,347      11,343

1.52%, 09/10/043

     15,886      15,880
           

              1,154,173

TIME DEPOSITS – 1.75%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     45,389      45,389

1.33%, 02/10/053

     22,694      22,693

1.39%, 02/02/053

     22,694      22,693

1.39%, 04/08/053

     31,772      31,761

1.40%, 10/25/043

     45,389      45,388

Bank of New York

             

1.39%, 11/01/043

     45,389      45,388

1.60%, 12/03/043

     11,347      11,346

Bank of Nova Scotia

             

1.13%, 10/06/043

     45,389      45,389

1.24%, 10/07/043

     34,042      34,041

1.42%, 10/29/043

     34,042      34,042

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     45,389      45,390

1.49%, 08/09/053

     45,389      45,377

1.54%, 06/23/053

     45,389      45,378

1.56%, 06/10/053

     22,694      22,700

Norddeutsche Landesbank

             

1.59%, 07/27/053

     45,389      45,374

Prudential Funding LLC

             

1.60%, 12/01/043

     22,694      22,603

SouthTrust Bank

             

1.55%, 09/01/043

     90,778      90,778

Toronto-Dominion Bank

             

1.22%, 03/23/053

     79,430      79,423

1.34%, 02/10/053

     18,156      18,154

1.41%, 11/01/043

     34,042      34,042

 

28

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRIA INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

1.53%, 09/13/043

   $ 22,694    $ 22,694  

1.77%, 05/10/053

     22,694      22,693  

1.90%, 05/11/053

     22,694      22,693  

UBS Finance (Delaware)

               

1.10%, 09/08/043

     45,389      45,379  

1.11%, 12/17/043

     68,083      67,859  

1.14%, 09/29/043

     45,389      45,349  
           


              1,014,016  

REPURCHASE AGREEMENTS – 1.55%

               

Banc of America Securities LLC

               

1.59%, 09/01/043,6

     136,167      136,167  

Bank of America, N.A

               

1.59%, 09/01/043,6

     260,986      260,986  

Goldman Sachs & Co.

               

1.59%, 09/01/043,6

     226,944      226,944  

Merrill Lynch Government Securities Inc.

               

1.57%, 09/01/043,6

     45,389      45,389  

1.59%, 09/01/043,6

     226,944      226,944  
           


              896,430  

U.S. GOVERNMENT AGENCY NOTES – 0.28%

               

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     31,772      31,835  

1.80%, 01/18/053

     21,106      20,959  

1.80%, 01/19/053

     22,694      22,536  

2.06%, 05/31/053

     22,628      22,275  

Federal National Mortgage Association

               

2.33%, 07/22/053

     68,083      66,659  
           


              164,264  

MEDIUM-TERM NOTES – 0.25%

               

CC USA Inc.

               

1.29%, 04/15/053,4

     45,389      45,386  

1.51%, 02/15/053,4

     29,503      29,524  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     34,042      34,041  

K2 USA LLC

               

1.46%, 01/12/053,4

     22,694      22,694  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     11,347      11,346  
           


              142,991  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $6,244,911)

          $ 6,244,911  
           


TOTAL INVESTMENTS IN SECURITIES – 110.66%
(Cost: $52,151,810)

            64,096,093  

Other Assets, Less Liabilities – (10.66%)

            (6,175,873 )
           


NET ASSETS – 100.00%

          $ 57,920,220  
           



1 Non-income earning security.
2 All or a portion of this security represents a security on loan. See Note 5.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   34.31 %   $ 19,875,577

Communications

   16.32       9,453,752

Industrial

   16.04       9,287,529

Basic Materials

   15.14       8,766,861

Energy

   12.63       7,316,864

Utilities

   4.80       2,781,899

Consumer Cyclical

   0.64       368,700

Short-Term and Other Net Assets

   0.12       69,038
    

 

TOTAL

   100.00 %   $ 57,920,220
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  29


Schedule of Investments

 

iSHARES® MSCI BELGIUM INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.89%

             

BANKS – 41.60%

             

Dexia Group1

     178,038    $ 3,065,957

Fortis1

     271,278      6,026,626

KBC Bankverzekeringsholdings SA1

     20,454      1,230,458
           

              10,323,041

BEVERAGES – 4.78%

             

Interbrew SA

     37,002      1,185,820
           

              1,185,820

CHEMICALS – 4.81%

             

Solvay SA1

     14,196      1,193,003
           

              1,193,003

DIVERSIFIED FINANCIAL SERVICES – 0.96%

             

Algemene Maatschappij voor Nijverheidskredit NV

     3,822      238,979
           

              238,979

ELECTRIC – 10.62%

             

Electrabel SA

     7,854      2,634,411
           

              2,634,411

ELECTRICAL COMPONENTS & EQUIPMENT – 1.14%

             

Bekaert NV

     4,494      282,089
           

              282,089

ELECTRONICS – 1.10%

             

Barco NV

     3,276      272,721
           

              272,721

FOOD – 7.57%

             

Colruyt NV

     5,040      663,350

Delhaize Group1

     21,588      1,213,673
           

              1,877,023

HOLDING COMPANIES – DIVERSIFIED – 4.89%

             

Groupe Bruxelles Lambert SA

     19,404      1,214,457
           

              1,214,457

MANUFACTURING – 3.57%

             

AGFA-Gevaert NV1

     32,214      886,740
           

              886,740

MINING – 2.04%

             

Umicore1

     7,518      506,169
           

              506,169

Security


   Shares or
Principal


   Value

PHARMACEUTICALS – 5.89%

             

Omega Pharma SA

     5,670    $ 283,554

UCB SA

     24,234      1,178,063
           

              1,461,617

REAL ESTATE INVESTMENT TRUSTS – 2.08%

             

Cofinimmo1

     3,696      515,204
           

              515,204

RETAIL – 1.14%

             

SA D’Ieteren NV1

     1,389      282,917
           

              282,917

TELECOMMUNICATIONS – 7.14%

             

Belgacom SA1,2

     36,834      1,228,334

Mobistar SA2

     7,938      542,647
           

              1,770,981

TRANSPORTATION – 0.56%

             

Compagnie Maritime Belge SA1

     924      139,244
           

              139,244
           

TOTAL COMMON STOCKS
(Cost: $23,843,363)

            24,784,416

SHORT-TERM INVESTMENTS – 44.08%

             

FLOATING RATE NOTES – 11.42%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 47,867      47,861

1.52%, 10/12/043,4

     39,889      39,889

1.56%, 09/15/043,4

     79,779      79,778

1.64%, 03/15/053,4

     39,889      39,906

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     59,834      59,833

1.38%, 11/22/043

     19,945      19,945

1.40%, 10/29/043

     79,779      79,778

CC USA Inc.

             

1.45%, 05/04/053,4

     79,779      79,768

1.61%, 07/29/053,4

     79,779      79,757

Den Danske Bank NY

             

1.51%, 08/12/053

     79,779      79,756

1.56%, 08/26/053

     79,779      79,755

Depfa Bank PLC

             

1.27%, 06/15/053

     79,779      79,779

 

30

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI BELGIUM INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Dorada Finance Inc.

             

1.61%, 07/29/053,4

   $ 66,216    $ 66,198

Five Finance Inc.

             

1.42%, 04/29/053,4

     63,823      63,819

Gemini Securitization Corp.

             

1.53%, 09/09/043

     39,889      39,876

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     51,058      51,056

1.58%, 04/22/053

     79,779      79,779

K2 USA LLC

             

1.45%, 06/10/053,4

     79,779      79,771

1.57%, 09/27/043,4

     86,161      86,160

1.61%, 07/25/053,4

     39,889      39,882

Links Finance LLC

             

1.55%, 04/15/053,4

     79,779      79,769

1.68%, 04/25/053

     79,779      79,812

Nationwide Building Society

             

1.59%, 07/28/053

     79,779      79,779

1.63%, 12/09/043,4

     66,216      65,919

Nordea Bank PLC

             

2.11%, 06/07/053

     79,779      79,766

Northern Rock PLC

             

1.56%, 01/13/053,4

     75,790      75,790

Permanent Financing PLC

             

1.52%, 03/10/053

     79,779      79,779

1.53%, 12/10/043

     39,889      39,889

1.55%, 06/10/053

     35,900      35,900

Sigma Finance Inc.

             

1.52%, 10/07/043

     79,779      79,777

1.57%, 11/15/043

     79,779      79,778

1.59%, 09/15/053

     59,834      59,839

Tango Finance Corp.

             

1.52%, 04/07/053,4

     29,279      29,277

1.56%, 01/18/053,4

     35,103      35,101

1.59%, 07/25/053,4

     79,779      79,771

1.66%, 05/17/053,4

     66,216      66,214

1.70%, 02/25/053,4

     44,676      44,672

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     19,761      19,727

1.48%, 06/15/053,4

     39,889      39,882

1.56%, 09/15/043,4

     39,889      39,889

1.56%, 07/15/053,4

     59,834      59,823

Security


   Shares or
Principal


   Value

White Pine Finance LLC

             

1.46%, 07/05/053

   $ 39,889    $ 39,882

1.55%, 04/15/053,4

     59,834      59,827

1.55%, 07/11/053

     19,945      19,943

1.56%, 11/15/043,4

     47,867      47,867

1.57%, 06/15/053,4

     32,709      32,710

1.58%, 03/29/053

     34,305      34,300

1.58%, 08/26/053,4

     39,889      39,881

1.68%, 05/20/053

     35,900      35,898
           

              2,832,807

MONEY MARKET FUNDS – 8.78%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     1,207,457      1,207,457

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     877,564      877,564

BlackRock Temp Cash Money Market Fund3

     40,273      40,273

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares3

     53,627      53,627
           

              2,178,921

COMMERCIAL PAPER – 8.18%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

     39,889      39,878

1.51%, 09/02/043

     35,900      35,899

1.54%, 09/14/043

     39,889      39,867

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     15,956      15,951

1.53%, 09/16/043

     39,249      39,224

1.54%, 09/15/043

     39,889      39,865

1.54%, 09/22/043

     19,945      19,927

Barton Capital Corp.

             

1.53%, 09/08/043

     39,889      39,877

1.53%, 09/09/043

     93,174      93,142

1.53%, 09/13/043

     57,437      57,408

1.53%, 09/14/043

     19,945      19,934

1.54%, 09/17/043

     23,934      23,917

 

SCHEDULES OF INVESTMENTS

  31


Schedule of Investments (Continued)

 

iSHARES® MSCI BELGIUM INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

   $ 39,889    $ 39,878

1.53%, 09/15/043

     15,956      15,946

Cantabric Finance LLC

             

1.55%, 09/17/043

     15,956      15,945

Corporate Asset Funding

             

1.42%, 09/03/043

     23,934      23,931

CRC Funding LLC

             

1.42%, 09/03/043

     39,889      39,886

Delaware Funding Corp.

             

1.50%, 09/09/043

     39,889      39,876

1.53%, 09/10/043

     63,823      63,798

1.53%, 09/20/043

     27,125      27,103

Edison Asset Securitization

             

1.07%, 09/21/043

     39,889      39,866

1.45%, 11/09/043

     79,779      79,557

1.52%, 09/08/043

     79,779      79,755

1.59%, 12/02/043

     79,779      79,454

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     23,934      23,932

1.53%, 09/07/043

     39,889      39,880

1.53%, 09/17/043

     23,934      23,917

1.53%, 09/21/043

     19,945      19,928

1.53%, 09/22/043

     39,889      39,854

1.54%, 09/14/043

     59,834      59,801

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     39,889      39,613

GIRO Funding US Corp.

             

1.54%, 09/09/043

     39,889      39,876

1.55%, 10/15/043

     52,315      52,216

Grampian Funding LLC

             

1.26%, 10/22/043

     79,779      79,637

1.44%, 10/27/043

     79,779      79,600

1.59%, 11/30/043

     39,889      39,731

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     19,945      19,944

1.53%, 09/20/043

     19,945      19,929

1.53%, 09/23/043

     27,922      27,896

1.54%, 09/15/043

     47,867      47,838

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     55,598      55,598

1.51%, 09/08/043

     31,911      31,902

1.52%, 09/09/043

     19,945      19,938

1.53%, 09/21/043

     39,889      39,855

Receivables Capital Corp.

             

1.54%, 09/14/043

     23,934      23,920

Scaldis Capital LLC

             

1.48%, 09/01/043

     43,878      43,879

Sydney Capital Corp.

             

1.25%, 10/22/043

     26,550      26,503

1.55%, 09/16/043

     23,934      23,918

Thames Asset Global

             

Securitization No. 1 Inc.

             

1.54%, 09/15/043

     31,911      31,892

1.54%, 09/23/043

     19,945      19,926

Windmill Funding Corp.

             

1.52%, 09/09/043

     19,945      19,938

1.52%, 09/10/043

     27,922      27,912
           

              2,028,657

TIME DEPOSITS – 7.18%

             

Abbey National Treasury

             

Services PLC

             

1.25%, 01/06/053

     79,779      79,779

1.33%, 02/10/053

     39,889      39,887

1.39%, 02/02/053

     39,889      39,887

1.39%, 04/08/053

     55,845      55,831

1.40%, 10/25/043

     79,779      79,777

Bank of New York

             

1.39%, 11/01/043

     79,779      79,777

1.60%, 12/03/043

     19,945      19,942

Bank of Nova Scotia

             

1.13%, 10/06/043

     79,779      79,779

1.24%, 10/07/043

     59,834      59,833

1.42%, 10/29/043

     59,834      59,835

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     79,779      79,780

1.49%, 08/09/053

     79,779      79,756

1.54%, 06/23/053

     79,779      79,759

1.56%, 06/10/053

     39,889      39,899

 

32

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI BELGIUM INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

Norddeutsche Landesbank

               

1.59%, 07/27/053

   $ 79,779    $ 79,753  

Prudential Funding LLC

               

1.60%, 12/01/043

     39,889      39,728  

SouthTrust Bank

               

1.55%, 09/01/043

     159,557      159,557  

Toronto-Dominion Bank

               

1.22%, 03/23/053

     139,612      139,599  

1.34%, 02/10/053

     31,911      31,909  

1.41%, 11/01/043

     59,834      59,833  

1.53%, 09/13/043

     39,889      39,889  

1.77%, 05/10/053

     39,889      39,887  

1.90%, 05/11/053

     39,889      39,887  

UBS Finance (Delaware)

               

1.10%, 09/08/043

     79,779      79,761  

1.11%, 12/17/043

     119,668      119,273  

1.14%, 09/29/043

     79,779      79,708  
           


              1,782,305  

REPURCHASE AGREEMENTS – 6.35%

               

Banc of America Securities LLC

               

1.59%, 09/01/043,6

     239,336      239,336  

Bank of America, N.A.

               

1.59%, 09/01/043,6

     458,727      458,727  

Goldman Sachs & Co.

               

1.59%, 09/01/043,6

     398,893      398,893  

Merrill Lynch Government

               

Securities Inc.

               

1.57%, 09/01/043,6

     79,779      79,779  

1.59%, 09/01/043,6

     398,893      398,893  
           


              1,575,628  

U.S. GOVERNMENT AGENCY NOTES – 1.16%

               

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     55,845      55,956  

1.80%, 01/18/053

     37,097      36,840  

1.80%, 01/19/053

     39,889      39,610  

2.06%, 05/31/053

     39,772      39,153  

Federal National Mortgage Association

               

2.33%, 07/22/053

     119,668      117,164  
           


              288,723  

MEDIUM-TERM NOTES – 1.01%

               

CC USA Inc.

               

1.29%, 04/15/053,4

     79,779      79,774  

1.51%, 02/15/053,4

     51,856      51,893  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     59,834      59,833  

K2 USA LLC

               

1.46%, 01/12/053,4

     39,889      39,888  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     19,945      19,943  
           


              251,331  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $10,938,372)

            10,938,372  
           


TOTAL INVESTMENTS IN SECURITIES – 143.97%
(Cost: $34,781,735)

            35,722,788  

Other Assets, Less Liabilities – (43.97%)

            (10,910,183 )
           


NET ASSETS – 100.00%

          $ 24,812,605  
           



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   44.64 %   $ 11,077,224

Consumer Non-Cyclical

   18.24       4,524,460

Utilities

   10.62       2,634,411

Communications

   7.14       1,770,981

Basic Materials

   6.85       1,699,172

Industrial

   6.37       1,580,794

Diversified

   4.89       1,214,457

Consumer Cyclical

   1.14       282,917

Short-Term and Other Net Assets

   0.11       28,189
    

 

TOTAL

   100.00 %   $ 24,812,605
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  33


Schedule of Investments

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 97.82%            
AUSTRIA – 0.99%            

Bank Austria Creditanstalt

   5,280    $ 334,314

Boehler-Uddeholm AG

   1,210      101,171

Erste Bank der Oesterreichischen Sparkassen AG

   16,720      635,807

Flughafen Wien AG

   220      12,622

Immofinanz Immobilien Anlage AG1

   31,082      251,575

Mayr-Melnhof Karton AG

   990      130,926

Oesterreichische Elektrizitaetswirtschafts AG Class A

   880      159,297

OMV AG

   1,980      452,335

RHI AG1,2

   3,190      68,930

Telekom Austria AG

   35,420      495,028

VA Technologie AG1

   2,090      135,889

Voest-Alpine AG

   3,300      161,743

Wienerberger Baustoffindustrie AG2

   8,360      302,765
         

            3,242,402
BELGIUM – 3.93%            

AGFA-Gevaert NV

   10,926      300,755

Barco NV2

   1,870      155,674

Bekaert NV

   2,640      165,713

Belgacom SA1

   20,240      674,960

Cofinimmo2

   854      119,043

Colruyt NV

   2,860      376,425

Compagnie Maritime Belge SA2

   770      116,037

Delhaize Group2

   9,460      531,839

Dexia Group2

   87,560      1,507,853

Electrabel SA2

   3,630      1,217,585

Fortis2

   155,760      3,460,315

Groupe Bruxelles Lambert SA

   9,662      604,725

Interbrew SA

   21,984      704,531

KBC Bankverzekeringsholding2

   14,520      873,485

Mobistar SA1

   3,752      256,489

Omega Pharma SA

   2,860      143,027

SA D’Ieteren NV2

   440      89,621

Solvay SA

   8,910      748,779

UCB SA

   11,880      577,511

Umicore2

   3,410      229,587
         

            12,853,954
FINLAND – 3.95%            

Amer Group Ltd.

   2,860      133,643

Elisa OYJ Class A1

   17,710      210,064

Fortum OYJ2

   44,440      623,792

KCI Konecranes OYJ

   2,310      82,929

Kesko OYJ Class B2

   8,030      175,172

Kone OYJ Class B

   5,390      325,558

Metso OYJ2

   15,510      199,803

Nokia OYJ

   591,250      6,912,414

Nokian Renkaat OYJ2

   1,320      135,362

Orion-Yhtyma OYJ Class B2

   3,850      110,656

Outokumpu OYJ2

   15,290      239,521

Pohjola Group PLC Class D2

   7,590      79,696

Rautaruukki OYJ2

   16,951      154,504

Sampo OYJ Class A2

   40,700      402,132

Stora Enso OYJ Class R

   83,490      1,115,105

TietoEnator OYJ2

   11,330      299,483

UPM-Kymmene OYJ2

   71,390      1,362,136

Uponor OYJ2

   5,830      199,803

Wartsila OYJ Class B2

   5,390      126,752
         

            12,888,525
FRANCE – 27.87%            

Accor SA2

   27,260      1,149,579

Air France1,2

   14,410      220,132

Alcatel SA Class A1,2

   161,590      1,885,251

ALSTOM1

   573,230      306,524

Arcelor2

   66,135      1,126,038

Atos Origin SA1

   5,720      309,760

Autoroutes du Sud de la France2

   10,120      441,528

AXA2

   184,140      3,757,356

BNP Paribas SA2

   105,820      6,400,574

Bouygues SA2

   25,410      873,617

Business Objects SA1

   7,590      140,299

Cap Gemini SA1

   15,400      435,513

Carrefour SA2

   75,680      3,548,353

CNP Assurances2

   4,400      266,510

Compagnie de Saint-Gobain

   41,030      2,058,376

Compagnie Generale des Etablissements Michelin Class B2

   19,140      1,011,149

Credit Agricole SA2

   88,000      2,213,790

Dassault Systemes SA2

   7,700      330,237

 

34

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Essilor International SA

   12,540    $ 768,089

Etablissements Economiques du Casino Guichard-Perrachon SA2

   4,290      338,104

European Aeronautic Defense and Space Co.2

   33,110      864,325

France Telecom

   145,970      3,446,830

Gecina SA2

   3,094      257,005

Groupe Danone

   31,900      2,550,939

Hermes International2

   990      186,728

Imerys SA2

   4,840      301,749

Klepierre2

   2,886      208,337

Lafarge SA2

   22,224      1,902,772

Lagardere S.C.A.2

   16,940      1,015,977

L’Air Liquide SA2

   14,630      2,286,550

L’Oreal SA2

   40,260      2,673,914

LVMH Moet Hennessy Louis Vuitton SA

   32,120      2,053,264

Pernod Ricard SA2

   6,979      861,728

Pinault-Printemps-Redoute SA2

   8,800      802,098

PSA Peugeot Citroen SA2

   22,000      1,317,847

Publicis Groupe2

   15,840      427,165

Renault SA2

   24,750      1,985,193

Sagem SA2

   2,349      219,815

Sanofi-Aventis2

   44,990      3,193,099

Sanofi-Aventis New1,2

   75,436      5,363,126

Schneider Electric SA

   28,494      1,781,650

Societe BIC SA2

   4,620      197,019

Societe Generale Class A2

   43,450      3,706,896

Societe Television Francaise 12

   15,620      438,317

Sodexho Alliance SA2

   14,190      372,149

Suez SA2

   105,792      2,048,104

Technip-Coflexip SA2

   2,541      380,451

Thales SA2

   11,550      389,519

Thomson2

   30,952      586,809

Total SA2

   77,660      15,110,270

Unibail Holding2

   5,661      639,823

Valeo SA2

   10,434      410,212

Veolia Environnement2

   35,970      926,744

Vinci SA2

   8,978      958,528

Vivendi Universal SA1

   135,960      3,350,909

Zodiac SA2

   6,600      217,930
         

            91,014,570
GERMANY – 19.32%            

Adidas-Salomon AG2

   5,940      762,530

Allianz AG2

   40,700      3,916,952

ALTANA AG2

   9,460      512,295

BASF AG2

   70,070      3,781,781

Bayer AG2

   87,450      2,228,649

Bayerische Hypo-und Vereinsbank AG1

   82,099      1,342,970

Beiersdorf AG2

   2,274      220,811

Celesio AG

   4,180      276,451

Commerzbank AG1

   61,270      1,005,229

Continental AG2

   17,160      889,238

DaimlerChrysler AG

   114,730      4,760,187

Deutsche Bank AG

   69,520      4,722,015

Deutsche Boerse AG

   14,630      705,326

Deutsche Lufthansa AG1

   21,780      253,311

Deutsche Post AG

   58,080      1,154,059

Deutsche Telekom AG1

   332,420      5,789,177

Douglas Holding AG

   4,070      114,655

E.ON AG2

   82,170      5,822,907

EPCOS AG1,2

   6,820      102,195

Fresenius Medical Care AG2

   4,510      328,422

HeidelbergerCement AG2

   8,400      369,446

Hypo Real Estate Holding AG1

   17,434      556,385

Infineon Technologies AG1

   85,470      830,974

KarstadtQuelle AG2

   5,830      92,178

Linde AG2

   11,220      600,378

MAN AG2

   14,410      487,547

Merck KGaA

   6,270      329,486

METRO AG2

   19,720      914,292

MLP AG2

   10,340      152,051

Muenchener Rueckversicherungs-Gesellschaft AG2

   23,911      2,258,759

Puma AG

   2,090      509,824

RWE AG2

   52,140      2,550,471

SAP AG2

   27,280      3,970,118

Schering AG2

   22,110      1,225,822

Siemens AG2

   106,370      7,268,934

Suedzucker AG2

   4,950      92,582

ThyssenKrupp AG2

   42,240      784,388

TUI AG

   15,400      283,167

Volkswagen AG2

   29,480      1,130,702
         

            63,096,664

 

SCHEDULES OF INVESTMENTS

  35


Schedule of Investments (Continued)

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

GREECE – 0.96%            

Hellenic Telecommunications Organization SA ADR2

   193,710    $ 1,230,059

National Bank of Greece SA ADR

   436,305      1,919,742
         

            3,149,801
IRELAND – 2.74%            

Allied Irish Banks PLC

   113,740      1,794,202

Bank of Ireland

   128,810      1,726,667

CRH PLC

   71,170      1,613,958

DCC PLC

   11,000      192,504

Depfa Bank PLC

   46,860      617,327

Eircom Group PLC1

   57,970      105,676

Elan Corp. PLC1

   50,710      1,121,627

Fyffes PLC

   43,010      95,132

Grafton Group PLC1

   25,410      217,092

Greencore Group PLC

   26,510      95,042

Independent News & Media PLC

   79,530      191,373

Irish Life & Permanent PLC

   35,090      533,914

Kerry Group PLC Class A

   18,810      390,903

Kingspan Group PLC

   20,570      123,994

Ryanair Holdings PLC1

   21,760      112,655

Waterford Wedgewood PLC1

   54,496      9,934

Waterford Wedgewood PLC Restricted

   9,511      1,734
         

            8,943,734
ITALY – 11.11%            

Alleanza Assicurazioni SpA2

   63,580      664,511

Arnoldo Mondadori Editore SpA2

   17,936      163,700

Assicurazioni Generali SpA2

   126,720      3,301,820

Autogrill SpA1,2

   22,442      323,194

Autostrade SpA

   32,340      646,924

Banca Antonveneta SpA1,2

   33,440      689,248

Banca Fideuram SpA2

   43,560      214,401

Banca Intesa SpA2

   429,925      1,572,688

Banca Monte dei Paschi di Siena SpA2

   150,480      438,908

Banca Nazionale del Lavoro SpA1,2

   168,025      387,980

Banca Popolare di Milano Scrl2

   50,490      311,098

Banca Popolare di Verona e Novara Scrl2

   47,850      786,798

Banche Popolari Unite Scrl2

   42,380      683,979

Benetton Group SpA2

   8,030      87,537

Bulgari SpA2

   15,510      144,951

Capitalia SpA2

   191,858      586,410

Edison SpA1

   114,620      189,723

Enel SpA2

   316,580      2,443,097

ENI SpA2

   348,260      7,114,671

Fiat SpA1,2

   64,496      461,670

Fineco SpA1,2

   25,194      135,027

Finmeccanica SpA2

   844,140      559,106

Gruppo Editoriale L’Espresso SpA2

   22,550      116,197

Italcementi SpA2

   11,770      159,920

Luxottica Group SpA2

   18,370      308,086

Mediaset SpA2

   80,190      820,570

Mediobanca SpA2

   64,020      763,252

Mediolanum SpA2

   37,918      225,340

Pirelli SpA2

   276,670      266,972

Riunione Adriatica di Sicurta SpA2

   39,406      694,407

Sanpaolo IMI SpA2

   123,750      1,382,115

Seat Pagine Gialle SpA1

   481,690      182,059

Snam Rete Gas SpA2

   94,136      422,149

Telecom Italia Media SpA1,2

   192,963      68,711

Telecom Italia Mobile SpA2

   496,210      2,635,302

Telecom Italia SpA2

   1,071,321      3,202,862

Terna SpA Rights1

   118,433      265,554

Tiscali SpA1,2

   26,600      73,544

UniCredito Italiano SpA

   580,470      2,779,454
         

            36,273,935
NETHERLANDS – 14.45%            

ABN AMRO Holding NV

   204,710      4,338,794

AEGON NV

   179,410      1,910,004

Akzo Nobel NV

   35,530      1,193,916

ASML Holding NV1,2

   62,920      802,900

Corio NV

   3,542      155,482

DSM NV

   9,790      475,674

Euronext NV2

   12,650      343,138

Getronics NV1,2

   66,550      112,421

Hagemeyer NV1,2

   67,870      119,600

Heineken NV2

   32,182      971,512

IHC Caland NV2

   3,190      153,134

ING Groep NV

   233,750      5,695,731

Koninklijke Ahold NV1

   202,760      1,246,856

Koninklijke KPN NV

   260,370      1,996,659

Koninklijke Numico NV CVA1

   19,620      616,134

Koninklijke Philips Electronics NV

   172,370      3,967,575

 

36

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Oce NV2

   10,560    $ 159,650

QIAGEN NV1,2

   17,380      154,612

Randstad Holdings NV

   5,610      170,923

Reed Elsevier NV2

   88,770      1,135,999

Rodamco Europe NV

   4,950      319,736

Royal Dutch Petroleum Co.2

   276,100      13,911,668

TPG NV2

   41,030      948,907

Unilever NV CVA

   75,130      4,494,056

Vedior NV

   21,340      290,466

VNU NV2

   30,360      773,351

Wereldhave NV

   1,554      132,673

Wolters Kluwer NV CVA2

   35,860      590,082
         

            47,181,653
PORTUGAL – 1.17%            

Banco BPI SA Registered

   54,516      191,472

Banco Comercial Portugues SA Class R2

   254,730      535,562

Banco Espirito Santo SA

   17,841      291,625

Brisa-Auto Estradas de Portugal SA

   65,450      481,225

CIMPOR-Cimentos de Portugal SGPS SA

   40,370      205,078

Electricidade de Portugal SA

   232,184      643,355

Jeronimo Martins SGPS SA1

   8,784      94,903

Portugal Telecom SGPS SA

   107,250      1,090,954

PT Multimedia-Servicos de Telecomunicacoes e Multimedia SGPS SA

   6,710      144,745

Sonae SGPS SA

   139,847      146,162
         

            3,825,081
SPAIN – 10.93%            

Abertis Infraestructuras SA2

   37,918      681,081

Acciona SA2

   3,080      189,215

Acerinox SA

   27,720      375,286

Actividades de Construcciones y Servicios SA

   34,713      590,614

Altadis SA2

   37,730      1,173,844

Amadeus Global Travel Distribution SA Class A2

   45,540      309,377

Antena 3 Television SA1

   2,809      138,736

Banco Bilbao Vizcaya Argentaria SA2

   426,470      5,664,899

Banco Popular Espanol SA2

   21,670      1,172,722

Banco Santander Central Hispano SA2

   569,030      5,559,999

Corporacion Mapfre SA2

   15,512      176,075

Endesa SA2

   125,180      2,315,438

Fomento de Construcciones y

           

Contratas SA

   5,720      209,380

Gamesa Corporacion Tecnologica SA

   13,970      197,112

Gas Natural SDG SA2

   21,450      510,676

Grupo Ferrovial SA2

   8,360      382,419

Iberdrola SA2

   102,190      2,085,175

Iberia Lineas Aereas de Espana SA2

   59,290      155,639

Indra Sistemas SA2

   17,380      221,991

Industria de Diseno Textil SA2

   30,037      689,560

Metrovacesa SA

   4,180      181,100

NH Hoteles SA2

   16,940      175,609

Promotora de Informaciones SA

   10,890      172,050

Repsol YPF SA

   123,640      2,554,415

Sacyr Vallehermoso SA

   15,400      210,364

Sacyr Vallehermoso SA New1,3

   385      5,259

Sociedad General de Aguas de Barcelona SA Class B2

   8,580      150,257

Sogecable SA1,2

   5,170      186,859

Telefonica Publicidad e Informacion SA2

   24,200      158,227

Telefonica SA

   586,960      8,331,723

Union Fenosa SA2

   28,490      631,886

Zeltia SA2

   22,550      149,083
         

            35,706,070
SWITZERLAND – 0.40%            

STMicroelectronics NV

   77,772      1,315,667
         

            1,315,667
         

TOTAL COMMON STOCKS
(Cost: $318,635,223)

          319,492,056
PREFERRED STOCKS – 1.27%            
GERMANY – 0.67%            

Fresenius Medical Care AG2

   3,740      190,899

Henkel KGaA2

   7,920      573,757

Porsche AG2

   1,100      668,081

ProSiebenSat.1 Media AG2

   11,975      206,801

RWE AG

   4,730      196,422

Volkswagen AG

   13,530      358,457
         

            2,194,417

 

SCHEDULES OF INVESTMENTS

  37


Schedule of Investments (Continued)

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

ITALY – 0.60%              

Banca Intesa SpA RNC2

     130,020    $ 368,171

Telecom Italia SpA RNC2

     720,758      1,581,067
           

              1,949,238
           

TOTAL PREFERRED STOCKS
(Cost: $3,716,570)

            4,143,655
SHORT-TERM INVESTMENTS – 34.28%              
FLOATING RATE NOTES – 8.87%              

Beta Finance Inc.

             

1.45%, 05/04/054,5

   $ 489,578      489,512

1.52%, 10/12/044,5

     407,982      407,977

1.56%, 09/15/044,5

     815,964      815,960

1.64%, 03/15/054,5

     407,982      408,158

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/044

     611,973      611,964

1.38%, 11/22/044

     203,991      203,994

1.40%, 10/29/044

     815,964      815,960

CC USA Inc.

             

1.45%, 05/04/054,5

     815,964      815,854

1.61%, 07/29/054,5

     815,964      815,741

Den Danske Bank NY

             

1.51%, 08/12/054

     815,964      815,732

1.56%, 08/26/054

     815,964      815,723

Depfa Bank PLC

             

1.27%, 06/15/054

     815,964      815,964

Dorada Finance Inc.

             

1.61%, 07/29/054,5

     677,250      677,065

Five Finance Inc.

             

1.42%, 04/29/054,5

     652,771      652,728

Gemini Securitization Corp.

             

1.53%, 09/09/044

     407,982      407,843

HBOS Treasury Services PLC

             

1.24%, 04/01/054

     522,217      522,186

1.58%, 04/22/054

     815,964      815,964

K2 USA LLC

             

1.45%, 06/10/054,5

     815,964      815,886

1.57%, 09/27/044,5

     881,241      881,231

1.61%, 07/25/054,5

     407,982      407,908

Security


   Principal

   Value

Links Finance LLC

             

1.55%, 04/15/054,5

   $ 815,964    $ 815,862

1.68%, 04/25/054

     815,964      816,307

Nationwide Building Society

             

1.59%, 07/28/054

     815,964      815,964

1.63%, 12/09/044,5

     677,250      674,214

Nordea Bank PLC

             

2.11%, 06/07/054

     815,964      815,840

Northern Rock PLC

             

1.56%, 01/13/054,5

     775,165      775,165

Permanent Financing PLC

             

1.52%, 03/10/054

     815,964      815,964

1.53%, 12/10/044

     407,982      407,982

1.55%, 06/10/054

     367,184      367,184

Sigma Finance Inc.

             

1.52%, 10/07/044

     815,964      815,947

1.57%, 11/15/044

     815,964      815,951

1.59%, 09/15/054

     611,973      612,027

Tango Finance Corp.

             

1.52%, 04/07/054,5

     299,459      299,441

1.56%, 01/18/054,5

     359,024      359,010

1.59%, 07/25/054,5

     815,964      815,890

1.66%, 05/17/054,5

     677,250      677,226

1.70%, 02/25/054,5

     456,940      456,895

WhistleJacket Capital LLC

             

1.26%, 10/20/044

     202,114      201,768

1.48%, 06/15/054,5

     407,982      407,908

1.56%, 09/15/044,5

     407,982      407,979

1.56%, 07/15/054,5

     611,973      611,865

White Pine Finance LLC

             

1.46%, 07/05/054

     407,982      407,907

1.55%, 04/15/054,5

     611,973      611,897

1.55%, 07/11/054

     203,991      203,971

1.56%, 11/15/044,5

     489,578      489,578

1.57%, 06/15/054,5

     334,545      334,545

1.58%, 03/29/054

     350,864      350,819

1.58%, 08/26/054,5

     407,982      407,902

1.68%, 05/20/054

     367,184      367,157
           

              28,973,515

 

38

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

MONEY MARKET FUNDS – 6.85%              

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares4,6

     12,419,986    $ 12,419,986

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares4,6

     8,975,599      8,975,599

BlackRock Temp Cash Money Market Fund4

     411,911      411,911

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares4

     548,489      548,489
           

              22,355,985
COMMERCIAL PAPER – 6.35%              

Alpine Securitization Corp.

             

1.50%, 09/08/044

   $ 407,982      407,863

1.51%, 09/02/044

     367,184      367,168

1.54%, 09/14/044

     407,982      407,755

Amsterdam Funding Corp.

             

1.49%, 09/08/044

     163,193      163,145

1.53%, 09/16/044

     401,438      401,182

1.54%, 09/15/044

     407,982      407,737

1.54%, 09/22/044

     203,991      203,808

Barton Capital Corp.

             

1.53%, 09/08/044

     407,982      407,860

1.53%, 09/09/044

     952,972      952,648

1.53%, 09/13/044

     587,461      587,161

1.53%, 09/14/044

     203,991      203,878

1.54%, 09/17/044

     244,789      244,622

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/044

     407,982      407,862

1.53%, 09/15/044

     163,193      163,096

Cantabric Finance LLC

             

1.55%, 09/17/044

     163,193      163,080

Corporate Asset Funding

             

1.42%, 09/03/044

     244,789      244,770

CRC Funding LLC

             

1.42%, 09/03/044

     407,982      407,950

Delaware Funding Corp.

             

1.50%, 09/09/044

     407,982      407,846

1.53%, 09/10/044

     652,771      652,521

1.53%, 09/20/044

     277,428      277,204

Security


   Principal

   Value

Edison Asset Securitization

             

1.07%, 09/21/044

   $ 407,982    $ 407,739

1.45%, 11/09/044

     815,964      813,696

1.52%, 09/08/044

     815,964      815,722

1.59%, 12/02/044

     815,964      812,648

Falcon Asset Securitization Corp.

             

1.48%, 09/03/044

     244,789      244,769

1.53%, 09/07/044

     407,982      407,878

1.53%, 09/17/044

     244,789      244,623

1.53%, 09/21/044

     203,991      203,817

1.53%, 09/22/044

     407,982      407,618

1.54%, 09/14/044

     611,972      611,633

Ford Credit Auto Receivables

             

1.85%, 01/14/054

     407,982      405,151

GIRO Funding US Corp.

             

1.54%, 09/09/044

     407,982      407,843

1.55%, 10/15/044

     535,068      534,054

Grampian Funding LLC

             

1.26%, 10/22/044

     815,964      814,513

1.44%, 10/27/044

     815,964      814,136

1.59%, 11/30/044

     407,982      406,360

Jupiter Securitization Corp.

             

1.47%, 09/02/044

     203,991      203,983

1.53%, 09/20/044

     203,991      203,826

1.53%, 09/23/044

     285,587      285,320

1.54%, 09/15/044

     489,578      489,285

Preferred Receivables Funding Corp.

             

1.47%, 09/01/044

     568,645      568,645

1.51%, 09/08/044

     326,385      326,290

1.52%, 09/09/044

     203,991      203,922

1.53%, 09/21/044

     407,982      407,635

Receivables Capital Corp.

             

1.54%, 09/14/044

     244,789      244,653

Scaldis Capital LLC

             

1.48%, 09/01/044

     448,780      448,780

Sydney Capital Corp.

             

1.25%, 10/22/044

     271,553      271,072

1.55%, 09/16/044

     244,789      244,631

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/044

     326,385      326,190

1.54%, 09/23/044

     203,991      203,799

 

SCHEDULES OF INVESTMENTS

  39


Schedule of Investments (Continued)

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Windmill Funding Corp.

             

1.52%, 09/09/044

   $ 203,991    $ 203,922

1.52%, 09/10/044

     285,587      285,479
           

              20,748,788
TIME DEPOSITS – 5.58%              

Abbey National Treasury Services PLC

             

1.25%, 01/06/054

     815,964      815,964

1.33%, 02/10/054

     407,982      407,955

1.39%, 02/02/054

     407,982      407,956

1.39%, 04/08/054

     571,174      571,123

1.40%, 10/25/044

     815,964      815,935

Bank of New York

             

1.39%, 11/01/044

     815,964      815,950

1.60%, 12/03/044

     203,991      203,965

Bank of Nova Scotia

             

1.13%, 10/06/044

     815,964      815,964

1.24%, 10/07/044

     611,973      611,967

1.42%, 10/29/044

     611,973      611,980

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/054

     815,964      815,978

1.49%, 08/09/054

     815,964      815,734

1.54%, 06/23/054

     815,964      815,766

1.56%, 06/10/054

     407,982      408,081

Norddeutsche Landesbank

             

1.59%, 07/27/054

     815,964      815,705

Prudential Funding LLC

             

1.60%, 12/01/044

     407,982      406,332

SouthTrust Bank

             

1.55%, 09/01/044

     1,631,927      1,631,927

Toronto-Dominion Bank

             

1.22%, 03/23/054

     1,427,936      1,427,797

1.34%, 02/10/054

     326,385      326,364

1.41%, 11/01/044

     611,973      611,962

1.53%, 09/13/044

     407,982      407,982

1.77%, 05/10/054

     407,982      407,954

1.90%, 05/11/054

     407,982      407,954

UBS Finance (Delaware)

             

1.10%, 09/08/044

     815,964      815,790

1.11%, 12/17/044

     1,223,945      1,219,907

1.14%, 09/29/044

     815,964      815,244
           

              18,229,236
REPURCHASE AGREEMENTS – 4.94%              

Banc of America Securities LLC

             

1.59%, 09/01/044,7

     2,447,891      2,447,891

Bank of America, N.A.

             

1.59%, 09/01/044,7

     4,691,791      4,691,791

Goldman Sachs & Co.

             

1.59%, 09/01/044,7

     4,079,818      4,079,818

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/044,7

     815,964      815,964

1.59%, 09/01/044,7

     4,079,818      4,079,818
           

              16,115,282
U.S. GOVERNMENT AGENCY NOTES – 0.90%              

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/054

     571,174      572,305

1.80%, 01/18/054

     379,423      376,786

1.80%, 01/19/054

     407,982      405,126

2.06%, 05/31/054

     406,782      400,451

Federal National Mortgage Association

             

2.33%, 07/22/054

     1,223,945      1,198,334
           

              2,953,002
MEDIUM-TERM NOTES – 0.79%              

CC USA Inc.

             

1.29%, 04/15/054,5

     815,964      815,914

1.51%, 02/15/054,5

     530,376      530,753

Dorada Finance Inc.

             

1.48%, 01/18/054,5

     611,973      611,961

K2 USA LLC

             

1.46%, 01/12/054,5

     407,982      407,967

WhistleJacket Capital LLC

             

1.32%, 02/04/054,5

     203,991      203,973
           

              2,570,568
           

TOTAL SHORT-TERM INVESTMENTS
(Cost: $111,946,376)

            111,946,376
           

 

40

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI EMU INDEX FUND

August 31, 2004

 

     Value

 

TOTAL INVESTMENTS IN SECURITIES – 133.37%
(Cost: $434,298,169)

   $ 435,582,087  
Other Assets, Less Liabilities – (33.37%)      (108,976,333 )
    


NET ASSETS – 100.00%    $ 326,605,754  
    



ADR - American Depositary Receipts

1 Non-income earning security.
2 All or a portion of this security represents a security on loan. See Note 5.
3 Security valued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.
4 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
5 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
6 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
7 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   27.32 %   $ 89,236,292

Communications

   15.38       50,199,887

Consumer Non-Cyclical

   12.43       40,555,420

Energy

   12.17       39,720,922

Industrial

   9.55       31,310,137

Utilities

   7.11       23,202,632

Consumer Cyclical

   6.49       21,135,161

Basic Materials

   5.05       16,495,754

Technology

   2.72       8,929,013

Diversified

   0.87       2,850,493

Short-Term and Other Net Assets

   0.91       2,970,043
    

 

TOTAL

   100.00 %   $ 326,605,754
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  41


Schedule of Investments

 

iSHARES® MSCI FRANCE INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 97.77%            
ADVERTISING – 0.46%            

Publicis Groupe1

   10,410    $ 280,732
         

            280,732
AEROSPACE & DEFENSE – 1.67%            

European Aeronautic Defense and Space Co.1

   20,790      542,716

Sagem SA

   1,617      151,316

Thales SA1

   6,540      220,559

Zodiac SA1

   3,225      106,489
         

            1,021,080
AIRLINES – 0.26%            

Air France1,2

   10,350      158,110
         

            158,110
APPAREL – 0.25%            

Hermes International1

   810      152,778
         

            152,778
AUTO MANUFACTURERS – 3.50%            

PSA Peugeot Citroen SA1

   14,595      874,272

Renault SA1

   15,795      1,266,914
         

            2,141,186
AUTO PARTS & EQUIPMENT – 1.47%            

Compagnie Generale des Etablissements Michelin Class B

   12,285      649,005

Valeo SA1

   6,435      252,992
         

            901,997
BANKS – 12.98%            

BNP Paribas SA1

   68,040      4,115,432

Credit Agricole SA1

   56,670      1,425,631

Societe Generale Class A1

   28,140      2,400,738
         

            7,941,801
BEVERAGES – 0.91%            

Pernod Ricard SA1

   4,515      557,487
         

            557,487
BUILDING MATERIALS – 4.42%            

Compagnie de Saint-Gobain1

   26,265      1,317,652

Imerys SA1

   2,640      164,590

Lafarge SA1

   14,295      1,223,908
         

            2,706,150
CHEMICALS – 2.38%            

L’Air Liquide SA1

   9,310      1,455,037
         

            1,455,037
COMMERCIAL SERVICES – 0.42%            

Autoroutes du Sud de la France1

   5,895      257,195
         

            257,195
COMPUTERS – 0.84%            

Atos Origin SA2

   3,825      207,138

Cap Gemini SA1,2

   10,860      307,121
         

            514,259
COSMETICS & PERSONAL CARE – 2.83%            

L’Oreal SA1

   26,100      1,733,461
         

            1,733,461
DIVERSIFIED FINANCIAL SERVICES – 0.38%            

Euronext NV1

   8,610      233,550
         

            233,550
ENGINEERING & CONSTRUCTION – 2.05%            

Bouygues SA1

   17,415      598,742

Vinci SA1

   6,165      658,201
         

            1,256,943
FOOD – 6.81%            

Carrefour SA1

   49,080      2,301,178

Etablissements Economiques du Casino Guichard-Perrachon SA1

   2,805      221,068

Groupe Danone1

   20,565      1,644,516
         

            4,166,762
FOOD SERVICE – 0.35%            

Sodexho Alliance SA1

   8,265      216,759
         

            216,759
HAND & MACHINE TOOLS – 1.90%            

Schneider Electric SA1

   18,630      1,164,881
         

            1,164,881
HEALTH CARE – PRODUCTS – 0.84%            

Essilor International SA1

   8,370      512,672
         

            512,672
HOLDING COMPANIES – DIVERSIFIED – 2.19%            

LVMH Moet Hennessy Louis Vuitton SA

   20,940      1,338,585
         

            1,338,585

 

42

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI FRANCE INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

HOME FURNISHINGS – 0.63%              

Thomson1

     20,355    $ 385,904
           

              385,904
HOUSEHOLD PRODUCTS & WARES – 0.19%              

Societe BIC SA1

     2,770      118,126
           

              118,126
INSURANCE – 4.30%              

AXA1

     120,480      2,458,381

CNP Assurances1

     2,850      172,626
           

              2,631,007
IRON & STEEL – 1.14%              

Arcelor

     40,805      694,760
           

              694,760
LODGING – 1.11%              

Accor SA1

     16,170      681,904
           

              681,904
MACHINERY – DIVERSIFIED – 0.31%              

ALSTOM2

     348,825      186,528
           

              186,528
MEDIA – 5.03%              

Lagardere S.C.A.1

     10,695      641,433

Societe Television Francaise11

     10,140      284,541

Vivendi Universal SA2

     87,255      2,150,511
           

              3,076,485
OIL & GAS – 15.94%              

Total SA1

     50,130      9,753,771
           

              9,753,771
OIL & GAS SERVICES – 0.41%              

Technip-Coflexip SA1

     1,680      251,538
           

              251,538
PHARMACEUTICALS – 9.04%              

Sanofi-Aventis1

     32,505      2,306,994

Sanofi-Aventis New1,2

     45,358      3,224,729
           

              5,531,723
REAL ESTATE – 1.21%              

Gecina SA1

     2,220      184,406

Klepierre

     1,905      137,520

Unibail Holding1

     3,675      415,359
           

              737,285

Security


   Shares or
Principal


   Value

RETAIL – 0.86%              

Pinault-Printemps-Redoute SA1

     5,760    $ 525,010
           

              525,010
SEMICONDUCTORS – 1.39%              

STMicroelectronics NV

     50,400      852,616
           

              852,616
SOFTWARE – 0.51%              

Business Objects SA1,2

     5,700      105,363

Dassault Systemes SA1

     4,860      208,435
           

              313,798
TELECOMMUNICATIONS – 5.67%              

Alcatel SA Class A1,2

     104,625      1,220,647

France Telecom

     95,370      2,251,998
           

              3,472,645
WATER – 3.12%              

Suez SA

     68,655      1,329,142

Veolia Environnement1

     22,515      580,085
           

              1,909,227
           

TOTAL COMMON STOCKS
(Cost: $61,208,513)

            59,833,752
SHORT-TERM INVESTMENTS – 34.58%              
FLOATING RATE NOTES – 8.94%              

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 92,487      92,475

1.52%, 10/12/043,4

     77,073      77,072

1.56%, 09/15/043,4

     154,146      154,145

1.64%, 03/15/053,4

     77,073      77,106

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     115,609      115,608

1.38%, 11/22/043

     38,536      38,538

1.40%, 10/29/043

     154,146      154,145

CC USA Inc.

             

1.45%, 05/04/053,4

     154,146      154,125

1.61%, 07/29/053,4

     154,146      154,104

Den Danske Bank NY

             

1.51%, 08/12/053

     154,146      154,102

1.56%, 08/26/053

     154,146      154,100

Depfa Bank PLC

             

1.27%, 06/15/053

     154,146      154,146

 

SCHEDULES OF INVESTMENTS

  43


Schedule of Investments (Continued)

 

iSHARES® MSCI FRANCE INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Dorada Finance Inc.

             

1.61%, 07/29/053,4

   $ 127,941    $ 127,906

Five Finance Inc.

             

1.42%, 04/29/053,4

     123,317      123,309

Gemini Securitization Corp.

             

1.53%, 09/09/043

     77,073      77,047

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     98,653      98,648

1.58%, 04/22/053

     154,146      154,146

K2 USA LLC

             

1.45%, 06/10/053,4

     154,146      154,131

1.57%, 09/27/043,4

     166,477      166,476

1.61%, 07/25/053,4

     77,073      77,059

Links Finance LLC

             

1.55%, 04/15/053,4

     154,146      154,127

1.68%, 04/25/053

     154,146      154,211

Nationwide Building Society

             

1.59%, 07/28/053

     154,146      154,146

1.63%, 12/09/043,4

     127,941      127,367

Nordea Bank PLC

             

2.11%, 06/07/053

     154,146      154,122

Northern Rock PLC

             

1.56%, 01/13/053,4

     146,438      146,438

Permanent Financing PLC

             

1.52%, 03/10/053

     154,146      154,146

1.53%, 12/10/043

     77,073      77,073

1.55%, 06/10/053

     69,366      69,366

Sigma Finance Inc.

             

1.52%, 10/07/043

     154,146      154,143

1.57%, 11/15/043

     154,146      154,143

1.59%, 09/15/053

     115,609      115,620

Tango Finance Corp.

             

1.52%, 04/07/053,4

     56,571      56,568

1.56%, 01/18/053,4

     67,824      67,822

1.59%, 07/25/053,4

     154,146      154,132

1.66%, 05/17/053,4

     127,941      127,936

1.70%, 02/25/053,4

     86,322      86,313

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     38,182      38,116

1.48%, 06/15/053,4

     77,073      77,060

1.56%, 09/15/043,4

     77,073      77,072

1.56%, 07/15/053,4

     115,609      115,589

Security


   Shares or
Principal


   Value

White Pine Finance LLC

             

1.46%, 07/05/053

   $ 77,073    $ 77,059

1.55%, 04/15/053,4

     115,609      115,595

1.55%, 07/11/053

     38,536      38,533

1.56%, 11/15/043,4

     92,487      92,487

1.57%, 06/15/053,4

     63,200      63,200

1.58%, 03/29/053

     66,283      66,274

1.58%, 08/26/053,4

     77,073      77,058

1.68%, 05/20/053

     69,366      69,361
           

              5,473,465
MONEY MARKET FUNDS – 6.93%              

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     2,361,398      2,361,398

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     1,695,603      1,695,603

BlackRock Temp Cash Money Market Fund3

     77,815      77,815

Short-Term Investment Co. – Prime Money Market Portfolio, Institutional Shares3

     103,617      103,617
           

              4,238,433
COMMERCIAL PAPER – 6.41%              

Alpine Securitization Corp.

             

1.50%, 09/08/043

     77,073      77,050

1.51%, 09/02/043

     69,366      69,363

1.54%, 09/14/043

     77,073      77,030

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     30,829      30,820

1.53%, 09/16/043

     75,837      75,788

1.54%, 09/15/043

     77,073      77,027

1.54%, 09/22/043

     38,536      38,502

Barton Capital Corp.

             

1.53%, 09/08/043

     77,073      77,050

1.53%, 09/09/043

     180,028      179,967

1.53%, 09/13/043

     110,979      110,922

1.53%, 09/14/043

     38,536      38,515

1.54%, 09/17/043

     46,244      46,212

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     77,073      77,050

1.53%, 09/15/043

     30,829      30,811

 

44

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI FRANCE INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Cantabric Finance LLC

             

1.55%, 09/17/043

   $ 30,829    $ 30,808

Corporate Asset Funding

             

1.42%, 09/03/043

     46,244      46,240

CRC Funding LLC

             

1.42%, 09/03/043

     77,073      77,067

Delaware Funding Corp.

             

1.50%, 09/09/043

     77,073      77,047

1.53%, 09/10/043

     123,317      123,269

1.53%, 09/20/043

     52,410      52,367

Edison Asset Securitization

             

1.07%, 09/21/043

     77,073      77,027

1.45%, 11/09/043

     154,146      153,717

1.52%, 09/08/043

     154,146      154,100

1.59%, 12/02/043

     154,146      153,519

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     46,244      46,240

1.53%, 09/07/043

     77,073      77,053

1.53%, 09/17/043

     46,244      46,212

1.53%, 09/21/043

     38,536      38,504

1.53%, 09/22/043

     77,073      77,004

1.54%, 09/14/043

     115,609      115,545

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     77,073      76,538

GIRO Funding US Corp.

             

1.54%, 09/09/043

     77,073      77,047

1.55%, 10/15/043

     101,081      100,890

Grampian Funding LLC

             

1.26%, 10/22/043

     154,146      153,872

1.44%, 10/27/043

     154,146      153,800

1.59%, 11/30/043

     77,073      76,767

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     38,536      38,535

1.53%, 09/20/043

     38,536      38,505

1.53%, 09/23/043

     53,951      53,901

1.54%, 09/15/043

     92,487      92,432

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     107,424      107,424

1.51%, 09/08/043

     61,658      61,640

1.52%, 09/09/043

     38,536      38,523

1.53%, 09/21/043

     77,073      77,007

Receivables Capital Corp.

             

1.54%, 09/14/043

     46,244      46,218

Scaldis Capital LLC

             

1.48%, 09/01/043

     84,780      84,780

Sydney Capital Corp.

             

1.25%, 10/22/043

     51,300      51,209

1.55%, 09/16/043

     46,244      46,214

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     61,658      61,621

1.54%, 09/23/043

     38,536      38,500

Windmill Funding Corp.

             

1.52%, 09/09/043

     38,536      38,523

1.52%, 09/10/043

     53,951      53,931
           

              3,919,703
TIME DEPOSITS – 5.63%              

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     154,146      154,143

1.33%, 02/10/053

     77,073      77,068

1.39%, 02/02/053

     77,073      77,069

1.39%, 04/08/053

     107,902      107,892

1.40%, 10/25/043

     154,146      154,142

Bank of New York

             

1.39%, 11/01/043

     154,146      154,143

1.60%, 12/03/043

     38,536      38,531

Bank of Nova Scotia

             

1.13%, 10/06/043

     154,146      154,146

1.24%, 10/07/043

     115,609      115,608

1.42%, 10/29/043

     115,609      115,611

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     154,146      154,148

1.49%, 08/09/053

     154,146      154,102

1.54%, 06/23/053

     154,146      154,108

1.56%, 06/10/053

     77,073      77,092

Norddeutsche Landesbank

             

1.59%, 07/27/053

     154,146      154,097

Prudential Funding LLC

             

1.60%, 12/01/043

     77,073      76,761

SouthTrust Bank

             

1.55%, 09/01/043

     308,292      308,292

Toronto-Dominion Bank

             

1.22%, 03/23/053

     269,755      269,729

1.34%, 02/10/053

     61,658      61,655

 

SCHEDULES OF INVESTMENTS

  45


Schedule of Investments (Continued)

 

iSHARES® MSCI FRANCE INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

1.41%, 11/01/043

   $ 115,609    $ 115,607  

1.53%, 09/13/043

     77,073      77,073  

1.77%, 05/10/053

     77,073      77,068  

1.90%, 05/11/053

     77,073      77,068  

UBS Finance (Delaware)

               

1.10%, 09/08/043

     154,146      154,113  

1.11%, 12/17/043

     231,219      230,456  

1.14%, 09/29/043

     154,146      154,010  
           


              3,443,732  
REPURCHASE AGREEMENTS – 4.97%                

Banc of America Securities LLC

               

1.59%, 09/01/043,6

     462,437      462,437  

Bank of America, N.A.

               

1.59%, 09/01/043,6

     886,338      886,338  

Goldman Sachs & Co.

               

1.59%, 09/01/043,6

     770,729      770,729  

Merrill Lynch Government Securities Inc.

               

1.57%, 09/01/043,6

     154,146      154,146  

1.59%, 09/01/043,6

     770,729      770,729  
           


              3,044,379  
U.S. GOVERNMENT AGENCY NOTES – 0.91%                

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     107,902      108,116  

1.80%, 01/18/053

     71,678      71,180  

1.80%, 01/19/053

     77,073      76,533  

2.06%, 05/31/053

     76,846      75,650  

Federal National Mortgage Association

               

2.33%, 07/22/053

     231,219      226,380  
           


              557,859  
MEDIUM-TERM NOTES – 0.79%                

CC USA Inc.

               

1.29%, 04/15/053,4

     154,146      154,136  

1.51%, 02/15/053,4

     100,195      100,267  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     115,609      115,607  

K2 USA LLC

               

1.46%, 01/12/053,4

     77,073      77,070  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     38,536      38,533  
           


              485,613  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $21,163,184)

            21,163,184  
           


TOTAL INVESTMENTS IN SECURITIES – 132.35%
(Cost: $82,371,697)

            80,996,936  
Other Assets, Less Liabilities – (32.35%)             (19,796,175 )
           


NET ASSETS – 100.00%           $ 61,200,761  
           



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Consumer Non-Cyclical

   21.04 %   $ 12,877,426

Financial

   18.87       11,543,643

Energy

   16.35       10,005,309

Communications

   11.16       6,829,862

Industrial

   10.35       6,335,582

Consumer Cyclical

   8.43       5,163,648

Basic Materials

   3.52       2,149,797

Utilities

   3.12       1,909,227

Technology

   2.74       1,680,673

Diversified

   2.19       1,338,585

Short-Term and Other Net Assets

   2.23       1,367,009
    

 

TOTAL

   100.00 %   $ 61,200,761
    

 

 

See notes to financial statements.

 

46

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI GERMANY INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 96.15%

           

AIRLINES – 0.59%

           

Deutsche Lufthansa AG1,2

   50,056    $ 582,172
         

            582,172

APPAREL – 2.02%

           

Adidas-Salomon AG2

   9,218      1,183,333

Puma AG

   3,344      815,719
         

            1,999,052

AUTO MANUFACTURERS – 9.01%

           

DaimlerChrysler AG

   172,018      7,137,086

Volkswagen AG2

   45,980      1,763,557
         

            8,900,643

AUTO PARTS & EQUIPMENT – 1.47%

           

Continental AG2

   28,006      1,451,282
         

            1,451,282

BANKS – 12.44%

           

Bayerische Hypo-und Vereinsbank AG1

   111,980      1,831,762

Commerzbank AG1

   106,194      1,742,277

Depfa Bank PLC

   66,528      876,430

Deutsche Bank AG2

   102,234      6,944,052

Hypo Real Estate Holding AG1

   27,910      890,714
         

            12,285,235

BIOTECHNOLOGY – 0.24%

           

QIAGEN NV1,2

   26,972      239,943
         

            239,943

BUILDING MATERIALS – 0.44%

           

HeidelbergerCement AG2

   9,822      431,988
         

            431,988

CHEMICALS – 8.34%

           

BASF AG

   88,660      4,785,111

Bayer AG

   135,256      3,446,978
         

            8,232,089

COSMETICS & PERSONAL CARE – 0.42%

           

Beiersdorf AG2

   4,259      413,559
         

            413,559

DIVERSIFIED FINANCIAL SERVICES – 1.41%

           

Deutsche Boerse AG2

   23,936      1,153,977

MLP AG2

   16,022      235,606
         

            1,389,583

ELECTRIC – 12.50%

           

E.ON AG2

   120,450      8,535,586

RWE AG2

   77,968      3,813,869
         

            12,349,455

ELECTRONICS – 0.15%

           

EPCOS AG1,2

   10,186      152,634
         

            152,634

ENGINEERING & CONSTRUCTION – 1.02%

           

Linde AG2

   18,854      1,008,871
         

            1,008,871

FOOD – 1.76%

           

METRO AG2

   31,988      1,483,082

Suedzucker AG2

   13,596      254,292
         

            1,737,374

HEALTH CARE – PRODUCTS – 0.57%

           

Fresenius Medical Care AG2

   7,700      560,720
         

            560,720

INSURANCE – 8.18%

           

Allianz AG2

   50,006      4,812,558

Muenchener Rueckversicherungs-Gesellschaft AG2

   34,576      3,266,231
         

            8,078,789

IRON & STEEL – 1.25%

           

ThyssenKrupp AG2

   66,550      1,235,819
         

            1,235,819

LEISURE TIME – 0.48%

           

TUI AG2

   25,894      476,126
         

            476,126

MACHINERY – DIVERSIFIED – 0.78%

           

MAN AG

   22,726      768,910
         

            768,910

MANUFACTURING – 10.85%

           

Siemens AG

   156,772      10,713,221
         

            10,713,221

PHARMACEUTICALS – 3.96%

           

ALTANA AG2

   14,718      797,035

Celesio AG2

   7,898      522,347

Merck KGaA

   10,340      543,363

Schering AG2

   36,982      2,050,355
         

            3,913,100

 

SCHEDULES OF INVESTMENTS

  47


Schedule of Investments (Continued)

 

iSHARES® MSCI GERMANY INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

RETAIL – 0.31%

             

Douglas Holding AG2

     6,952    $ 195,842

KarstadtQuelle AG2

     6,798      107,484
           

              303,326

SEMICONDUCTORS – 1.25%

             

Infineon Technologies AG1

     126,500      1,229,884
           

              1,229,884

SOFTWARE – 5.98%

             

SAP AG2

     40,612      5,910,353
           

              5,910,353

TELECOMMUNICATIONS – 8.83%

             

Deutsche Telekom AG1

     500,720      8,720,163
           

              8,720,163

TRANSPORTATION – 1.90%

             

Deutsche Post AG

     94,204      1,871,848
           

              1,871,848
           

TOTAL COMMON STOCKS
(Cost: $127,538,314)

            94,956,139

PREFERRED STOCKS – 3.70%

             

AUTO MANUFACTURERS – 1.60%

             

Porsche AG2

     1,628      988,760

Volkswagen AG

     22,484      595,681
           

              1,584,441

ELECTRIC – 0.49%

             

RWE AG

     11,638      483,289
           

              483,289

HEALTH CARE – PRODUCTS – 0.30%

             

Fresenius Medical Care AG2

     5,830      297,578
           

              297,578

HOUSEHOLD PRODUCTS & WARES – 1.02%

             

Henkel KGaA2

     13,948      1,010,449
           

              1,010,449

MEDIA – 0.29%

             

ProSiebenSat.1 Media AG2

     16,306      281,595
           

              281,595
           

TOTAL PREFERRED STOCKS
(Cost: $3,116,206)

            3,657,352

Security


   Principal

   Value

SHORT-TERM INVESTMENTS – 28.49%

             

FLOATING RATE NOTES – 7.37%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 122,985    $ 122,969

1.52%, 10/12/043,4

     102,488      102,486

1.56%, 09/15/043,4

     204,975      204,974

1.64%, 03/15/053,4

     102,488      102,532

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     153,731      153,730

1.38%, 11/22/043

     51,244      51,245

1.40%, 10/29/043

     204,975      204,974

CC USA Inc.

             

1.45%, 05/04/053,4

     204,975      204,948

1.61%, 07/29/053,4

     204,975      204,919

Den Danske Bank NY

             

1.51%, 08/12/053

     204,975      204,917

1.56%, 08/26/053

     204,975      204,915

Depfa Bank PLC

             

1.27%, 06/15/053

     204,975      204,975

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     170,129      170,083

Five Finance Inc.

             

1.42%, 04/29/053,4

     163,980      163,969

Gemini Securitization Corp.

             

1.53%, 09/09/043

     102,488      102,453

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     131,184      131,176

1.58%, 04/22/053

     204,975      204,975

K2 USA LLC

             

1.45%, 06/10/053,4

     204,975      204,956

1.57%, 09/27/043,4

     221,373      221,371

1.61%, 07/25/053,4

     102,488      102,470

Links Finance LLC

             

1.55%, 04/15/053,4

     204,975      204,950

1.68%, 04/25/053

     204,975      205,061

Nationwide Building Society

             

1.59%, 07/28/053

     204,975      204,975

1.63%, 12/09/043,4

     170,129      169,367

Nordea Bank PLC

             

2.11%, 06/07/053

     204,975      204,944

 

48

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI GERMANY INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

Northern Rock PLC

             

1.56%, 01/13/053,4

   $ 194,726    $ 194,726

Permanent Financing PLC

             

1.52%, 03/10/053

     204,975      204,975

1.53%, 12/10/043

     102,488      102,488

1.55%, 06/10/053

     92,239      92,239

Sigma Finance Inc.

             

1.52%, 10/07/043

     204,975      204,972

1.57%, 11/15/043

     204,975      204,972

1.59%, 09/15/053

     153,731      153,745

Tango Finance Corp.

             

1.52%, 04/07/053,4

     75,226      75,221

1.56%, 01/18/053,4

     90,189      90,186

1.59%, 07/25/053,4

     204,975      204,957

1.66%, 05/17/053,4

     170,129      170,123

1.70%, 02/25/053,4

     114,786      114,775

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     50,772      50,685

1.48%, 06/15/053,4

     102,488      102,469

1.56%, 09/15/043,4

     102,488      102,487

1.56%, 07/15/053,4

     153,731      153,704

White Pine Finance LLC

             

1.46%, 07/05/053

     102,488      102,469

1.55%, 04/15/053,4

     153,731      153,712

1.55%, 07/11/053

     51,244      51,239

1.56%, 11/15/043,4

     122,985      122,985

1.57%, 06/15/053,4

     84,040      84,040

1.58%, 03/29/053

     88,139      88,128

1.58%, 08/26/053,4

     102,488      102,467

1.68%, 05/20/053

     92,239      92,232
           

              7,278,330

MONEY MARKET FUNDS – 5.71%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     3,140,365      3,140,365

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     2,254,725      2,254,725

BlackRock Temp Cash Money Market Fund3

     103,475      103,475

Short-Term Investment Co. – Prime Money Market Portfolio, Institutional Shares3

     137,784      137,784
           

              5,636,349

COMMERCIAL PAPER – 5.28%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

     102,488      102,458

1.51%, 09/02/043

     92,239      92,235

1.54%, 09/14/043

     102,488      102,431

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     40,995      40,983

1.53%, 09/16/043

     100,844      100,779

1.54%, 09/15/043

     102,488      102,426

1.54%, 09/22/043

     51,244      51,198

Barton Capital Corp.

             

1.53%, 09/08/043

     102,488      102,457

1.53%, 09/09/043

     239,392      239,311

1.53%, 09/13/043

     147,574      147,499

1.53%, 09/14/043

     51,244      51,215

1.54%, 09/17/043

     61,493      61,450

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     102,488      102,457

1.53%, 09/15/043

     40,995      40,971

Cantabric Finance LLC

             

1.55%, 09/17/043

     40,995      40,967

Corporate Asset Funding

             

1.42%, 09/03/043

     61,493      61,488

CRC Funding LLC

             

1.42%, 09/03/043

     102,488      102,479

Delaware Funding Corp.

             

1.50%, 09/09/043

     102,488      102,453

1.53%, 09/10/043

     163,980      163,918

1.53%, 09/20/043

     69,692      69,635

Edison Asset Securitization

             

1.07%, 09/21/043

     102,488      102,427

1.45%, 11/09/043

     204,975      204,405

1.52%, 09/08/043

     204,975      204,914

1.59%, 12/02/043

     204,975      204,142

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     61,493      61,487

1.53%, 09/07/043

     102,488      102,461

 

SCHEDULES OF INVESTMENTS

  49


Schedule of Investments (Continued)

 

iSHARES® MSCI GERMANY INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

1.53%, 09/17/043

   $ 61,493    $ 61,451

1.53%, 09/21/043

     51,244      51,200

1.53%, 09/22/043

     102,488      102,396

1.54%, 09/14/043

     153,731      153,645

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     102,488      101,777

GIRO Funding US Corp.

             

1.54%, 09/09/043

     102,488      102,453

1.55%, 10/15/043

     134,412      134,158

Grampian Funding LLC

             

1.26%, 10/22/043

     204,975      204,611

1.44%, 10/27/043

     204,975      204,516

1.59%, 11/30/043

     102,488      102,080

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     51,244      51,242

1.53%, 09/20/043

     51,244      51,202

1.53%, 09/23/043

     71,741      71,674

1.54%, 09/15/043

     122,985      122,911

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     142,847      142,848

1.51%, 09/08/043

     81,990      81,966

1.52%, 09/09/043

     51,244      51,226

1.53%, 09/21/043

     102,488      102,400

Receivables Capital Corp.

             

1.54%, 09/14/043

     61,493      61,458

Scaldis Capital LLC

             

1.48%, 09/01/043

     112,736      112,736

Sydney Capital Corp.

             

1.25%, 10/22/043

     68,216      68,095

1.55%, 09/16/043

     61,493      61,453

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     81,990      81,941

1.54%, 09/23/043

     51,244      51,196

Windmill Funding Corp.

             

1.52%, 09/09/043

     51,244      51,226

1.52%, 09/10/043

     71,741      71,715
           

              5,212,222

TIME DEPOSITS – 4.63%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     204,975      204,975

1.33%, 02/10/053

     102,488      102,475

1.39%, 02/02/053

     102,488      102,481

1.39%, 04/08/053

     143,483      143,470

1.40%, 10/25/043

     204,975      204,970

Bank of New York

             

1.39%, 11/01/043

     204,975      204,972

1.60%, 12/03/043

     51,244      51,237

Bank of Nova Scotia

             

1.13%, 10/06/043

     204,975      204,975

1.24%, 10/07/043

     153,731      153,730

1.42%, 10/29/043

     153,731      153,734

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     204,975      204,979

1.49%, 08/09/053

     204,975      204,917

1.54%, 06/23/053

     204,975      204,925

1.56%, 06/10/053

     102,488      102,512

Norddeutsche Landesbank

             

1.59%, 07/27/053

     204,975      204,910

Prudential Funding LLC

             

1.60%, 12/01/043

     102,488      102,073

SouthTrust Bank

             

1.55%, 09/01/043

     409,950      409,950

Toronto-Dominion Bank

             

1.22%, 03/23/053

     358,706      358,671

1.34%, 02/10/053

     81,990      81,985

1.41%, 11/01/043

     153,731      153,729

1.53%, 09/13/043

     102,488      102,488

1.77%, 05/10/053

     102,488      102,480

1.90%, 05/11/053

     102,488      102,480

UBS Finance (Delaware)

             

1.10%, 09/08/043

     204,975      204,931

1.11%, 12/17/043

     307,463      306,448

1.14%, 09/29/043

     204,975      204,794
           

              4,579,291

REPURCHASE AGREEMENTS – 4.10%

             

Banc of America Securities LLC

             

1.59%, 09/01/043,6

     614,926      614,926

Bank of America, N.A.

             

1.59%, 09/01/043,6

     1,178,606      1,178,606

Goldman Sachs & Co.

             

1.59%, 09/01/043,6

     1,024,875      1,024,875

 

50

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI GERMANY INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

Merrill Lynch Government Securities Inc.

               

1.57%, 09/01/043,6

   $ 204,975    $ 204,975  

1.59%, 09/01/043,6

     1,024,875      1,024,875  
           


              4,048,257  

U.S. GOVERNMENT AGENCY NOTES – 0.75%

               

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     143,483      143,767  

1.80%, 01/18/053

     95,313      94,651  

1.80%, 01/19/053

     102,488      101,770  

2.06%, 05/31/053

     102,186      100,596  

Federal National Mortgage Association

               

2.33%, 07/22/053

     307,463      301,029  
           


              741,813  

MEDIUM-TERM NOTES – 0.65%

               

CC USA Inc.

               

1.29%, 04/15/053,4

     204,975      204,962  

1.51%, 02/15/053,4

     133,234      133,329  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     153,731      153,728  

K2 USA LLC

               

1.46%, 01/12/053,4

     102,488      102,484  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     51,244      51,239  
           


              645,742  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $28,142,004)

            28,142,004  
           


TOTAL INVESTMENTS IN SECURITIES – 128.34%
(Cost: $158,796,524)

            126,755,495  

Other Assets, Less Liabilities – (28.34%)

            (27,991,760 )
           


NET ASSETS – 100.00%

          $ 98,763,735  
           



1 Non-income earning security.
2 All or a portion of this security represents a security on loan. See Note 5.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

 

 

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   22.03 %   $ 21,753,607

Consumer Cyclical

   15.48       15,297,042

Industrial

   15.14       14,947,472

Utilities

   12.99       12,832,744

Basic Materials

   9.59       9,467,908

Communications

   9.12       9,001,758

Consumer Non-Cyclical

   8.27       8,172,723

Technology

   7.23       7,140,237

Short-Term and Other Net Assets

   0.15       150,244
    

 

TOTAL

   100.00 %   $ 98,763,735
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  51


Schedule of Investments

 

iSHARES® MSCI ITALY INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 94.63%

           

AEROSPACE & DEFENSE – 1.40%

           

Finmeccanica SpA1

   575,550    $ 381,209
         

            381,209

APPAREL – 0.25%

           

Benetton Group SpA1

   6,282      68,482
         

            68,482

AUTO MANUFACTURERS – 1.34%

           

Fiat SpA1,2

   50,877      364,183
         

            364,183

AUTO PARTS & EQUIPMENT – 0.65%

           

Pirelli SpA1

   182,772      176,366
         

            176,366

BANKS – 24.73%

           

Banca Antonveneta SpA1,2

   23,634      487,132

Banca Intesa SpA1

   327,074      1,196,455

Banca Monte dei Paschi di Siena SpA1

   120,879      352,570

Banca Nazionale del Lavoro SpA1,2

   126,621      292,377

Banca Popolare di Milano Scrl1

   42,390      261,189

Banche Popolari Unite Scrl

   37,215      600,620

Banco Popolare di Verona e Novara Scrl1

   39,375      647,443

Capitalia SpA

   141,318      431,936

Fineco SpA1,2

   14,695      78,757

Sanpaolo IMI SpA1

   96,246      1,074,934

UniCredito Italiano SpA1

   276,480      1,323,864
         

            6,747,277

BUILDING MATERIALS – 0.46%

           

Italcementi SpA1

   9,234      125,463
         

            125,463

COMMERCIAL SERVICES – 1.61%

           

Autostrade SpA

   21,933      438,744
         

            438,744

DIVERSIFIED FINANCIAL SERVICES – 2.67%

           

Banca Fideuram SpA1

   31,653      155,795

Mediobanca SpA1

   48,114      573,620
         

            729,415

ELECTRIC – 6.07%

           

Edison SpA1,2

   88,929      147,199

Enel SpA1

   168,192      1,297,964

Terna SpA Rights2

   94,338      211,527
         

            1,656,690

GAS – 2.16%

           

Snam Rete Gas SpA1

   131,202      588,370
         

            588,370

HEALTH CARE – PRODUCTS – 0.92%

           

Luxottica Group SpA1

   14,976      251,165
         

            251,165

INSURANCE – 13.26%

           

Alleanza Assicurazioni SpA1

   47,961      501,268

Assicurazioni Generali SpA1

   91,602      2,386,785

Mediolanum SpA1

   27,855      165,537

Riunione Adriatica di Sicurta SpA1

   31,995      563,811
         

            3,617,401

MEDIA – 3.47%

           

Arnoldo Mondadori Editore SpA1

   11,097      101,281

Gruppo Editoriale L’Espresso SpA1

   16,794      86,537

Mediaset SpA1

   56,124      574,307

Seat Pagine Gialle SpA1,2

   387,211      146,350

Telecom Italia Media SpA1,2

   107,278      38,200
         

            946,675

OIL & GAS – 18.77%

           

ENI SpA1

   250,632      5,120,209
         

            5,120,209

RETAIL – 1.01%

           

Autogrill SpA1,2

   11,124      160,200

Bulgari SpA1

   12,456      116,409
         

            276,609

TELECOMMUNICATIONS – 15.86%

           

Telecom Italia Mobile SpA

   361,755      1,921,231

Telecom Italia SpA1

   787,483      2,354,289

Tiscali SpA1,2

   18,567      51,334
         

            4,326,854
         

TOTAL COMMON STOCKS
(Cost: $25,850,955)

          25,815,112

 

52

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI ITALY INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

PREFERRED STOCKS – 5.05%

             

BANKS – 0.45%

             

Banca Intesa SpA RNC

     43,821    $ 124,086
           

              124,086

TELECOMMUNICATIONS – 4.60%

             

Telecom Italia SpA RNC1

     571,519      1,253,693
           

              1,253,693
           

TOTAL PREFERRED STOCKS
(Cost: $961,484)

            1,377,779

SHORT-TERM INVESTMENTS – 47.31%

             

FLOATING RATE NOTES – 12.25%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 56,472      56,465

1.52%, 10/12/043,4

     47,059      47,059

1.56%, 09/15/043,4

     94,119      94,119

1.64%, 03/15/053,4

     47,059      47,080

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     70,589      70,589

1.38%, 11/22/043

     23,530      23,530

1.40%, 10/29/043

     94,119      94,118

CC USA Inc.

             

1.45%, 05/04/053,4

     94,119      94,106

1.61%, 07/29/053,4

     94,119      94,093

Den Danske Bank NY

             

1.51%, 08/12/053

     94,119      94,092

1.56%, 08/26/053

     94,119      94,091

Depfa Bank PLC

             

1.27%, 06/15/053

     94,119      94,119

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     78,119      78,097

Five Finance Inc.

             

1.42%, 04/29/053,4

     75,295      75,290

Gemini Securitization Corp.

             

1.53%, 09/09/043

     47,059      47,043

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     60,236      60,233

1.58%, 04/22/053

     94,119      94,119

K2 USA LLC

             

1.45%, 06/10/053,4

     94,119      94,110

Security


   Principal

   Value

1.57%, 09/27/043,4

   $ 101,648    $ 101,647

1.61%, 07/25/053,4

     47,059      47,051

Links Finance LLC

             

1.55%, 04/15/053,4

     94,119      94,107

1.68%, 04/25/053

     94,119      94,159

Nationwide Building Society

             

1.59%, 07/28/053

     94,119      94,119

1.63%, 12/09/043,4

     78,119      77,768

Nordea Bank PLC

             

2.11%, 06/07/053

     94,119      94,105

Northern Rock PLC

             

1.56%, 01/13/053,4

     89,413      89,413

Permanent Financing PLC

             

1.52%, 03/10/053

     94,119      94,119

1.53%, 12/10/043

     47,059      47,059

1.55%, 06/10/053

     42,353      42,353

Sigma Finance Inc.

             

1.52%, 10/07/043

     94,119      94,117

1.57%, 11/15/043

     94,119      94,117

1.59%, 09/15/053

     70,589      70,595

Tango Finance Corp.

             

1.52%, 04/07/053,4

     34,542      34,540

1.56%, 01/18/053,4

     41,412      41,411

1.59%, 07/25/053,4

     94,119      94,110

1.66%, 05/17/053,4

     78,119      78,116

1.70%, 02/25/053,4

     52,707      52,701

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     23,313      23,273

1.48%, 06/15/053,4

     47,059      47,051

1.56%, 09/15/043,4

     47,059      47,059

1.56%, 07/15/053,4

     70,589      70,577

White Pine Finance LLC

             

1.46%, 07/05/053

     47,059      47,051

1.55%, 04/15/053,4

     70,589      70,580

1.55%, 07/11/053

     23,530      23,527

1.56%, 11/15/043,4

     56,471      56,471

1.57%, 06/15/053,4

     38,589      38,589

1.58%, 03/29/053

     40,471      40,466

1.58%, 08/26/053,4

     47,059      47,050

1.68%, 05/20/053

     42,353      42,350
           

              3,342,004

 

SCHEDULES OF INVESTMENTS

  53


Schedule of Investments (Continued)

 

iSHARES® MSCI ITALY INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

MONEY MARKET FUNDS – 9.43%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     1,425,185    $ 1,425,185

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     1,035,308      1,035,308

BlackRock Temp Cash Money Market Fund3

     47,513      47,513

Short-Term Investment Co. – Prime Money Market Portfolio, Institutional Shares3

     63,267      63,267
           

              2,571,273

COMMERCIAL PAPER – 8.77%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

   $ 47,059      47,045

1.51%, 09/02/043

     42,353      42,352

1.54%, 09/14/043

     47,059      47,033

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     18,824      18,818

1.53%, 09/16/043

     46,305      46,275

1.54%, 09/15/043

     47,059      47,031

1.54%, 09/22/043

     23,530      23,509

Barton Capital Corp.

             

1.53%, 09/08/043

     47,059      47,045

1.53%, 09/09/043

     109,922      109,885

1.53%, 09/13/043

     67,762      67,727

1.53%, 09/14/043

     23,530      23,517

1.54%, 09/17/043

     28,236      28,216

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     47,059      47,046

1.53%, 09/15/043

     18,824      18,813

Cantabric Finance LLC

             

1.55%, 09/17/043

     18,824      18,811

Corporate Asset Funding

             

1.42%, 09/03/043

     28,236      28,233

CRC Funding LLC

             

1.42%, 09/03/043

     47,059      47,056

Delaware Funding Corp.

             

1.50%, 09/09/043

     47,059      47,044

1.53%, 09/10/043

     75,295      75,266

1.53%, 09/20/043

     32,000      31,975

Security


   Principal

   Value

Edison Asset Securitization

             

1.07%, 09/21/043

   $ 47,059    $ 47,031

1.45%, 11/09/043

     94,119      93,857

1.52%, 09/08/043

     94,119      94,091

1.59%, 12/02/043

     94,119      93,736

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     28,236      28,233

1.53%, 09/07/043

     47,059      47,047

1.53%, 09/17/043

     28,236      28,216

1.53%, 09/21/043

     23,530      23,510

1.53%, 09/22/043

     47,059      47,017

1.54%, 09/14/043

     70,590      70,550

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     47,059      46,733

GIRO Funding US Corp.

             

1.54%, 09/09/043

     47,059      47,043

1.55%, 10/15/043

     61,718      61,602

Grampian Funding LLC

             

1.26%, 10/22/043

     94,119      93,952

1.44%, 10/27/043

     94,119      93,908

1.59%, 11/30/043

     47,059      46,872

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     23,530      23,529

1.53%, 09/20/043

     23,530      23,511

1.53%, 09/23/043

     32,942      32,911

1.54%, 09/15/043

     56,471      56,437

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     65,591      65,591

1.51%, 09/08/043

     37,648      37,636

1.52%, 09/09/043

     23,530      23,522

1.53%, 09/21/043

     47,059      47,019

Receivables Capital Corp.

             

1.54%, 09/14/043

     28,236      28,220

Scaldis Capital LLC

             

1.48%, 09/01/043

     51,765      51,765

Sydney Capital Corp.

             

1.25%, 10/22/043

     31,323      31,267

1.55%, 09/16/043

     28,236      28,217

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     37,648      37,625

1.54%, 09/23/043

     23,530      23,508

 

54

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI ITALY INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Windmill Funding Corp.

             

1.52%, 09/09/043

   $ 23,530    $ 23,522

1.52%, 09/10/043

     32,942      32,929
           

              2,393,304

TIME DEPOSITS – 7.71%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     94,119      94,119

1.33%, 02/10/053

     47,059      47,056

1.39%, 02/02/053

     47,059      47,056

1.39%, 04/08/053

     65,883      65,877

1.40%, 10/25/043

     94,119      94,117

Bank of New York

             

1.39%, 11/01/043

     94,119      94,117

1.60%, 12/03/043

     23,530      23,527

Bank of Nova Scotia

             

1.13%, 10/06/043

     94,119      94,119

1.24%, 10/07/043

     70,589      70,588

1.42%, 10/29/043

     70,589      70,590

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     94,119      94,120

1.49%, 08/09/053

     94,119      94,093

1.54%, 06/23/053

     94,119      94,096

1.56%, 06/10/053

     47,059      47,071

Norddeutsche Landesbank

             

1.59%, 07/27/053

     94,119      94,090

Prudential Funding LLC

             

1.60%, 12/01/043

     47,059      46,870

SouthTrust Bank

             

1.55%, 09/01/043

     188,238      188,238

Toronto-Dominion Bank

             

1.22%, 03/23/053

     164,708      164,692

1.34%, 02/10/053

     37,648      37,645

1.41%, 11/01/043

     70,589      70,588

1.53%, 09/13/043

     47,059      47,059

1.77%, 05/10/053

     47,059      47,056

1.90%, 05/11/053

     47,059      47,057

UBS Finance (Delaware)

             

1.10%, 09/08/043

     94,119      94,099

1.11%, 12/17/043

     141,178      140,713

1.14%, 09/29/043

     94,119      94,036
           

              2,102,689

REPURCHASE AGREEMENTS – 6.81%

             

Banc of America Securities LLC

             

1.59%, 09/01/043,6

     282,357      282,357

Bank of America, N.A.

             

1.59%, 09/01/043,6

     541,183      541,183

Goldman Sachs & Co.

             

1.59%, 09/01/043,6

     470,594      470,594

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/043,6

     94,119      94,119

1.59%, 09/01/043,6

     470,594      470,594
           

              1,858,847

U.S. GOVERNMENT AGENCY NOTES – 1.25%

             

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/053

     65,883      66,014

1.80%, 01/18/053

     43,765      43,462

1.80%, 01/19/053

     47,059      46,730

2.06%, 05/31/053

     46,921      46,191

Federal National Mortgage Association

             

2.33%, 07/22/053

     141,178      138,224
           

              340,621

MEDIUM – TERM NOTES – 1.09%

             

CC USA Inc.

             

1.29%, 04/15/053,4

     94,119      94,113

1.51%, 02/15/053,4

     61,177      61,221

Dorada Finance Inc.

             

1.48%, 01/18/053,4

     70,589      70,588

K2 USA LLC

             

1.46%, 01/12/053,4

     47,059      47,058

WhistleJacket Capital LLC

             

1.32%, 02/04/053,4

     23,530      23,528
           

              296,508
           

TOTAL SHORT-TERM INVESTMENTS
(Cost: $12,905,246)

            12,905,246
           

 

SCHEDULES OF INVESTMENTS

  55


Schedule of Investments (Continued)

 

iSHARES® MSCI ITALY INDEX FUND

August 31, 2004

 

     Value

 

TOTAL INVESTMENTS IN SECURITIES – 146.99%
(Cost: $39,717,685)

   $ 40,098,137  

Other Assets, Less Liabilities – (46.99%)

     (12,818,725 )
    


NET ASSETS – 100.00%

   $ 27,279,412  
    



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   41.11 %   $ 11,218,179

Communications

   23.93       6,527,222

Energy

   18.77       5,120,209

Utilities

   8.23       2,245,060

Consumer Cyclical

   3.25       885,640

Consumer Non-Cyclical

   2.53       689,909

Industrial

   1.86       506,672

Short-Term and Other Net Assets

   0.32       86,521
    

 

TOTAL

   100.00 %   $ 27,279,412
    

 

 

See notes to financial statements.

 

56

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI NETHERLANDS INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.00%

             

BANKS – 4.90%

             

ABN AMRO Holding NV

     65,340    $ 1,384,870
           

              1,384,870

BEVERAGES – 3.83%

             

Heineken NV

     35,863      1,082,619
           

              1,082,619

CHEMICALS – 5.29%

             

Akzo Nobel NV

     36,720      1,233,904

DSM NV

     5,400      262,374
           

              1,496,278

COMMERCIAL SERVICES – 2.49%

             

IHC Caland NV1

     7,992      383,651

Randstad Holdings NV

     2,916      88,844

Vedior NV

     16,920      230,304
           

              702,799

COMPUTERS – 0.23%

             

Getronics NV1,2

     38,952      65,800
           

              65,800

DISTRIBUTION & WHOLESALE – 0.26%

             

Hagemeyer NV1,2

     41,292      72,764
           

              72,764

ELECTRONICS – 4.63%

             

Koninklijke Philips Electronics NV

     56,880      1,309,252
           

              1,309,252

FOOD – 13.96%

             

Koninklijke Ahold NV2

     120,096      738,521

Koninklijke Numico NV CVA1,2

     11,768      369,555

Unilever NV CVA

     47,448      2,838,200
           

              3,946,276

INSURANCE – 18.54%

             

AEGON NV

     106,344      1,132,141

ING Groep NV

     168,552      4,107,067
           

              5,239,208

MEDIA – 7.61%

             

Reed Elsevier NV

     88,416      1,131,469

VNU NV

     20,016      509,861

Wolters Kluwer NV CVA1

     30,996      510,044
           

              2,151,374

OFFICE & BUSINESS EQUIPMENT – 1.20%

             

Oce NV1

     22,500      340,163
           

              340,163

Security


   Shares or
Principal


   Value

OIL & GAS – 24.29%

             

Royal Dutch Petroleum Co.1

     136,260    $ 6,865,642
           

              6,865,642

REAL ESTATE INVESTMENT TRUSTS – 1.44%

             

Corio NV

     2,268      99,558

Rodamco Europe NV1

     3,276      211,607

Wereldhave NV

     1,116      95,278
           

              406,443

SEMICONDUCTORS – 1.90%

             

ASML Holding NV2

     42,156      537,938
           

              537,938

TELECOMMUNICATIONS – 4.28%

             

Koninklijke KPN NV

     157,644      1,208,900
           

              1,208,900

TRANSPORTATION – 4.15%

             

TPG NV

     50,688      1,172,269
           

              1,172,269
           

TOTAL COMMON STOCKS
(Cost: $31,670,601)

            27,982,595

SHORT-TERM INVESTMENTS – 11.31%

             

FLOATING RATE NOTES – 2.92%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 13,939      13,938

1.52%, 10/12/043,4

     11,616      11,616

1.56%, 09/15/043,4

     23,232      23,225

1.64%, 03/15/053,4

     11,616      11,622

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     17,424      17,424

1.38%, 11/22/043

     5,808      5,808

1.40%, 10/29/043

     23,232      23,232

CC USA Inc.

             

1.45%, 05/04/053,4

     23,232      23,229

1.61%, 07/29/053,4

     23,232      23,226

Den Danske Bank NY

             

1.51%, 08/12/053

     23,232      23,226

1.56%, 08/26/053

     23,232      23,226

Depfa Bank PLC

             

1.27%, 06/15/053

     23,232      23,232

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     19,283      19,278

Five Finance Inc.

             

1.42%, 04/29/053,4

     18,586      18,585

Gemini Securitization Corp.

             

1.53%, 09/09/043

     11,616      11,612

 

SCHEDULES OF INVESTMENTS

  57


Schedule of Investments (Continued)

 

iSHARES® MSCI NETHERLANDS INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

HBOS Treasury Services PLC

             

1.24%, 04/01/053

   $ 14,869    $ 14,868

1.58%, 04/22/053

     23,232      23,232

K2 USA LLC

             

1.45%, 06/10/053,4

     23,232      23,230

1.57%, 09/27/043,4

     25,091      25,091

1.61%, 07/25/053,4

     11,616      11,615

Links Finance LLC

             

1.55%, 04/15/053,4

     23,232      23,230

1.68%, 04/25/053

     23,232      23,242

Nationwide Building Society

             

1.59%, 07/28/053

     23,232      23,232

1.63%, 12/09/043,4

     19,283      19,196

Nordea Bank PLC

             

2.11%, 06/07/053

     23,232      23,229

Northern Rock PLC

             

1.56%, 01/13/053,4

     22,071      22,071

Permanent Financing PLC

             

1.52%, 03/10/053

     23,232      23,232

1.53%, 12/10/043

     11,616      11,616

1.55%, 06/10/053

     10,455      10,455

Sigma Finance Inc.

             

1.52%, 10/07/043

     23,232      23,232

1.57%, 11/15/043

     23,232      23,232

1.59%, 09/15/053

     17,424      17,426

Tango Finance Corp.

             

1.52%, 04/07/053,4

     8,526      8,526

1.56%, 01/18/053,4

     10,222      10,222

1.59%, 07/25/053,4

     23,232      23,230

1.66%, 05/17/053,4

     19,283      19,283

1.70%, 02/25/053,4

     13,010      13,009

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     5,755      5,745

1.48%, 06/15/053,4

     11,616      11,615

1.56%, 09/15/043,4

     11,616      11,617

1.56%, 07/15/053,4

     17,424      17,421

White Pine Finance LLC

             

1.46%, 07/05/053

     11,616      11,614

1.55%, 04/15/053,4

     17,424      17,422

1.55%, 07/11/053

     5,808      5,808

1.56%, 11/15/043,4

     13,939      13,939

1.57%, 06/15/053,4

     9,525      9,525

1.58%, 03/29/053

     9,990      9,989

1.58%, 08/26/053,4

     11,616      11,614

1.68%, 05/20/053

     10,455      10,454
           

              824,941

Security


   Shares or
Principal


   Value

MONEY MARKET FUNDS – 2.28%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     363,216    $ 363,216

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     255,556      255,556

BlackRock Temp Cash Money Market Fund3

     11,728      11,728

Short-Term Investment Co. – Prime Money Market Portfolio, Institutional Shares3

     15,617      15,617
           

              646,117

COMMERCIAL PAPER – 2.09%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

   $ 11,616      11,613

1.51%, 09/02/043

     10,455      10,454

1.54%, 09/14/043

     11,616      11,610

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     4,646      4,645

1.53%, 09/16/043

     11,430      11,423

1.54%, 09/15/043

     11,616      11,609

1.54%, 09/22/043

     5,808      5,803

Barton Capital Corp.

             

1.53%, 09/08/043

     11,616      11,613

1.53%, 09/09/043

     27,133      27,124

1.53%, 09/13/043

     16,726      16,718

1.53%, 09/14/043

     5,808      5,805

1.54%, 09/17/043

     6,970      6,965

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     11,616      11,613

1.53%, 09/15/043

     4,646      4,644

Cantabric Finance LLC

             

1.55%, 09/17/043

     4,646      4,643

Corporate Asset Funding

             

1.42%, 09/03/043

     6,970      6,969

CRC Funding LLC

             

1.42%, 09/03/043

     11,616      11,615

Delaware Funding Corp.

             

1.50%, 09/09/043

     11,616      11,612

1.53%, 09/10/043

     18,586      18,579

1.53%, 09/20/043

     7,899      7,893

Edison Asset Securitization

             

1.07%, 09/21/043

     11,616      11,609

1.45%, 11/09/043

     23,232      23,168

 

58

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI NETHERLANDS INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

1.52%, 09/08/043

   $ 23,232    $ 23,226

1.59%, 12/02/043

     23,232      23,138

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     6,970      6,969

1.53%, 09/07/043

     11,616      11,613

1.53%, 09/17/043

     6,970      6,965

1.53%, 09/21/043

     5,808      5,803

1.53%, 09/22/043

     11,616      11,606

1.54%, 09/14/043

     17,424      17,415

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     11,616      11,536

GIRO Funding US Corp.

             

1.54%, 09/09/043

     11,616      11,612

1.55%, 10/15/043

     15,235      15,206

Grampian Funding LLC

             

1.26%, 10/22/043

     23,232      23,191

1.44%, 10/27/043

     23,232      23,180

1.59%, 11/30/043

     11,616      11,570

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     5,808      5,808

1.53%, 09/20/043

     5,808      5,804

1.53%, 09/23/043

     8,131      8,124

1.54%, 09/15/043

     13,939      13,931

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     16,191      16,191

1.51%, 09/08/043

     9,293      9,290

1.52%, 09/09/043

     5,808      5,806

1.53%, 09/21/043

     11,616      11,606

Receivables Capital Corp.

             

1.54%, 09/14/043

     6,970      6,966

Scaldis Capital LLC

             

1.48%, 09/01/043

     12,778      12,778

Sydney Capital Corp.

             

1.25%, 10/22/043

     7,732      7,718

1.55%, 09/16/043

     6,970      6,965

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     9,293      9,287

1.54%, 09/23/043

     5,808      5,803

Windmill Funding Corp.

             

1.52%, 09/09/043

     5,808      5,806

1.52%, 09/10/043

     8,131      8,128
           

              590,768

TIME DEPOSITS – 1.84%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     23,232      23,232

1.33%, 02/10/053

     11,616      11,615

1.39%, 02/02/053

     11,616      11,615

1.39%, 04/08/053

     16,263      16,262

1.40%, 10/25/043

     23,232      23,232

Bank of New York

             

1.39%, 11/01/043

     23,232      23,233

1.60%, 12/03/043

     5,808      5,807

Bank of Nova Scotia

             

1.13%, 10/06/043

     23,232      23,232

1.24%, 10/07/043

     17,424      17,424

1.42%, 10/29/043

     17,424      17,425

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     23,232      23,233

1.49%, 08/09/053

     23,232      23,226

1.54%, 06/23/053

     23,232      23,227

1.56%, 06/10/053

     11,616      11,620

Norddeutsche Landesbank

             

1.59%, 07/27/053

     23,232      23,225

Prudential Funding LLC

             

1.60%, 12/01/043

     11,616      11,569

SouthTrust Bank

             

1.55%, 09/01/043

     46,465      46,465

Toronto-Dominion Bank

             

1.22%, 03/23/053

     40,657      40,653

1.34%, 02/10/053

     9,293      9,292

1.41%, 11/01/043

     17,424      17,425

1.53%, 09/13/043

     11,616      11,616

1.77%, 05/10/053

     11,616      11,615

1.90%, 05/11/053

     11,616      11,615

UBS Finance (Delaware)

             

1.10%, 09/08/043

     23,232      23,227

1.11%, 12/17/043

     34,849      34,734

1.14%, 09/29/043

     23,232      23,212
           

              519,031

REPURCHASE AGREEMENTS – 1.62%

             

Banc of America Securities LLC

             

1.59%, 09/01/043,6

     69,697      69,697

 

SCHEDULES OF INVESTMENTS

  59


Schedule of Investments (Continued)

 

iSHARES® MSCI NETHERLANDS INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

Bank of America, N.A.

               

1.59%, 09/01/043,6

   $ 133,586    $ 133,586  

Goldman Sachs & Co.

               

1.59%, 09/01/043,6

     116,162      116,162  

Merrill Lynch Government Securities Inc.

               

1.57%, 09/01/043,6

     23,232      23,232  

1.59%, 09/01/043,6

     116,162      116,162  
           


              458,839  

U.S. GOVERNMENT AGENCY NOTES – 0.30%

               

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     16,263      16,295  

1.80%, 01/18/053

     10,803      10,728  

1.80%, 01/19/053

     11,616      11,535  

2.06%, 05/31/053

     11,582      11,402  

Federal National Mortgage Association

               

2.33%, 07/22/053

     34,849      34,119  
           


              84,079  

MEDIUM-TERM NOTES – 0.26%

               

CC USA Inc.

               

1.29%, 04/15/053,4

     23,232      23,231  

1.51%, 02/15/053,4

     15,101      15,112  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     17,424      17,424  

K2 USA LLC

               

1.46%, 01/12/053,4

     11,616      11,616  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     5,808      5,808  
           


              73,191  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $3,196,966)

            3,196,966  
           


TOTAL INVESTMENTS IN SECURITIES – 110.31%
(Cost: $34,867,567)

            31,179,561  

Other Assets, Less Liabilities – (10.31%)

            (2,914,556 )
           


NET ASSETS – 100.00%

          $ 28,265,005  
           



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   24.88 %   $ 7,030,521

Energy

   24.29       6,865,642

Consumer Non-Cyclical

   20.28       5,731,694

Communications

   11.89       3,360,274

Industrial

   8.78       2,481,521

Basic Materials

   5.29       1,496,278

Technology

   3.33       943,901

Consumer Cyclical

   0.26       72,764

Short-Term and Other Net Assets

   1.00       282,410
    

 

TOTAL

   100.00 %   $ 28,265,005
    

 

 

See notes to financial statements.

 

60

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of investments

 

iSHARES® MSCI SPAIN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.88%

           

ADVERTISING – 0.64%

           

Telefonica Publicidad e Informacion SA

   44,704    $ 292,289
         

            292,289

AGRICULTURE – 3.40%

           

Altadis SA1

   49,610      1,543,450
         

            1,543,450

AIRLINES – 0.46%

           

Iberia Lineas Aereas de Espana SA1

   78,826      206,922
         

            206,922

BANKS – 30.99%

           

Banco Bilbao Vizcaya Argentaria SA

   429,770      5,708,733

Banco Popular Espanol SA

   36,300      1,964,458

Banco Santander Central Hispano SA1

   609,928      5,959,614

Bankinter SA1

   12,386      454,441
         

            14,087,246

BIOTECHNOLOGY – 0.45%

           

Zeltia SA1

   30,954      204,644
         

            204,644

BUILDING MATERIALS – 0.63%

           

Uralita SA1,2

   75,482      286,208
         

            286,208

COMMERCIAL SERVICES – 1.89%

           

Abertis Infraestructuras SA1

   47,811      858,788
         

            858,788

COMPUTERS – 0.70%

           

Indra Sistemas SA1

   24,882      317,813
         

            317,813

ELECTRIC – 12.45%

           

Endesa SA

   121,902      2,254,805

Iberdrola SA

   108,328      2,210,421

Union Fenosa SA1

   53,790      1,193,021
         

            5,658,247

ENERGY – ALTERNATE SOURCES – 0.57%

           

Gamesa Corporacion Tecnologica SA

   18,216      257,021
         

            257,021

ENGINEERING & CONSTRUCTION – 5.09%

           

Acciona SA1

   5,148      316,259

Actividades de Construcciones y Servicios SA

   59,519      1,012,668

Fomento de Construcciones y Contratas SA

   15,026      550,024

Grupo Ferrovial SA1

   9,504      434,750
         

            2,313,701

FOOD – 1.01%

           

Ebro Puleva SA

   22,953      264,722

Viscofan SA

   20,900      195,324
         

            460,046

FOREST PRODUCTS & PAPER – 0.53%

           

Grupo Empresarial ENCE SA

   8,800      241,378
         

            241,378

GAS – 2.22%

           

Gas Natural SDG SA1

   42,416      1,009,829
         

            1,009,829

INSURANCE – 1.04%

           

Corporacion Mapfre SA1

   41,797      474,434
         

            474,434

IRON & STEEL – 1.33%

           

Acerinox SA

   44,792      606,414
         

            606,414

LODGING – 0.78%

           

NH Hoteles SA1

   34,210      354,638
         

            354,638

MEDIA – 1.43%

           

Antena 3 Television SA2

   2,551      125,993

Promotora de Informaciones SA

   29,480      465,752

Sogecable SA1,2

   1,562      56,455
         

            648,200

OIL & GAS – 4.99%

           

Repsol YPF SA

   109,890      2,270,338
         

            2,270,338

PHARMACEUTICALS – 1.07%

           

FAES FARMA SA1

   32,498      486,576
         

            486,576

REAL ESTATE – 0.82%

           

Metrovacesa SA1

   660      28,595

Sacyr Vallehermoso SA

   24,442      333,877

Sacyr Vallehermoso SA New2,3

   611      8,346
         

            370,818

 

SCHEDULES OF INVESTMENTS

  61


Schedule of Investments (Continued)

 

iSHARES® MSCI SPAIN INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

RETAIL – 2.19%

             

Industria de Diseno Textil SA

     43,406    $ 996,472
           

              996,472

TELECOMMUNICATIONS – 23.21%

             

Telefonica SA1

     743,121      10,548,383
           

              10,548,383

TRANSPORTATION – 0.78%

             

Amadeus Global Travel Distribution SA Class A

     52,316      355,410
           

              355,410

WATER – 1.21%

             

Sociedad General de Aguas de Barcelona SA Class B1

     31,504      551,713
           

              551,713
           

TOTAL COMMON STOCKS
(Cost: $36,991,001)

            45,400,978

SHORT-TERM INVESTMENTS – 26.47%

             

FLOATING RATE NOTES – 6.85%

             

Beta Finance Inc.

             

1.45%, 05/04/054,5

   $ 52,612      52,604

1.52%, 10/12/044,5

     43,843      43,842

1.56%, 09/15/044,5

     87,686      87,680

1.64%, 03/15/054,5

     43,843      43,862

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/044

     65,764      65,763

1.38%, 11/22/044

     21,921      21,922

1.40%, 10/29/044

     87,686      87,686

CC USA Inc.

             

1.45%, 05/04/054,5

     87,686      87,674

1.61%, 07/29/054,5

     87,686      87,662

Den Danske Bank NY

             

1.51%, 08/12/054

     87,686      87,661

1.56%, 08/26/054

     87,686      87,660

Depfa Bank PLC

             

1.27%, 06/15/054

     87,686      87,686

Dorada Finance Inc.

             

1.61%, 07/29/054,5

     72,779      72,759

Five Finance Inc.

             

1.42%, 04/29/054,5

     70,149      70,144

Gemini Securitization Corp.

             

1.53%, 09/09/044

     43,843      43,828

Security


   Principal

   Value

HBOS Treasury Services PLC

             

1.24%, 04/01/054

   $ 56,119    $ 56,116

1.58%, 04/22/054

     87,686      87,686

K2 USA LLC

             

1.45%, 06/10/054,5

     87,686      87,678

1.57%, 09/27/044,5

     94,701      94,700

1.61%, 07/25/054,5

     43,843      43,835

Links Finance LLC

             

1.55%, 04/15/054,5

     87,686      87,675

1.68%, 04/25/054

     87,686      87,723

Nationwide Building Society

             

1.59%, 07/28/054

     87,686      87,686

1.63%, 12/09/044,5

     72,779      72,453

Nordea Bank PLC

             

2.11%, 06/07/054

     87,686      87,673

Northern Rock PLC

             

1.56%, 01/13/054,5

     83,302      83,302

Permanent Financing PLC

             

1.52%, 03/10/054

     87,686      87,686

1.53%, 12/10/044

     43,843      43,843

1.55%, 06/10/054

     39,459      39,459

Sigma Finance Inc.

             

1.52%, 10/07/044

     87,686      87,684

1.57%, 11/15/044

     87,686      87,685

1.59%, 09/15/054

     65,764      65,770

Tango Finance Corp.

             

1.52%, 04/07/054,5

     32,181      32,179

1.56%, 01/18/054,5

     38,582      38,580

1.59%, 07/25/054,5

     87,686      87,678

1.66%, 05/17/054,5

     72,779      72,777

1.70%, 02/25/054,5

     49,104      49,099

WhistleJacket Capital LLC

             

1.26%, 10/20/044

     21,720      21,683

1.48%, 06/15/054,5

     43,843      43,835

1.56%, 09/15/044,5

     43,843      43,843

1.56%, 07/15/054,5

     65,764      65,753

White Pine Finance LLC

             

1.46%, 07/05/054

     43,843      43,835

1.55%, 04/15/054,5

     65,764      65,756

1.55%, 07/11/054

     21,921      21,919

1.56%, 11/15/044,5

     52,612      52,612

1.57%, 06/15/054,5

     35,951      35,951

1.58%, 03/29/054

     37,705      37,700

1.58%, 08/26/054,5

     43,843      43,834

1.68%, 05/20/054

     39,459      39,456
           

              3,113,577

 

62

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SPAIN INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

MONEY MARKET FUNDS – 5.29%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares4,6

     1,337,924    $ 1,337,924

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares4,6

     964,545      964,545

BlackRock Temp Cash Money Market Fund4

     44,266      44,266

Short-Term Investment Co. – Prime Money Market Portfolio, Institutional Shares4

     58,942      58,942
           

              2,405,677

COMMERCIAL PAPER – 4.90%

             

Alpine Securitization Corp.

             

1.50%, 09/08/044

   $ 43,843      43,830

1.51%, 09/02/044

     39,459      39,457

1.54%, 09/14/044

     43,843      43,819

Amsterdam Funding Corp.

             

1.49%, 09/08/044

     17,537      17,532

1.53%, 09/16/044

     43,140      43,113

1.54%, 09/15/044

     43,843      43,817

1.54%, 09/22/044

     21,921      21,902

Barton Capital Corp.

             

1.53%, 09/08/044

     43,843      43,830

1.53%, 09/09/044

     102,409      102,375

1.53%, 09/13/044

     63,130      63,098

1.53%, 09/14/044

     21,921      21,909

1.54%, 09/17/044

     26,306      26,288

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/044

     43,843      43,830

1.53%, 09/15/044

     17,537      17,527

Cantabric Finance LLC

             

1.55%, 09/17/044

     17,537      17,525

Corporate Asset Funding

             

1.42%, 09/03/044

     26,306      26,304

CRC Funding LLC

             

1.42%, 09/03/044

     43,843      43,839

Delaware Funding Corp.

             

1.50%, 09/09/044

     43,843      43,828

1.53%, 09/10/044

     70,149      70,122

1.53%, 09/20/044

     29,813      29,789

 

Security


   Principal

   Value

Edison Asset Securitization

             

1.07%, 09/21/044

   $ 43,843    $ 43,817

1.45%, 11/09/044

     87,686      87,442

1.52%, 09/08/044

     87,686      87,660

1.59%, 12/02/044

     87,686      87,330

Falcon Asset Securitization Corp.

             

1.48%, 09/03/044

     26,306      26,304

1.53%, 09/07/044

     43,843      43,832

1.53%, 09/17/044

     26,306      26,288

1.53%, 09/21/044

     21,921      21,903

1.53%, 09/22/044

     43,843      43,804

1.54%, 09/14/044

     65,764      65,728

Ford Credit Auto Receivables

             

1.85%, 01/14/054

     43,843      43,539

GIRO Funding US Corp.

             

1.54%, 09/09/044

     43,843      43,828

1.55%, 10/15/044

     57,500      57,391

Grampian Funding LLC

             

1.26%, 10/22/044

     87,686      87,530

1.44%, 10/27/044

     87,686      87,489

1.59%, 11/30/044

     43,843      43,669

Jupiter Securitization Corp.

             

1.47%, 09/02/044

     21,921      21,921

1.53%, 09/20/044

     21,921      21,904

1.53%, 09/23/044

     30,690      30,661

1.54%, 09/15/044

     52,612      52,580

Preferred Receivables Funding Corp.

             

1.47%, 09/01/044

     61,108      61,108

1.51%, 09/08/044

     35,074      35,064

1.52%, 09/09/044

     21,921      21,914

1.53%, 09/21/044

     43,843      43,806

Receivables Capital Corp.

             

1.54%, 09/14/044

     26,306      26,291

Scaldis Capital LLC

             

1.48%, 09/01/044

     48,227      48,227

Sydney Capital Corp.

             

1.25%, 10/22/044

     29,182      29,130

1.55%, 09/16/044

     26,306      26,289

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/044

     35,074      35,053

1.54%, 09/23/044

     21,921      21,901

 

SCHEDULES OF INVESTMENTS

  63


Schedule of Investments (Continued)

 

iSHARES® MSCI SPAIN INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Windmill Funding Corp.

             

1.52%, 09/09/044

   $ 21,921    $ 21,914

1.52%, 09/10/044

     30,690      30,678
           

              2,229,729
TIME DEPOSITS – 4.31%              

Abbey National Treasury Services PLC

             

1.25%, 01/06/054

     87,686      87,686

1.33%, 02/10/054

     43,843      43,840

1.39%, 02/02/054

     43,843      43,840

1.39%, 04/08/054

     61,380      61,375

1.40%, 10/25/044

     87,686      87,684

Bank of New York

             

1.39%, 11/01/044

     87,686      87,684

1.60%, 12/03/044

     21,921      21,919

Bank of Nova Scotia

             

1.13%, 10/06/044

     87,686      87,686

1.24%, 10/07/044

     65,764      65,764

1.42%, 10/29/044

     65,764      65,766

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/054

     87,686      87,687

1.49%, 08/09/054

     87,686      87,661

1.54%, 06/23/054

     87,686      87,665

1.56%, 06/10/054

     43,843      43,854

Norddeutsche Landesbank

             

1.59%, 07/27/054

     87,686      87,658

Prudential Funding LLC

             

1.60%, 12/01/044

     43,843      43,666

SouthTrust Bank

             

1.55%, 09/01/044

     175,372      175,372

Toronto-Dominion Bank

             

1.22%, 03/23/054

     153,450      153,435

1.34%, 02/10/054

     35,074      35,072

1.41%, 11/01/044

     65,764      65,763

1.53%, 09/13/044

     43,843      43,843

1.77%, 05/10/054

     43,843      43,840

1.90%, 05/11/054

     43,843      43,840

UBS Finance (Delaware)

             

1.10%, 09/08/044

     87,686      87,667

1.11%, 12/17/044

     131,529      131,095

1.14%, 09/29/044

     87,686      87,608
           

              1,958,970
REPURCHASE AGREEMENTS – 3.81%              

Banc of America Securities LLC

             

1.59%, 09/01/044,7

     263,058      263,058

Bank of America, N.A.

             

1.59%, 09/01/044,7

     504,193      504,193

Goldman Sachs & Co.

             

1.59%, 09/01/044,7

     438,429      438,429

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/044,7

     87,686      87,686

1.59%, 09/01/044,7

     438,429      438,429
           

              1,731,795

U.S. GOVERNMENT AGENCY NOTES – 0.70%

             

Federal Home Loan

             

Mortgage Corp.

             

1.63%, 04/15/054

     61,380      61,502

1.80%, 01/18/054

     40,774      40,491

1.80%, 01/19/054

     43,843      43,536

2.06%, 05/31/054

     43,714      43,034

Federal National Mortgage Association

             

2.33%, 07/22/054

     131,529      128,777
           

              317,340
MEDIUM-TERM NOTES – 0.61%              

CC USA Inc.

             

1.29%, 04/15/054,5

     87,686      87,680

1.51%, 02/15/054,5

     56,996      57,036

Dorada Finance Inc.

             

1.48%, 01/18/054,5

     65,764      65,763

K2 USA LLC

             

1.46%, 01/12/054,5

     43,843      43,841

WhistleJacket Capital LLC

             

1.32%, 02/04/054,5

     21,921      21,920
           

              276,240
           

TOTAL SHORT-TERM INVESTMENTS
(Cost: $12,033,328)

            12,033,328
           

 

64

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SPAIN INDEX FUND

August 31, 2004

 

     Value

 

TOTAL INVESTMENTS IN SECURITIES – 126.35%
(Cost: $49,024,329)

   $ 57,434,306  

Other Assets, Less Liabilities – (26.35%)

     (11,977,979 )
    


NET ASSETS – 100.00%

   $ 45,456,327  
    



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 Security valued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.
4 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
5 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
6 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
7 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


  

% of

Net Assets


    Value

Financial

   32.85 %   $ 14,932,498

Communications

   25.28       11,488,872

Utilities

   15.88       7,219,789

Consumer Non-Cyclical

   7.82       3,553,504

Industrial

   6.50       2,955,319

Energy

   5.56       2,527,359

Consumer Cyclical

   3.43       1,558,032

Basic Materials

   1.86       847,792

Technology

   0.70       317,813

Short-Term and Other Net Assets

   0.12       55,349
    

 

TOTAL

   100.00 %   $ 45,456,327
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  65


Schedule of Investments

 

iSHARES® MSCI SWEDEN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.90%            
AGRICULTURE - 1.89%            

Swedish Match AB1

   51,810    $ 524,113
         

            524,113
AIRLINES - 0.32%            

SAS AB1,2

   11,638      89,847
         

            89,847
AUTO MANUFACTURERS - 7.61%            

Scania AB Class B

   14,696      479,251

Volvo AB Class A1

   14,300      468,241

Volvo AB Class B1

   34,122      1,164,984
         

            2,112,476
BANKS - 18.60%            

Nordea AB

   333,322      2,551,115

Skandinaviska Enskilda Banken AB Class A1

   73,216      1,028,150

Svenska Handelsbanken AB Class A1

   82,632      1,583,831
         

            5,163,096
COMMERCIAL SERVICES - 2.03%            

Securitas AB Class B

   45,430      563,884
         

            563,884
COMPUTERS - 0.34%            

WM-Data AB Class B

   48,642      92,910
         

            92,910
COSMETICS & PERSONAL CARE - 0.38%            

Oriflame Cosmetics SA SDR2

   4,554      104,260
         

            104,260
DIVERSIFIED FINANCIAL SERVICES - 0.72%            

D Carnegie AB

   8,800      77,894

OM AB1,2

   11,550      122,221
         

            200,115
ENGINEERING & CONSTRUCTION - 1.84%            

Skanska AB Class B1

   56,694      509,377
         

            509,377
FOOD - 0.41%            

Axfood AB

   4,488      114,996
         

            114,996
FOREST PRODUCTS & PAPER - 5.28%            

Billerud AB

   8,272      128,273

Holmen AB Class B1

   7,568      216,076

Svenska Cellulosa AB Class B

   29,876      1,121,424
         

            1,465,773
HAND & MACHINE TOOLS - 4.18%            

Sandvik AB1

   34,012      1,161,229
         

            1,161,229
HEALTH CARE - PRODUCTS - 2.95%            

Elekta AB Class B2

   4,378      99,357

Gambro AB Class A

   27,082      290,185

Gambro AB Class B1

   14,652      154,559

Getinge AB Class B

   24,860      275,476
         

            819,577
HEALTH CARE - SERVICES - 0.38%            

Capio AB2

   11,484      106,619
         

            106,619
HOME FURNISHINGS - 2.87%            

Electrolux AB Series B

   43,464      795,482
         

            795,482
INSURANCE - 2.04%            

Skandia Forsakrings AB1

   157,256      567,250
         

            567,250
IRON & STEEL - 0.84%            

Svenskt Stal AB Class A

   9,218      161,347

Svenskt Stal AB Class B

   4,224      70,561
         

            231,908
MACHINERY - CONSTRUCTION & MINING - 3.45%            

Atlas Copco AB Class A1

   17,204      609,129

Atlas Copco AB Class B

   10,758      347,965
         

            957,094
MANUFACTURING - 1.29%            

Alfa Laval AB

   12,804      180,655

Trelleborg AB Class B

   11,902      178,226
         

            358,881
MEDIA - 1.19%            

Eniro AB1

   24,309      183,625

Modern Times Group AB Class B2

   7,788      147,720
         

            331,345

 

66

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SWEDEN INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

METAL FABRICATE & HARDWARE - 4.20%              

Assa Abloy AB Class B

     45,364    $ 544,950

Hoganas AB Class B

     4,136      93,865

SKF AB Class B1

     14,322      527,105
           

              1,165,920
OIL & GAS - 0.45%              

Lundin Petroleum AB1,2

     25,102      124,628
           

              124,628
REAL ESTATE - 1.27%              

Castellum AB

     6,468      161,855

Fabege AB2

     6,330      91,839

Wihlborgs Fastigheter AB

     7,040      97,924
           

              351,618
RETAIL - 6.74%              

Hennes & Mauritz AB Class B1

     71,940      1,872,041
           

              1,872,041
TELECOMMUNICATIONS - 28.63%              

Tele2 AB Class B1

     14,916      561,871

Telefonaktiebolaget LM

             

Ericsson Class B2

     2,248,180      6,044,782

TeliaSonera AB2

     284,240      1,339,327
           

              7,945,980
           

TOTAL COMMON STOCKS
(Cost: $23,392,218)

            27,730,419
SHORT-TERM INVESTMENTS - 35.64%              
FLOATING RATE NOTES - 9.23%              

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 43,276      43,258

1.52%, 10/12/043,4

     36,063      36,063

1.56%, 09/15/043,4

     72,126      72,126

1.64%, 03/15/053,4

     36,063      36,079

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     54,095      54,094

1.38%, 11/22/043

     18,032      18,032

1.40%, 10/29/043

     72,126      72,126

CC USA Inc.

             

1.45%, 05/04/053,4

     72,126      72,116

1.61%, 07/29/053,4

     72,126      72,106

Security


   Principal

   Value

Den Danske Bank NY

             

1.51%, 08/12/053

   $ 72,126    $ 72,106

1.56%, 08/26/053

     72,126      72,105

Depfa Bank PLC

             

1.27%, 06/15/053

     72,126      72,126

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     59,865      59,848

Five Finance Inc.

             

1.42%, 04/29/053,4

     57,701      57,697

Gemini Securitization Corp.

             

1.53%, 09/09/043

     36,063      36,051

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     46,161      46,158

1.58%, 04/22/053

     72,126      72,126

K2 USA LLC

             

1.45%, 06/10/053,4

     72,126      72,119

1.57%, 09/27/043,4

     77,896      77,895

1.61%, 07/25/053,4

     36,063      36,057

Links Finance LLC

             

1.55%, 04/15/053,4

     72,126      72,117

1.68%, 04/25/053

     72,126      72,157

Nationwide Building Society

             

1.59%, 07/28/053

     72,126      72,126

1.63%, 12/09/043,4

     59,865      59,596

Nordea Bank PLC

             

2.11%, 06/07/053

     72,126      72,115

Northern Rock PLC

             

1.56%, 01/13/053,4

     68,520      68,520

Permanent Financing PLC

             

1.52%, 03/10/053

     72,126      72,126

1.53%, 12/10/043

     36,063      36,064

1.55%, 06/10/053

     32,457      32,457

Sigma Finance Inc.

             

1.52%, 10/07/043

     72,126      72,125

1.57%, 11/15/043

     72,126      72,125

1.59%, 09/15/053

     54,095      54,099

Tango Finance Corp.

             

1.52%, 04/07/053,4

     26,470      26,469

1.56%, 01/18/053,4

     31,735      31,734

1.59%, 07/25/053,4

     72,126      72,120

1.66%, 05/17/053,4

     59,865      59,862

1.70%, 02/25/053,4

     40,391      40,387

 

SCHEDULES OF INVESTMENTS

  67


Schedule of Investments (Continued)

 

iSHARES® MSCI SWEDEN INDEX FUND

August 31, 2004

 

Security


  

Shares or

Principal


   Value

WhistleJacket Capital LLC

             

1.26%, 10/20/043

   $ 17,866    $ 17,835

1.48%, 06/15/053,4

     36,063      36,057

1.56%, 09/15/043,4

     36,063      36,063

1.56%, 07/15/053,4

     54,095      54,085

White Pine Finance LLC

             

1.46%, 07/05/053

     36,063      36,056

1.55%, 04/15/053,4

     54,095      54,088

1.55%, 07/11/053

     18,032      18,030

1.56%, 11/15/043,4

     43,276      43,276

1.57%, 06/15/053,4

     29,572      29,572

1.58%, 03/29/053

     31,014      31,010

1.58%, 08/26/053,4

     36,063      36,056

1.68%, 05/20/053

     32,457      32,454
           

              2,561,069

MONEY MARKET FUNDS – 7.11%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     1,095,736      1,095,736

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     793,386      793,386

BlackRock Temp Cash Money Market Fund3

     36,410      36,410

Short-Term Investment Co.- Prime Money Market Portfolio, Institutional Shares3

     48,483      48,483
           

              1,974,015

COMMERCIAL PAPER – 6.61%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

     36,063      36,052

1.51%, 09/02/043

     32,457      32,455

1.54%, 09/14/043

     36,063      36,043

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     14,425      14,421

1.53%, 09/16/043

     35,485      35,462

1.54%, 09/15/043

     36,063      36,042

1.54%, 09/22/043

     18,032      18,016

Barton Capital Corp.

             

1.53%, 09/08/043

     36,063      36,052

1.53%, 09/09/043

     84,237      84,208

Security


   Principal

   Value

1.53%, 09/13/043

   $ 51,928    $ 51,901

1.53%, 09/14/043

     18,032      18,022

1.54%, 09/17/043

     21,638      21,623

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     36,063      36,052

1.53%, 09/15/043

     14,425      14,417

Cantabric Finance LLC

             

1.55%, 09/17/043

     14,425      14,415

Corporate Asset Funding

             

1.42%, 09/03/043

     21,638      21,636

CRC Funding LLC

             

1.42%, 09/03/043

     36,063      36,060

Delaware Funding Corp.

             

1.50%, 09/09/043

     36,063      36,051

1.53%, 09/10/043

     57,701      57,679

1.53%, 09/20/043

     24,523      24,503

Edison Asset Securitization

             

1.07%, 09/21/043

     36,063      36,042

1.45%, 11/09/043

     72,126      71,926

1.52%, 09/08/043

     72,126      72,105

1.59%, 12/02/043

     72,126      71,833

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     21,638      21,636

1.53%, 09/07/043

     36,063      36,054

1.53%, 09/17/043

     21,638      21,623

1.53%, 09/21/043

     18,032      18,016

1.53%, 09/22/043

     36,063      36,031

1.54%, 09/14/043

     54,095      54,064

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     36,063      35,813

GIRO Funding US Corp.

             

1.54%, 09/09/043

     36,063      36,051

1.55%, 10/15/043

     47,297      47,207

Grampian Funding LLC

             

1.26%, 10/22/043

     72,126      71,998

1.44%, 10/27/043

     72,126      71,964

1.59%, 11/30/043

     36,063      35,920

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     18,032      18,031

1.53%, 09/20/043

     18,032      18,017

1.53%, 09/23/043

     25,244      25,221

1.54%, 09/15/043

     43,276      43,250

 

68

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SWEDEN INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

   $ 50,265    $ 50,265

1.51%, 09/08/043

     28,850      28,842

1.52%, 09/09/043

     18,032      18,025

1.53%, 09/21/043

     36,063      36,032

Receivables Capital Corp.

             

1.54%, 09/14/043

     21,638      21,626

Scaldis Capital LLC

             

1.48%, 09/01/043

     39,669      39,670

Sydney Capital Corp.

             

1.25%, 10/22/043

     24,004      23,961

1.55%, 09/16/043

     21,638      21,624

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     28,850      28,833

1.54%, 09/23/043

     18,032      18,015

Windmill Funding Corp.

             

1.52%, 09/09/043

     18,032      18,025

1.52%, 09/10/043

     25,244      25,235
           

              1,834,065

TIME DEPOSITS – 5.80%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     72,126      72,126

1.33%, 02/10/053

     36,063      36,061

1.39%, 02/02/053

     36,063      36,061

1.39%, 04/08/053

     50,488      50,484

1.40%, 10/25/043

     72,126      72,124

Bank of New York

             

1.39%, 11/01/043

     72,126      72,125

1.60%, 12/03/043

     18,032      18,029

Bank of Nova Scotia

             

1.13%, 10/06/043

     72,126      72,126

1.24%, 10/07/043

     54,095      54,094

1.42%, 10/29/043

     54,095      54,095

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     72,126      72,127

1.49%, 08/09/053

     72,126      72,106

1.54%, 06/23/053

     72,126      72,109

1.56%, 06/10/053

     36,063      36,072

Norddeutsche Landesbank

             

1.59%, 07/27/053

     72,126      72,103

Prudential Funding LLC

             

1.60%, 12/01/043

     36,063      35,917

SouthTrust Bank

             

1.55%, 09/01/043

     144,252      144,252

Toronto-Dominion Bank

             

1.22%, 03/23/053

     126,221      126,208

1.34%, 02/10/053

     28,850      28,848

1.41%, 11/01/043

     54,095      54,094

1.53%, 09/13/043

     36,063      36,064

1.77%, 05/10/053

     36,063      36,061

1.90%, 05/11/053

     36,063      36,061

UBS Finance (Delaware)

             

1.10%, 09/08/043

     72,126      72,111

1.11%, 12/17/043

     108,189      107,832

1.14%, 09/29/043

     72,126      72,062
           

              1,611,352

REPURCHASE AGREEMENTS – 5.13%

             

Banc of America Securities LLC

             

1.59%, 09/01/043,6

     216,378      216,378

Bank of America, N.A

             

1.59%, 09/01/043,6

     414,725      414,725

Goldman Sachs & Co.

             

1.59%, 09/01/043,6

     360,630      360,630

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/043,6

     72,126      72,126

1.59%, 09/01/043,6

     360,630      360,630
           

              1,424,489

U.S. GOVERNMENT AGENCY NOTES – 0.94%

             

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/053

     50,488      50,588

1.80%, 01/18/053

     33,539      33,306

1.80%, 01/19/053

     36,063      35,811

2.06%, 05/31/053

     35,957      35,397

Federal National Mortgage Association

             

2.33%, 07/22/053

     108,189      105,925
           

              261,027

 

SCHEDULES OF INVESTMENTS

  69


Schedule of Investments (Continued)

 

iSHARES® MSCI SWEDEN INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

MEDIUM-TERM NOTES – 0.82%

               

CC USA Inc.

               

1.29%, 04/15/053,4

   $ 72,126    $ 72,122  

1.51%, 02/15/053,4

     46,882      46,915  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     54,095      54,093  

K2 USA LLC

               

1.46%, 01/12/053,4

     36,063      36,062  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     18,032      18,030  
           


              227,222  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $9,893,239)

            9,893,239  
           


TOTAL INVESTMENTS IN SECURITIES – 135.54%
(Cost: $33,285,457)

            37,623,658  

Other Assets, Less Liabilities – (35.54%)

            (9,865,461 )
           


NET ASSETS – 100.00%

          $ 27,758,197  
           



SDR - Swedish Depositary Receipts

1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule-144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Communications

   29.82 %   $ 8,277,325

Financial

   22.63       6,282,079

Consumer Cyclical

   17.54       4,869,846

Industrial

   14.96       4,152,501

Consumer Non-Cyclical

   8.04       2,233,449

Basic Materials

   6.12       1,697,681

Energy

   0.45       124,628

Technology

   0.34       92,910

Short-Term and Other Net Assets

   0.10       27,778
    

 

TOTAL

   100.00 %   $ 27,758,197
    

 

 

See Notes to Financial Statements.

 

70

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI SWITZERLAND INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.73%

           

BANKS – 15.91%

           

Banque Cantonale Vaudoise

   2,346    $ 266,875

Credit Suisse Group1

   61,722      1,922,652

Julius Baer Holding AG2

   1,718      461,322

UBS AG Registered

   55,991      3,748,776

Vontobel Holding AG Registered

   13,800      269,895
         

            6,669,520

BUILDING MATERIALS – 4.26%

           

Geberit AG Registered

   184      130,884

Holcim Ltd. Registered

   30,935      1,655,250
         

            1,786,134

CHEMICALS – 8.67%

           

Ciba Specialty Chemicals AG Registered1

   13,690      831,300

Clariant AG Registered

   13,846      168,155

Givaudan SA Registered

   2,093      1,295,694

Lonza Group AG Registered

   3,590      159,109

Syngenta AG1

   13,156      1,180,155
         

            3,634,413

COMMERCIAL SERVICES – 2.12%

           

Adecco SA Registered

   10,512      486,617

Societe Generale de Surveillance Holding SA

   736      401,650
         

            888,267

COMPUTERS – 0.36%

           

Logitech International SA Registered1

   3,360      151,565
         

            151,565

ENGINEERING & CONSTRUCTION – 1.78%

           

ABB Ltd.1

   132,095      746,912
         

            746,912

FOOD – 11.53%

           

Nestle SA Registered

   20,470      4,834,797
         

            4,834,797

HAND & MACHINE TOOLS – 2.21%

           

Schindler Holding AG Participation Certificates

   2,208      605,957

Schindler Holding AG Registered

   1,012      319,230
         

            925,187

HEALTH CARE – PRODUCTS – 4.73%

           

Nobel Biocare Holding AG

   2,576      363,632

Phonak Holding AG Registered

   5,796      174,604

Straumann Holding AG Registered

   851      166,435

Synthes Inc.

   11,960      1,278,010
         

            1,982,681

INSURANCE – 8.06%

           

Swiss Reinsurance Co.

   28,560      1,614,883

Zurich Financial Services AG1

   12,661      1,764,782
         

            3,379,665

LEISURE TIME – 0.02%

           

Kuoni Reisen Holding AG Registered

   23      8,325
         

            8,325

MANUFACTURING – 0.31%

           

Sulzer AG Registered

   460      128,780
         

            128,780

PHARMACEUTICALS – 30.18%

           

Novartis AG

   177,888      8,213,669

Roche Holding AG Genusschein2

   37,053      3,586,811

Serono SA

   1,334      850,023
         

            12,650,503

RETAIL – 6.61%

           

Compagnie Financiere Richemont AG Class-A

   46,000      1,173,534

Swatch Group (The) AG Class-B2

   5,198      638,452

Swatch Group (The) AG Registered

   23,299      593,476

Valora Holding AG Registered

   1,679      366,770
         

            2,772,232

TELECOMMUNICATIONS – 2.98%

           

Kudelski SA Bearer1

   1,909      55,100

Swisscom AG Registered2

   3,611      1,191,754
         

            1,246,854
         

TOTAL COMMON STOCKS
(Cost: $38,615,315)

          41,805,835

 

SCHEDULES OF INVESTMENTS

  71


Schedule of Investments (Continued)

 

iSHARES® MSCI SWITZERLAND INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

SHORT-TERM INVESTMENTS – 3.85%

             

FLOATING RATE NOTES – 0.98%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 6,976    $ 6,975

1.52%, 10/12/043,4

     5,813      5,813

1.56%, 09/15/043,4

     11,627      11,627

1.64%, 03/15/053,4

     5,813      5,816

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     8,720      8,720

1.38%, 11/22/043

     2,907      2,907

1.40%, 10/29/043

     11,627      11,627

CC USA Inc.

             

1.45%, 05/04/053,4

     11,627      11,625

1.61%, 07/29/053,4

     11,627      11,623

Den Danske Bank NY

             

1.51%, 08/12/053

     11,627      11,623

1.56%, 08/26/053

     11,627      11,623

Depfa Bank PLC

             

1.27%, 06/15/053

     11,627      11,627

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     9,650      9,647

Five Finance Inc.

             

1.42%, 04/29/053,4

     9,301      9,301

Gemini Securitization Corp.

             

1.53%, 09/09/043

     5,813      5,811

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     7,441      7,441

1.58%, 04/22/053

     11,627      11,627

K2 USA LLC

             

1.45%, 06/10/053,4

     11,627      11,625

1.57%, 09/27/043,4

     12,557      12,557

1.61%, 07/25/053,4

     5,813      5,812

Links Finance LLC

             

1.55%, 04/15/053,4

     11,627      11,625

1.68%, 04/25/053

     11,627      11,631

Nationwide Building Society

             

1.59%, 07/28/053

     11,627      11,627

1.63%, 12/09/043,4

     9,650      9,607

Nordea Bank PLC

             

2.11%, 06/07/053

     11,627      11,625

Security


  

Shares or

Principal


   Value

Northern Rock PLC

             

1.56%, 01/13/053,4

   $ 11,045    $ 11,045

Permanent Financing PLC

             

1.52%, 03/10/053

     11,627      11,627

1.53%, 12/10/043

     5,813      5,813

1.55%, 06/10/053

     5,232      5,232

Sigma Finance Inc.

             

1.52%, 10/07/043

     11,627      11,626

1.57%, 11/15/043

     11,627      11,626

1.59%, 09/15/053

     8,720      8,721

Tango Finance Corp.

             

1.52%, 04/07/053,4

     4,267      4,267

1.56%, 01/18/053,4

     5,116      5,116

1.59%, 07/25/053,4

     11,627      11,626

1.66%, 05/17/053,4

     9,650      9,650

1.70%, 02/25/053,4

     6,511      6,510

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     2,880      2,875

1.48%, 06/15/053,4

     5,813      5,812

1.56%, 09/15/043,4

     5,813      5,813

1.56%, 07/15/053,4

     8,720      8,719

White Pine Finance LLC

             

1.46%, 07/05/053

     5,813      5,812

1.55%, 04/15/053,4

     8,720      8,719

1.55%, 07/11/053

     2,907      2,906

1.56%, 11/15/043,4

     6,976      6,976

1.57%, 06/15/053,4

     4,767      4,767

1.58%, 03/29/053

     4,999      4,999

1.58%, 08/26/053,4

     5,813      5,812

1.68%, 05/20/053

     5,232      5,232
           

              412,843

MONEY MARKET FUNDS – 0.80%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     195,904      195,904

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     127,893      127,893

BlackRock Temp Cash Money Market Fund3

     5,869      5,869

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares3

     7,815      7,815
           

              337,481

 

72

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SWITZERLAND INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

COMMERCIAL PAPER – 0.71%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

   $ 5,813      5,812

1.51%, 09/02/043

     5,232      5,232

1.54%, 09/14/043

     5,813      5,810

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     2,325      2,325

1.53%, 09/16/043

     5,720      5,717

1.54%, 09/15/043

     5,813      5,810

1.54%, 09/22/043

     2,907      2,904

Barton Capital Corp.

             

1.53%, 09/08/043

     5,813      5,812

1.53%, 09/09/043

     13,579      13,574

1.53%, 09/13/043

     8,371      8,366

1.53%, 09/14/043

     2,907      2,905

1.54%, 09/17/043

     3,488      3,486

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     5,813      5,812

1.53%, 09/15/043

     2,325      2,324

Cantabric Finance LLC

             

1.55%, 09/17/043

     2,325      2,324

Corporate Asset Funding

             

1.42%, 09/03/043

     3,488      3,488

CRC Funding LLC

             

1.42%, 09/03/043

     5,813      5,813

Delaware Funding Corp.

             

1.50%, 09/09/043

     5,813      5,811

1.53%, 09/10/043

     9,301      9,298

1.53%, 09/20/043

     3,953      3,950

Edison Asset Securitization

             

1.07%, 09/21/043

     5,813      5,810

1.45%, 11/09/043

     11,627      11,594

1.52%, 09/08/043

     11,627      11,623

1.59%, 12/02/043

     11,627      11,579

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     3,488      3,488

1.53%, 09/07/043

     5,813      5,812

Security


   Principal

   Value

1.53%, 09/17/043

   $ 3,488    $ 3,486

1.53%, 09/21/043

     2,907      2,904

1.53%, 09/22/043

     5,813      5,809

1.54%, 09/14/043

     8,715      8,715

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     5,813      5,773

GIRO Funding US Corp.

             

1.54%, 09/09/043

     5,813      5,811

1.55%, 10/15/043

     7,624      7,610

Grampian Funding LLC

             

1.26%, 10/22/043

     11,627      11,606

1.44%, 10/27/043

     11,627      11,601

1.59%, 11/30/043

     5,813      5,790

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     2,907      2,907

1.53%, 09/20/043

     2,907      2,905

1.53%, 09/23/043

     4,069      4,066

1.54%, 09/15/043

     6,976      6,972

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     8,103      8,103

1.51%, 09/08/043

     4,651      4,649

1.52%, 09/09/043

     2,907      2,906

1.53%, 09/21/043

     5,813      5,808

Receivables Capital Corp.

             

1.54%, 09/14/043

     3,488      3,486

Scaldis Capital LLC

             

1.48%, 09/01/043

     6,395      6,395

Sydney Capital Corp.

             

1.25%, 10/22/043

     3,869      3,862

1.55%, 09/16/043

     3,488      3,486

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     4,651      4,648

1.54%, 09/23/043

     2,907      2,904

Windmill Funding Corp.

             

1.52%, 09/09/043

     2,907      2,906

1.52%, 09/10/043

     4,069      4,068
           

              295,655

TIME DEPOSITS – 0.62%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     11,627      11,612

 

SCHEDULES OF INVESTMENTS

  73


Schedule of Investments (Continued)

 

iSHARES® MSCI SWITZERLAND INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

1.33%, 02/10/053

   $ 5,813    $ 5,813  

1.39%, 02/02/053

     5,813      5,813  

1.39%, 04/08/053

     8,139      8,138  

1.40%, 10/25/043

     11,627      11,626  

Bank of New York

               

1.39%, 11/01/043

     11,627      11,626  

1.60%, 12/03/043

     2,907      2,906  

Bank of Nova Scotia

               

1.13%, 10/06/043

     11,627      11,627  

1.24%, 10/07/043

     8,720      8,720  

1.42%, 10/29/043

     8,720      8,720  

National City Bank (Cleveland, Ohio)

               

1.25%, 01/06/053

     11,627      11,627  

1.49%, 08/09/053

     11,627      11,623  

1.54%, 06/23/053

     11,627      11,624  

1.56%, 06/10/053

     5,813      5,815  

Norddeutsche Landesbank

               

1.59%, 07/27/053

     11,627      11,623  

Prudential Funding LLC

               

1.60%, 12/01/043

     5,813      5,790  

SouthTrust Bank

               

1.55%, 09/01/043

     23,253      23,253  

Toronto-Dominion Bank

               

1.22%, 03/23/053

     20,347      20,345  

1.34%, 02/10/053

     4,651      4,650  

1.41%, 11/01/043

     8,720      8,720  

1.53%, 09/13/043

     5,813      5,813  

1.77%, 05/10/053

     5,813      5,813  

1.90%, 05/11/053

     5,813      5,813  

UBS Finance (Delaware)

               

1.10%, 09/08/043

     11,627      11,625  

1.11%, 12/17/043

     17,440      17,382  

1.14%, 09/29/043

     11,627      11,616  
           


              259,733  

REPURCHASE AGREEMENTS – 0.55%

               

Banc of America Securities LLC

               

1.59%, 09/01/043,6

     34,880      34,880  

Bank of America, N.A.

               

1.59%, 09/01/043,6

     66,853      66,853  

Goldman Sachs & Co.

               

1.59%, 09/01/043,6

     58,133      58,133  

Merrill Lynch Government Securities Inc.

               

1.57%, 09/01/043,6

     11,627      11,627  

1.59%, 09/01/043,6

     58,133      58,133  
           


              229,626  

U.S. GOVERNMENT AGENCY NOTES – 0.10%

               

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     8,139      8,155  

1.80%, 01/18/053

     5,406      5,369  

1.80%, 01/19/053

     5,813      5,773  

2.06%, 05/31/053

     5,796      5,706  

Federal National Mortgage Association

               

2.33%, 07/22/053

     17,440      17,075  
           


              42,078  

MEDIUM-TERM NOTES – 0.09%

               

CC USA Inc.

               

1.29%, 04/15/053,4

     11,627      11,626  

1.51%, 02/15/053,4

     7,557      7,563  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     8,720      8,720  

K2 USA LLC

               

1.46%, 01/12/053,4

     5,813      5,813  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     2,907      2,907  
           


              36,629  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $1,614,045)

            1,614,045  
           


TOTAL INVESTMENTS IN SECURITIES – 103.58%
(Cost: $40,229,360)

            43,419,880  

Other Assets, Less Liabilities – (3.58%)

            (1,499,711 )
           


NET ASSETS – 100.00%

          $ 41,920,169  
           



1 Non-income earning security.
2 All or a portion of this security represents a security on loan. See Note 5.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule-144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

74

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SWITZERLAND INDEX FUND

August 31, 2004

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Consumer Non-Cyclical

   48.56 %   $ 20,356,248

Financial

   23.97       10,049,185

Basic Materials

   8.67       3,634,413

Industrial

   8.56       3,587,013

Consumer Cyclical

   6.63       2,780,557

Communications

   2.98       1,246,854

Technology

   0.36       151,565

Short-Term and Other Net Assets

   0.27       114,334
    

 

TOTAL

   100.00 %   $ 41,920,169
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  75


Schedule of Investments

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.26%

           

ADVERTISING – 0.61%

           

Aegis Group PLC

   253,296    $ 380,482

WPP Group PLC

   265,104      2,365,468
         

            2,745,950

AEROSPACE & DEFENSE – 1.13%

           

BAE Systems PLC

   715,248      2,579,824

Cobham PLC

   26,496      648,244

Meggitt PLC

   101,088      412,805

Rolls-Royce Group PLC

   353,376      1,473,248
         

            5,114,121

AGRICULTURE – 2.03%

           

British American Tobacco PLC

   361,728      5,449,869

Imperial Tobacco Group PLC

   170,208      3,747,835
         

            9,197,704

AIRLINES – 0.11%

           

British Airways PLC1

   125,712      506,575
         

            506,575

AUTO PARTS & EQUIPMENT – 0.15%

           

GKN PLC

   174,528      693,867
         

            693,867

BANKS – 20.84%

           

Barclays PLC2

   1,510,416      13,979,803

HBOS PLC

   910,656      11,131,736

HSBC Holdings PLC

   2,578,896      40,037,202

Lloyds TSB Group PLC

   1,304,784      9,787,996

Royal Bank of Scotland Group PLC

   697,824      19,420,272
         

            94,357,009

BEVERAGES – 2.74%

           

Diageo PLC

   714,528      8,785,710

SABMiller PLC

   186,912      2,323,455

Scottish & Newcastle PLC

   184,464      1,314,922
         

            12,424,087

BUILDING MATERIALS – 0.69%

           

BPB PLC

   115,200      837,764

Hanson PLC

   172,368      1,173,658

Pilkington PLC

   247,536      395,208

RMC Group PLC

   63,792      729,291
         

            3,135,921

CHEMICALS – 0.84%

           

BOC Group PLC

   116,784      1,879,242

Imperial Chemical Industries PLC

   277,920      1,099,921

Johnson Matthey PLC

   51,408      839,260
         

            3,818,423

COMMERCIAL SERVICES – 1.67%

           

Aggreko PLC

   61,632      168,527

Brambles Industries PLC

   169,776      740,640

Bunzl PLC

   102,816      784,234

Capita Group PLC

   152,640      870,456

Davis Service Group PLC

   47,232      333,075

De La Rue PLC

   41,184      230,784

Group 4 Securicor PLC1

   253,259      531,913

Hays PLC

   414,720      884,082

Intertek Group PLC

   36,432      374,885

Kidde PLC

   195,984      415,146

Rank Group PLC

   139,392      719,679

Rentokil Initial PLC

   430,128      1,162,603

Serco Group PLC

   94,176      337,142
         

            7,553,166

COMPUTERS – 0.12%

           

LogicaCMG PLC

   180,291      520,557
         

            520,557

DISTRIBUTION & WHOLESALE – 0.57%

           

Inchcape PLC

   16,992      507,425

Wolseley PLC

   136,224      2,079,335
         

            2,586,760

DIVERSIFIED FINANCIAL SERVICES – 1.10%

           

AMVESCAP PLC

   163,584      853,410

Cattles PLC

   80,064      460,900

Close Brothers Group PLC

   27,648      348,162

ICAP PLC

   105,408      426,179

London Stock Exchange PLC

   57,997      372,471

Man Group PLC

   64,368      1,531,965

Provident Financial PLC

   60,624      648,359

Schroders PLC

   30,816      337,885
         

            4,979,331

ELECTRIC – 2.76%

           

International Power PLC1

   259,776      635,561

International Power PLC Rights1

   82,154      77,960

 

76

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

National Grid Transco PLC

   721,296    $ 6,017,506

Scottish & Southern Energy PLC

   198,000      2,625,136

Scottish Power PLC

   434,016      3,140,660
         

            12,496,823

ELECTRONICS – 0.20%

           

Electrocomponents PLC

   104,544      608,875

Premier Farnell PLC

   89,856      312,786
         

            921,661

ENGINEERING & CONSTRUCTION – 0.74%

           

AMEC PLC

   71,568      409,094

BAA PLC

   250,128      2,497,321

Balfour Beatty PLC

   94,896      453,243
         

            3,359,658

ENTERTAINMENT – 0.77%

           

EMI Group PLC

   186,336      745,840

Hilton Group PLC

   372,096      1,747,087

William Hill PLC

   100,656      984,143
         

            3,477,070

FOOD – 4.45%

           

Cadbury Schweppes PLC

   481,248      3,856,876

J Sainsbury PLC1,3

   313,984      1,470,000

Tate & Lyle PLC

   96,768      623,209

Tesco PLC

   1,808,784      8,655,406

Unilever PLC

   647,280      5,542,660
         

            20,148,151

FOOD SERVICE – 0.62%

           

Compass Group PLC

   498,816      2,788,500
         

            2,788,500

GAS - 0.98%

           

Centrica PLC

   1,002,960      4,438,516
         

            4,438,516

HEALTH CARE – PRODUCTS – 0.48%

           

Smith & Nephew PLC

   217,152      1,953,228

SSL International PLC

   41,616      211,120
         

            2,164,348

HOLDING COMPANIES – DIVERSIFIED – 0.18%

           

Tomkins PLC

   177,696      830,333
         

            830,333

HOME BUILDERS – 0.80%

           

Barratt Developments PLC

   57,312      610,360

Bellway PLC

   26,352      364,315

Berkeley Group (The) PLC

   24,912      546,748

Persimmon PLC

   63,792      768,883

Taylor Woodrow PLC

   139,248      686,370

Wimpey (George) PLC

   86,688      654,979
         

            3,631,655

HOME FURNISHINGS – 0.07%

           

MFI Furniture Group PLC

   144,000      320,573
         

            320,573

HOUSEHOLD PRODUCTS & WARES – 0.80%

           

Reckitt Benckiser PLC

   138,096      3,627,046
         

            3,627,046

INSURANCE – 2.96%

           

Aviva PLC

   529,056      5,053,767

Friends Provident PLC

   441,504      1,062,301

Legal & General Group PLC

   1,519,800      2,720,374

Prudential PLC

   469,008      3,703,939

Royal & Sun Alliance Insurance Group PLC

   673,632      857,370
         

            13,397,751

IRON & STEEL – 0.17%

           

Corus Group PLC1

   971,136      768,691
         

            768,691

LEISURE TIME – 0.41%

           

Carnival PLC

   39,069      1,875,155
         

            1,875,155

LODGING – 0.38%

           

InterContinental Hotels Group PLC

   169,776      1,727,142
         

            1,727,142

MANUFACTURING – 0.84%

           

BBA Group PLC

   103,968      487,222

Cookson Group PLC1

   446,832      267,273

FKI PLC

   144,144      313,762

IMI PLC

   86,112      545,287

Invensys PLC1

   1,300,773      345,154

Invensys PLC Deferred4

   338,403      —  

Novar PLC

   103,824      227,864

Smiths Group PLC

   131,184      1,637,795
         

            3,824,357

 

SCHEDULES OF INVESTMENTS

  77


Schedule of Investments (Continued)

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

MEDIA – 3.33%

           

British Sky Broadcasting Group PLC

   294,192    $ 2,529,751

Daily Mail & General Trust PLC Class A

   71,856      881,590

EMAP PLC

   59,616      789,332

ITV PLC

   978,048      1,821,041

Pearson PLC

   187,632      2,091,064

Reed Elsevier PLC

   296,496      2,624,237

Reuters Group PLC

   334,800      1,927,323

Trinity Mirror PLC

   66,960      776,952

United Business Media PLC

   77,184      659,538

Yell Group

   162,288      994,813
         

            15,095,641

MINING – 2.57%

           

BHP Billiton PLC

   577,914      5,437,309

Rio Tinto PLC

   249,552      6,190,766
         

            11,628,075

OIL & GAS – 14.77%

           

BG Group PLC

   827,424      5,098,093

BP PLC

   5,113,440      45,327,200

Shell Transport & Trading Co. PLC

   2,257,056      16,464,642
         

            66,889,935

PACKAGING & CONTAINERS – 0.23%

           

Rexam PLC

   128,016      1,016,750
         

            1,016,750

PHARMACEUTICALS – 10.37%

           

Alliance Unichem PLC

   59,328      718,814

AstraZeneca PLC

   392,544      18,042,568

GlaxoSmithKline PLC

   1,384,848      28,176,290
         

            46,937,672

REAL ESTATE – 1.42%

           

British Land Co. PLC

   114,336      1,479,902

Great Portland Estates PLC

   28,906      143,259

Hammerson PLC

   64,944      856,955

Land Securities Group PLC

   108,879      2,252,481

Liberty International PLC

   57,744      861,673

Slough Estates PLC

   99,936      826,987
         

            6,421,257

RETAIL – 4.27%

           

Boots Group PLC

   180,432      2,200,708

Dixons Group PLC

   457,344      1,295,814

Enterprise Inns PLC

   78,192      769,429

GUS PLC

   236,304      3,606,966

HMV Group PLC

   87,120      349,887

Kesa Electricals PLC

   123,889      626,265

Kingfisher PLC

   542,304      2,702,350

Marks & Spencer Group PLC

   528,912      3,349,232

Mitchells & Butlers PLC

   120,725      559,777

Next PLC

   61,488      1,645,934

Punch Taverns PLC

   56,736      465,417

Signet Group PLC

   398,016      750,021

Whitebread PLC

   70,128      1,028,808
         

            19,350,608

SEMICONDUCTORS – 0.07%

           

ARM Holdings PLC

   230,832      328,052
         

            328,052

SOFTWARE – 0.29%

           

Misys PLC

   136,080      427,790

Sage Group PLC

   299,232      880,126
         

            1,307,916

TELECOMMUNICATIONS – 9.70%

           

BT Group PLC

   2,014,571      6,632,126

Cable & Wireless PLC

   559,152      1,086,358

Marconi Corp. PLC1

   46,080      479,966

Vodafone Group PLC

   15,728,976      35,723,247
         

            43,921,697

TRANSPORTATION – 0.85%

           

Arriva PLC

   48,240      374,028

Associated British Ports Holdings PLC

   78,480      608,140

Exel PLC

   69,840      877,586

FirstGroup PLC

   93,888      495,299

National Express Group PLC

   30,960      374,831

Peninsular & Oriental Steam Navigation Co. (The)

   176,256      760,982

Stagecoach Group PLC1

   235,152      376,494
         

            3,867,360

VENTURE CAPITAL – 0.33%

           

3i Group PLC

   143,424      1,479,701
         

            1,479,701

WATER – 0.85%

           

Kelda Group PLC

   90,000      854,051

 

78

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

Severn Trent PLC

     79,344    $ 1,236,093

United Utilities PLC

     131,328      1,293,482

United Utilities PLC Class A

     70,877      466,028
           

              3,849,654
           

TOTAL COMMON STOCKS
(Cost: $452,626,172)

            449,525,219

SHORT-TERM INVESTMENTS – 0.36%

             

MONEY MARKET FUNDS – 0.12%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares2,5

     431,176      431,176

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares2,5

     108,580      108,580

BlackRock Temp Cash Money Market Fund5

     4,983      4,983

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares5

     6,635      6,635
           

              551,374

FLOATING RATE NOTES – 0.08%

             

Beta Finance Inc.

             

1.45%, 05/04/055,6

     5,923      5,922

1.52%, 10/12/045,6

     4,935      4,935

1.56%, 09/15/045,6

     9,871      9,871

1.64%, 03/15/055,6

     4,935      4,938

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/045

     7,403      7,403

1.38%, 11/22/045

     2,468      2,468

1.40%, 10/29/045

     9,871      9,871

CC USA Inc.

             

1.45%, 05/04/055,6

     9,871      9,870

1.61%, 07/29/055,6

     9,871      9,868

Den Danske Bank NY

             

1.51%, 08/12/055

     9,871      9,868

1.56%, 08/26/055

     9,871      9,868

Depfa Bank PLC

             

1.27%, 06/15/055

     9,871      9,871

Security


   Principal

   Value

Dorada Finance Inc.

             

1.61%, 07/29/055,6

   $ 8,193    $ 8,191

Five Finance Inc.

             

1.42%, 04/29/055,6

     7,897      7,896

Gemini Securitization Corp.

             

1.53%, 09/09/045

     4,935      4,934

HBOS Treasury Services PLC

             

1.24%, 04/01/055

     6,317      6,317

1.58%, 04/22/055

     9,871      9,871

K2 USA LLC

             

1.45%, 06/10/055,6

     9,871      9,870

1.57%, 09/27/045,6

     10,661      10,660

1.61%, 07/25/055,6

     4,935      4,935

Links Finance LLC

             

1.55%, 04/15/055,6

     9,871      9,870

1.68%, 04/25/055

     9,871      9,875

Nationwide Building Society

             

1.59%, 07/28/055

     9,871      9,871

1.63%, 12/09/045,6

     8,193      8,156

Nordea Bank PLC

             

2.11%, 06/07/055

     9,871      9,869

Northern Rock PLC

             

1.56%, 01/13/055,6

     9,377      9,377

Permanent Financing PLC

             

1.52%, 03/10/055

     9,871      9,871

1.53%, 12/10/045

     4,935      4,935

1.55%, 06/10/055

     4,442      4,442

Sigma Finance Inc.

             

1.52%, 10/07/045

     9,871      9,871

1.57%, 11/15/045

     9,871      9,871

1.59%, 09/15/055

     7,403      7,404

Tango Finance Corp.

             

1.52%, 04/07/055,6

     3,623      3,622

1.56%, 01/18/055,6

     4,343      4,343

1.59%, 07/25/055,6

     9,871      9,870

1.66%, 05/17/055,6

     8,193      8,193

1.70%, 02/25/055,6

     5,528      5,527

WhistleJacket Capital LLC

             

1.26%, 10/20/045

     2,445      2,441

1.48%, 06/15/055,6

     4,935      4,935

1.56%, 09/15/045,6

     4,935      4,935

1.56%, 07/15/055,6

     7,403      7,402

 

SCHEDULES OF INVESTMENTS

  79


Schedule of Investments (Continued)

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

White Pine Finance LLC

             

1.46%, 07/05/055

   $ 4,935    $ 4,935

1.55%, 04/15/055,6

     7,403      7,402

1.55%, 07/11/055

     2,468      2,467

1.56%, 11/15/045,6

     5,923      5,923

1.57%, 06/15/055,6

     4,047      4,047

1.58%, 03/29/055

     4,244      4,244

1.58%, 08/26/055,6

     4,935      4,934

1.68%, 05/20/055

     4,442      4,442
           

              350,501

COMMERCIAL PAPER – 0.05%

             

Alpine Securitization Corp.

             

1.50%, 09/08/045

     4,935      4,934

1.51%, 09/02/045

     4,442      4,442

1.54%, 09/14/045

     4,935      4,933

Amsterdam Funding Corp.

             

1.49%, 09/08/045

     1,974      1,974

1.53%, 09/16/045

     4,856      4,853

1.54%, 09/15/045

     4,935      4,932

1.54%, 09/22/045

     2,468      2,465

Barton Capital Corp.

             

1.53%, 09/08/045

     4,935      4,934

1.53%, 09/09/045

     11,528      11,524

1.53%, 09/13/045

     7,107      7,104

1.53%, 09/14/045

     2,468      2,466

1.54%, 09/17/045

     2,961      2,959

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/045

     4,935      4,934

1.53%, 09/15/045

     1,974      1,973

Cantabric Finance LLC

             

1.55%, 09/17/045

     1,974      1,973

Corporate Asset Funding

             

1.42%, 09/03/045

     2,961      2,962

CRC Funding LLC

             

1.42%, 09/03/045

     4,935      4,935

Delaware Funding Corp.

             

1.50%, 09/09/045

     4,935      4,934

1.53%, 09/10/045

     7,897      7,894

1.53%, 09/20/045

     3,356      3,353

Edison Asset Securitization

             

1.07%, 09/21/045

     4,935      4,932

1.45%, 11/09/045

     9,871      9,843

1.52%, 09/08/045

     9,871      9,868

1.59%, 12/02/045

     9,871      9,831

Falcon Asset Securitization Corp.

             

1.48%, 09/03/045

     2,961      2,961

1.53%, 09/07/045

     4,935      4,934

1.53%, 09/17/045

     2,961      2,959

1.53%, 09/21/045

     2,468      2,466

1.53%, 09/22/045

     4,935      4,931

1.54%, 09/14/045

     7,399      7,399

Ford Credit Auto Receivables

             

1.85%, 01/14/055

     4,935      4,901

GIRO Funding US Corp.

             

1.54%, 09/09/045

     4,935      4,934

1.55%, 10/15/045

     6,473      6,461

Grampian Funding LLC

             

1.26%, 10/22/045

     9,871      9,853

1.44%, 10/27/045

     9,871      9,849

1.59%, 11/30/045

     4,935      4,916

Jupiter Securitization Corp.

             

1.47%, 09/02/045

     2,468      2,468

1.53%, 09/20/045

     2,468      2,466

1.53%, 09/23/045

     3,455      3,452

1.54%, 09/15/045

     5,923      5,919

Preferred Receivables Funding Corp.

             

1.47%, 09/01/045

     6,879      6,880

1.51%, 09/08/045

     3,948      3,947

1.52%, 09/09/045

     2,468      2,467

1.53%, 09/21/045

     4,935      4,931

Receivables Capital Corp.

             

1.54%, 09/14/045

     2,961      2,960

Scaldis Capital LLC

             

1.48%, 09/01/045

     5,429      5,429

Sydney Capital Corp.

             

1.25%, 10/22/045

     3,285      3,280

1.55%, 09/16/045

     2,961      2,959

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/045

     3,948      3,946

1.54%, 09/23/045

     2,468      2,465

 

80

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Windmill Funding Corp.

             

1.52%, 09/09/045

   $ 2,468    $ 2,467

1.52%, 09/10/045

     3,455      3,453
           

              251,005

TIME DEPOSITS – 0.05%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/055

     9,871      9,871

1.33%, 02/10/055

     4,935      4,936

1.39%, 02/02/055

     4,935      4,931

1.39%, 04/08/055

     6,910      6,909

1.40%, 10/25/045

     9,871      9,871

Bank of New York

             

1.39%, 11/01/045

     9,871      9,871

1.60%, 12/03/045

     2,468      2,467

Bank of Nova Scotia

             

1.13%, 10/06/045

     9,871      9,871

1.24%, 10/07/045

     7,403      7,403

1.42%, 10/29/045

     7,403      7,403

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/055

     9,871      9,871

1.49%, 08/09/055

     9,871      9,868

1.54%, 06/23/055

     9,871      9,868

1.56%, 06/10/055

     4,935      4,937

Norddeutsche Landesbank

             

1.59%, 07/27/055

     9,871      9,868

Prudential Funding LLC

             

1.60%, 12/01/045

     4,935      4,915

SouthTrust Bank

             

1.55%, 09/01/045

     19,742      19,742

Toronto-Dominion Bank

             

1.22%, 03/23/055

     17,274      17,272

1.34%, 02/10/055

     3,948      3,948

1.41%, 11/01/045

     7,403      7,403

1.53%, 09/13/045

     4,935      4,935

1.77%, 05/10/055

     4,935      4,935

1.90%, 05/11/055

     4,935      4,935

UBS Finance (Delaware)

             

1.10%, 09/08/045

     9,871      9,869

1.11%, 12/17/045

     14,806      14,757

1.14%, 09/29/045

     9,871      9,862
           

              220,518

REPURCHASE AGREEMENTS – 0.04%

             

Banc of America Securities LLC

             

1.59%, 09/01/045,7

     29,613      29,613

Bank of America, N.A.

             

1.59%, 09/01/045,7

     56,757      56,757

Goldman Sachs & Co.

             

1.59%, 09/01/045,7

     49,354      49,354

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/045,7

     9,871      9,871

1.59%, 09/01/045,7

     49,354      49,354
           

              194,949

U.S. GOVERNMENT AGENCY NOTES – 0.01%

             

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/055

     6,910      6,923

1.80%, 01/18/055

     4,590      4,558

1.80%, 01/19/055

     4,935      4,901

2.06%, 05/31/055

     4,921      4,844

Federal National Mortgage Association

             

2.33%, 07/22/055

     14,806      14,496
           

              35,722

MEDIUM-TERM NOTES – 0.01%

             

CC USA Inc.

             

1.29%, 04/15/055,6

     9,871      9,870

1.51%, 02/15/055,6

     6,416      6,421

Dorada Finance Inc.

             

1.48%, 01/18/055,6

     7,403      7,403

K2 USA LLC

             

1.46%, 01/12/055,6

     4,935      4,935

WhistleJacket Capital LLC

             

1.32%, 02/04/055,6

     2,468      2,468
           

              31,097
           

TOTAL SHORT-TERM INVESTMENTS
(Cost: $1,635,166)

            1,635,166
           

 

SCHEDULES OF INVESTMENTS

  81


Schedule of Investments (Continued)

 

iSHARES® MSCI UNITED KINGDOM INDEX FUND

August 31, 2004

 

     Value

TOTAL INVESTMENTS IN SECURITIES – 99.62%
(Cost: $454,261,338)

   $ 451,160,385

Other Assets, Less Liabilities – 0.38%

     1,709,713
    

NET ASSETS – 100.00%

   $ 452,870,098
    


1 Non-income earning security.
2 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
3 All or a portion of this security represents a security on loan. See Note 5.
4 Security valued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.
5 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
6 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
7 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   26.65 %   $ 120,635,049

Consumer Non-Cyclical

   22.54       102,052,174

Energy

   14.77       66,889,935

Communications

   13.64       61,763,288

Consumer Cyclical

   8.15       36,957,905

Industrial

   4.68       21,239,828

Utilities

   4.59       20,784,993

Basic Materials

   3.58       16,215,189

Technology

   0.48       2,156,525

Diversified

   0.18       830,333

Short-Term and Other Net Assets

   0.74       3,344,879
    

 

TOTAL

   100.00 %   $ 452,870,098
    

 

 

See notes to financial statements.

 

82

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Assets and Liabilities

 

iSHARES®, INC.

August 31, 2004

 

     iShares MSCI

 
    

Austria

Index Fund


   

Belgium

Index Fund


   

EMU

Index Fund


   

France

Index Fund


   

Germany

Index Fund


   

Italy

Index Fund


 
ASSETS                                                 

Investments, at cost:

                                                

Unaffiliated issuers

   $ 50,943,876     $ 32,696,714     $ 412,902,584     $ 78,314,696     $ 153,401,434     $ 37,257,192  
    


 


 


 


 


 


Affiliates of the investment adviser

   $ 1,207,934     $ 2,085,021     $ 21,395,585     $ 4,057,001     $ 5,395,090     $ 2,460,493  
    


 


 


 


 


 


Foreign currency, at cost

   $ 47,418     $ 10,654     $ 2,588,366     $ 1,322,370     $ 607,799     $ 32,087  
    


 


 


 


 


 


Investments in securities, at value (including securities on loana) (Note 1):

                                                

Unaffiliated issuers

   $ 62,888,159     $ 33,637,767     $ 414,186,502     $ 76,939,935     $ 121,360,405     $ 37,637,644  

Affiliates of the investment adviser

     1,207,934       2,085,021       21,395,585       4,057,001       5,395,090       2,460,493  

Foreign currency, at value

     46,699       10,572       2,560,650       1,304,204       606,939       31,456  

Receivables:

                                                

Investment securities sold

     —         252,671       2,179,661       227,291       —         333,610  

Dividends and interest

     47,775       20,778       684,944       72,767       107,467       66,723  
    


 


 


 


 


 


Total Assets

     64,190,567       36,006,809       441,007,342       82,601,198       127,469,901       40,529,926  
    


 


 


 


 


 


LIABILITIES

                                                

Payables:

                                                

Investment securities purchased

     —         244,017       2,316,813       230,344       531,891       332,868  

Collateral for securities on loan (Note 5)

     6,216,382       10,926,359       111,753,218       21,111,588       28,073,093       12,890,388  

Investment advisory fees (Note 2)

     53,965       23,828       331,557       58,505       101,182       27,258  
    


 


 


 


 


 


Total Liabilities

     6,270,347       11,194,204       114,401,588       21,400,437       28,706,166       13,250,514  
    


 


 


 


 


 


NET ASSETS

   $ 57,920,220     $ 24,812,605     $ 326,605,754     $ 61,200,761     $ 98,763,735     $ 27,279,412  
    


 


 


 


 


 


Net assets consist of:

                                                

Paid-in capital

   $ 49,030,999     $ 26,399,101     $ 335,945,062     $ 68,481,263     $ 162,732,266     $ 31,344,707  

Undistributed net investment income

     480,630       533,300       6,691,251       724,345       1,573,473       792,629  

Accumulated net realized loss

     (3,535,020 )     (3,064,051 )     (17,295,073 )     (6,614,126 )     (33,495,073 )     (5,252,396 )

Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies

     11,943,611       944,255       1,264,514       (1,390,721 )     (32,046,931 )     394,472  
    


 


 


 


 


 


NET ASSETS

   $ 57,920,220     $ 24,812,605     $ 326,605,754     $ 61,200,761     $ 98,763,735     $ 27,279,412  
    


 


 


 


 


 


Shares outstanding

     3,400,000       1,680,000       5,500,000       3,000,000       6,600,000       1,350,000  
    


 


 


 


 


 


Net asset value per share

   $ 17.04     $ 14.77     $ 59.38     $ 20.40     $ 14.96     $ 20.21  
    


 


 


 


 


 



a Securities on loan with market values of $5,918,010, $10,398,945, $106,247,071, $20,107,907, $26,726,911 and $12,223,903, respectively. See Note 5.

 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  83


Statements of Assets and Liabilities (Continued)

 

iSHARES®, INC.

August 31, 2004

 

     iShares MSCI

 
     Netherlands
Index Fund


   

Spain

Index Fund


   

Sweden

Index Fund


    Switzerland
Index Fund


    United Kingdom
Index Fund


 
ASSETS                                         

Investments, at cost:

                                        

Unaffiliated issuers

   $ 34,248,795     $ 46,721,860     $ 31,396,335     $ 39,905,563     $ 441,412,822  
    


 


 


 


 


Affiliates of the investment adviser

   $ 618,772     $ 2,302,469     $ 1,889,122     $ 323,797     $ 12,848,516  
    


 


 


 


 


Foreign currency, at cost

   $ 21,281     $ 77,089     $ 6,161     $ 34,525     $ 669,865  
    


 


 


 


 


Investments in securities, at value
(including securities on loan
a) (Note 1):

                                        

Unaffiliated issuers

   $ 30,560,789     $ 55,131,837     $ 35,734,536     $ 43,096,083     $ 436,640,826  

Affiliates of the investment adviser

     618,772       2,302,469       1,889,122       323,797       14,519,559  

Foreign currency, at value

     21,165       76,755       6,099       33,431       662,378  

Receivables:

                                        

Investment securities sold

     46,218       452,964       175,034       225,643       637,991  

Dividends and interest

     263,711       4,331       2,107       105,453       2,953,194  

Capital shares sold

     —         —         —         —         151,609  
    


 


 


 


 


Total Assets

     31,510,655       57,968,356       37,806,898       43,784,407       455,565,557  
    


 


 


 


 


LIABILITIES

                                        

Payables:

                                        

Investment securities purchased

     35,840       457,502       143,205       229,953       937,911  

Collateral for securities on loan (Note 5)

     3,181,876       12,009,336       9,878,277       1,592,362       1,351,900  

Investment advisory fees (Note 2)

     27,934       45,191       27,219       41,923       405,648  
    


 


 


 


 


Total Liabilities

     3,245,650       12,512,029       10,048,701       1,864,238       2,695,459  
    


 


 


 


 


NET ASSETS

   $ 28,265,005     $ 45,456,327     $ 27,758,197     $ 41,920,169     $ 452,870,098  
    


 


 


 


 


Net assets consist of:

                                        

Paid-in capital

   $ 39,581,064     $ 40,924,478     $ 30,061,447     $ 45,728,388     $ 476,195,048  

Undistributed net investment income

     558,614       759,103       420,504       269,799       6,931,580  

Accumulated net realized loss

     (8,186,705 )     (4,636,855 )     (7,061,802 )     (7,278,025 )     (27,113,445 )

Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies

     (3,687,968 )     8,409,601       4,338,048       3,200,007       (3,143,085 )
    


 


 


 


 


NET ASSETS

   $ 28,265,005     $ 45,456,327     $ 27,758,197     $ 41,920,169     $ 452,870,098  
    


 


 


 


 


Shares outstanding

     1,800,000       1,650,000       1,650,000       2,875,000       28,800,000  
    


 


 


 


 


Net asset value per share

   $ 15.70     $ 27.55     $ 16.82     $ 14.58     $ 15.72  
    


 


 


 


 



a Securities on loan with market values of $3,026,938, $11,414,043, $9,390,487, $1,516,298 and $1,276,747, respectively. See Note 5.

 

See notes to financial statements.

 

84

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Operations

 

iSHARES®, INC.

Year Ended August 31, 2004

 

     iShares MSCI

 
    

Austria

Index Fund


   Belgium
Index Fund


   

EMU

Index Fund


   

France

Index Fund


    Germany
Index Fund


   

Italy

Index Fund


 
NET INVESTMENT INCOME                                                

Dividendsa

   $ 758,642    $ 634,605     $ 8,493,140     $ 1,093,976     $ 2,395,773     $ 970,447  

Interestb

     205      193       1,630       334       776       154  

Securities lending incomeb

     21,492      38,601       376,345       54,817       176,961       32,901  
    

  


 


 


 


 


Total investment income

     780,339      673,399       8,871,115       1,149,127       2,573,510       1,003,502  
    

  


 


 


 


 


EXPENSES (Note 2)

                                               

Investment advisory fees

     213,811      110,619       1,687,063       333,419       731,209       160,439  

Distribution fees

     67,990      36,909       576,486       116,817       267,711       56,600  

Stock dividend taxes

     —        —         17,897       —         —         8,851  
    

  


 


 


 


 


Total expenses

     281,801      147,528       2,281,446       450,236       998,920       225,890  
    

  


 


 


 


 


Net investment income

     498,538      525,871       6,589,669       698,891       1,574,590       777,612  
    

  


 


 


 


 


NET REALIZED AND UNREALIZED GAIN (LOSS)

                                               

Net realized gain (loss) from:

                                               

Investments

     327,576      (484,167 )     (6,452,133 )     238,145       (4,839,717 )     (336,405 )

In-kind redemptions

     3,588,367      2,714,511       15,210,486       1,524,334       14,686,409       771,285  

Foreign currency transactions

     3,488      6,518       98,982       25,454       (1,117 )     15,017  
    

  


 


 


 


 


Net realized gain

     3,919,431      2,236,862       8,857,335       1,787,933       9,845,575       449,897  
    

  


 


 


 


 


Net change in unrealized appreciation (depreciation) on:

                                               

Investments

     8,636,259      2,626,709       19,815,097       8,615,597       9,718,946       4,873,540  

Translation of assets and liabilities in foreign currencies

     1,300      253       (22,978 )     (16,415 )     (1,272 )     7,056  
    

  


 


 


 


 


Net change in unrealized appreciation (depreciation)

     8,637,559      2,626,962       19,792,119       8,599,182       9,717,674       4,880,596  
    

  


 


 


 


 


Net realized and unrealized gain

     12,556,990      4,863,824       28,649,454       10,387,115       19,563,249       5,330,493  
    

  


 


 


 


 


NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 13,055,528    $ 5,389,695     $ 35,239,123     $ 11,086,006     $ 21,137,839     $ 6,108,105  
    

  


 


 


 


 



a Net of foreign withholding tax of $70,374, $38,940, $414,246, $45,333, $126,512 and $35,864, respectively.
b Includes income earned from affiliates of the Funds’ investment adviser. See Note 2.

 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  85


Statements of Operations (Continued)

 

iSHARES®, INC.

Year Ended August 31, 2004

 

     iShares MSCI

 
     Netherlands
Index Fund


   

Spain

Index Fund


    Sweden
Index Fund


    Switzerland
Index Fund


    United Kingdom
Index Fund


 
NET INVESTMENT INCOME                                         

Dividendsa

   $ 701,633     $ 1,113,686     $ 603,054     $ 580,381     $  9,594,862b  

Interestb

     121       211       153       151       2,120  

Securities lending incomeb

     20,506       48,303       39,633       17,088       16,943  
    


 


 


 


 


Total investment income

     722,260       1,162,200       642,840       597,620       9,613,925  
    


 


 


 


 


EXPENSES (Note 2)

                                        

Investment advisory fees

     131,004       279,745       142,121       244,345       1,454,776  

Distribution fees

     43,809       99,673       48,845       86,032       446,684  

Foreign taxes

     —         —         30,947       —         —    
    


 


 


 


 


Total expenses

     174,813       379,418       221,913       330,377       1,901,460  
    


 


 


 


 


Net investment income

     547,447       782,782       420,927       267,243       7,712,465  
    


 


 


 


 


NET REALIZED AND UNREALIZED GAIN (LOSS)                                         

Net realized gain (loss) from:

                                        

Investments

     (231,738 )     (66,102 )     16,165       (747,078 )     (3,511,657 )

In-kind redemptions

     —         4,021,667       —         626,973       1,183,528  

Foreign currency transactions

     11,167       3,378       (422 )     2,554       98,166  
    


 


 


 


 


Net realized gain (loss)

     (220,571 )     3,958,943       15,743       (117,551 )     (2,229,963 )
    


 


 


 


 


Net change in unrealized appreciation (depreciation) on:

                                        

Investments

     1,714,975       5,004,231       5,562,711       6,450,291       28,405,088  

Translation of assets and liabilities in foreign currencies

     6,000       4,608       (23 )     9,155       (20,827 )
    


 


 


 


 


Net change in unrealized appreciation (depreciation)

     1,720,975       5,008,839       5,562,688       6,459,446       28,384,261  
    


 


 


 


 


Net realized and unrealized gain

     1,500,404       8,967,782       5,578,431       6,341,895       26,154,298  
    


 


 


 


 


NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 2,047,851     $ 9,750,564     $ 5,999,358     $ 6,609,138     $ 33,866,763  
    


 


 


 


 



a Net of foreign withholding tax of $57,329, $105,758, $25,984, $15,054 and $831,317, respectively.
b Includes income earned from affiliates of the Funds’ investment adviser. See Note 2.

 

See notes to financial statements.

 

86

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets

 

iSHARES®, INC.

 

    

iShares MSCI

Austria

Index Fund


   

iShares MSCI

Belgium

Index Fund


   

iShares MSCI

EMU

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                                

OPERATIONS:

                                                

Net investment income

   $ 498,538     $ 166,934     $ 525,871     $ 809,843     $ 6,589,669     $ 2,947,241  

Net realized gain (loss)

     3,919,431       (152,796 )     2,236,862       1,821,007       8,857,335       (5,916,411 )

Net change in unrealized appreciation (depreciation)

     8,637,559       4,589,365       2,626,962       711,331       19,792,119       18,491,963  
    


 


 


 


 


 


Net increase in net assets resulting from operations

     13,055,528       4,603,503       5,389,695       3,342,181       35,239,123       15,522,793  
    


 


 


 


 


 


DISTRIBUTIONS TO SHAREHOLDERS:

                                                

From net investment income

     (272,938 )     (208,682 )     (884,836 )     (132,112 )     (3,047,220 )     (1,485,447 )
    


 


 


 


 


 


Total distributions to shareholders

     (272,938 )     (208,682 )     (884,836 )     (132,112 )     (3,047,220 )     (1,485,447 )
    


 


 


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                                

Proceeds from shares sold

     32,913,587       6,782,294       19,364,816       36,573,861       175,480,082       20,183,374  

Cost of shares redeemed

     (10,064,261 )     (3,629,301 )     (20,928,283 )     (28,339,593 )     (46,454,697 )     —    
    


 


 


 


 


 


Net increase (decrease) in net assets from capital share transactions

     22,849,326       3,152,993       (1,563,467 )     8,234,268       129,025,385       20,183,374  
    


 


 


 


 


 


INCREASE IN NET ASSETS

     35,631,916       7,547,814       2,941,392       11,444,337       161,217,288       34,220,720  

NET ASSETS:

                                                

Beginning of year

     22,288,304       14,740,490       21,871,213       10,426,876       165,388,466       131,167,746  
    


 


 


 


 


 


End of year

   $ 57,920,220     $ 22,288,304     $ 24,812,605     $ 21,871,213     $ 326,605,754     $ 165,388,466  
    


 


 


 


 


 


Undistributed net investment income included in net assets at end of year

   $ 480,630     $ 176,004     $ 533,300     $ 805,281     $ 6,691,251     $ 3,037,701  
    


 


 


 


 


 


SHARES ISSUED AND REDEEMED:

                                                

Shares sold

     2,100,000       700,000       1,360,000       3,840,000       2,950,000       450,000  

Shares redeemed

     (800,000 )     (400,000 )     (1,640,000 )     (2,880,000 )     (750,000 )     —    
    


 


 


 


 


 


Net increase (decrease) in shares outstanding

     1,300,000       300,000       (280,000 )     960,000       2,200,000       450,000  
    


 


 


 


 


 


 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  87


Statements of Changes in Net Assets (Continued)

 

iSHARES®, INC.

 

    

iShares MSCI

France

Index Fund


   

iShares MSCI

Germany

Index Fund


   

iShares MSCI

Italy

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                                

OPERATIONS:

                                                

Net investment income

   $ 698,891     $ 751,423     $ 1,574,590     $ 1,675,435     $ 777,612     $ 826,393  

Net realized gain (loss)

     1,787,933       (3,038,659 )     9,845,575       (7,284,602 )     449,897       (412,813 )

Net change in unrealized appreciation (depreciation)

     8,599,182       7,255,337       9,717,674       16,801,013       4,880,596       3,106,712  
    


 


 


 


 


 


Net increase in net assets resulting from operations

     11,086,006       4,968,101       21,137,839       11,191,846       6,108,105       3,520,292  
    


 


 


 


 


 


DISTRIBUTIONS TO SHAREHOLDERS:

                                                

From net investment income

     (794,879 )     (567,205 )     (1,804,102 )     (838,725 )     (824,876 )     (733,556 )
    


 


 


 


 


 


Total distributions to shareholders

     (794,879 )     (567,205 )     (1,804,102 )     (838,725 )     (824,876 )     (733,556 )
    


 


 


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                                

Proceeds from shares sold

     4,101,648       —         37,742,897       24,678,639       —         2,068,633  

Cost of shares redeemed

     (7,267,190 )     —         (60,113,109 )     (27,391,209 )     (8,001,044 )     (4,396,226 )
    


 


 


 


 


 


Net decrease in net assets from capital share transactions

     (3,165,542 )     —         (22,370,212 )     (2,712,570 )     (8,001,044 )     (2,327,593 )
    


 


 


 


 


 


INCREASE (DECREASE) IN NET ASSETS

     7,125,585       4,400,896       (3,036,475 )     7,640,551       (2,717,815 )     459,143  

NET ASSETS:

                                                

Beginning of year

     54,075,176       49,674,280       101,800,210       94,159,659       29,997,227       29,538,084  
    


 


 


 


 


 


End of year

   $ 61,200,761     $ 54,075,176     $ 98,763,735     $ 101,800,210     $ 27,279,412     $ 29,997,227  
    


 


 


 


 


 


Undistributed net investment income included in net assets at end of year

   $ 724,345     $ 794,879     $ 1,573,473     $ 1,804,102     $ 792,629     $ 824,876  
    


 


 


 


 


 


SHARES ISSUED AND REDEEMED:

                                                

Shares sold

     200,000       —         2,400,000       2,700,000       —         150,000  

Shares redeemed

     (400,000 )     —         (3,900,000 )     (2,400,000 )     (450,000 )     (300,000 )
    


 


 


 


 


 


Net increase (decrease) in shares outstanding

     (200,000 )     —         (1,500,000 )     300,000       (450,000 )     (150,000 )
    


 


 


 


 


 


 

See notes to financial statements

 

88

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets (Continued)

 

iSHARES®, INC.

 

    

iShares MSCI

Netherlands

Index Fund


   

iShares MSCI

Spain

Index Fund


   

iShares MSCI

Sweden

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                                

OPERATIONS:

                                                

Net investment income

   $ 547,447     $ 461,181     $ 782,782     $ 433,459     $ 420,927     $ 316,152  

Net realized gain (loss)

     (220,571 )     (2,384,716 )     3,958,943       (400,527 )     15,743       (1,250,998 )

Net change in unrealized appreciation (depreciation)

     1,720,975       2,574,851       5,008,839       10,543,059       5,562,688       5,001,133  
    


 


 


 


 


 


Net increase in net assets resulting from operations

     2,047,851       651,316       9,750,564       10,575,991       5,999,358       4,066,287  
    


 


 


 


 


 


DISTRIBUTIONS TO SHARE HOLDERS:

                                                

From net investment income

     (480,580 )     (320,678 )     (464,559 )     (163,361 )     (332,115 )     (100,930 )
    


 


 


 


 


 


Total distributions to shareholders

     (480,580 )     (320,678 )     (464,559 )     (163,361 )     (332,115 )     (100,930 )
    


 


 


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                                

Proceeds from shares sold

     8,098,478       12,435,251       2,263,744       34,361,557       5,099,033       14,403,629  

Cost of shares redeemed

     —         (13,270,048 )     (16,465,374 )     (13,252,013 )     —         (9,531,073 )
    


 


 


 


 


 


Net increase (decrease) in net assets from capital share transactions

     8,098,478       (834,797 )     (14,201,630 )     21,109,544       5,099,033       4,872,556  
    


 


 


 


 


 


INCREASE (DECREASE) IN NET ASSETS

     9,665,749       (504,159 )     (4,915,625 )     31,522,174       10,766,276       8,837,913  

NET ASSETS:

                                                

Beginning of year

     18,599,256       19,103,415       50,371,952       18,849,778       16,991,921       8,154,008  
    


 


 


 


 


 


End of year

   $ 28,265,005     $ 18,599,256     $ 45,456,327     $ 50,371,952     $ 27,758,197     $ 16,991,921  
    


 


 


 


 


 


Undistributed net investment income included in net assets at end of year

   $ 558,614     $ 480,580     $ 759,103     $ 437,502     $ 420,504     $ 332,115  
    


 


 


 


 


 


SHARES ISSUED AND REDEEMED:

                                                

Shares sold

     500,000       1,050,000       75,000       1,875,000       300,000       1,500,000  

Shares redeemed

     —         (1,050,000 )     (675,000 )     (675,000 )     —         (975,000 )
    


 


 


 


 


 


Net increase (decrease) in shares outstanding

     500,000       —         (600,000 )     1,200,000       300,000       525,000  
    


 


 


 


 


 


 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  89


Statements of Changes in Net Assets (Continued)

 

iSHARES®, INC.

 

    

iShares MSCI

Switzerland

Index Fund


   

iShares MSCI

United Kingdom

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                

OPERATIONS:

                                

Net investment income

   $ 267,243     $ 124,078     $ 7,712,465     $ 4,728,393  

Net realized gain (loss)

     (117,551 )     (2,929,581 )     (2,229,963 )     2,870,683  

Net change in unrealized appreciation (depreciation)

     6,459,446       4,321,125       28,384,261       4,860,539  
    


 


 


 


Net increase in net assets resulting from operations

     6,609,138       1,515,622       33,866,763       12,459,615  
    


 


 


 


DISTRIBUTIONS TO SHAREHOLDERS:

                                

From net investment income

     (146,432 )     (73,589 )     (5,320,972 )     (2,770,755 )
    


 


 


 


Total distributions to shareholders

     (146,432 )     (73,589 )     (5,320,972 )     (2,770,755 )
    


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                

Proceeds from shares sold

     3,722,134       2,976,574       281,527,046       76,462,198  

Cost of shares redeemed

     (1,907,959 )     (2,658,605 )     (8,011,981 )     (55,409,169 )
    


 


 


 


Net increase in net assets from capital share transactions

     1,814,175       317,969       273,515,065       21,053,029  
    


 


 


 


INCREASE IN NET ASSETS

     8,276,881       1,760,002       302,060,856       30,741,889  

NET ASSETS:

                                

Beginning of year

     33,643,288       31,883,286       150,809,242       120,067,353  
    


 


 


 


End of year

   $ 41,920,169     $ 33,643,288     $ 452,870,098     $ 150,809,242  
    


 


 


 


Undistributed net investment income included in net assets at end of year

   $ 269,799     $ 146,432     $ 6,931,580     $ 4,441,921  
    


 


 


 


SHARES ISSUED AND REDEEMED:

                                

Shares sold

     250,000       250,000       17,800,000       6,600,000  

Shares redeemed

     (125,000 )     (250,000 )     (600,000 )     (4,400,000 )
    


 


 


 


Net increase in shares outstanding

     125,000       —         17,200,000       2,200,000  
    


 


 


 


 

See notes to financial statements.

 

90

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Austria Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 10.61     $ 8.19     $ 8.18     $ 7.67     $ 9.13  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomec

     0.21       0.09       0.13       0.13       0.04  

Net realized and unrealized gain (loss)

     6.39       2.43       (0.12 )     0.52       (1.46 )
    


 


 


 


 


Total from investment operations

     6.60       2.52       0.01       0.65       (1.42 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.17 )     (0.10 )     —         (0.14 )     (0.04 )

Return of capital

     —         —         —         (0.00 )e     —    
    


 


 


 


 


Total distributions

     (0.17 )     (0.10 )     —         (0.14 )     (0.04 )
    


 


 


 


 


Net asset value, end of year

   $ 17.04     $ 10.61     $ 8.19     $ 8.18     $ 7.67  
    


 


 


 


 


Total return

     62.70 %     31.15 %     0.12 %     8.41 %     (15.51 )%
    


 


 


 


 


Ratios/supplemental Data:

                                        

Net assets, end of year (000s)

   $ 57,920     $ 22,288     $ 14,740     $ 11,447     $ 10,741  

Ratio of expenses to average net assets

     0.77 %     0.84 %     0.84 %     0.84 %a     1.16 %a

Ratio of net investment income to average net assets

     1.37 %     0.98 %     1.57 %     1.69 %b     0.51 %b

Portfolio turnover rated

     11 %     26 %     32 %     66 %     34 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the years ended August 31, 2001 and August 31, 2000 were 0.97% and 1.20%, respectively.
b Ratio of net investment income to average net assets prior to waived fees and reimbursed expenses for the years ended August 31, 2001 and August 31, 2000 were 1.55% and 0.47%, respectively.
c Based on average shares outstanding throughout the period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Rounds to less than $0.01.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  91


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Belgium Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 11.16     $ 10.43     $ 11.81     $ 13.23     $ 16.07  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomec

     0.37       0.41       0.25       0.19       0.19  

Net realized and unrealized gain (loss)

     4.25       0.43       (1.56 )     (1.34 )     (2.67 )
    


 


 


 


 


Total from investment operations

     4.62       0.84       (1.31 )     (1.15 )     (2.48 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (1.01 )     (0.11 )     (0.07 )     (0.27 )     (0.36 )
    


 


 


 


 


Total distributions

     (1.01 )     (0.11 )     (0.07 )     (0.27 )     (0.36 )
    


 


 


 


 


Net asset value, end of year

   $ 14.77     $ 11.16     $ 10.43     $ 11.81     $ 13.23  
    


 


 


 


 


Total return

     42.88 %     8.25 %     (11.10 )%     (8.72 )%     (15.50 )%
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 24,813     $ 21,871     $ 10,427     $ 9,918     $ 13,230  

Ratio of expenses to average net assets

     0.78 %     0.84 %     0.84 %     0.84 %a     1.13 %

Ratio of net investment income to average net assets

     2.79 %     4.10 %     2.26 %     1.60 %b     1.36 %

Portfolio turnover rated

     21 %     8 %     18 %     36 %     53 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the year ended August 31, 2001 was 0.87%.
b Ratio of net investment income to average net assets prior to waived fees and reimbursed expenses for the year ended August 31, 2001 was 1.57%.
c Based on average shares outstanding throughout the period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

92

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI EMU Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


   

Period from
Jul. 25, 2000h
to

Aug. 31, 2000


 

Net asset value, beginning of period

   $ 50.12     $ 46.02     $ 56.74     $ 76.02     $ 80.72  
    


 


 


 


 


Income from investment operations:

                                        

Net investment income (loss)c

     1.36       0.93       0.75       0.72       (0.00 )e

Net realized and unrealized gain (loss)

     8.69       3.62       (11.47 )     (19.32 )     (4.70 )
    


 


 


 


 


Total from investment operations

     10.05       4.55       (10.72 )     (18.60 )     (4.70 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.79 )     (0.45 )     —         (0.42 )     —    

Return of capital

     —         —         —         (0.26 )     —    
    


 


 


 


 


Total distributions

     (0.79 )     (0.45 )     —         (0.68 )     —    
    


 


 


 


 


Net asset value, end of period

   $ 59.38     $ 50.12     $ 46.02     $ 56.74     $ 76.02  
    


 


 


 


 


Total return

     20.07 %     10.05 %     (18.89 )%     (24.51 )%     (5.82 )%f
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of period (000s)

   $ 326,606     $ 165,388     $ 131,168     $ 90,779     $ 41,811  

Ratio of expenses to average net assetsg

     0.79 %     0.84 %     0.84 %     0.84 %     0.84 %a

Ratio of expenses to average net assets exclusive of foreign taxes on stock dividendsg

     0.79 %     0.84 %     0.84 %     0.84 %     0.84 %

Ratio of net investment income to average net assetsg

     2.29 %     2.08 %     1.44 %     1.13 %     0.03 %b

Portfolio turnover rated

     11 %     7 %     3 %     24 %     0 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was 1.57%.
b Ratio of net investment loss to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was (0.70)%.
c Based on average shares outstanding throughout the period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Rounds to less than $0.01.
f Not annualized.
g Annualized for periods of less than one year.
h Commencement of operations.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  93


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI France Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 16.90     $ 15.52     $ 19.53     $ 26.41     $ 22.90  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.24       0.23       0.18       0.06       0.10  

Net realized and unrealized gain (loss)

     3.54       1.33       (4.19 )     (6.89 )     5.21  
    


 


 


 


 


Total from investment operations

     3.78       1.56       (4.01 )     (6.83 )     5.31  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.28 )     (0.18 )     —         (0.04 )     (0.11 )

Net realized gain

     —         —         —         (0.00 )c     (1.67 )

Return of capital

     —         —         —         (0.01 )     (0.02 )
    


 


 


 


 


Total distributions

     (0.28 )     (0.18 )     —         (0.05 )     (1.80 )
    


 


 


 


 


Net asset value, end of year

   $ 20.40     $ 16.90     $ 15.52     $ 19.53     $ 26.41  
    


 


 


 


 


Total return

     22.44 %     10.22 %     (20.53 )%     (25.86 )%     23.45 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 61,201     $ 54,075     $ 49,674     $ 58,602     $ 95,116  

Ratio of expenses to average net assets

     0.79 %     0.84 %     0.84 %     0.84 %     0.96 %

Ratio of net investment income to average net assets

     1.23 %     1.56 %     1.00 %     0.28 %     0.36 %

Portfolio turnover rateb

     9 %     9 %     3 %     14 %     17 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Rounds to less than $0.01.

 

See notes to financial statements.

 

94

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Germany Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 12.57     $ 12.07     $ 15.19     $ 20.46     $ 21.17  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.19       0.21       0.11       0.18       0.18  

Net realized and unrealized gain (loss)

     2.40       0.41       (3.23 )     (5.26 )     1.64  
    


 


 


 


 


Total from investment operations

     2.59       0.62       (3.12 )     (5.08 )     1.82  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.20 )     (0.12 )     —         (0.19 )     (0.17 )

Net realized gain

     —         —         —         —         (2.32 )

Return of capital

     —         —         —         (0.00 )c     (0.04 )
    


 


 


 


 


Total distributions

     (0.20 )     (0.12 )     —         (0.19 )     (2.53 )
    


 


 


 


 


Net asset value, end of year

   $ 14.96     $ 12.57     $ 12.07     $ 15.19     $ 20.46  
    


 


 


 


 


Total return

     20.55 %     5.39 %     (20.54 )%     (24.87 )%     8.44 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 98,764     $ 101,800     $ 94,160     $ 118,525     $ 153,487  

Ratio of expenses to average net assets

     0.80 %     0.84 %     0.84 %     0.84 %     0.94 %

Ratio of net investment income to average net assets

     1.27 %     1.98 %     0.77 %     0.99 %     0.73 %

Portfolio turnover rateb

     9 %     11 %     9 %     20 %     56 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Rounds to less than $0.01.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  95


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Italy Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 16.67     $ 15.15     $ 17.79     $ 22.23     $ 21.56  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.56       0.43       0.37       0.24       0.39  

Net realized and unrealized gain (loss)

     3.59       1.47       (3.01 )     (4.37 )     2.51  
    


 


 


 


 


Total from investment operations

     4.15       1.90       (2.64 )     (4.13 )     2.90  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.61 )     (0.38 )     —         (0.24 )     (0.12 )

Net realized gain

     —         —         —         (0.07 )     (1.80 )

Return of capital

     —         —         —         (0.00 )c     (0.31 )
    


 


 


 


 


Total distributions

     (0.61 )     (0.38 )     —         (0.31 )     (2.23 )
    


 


 


 


 


Net asset value, end of year

   $ 20.21     $ 16.67     $ 15.15     $ 17.79     $ 22.23  
    


 


 


 


 


Total return

     25.09 %     12.79 %     (14.84 )%     (18.61 )%     13.35 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 27,279     $ 29,997     $ 29,538     $ 34,682     $ 50,008  

Ratio of expenses to average net assets

     0.83 %     0.84 %     0.84 %     0.84 %     0.99 %

Ratio of expenses to average net assets exclusive of foreign taxes on stock dividends

     0.79 %     0.84 %     0.84 %     0.84 %     0.99 %

Ratio of net investment income to average net assets

     2.85 %     2.84 %     2.34 %     1.16 %     1.61 %

Portfolio turnover rateb

     9 %     22 %     10 %     20 %     40 %.

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Rounds to less than $0.01.

 

See notes to financial statements.

 

96

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Netherlands Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 14.31     $ 14.69     $ 18.59     $ 23.53     $ 23.45  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.39       0.30       0.25       0.28       0.13  

Net realized and unrealized gain (loss)

     1.37       (0.43 )     (4.11 )     (4.94 )     0.18  
    


 


 


 


 


Total from investment operations

     1.76       (0.13 )     (3.86 )     (4.66 )     0.31  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.37 )     (0.25 )     (0.04 )     (0.28 )     (0.08 )

Net realized gain

     —         —         —         —         (0.11 )

Return of capital

     —         —         —         —         (0.04 )
    


 


 


 


 


Total distributions

     (0.37 )     (0.25 )     (0.04 )     (0.28 )     (0.23 )
    


 


 


 


 


Net asset value, end of year

   $ 15.70     $ 14.31     $ 14.69     $ 18.59     $ 23.53  
    


 


 


 


 


Total return

     12.28 %     (0.78 )%     (20.79 )%     (19.83 )%     1.28 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 28,265     $ 18,599     $ 19,103     $ 24,184     $ 30,613  

Ratio of expenses to average net assets

     0.78 %     0.84 %     0.84 %     0.84 %     1.03 %

Ratio of net investment income to average net assets

     2.45 %     2.37 %     1.48 %     1.34 %     0.53 %

Portfolio turnover rateb

     9 %     18 %     15 %     35 %     22 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  97


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Spain Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 22.39     $ 17.95     $ 21.33     $ 24.19     $ 25.59  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.44       0.24       0.17       0.19       0.15  

Net realized and unrealized gain (loss)

     4.99       4.36       (3.55 )     (2.89 )     (0.60 )
    


 


 


 


 


Total from investment operations

     5.43       4.60       (3.38 )     (2.70 )     (0.45 )
    


 


 


 


 


Less distributions from:                                         

Net investment income

     (0.27 )     (0.16 )     —         (0.16 )     (0.14 )

Net realized gain

     —         —         —         —         (0.80 )

Return of capital

     —         —         —         (0.00 )c     (0.01 )
    


 


 


 


 


Total distributions

     (0.27 )     (0.16 )     —         (0.16 )     (0.95 )
    


 


 


 


 


Net asset value, end of year    $ 27.55     $ 22.39     $ 17.95     $ 21.33     $ 24.19  
    


 


 


 


 


Total return

     24.28 %     25.81 %     (15.85 )%     (11.17 )%     (1.81 )%
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 45,456     $ 50,372     $ 18,850     $ 27,198     $ 39,913  

Ratio of expenses to average net assets

     0.80 %     0.84 %     0.84 %     0.84 %     0.99 %

Ratio of net investment income to average net assets

     1.64 %     1.22 %     0.85 %     0.82 %     0.57 %

Portfolio turnover rateb

     6 %     17 %     14 %     26 %     39 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Rounds to less than $0.01.

 

See notes to financial statements.

 

98

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Sweden Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 12.59     $ 9.88     $ 12.88     $ 24.38     $ 22.26  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.28       0.25       0.12       0.07       0.14  

Net realized and unrealized gain (loss)

     4.20       2.58       (3.12 )     (11.52 )     8.38  
    


 


 


 


 


Total from investment operations

     4.48       2.83       (3.00 )     (11.45 )     8.52  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.25 )     (0.12 )     —         (0.05 )     (0.14 )

Net realized gain

     —         —         —         —         (6.22 )

Return of capital

     —         —         —         (0.00 )c     (0.04 )
    


 


 


 


 


Total distributions

     (0.25 )     (0.12 )     —         (0.05 )     (6.40 )
    


 


 


 


 


Net asset value, end of year

   $ 16.82     $ 12.59     $ 9.88     $ 12.88     $ 24.38  
    


 


 


 


 


Total return

     35.81 %     29.04 %     (23.29 )%     (46.99 )%     39.15 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 27,758     $ 16,992     $ 8,154     $ 10,630     $ 23,774  

Ratio of expenses to average net assets

     0.92 %     0.84 %     0.84 %     0.84 %     1.03 %

Ratio of expenses to average net assets exclusive of foreign taxes

     0.79 %     0.84 %     0.84 %     0.84 %     1.03 %

Ratio of net investment income to average net assets

     1.74 %     2.44 %     0.98 %     0.40 %     0.46 %

Portfolio turnover rateb

     9 %     12 %     31 %     43 %     90 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Rounds to less than $0.01.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  99


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Switzerland Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 12.23     $ 11.59     $ 12.95     $ 15.54     $ 15.39  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.09       0.05       0.03       0.04       0.04  

Net realized and unrealized gain (loss)

     2.31       0.62       (1.38 )     (2.54 )     0.27  
    


 


 


 


 


Total from investment operations

     2.40       0.67       (1.35 )     (2.50 )     0.31  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.05 )     (0.03 )     (0.01 )     (0.05 )     (0.04 )

Net realized gain

     —         —         —         (0.04 )     (0.11 )

Return of capital

     —         —         —         —         (0.01 )
    


 


 


 


 


Total distributions

     (0.05 )     (0.03 )     (0.01 )     (0.09 )     (0.16 )
    


 


 


 


 


Net asset value, end of year

   $ 14.58     $ 12.23     $ 11.59     $ 12.95     $ 15.54  
    


 


 


 


 


Total return

     19.56 %     5.89 %     (10.47 )%     (16.08 )%     1.96 %
    


 


 


 


 


Ratios/supplemental data:

                                        

Net assets, end of year (000s)

   $ 41,920     $ 33,643     $ 31,883     $ 32,384     $ 44,685  

Ratio of expenses to average net assets

     0.79 %     0.84 %     0.84 %     0.84 %     1.01 %

Ratio of net investment income to average net assets

     0.64 %     0.43 %     0.20 %     0.29 %     0.23 %

Portfolio turnover rateb

     4 %     10 %     12 %     34 %     35 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

100

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI United Kingdom Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 13.00     $ 12.77     $ 15.11     $ 18.35     $ 20.25  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.48       0.39       0.48       0.26       0.27  

Net realized and unrealized gain (loss)

     2.72       0.12       (2.60 )     (3.23 )     (0.85 )
    


 


 


 


 


Total from investment operations

     3.20       0.51       (2.12 )     (2.97 )     (0.58 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.48 )     (0.28 )     (0.22 )     (0.25 )     (0.25 )

Net realized gain

     —         —         —         (0.02 )     (1.03 )

Return of capital

     —         —         —         —         (0.04 )
    


 


 


 


 


Total distributions

     (0.48 )     (0.28 )     (0.22 )     (0.27 )     (1.32 )
    


 


 


 


 


Net asset value, end of year

   $ 15.72     $ 13.00     $ 12.77     $ 15.11     $ 18.35  
    


 


 


 


 


Total return

     24.77 %     4.20 %     (14.19 )%     (16.20 )%     (3.00 )%
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 452,870     $ 150,809     $ 120,067     $ 117,883     $ 146,803  

Ratio of expenses to average net assets

     0.77 %     0.84 %     0.84 %     0.84 %     0.94 %

Ratio of net investment income to average net assets

     3.11 %     3.23 %     3.39 %     1.57 %     1.39 %

Portfolio turnover rateb

     6 %     6 %     14 %     30 %     33 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  101


Notes to the Financial Statements

 

iSHARES®, INC.

 

1. SIGNIFICANT ACCOUNTING POLICIES

 

iShares, Inc. (the “Company”), is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company was incorporated under the laws of the State of Maryland on September 1, 1994 pursuant to amended and restated Articles of Incorporation. As of August 31, 2004, the Company offered 24 investment portfolios or funds.

 

These financial statements relate only to the iShares MSCI Austria, iShares MSCI Belgium, iShares MSCI EMU, iShares MSCI France, iShares MSCI Germany, iShares MSCI Italy, iShares MSCI Netherlands, iShares MSCI Spain, iShares MSCI Sweden, iShares MSCI Switzerland and iShares MSCI United Kingdom Index Funds (each a “Fund”, collectively the “Funds”).

 

The investment objective of each Fund is to seek investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in a particular market, as measured by a particular equity securities index compiled by Morgan Stanley Capital International Inc. (“MSCI”). The investment adviser utilizes a “passive” or index approach to achieve each Fund’s investment objective. Each of the Funds is classified as a non-diversified fund under the 1940 Act. 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 affecting these companies.

 

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 securities of U.S. issuers. 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 of the Fund; less publicly available information about issuers; the imposition of withholding or other taxes; higher transaction and custody costs; settlement delays and risk of loss attendant in settlement procedures; difficulties in enforcing contractual obligations; lesser regulation of securities markets; different accounting, disclosure and reporting requirements; more substantial governmental involvement in the economy; higher inflation rates; greater social, economic and political uncertainties; the risk of nationalization or expropriation of assets; and the risk of war.

 

Under the Company’s organizational documents, the Funds’ officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred.

 

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 that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

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

 

102

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

SECURITY VALUATION

 

Portfolio securities for which market prices are readily available are valued using the official closing price 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. Short-term investments and debt securities maturing in 60 days or less are valued at amortized cost. Securities of investment companies, other than investment companies whose shares are traded on an exchange, are valued at the investment company’s published net asset value per share. Any securities, including restricted securities or other assets for which market quotations are not readily available, or for which a significant event has occurred since the time of the most recent market quotation, are valued in accordance with fair value pricing policies approved by the Company’s Board of Directors (the “Board”).

 

SECURITY TRANSACTIONS AND INCOME RECOGNITION

 

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.

 

FOREIGN CURRENCY TRANSLATION

 

The accounting records of the Funds are maintained in U.S. dollars. 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 currencies, investment securities 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, the exchange rates as of 4:00 p.m. London 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

 

Italy and Greece may levy taxes on stock dividends at rates of 27.0% and 3.0%, respectively, based on the par value of stock dividends received by the iShares MSCI Italy and iShares MSCI EMU Index Funds. These taxes are paid by the Funds receiving the stock dividends and, if any, are disclosed in their respective Statements of Operations.

 

During the year ended August 31, 2004, the iShares MSCI Sweden Index Fund paid foreign taxes on certain taxable corporate events (i.e., spin-offs and tender offers) by Swedish companies whose securities are held by the Fund. The foreign taxes paid by the Fund are disclosed in its Statement of Operations.

 

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. Dividends and distributions are paid in U.S. dollars and cannot be automatically reinvested in additional shares of the Funds.

 

NOTES TO THE FINANCIAL STATEMENTS

  103


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

At August 31, 2004, the tax year-end of the Funds, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

 

iShares MSCI Index Fund


   Undistributed
Ordinary
Income


   Unrealized
Appreciation
(Depreciation)


    Capital and
Other Losses


    Total
Distributable
Earnings
(Accumulated
Losses)


 

Austria

   $ 634,690    $ 11,664,201     $ (3,409,670 )   $ 8,889,221  

Belgium

     613,600      331,679       (2,531,775 )     (1,586,496 )

EMU

     6,789,991      (6,245,138 )     (9,884,161 )     (9,339,308 )

France

     724,345      (1,559,360 )     (6,445,487 )     (7,280,502 )

Germany

     1,573,473      (35,513,677 )     (30,028,327 )     (63,968,531 )

Italy

     792,629      199,034       (5,056,958 )     (4,065,295 )

Netherlands

     558,614      (4,482,874 )     (7,391,799 )     (11,316,059 )

Spain

     759,103      8,200,485       (4,427,739 )     4,531,849  

Sweden

     420,504      3,480,112       (6,203,866 )     (2,303,250 )

Switzerland

     269,799      2,656,328       (6,734,346 )     (3,808,219 )

United Kingdom

     6,976,148      (8,089,189 )     (22,211,909 )     (23,324,950 )

 

The differences between the components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Statements of Assets and Liabilities are primarily due to differing treatments of wash sales.

 

For the years ended August 31, 2004 and August 31, 2003, the tax characterization of distributions paid for each Fund was equal to the book characterization of distributions paid. The total distributions and distributions per share are disclosed in the accompanying Statements of Changes in Net Assets and the Financial Highlights for all 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 by complying with the provisions applicable to regulated investment companies, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, and to annually distribute substantially all of its net income and any net gains (taking into account any capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income and excise taxes. Accordingly, no provision for federal income taxes was required for the year ended August 31, 2004.

 

From November 1, 2003 to August 31, 2004, certain Funds incurred net realized capital losses and net foreign currency losses. As permitted by tax regulations, these Funds have elected to defer those losses and treat them as arising in the year ending August 31, 2005, as follows:

 

iShares MSCI Index Fund


  

Deferred

Net Realized
Capital/Net Foreign
Currency Losses


Belgium

   $ 15,331

EMU

     2,057,503

Germany

     2,241,687

Italy

     330,798

Netherlands

     129,137

Spain

     64,528

Switzerland

     710,991

United Kingdom

     1,546,042

 

104

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

The Funds had tax basis net capital loss carryforwards at August 31, 2004, the tax year-end of the Funds, as follows:

 

iShares MSCI Index Fund


   Expiring
in 2007


   Expiring
in 2008


   Expiring
in 2009


  

Expiring

in 2010


  

Expiring

in 2011


  

Expiring

in 2012


   Total

Austria

   $ 4,273    $ 551,208    $ 336,553    $ 1,291,324    $ 370,948    $ 855,364    $ 3,409,670

Belgium

     —        94,675      450,543      1,677,678      117,767      175,781      2,516,444

EMU

     —        —        443      1,923,552      1,144,756      4,757,907      7,826,658

France

     —        —        —        3,807,513      236,944      2,401,030      6,445,487

Germany

     —        —        86,860      13,573,336      5,469,732      8,656,712      27,786,640

Italy

     —        —        —        3,335,772      848,408      541,980      4,726,160

Netherlands

     —        —        60,885      3,222,792      1,497,810      2,481,175      7,262,662

Spain

     —        —        20,276      2,081,931      678,910      1,582,094      4,363,211

Sweden

     —        —        126,557      3,350,244      1,577,551      1,149,514      6,203,866

Switzerland

     —        —        —        2,855,879      1,018,305      2,149,171      6,023,355

United Kingdom

     —        —        —        9,945,254      6,448,554      4,272,059      20,665,867

 

Net capital loss carryforwards may be applied against any net realized taxable gains in each succeeding year, or until their respective expiration date, whichever occurs first.

 

If any of the Funds own shares in certain foreign investment entities, referred to, under U.S. tax law, as “passive foreign investment companies”, such Funds may elect to mark-to-market annually the shares of the passive foreign investment companies, and would be required to distribute to shareholders any such mark-to-market gains.

 

At August 31, 2004, the aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

iShares MSCI Index Fund


  

Tax

Cost


   Unrealized
Appreciation


   Unrealized
Depreciation


    Net Unrealized
Appreciation
(Depreciation)


 

Austria

   $ 52,431,220    $ 11,664,873    $ —       $ 11,664,873  

Belgium

     35,394,311      763,041      (434,564 )     328,477  

EMU

     441,807,821      17,801,516      (24,027,250 )     (6,225,734 )

France

     82,540,336      10,949,207      (12,492,607 )     (1,543,400 )

Germany

     162,263,270      3,137,216      (38,644,991 )     (35,507,775 )

Italy

     39,913,123      3,943,360      (3,758,346 )     185,014  

Netherlands

     35,662,474      —        (4,482,913 )     (4,482,913 )

Spain

     49,233,445      8,309,192      (108,331 )     8,200,861  

Sweden

     34,143,393      4,120,742      (640,477 )     3,480,265  

Switzerland

     40,773,039      5,424,404      (2,777,563 )     2,646,841  

United Kingdom

     459,207,442      20,859,186      (28,906,243 )     (8,047,057 )

 

NOTES TO THE FINANCIAL STATEMENTS

  105


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

REPURCHASE AGREEMENTS

 

Each Fund may enter into repurchase agreements with banks and securities dealers. These transactions involve the purchase of securities with a simultaneous commitment to resell the securities to the bank or the dealer at an agreed-upon date and price. A repurchase agreement is accounted for as an investment by the Funds, collateralized by securities, which are delivered to the Funds’ custodian or to an agent bank under a tri-party agreement. The securities are marked-to-market daily and additional securities are acquired as needed, to ensure that their value equals or exceeds the repurchase price plus accrued interest. At August 31, 2004 a portion of the Funds’ cash collateral for securities on loan was invested in repurchase agreements as disclosed in the Funds’ Schedules of Investments. For further information, see Note 5, below.

 

2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

 

Pursuant to an Investment Advisory Agreement with the Company, as amended on December 28, 2001, Barclays Global Fund Advisors (“BGFA”) manages the investment of each Fund’s assets. BGFA is a California corporation indirectly owned by Barclays Bank PLC.

 

Under the Investment Advisory Agreement, BGFA is responsible for all of the expenses (“Covered Expenses”) of each of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except interest, taxes, brokerage commissions and other expenses connected with the executions of portfolio transactions, distribution fees and extraordinary expenses.

 

For its investment advisory services to the Funds, BGFA is entitled to an annual investment advisory fee based on each Fund’s allocable portion of the aggregate net assets of all the funds offered by the Company (except for the iShares MSCI Brazil, iShares MSCI Emerging Markets, iShares MSCI Pacific ex-Japan, iShares MSCI South Africa, iShares MSCI South Korea, and iShares MSCI Taiwan Index Funds) as follows:

 

Investment Advisory Fee

  

Aggregate Net Assets


0.59%    First $7 billion
0.54    Over $7 billion, up to and including $11 billion
0.49    Over $11 billion

 

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.

 

Investors Bank & Trust Company (“Investors Bank”) serves as administrator, custodian and transfer agent for the Company. As compensation for its services, Investors Bank receives certain out-of-pocket costs, transaction fees, and asset-based fees, which are accrued daily and paid monthly. These fees are Covered Expenses as defined above.

 

106

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

BGI serves as securities lending agent for the Company. BGI is an affiliate of BGFA, the Funds’ investment adviser. As securities lending agent, BGI receives, as fees, a share of the income earned on investment of the cash collateral received for the loan of securities. For the year ended August 31, 2004, BGI earned securities lending agent fees as follows:

 

iShares MSCI Index Fund


   Securities Lending
Agent Fees


Austria

   $ 21,501

Belgium

     38,576

EMU

     376,951

France

     54,991

Germany

     176,596

Italy

     33,334

Netherlands

     20,421

Spain

     48,320

Sweden

     39,655

Switzerland

     17,090

United Kingdom

     16,947

 

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. Prior to July 1, 2004, the Company had in effect a distribution plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor was 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 expenses and services. At the Board meeting held on March 16, 2004, the Directors voted to terminate the Plan, effective July 1, 2004.

 

As defined under Section 2(a)(3) of the 1940 Act, certain broker-dealers may be deemed to be an “affiliated person” of a Fund by virtue of being a DTC Participant that owned of record 5% or more of the outstanding shares of such Fund. The broker-dealers identified to be an “affiliated person” of a Fund (other than BGIS) did not execute any portfolio transactions with the Funds during the year.

 

Pursuant to Rule 17a-7 of the 1940 Act, certain Funds executed cross trades for the year ended August 31, 2004. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment adviser. The Board reviewed all such transactions executed during the first ten months of the fiscal year and concluded that they were in compliance with the requirements and restrictions set forth by Rule 17a-7. The Board is scheduled at its next meeting to review all such transactions executed during the last two months of the fiscal year.

 

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission, each Fund may invest in the Institutional Shares of the Institutional Money Market Fund (“IMMF”) and Prime Money Market Fund (“PMMF”) of Barclays Global Investors Funds. The IMMF and PMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Money Market Master Portfolio and Prime Money Market Master Portfolio (collectively, the “Master Portfolios”), respectively, which are managed by BGFA, the Funds’ investment adviser. The IMMF and PMMF are open-end money market funds available to institutional and accredited investors, including other investment companies managed by BGFA. The IMMF and PMMF seek a high level of income consistent with liquidity and the preservation of capital. While the IMMF and PMMF do not directly charge an investment advisory fee, the Master Portfolios in which they invest do charge an investment advisory fee. Income distributions from the IMMF and PMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Funds from temporary cash investments or from investment of securities lending collateral are recorded as either interest income or securities lending income, respectively, in the accompanying Statements of Operations.

 

NOTES TO THE FINANCIAL STATEMENTS

  107


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

The following table provides information about the investments of each iShares Fund in shares of issuers affiliated with BGFA for the year ended August 31, 2004, including income earned from affiliated issuers and net realized gains from sales of affiliated issuers.

 

iShares MSCI Index Fund and Name
of Affiliated Issuer


  

Number of
Shares Held
Beginning
of Year

(in 000S)


   Gross
Additions
(in 000S)


   Gross
Reductions
(in 000S)


  

Number of
Shares Held
End of Year

(in 000S)


  

Value at

End of Year


   Dividend
and
Interest
Income


   Net
Realized
Gain


Austria

                                        

IMMF

   12    3,040    3,023    29    $ 28,529    $ 205    $ —  

Belgium

                                        

IMMF

   15    3,381    3,384    12      12,013      193      —  

EMU

                                        

IMMF

   56    21,930    21,793    193      193,158      1,630      —  

France

                                        

IMMF

   55    4,363    4,366    52      51,595      334      —  

Germany

                                        

IMMF

   61    11,982    11,974    69      68,911      776      —  

Italy

                                        

IMMF

   28    2,811    2,824    15      14,858      154      —  

Netherlands

                                        

IMMF

   —      2,160    2,145    15      15,090      121      —  

Spain

                                        

IMMF

   62    3,594    3,632    24      23,992      211      —  

Sweden

                                        

IMMF

   6    1,678    1,669    15      14,962      153      —  

Switzerland

                                        

IMMF

   3    2,419    2,400    22      21,684      151      —  

United Kingdom

                                        

IMMF

   85    18,181    17,983    283      283,266      2,120      —  

Barclays PLC

   624    974    88    1,510      13,979,803      408,840      30,813

 

The Funds invested cash collateral from securities on loan in the IMMF and PMMF. Due to the nature of the structure of the joint account used for the investment of the collateral for securities on loan, the information reported above for each Fund does not include the Funds’ holdings of the IMMF and PMMF in connection with the investment of collateral for securities on loan.

 

As of August 31, 2004, certain directors and officers of the Company are also officers of BGI.

 

108

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

3. INVESTMENT PORTFOLIO TRANSACTIONS

 

Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the year ended August 31, 2004, were as follows:

 

iShares MSCI Index Fund


   Purchases

   Sales

Austria

   $ 4,981,837    $ 3,989,246

Belgium

     3,845,791      4,455,064

EMU

     36,049,159      31,593,032

France

     4,785,130      5,833,182

Germany

     10,752,845      11,113,853

Italy

     2,526,641      2,561,057

Netherlands

     1,974,876      1,871,131

Spain

     3,154,225      2,872,051

Sweden

     2,265,432      2,197,968

Switzerland

     1,888,039      1,783,248

United Kingdom

     16,103,044      13,819,544

 

In-kind transactions (see Note 4) for the year ended August 31, 2004, were as follows:

 

iShares MSCI Index Fund


   In-kind
Purchases


  

In-kind

Sales


Austria

   $ 32,097,067    $ 10,044,123

Belgium

     18,313,479      19,594,664

EMU

     171,098,827      45,319,034

France

     3,785,232      7,259,010

Germany

     37,650,258      59,924,853

Italy

     —        7,980,456

Netherlands

     7,971,726      —  

Spain

     2,261,166      16,449,517

Sweden

     5,100,204      —  

Switzerland

     3,712,739      1,874,413

United Kingdom

     279,583,258      7,938,348

 

NOTES TO THE FINANCIAL STATEMENTS

  109


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

4. CAPITAL SHARE TRANSACTIONS

 

The Company has authorized 10.9 billion shares of $.001 par value capital stock. The number of shares authorized to each Fund are as follows:

 

iShares MSCI Index Fund


   Authorized Shares

Austria

   19,800,000

Belgium

   136,200,000

EMU

   500,000,000

France

   340,200,000

Germany

   382,200,000

Italy

   63,600,000

Netherlands

   255,000,000

Spain

   127,800,000

Sweden

   63,600,000

Switzerland

   318,625,000

United Kingdom

   943,200,000

 

The Company issues and redeems capital shares of each Fund only in aggregations of a specified number of shares (each, a “Creation Unit”) at net asset value. Except when aggregated in Creation Units, shares are not redeemable. Transactions in capital shares for each Fund are disclosed in detail in the Statements of Changes in Net Assets.

 

The consideration for the purchase of Creation Units of a Fund generally consists of the in-kind deposit of a designated portfolio of equity securities constituting a portfolio sampling representation of the corresponding MSCI Index and an amount of cash. A purchase transaction fee and a redemption transaction fee are charged to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units.

 

5. LOANS OF PORTFOLIO SECURITIES

 

Each Fund may lend its investment securities to approved borrowers such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each Fund is required to have a value 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 may not return the securities when due.

 

As of August 31, 2004, the Funds had loaned securities which were collateralized by cash. The cash collateral received was invested in a joint account with other funds managed by BGFA, which invests in securities with remaining maturities of 397 days or less, repurchase agreements and money market mutual funds including money market funds managed by BGFA. Repurchase agreements held in the joint account are fully collateralized by U.S. Government securities. Income from the joint account is allocated daily to each Fund, based on each Fund’s portion of the total cash collateral received. The market value of the securities on loan at August 31, 2004, and the value of the related collateral received are disclosed in the Statements of Assets and Liabilities. Securities lending income, which is disclosed in the Funds’ Statements of Operations, is presented net of rebates paid to, or fees paid by, borrowers.

 

110

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors of

iShares, Inc.

 

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the iShares MSCI Austria Index Fund, iShares MSCI Belgium Index Fund, iShares MSCI EMU Index Fund, iShares MSCI France Index Fund, iShares MSCI Germany Index Fund, iShares MSCI Italy Index Fund, iShares MSCI Netherlands Index Fund, iShares MSCI Spain Index Fund, iShares MSCI Sweden Index Fund, iShares MSCI Switzerland Index Fund and iShares MSCI United Kingdom Index Fund, each a portfolio of the iShares MSCI Index Fund Series (the “Funds”) at August 31, 2004, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

The financial statements of the Funds as of August 31, 2000 and for the year then ended were audited by other auditors, whose report dated October 13, 2000 expressed an unqualified opinion on those statements.

 

PricewaterhouseCoopers LLP

San Francisco, California

October 22, 2004

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  111


Tax Information (Unaudited)

 

iSHARES®, INC.

 

For the year ended August 31, 2004, the Funds earned foreign source income and paid foreign taxes which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code (the “Code”) as follows:

 

iShares Msci Index Fund


   Foreign Source
Income Earned


   Foreign
Taxes Paid


Austria

   $ 829,016    $ 63,119

Belgium

     673,545      32,514

EMU

     8,907,386      372,284

France

     1,139,309      29,424

Germany

     2,522,285      74,850

Italy

     1,006,311      36,123

Netherlands

     758,962      54,428

Spain

     1,219,444      66,568

Sweden

     629,038      56,931

Switzerland

     595,435      10,741

United Kingdom

     10,426,179      797,772

 

Under Section 854(b)(2) of the Code, the Funds hereby designate the following maximum amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the year ended August 31, 2004:

 

iShares MSCI Index Fund


   Qualified
Dividend
Income


Austria

   $ 455,106

Belgium

     199,604

EMU

     2,689,404

France

     579,493

Germany

     659,329

Italy

     239,006

Netherlands

     345,888

Spain

     447,649

Sweden

     224,894

Switzerland

     98,341

United Kingdom

     7,894,608

 

In January 2005, shareholders will receive Form 1099-DIV which will include their share of qualified dividends distributed during the calendar year 2004. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.

 

112

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Supplemental Information (Unaudited)

 

iSHARES®, INC.

 

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

 

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

 

The following information shows the frequency distributions of premiums and discounts for each of the iShares Funds included in this report. Except for the iShares MSCI EMU Index Fund, the information shown for each Fund is for the period from January 1, 1999 through June 30, 2004, the date of the most recent calendar quarter-end. The information shown for the iShares MSCI EMU Index Fund is for each full calendar quarter completed after the launch date of that Fund through June 30, 2004. The specific periods covered for each Fund are disclosed in the table for such Fund.

 

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

 

iShares MSCI Austria Index Fund

Period Covered: January 1, 1999 Through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 3.0%

   10    0.72 %

Greater than 2.5% and Less than 3.0%

   8    0.58  

Greater than 2.0% and Less than 2.5%

   9    0.65  

Greater than 1.5% and Less than 2.0%

   36    2.61  

Greater than 1.0% and Less than 1.5%

   101    7.32  

Greater than 0.5% and Less than 1.0%

   221    16.01  

Between 0.5% And – 0.5%

   736    53.34  

Less than – 0.5% and Greater than – 1.0%

   169    12.25  

Less than – 1.0% and Greater than – 1.5%

   60    4.35  

Less than – 1.5% and Greater than – 2.0%

   18    1.30  

Less than – 2.0% and Greater than – 2.5%

   7    0.51  

Less than – 2.5%

   5    0.36  
    
  

     1,380    100.00 %
    
  

 

SUPPLEMENTAL INFORMATION

  113


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI Belgium Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 2.5%

   11    0.80 %

Greater than 2.0% and Less than 2.5%

   12    0.87  

Greater than 1.5% and Less than 2.0%

   30    2.17  

Greater than 1.0% and Less than 1.5%

   95    6.88  

Greater than 0.5% and Less than 1.0%

   248    17.97  

Between 0.5% and – 0.5%

   690    50.01  

Less than – 0.5% and Greater than – 1.0%

   189    13.7  

Less than – 1.0% and Greater than – 1.5%

   70    5.07  

Less than – 1.5% and Greater than – 2.0%

   20    1.45  

Less than – 2.0% and Greater than – 2.5%

   10    0.72  

Less than – 2.5%

   5    0.36  
    
  

     1,380    100.00 %
    
  

 

iShares MSCI EMU Index Fund

Period Covered: October 1, 2000 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 2.5%

   7    0.75 %

Greater than 2.0% and Less than 2.5%

   7    0.75  

Greater than 1.5% and Less than 2.0%

   23    2.45  

Greater than 1.0% and Less than 1.5%

   79    8.41  

Greater than 0.5% and Less than 1.0%

   260    27.69  

Between 0.5% and – 0.5%

   468    49.84  

Less than – 0.5% and Greater than – 1.0%

   68    7.24  

Less than – 1.0% and Greater than – 1.5%

   19    2.02  

Less than – 1.5%

   8    0.85  
    
  

     939    100.00 %
    
  

 

114

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI France Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 2.0%

   5    0.36 %

Greater than 1.5% and Less than 2.0%

   11    0.80  

Greater than 1.0% and Less than 1.5%

   52    3.77  

Greater than 0.5% and Less than 1.0%

   150    10.87  

Between 0.5% and – 0.5%

   979    70.94  

Less than – 0.5% and Greater than – 1.0%

   135    9.78  

Less than – 1.0% and Greater than – 1.5%

   35    2.54  

Less than – 1.5% and Greater than – 2.0%

   6    0.43  

Less than – 2.0%

   7    0.51  
    
  

     1,380    100.00 %
    
  

 

iShares MSCI Germany Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 2.5%

   7    0.51 %

Greater than 2.0% and Less than 2.5%

   7    0.51  

Greater than 1.5% and Less than 2.0%

   31    2.25  

Greater than 1.0% and Less than 1.5%

   74    5.36  

Greater than 0.5% and Less than 1.0%

   209    15.14  

Between 0.5% and – 0.5%

   805    58.34  

Less than – 0.5% and Greater than – 1.0%

   160    11.59  

Less than – 1.0% and Greater than – 1.5%

   58    4.20  

Less than – 1.5% and Greater than – 2.0%

   18    1.30  

Less than – 2.0% and Greater than – 2.5%

   4    0.29  

Less than – 2.5%

   7    0.51  
    
  

     1,380    100.00 %
    
  

 

SUPPLEMENTAL INFORMATION

  115


Supplemental Information (Unaudited) (Continued)

 

iSHARE®, INC.

 

iShares MSCI Italy Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 2.0%

   10    0.72 %

Greater than 1.5% and Less than 2.0%

   13    0.94  

Greater than 1.0% and Less than 1.5%

   35    2.54  

Greater than 0.5% and Less than 1.0%

   159    11.52  

Between 0.5% and – 0.5%

   973    70.51  

Less than – 0.5% and Greater than – 1.0%

   137    9.93  

Less than – 1.0% and Greater than – 1.5%

   31    2.25  

Less than – 1.5% and Greater than – 2.0%

   13    0.94  

Less than – 2.0%

   9    0.65  
    
  

     1,380    100.00 %
    
  

 

iShares MSCI Netherlands Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


   Percentage of
Total Days


 

Greater than 2.5%

   12    0.87 %

Greater than 2.0% and Less than 2.5%

   7    0.51  

Greater than 1.5% and Less than 2.0%

   22    1.59  

Greater than 1.0% and Less than 1.5%

   51    3.70  

Greater than 0.5% and Less than 1.0%

   241    17.46  

Between 0.5% and – 0.5%

   855    61.96  

Less than – 0.5% and Greater than – 1.0%

   119    8.62  

Less than – 1.0% and Greater than – 1.5%

   53    3.84  

Less than – 1.5% and Greater than – 2.0%

   13    0.94  

Less than – 2.0%

   7    0.51  
    
  

     1,380    100.00 %
    
  

 

116

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Supplemental Information (Unaudited) (Continued)

 

iSHARE®, INC.

 

iShares MSCI Spain Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 3.0%

   6    0.43 %

Greater than 2.0% and Less than 3.0%

   11    0.80  

Greater than 1.5% and Less than 2.0%

   13    0.94  

Greater than 1.0% and Less than 1.5%

   46    3.33  

Greater than 0.5% and Less than 1.0%

   173    12.54  

Between 0.5% and – 0.5%

   933    67.61  

Less than – 0.5% and Greater than – 1.0%

   136    9.86  

Less than – 1.0% and Greater than – 1.5%

   45    3.26  

Less than – 1.5% and Greater than – 2.0%

   10    0.72  

Less than – 2.0%

   7    0.51  
    
  

     1,380    100.00 %
    
  

 

iShares MSCI Sweden Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


   Percentage of
Total Days


 

Greater than 2.5%

   12    0.87 %

Greater than 2.0% and Less than 2.5%

   17    1.23  

Greater than 1.5% and Less than 2.0%

   25    1.81  

Greater than 1.0% and Less than 1.5%

   84    6.09  

Greater than 0.5% and Less than 1.0%

   251    18.19  

Between 0.5% and – 0.5%

   776    56.23  

Less than – 0.5% and Greater than – 1.0%

   114    8.26  

Less than – 1.0% and Greater than – 1.5%

   57    4.13  

Less than – 1.5% and Greater than – 2.0%

   17    1.23  

Less than – 2.0% and Greater than – 2.5%

   15    1.09  

Less than – 2.5%

   12    0.87  
    
  

     1,380    100.00 %
    
  

 

SUPPLEMENTAL INFORMATION

  117


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI Switzerland Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


  

Percentage of

Total Days


 

Greater than 3.0%

   2    0.14 %

Greater than 2.5% and Less than 3.0%

   8    0.58  

Greater than 2.0% and Less than 2.5%

   8    0.58  

Greater than 1.5% and Less than 2.0%

   33    2.39  

Greater than 1.0% and Less than 1.5%

   116    8.41  

Greater than 0.5% and Less than 1.0%

   277    20.07  

Between 0.5% and – 0.5%

   763    55.29  

Less than – 0.5% and Greater than – 1.0%

   108    7.83  

Less than – 1.0% and Greater than – 1.5%

   38    2.75  

Less than – 1.5% and Greater than – 2.0%

   19    1.38  

Less than – 2.0%

   8    0.58  
    
  

     1,380    100.00 %
    
  

 

iShares MSCI United Kingdom Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


   Number
of Days


   Percentage of
Total Days


 

Greater than 3.5% and Less than 4.0%

   7    0.51 %

Greater than 2.5% and Less than 3.5%

   9    0.65  

Greater than 2.0% and Less than 2.5%

   20    1.45  

Greater than 1.5% and Less than 2.0%

   80    5.80  

Greater than 1.0% and Less than 1.5%

   212    15.36  

Greater than 0.5% and Less than 1.0%

   345    25.00  

Between 0.5% and – 0.5%

   620    44.93  

Less than – 0.5% and Greater than – 1.0%

   61    4.42  

Less than – 1.0% and Greater than – 1.5%

   14    1.01  

Less than – 1.5% and Greater than – 2.5%

   8    0.58  

Less than – 2.5%

   4    0.29  
    
  

     1,380    100.00 %
    
  

 

118

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Director Information (Unaudited)

 

iSHARES®, INC.

 

The Board of Directors has responsibility for the overall management and operations of the Company, including general supervision of the duties performed by BGFA and other service providers. Each Director serves until his or her successor is duly elected or appointed and qualified.

 

iShares, Inc., iShares Trust, Barclays Global Investors Funds and Master Investment Portfolio are considered to be members of the same fund complex, as defined in Form N-1A under the 1940 Act. Each Director of iShares, Inc. also serves as a Trustee for iShares Trust and oversees 97 portfolios within the fund complex. In addition, Lee T. Kranefuss and Richard K. Lyons each serves as a Trustee for Barclays Global Investors Funds and Master Investment Portfolio and oversees 124 portfolios within the fund complex.

 

Unless otherwise noted in the tables below, the address for each Director is 45 Fremont Street, San Francisco, California 94105. Additional information about the Funds’ Directors may be found in the Funds’ Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-474-2737.

 

Interested Directors

 

Name and Age


 

Position(s),

Length of Service


 

Principal Occupation(s)

During Past 5 Years


 

Other Directorships Held


*Lee T. Kranefuss(43)   Director, Chairman, and President (since June 18, 2003)   Chief Executive Officer of the Intermediary Investors and Exchange Traded Products Business of BGI (since 2003); Chief Executive Officer of the Individual Investor Business of BGI (1997-2003).   Trustee (since June 18, 2003) of iShares Trust; Board of Trustees (since 2001) for Barclays Global Investors Funds and Master Investment Portfolio.
*Nathan Most(90)   Director (since December 16, 1996)   Consultant to BGI (1998-2002), American Stock Exchange (1996-2000) and the Hong Kong Stock Exchange (since 1998); Consultant to the Amsterdam Stock Exchange (1997-1998); Consultant to the Pacific Stock Exchange (1997-1998).   Trustee (since 2000) and President (2000-2002) of iShares Trust.
*John E. Martinez(42)   Director (since December 5, 2003)   Co-CEO of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); CEO of Capital Markets Groups of BGI (1996-2001)   Trustee (since December 5, 2003) of iShares Trust; Director (since November 2003) of Barclays Global Investors UK Holdings.

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

 

DIRECTOR INFORMATION

  119


Director Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

Independent Directors

 

Name and Age


 

Position(s),

Length of Service


 

Principal Occupation(s)

During Past 5 Years


 

Other Directorships Held


John B. Carroll (69)   Director (since December 16, 1996)   Retired Vice President of Investment Management (1984-2000) of Verizon Corporation; Advisory Board member of Ibbotson Associates (1992-1998); former Vice Chairman and Executive Committee Member (1994-1998) of the Committee on Investment of Employee Benefit Assets of the Financial Executive Institute.   Trustee (since 2002) of iShares Trust; Trustee and member of the Executive Committee (since 1991) of The Common Fund Institutional Funds, a non-profit organization; Member of the Board of Managers of JP Morgan Private Equity Funds.
Richard K. Lyons (43)   Director (since February 28, 2002)   Professor, University of California, Berkeley: Haas School of Business (since 1993); Consultant for IMF World Bank, Federal Reserve Bank, and Citibank N.A. (since 2000).   Trustee (since 2000) of iShares Trust; Director (since 2003) of the BGI Cayman Prime Money Market Fund, Ltd.; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Board of Trustees: Matthews Asian Funds since 1995 (oversees 6 portfolios).
George C. Parker (65)   Director (since February 28, 2002)   Dean Witter Distinguished Professor of Finance (since 1994); Associate Dean for Academic Affairs, Director of MBA Program, and Professor, Stanford University: Graduate School of Business (1993-2001).   Trustee (since 2000) of iShares Trust; Director (since 1985) of Bailard, Biehl and Kaiser, Inc.; Director (since 1978) of California Casualty Group of Insurance Companies; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (1994-2002) of Dresdner/RCM Mutual Funds; Director (since 1999) of Tyon Ranch Company.
W. Allen Reed (57)   Director (since December 16, 1996)   President and Chief Executive Officer (since 1994) of General Motors Investment Management Corporation.   Trustee (since 2002) of iShares Trust; Director (since 1994) of General Motors Investment Management Corporation; Director (1995-1998) of Taubman Centers, Inc. (a real estate investment trust); Director (since 1992) of FLIR Systems (an imaging technology company); Director (since 1994) of General Motors Acceptance Corporation; Director (since 1994) of GMAC Insurance Holdings, Inc.; Director (since 1995) of Global Emerging Markets Fund; Director (since 2000) of Temple Inland Industries; Chairman (since 1995) of the Investment Advisory Committee of Howard Hughes Medical Institute.

 

120

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Director Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

                                                                 Officer

 

Name and Age


 

Position


 

Principal Occupation(s)

During Past 5 Years


 

Directorships Held by Officers


Michael A. Latham (39)   Secretary, Treasurer and Principal Financial Officer (since February 28, 2002)   Chief Operating Officer of the Intermediary Investors and Exchange Traded Products Business of BGI (since 2003); Director of Mutual Fund Delivery in the U.S. Individual Investor Business of BGI (2000-2003); Head of Operations, BGI Europe (1997-2000).   None.

 

DIRECTOR INFORMATION

  121


The iShares® Family of Funds

 

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

 

iShares S&P Domestic Index Funds

 

iShares S&P 1500 (ISI)

iShares S&P 500 (IVV)

iShares S&P 500/BARRA Growth (IVW)

iShares S&P 500/BARRA Value (IVE)

iShares S&P MidCap 400 (IJH)

iShares S&P MidCap 400/BARRA Growth (IJK)

iShares S&P MidCap 400/BARRA Value (IJJ)

iShares S&P SmallCap 600 (IJR)

iShares S&P SmallCap 600/BARRA Growth (IJT)

iShares S&P SmallCap 600/BARRA Value (IJS)

iShares S&P 100 (OEF)

 

iShares Sector and Specialty Index Funds

 

iShares Cohen & Steers Realty Majors (ICF)

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

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

iShares Dow Jones U.S. Consumer Non-Cyclical Sector (IYK)

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

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

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

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

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

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

iShares Dow Jones Select Dividend (DVY)

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

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

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

iShares Dow Jones Transportation Average (IYT)

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

iShares Goldman Sachs Natural Resources (IGE)

iShares Goldman Sachs Networking (IGN)

iShares Goldman Sachs Semiconductor (IGW)

iShares Goldman Sachs Software (IGV)

iShares Goldman Sachs Technology (IGM)

iShares Nasdaq Biotechnology (IBB)

iShares S&P Global Energy Sector (IXC)

iShares S&P Global Financials Sector (IXG)

iShares S&P Global Healthcare Sector (IXJ)

iShares S&P Global Technology Sector (IXN)

iShares S&P Global Telecommunications Sector (IXP)

 

iShares Russell Index Funds

 

iShares Russell 3000 (IWV)

iShares Russell 3000 Growth (IWZ)

iShares Russell 3000 Value (IWW)

iShares Russell 1000 (IWB)

iShares Russell 1000 Growth (IWF)

iShares Russell 1000 Value (IWD)

iShares Russell Midcap (IWR)

iShares Russell Midcap Growth (IWP)

iShares Russell Midcap Value (IWS)

iShares Russell 2000 (IWM)

iShares Russell 2000 Growth (IWO)

iShares Russell 2000 Value (IWN)

 

iShares International Index Funds

 

iShares FTSE/Xinhua China 25 (FXI)

iShares MSCI Australia (EWA)

iShares MSCI Austria (EWO)

iShares MSCI Belgium (EWK)

iShares MSCI Brazil (EWZ)

iShares MSCI Canada (EWC)

iShares MSCI EAFE (EFA)

iShares MSCI Emerging Markets (EEM)

iShares MSCI EMU (EZU)

iShares MSCI France (EWQ)

iShares MSCI Germany (EWG)

iShares MSCI Hong Kong (EWH)

iShares MSCI Italy (EWI)

iShares MSCI Japan (EWJ)

iShares MSCI Malaysia (EWM)

iShares MSCI Mexico (EWW)

iShares MSCI Netherlands (EWN)

iShares MSCI Pacific ex-Japan (EPP)

iShares MSCI Singapore (EWS)

iShares MSCI South Africa (EZA)

iShares MSCI South Korea (EWY)

iShares MSCI Spain (EWP)

iShares MSCI Sweden (EWD)

iShares MSCI Switzerland (EWL)

iShares MSCI Taiwan (EWT)

iShares MSCI United Kingdom (EWU)

iShares S&P Europe 350 (IEV)

iShares S&P Global 100 (IOO)

iShares S&P Latin America 40 (ILF)

iShares S&P/TOPIX 150 (ITF)

 

iShares Bond Funds

 

iShares Lehman Aggregate (AGG)

iShares Lehman TIPS (TIP)

iShares Lehman 1-3 Year Treasury (SHY)

iShares Lehman 7-10 Year Treasury (IEF)

iShares Lehman 20+ Year Treasury (TLT)

iShares GS $ InvesTopTM Corporate (LQD)

 

iShares NYSE Index Funds

 

iShares NYSE 100 (NY)

iShares NYSE Composite (NYC)

 

iShares Morningstar Index Funds

 

iShares Morningstar Large Core (JKD)

iShares Morningstar Large Growth (JKE)

iShares Morningstar Large Value (JKF)

iShares Morningstar Mid Core (JKG)

iShares Morningstar Mid Growth (JKH)

iShares Morningstar Mid Value (JKI)

iShares Morningstar Small Core (JKJ)

iShares Morningstar Small Growth (JKK)

iShares Morningstar Small Value (JKL)

 

iShares is a registered trademark of Barclays Global Investors, N.A. The iShares Funds are not sponsored, endorsed or issued by Goldman, Sachs & Co. or Lehman Brothers, nor are they sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., Dow Jones & Company, Inc., FTSE/Xinhua Index Limited, Morgan Stanley Capital International, Morningstar, Inc., The Nasdaq Stock Market, Inc., New York Stock Exchange, Inc., Frank Russell Company, or Standard & Poor’s. None of these companies make any representation regarding the advisability of investing in the iShares Funds. Neither SEI nor BGI, nor any of their affiliates, are affiliated with the companies listed above. “GS $ InvesTop” and “Goldman Sachs®” are trademarks of Goldman, Sachs & Co.

 

An investment in the Fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

 

This advertising section does not constitute part of the 2004 Annual Report.

 

1353-iS-0904

 

122

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares Funds are distributed by SEI Investments Distribution Co. (SEI). Barclays Global Fund Advisors (BGFA) serves as an adviser to the iShares Funds. Barclays Global Investors Services (BGIS) assists in the marketing of the iShares Funds. BGFA and BGIS are subsidiaries of Barclays Global Investors, N.A., a wholly owned subsidiary of Barclays Bank PLC, none of which is affiliated with SEI.

 

The iShares Funds 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 the iShares Funds.

 

©2004 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.

 

Investing involves risk, including possible loss of principal.

 

A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, 2004 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the Securities and Exchange Commission’s website at www.sec.gov.

 

Beginning January 31, 2005, the Funds will be filing their complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which when filed, will be available on the Commission’s website at www.sec.gov. When filed, the Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily and monthly basis on the Funds’ website at www.iShares.com.

 

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.

 

LOGO   LOGO


2004 ANNUAL REPORT TO SHAREHOLDERS | AUGUST 31, 2004

 

LOGO

 

iSHARES MSCI SERIES

 

iSHARES MSCI AUSTRALIA INDEX FUND

iSHARES MSCI BRAZIL INDEX FUND

iSHARES MSCI CANADA INDEX FUND

iSHARES MSCI EMERGING MARKETS INDEX FUND

iSHARES MSCI HONG KONG INDEX FUND

iSHARES MSCI MALAYSIA INDEX FUND

iSHARES MSCI MEXICO INDEX FUND

iSHARES MSCI PACIFIC EX-JAPAN INDEX FUND

iSHARES MSCI SINGAPORE INDEX FUND

iSHARES MSCI SOUTH AFRICA INDEX FUND

iSHARES MSCI SOUTH KOREA INDEX FUND

iSHARES MSCI TAIWAN INDEX FUND

 

Electronic delivery of this document may be

available to you. See inside for details.


LOGO

 

Dear iShares Shareholder:

 

Electronic delivery is the easiest, most convenient way to receive reporting on your iShares holdings. In addition, it’s a way we can all care for our environment. To that end, we are pleased to offer shareholder reports and prospectuses online.

 

To sign up for electronic delivery, please follow these simple steps:

 

1. Go to www.icsdelivery.com.

 

2. From the main page, select the first letter of your brokerage firm’s name.

 

3. Select your brokerage institution from the list that follows. If your brokerage firm is not listed, electronic delivery may not be available. Please contact your brokerage firm or financial adviser.

 

4. Fill out the appropriate information and provide the e-mail address where you would like your information sent.

 

Your information and email address will be kept confidential and only used to deliver documents to you. If at any time you are not satisfied, you can cancel electronic delivery at www.icsdelivery.com and once again receive physical delivery of your materials. If you have any questions, please contact your brokerage firm or financial adviser.

 

Once you have enrolled, you will no longer receive prospectuses and shareholder reports in the mail. Instead, you will receive e-mail notifications announcing that the shareholder report or prospectus has been posted on the iShares website at www.iShares.com.


Table of Contents

 

Shareholder Letter

   1

Managers’ Discussion & Analysis

   2

Shareholder Expenses

   26

Schedules of Investments

   28

iShares MSCI Australia Index Fund

   28

iShares MSCI Brazil Index Fund

   34

iShares MSCI Canada Index Fund

   36

iShares MSCI Emerging Markets Index Fund

   39

iShares MSCI Hong Kong Index Fund

   47

iShares MSCI Malaysia Index Fund

   52

iShares MSCI Mexico Index Fund

   55

iShares MSCI Pacific ex-Japan Index Fund

   57

iShares MSCI Singapore Index Fund

   63

iShares MSCI South Africa Index Fund

   68

iShares MSCI South Korea Index Fund

   70

iShares MSCI Taiwan Index Fund

   73

Financial Statements

   76

Financial Highlights

   84

Notes to the Financial Statements

   96

Report of Independent Registered Public Accounting Firm

   106

Tax Information (Unaudited)

   107

Supplemental Information (Unaudited)

   108

Director Information (Unaudited)

   115

iShares Family of Funds

   118


To Our Shareholders:

 

Global markets generally delivered strong performance during the 12-month reporting period ended August 31, 2004. For most of the markets included in this report, performance was driven largely by escalating export demand early in the reporting period. To a large extent, this demand came from the U.S., and was fueled by improving economic growth in the U.S. Burgeoning economic expansion in China also translated into rising export growth, particularly among China’s Asian neighbors, but also from Brazil.

 

During the course of the reporting period, though, market strength slowed somewhat. Oil prices surged about 40% during the reporting period, ultimately weighing on global economic growth and dampening export demand. The U.S. dollar weakened, making exports to the U.S. more expensive and therefore weakening demand. Canada, Australia, and South Africa, in particular, felt the dampening effects of a rising local currency against the U.S. dollar. In addition, mixed economic signals from the U.S. and abroad suggested that the global economic recovery might be faltering. China’s economy also gave signs of slowing after reporting a robust 9.8% gross domestic product (GDP) annual growth rate for the first quarter of 2004 and 9.6% in the second quarter. By July, money and credit growth had slowed in China, as had import levels for basic materials.

 

As market conditions change, we encourage you to talk with your financial adviser about what blend of investments or asset allocation can best help you meet your financial goals. One trait many successful investors share is the ability to stay focused on their personal financial goals while ignoring market swings. Regardless of market conditions, a sound, disciplined investment plan is essential.

 

On behalf of the iShares® family of funds, we thank you for making the iShares Funds a part of your portfolio. We look forward to meeting your investment needs in the year ahead.

 

LOGO


Lee T. Kranefuss

President and Chairman of the Board of Directors

iShares, Inc.

 

SHAREHOLDER LETTER

  1


Managers’ Discussion & Analysis

 

iSHARES® MSCI AUSTRALIA INDEX FUND

Performance as of 8/31/04

 

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
24.95%    23.50 %   24.31 %   8.74 %   8.62 %   8.74 %   6.49 %   6.46 %   6.76 %

 

Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
24.95%    23.50 %   24.31 %   52.05 %   51.20 %   52.06 %   70.42 %   69.92 %   74.19 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
AUSTRALIA
INDEX
FUND


   MSCI
AUSTRALIA
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,161    $ 10,156

4/30/1996

   $ 10,633    $ 10,655

5/31/1996

   $ 10,523    $ 10,573

6/30/1996

   $ 10,261    $ 10,224

7/31/1996

   $ 9,769    $ 9,744

8/31/1996

   $ 10,388    $ 10,368

9/30/1996

   $ 10,378    $ 10,378

10/31/1996

   $ 10,787    $ 10,776

11/30/1996

   $ 11,238    $ 11,216

12/31/1996

   $ 11,235    $ 11,184

1/31/1997

   $ 10,769    $ 10,729

2/28/1997

   $ 11,048    $ 11,039

3/31/1997

   $ 11,059    $ 10,999

4/30/1997

   $ 11,338    $ 11,297

5/31/1997

   $ 11,545    $ 11,503

6/30/1997

   $ 11,979    $ 11,878

7/31/1997

   $ 11,886    $ 11,786

8/31/1997

   $ 11,035    $ 10,974

9/30/1997

   $ 11,590    $ 11,500

10/31/1997

   $ 10,022    $ 9,947

11/30/1997

   $ 9,863    $ 9,736

12/31/1997

   $ 10,090    $ 10,016

1/31/1998

   $ 10,702    $ 10,678

2/28/1998

   $ 10,799    $ 10,864

3/31/1998

   $ 10,842    $ 10,897

4/30/1998

   $ 10,724    $ 10,735

5/31/1998

   $ 10,058    $ 10,117

6/30/1998

   $ 10,015    $ 10,139

7/31/1998

   $ 9,865    $ 10,076

8/31/1998

   $ 8,485    $ 8,711

9/30/1998

   $ 9,077    $ 9,286

10/31/1998

   $ 9,843    $ 10,081

11/30/1998

   $ 10,434    $ 10,707

12/31/1998

   $ 10,310    $ 10,624

1/31/1999

   $ 10,847    $ 11,264

2/28/1999

   $ 10,606    $ 10,978

3/31/1999

   $ 11,122    $ 11,439

4/30/1999

   $ 12,350    $ 12,610

5/31/1999

   $ 11,374    $ 11,573

6/30/1999

   $ 11,922    $ 12,149

7/31/1999

   $ 11,900    $ 12,139

8/31/1999

   $ 11,208    $ 11,455

9/30/1999

   $ 11,298    $ 11,501

10/31/1999

   $ 10,961    $ 11,233

11/30/1999

   $ 11,500    $ 11,828

12/31/1999

   $ 12,293    $ 12,496

1/31/2000

   $ 11,709    $ 12,045

2/29/2000

   $ 11,372    $ 11,762

3/31/2000

   $ 11,316    $ 11,659

4/30/2000

   $ 10,956    $ 11,345

5/31/2000

   $ 10,507    $ 10,942

6/30/2000

   $ 12,012    $ 12,523

7/31/2000

   $ 11,304    $ 11,761

8/31/2000

   $ 11,415    $ 11,885

9/30/2000

   $ 10,932    $ 11,362

10/31/2000

   $ 10,265    $ 10,631

11/30/2000

   $ 10,507    $ 10,867

12/31/2000

   $ 10,877    $ 11,252

1/31/2001

   $ 11,292    $ 11,706

2/28/2001

   $ 10,773    $ 11,172

3/31/2001

   $ 9,666    $ 9,986

4/30/2001

   $ 10,796    $ 11,161

5/31/2001

   $ 10,842    $ 11,225

6/30/2001

   $ 11,234    $ 11,581

7/31/2001

   $ 10,634    $ 10,968

8/31/2001

   $ 10,870    $ 11,209

9/30/2001

   $ 9,459    $ 9,746

10/31/2001

   $ 10,376    $ 10,693

11/30/2001

   $ 10,976    $ 11,307

12/31/2001

   $ 11,130    $ 11,462

1/31/2002

   $ 11,165    $ 11,514

2/28/2002

   $ 11,272    $ 11,623

3/31/2002

   $ 11,638    $ 11,988

4/30/2002

   $ 11,520    $ 11,871

5/31/2002

   $ 12,264    $ 12,646

6/30/2002

   $ 11,673    $ 12,022

7/31/2002

   $ 10,799    $ 11,121

8/31/2002

   $ 11,059    $ 11,385

9/30/2002

   $ 10,444    $ 10,749

10/31/2002

   $ 11,012    $ 11,326

11/30/2002

   $ 11,319    $ 11,624

12/31/2002

   $ 11,098    $ 11,407

1/31/2003

   $ 11,293    $ 11,613

2/28/2003

   $ 11,135    $ 11,448

3/31/2003

   $ 11,536    $ 11,852

4/30/2003

   $ 12,435    $ 12,791

5/31/2003

   $ 12,861    $ 13,219

6/30/2003

   $ 13,371    $ 13,731

7/31/2003

   $ 13,323    $ 13,687

8/31/2003

   $ 13,639    $ 14,012

9/30/2003

   $ 14,186    $ 14,553

10/31/2003

   $ 15,377    $ 15,784

11/30/2003

   $ 15,341    $ 15,719

12/31/2003

   $ 16,627    $ 17,050

1/31/2004

   $ 16,602    $ 17,026

2/29/2004

   $ 17,368    $ 17,811

3/31/2004

   $ 17,632    $ 18,061

4/30/2004

   $ 16,577    $ 16,990

5/31/2004

   $ 16,614    $ 17,031

6/30/2004

   $ 16,677    $ 17,064

7/31/2004

   $ 16,715    $ 17,108

8/31/2004

   $ 17,042    $ 17,420

 

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

 

2

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Australia Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Australian equity market, as measured by the MSCI Australia Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 24.95%, while the Index returned 24.31%.

 

One factor that may cause the performance of a fund to differ from that of its benchmark index is called “revenue differential”. In the case of the Fund, revenue differential is due to the difference in the foreign taxes withheld on the dividend income earned. The Index assumes the full foreign tax withholding rate of 30%, whereas the Fund is subject to a more favorable withholding tax rate of 15%. The reduced tax rate had a positive impact on the Fund’s performance for the reporting period, relative to the Index’s performance.

 

Now in its 13th year of economic expansion, characterized by low inflation and low interest rates, Australia’s economy began to see signs of slowing during the reporting period. Two factors posed a threat to Australia’s economic boom: an overheated housing market and a strong local currency.

 

Thanks in part to low interest rates, Australia experienced a housing boom during the reporting period, lifting consumer spending levels. By mid-2004, interest rates had started to rise, and housing prices began to fall. As housing prices fell, so did consumer spending levels, which contributed to a slow down in the overall economy.

 

The country’s strong currency also began to weigh on growth prospects. Although U.S. economic recovery increased export demand for Australia, the Australian dollar’s rapid gains against the U.S. dollar limited potential gains during the reporting period. However, for U.S.-based investors, the strengthening Australian currency meant enhanced returns on Australian-based investments during the reporting period.

 

Within the Fund, top holding BHP Billiton Ltd. (8.93% of the net assets of the Fund as of August 31, 2004) posted gains during the reporting period, in part due to increased demand from China. Westfield Group (3.99% of the net assets of the Fund as of August 31, 2004), which owns and manages shopping centers around the world, benefited from strong real estate prices in Australia and abroad during the reporting period.

 

Australian banks in the Fund’s top ten holdings generally performed well, with Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., and Westpac Banking Corp. Ltd. (6.83%, 6.01%, and 5.37%, respectively, of the net assets of the Fund as of August 31, 2004) all posting gains during the reporting period. National Australia Bank Ltd. (7.27% of the net assets of the Fund as of August 31, 2004), however, declined during the reporting period.

 

Publication and entertainment giant The News Corp. Ltd. (whose preferred and common shares represent 5.15% and 2.73%, respectively, of the net assets of the Fund as of August 31, 2004) declined during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  3


Managers’ Discussion & Analysis

 

iSHARES® MSCI BRAZIL INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

    Cumulative Total Returns

 
Year Ended 8/31/04

    Inception to 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
41.42%    41.83 %   42.35 %   (1.72 )%   (1.63 )%   0.65 %   (6.94 )%   (6.59 )%   2.74 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (7/10/00). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

Certain sectors and markets performed exceptionally well based on market conditions during the one-year period. Investors should not expect that such exceptional returns will be repeated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (7/14/00), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
BRAZIL
INDEX
FUND


   MSCI
BRAZIL
INDEX


7/10/2000

   $ 10,000    $ 10,000

7/31/2000

   $ 9,466    $ 9,457

8/31/2000

   $ 9,703    $ 9,697

9/30/2000

   $ 8,972    $ 9,078

10/31/2000

   $ 8,216    $ 8,368

11/30/2000

   $ 7,278    $ 7,432

12/31/2000

   $ 8,259    $ 8,481

1/31/2001

   $ 9,338    $ 9,608

2/28/2001

   $ 8,359    $ 8,619

3/31/2001

   $ 7,477    $ 7,641

4/30/2001

   $ 7,765    $ 8,033

5/31/2001

   $ 7,381    $ 7,617

6/30/2001

   $ 7,296    $ 7,505

7/31/2001

   $ 6,600    $ 6,882

8/31/2001

   $ 5,965    $ 6,245

9/30/2001

   $ 4,964    $ 5,235

10/31/2001

   $ 5,182    $ 5,447

11/30/2001

   $ 5,853    $ 6,096

12/31/2001

   $ 6,647    $ 6,955

1/31/2002

   $ 6,178    $ 6,454

2/28/2002

   $ 7,014    $ 7,363

3/31/2002

   $ 7,014    $ 7,367

4/30/2002

   $ 6,924    $ 7,284

5/31/2002

   $ 6,338    $ 6,701

6/30/2002

   $ 5,172    $ 5,467

7/31/2002

   $ 3,611    $ 3,884

8/31/2002

   $ 4,421    $ 4,769

9/30/2002

   $ 3,089    $ 3,326

10/31/2002

   $ 3,936    $ 4,275

11/30/2002

   $ 3,968    $ 4,325

12/31/2002

   $ 4,340    $ 4,728

1/31/2003

   $ 4,189    $ 4,571

2/28/2003

   $ 4,022    $ 4,398

3/31/2003

   $ 4,556    $ 5,003

4/30/2003

   $ 5,517    $ 6,057

5/31/2003

   $ 5,657    $ 6,202

6/30/2003

   $ 5,679    $ 6,212

7/31/2003

   $ 5,959    $ 6,554

8/31/2003

   $ 6,580    $ 7,218

9/30/2003

   $ 6,726    $ 7,348

10/31/2003

   $ 7,455    $ 8,146

11/30/2003

   $ 7,903    $ 8,634

12/31/2003

   $ 9,245    $ 10,165

1/31/2004

   $ 8,850    $ 9,757

2/29/2004

   $ 9,174    $ 10,123

3/31/2004

   $ 9,185    $ 10,124

4/30/2004

   $ 7,846    $ 8,637

5/31/2004

   $ 7,682    $ 8,485

6/30/2004

   $ 8,077    $ 8,914

7/31/2004

   $ 8,686    $ 9,664

8/31/2004

   $ 9,306    $ 10,274

 

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

 

4

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Brazil Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Brazilian equity market, as measured by the MSCI Brazil Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 41.42%, while the Index returned 42.35%.

 

Brazil continued to deliver one of the strongest equity market and currency performances in the world during the reporting period. Of course, there can be no guarantee of future performance.

 

During the reporting period, Brazil’s stock market gained amid prospects for accelerating economic expansion. During the course of the reporting period, President Luiz Inacio Lula da Silva continued to implement fiscal austerity measures in an attempt to attract investors from the global financial community. In September 2003, he passed a bill aimed at overhauling the tax system, including tax breaks for investment. In November, he introduced a bill that would revamp the power industry by allowing supply and demand to determine electricity prices. These actions seemingly paid off as economic growth improved. For the second quarter of 2004, gross domestic product (“GDP”) annual growth was a healthy 5.7%, marking three consecutive quarters of strong GDP growth.

 

Oil company Petroleo Brasileiro SA performed well during the reporting period. Its preferred and common shares, which represented 12.89% and 10.75%, respectively, of the net assets of the Fund as of August 31, 2004, benefited from higher oil prices.

 

The world’s largest iron ore exporter, Companhia Vale do Rio Doce (whose Class A preferred shares and ADR shares represented 8.69% and 7.11%, respectively, of the net assets of the Fund as of August 31, 2004) posted strong gains during the reporting period as demand from China had driven up the price of iron ore. Steel company Gerdau SA (whose preferred shares represented 3.12% of the Fund’s net assets as of August 31, 2004) also benefited from increased demand during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  5


Managers’ Discussion & Analysis

 

iSHARES® MSCI CANADA INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
18.70%    19.12 %   18.83 %   8.22 %   8.29 %   8.63 %   9.65 %   9.74 %   10.31 %

 

Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
18.70%    19.12 %   18.83 %   48.40 %   48.88 %   51.28 %   118.30 %   119.88 %   129.77 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
CANADA
INDEX
FUND


   MSCI
CANADA
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,088    $ 10,091

4/30/1996

   $ 10,462    $ 10,506

5/31/1996

   $ 10,639    $ 10,672

6/30/1996

   $ 10,344    $ 10,380

7/31/1996

   $ 10,030    $ 10,062

8/31/1996

   $ 10,463    $ 10,511

9/30/1996

   $ 10,877    $ 10,928

10/31/1996

   $ 11,726    $ 11,783

11/30/1996

   $ 12,546    $ 12,640

12/31/1996

   $ 12,115    $ 12,204

1/31/1997

   $ 12,678    $ 12,803

2/28/1997

   $ 12,569    $ 12,701

3/31/1997

   $ 11,907    $ 12,063

4/30/1997

   $ 12,174    $ 12,345

5/31/1997

   $ 13,183    $ 13,377

6/30/1997

   $ 13,351    $ 13,612

7/31/1997

   $ 14,211    $ 14,497

8/31/1997

   $ 13,445    $ 13,733

9/30/1997

   $ 14,226    $ 14,533

10/31/1997

   $ 13,545    $ 13,846

11/30/1997

   $ 13,165    $ 13,426

12/31/1997

   $ 13,436    $ 13,765

1/31/1998

   $ 13,215    $ 13,519

2/28/1998

   $ 14,322    $ 14,665

3/31/1998

   $ 15,318    $ 15,770

4/30/1998

   $ 15,369    $ 15,845

5/31/1998

   $ 15,157    $ 15,653

6/30/1998

   $ 14,533    $ 15,022

7/31/1998

   $ 13,466    $ 13,953

8/31/1998

   $ 10,529    $ 10,911

9/30/1998

   $ 10,986    $ 11,193

10/31/1998

   $ 12,029    $ 12,325

11/30/1998

   $ 12,454    $ 12,778

12/31/1998

   $ 12,567    $ 12,920

1/31/1999

   $ 13,518    $ 13,991

2/28/1999

   $ 12,717    $ 13,193

3/31/1999

   $ 13,283    $ 13,736

4/30/1999

   $ 14,651    $ 15,133

5/31/1999

   $ 14,213    $ 14,716

6/30/1999

   $ 14,844    $ 15,329

7/31/1999

   $ 14,886    $ 15,439

8/31/1999

   $ 14,710    $ 15,189

9/30/1999

   $ 15,122    $ 15,627

10/31/1999

   $ 15,990    $ 16,678

11/30/1999

   $ 16,435    $ 17,349

12/31/1999

   $ 18,364    $ 19,864

1/31/2000

   $ 18,119    $ 19,924

2/29/2000

   $ 18,943    $ 21,113

3/31/2000

   $ 20,022    $ 22,999

4/30/2000

   $ 19,800    $ 22,154

5/31/2000

   $ 20,034    $ 21,737

6/30/2000

   $ 21,937    $ 24,467

7/31/2000

   $ 22,582    $ 25,208

8/31/2000

   $ 24,598    $ 27,422

9/30/2000

   $ 23,320    $ 24,652

10/31/2000

   $ 21,693    $ 22,496

11/30/2000

   $ 19,385    $ 20,478

12/31/2000

   $ 19,771    $ 20,924

1/31/2001

   $ 20,900    $ 21,946

2/28/2001

   $ 17,780    $ 18,446

3/31/2001

   $ 16,176    $ 16,756

4/30/2001

   $ 17,439    $ 17,949

5/31/2001

   $ 17,691    $ 18,279

6/30/2001

   $ 16,963    $ 17,578

7/31/2001

   $ 16,844    $ 17,451

8/31/2001

   $ 16,001    $ 16,588

9/30/2001

   $ 14,625    $ 15,167

10/31/2001

   $ 14,670    $ 15,227

11/30/2001

   $ 16,001    $ 16,626

12/31/2001

   $ 16,240    $ 16,890

1/31/2002

   $ 16,136    $ 16,783

2/28/2002

   $ 15,971    $ 16,622

3/31/2002

   $ 16,540    $ 17,226

4/30/2002

   $ 16,390    $ 17,073

5/31/2002

   $ 16,779    $ 17,497

6/30/2002

   $ 15,821    $ 16,502

7/31/2002

   $ 14,040    $ 14,645

8/31/2002

   $ 14,205    $ 14,824

9/30/2002

   $ 13,052    $ 13,628

10/31/2002

   $ 13,441    $ 14,038

11/30/2002

   $ 14,190    $ 14,857

12/31/2002

   $ 14,097    $ 14,736

1/31/2003

   $ 14,473    $ 15,148

2/28/2003

   $ 14,983    $ 15,675

3/31/2003

   $ 14,773    $ 15,467

4/30/2003

   $ 15,704    $ 16,449

5/31/2003

   $ 17,025    $ 17,853

6/30/2003

   $ 17,460    $ 18,323

7/31/2003

   $ 17,505    $ 18,381

8/31/2003

   $ 18,391    $ 19,336

9/30/2003

   $ 18,691    $ 19,667

10/31/2003

   $ 19,937    $ 20,991

11/30/2003

   $ 20,538    $ 21,612

12/31/2003

   $ 21,617    $ 22,784

1/31/2004

   $ 21,785    $ 23,023

2/29/2004

   $ 22,257    $ 23,521

3/31/2004

   $ 22,181    $ 23,405

4/30/2004

   $ 20,337    $ 21,453

5/31/2004

   $ 20,657    $ 21,825

6/30/2004

   $ 21,754    $ 22,955

7/31/2004

   $ 21,830    $ 22,973

8/31/2004

   $ 21,830    $ 22,978

 

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

 

6

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Canada Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Canadian equity market, as measured by the MSCI Canada Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 18.70%, while the Index returned 18.83%.

 

Although the Canadian market entered the reporting period better poised than many for economic recovery, its growth was far from stellar over the course of the reporting period. Canada depends heavily on exports to the U.S., which generally account for 85% of Canada’s total exports, for its economic prosperity. During the reporting period, the Canadian currency appreciated swiftly against the U.S. dollar. The rise made Canadian exports more expensive to the American market, and export levels to the U.S. shrank, as the U.S. turned instead to less costly suppliers, such as China and Mexico.

 

Among the Fund’s ten largest holdings as of August 31, 2004, financial companies generally moved in step with their counterparts around the world. The Fund’s largest holding at 6.44% of net assets as of August 31, 2004, Manulife Financial Corp. logged strong gains during the reporting period, as did Sun Life Financial Inc. (3.57% of the net assets of the Fund as of August 31, 2004). Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce (5.81%, 4.40%, and 3.99%, respectively, of the net assets of the Fund as of August 31, 2004) all performed well during the reporting period. Royal Bank of Canada (6.31% of the net assets of the Fund as of August 31, 2004), on the other hand, posted a slight decline during the reporting period, largely due to underperformance in its U.S. business.

 

Nortel Networks Corp. (3.25% of the net assets of the Fund as of August 31, 2004) rebounded early in the reporting period, but lost traction and finished the period with modest gains.

 

MANAGERS’ DISCUSSION & ANALYSIS

  7


Managers’ Discussion & Analysis

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

    Cumulative Total Returns

 
Year Ended 8/31/04

    Inception to 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
20.21%    18.49 %   20.12 %   40.24 %   39.94 %   39.16 %   60.71 %   60.22 %   58.83 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (4/7/03). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (4/11/03), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
EMERGING
MARKETS
INDEX
FUND


   MSCI
EMERGING
MARKETS
INDEX


4/07/2003

   $ 10,000    $ 10,000

4/30/2003

   $ 10,388    $ 10,305

5/31/2003

   $ 11,238    $ 11,042

6/30/2003

   $ 11,785    $ 11,668

7/31/2003

   $ 12,483    $ 12,394

8/31/2003

   $ 13,371    $ 13,223

9/30/2003

   $ 13,457    $ 13,319

10/31/2003

   $ 14,633    $ 14,453

11/30/2003

   $ 14,878    $ 14,629

12/31/2003

   $ 16,068    $ 15,688

1/31/2004

   $ 16,545    $ 16,236

2/29/2004

   $ 17,165    $ 16,980

3/31/2004

   $ 17,300    $ 17,193

4/30/2004

   $ 15,874    $ 15,785

5/31/2004

   $ 15,869    $ 15,571

6/30/2004

   $ 15,930    $ 15,536

7/31/2004

   $ 15,541    $ 15,251

8/31/2004

   $ 16,070    $ 15,884

 

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

 

8

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Emerging Markets Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 20.21%, while the Index returned 20.12%.

 

Emerging markets generally posted healthy gains during the reporting period. Because many emerging markets depend on exports to the U.S. and to neighboring countries for their economic livelihood, the improving economic conditions in the U.S. and other major markets helped to lift share prices. For some emerging markets, however, a weak U.S. dollar limited export growth.

 

South Korea, South Africa and Taiwan, the three largest markets in the Fund, represent approximately 43% of the Fund’s net assets as of August 31, 2004.

 

South Korea grappled with a number of obstacles during the reporting period, but ultimately posted modest gains. Early in the reporting period, the International Monetary Fund cut its growth outlook for the country from 5.0% to 2.5%. Surging oil prices also hurt South Korea, which is the world’s fourth-largest oil importer. However, as a major exporter of electronics, South Korea benefited from signs of recovery in the U.S. during the reporting period. Samsung Electronics Co. Ltd., the largest Fund holding at 6.98% of net assets as of August 31, 2004, benefited from the increased export demand, but retraced most of its gains when demand for LCD televisions waned late in the reporting period. Korean steel manufacturer POSCO (2.87% of the net assets of the Fund as of August 31, 2004) continued to benefit from global growth as well as Korea’s strong currency as it converted foreign gains back into the local currency.

 

South Africa found its growth hindered by the strength of its currency, which gained against the U.S. dollar during the reporting period. Record high gold prices helped to mitigate the problem for Anglo American PLC (3.82% of the Fund’s net assets as of August 31, 2004), the largest mining company in the world, although it did implement cost-cutting measures to counter the currency’s rise and deliver positive returns.

 

The Taiwanese market also advanced during the reporting period. Because of Taiwan’s dependence on exports, signs of increasing global growth helped boost the equity market. Although improving economic conditions in the U.S. helped Taiwan’s export market, growing demand from China and Japan also contributed to export growth, helping Taiwan’s local economy. Demand in the electronics sector waned late in the reporting period, causing Taiwan Semiconductor Manufacturing Co. Ltd. (2.95% of the net assets of the Fund as of August 31, 2004) to post a loss during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  9


Manager’s Discussion & Analysis

 

iSHARES® MSCI HONG KONG INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
22.69%    22.59 %   23.40 %   0.18 %   0.26 %   1.34 %   0.80 %   0.84 %   2.89 %

 

Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
22.69%    22.59 %   23.40 %   0.89 %   1.31 %   6.86 %   6.99 %   7.36 %   27.30 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
HONG
KONG
INDEX
FUND


   MSCI
HONG
KONG
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,429    $ 10,460

4/30/1996

   $ 10,468    $ 10,484

5/31/1996

   $ 10,826    $ 10,799

6/30/1996

   $ 10,569    $ 10,549

7/31/1996

   $ 10,031    $ 10,068

8/31/1996

   $ 10,322    $ 10,398

9/30/1996

   $ 10,979    $ 11,108

10/31/1996

   $ 11,414    $ 11,575

11/30/1996

   $ 12,418    $ 12,523

12/31/1996

   $ 12,315    $ 12,458

1/31/1997

   $ 11,948    $ 12,191

2/28/1997

   $ 11,869    $ 12,171

3/31/1997

   $ 11,048    $ 11,364

4/30/1997

   $ 11,207    $ 11,549

5/31/1997

   $ 12,609    $ 13,009

6/30/1997

   $ 13,175    $ 13,675

7/31/1997

   $ 13,900    $ 14,529

8/31/1997

   $ 12,160    $ 12,625

9/30/1997

   $ 12,911    $ 13,424

10/31/1997

   $ 9,122    $ 9,549

11/30/1997

   $ 9,006    $ 9,422

12/31/1997

   $ 9,022    $ 9,557

1/31/1998

   $ 7,648    $ 8,226

2/28/1998

   $ 9,197    $ 9,855

3/31/1998

   $ 8,964    $ 9,651

4/30/1998

   $ 7,989    $ 8,630

5/31/1998

   $ 6,881    $ 7,453

6/30/1998

   $ 6,540    $ 7,058

7/31/1998

   $ 6,056    $ 6,535

8/31/1998

   $ 5,566    $ 6,098

9/30/1998

   $ 6,452    $ 7,100

10/31/1998

   $ 8,415    $ 9,459

11/30/1998

   $ 8,397    $ 9,443

12/31/1998

   $ 8,191    $ 9,279

1/31/1999

   $ 7,568    $ 8,661

2/28/1999

   $ 7,629    $ 8,747

3/31/1999

   $ 8,648    $ 9,895

4/30/1999

   $ 10,614    $ 12,102

5/31/1999

   $ 9,921    $ 11,133

6/30/1999

   $ 10,913    $ 12,197

7/31/1999

   $ 10,588    $ 11,805

8/31/1999

   $ 10,604    $ 11,913

9/30/1999

   $ 10,210    $ 11,437

10/31/1999

   $ 10,631    $ 12,036

11/30/1999

   $ 11,734    $ 13,599

12/31/1999

   $ 12,614    $ 14,801

1/31/2000

   $ 11,637    $ 13,677

2/29/2000

   $ 12,117    $ 14,481

3/31/2000

   $ 12,361    $ 14,871

4/30/2000

   $ 11,537    $ 13,479

5/31/2000

   $ 10,370    $ 11,941

6/30/2000

   $ 11,139    $ 12,870

7/31/2000

   $ 11,791    $ 13,743

8/31/2000

   $ 12,167    $ 13,868

9/30/2000

   $ 11,092    $ 12,734

10/31/2000

   $ 10,228    $ 11,882

11/30/2000

   $ 9,851    $ 11,465

12/31/2000

   $ 10,846    $ 12,619

1/31/2001

   $ 11,225    $ 12,987

2/28/2001

   $ 11,068    $ 12,691

3/31/2001

   $ 9,867    $ 11,354

4/30/2001

   $ 9,858    $ 11,350

5/31/2001

   $ 9,738    $ 11,222

6/30/2001

   $ 9,229    $ 10,635

7/31/2001

   $ 8,989    $ 10,370

8/31/2001

   $ 8,409    $ 9,727

9/30/2001

   $ 7,232    $ 8,399

10/31/2001

   $ 7,505    $ 8,712

11/30/2001

   $ 8,353    $ 9,700

12/31/2001

   $ 8,787    $ 10,177

1/31/2002

   $ 8,559    $ 9,929

2/28/2002

   $ 8,218    $ 9,505

3/31/2002

   $ 8,702    $ 10,062

4/30/2002

   $ 9,223    $ 10,637

5/31/2002

   $ 8,910    $ 10,303

6/30/2002

   $ 8,360    $ 9,680

7/31/2002

   $ 7,991    $ 9,281

8/31/2002

   $ 7,574    $ 8,827

9/30/2002

   $ 6,986    $ 8,198

10/31/2002

   $ 7,261    $ 8,493

11/30/2002

   $ 7,725    $ 9,025

12/31/2002

   $ 7,118    $ 8,348

1/31/2003

   $ 7,166    $ 8,395

2/28/2003

   $ 7,069    $ 8,294

3/31/2003

   $ 6,673    $ 7,865

4/30/2003

   $ 6,654    $ 7,854

5/31/2003

   $ 7,214    $ 8,524

6/30/2003

   $ 7,311    $ 8,639

7/31/2003

   $ 7,774    $ 9,188

8/31/2003

   $ 8,721    $ 10,316

9/30/2003

   $ 9,223    $ 10,893

10/31/2003

   $ 9,619    $ 11,361

11/30/2003

   $ 9,561    $ 11,299

12/31/2003

   $ 9,738    $ 11,527

1/31/2004

   $ 10,689    $ 12,651

2/29/2004

   $ 11,013    $ 13,060

3/31/2004

   $ 10,336    $ 12,279

4/30/2004

   $ 9,846    $ 11,684

5/31/2004

   $ 9,836    $ 11,694

6/30/2004

   $ 9,856    $ 11,726

7/31/2004

   $ 9,983    $ 11,885

8/31/2004

   $ 10,699    $ 12,729

 

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

 

10

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Hong Kong Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Hong Kong equity market, as measured by the MSCI Hong Kong Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 22.69%, while the Index returned 23.40%.

 

The Hong Kong market delivered solid gains during the reporting period. Recovering from the conditions of the previous reporting period, when rising unemployment, the SARS virus and a global economic slowdown all took their toll, Hong Kong’s economy appeared to be coming back strongly during the reporting period. By some estimates, gross domestic product (GDP) is on track to grow a healthy 6.5% in 2004. Importantly, real estate – an important segment of Hong Kong’s economy – sprang back to life after languishing in prior reporting periods.

 

The recovering real estate market was a driver of both market and Fund performance during the reporting period. The strongest performer among the Fund’s ten largest holdings as of August 31, 2004 was Wharf (Holdings) Ltd. (2.82% of the net assets of the Fund as of August 31, 2004), which gained over 40%. The Fund’s three largest holdings, Hutchison Whampoa Ltd., Cheung Kong (Holdings) Ltd., and Sun Hung Kai Properties Ltd. (13.44%, 9.49%, and 9.09%, respectively, of the net assets of the Fund as of August 31, 2004) all posted gains during the reporting period. Swire Pacific Ltd. Class A shares (4.76% of the Fund’s net assets as of August 31, 2004) and BOC Hong Kong Holdings Ltd. (4.72% of the net assets of the Fund as of August 31, 2004) also performed well during the reporting period, logging some of the best gains among the Fund’s ten largest holdings as of August 31, 2004.

 

As the economic landscape strengthened in Hong Kong and the region, utilities companies also gained ground. CLP Holdings Ltd., Hong Kong & China Gas Co. Ltd. and Hongkong Electric Holdings Ltd. (7.78%, 4.62% and 4.36%, respectively, of the Fund’s net assets as of August 31, 2004) all performed well during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  11


Managers’ Discussion & Analysis

 

iSHARES® MSCI MALAYSIA INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
11.01%    7.88 %   12.16 %   4.47 %   3.83 %   5.37 %   (6.11 )%   (6.40 )%   (4.92 )%
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
11.01%    7.88 %   12.16 %   24.44 %   20.69 %   29.87 %   (41.38 )%   (42.91 )%   (34.81 )%

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. In the case of the Malaysia Fund, which has a NAV determined prior to the opening of the regular trading day on the American Stock Exchange (the “Amex”), the market return will use the midpoint of the bid/ask spread as of the opening of regular trading on the Amex. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
MALAYSIA
INDEX
FUND


   MSCI
MALAYSIA
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,438    $ 10,445

4/30/1996

   $ 10,899    $ 10,993

5/31/1996

   $ 10,498    $ 10,565

6/30/1996

   $ 10,551    $ 10,607

7/31/1996

   $ 9,894    $ 9,962

8/31/1996

   $ 10,428    $ 10,503

9/30/1996

   $ 10,542    $ 10,680

10/31/1996

   $ 10,783    $ 10,902

11/30/1996

   $ 11,237    $ 11,348

12/31/1996

   $ 11,320    $ 11,460

1/31/1997

   $ 11,418    $ 11,642

2/28/1997

   $ 11,834    $ 12,152

3/31/1997

   $ 11,169    $ 11,473

4/30/1997

   $ 9,922    $ 10,185

5/31/1997

   $ 10,141    $ 10,398

6/30/1997

   $ 9,877    $ 10,126

7/31/1997

   $ 8,879    $ 9,138

8/31/1997

   $ 6,229    $ 6,378

9/30/1997

   $ 5,812    $ 5,913

10/31/1997

   $ 4,622    $ 4,680

11/30/1997

   $ 3,713    $ 3,685

12/31/1997

   $ 3,744    $ 3,669

1/31/1998

   $ 3,325    $ 3,257

2/28/1998

   $ 4,877    $ 4,887

3/31/1998

   $ 4,763    $ 4,761

4/30/1998

   $ 4,048    $ 4,012

5/31/1998

   $ 3,340    $ 3,311

6/30/1998

   $ 2,572    $ 2,566

7/31/1998

   $ 2,298    $ 2,292

8/31/1998

   $ 1,648    $ 1,658

9/30/1998

   $ 2,094    $ 1,546

10/31/1998

   $ 1,851    $ 1,707

11/30/1998

   $ 2,253    $ 2,147

12/31/1998

   $ 2,646    $ 2,539

1/31/1999

   $ 2,663    $ 2,578

2/28/1999

   $ 2,428    $ 2,839

3/31/1999

   $ 2,251    $ 2,628

4/30/1999

   $ 4,058    $ 3,651

5/31/1999

   $ 4,570    $ 4,074

6/30/1999

   $ 4,999    $ 4,506

7/31/1999

   $ 4,747    $ 4,299

8/31/1999

   $ 4,711    $ 5,020

9/30/1999

   $ 4,112    $ 4,373

10/31/1999

   $ 4,652    $ 4,948

11/30/1999

   $ 4,601    $ 4,892

12/31/1999

   $ 5,107    $ 5,441

1/31/2000

   $ 5,832    $ 6,250

2/29/2000

   $ 6,303    $ 6,711

3/31/2000

   $ 6,228    $ 6,652

4/30/2000

   $ 5,781    $ 6,138

5/31/2000

   $ 5,958    $ 6,328

6/30/2000

   $ 5,351    $ 5,666

7/31/2000

   $ 5,115    $ 5,406

8/31/2000

   $ 5,067    $ 5,359

9/30/2000

   $ 4,481    $ 4,720

10/31/2000

   $ 4,761    $ 5,036

11/30/2000

   $ 4,634    $ 4,919

12/31/2000

   $ 4,297    $ 4,573

1/31/2001

   $ 4,638    $ 4,936

2/28/2001

   $ 4,536    $ 4,823

3/31/2001

   $ 4,135    $ 4,400

4/30/2001

   $ 3,692    $ 3,952

5/31/2001

   $ 3,598    $ 3,862

6/30/2001

   $ 3,726    $ 4,001

7/31/2001

   $ 4,178    $ 4,491

8/31/2001

   $ 4,397    $ 4,739

9/30/2001

   $ 3,984    $ 4,284

10/31/2001

   $ 3,907    $ 4,200

11/30/2001

   $ 4,139    $ 4,459

12/31/2001

   $ 4,493    $ 4,842

1/31/2002

   $ 4,770    $ 5,149

2/28/2002

   $ 4,710    $ 5,078

3/31/2002

   $ 5,099    $ 5,512

4/30/2002

   $ 5,428    $ 5,873

5/31/2002

   $ 5,073    $ 5,494

6/30/2002

   $ 4,995    $ 5,417

7/31/2002

   $ 4,969    $ 5,405

8/31/2002

   $ 4,917    $ 5,349

9/30/2002

   $ 4,415    $ 4,803

10/31/2002

   $ 4,597    $ 5,011

11/30/2002

   $ 4,415    $ 4,811

12/31/2002

   $ 4,523    $ 4,944

1/31/2003

   $ 4,699    $ 5,136

2/28/2003

   $ 4,567    $ 4,996

3/31/2003

   $ 4,461    $ 4,888

4/30/2003

   $ 4,443    $ 4,873

5/31/2003

   $ 4,743    $ 5,207

6/30/2003

   $ 4,919    $ 5,398

7/31/2003

   $ 5,140    $ 5,655

8/31/2003

   $ 5,281    $ 5,813

9/30/2003

   $ 5,193    $ 5,720

10/31/2003

   $ 5,863    $ 6,466

11/30/2003

   $ 5,625    $ 6,217

12/31/2003

   $ 5,656    $ 6,259

1/31/2004

   $ 5,889    $ 6,523

2/29/2004

   $ 6,355    $ 7,044

3/31/2004

   $ 6,472    $ 7,175

4/30/2004

   $ 6,024    $ 6,683

5/31/2004

   $ 5,755    $ 6,384

6/30/2004

   $ 5,826    $ 6,475

7/31/2004

   $ 5,916    $ 6,569

8/31/2004

   $ 5,862    $ 6,519

 

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

 

12

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Malaysia Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Malaysian equity market, as measured by the MSCI Malaysia Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 11.01%, while the Index returned 12.16%.

 

Recovering from the repercussions of a sluggish global economy, the SARS virus and the terrorist bombings in neighboring Bali, the Malaysian market rebounded during the reporting period.

 

Because Malaysia’s economy relies heavily on exports, it generally benefited during the reporting period from the upswing in economic growth both in the U.S. and among its Asian neighbors. However, Malaysia competes with China for much of its export trade with Europe and other Asian countries. Malaysia’s currency, the ringgit, is pegged to the U.S. dollar. During the reporting period, the U.S. dollar experienced volatility against both the euro and the Japanese yen, affecting Malaysia’s exporters. Nevertheless, export-based companies generally logged gains during the year. Tourism, another important industry for Malaysia, also rebounded during the reporting period as economic conditions in Asia improved.

 

One of Malaysia’s leading exports is palm oil. IOI Corp. Bhd., a major producer of palm oil and rubber, which represented 3.67% of the Fund’s net assets as of August 31, 2004, was the best performer among the Fund’s ten largest holdings, thanks largely to increased regional demand.

 

Export-related companies Malaysia International Shipping Corp. Bhd. (3.82% of the net assets of the Fund as of August 31, 2004), British American Tobacco (Malaysia) Bhd. (3.81% of the net assets of the Fund as of August 31, 2004) and Sime Darby Bhd. (4.26% of the net assets of the Fund as of August 31, 2004) also benefited from the increase in foreign demand and a healthier economic environment.

 

The improved economic climate also benefited Telekom Malaysia Bhd. (5.80% of the net assets of the Fund as of August 31, 2004), which was a strong performer during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  13


Managers’ Discussion & Analysis

 

iSHARES® MSCI MEXICO INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
30.28%    30.84 %   28.28 %   9.72 %   9.92 %   10.79 %   10.45 %   10.50 %   12.33 %
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
30.28%    30.84 %   28.28 %   58.99 %   60.49 %   66.94 %   132.18 %   133.05 %   168.11 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
MEXICO
INDEX
FUND


   MSCI
MEXICO
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,864    $ 10,916

4/30/1996

   $ 11,437    $ 11,543

5/31/1996

   $ 11,618    $ 11,621

6/30/1996

   $ 11,427    $ 11,489

7/31/1996

   $ 10,683    $ 10,746

8/31/1996

   $ 11,593    $ 11,740

9/30/1996

   $ 11,683    $ 11,723

10/31/1996

   $ 10,828    $ 11,020

11/30/1996

   $ 11,311    $ 11,492

12/31/1996

   $ 11,552    $ 11,787

1/31/1997

   $ 12,408    $ 12,801

2/28/1997

   $ 12,820    $ 13,258

3/31/1997

   $ 12,629    $ 12,993

4/30/1997

   $ 12,619    $ 13,054

5/31/1997

   $ 13,283    $ 13,823

6/30/1997

   $ 14,813    $ 15,407

7/31/1997

   $ 17,027    $ 17,756

8/31/1997

   $ 15,675    $ 16,326

9/30/1997

   $ 17,874    $ 18,776

10/31/1997

   $ 14,575    $ 15,294

11/30/1997

   $ 15,893    $ 16,780

12/31/1997

   $ 17,159    $ 18,142

1/31/1998

   $ 14,782    $ 15,596

2/28/1998

   $ 15,311    $ 16,141

3/31/1998

   $ 16,017    $ 16,986

4/30/1998

   $ 16,349    $ 17,368

5/31/1998

   $ 14,107    $ 15,038

6/30/1998

   $ 13,225    $ 14,108

7/31/1998

   $ 13,287    $ 13,935

8/31/1998

   $ 8,749    $ 9,162

9/30/1998

   $ 10,011    $ 10,916

10/31/1998

   $ 11,381    $ 12,225

11/30/1998

   $ 10,723    $ 11,472

12/31/1998

   $ 11,153    $ 12,060

1/31/1999

   $ 11,110    $ 11,906

2/28/1999

   $ 12,107    $ 13,075

3/31/1999

   $ 14,329    $ 15,528

4/30/1999

   $ 15,922    $ 17,356

5/31/1999

   $ 15,185    $ 16,918

6/30/1999

   $ 16,746    $ 18,369

7/31/1999

   $ 15,131    $ 16,603

8/31/1999

   $ 14,604    $ 16,060

9/30/1999

   $ 14,451    $ 15,848

10/31/1999

   $ 15,062    $ 16,691

11/30/1999

   $ 17,243    $ 19,036

12/31/1999

   $ 19,642    $ 21,716

1/31/2000

   $ 17,341    $ 19,510

2/29/2000

   $ 19,632    $ 22,178

3/31/2000

   $ 20,057    $ 22,697

4/30/2000

   $ 17,854    $ 20,204

5/31/2000

   $ 16,469    $ 18,161

6/30/2000

   $ 18,094    $ 20,422

7/31/2000

   $ 17,974    $ 19,957

8/31/2000

   $ 18,723    $ 20,892

9/30/2000

   $ 17,110    $ 19,276

10/31/2000

   $ 17,301    $ 19,694

11/30/2000

   $ 15,632    $ 17,685

12/31/2000

   $ 15,169    $ 17,266

1/31/2001

   $ 17,263    $ 19,870

2/28/2001

   $ 16,024    $ 18,513

3/31/2001

   $ 15,675    $ 17,917

4/30/2001

   $ 16,959    $ 19,631

5/31/2001

   $ 18,322    $ 21,260

6/30/2001

   $ 18,614    $ 21,588

7/31/2001

   $ 17,871    $ 20,959

8/31/2001

   $ 17,408    $ 20,273

9/30/2001

   $ 14,312    $ 17,013

10/31/2001

   $ 15,060    $ 18,111

11/30/2001

   $ 15,763    $ 18,860

12/31/2001

   $ 17,214    $ 20,457

1/31/2002

   $ 18,672    $ 22,148

2/28/2002

   $ 18,125    $ 21,515

3/31/2002

   $ 20,153    $ 23,863

4/30/2002

   $ 19,869    $ 23,448

5/31/2002

   $ 18,342    $ 21,613

6/30/2002

   $ 16,314    $ 19,414

7/31/2002

   $ 15,300    $ 18,039

8/31/2002

   $ 15,551    $ 18,493

9/30/2002

   $ 14,001    $ 16,505

10/31/2002

   $ 14,856    $ 17,591

11/30/2002

   $ 15,505    $ 18,424

12/31/2002

   $ 14,954    $ 17,657

1/31/2003

   $ 14,077    $ 16,725

2/28/2003

   $ 13,781    $ 16,335

3/31/2003

   $ 13,900    $ 16,611

4/30/2003

   $ 16,009    $ 19,067

5/31/2003

   $ 16,601    $ 19,596

6/30/2003

   $ 17,289    $ 20,383

7/31/2003

   $ 18,071    $ 21,258

8/31/2003

   $ 17,822    $ 20,900

9/30/2003

   $ 18,260    $ 21,324

10/31/2003

   $ 18,876    $ 21,868

11/30/2003

   $ 19,516    $ 22,682

12/31/2003

   $ 20,374    $ 23,453

1/31/2004

   $ 22,174    $ 25,449

2/29/2004

   $ 23,518    $ 26,861

3/31/2004

   $ 24,622    $ 28,121

4/30/2004

   $ 22,762    $ 26,108

5/31/2004

   $ 23,002    $ 26,414

6/30/2004

   $ 23,350    $ 26,894

7/31/2004

   $ 22,930    $ 26,477

8/31/2004

   $ 23,218    $ 26,812

 

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

 

14

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Mexico Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Mexican equity market, as measured by the MSCI Mexico Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 30.28%, while the Index returned 28.28%.

 

Regulatory restraints, such as those imposed by the Securities and Exchange Commission and the Internal Revenue Service, can restrict the Fund’s ability to hold a given index constituent at its index weight, resulting in differences between a fund’s holdings and the securities in its underlying index. Once such constraint, the 5/50 Rule, precludes the sum of all the securities weighted 5% or more in a fund’s portfolio from exceeding 50% of a fund’s total assets. As of August 31, 2004, nearly 80% of the Index was represented by securities each having a weighting of 5% or more of the Index. To comply with the 5/50 Rule, the Fund was obligated to underweight several of the Index’s largest weighted constituents and to overweight others. The combined effect of all the misweights in the Fund had a net positive impact on the Fund’s return relative to the Index’s return during the reporting period.

 

Mexico’s equity markets delivered gains for the reporting period. Because Mexico depends on the U.S. for 80% of its exports, its economic health is closely tied to that of the U.S. As economic conditions improved during the reporting period, demand for Mexico’s products, particularly commodities, increased. The growth was not all positive as mixed economic news in the U. S., in addition to rising oil prices, put some pressure on Mexican markets.

 

A growing housing market also contributed to market performance. Although Mexico’s President Fox has not had great success in passing economic reform, he has taken steps designed to improve the mortgage market. These steps have contributed to a housing boom that has increased construction levels as well as consumer spending. Benefiting from both export and domestic demand, cement company Cemex SA de CV (9.20% of the net assets of the Fund as of August 31, 2004) performed well during the reporting period.

 

Because more than 37% of the Fund’s net assets as of August 31, 2004 are comprised of Mexico’s two largest telecommunications companies, the sector’s performance is important to the Fund’s performance. Global telecommunications companies, particularly wireless telecommunications, generally posted gains during the reporting period, and Mexico’s telecommunications companies moved in step with this trend. The largest Fund holding at 20.27% of net assets as of August 31, 2004, America Movil SA de CV Series L, was a strong performer during the reporting period. Telefonos de Mexico SA de CV Series L (17.50% of the net assets of the Fund as of August 31, 2004) also posted gains.

 

MANAGERS’ DISCUSSION & ANALYSIS

  15


Managers’ Discussion & Analysis

 

iSHARES® MSCI PACIFIC EX-JAPAN INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

    Cumulative Total Returns

 
Year Ended 8/31/04

    Inception to 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
24.74%    23.03 %   24.33 %   17.43 %   17.43 %   17.40 %   58.12 %   58.11 %   57.95 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (10/25/01). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (10/26/01), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
PACIFIC
EX-JAPAN
INDEX
FUND


   MSCI
PACIFIC
FREE
EX-JAPAN
INDEX


10/25/2001

   $ 10,000    $ 10,000

10/31/2001

   $ 9,890    $ 9,895

11/30/2001

   $ 10,630    $ 10,623

12/31/2001

   $ 10,958    $ 10,961

1/31/2002

   $ 11,067    $ 11,093

2/28/2002

   $ 10,944    $ 10,969

3/31/2002

   $ 11,390    $ 11,419

4/30/2002

   $ 11,436    $ 11,462

5/31/2002

   $ 11,800    $ 11,831

6/30/2002

   $ 11,183    $ 11,205

7/31/2002

   $ 10,508    $ 10,526

8/31/2002

   $ 10,551    $ 10,567

9/30/2002

   $ 9,870    $ 9,874

10/31/2002

   $ 10,412    $ 10,417

11/30/2002

   $ 10,657    $ 10,666

12/31/2002

   $ 10,330    $ 10,340

1/31/2003

   $ 10,416    $ 10,432

2/28/2003

   $ 10,283    $ 10,296

3/31/2003

   $ 10,397    $ 10,402

4/30/2003

   $ 10,955    $ 10,969

5/31/2003

   $ 11,511    $ 11,525

6/30/2003

   $ 11,942    $ 11,942

7/31/2003

   $ 12,141    $ 12,148

8/31/2003

   $ 12,676    $ 12,704

9/30/2003

   $ 13,228    $ 13,240

10/31/2003

   $ 14,158    $ 14,176

11/30/2003

   $ 14,131    $ 14,136

12/31/2003

   $ 15,054    $ 15,070

1/31/2004

   $ 15,436    $ 15,458

2/29/2004

   $ 16,035    $ 16,051

3/31/2004

   $ 15,976    $ 15,983

4/30/2004

   $ 15,139    $ 15,147

5/31/2004

   $ 15,125    $ 15,132

6/30/2004

   $ 15,212    $ 15,210

7/31/2004

   $ 15,342    $ 15,341

8/31/2004

   $ 15,811    $ 15,795

 

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

 

16

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Pacific ex-Japan Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Australia, Hong Kong, New Zealand and Singapore equity markets, as measured by the MSCI Pacific Free ex-Japan Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 24.74%, while the Index returned 24.33%.

 

The markets comprising the Index – Australia, Hong Kong, New Zealand and Singapore – all posted gains during the reporting period, responding in accordance with the overall global economic recovery.

 

Australia’s economy, now in its 13th year of economic prosperity, began to see signs of slowing during the reporting period. Partly to blame was its strong currency, as a rising Australian dollar made Australian goods more expensive to its export market. For U.S.-based investors, however, the stronger currency boosted returns, and the Australian market contributed the most, in U.S dollar terms, to the Fund’s overall performance during the reporting period. BHP Billiton Ltd. (5.74% of the net assets of the Fund as of August 31, 2004) logged gains. Westfield Group (2.57% of the net assets of the Fund as of August 31, 2004), which owns and manages shopping centers around the world, benefited from strong real estate prices in Australia and abroad during the reporting period. The financial sector also performed well, with Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., and Westpac Banking Corp. Ltd. (4.44%, 3.86% and 3.46%, respectively, of the Fund’s net assets as of August 31, 2004) all posting gains during the reporting period.

 

For Hong Kong, a recovering real estate market was the main driver of performance. The sector continued to benefit from the government’s efforts to reverse deflation in the property market. Hutchison Whampoa Ltd., Cheung Kong (Holdings) Ltd. and Sun Hung Kai Properties Ltd. (2.80%, 2.16%, and 1.96%, respectively, of the net assets of the Fund as of August 31, 2004) all posted gains during the reporting period.

 

Singapore’s economic livelihood is largely dependent on exports, both to the U.S. and to its Asian neighbors. During the reporting period, regional trade strengthened, particularly with China. Improving economic conditions in the U.S. also helped the Singapore market as demand for exports to the U.S. continued to grow.

 

MANAGERS’ DISCUSSION & ANALYSIS

  17


Managers’ Discussion & Analysis

 

iSHARES® MSCI SINGAPORE INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
23.47%    23.31 %   23.48 %   (1.90 )%   (2.05 )%   (2.29 )%   (5.60 )%   (5.54 )%   (4.99 )%
Cumulative Total Returns

 
Year Ended 8/31/04

    Five Years Ended 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
23.47%    23.31 %   23.48 %   (9.16 )%   (9.86 )%   (10.92 )%   (38.62 )%   (38.33 )%   (35.24 )%

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
SINGAPORE
INDEX
FUND


   MSCI
SINGAPORE
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,278    $ 10,303

4/30/1996

   $ 10,302    $ 10,279

5/31/1996

   $ 9,714    $ 9,687

6/30/1996

   $ 9,722    $ 9,567

7/31/1996

   $ 8,979    $ 8,824

8/31/1996

   $ 9,327    $ 9,191

9/30/1996

   $ 9,352    $ 9,203

10/31/1996

   $ 8,934    $ 8,771

11/30/1996

   $ 9,548    $ 9,354

12/31/1996

   $ 9,720    $ 9,578

1/31/1997

   $ 9,999    $ 9,934

2/28/1997

   $ 9,720    $ 9,665

3/31/1997

   $ 8,803    $ 8,716

4/30/1997

   $ 8,524    $ 8,412

5/31/1997

   $ 9,073    $ 8,981

6/30/1997

   $ 8,934    $ 8,938

7/31/1997

   $ 8,942    $ 8,886

8/31/1997

   $ 7,137    $ 6,958

9/30/1997

   $ 7,294    $ 7,183

10/31/1997

   $ 5,991    $ 5,948

11/30/1997

   $ 6,066    $ 6,220

12/31/1997

   $ 5,456    $ 5,702

1/31/1998

   $ 4,508    $ 4,813

2/28/1998

   $ 5,687    $ 5,975

3/31/1998

   $ 5,588    $ 5,823

4/30/1998

   $ 5,167    $ 5,400

5/31/1998

   $ 4,154    $ 4,380

6/30/1998

   $ 3,560    $ 3,774

7/31/1998

   $ 3,577    $ 3,855

8/31/1998

   $ 2,763    $ 3,106

9/30/1998

   $ 3,307    $ 3,668

10/31/1998

   $ 4,404    $ 4,698

11/30/1998

   $ 5,191    $ 5,514

12/31/1998

   $ 5,159    $ 5,498

1/31/1999

   $ 4,981    $ 5,315

2/28/1999

   $ 4,914    $ 5,244

3/31/1999

   $ 5,117    $ 5,478

4/30/1999

   $ 6,605    $ 7,083

5/31/1999

   $ 6,334    $ 6,609

6/30/1999

   $ 6,977    $ 7,342

7/31/1999

   $ 6,943    $ 7,451

8/31/1999

   $ 6,756    $ 7,270

9/30/1999

   $ 6,560    $ 7,076

10/31/1999

   $ 6,892    $ 7,421

11/30/1999

   $ 7,224    $ 7,861

12/31/1999

   $ 8,014    $ 8,806

1/31/2000

   $ 6,981    $ 7,634

2/29/2000

   $ 6,361    $ 6,948

3/31/2000

   $ 6,499    $ 6,958

4/30/2000

   $ 6,732    $ 7,377

5/31/2000

   $ 5,638    $ 5,999

6/30/2000

   $ 6,508    $ 6,810

7/31/2000

   $ 6,482    $ 6,814

8/31/2000

   $ 6,669    $ 7,047

9/30/2000

   $ 6,079    $ 6,450

10/31/2000

   $ 6,035    $ 6,445

11/30/2000

   $ 5,921    $ 6,326

12/31/2000

   $ 6,006    $ 6,365

1/31/2001

   $ 6,006    $ 6,384

2/28/2001

   $ 5,863    $ 6,235

3/31/2001

   $ 4,878    $ 5,184

4/30/2001

   $ 4,968    $ 5,244

5/31/2001

   $ 4,771    $ 5,026

6/30/2001

   $ 4,842    $ 5,095

7/31/2001

   $ 4,735    $ 4,974

8/31/2001

   $ 4,808    $ 5,067

9/30/2001

   $ 3,917    $ 4,090

10/31/2001

   $ 3,944    $ 4,113

11/30/2001

   $ 4,205    $ 4,419

12/31/2001

   $ 4,611    $ 4,857

1/31/2002

   $ 5,156    $ 5,441

2/28/2002

   $ 4,938    $ 5,210

3/31/2002

   $ 5,147    $ 5,490

4/30/2002

   $ 5,002    $ 5,321

5/31/2002

   $ 4,947    $ 5,257

6/30/2002

   $ 4,675    $ 4,928

7/31/2002

   $ 4,584    $ 4,828

8/31/2002

   $ 4,548    $ 4,818

9/30/2002

   $ 4,021    $ 4,269

10/31/2002

   $ 4,393    $ 4,680

11/30/2002

   $ 4,166    $ 4,433

12/31/2002

   $ 4,056    $ 4,330

1/31/2003

   $ 3,880    $ 4,141

2/28/2003

   $ 3,862    $ 4,100

3/31/2003

   $ 3,807    $ 4,040

4/30/2003

   $ 3,834    $ 4,076

5/31/2003

   $ 4,213    $ 4,445

6/30/2003

   $ 4,463    $ 4,703

7/31/2003

   $ 4,786    $ 5,050

8/31/2003

   $ 4,971    $ 5,244

9/30/2003

   $ 5,155    $ 5,413

10/31/2003

   $ 5,451    $ 5,733

11/30/2003

   $ 5,405    $ 5,689

12/31/2003

   $ 5,666    $ 5,958

1/31/2004

   $ 5,968    $ 6,258

2/29/2004

   $ 6,015    $ 6,330

3/31/2004

   $ 5,996    $ 6,300

4/30/2004

   $ 5,855    $ 6,197

5/31/2004

   $ 5,751    $ 6,062

6/30/2004

   $ 5,855    $ 6,162

7/31/2004

   $ 6,005    $ 6,330

8/31/2004

   $ 6,137    $ 6,476

 

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

 

18

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Singapore Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Singaporean equity market, as measured by the MSCI Singapore Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 23.47%, while the Index returned 23.48%.

 

Singapore rebounded from the difficulties in previous reporting periods to deliver solid gains during the reporting period. Because Singapore’s economy relies heavily on its export market, to both the U.S. and its Asian neighbors, it responded positively to signs of renewed economic strength in the U.S. economy and among its neighbors. Regional demand strengthened, due largely to China’s strong growth during the reporting period. Thanks largely to export growth, Singapore’s gross domestic product (GDP), which grew at a 1.1% pace in 2003, is on track to grow by 8.6% in 2004.

 

The ten largest holdings in the Fund account for roughly 70% of the Fund’s net assets as of August 31, 2004. Among the ten largest holdings, the improved economic conditions translated into gains for companies like Keppel Corp. Ltd. (3.82% of the net assets of the Fund as of August 31, 2004). Singapore Telecommunications Ltd. (11.70% of the net assets of the Fund as of August 31, 2004) and City Developments Ltd. (3.41% of the net assets of the Fund as of August 31, 2004) were among the strongest performers within the Fund’s ten largest holdings during the reporting period.

 

Financial companies also generally performed well during the reporting period, as the economic environment improved. The largest Fund holding at 13.98% of the net assets of the Fund as of August 31, 2004, DBS Group Holdings Ltd. performed well during the reporting period, as did Oversea-Chinese Banking Corp. Ltd. (10.73% of the net assets of the Fund as of August 31, 2004).

 

Singapore Airlines Ltd. (3.98% of the net assets of the Fund as of August 31, 2004), having overcome a drop-off in business in the wake of the SARS virus was dealt another blow during the reporting period in the form of the November terrorist bombings in Istanbul. Because Singapore Airlines operates regular flights to Istanbul, it suffered a setback, finishing the reporting period with a slight loss.

 

MANAGERS’ DISCUSSION & ANALYSIS

  19


Managers’ Discussion & Analysis

 

iSHARES® MSCI SOUTH AFRICA INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

    Cumulative Total Returns

 
Year Ended 8/31/04

    Inception to 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
31.30%    33.09 %   31.41 %   34.08 %   34.78 %   35.62 %   58.73 %   60.03 %   61.84 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (2/3/03). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (2/7/03), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
SOUTH
AFRICA
INDEX
FUND


   MSCI
SOUTH
AFRICA
INDEX


2/3/2003

   $ 10,000    $ 10,000

2/28/2003

   $ 9,990    $ 10,031

3/31/2003

   $ 9,434    $ 9,539

4/30/2003

   $ 9,997    $ 10,098

5/31/2003

   $ 10,297    $ 10,416

6/30/2003

   $ 10,715    $ 10,836

7/31/2003

   $ 11,408    $ 11,564

8/31/2003

   $ 12,089    $ 12,315

9/30/2003

   $ 12,265    $ 12,476

10/31/2003

   $ 13,541    $ 13,768

11/30/2003

   $ 14,558    $ 14,790

12/31/2003

   $ 14,792    $ 15,021

1/31/2004

   $ 14,633    $ 14,913

2/29/2004

   $ 15,454    $ 15,792

3/31/2004

   $ 16,084    $ 16,394

4/30/2004

   $ 13,965    $ 14,222

5/31/2004

   $ 14,821    $ 15,103

6/30/2004

   $ 15,155    $ 15,447

7/31/2004

   $ 15,314    $ 15,609

8/31/2004

   $ 15,872    $ 16,184

 

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

 

20

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI South Africa Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the South African equity market, as measured by the MSCI South Africa Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 31.30%, while the Index returned 31.41%.

 

The South African economy is predominantly driven by metals, mining, and materials companies. During the reporting period, prices for gold and other metals climbed. Because these companies generally make their revenues in U.S. dollars but incur costs in South African rand, the local currency’s rapid gains cut into profits. Since the end of 2001, the rand has appreciated 96% against the U.S. dollar, putting pressure on the profits of South African exporters. In August, however, the rand weakened in response to an unexpected 0.50% interest rate cut by the local monetary policy committee, a move that can only help South African companies. For U.S. investors, the strengthening rand during the reporting period helped performance.

 

The currency’s strength severely hindered companies like Anglo American PLC, the largest mining company in the world and the largest Fund holding at 24.06% of net assets as of August 31, 2004, which implemented cost-cutting measures to counter the rand’s rise. Although Anglo American posted gains for the reporting period, other top ten Fund holdings did not fare as well. Impala Platinum Holdings Ltd., Gold Fields Ltd. and AngloGold Ashanti Ltd. (4.17%, 3.68%, and 3.46%, respectively, of the net assets of the Fund as of August 31, 2004) all declined during the reporting period.

 

Telecommunications company MTN Group Ltd. (4.59% of the net assets of the Fund as of August 31, 2004) was the top performer among the Fund’s ten largest holdings, benefiting from strength in the telecommunications industry globally.

 

Financial companies also generally performed well, with Standard Bank Group Ltd., Old Mutual PLC, and Sanlam Ltd. (6.43%, 5.80%, and 2.84%, respectively, of the net assets of the Fund as of August 31, 2004) all posted gains during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  21


Managers’ Discussion & Analysis

 

iSHARES® MSCI SOUTH KOREA INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

    Cumulative Total Returns

 
Year Ended 8/31/04

    Inception to 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
5.83%    5.27 %   8.64 %   4.47 %   4.50 %   4.92 %   20.78 %   20.91 %   23.05 %

 

Total returns for the periods since inception are calculated from the inception date of the Fund (5/9/00). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. In the case of the South Korea Fund, the NAV of which is determined prior to the opening of the regular trading day on the American Stock Exchange (the “AMEX”), the market return is calculated using the midpoint of the bid/ask spread as of the opening of regular trading on the AMEX. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (5/12/00), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
SOUTH
KOREA
INDEX
FUND


   MSCI
SOUTH
KOREA
INDEX


5/9/2000

   $ 10,000    $ 10,000

5/31/2000

   $ 9,455    $ 9,437

6/30/2000

   $ 10,717    $ 10,761

7/31/2000

   $ 9,111    $ 9,035

8/31/2000

   $ 8,919    $ 8,748

9/30/2000

   $ 7,913    $ 7,660

10/31/2000

   $ 6,557    $ 6,211

11/30/2000

   $ 6,095    $ 5,804

12/31/2000

   $ 5,909    $ 5,583

1/31/2001

   $ 7,471    $ 7,119

2/28/2001

   $ 6,930    $ 6,608

3/31/2001

   $ 5,997    $ 5,695

4/30/2001

   $ 6,822    $ 6,492

5/31/2001

   $ 7,348    $ 6,984

6/30/2001

   $ 6,955    $ 6,590

7/31/2001

   $ 6,419    $ 6,114

8/31/2001

   $ 6,557    $ 6,255

9/30/2001

   $ 5,468    $ 5,209

10/31/2001

   $ 6,369    $ 6,074

11/30/2001

   $ 8,042    $ 7,658

12/31/2001

   $ 8,670    $ 8,288

1/31/2002

   $ 9,348    $ 8,941

2/28/2002

   $ 10,318    $ 9,888

3/31/2002

   $ 11,263    $ 10,669

4/30/2002

   $ 11,150    $ 10,744

5/31/2002

   $ 11,214    $ 10,747

6/30/2002

   $ 10,749    $ 10,344

7/31/2002

   $ 10,457    $ 10,070

8/31/2002

   $ 10,476    $ 10,113

9/30/2002

   $ 8,947    $ 8,679

10/31/2002

   $ 9,309    $ 9,110

11/30/2002

   $ 10,501    $ 10,273

12/31/2002

   $ 9,195    $ 8,974

1/31/2003

   $ 8,848    $ 8,585

2/28/2003

   $ 8,388    $ 8,161

3/31/2003

   $ 7,512    $ 7,384

4/30/2003

   $ 8,571    $ 8,433

5/31/2003

   $ 9,071    $ 8,949

6/30/2003

   $ 9,803    $ 9,656

7/31/2003

   $ 10,788    $ 10,709

8/31/2003

   $ 11,412    $ 11,326

9/30/2003

   $ 10,704    $ 10,598

10/31/2003

   $ 11,808    $ 11,807

11/30/2003

   $ 11,818    $ 11,787

12/31/2003

   $ 12,297    $ 12,117

1/31/2004

   $ 13,217    $ 13,352

2/29/2004

   $ 13,677    $ 13,830

3/31/2004

   $ 14,046    $ 14,350

4/30/2004

   $ 13,092    $ 13,439

5/31/2004

   $ 12,417    $ 12,790

6/30/2004

   $ 11,958    $ 12,242

7/31/2004

   $ 11,038    $ 11,240

8/31/2004

   $ 12,078    $ 12,305

 

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

 

22

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI South Korea Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the South Korean equity market, as measured by the MSCI South Korea Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 5.83%, while the Index returned 8.64%.

 

Regulatory constraints, such as those imposed by the Securities and Exchange Commission and Internal Revenue Service, can restrict the Fund’s ability to hold a given index component at its index weight, resulting in differences between a fund’s holdings and the securities in its underlying index. One such constraint, the “Single Issuer Rule”, generally prohibits a fund from investing more than 25% of the value of its total assets in the securities of a single issuer. To comply with this Rule, the Fund was obligated to underweight its investment in the Index’s largest constituent, Samsung Electronics Co. Ltd. As of August 31, 2004, Samsung Electronics represented 32.16% of the Index, compared to 22.35% of the Fund’s net assets. This weight difference had a negative impact on the Fund’s performance relative to the performance of the Index.

 

The South Korean market grappled with issues on multiple fronts to deliver gains during the reporting period. Early in the reporting period, the market stumbled as the International Monetary Fund cut its growth outlook for the country down from 5.0% to 2.5%. News of OPEC’s plans to cut oil production compounded the market’s woes, as the production cuts would have meant higher oil prices, which in turn would have raised costs for energy-using companies, slowing their earnings growth. Because it has no natural oil reserves, Korea is the world’s fourth-largest oil importer.

 

Early in the reporting period, these problems were offset by South Korea’s export market, which expanded as demand for cars, semiconductors and computers accelerated in the U.S., China, and Europe. The country’s exports grew 45% in February and reached a record high in March, according to a government report. As the reporting period progressed, rising interest rates began to sap demand from these markets. In an attempt to revive the economy, the central bank left its key interest rate at a record low.

 

The world’s largest maker of liquid crystal displays (“LCD”) for televisions, Samsung Electronics Co. Ltd. represented 22.35% of the net assets of the Fund as of August 31, 2004. Its performance, therefore, had a large impact on the Fund as a whole during the reporting period. During the first half of the reporting period, Samsung saw its share price climb, thanks in part to increasing demand for LCD televisions. By summer, the demand had dropped, and Samsung anticipated that supply would exceed demand during the second half of 2004. The gains that Samsung’s share price had made early in the reporting period were nearly erased in the final months, but the company finished the reporting period with a slight gain.

 

Cellular phone maker LG Electronics Inc. (3.83% of the net assets of the Fund as of August 31, 2004) also experienced a drop in demand during the reporting period, and its share price declined.

 

Steel manufacturer POSCO (7.13% of the net assets of the Fund as of August 31, 2004) continued to benefit from global growth as well as Korea’s strong currency as it converted foreign gains back into the local currency.

 

MANAGERS’ DISCUSSION & ANALYSIS

  23


Managers’ Discussion & Analysis

 

iSHARES® MSCI TAIWAN INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns

    Cumulative Total Returns

 
Year Ended 8/31/04

    Inception to 8/31/04

    Inception to 8/31/04

 
NAV

   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 
(1.10)%    (5.30 )%   (0.39 )%   (12.45 )%   (12.74 )%   (11.59 )%   (42.79 )%   (43.57 )%   (40.38 )%

 

Total returns for the periods since inception are calculated from the inception date of the Fund (6/20/00). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. In the case of the Taiwan Fund, the NAV of which is determined prior to the opening of the regular trading day on the American Stock Exchange (the “AMEX”), the market return is calculated using the midpoint of the bid/ask spread as of the opening of regular trading on the AMEX. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (6/23/00), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

     iSHARES
MSCI
TAIWAN
INDEX
FUND


   MSCI
TAIWAN
INDEX


6/20/2000

   $ 10,000    $ 10,000

6/30/2000

   $ 9,638    $ 9,604

7/31/2000

   $ 9,393    $ 9,376

8/31/2000

   $ 8,790    $ 8,785

9/30/2000

   $ 7,403    $ 7,373

10/31/2000

   $ 6,449    $ 6,417

11/30/2000

   $ 5,951    $ 5,922

12/31/2000

   $ 5,469    $ 5,441

1/31/2001

   $ 7,055    $ 7,032

2/28/2001

   $ 6,540    $ 6,522

3/31/2001

   $ 6,433    $ 6,422

4/30/2001

   $ 5,973    $ 5,968

5/31/2001

   $ 5,555    $ 5,557

6/30/2001

   $ 5,330    $ 5,354

7/31/2001

   $ 4,735    $ 4,767

8/31/2001

   $ 4,826    $ 4,880

9/30/2001

   $ 3,771    $ 3,816

10/31/2001

   $ 4,108    $ 4,156

11/30/2001

   $ 4,714    $ 4,779

12/31/2001

   $ 5,742    $ 5,823

1/31/2002

   $ 6,005    $ 6,094

2/28/2002

   $ 5,742    $ 5,838

3/31/2002

   $ 6,289    $ 6,400

4/30/2002

   $ 6,106    $ 6,208

5/31/2002

   $ 5,828    $ 5,925

6/30/2002

   $ 5,330    $ 5,424

7/31/2002

   $ 4,982    $ 5,084

8/31/2002

   $ 4,724    $ 4,835

9/30/2002

   $ 4,012    $ 4,104

10/31/2002

   $ 4,446    $ 4,556

11/30/2002

   $ 4,542    $ 4,653

12/31/2002

   $ 4,269    $ 4,372

1/31/2003

   $ 4,783    $ 4,903

2/28/2003

   $ 4,205    $ 4,313

3/31/2003

   $ 4,141    $ 4,249

4/30/2003

   $ 4,017    $ 4,131

5/31/2003

   $ 4,435    $ 4,563

6/30/2003

   $ 4,762    $ 4,904

7/31/2003

   $ 5,335    $ 5,501

8/31/2003

   $ 5,785    $ 5,985

9/30/2003

   $ 5,806    $ 6,021

10/31/2003

   $ 6,203    $ 6,434

11/30/2003

   $ 5,839    $ 6,058

12/31/2003

   $ 5,974    $ 6,205

1/31/2004

   $ 6,489    $ 6,748

2/29/2004

   $ 6,741    $ 7,014

3/31/2004

   $ 6,569    $ 6,835

4/30/2004

   $ 6,124    $ 6,376

5/31/2004

   $ 6,151    $ 6,408

6/30/2004

   $ 5,786    $ 6,027

7/31/2004

   $ 5,351    $ 5,557

8/31/2004

   $ 5,721    $ 5,962

 

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

 

24

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Taiwan Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Taiwanese equity market, as measured by the MSCI Taiwan Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 the Fund declined 1.10%, while the Index declined 0.39%.

 

Taiwan got off to a strong start for the reporting period, due largely to improving economic conditions in the U.S. and China. In December, Taiwan’s export orders rose 20% to a record $15.7 billion on stronger Chinese and U.S. demand for computer chips, flat-panel displays and other electronic goods. The increased levels of exports, in turn, prompted companies to increase hiring, which resulted in an annualized unemployment rate of 4.7%, a two-year low.

 

During the second half of the reporting period, Taiwan struggled with political upheaval and a downturn in the electronics industry. In March, President Chen Shui-bian defeated his opponent Lien Chan amid cries of fraud. In the coming months, Chen Shui-bian reiterated planned constitutional revisions, despite warnings from mainland China. The tensions with China hurt markets, as many investors feared damage to export trade. In June, Taiwan was dealt a second blow, when the global semiconductor industry was downgraded. Because technology accounts for more than 50% of Taiwan’s economy, the downgrade spurred market declines.

 

Among the ten largest Fund holdings, performance was mixed during the reporting period. Electronics-related companies generally posted losses for the reporting period. The two largest holdings, Taiwan Semiconductor Manufacturing Co. Ltd. (12.43% of the net assets of the Fund as of August 31, 2004) and United Microelectronics Corp. (5.91% of the net assets of the Fund as of August 31, 2004) both declined. Hon Hai Precision Industry Co. Ltd. (4.03% of the net assets of the Fund as of August 31, 2004) also lost ground for the reporting period.

 

Taiwan’s largest steel producer China Steel Corp. (3.68% of the net assets of the Fund as of August 31, 2004), on the other hand, benefited from demand during the reporting period.

 

Financial company Cathay Financial Holdings Co. Ltd. (4.26% of the net assets of the Fund as of August 31, 2004) benefited from increased real estate activity and improving economic conditions. The company was a strong performer among the Fund’s ten largest holdings during the reporting period.

 

MANAGERS’ DISCUSSION & ANALYSIS

  25


Shareholder Expenses

 

iSHARES®, INC.

 

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

 

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from March 1, 2004 to August 31, 2004.

 

Actual Expenses

 

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

 

Hypothetical Example for Comparison Purposes

 

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

 

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

 

iShares MSCI Index Fund


   Beginning
Account Value
(March 1, 2004)


   Ending
Account Value
(August 31, 2004)


   Annualized
Expense Ratio


    Expenses Paid
During Period*
(March 1 to
August 31, 2004)


Australia

                          

Actual

   $ 1,000.00    $ 981.20    0.75 %   $ 3.74

Hypothetical (5% return before expenses)

     1,000.00      1,021.35    0.75       3.81

Brazil

                          

Actual

     1,000.00      1,014.40    0.91       4.61

Hypothetical (5% return before expenses)

     1,000.00      1,020.56    0.91       4.62

Canada

                          

Actual

     1,000.00      980.80    0.60       2.99

Hypothetical (5% return before expenses)

     1,000.00      1,022.13    0.60       3.05

Emerging Markets

                          

Actual

     1,000.00      936.30    0.77       3.75

Hypothetical (5% return before expenses)

     1,000.00      1,021.25    0.77       3.91

 

26

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Shareholder Expenses (Continued)

 

iSHARES®, INC.

 

iShares MSCI Index Fund


   Beginning
Account Value
(March 1, 2004)


   Ending
Account Value
(August 31, 2004)


   Annualized
Expense Ratio


   

Expenses Paid

During Period*
(March 1 to
August 31, 2004)


Hong Kong

                          

Actual

   $ 1,000.00    $ 971.50    0.76 %   $ 3.77

Hypothetical (5% return before expenses)

     1,000.00      1,021.33    0.76       3.86

Malaysia

                          

Actual

     1,000.00      922.40    0.76       3.67

Hypothetical (5% return before expenses)

     1,000.00      1,021.33    0.76       3.86

Mexico

                          

Actual

     1,000.00      987.20    0.74       3.70

Hypothetical (5% return before expenses)

     1,000.00      1,021.40    0.74       3.76

Pacific ex-Japan

                          

Actual

     1,000.00      986.10    0.50       2.50

Hypothetical (5% return before expenses)

     1,000.00      1,022.62    0.50       2.54

Singapore

                          

Actual

     1,000.00      1,020.40    0.75       3.81

Hypothetical (5% return before expenses)

     1,000.00      1,021.35    0.75       3.81

South Africa

                          

Actual

     1,000.00      1,027.10    0.90       4.59

Hypothetical (5% return before expenses)

     1,000.00      1,020.59    0.90       4.57

South Korea

                          

Actual

     1,000.00      883.10    0.91       4.31

Hypothetical (5% return before expenses)

     1,000.00      1,020.54    0.91       4.62

Taiwan

                          

Actual

     1,000.00      848.70    1.39       6.46

Hypothetical (5% return before expenses)

     1,000.00      1,018.14    1.39       7.05

* Expenses are calculated using each Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days), and divided by the number of days in the year (366 days).

 

SHAREHOLDER EXPENSES

  27


Schedule of Investments

 

iSHARES® MSCI AUSTRALIA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 93.96%

           

BANKS – 26.92%

           

Australia & New Zealand Banking Group Ltd.

   829,686    $ 10,750,949

Commonwealth Bank of Australia

   573,012      12,219,899

National Australia Bank Ltd.

   691,878      13,020,381

Suncorp-Metway Ltd.

   245,586      2,583,966

Westpac Banking Corp. Ltd.

   808,434      9,619,255
         

            48,194,450

BEVERAGES – 3.07%

           

Coca-Cola Amatil Ltd.

   209,286      1,069,980

Foster’s Group Ltd.

   922,812      3,043,176

Lion Nathan Ltd.

   134,442      674,047

Southcorp Ltd.1

   295,350      715,366
         

            5,502,569

BIOTECHNOLOGY – 0.41%

           

Sonic Healthcare Ltd.

   111,474      736,007
         

            736,007

BUILDING MATERIALS – 3.06%

           

Boral Ltd.

   266,442      1,320,799

CSR Ltd.

   417,516      678,107

James Hardie Industries NV

   210,936      810,301

Rinker Group Ltd.

   434,346      2,668,407
         

            5,477,614

COMMERCIAL SERVICES – 1.19%

           

Brambles Industries Ltd.2

   445,302      2,122,538
         

            2,122,538

COMPUTERS – 0.25%

           

Computershare Ltd.

   178,068      447,644
         

            447,644

DIVERSIFIED FINANCIAL SERVICES – 1.93%

           

Australian Stock Exchange Ltd.2

   47,190      519,176

Macquarie Bank Ltd.

   99,000      2,369,910

Perpetual Trustees Australia Ltd.2

   17,622      572,414
         

            3,461,500

ENGINEERING & CONSTRUCTION – 0.24%

           

Leighton Holdings Ltd.2

   62,238      430,704
         

            430,704

ENTERTAINMENT – 1.78%

           

Aristocrat Leisure Ltd.2

   143,418      711,961

TABCORP Holdings Ltd.2

   232,624      2,468,940
         

            3,180,901

FOOD – 2.34%

           

Woolworths Ltd.

   467,808      4,178,834
         

            4,178,834

FOREST PRODUCTS & PAPER – 0.43%

           

PaperlinX Ltd.

   204,864      763,830
         

            763,830

GAS – 1.10%

           

Australian Gas Light Co. Ltd.

   208,626      1,960,846
         

            1,960,846

HEALTH CARE – PRODUCTS – 0.19%

           

Cochlear Ltd.2

   25,014      339,672
         

            339,672

HOLDING COMPANIES – DIVERSIFIED – 0.48%

           

Patrick Corp. Ltd.2

   229,878      857,094
         

            857,094

HOUSEHOLD PRODUCTS & WARES – 0.25%

           

Pacific Brands Ltd.

   224,730      442,754
         

            442,754

INSURANCE – 5.60%

           

AMP Ltd.

   850,542      3,753,814

AXA Asia Pacific Holdings Ltd.

   321,420      876,107

Insurance Australia Group Ltd.

   729,366      2,616,412

QBE Insurance Group Ltd.2

   311,850      2,785,693
         

            10,032,026

INVESTMENT COMPANIES – 1.24%

           

Macquarie Infrastructure Group

   885,852      2,220,683
         

            2,220,683

IRON & STEEL – 1.34%

           

BHP Steel Ltd.

   337,194      1,869,160

OneSteel Ltd.

   255,948      524,139
         

            2,393,299

MANUFACTURING – 3.26%

           

Ansell Ltd.2

   73,736      439,980

Futuris Corp. Ltd.2

   251,130      317,430

 

28

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRALIA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Orica Ltd.

     124,344    $ 1,422,449

Wesfarmers Ltd.

     172,524      3,662,144
           

              5,842,003

MEDIA – 3.67%

             

John Fairfax Holdings Ltd.

     411,488      1,109,986

News Corp. Ltd. (The)2

     627,132      4,884,627

Publishing & Broadcasting Ltd.2

     60,258      580,398
           

              6,575,011

MINING – 14.21%

             

Alumina Ltd.

     532,092      2,040,250

BHP Billiton Ltd.

     1,723,062      15,975,799

Iluka Resources Ltd.

     105,468      346,314

Newcrest Mining Ltd.

     151,602      1,595,101

Rio Tinto Ltd.2

     142,758      3,634,149

WMC Resources Ltd.

     528,462      1,836,013
           

              25,427,626

OIL & GAS – 2.94%

             

Origin Energy Ltd.

     306,570      1,277,258

Santos Ltd.

     270,270      1,259,618

Woodside Petroleum Ltd.

     214,434      2,731,663
           

              5,268,539

PACKAGING & CONTAINERS – 1.16%

             

Amcor Ltd.

     402,006      2,080,815
           

              2,080,815

PHARMACEUTICALS – 1.38%

             

CSL Ltd.

     89,430      1,632,453

Mayne Group Ltd.

     294,166      845,442
           

              2,477,895

REAL ESTATE – 10.58%

             

Centro Properties Group

     292,578      937,982

Commonwealth Property Office Fund

     596,046      509,286

Deutsche Office Trust

     513,876      431,820

Gandel Retail Trust

     636,240      678,414

General Property Trust

     925,254      2,319,457

ING Industrial Fund

     301,158      414,692

Investa Property Group

     651,504      915,518

Lend Lease Corp Ltd.

     168,570      1,326,058

Macquarie Goodman Industrial Trust

     733,128      926,680

Security


  

Shares or

Principal


   Value

Mirvac Group

     325,776    $ 1,039,811

Stockland Trust Group

     580,734      2,300,579

Westfield Group1,2

     655,084      7,137,722
           

              18,938,019

RETAIL – 2.06%

             

Coles Myer Ltd.

     502,656      3,187,456

Harvey Norman Holdings Ltd.

     241,494      503,066
           

              3,690,522

TELECOMMUNICATIONS – 2.40%

             

Telstra Corp. Ltd.

     985,512      3,340,413

Transurban Group

     241,428      954,713
           

              4,295,126

TRANSPORTATION – 0.48%

             

Toll Holdings Ltd.

     110,286      852,769
           

              852,769
           

TOTAL COMMON STOCKS
(Cost: $149,129,690)

            168,191,290

PREFERRED STOCKS – 5.15%

             

MEDIA – 5.15%

             

News Corp. Ltd. (The)

     1,242,120      9,209,792
           

              9,209,792
           

TOTAL PREFERRED STOCKS
(Cost: $9,568,141)

            9,209,792

SHORT-TERM INVESTMENTS – 11.49%

             

FLOATING RATE NOTES – 2.96%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 89,614      89,602

1.52%, 10/12/043,4

     74,678      74,678

1.56%, 09/15/043,4

     149,357      149,356

1.64%, 03/15/053,4

     74,678      74,711

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     112,017      112,016

1.38%, 11/22/043

     37,339      37,340

1.40%, 10/29/043

     149,357      149,356

CC USA Inc.

             

1.45%, 05/04/053,4

     149,357      149,337

1.61%, 07/29/053,4

     149,357      149,316

 

SCHEDULES OF INVESTMENTS

  29


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRALIA INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Den Danske Bank NY

             

1.51%, 08/12/053

   $ 149,357    $ 149,314

1.56%, 08/26/053

     149,357      149,313

Depfa Bank PLC

             

1.27%, 06/15/053

     149,357      149,357

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     123,966      123,932

Five Finance Inc.

             

1.42%, 04/29/053,4

     119,485      119,477

Gemini Securitization Corp.

             

1.53%, 09/09/043

     74,678      74,653

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     95,588      95,583

1.58%, 04/22/053

     149,357      149,357

K2 USA LLC

             

1.45%, 06/10/053,4

     149,357      149,343

1.57%, 09/27/043,4

     161,305      161,303

1.61%, 07/25/053,4

     74,678      74,665

Links Finance LLC

             

1.55%, 04/15/053,4

     149,357      149,338

1.68%, 04/25/053

     149,357      149,420

Nationwide Building Society

             

1.59%, 07/28/053

     149,357      149,357

1.63%, 12/09/043,4

     123,966      123,410

Nordea Bank PLC

             

2.11%, 06/07/053

     149,357      149,335

Northern Rock PLC

             

1.56%, 01/13/053,4

     141,889      141,889

Permanent Financing PLC

             

1.52%, 03/10/053

     149,357      149,357

1.53%, 12/10/043

     74,678      74,678

1.55%, 06/10/053

     67,210      67,210

Sigma Finance Inc.

             

1.52%, 10/07/043

     149,357      149,354

1.57%, 11/15/043

     149,357      149,354

1.59%, 09/15/053

     112,017      112,028

Tango Finance Corp.

             

1.52%, 04/07/053,4

     54,814      54,811

1.56%, 01/18/053,4

     65,717      65,715

1.59%, 07/25/053,4

     149,357      149,343

1.66%, 05/17/053,4

     123,966      123,962

1.70%, 02/25/053,4

     83,640      83,632

Security


   Shares or
Principal


   Value

WhistleJacket Capital LLC

             

1.26%, 10/20/043

   $ 36,996    $ 36,932

1.48%, 06/15/053,4

     74,678      74,665

1.56%, 09/15/043,4

     74,678      74,678

1.56%, 07/15/053,4

     112,017      111,998

White Pine Finance LLC

             

1.46%, 07/05/053

     74,678      74,665

1.55%, 04/15/053,4

     112,017      112,004

1.55%, 07/11/053

     37,339      37,336

1.56%, 11/15/043,4

     89,614      89,614

1.57%, 06/15/053,4

     61,236      61,236

1.58%, 03/29/053

     64,223      64,215

1.58%, 08/26/053,4

     74,678      74,664

1.68%, 05/20/053

     67,210      67,206
           

              5,303,415

MONEY MARKET FUNDS – 2.33%

             

Barclays Global Investors Funds
Institutional Money Market Fund,
Institutional Shares
3,5

     2,357,761      2,357,761

Barclays Global Investors Funds
Prime Money Market Fund,
Institutional Shares
3,5

     1,642,923      1,642,923

BlackRock Temp Cash Money Market Fund3

     75,398      75,398

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares3

     100,397      100,397
           

              4,176,479

COMMERCIAL PAPER – 2.12%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

     74,678      74,657

1.51%, 09/02/043

     67,210      67,208

1.54%, 09/14/043

     74,678      74,637

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     29,871      29,863

1.53%, 09/16/043

     73,480      73,434

1.54%, 09/15/043

     74,678      74,634

1.54%, 09/22/043

     37,339      37,306

Barton Capital Corp.

             

1.53%, 09/08/043

     74,678      74,656

1.53%, 09/09/043

     174,435      174,376

 

30

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRALIA INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

1.53%, 09/13/043

   $ 107,531    $ 107,476

1.53%, 09/14/043

     37,339      37,319

1.54%, 09/17/043

     44,807      44,776

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     74,678      74,657

1.53%, 09/15/043

     29,871      29,854

Cantabric Finance LLC

             

1.55%, 09/17/043

     29,871      29,851

Corporate Asset Funding

             

1.42%, 09/03/043

     44,807      44,803

CRC Funding LLC

             

1.42%, 09/03/043

     74,678      74,672

Delaware Funding Corp.

             

1.50%, 09/09/043

     74,678      74,653

1.53%, 09/10/043

     119,485      119,440

1.53%, 09/20/043

     50,781      50,740

Edison Asset Securitization

             

1.07%, 09/21/043

     74,678      74,634

1.45%, 11/09/043

     149,357      148,942

1.52%, 09/08/043

     149,357      149,313

1.59%, 12/02/043

     149,357      148,750

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     44,807      44,803

1.53%, 09/07/043

     74,678      74,659

1.53%, 09/17/043

     44,807      44,777

1.53%, 09/21/043

     37,339      37,307

1.53%, 09/22/043

     74,678      74,612

1.54%, 09/14/043

     582,017      111,955

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     74,678      74,160

GIRO Funding US Corp.

             

1.54%, 09/09/043

     74,678      74,653

1.55%, 10/15/043

     97,941      97,755

Grampian Funding LLC

             

1.26%, 10/22/043

     149,357      149,091

1.44%, 10/27/043

     149,357      149,023

1.59%, 11/30/043

     74,678      74,381

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     37,339      37,338

1.53%, 09/20/043

     37,339      37,309

1.53%, 09/23/043

     52,275      52,226

1.54%, 09/15/043

     89,614      89,560

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     104,087      104,087

1.51%, 09/08/043

     59,743      59,725

1.52%, 09/09/043

     37,339      37,327

1.53%, 09/21/043

     74,678      74,615

Receivables Capital Corp.

             

1.54%, 09/14/043

     44,807      44,782

Scaldis Capital LLC

             

1.48%, 09/01/043

     82,146      82,146

Sydney Capital Corp.

             

1.25%, 10/22/043

     49,706      49,618

1.55%, 09/16/043

     44,807      44,778

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     59,743      59,707

1.54%, 09/23/043

     37,339      37,304

Windmill Funding Corp.

             

1.52%, 09/09/043

     37,339      37,327

1.52%, 09/10/043

     52,275      52,255
           

              3,797,931
TIME DEPOSITS – 1.87%              

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     149,357      149,357

1.33%, 02/10/053

     74,678      74,673

1.39%, 02/02/053

     74,668      74,664

1.39%, 04/08/053

     104,550      104,540

1.40%, 10/25/043

     149,357      149,353

Bank of New York

             

1.39%, 11/01/043

     149,357      149,354

1.60%, 12/03/043

     37,339      37,334

Bank of Nova Scotia

             

1.13%, 10/06/043

     149,357      149,357

1.24%, 10/07/043

     112,017      112,016

1.42%, 10/29/043

     112,017      112,019

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     149,357      149,359

1.49%, 08/09/053

     149,357      149,315

1.54%, 06/23/053

     149,357      149,320

1.56%, 06/10/053

     74,678      74,696

 

SCHEDULE OF INVESTMENTS

  31


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRALIA INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

Norddeutsche Landesbank

               

1.59%, 07/27/053

   $ 149,357    $ 149,309  

Prudential Funding LLC

               

1.60%, 12/01/043

     74,678      74,376  

SouthTrust Bank

               

1.55%, 09/01/043

     298,713      298,713  

Toronto-Dominion Bank

               

1.22%, 03/23/053

     261,374      261,349  

1.34%, 02/10/053

     59,743      59,739  

1.41%, 11/01/043

     112,017      112,016  

1.53%, 09/13/043

     74,678      74,678  

1.77%, 05/10/053

     74,678      74,673  

1.90%, 05/11/053

     74,678      74,674  

UBS Finance (Delaware)

               

1.10%, 09/08/043

     149,357      149,325  

1.11%, 12/17/043

     224,035      223,296  

1.14%, 09/29/043

     149,357      149,225  
           


              3,336,730  
REPURCHASE AGREEMENTS – 1.65%                

Banc of America Securities LLC

               

1.59%, 09/01/043,6

     448,070      448,070  

Bank of America, N.A.

               

1.59%, 09/01/043,6

     858,800      858,800  

Goldman Sachs & Co.

               

1.59%, 09/01/043,6

     746,783      746,783  

Merrill Lynch Government Securities Inc.

               

1.57%, 09/01/043,6

     149,357      149,357  

1.59%, 09/01/043,6

     746,783      746,783  
           


              2,949,793  
U.S. GOVERNMENT AGENCY NOTES – 0.30%                

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     104,550      104,757  

1.80%, 01/18/053

     69,451      68,968  

1.80%, 01/19/053

     74,678      74,156  

2.06%, 05/31/053

     74,459      73,300  

Federal National Mortgage Association

               

2.33%, 07/22/053

     224,035      219,347  
           


              540,528  
MEDIUM-TERM NOTES – 0.26%                

CC USA Inc.

               

1.29%, 04/15/053,4

     149,357      149,347  

1.51%, 02/15/053,4

     97,082      97,151  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     112,017      112,015  

K2 USA LLC

               

1.46%, 01/12/053,4

     74,678      74,676  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     37,339      37,336  
           


              470,525  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $20,575,401)

            20,575,401  
           


TOTAL INVESTMENTS IN SECURITIES – 110.60%
(Cost: $179,273,232)

            197,976,483  

Other Assets, Less Liabilities – (10.60%)

            (18,978,057 )
           


NET ASSETS – 100.00%

          $ 178,998,426  
           



1 Non-income earning security.
2 All or a portion of this security represents a security on loan. See Note 5.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

32

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI AUSTRALIA INDEX FUND

August 31, 2004

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   46.27 %   $ 82,846,678

Basic Materials

   15.98       28,584,755

Communications

   11.22       20,079,929

Consumer Non-Cyclical

   8.83       15,800,269

Industrial

   8.20       14,683,905

Consumer Cyclical

   3.84       6,871,423

Energy

   2.94       5,268,539

Utilities

   1.10       1,960,846

Diversified

   0.48       857,094

Technology

   0.25       447,644

Short-Term and Other Net Assets

   0.89       1,597,344
    

 

TOTAL

   100.00 %   $ 178,998,426
    

 

 

See notes to financial statements.

 

SCHEDULE OF INVESTMENTS

  33


Schedule of Investments

 

iSHARES® MSCI BRAZIL INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 27.97%            
AGRICULTURE – 0.97%            

Souza Cruz SA

   206,200    $ 2,029,583
         

            2,029,583
BANKS – 2.73%            

Unibanco Holdings SA

   1,241,110      5,726,242
         

            5,726,242
ELECTRIC – 2.33%            

Centrais Eletricas Brasileiras SA

   355,231,000      4,880,480
         

            4,880,480
IRON & STEEL – 2.61%            

Companhia Siderurgica Nacional SA

   352,884      5,469,340
         

            5,469,340
MINING – 7.11%            

Companhia Vale do Rio Doce ADR

   257,868      14,897,034
         

            14,897,034
OIL & GAS – 10.75%            

Petroleo Brasileiro SA

   728,900      22,519,672
         

            22,519,672
TELECOMMUNICATIONS – 0.85%            

Brasil Telecom Participacoes SA

   210,444,000      1,521,152

Tele Norte Leste Participacoes SA

   20,012      260,920
         

            1,782,072
WATER – 0.62%            

Companhia de Saneamento Basico do Estado de Sao Paulo

   27,170,000      1,293,779
         

            1,293,779
         

TOTAL COMMON STOCKS
(Cost: $46,276,549)

          58,598,202
PREFERRED STOCKS – 71.17%            
AEROSPACE & DEFENSE – 2.75%            

Embraer-Empresa Brasileira de Aeronautica SA

   864,543      5,761,650
         

            5,761,650
BANKS – 9.15%            

Banco Bradesco SA

   191,673      9,347,801

Banco Itau Holding Financeira SA

   96,824,000      9,828,000
         

            19,175,801
BEVERAGES – 6.48%            

Companhia de Bebidas das Americas

   62,244,000      13,572,213
         

            13,572,213
BUILDING MATERIALS – 0.79%            

Duratex SA

   46,687,000      1,659,415
         

            1,659,415
CHEMICALS – 1.14%            

Braskem SA Class A1

   82,659,000      2,395,585
         

            2,395,585
ELECTRIC – 4.49%            

Centrais Eletricas Brasileiras SA Class B

   209,209,000      2,717,715

Companhia Energetica de Minas Gerais

   295,165,467      5,447,347

Companhia Paranaense de Energia Class B

   360,659,000      1,232,599
         

            9,397,661
FOOD – 2.02%            

Companhia Brasileira de Distribuicao Grupo Pao de Acucar

   102,258,000      2,128,337

Sadia SA

   1,235,000      2,110,390
         

            4,238,727
FOREST PRODUCTS & PAPER – 4.72%            

Aracruz Celulose SA Class B

   1,482,000      5,216,883

Klabin SA

   1,482,000      2,355,195

Votorantim Celulose e Papel SA

   32,851,000      2,324,045
         

            9,896,123
IRON & STEEL – 6.02%            

Companhia Siderurgica de Tubarao

   41,990,000      1,757,955

Gerdau SA

   395,378      6,546,843

Usinas Siderurgicas de Minas Gerais SA Class A

   271,700      4,299,286
         

            12,604,084
MINING – 9.70%            

Caemi Mineracao e Metalurgica SA1

   3,952,000      2,120,519

Companhia Vale do Rio Doce Class A

   1,111,500      18,210,974
         

            20,331,493

 

34

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI BRAZIL INDEX FUND

August 31, 2004

 

Security


   Shares

    Value

OIL & GAS – 12.89%             

Petroleo Brasileiro SA

   963,300     $ 26,996,104
          

             26,996,104
TELECOMMUNICATIONS – 10.57%             

Brasil Telecom Participacoes SA

   724,204,000       4,695,196

Embratel Participacoes SA

   660,781,000       1,716,312

Tele Celular Sul Participacoes SA

   690,631,000       953,568

Tele Centro Oeste Celular Participacoes SA

   763,798,000       2,393,720

Tele Nordeste Celular Participacoes SA

   712,870,000       896,569

Tele Norte Leste Participacoes SA

   522,652       7,164,584

Telemig Celular Participacoes SA

   712,193,000       1,063,667

Telesp Celular Participacoes SA1

   1,244,984,000       3,259,256
          

             22,142,872
TEXTILES – 0.45%             

Companhia de Tecidos Norte de Minas

   10,868,400       943,463
          

             943,463
          

TOTAL PREFERRED STOCKS
(Cost: $123,220,433)

           149,115,191
SHORT-TERM INVESTMENTS – 0.47%             
MONEY MARKET FUNDS – 0.47%             

Barclays Global Investors Funds

            

Institutional Money Market Fund,

            

Institutional Shares2

   980,912       980,912
          

             980,912
          

              

TOTAL SHORT-TERM INVESTMENTS
(Cost: $980,912)

           980,912
          

TOTAL INVESTMENTS IN SECURITIES – 99.61%
(Cost: $170,477,894)

           208,694,305

Other Assets, Less Liabilities – 0.39%

           809,279
          

NET ASSETS – 100.00%

         $ 209,503,584
          


ADR - American Depositary Receipts

            

1   Non-income earning security.

            

2   Issuer is an affiliate of the Fund’s investment adviser. See Note 2.

            
SECTOR DIVERSIFICATION             

Sector


  

% of

Net Assets


    Value

Basic Materials

   31.30 %   $ 65,593,659

Energy

   23.64       49,515,776

Financial

   11.88       24,902,043

Communications

   11.42       23,924,944

Consumer Non-Cyclical

   9.47       19,840,523

Utilities

   7.44       15,571,920

Industrial

   3.54       7,421,065

Consumer Cyclical

   0.45       943,463

Short-Term and Other Net Assets

   0.86       1,790,191
    

 

TOTAL

   100.00 %   $ 209,503,584
    

 

 

See notes to financial statements.

 

SCHEDULE OF INVESTMENTS

  35


Schedule of Investments

 

iSHARES® MSCI CANADA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.76%            
AEROSPACE & DEFENSE – 0.14%            

CAE Inc.

   104,420    $ 455,688
         

            455,688
AUTO PARTS & EQUIPMENT – 1.49%            

Magna International Inc. Class A

   64,922      4,845,499
         

            4,845,499
BANKS – 21.80%            

Bank of Montreal

   347,764      14,326,525

Bank of Nova Scotia

   691,896      18,893,760

Canadian Imperial Bank of Commerce

   255,148      12,970,411

National Bank of Canada

   128,255      4,205,082

Royal Bank of Canada

   455,175      20,527,094
         

            70,922,872
BEVERAGES – 0.23%            

Molson Inc. Class A

   30,233      745,729
         

            745,729
BUILDING MATERIALS – 0.29%            

Masonite International Corp.1

   37,682      943,766
         

            943,766
CHEMICALS – 2.53%            

Agrium Inc.

   91,708      1,428,935

Methanex Corp.

   39,952      530,328

NOVA Chemicals Corp.

   63,560      2,054,991

Potash Corp. of Saskatchewan Inc.

   75,818      4,218,441
         

            8,232,695
COMMERCIAL SERVICES – 0.20%            

Quebecor World Inc.

   29,737      652,246
            652,246
COMPUTERS – 0.36%            

CGI Group Inc.1

   182,971      1,173,425
         

            1,173,425
DIVERSIFIED FINANCIAL SERVICES – 0.95%            

C.I. Fund Management Inc.

   89,548      1,098,961

IGM Financial Inc.

   77,634      1,988,576
         

            3,087,537
ELECTRONICS – 0.50%            

Celestica Inc.1

   112,725      1,610,113
         

            1,610,113
ENERGY – ALTERNATE SOURCES – 0.05%            

Ballard Power Systems Inc.1

   22,927      147,905
         

            147,905
ENGINEERING & CONSTRUCTION – 0.37%            

SNC-Lavalin Group Inc.

   33,142      1,202,831
         

            1,202,831
ENTERTAINMENT – 0.14%            

Intrawest Corp.

   29,056      462,876
         

            462,876
FOOD – 1.48%            

George Weston Ltd.

   17,802      1,179,369

Loblaw Companies Ltd.

   79,904      3,638,616
         

            4,817,985
FOREST PRODUCTS & PAPER – 0.71%            

Abitibi-Consolidated Inc.

   101,015      597,227

Domtar Inc.

   141,875      1,717,446
         

            2,314,673
HAND & MACHINE TOOLS – 0.36%            

Finning International Inc.

   50,394      1,184,886
         

            1,184,886
HEALTH CARE – SERVICES – 0.44%            

MDS Inc.

   99,426      1,432,229
         

            1,432,229
HOLDING COMPANIES – DIVERSIFIED – 1.86%            

Brascan Corp. Class A

   172,630      4,880,440

Onex Corp.

   91,286      1,159,088
         

            6,039,528
INSURANCE – 14.23%            

Fairfax Financial Holdings Ltd.

   9,534      1,252,893

Great-West Lifeco Inc.

   94,209      3,667,973

Manulife Financial Corp.

   506,798      20,962,728

Power Corp. of Canada

   227,454      4,885,358

Power Financial Corp.

   176,152      3,918,500

Sun Life Financial Inc.

   419,042      11,605,072
         

            46,292,524

 

36

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI CANADA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

IRON & STEEL – 0.53%            

Dofasco Inc.

   56,523    $ 1,715,938
         

            1,715,938
LODGING – 0.43%            

Fairmont Hotels & Resorts Inc.

   14,755      396,423

Four Seasons Hotels Inc.

   17,258      989,427
         

            1,385,850
MANUFACTURING – 0.60%            

Bombardier Inc. Class B

   842,732      1,937,977
         

            1,937,977
MEDIA – 2.86%            

Rogers Communications Inc. Class B

   109,414      1,944,806

Shaw Communications Inc. Class B

   124,680      1,930,383

Thomson Corp.

   165,029      5,439,594
         

            9,314,783
MINING – 12.67%            

Agnico-Eagle Mines Ltd.

   54,026      732,320

Alcan Inc.

   256,056      11,102,367

Barrick Gold Corp.

   359,114      7,168,107

Cameco Corp.

   40,639      2,644,804

Falconbridge Ltd.

   58,793      1,405,570

Glamis Gold Ltd.1

   87,849      1,458,149

Goldcorp Inc.

   101,923      1,310,394

Inco Ltd.1

   131,433      4,486,837

Kinross Gold Corp.1

   96,702      593,746

Meridian Gold Inc.1

   60,382      795,561

Noranda Inc.

   120,083      1,960,371

Placer Dome Inc.

   288,290      5,052,077

Teck Cominco Ltd. Class B

   128,255      2,506,501
         

            41,216,804
OIL & GAS – 17.37%            

Canadian Natural Resources Ltd.

   181,156      5,872,171

EnCana Corp.

   308,266      12,554,306

Husky Energy Inc.

   91,937      1,952,335

Imperial Oil Ltd.

   90,800      4,241,606

Nexen Inc.

   89,217      3,172,295

Penn West Petroleum Ltd.

   36,329      1,834,923

Petro-Canada

   157,765      7,363,804

Precision Drilling Corp. Class A1

   38,596      1,895,235

Shell Canada Ltd.

   50,848      2,516,930

Suncor Energy Inc.

   318,481      8,820,106

Talisman Energy Inc.

   275,805      6,292,273
         

            56,515,984
PHARMACEUTICALS – 0.74%            

Angiotech Pharmaceuticals Inc.1

   22,927      392,557

Biovail Corp.1

   83,990      1,265,332

QLT Corp.1

   48,168      744,674
         

            2,402,563
PIPELINES – 3.59%            

Enbridge Inc.

   114,862      4,587,157

TransCanada Corp.

   339,592      7,085,143
         

            11,672,300
REAL ESTATE – 0.87%            

Brookfield Properties Corp.

   65,382      2,062,292

MI Developments Inc. Class A

   33,120      766,667
         

            2,828,959
RETAIL – 1.46%            

Canadian Tire Corp. Class A

   55,630      2,045,171

Hudson’s Bay Co.

   53,345      566,811

Shoppers Drug Mart Corp.1

   82,855      2,138,031
         

            4,750,013
SEMICONDUCTORS – 0.75%            

ATI Technologies Inc.1

   169,811      2,452,568
         

            2,452,568
SOFTWARE – 0.55%            

Cognos Inc.1

   53,572      1,682,867

Open Text Corp.1

   5,683      121,717
         

            1,804,584
TELECOMMUNICATIONS – 5.18%            

Aliant Inc.

   7,344      146,033

BCE Inc.

   214,061      4,443,358

Nortel Networks Corp.1

   2,802,542      10,571,216

TELUS Corp.

   89,452      1,674,170
         

            16,834,777
TRANSPORTATION – 4.03%            

Canadian National Railway Co.

   209,067      9,518,768

Canadian Pacific Railway Ltd.

   113,046      2,863,043

CP Ships Ltd.

   61,517      718,539
         

            13,100,350

TOTAL COMMON STOCKS
(Cost: $262,998,434)

          324,498,457

 

SCHEDULE OF INVESTMENTS

  37


Schedule of Investments (Continued)

 

iSHARES® MSCI CANADA INDEX FUND

August 31, 2004

 

Security


   Shares

    Value

SHORT-TERM INVESTMENTS – 0.06%

            

MONEY MARKET FUNDS – 0.06%

            

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares2

   199,282     $ 199,282
          

             199,282
          

TOTAL SHORT-TERM INVESTMENTS
(Cost: $199,282)

           199,282
          

TOTAL INVESTMENTS IN SECURITIES – 99.82%
(Cost: $263,197,716)

           324,697,739
Other Assets, Less Liabilities – 0.18%            600,076
          

NET ASSETS – 100.00%          $ 325,297,815
          


1   Non-income earning security.

2   Issuer is an affiliate of the Fund’s investment adviser. See Note 2.

SECTOR DIVERSIFICATION

Sector


  

% of

Net Assets


    Value

Financial

   37.85 %   $ 123,131,892

Energy

   21.01       68,336,189

Basic Materials

   16.44       53,480,110

Communications

   8.04       26,149,560

Industrial

   6.28       20,435,611

Consumer Cyclical

   3.52       11,444,238

Consumer Non-Cyclical

   3.09       10,050,752

Diversified

   1.86       6,039,528

Technology

   1.67       5,430,577

Short-Term and Other Net Assets

   0.24       799,358
    

 

TOTAL

   100.00 %   $ 325,297,815
    

 

 

See notes to financial statements.

 

38

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 96.75%            
ARGENTINA – 0.71%            

Petrobras Energia Participaciones SA ADR

   493,385    $ 4,642,753

Tenaris SA ADR

   238,993      9,213,180
         

            13,855,933
BRAZIL – 7.05%            

Aracruz Celulose SA ADR1

   160,716      5,594,524

Banco Bradesco SA ADR1

   282,656      13,779,480

Banco Itau Holding Financiera SA ADR1

   342,816      17,277,926

Brasil Telecom Participacoes SA ADR1

   193,521      6,314,590

Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR

   235,591      4,853,175

Companhia Vale do Rio Doce ADR

   377,520      21,809,330

Companhia Vale do Rio Doce Sponsored ADR

   475,587      23,161,087

Empresa Brasileira de Aeronautica SA ADR

   330,572      8,776,687

Petroleo Brasileiro SA ADR1

   662,304      20,365,848

Tele Norte Leste Participacoes SA ADR1

   804,309      11,019,033

Telesp Celular Partcipacoes SA ADR1

   525,676      3,380,097

Votorantim Celulose e Papel ADR

   51,067      1,793,984
         

            138,125,761
CHILE – 2.29%            

Banco Santander Chile SA ADR

   479,475      13,089,667

Compania de Telecomunicaciones de Chile SA ADR1

   834,229      10,277,701

Enersis SA Chile ADR1

   1,461,680      9,676,322

Sociedad Quimica y Minera de Chile SA ADR1

   261,380      11,688,914
         

            44,732,604
CHINA – 5.27%            

Aluminum Corp. of China Ltd.1

   2,420,000      1,186,738

Angang New Steel Co. Ltd. Class H1

   4,356,000      1,605,587

Beijing Capital International Airport Co. Ltd. Class H

   1,940,000      677,761

China Eastern Airlines Corp. Ltd. Class H1

   7,260,000      1,452,009

China Life Insurance Co. Ltd.1

   14,400,000      8,584,670

China Petroleum and Chemical Corp. Class H1

   39,852,000      15,583,254

China Shipping Development Co. Ltd.1

   4,374,000      3,028,173

China Southern Airlines Co. Ltd.1

   3,394,000      1,174,854

China Telecom Corp. Ltd. Class H1

   20,898,000      6,698,120

Cofco International Ltd.1

   1,458,000      588,811

Cosco Pacific Ltd.1

   1,458,000      2,187,014

Datang International Power Generation Co. Ltd.1

   1,944,000      1,520,317

Guangshen Railway Co. Ltd. Class H1

   15,558,363      4,288,551

Huadian Power International Corp. Ltd.1

   8,262,000      2,409,765

Huaneng Power International Inc. Class H1

   5,832,000      4,336,643

Jiangsu Expressway Co. Ltd. Class H

   1,458,000      588,811

Jiangxi Copper Co. Ltd.1

   4,858,000      2,226,598

Maanshan Iron & Steel Co. Ltd.1

   3,388,000      1,183,636

PetroChina Co. Ltd. Class H1

   51,516,000      25,923,281

Ping An Insurance (Group) Co. of China Ltd.1

   2,783,000      3,639,331

Qingling Motors Co. Ltd.1

   3,402,000      427,434

Semiconductor Manufacturing International Corp.1

   7,260,000      1,489,240

Sinopec Beijing Yanhua Petrochemical Co. Ltd. Class H1

   3,388,000      1,172,777

Sinopec Shanghai Petrochemical Co. Ltd.1

   5,832,000      2,018,782

Travelsky Technology Ltd. Class H1

   486,000      345,810

Tsingtao Brewery Co. Ltd. Class H1

   972,000      891,006

Yanzhou Coal Mining Co. Ltd. Class H1

   3,402,000      3,685,524

Yizheng Chemical Fibre Co. Ltd. Class H1

   1,944,000      378,833

Zhejiang Expressway Co. Ltd.1

   5,832,000      3,962,795
         

            103,256,125

 

SCHEDULE OF INVESTMENTS

  39


Schedule of Investments (Continued)

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

CZECH REPUBLIC – 1.96%            
CEZ AS    1,416,880    $ 11,108,386

Komercni Banka AS

   69,417      7,415,816

Philip Morris CR AS

   27,192      15,477,730

Unipetrol AS1

   1,402,700      4,410,630
         

            38,412,562
HONG KONG – 4.27%            

Beijing Enterprises Holdings Ltd.1

   972,000      1,227,469

China Everbright Pacific Ltd.1

   5,662,000      2,322,887

China Merchants Holdings International Co. Ltd.

   972,000      1,476,702

China Mobile Ltd.

   11,421,000      33,311,463

China Overseas Land & Investment Ltd.

   7,754,000      1,540,869

China Resources Enterprises Ltd.

   3,402,000      4,514,221

China Resources Land Ltd.1

   7,776,000      1,016,868

China Travel International Investment Hong Kong Ltd.1

   17,226,951      3,533,756

Citic Pacific Ltd.1

   2,673,000      6,819,621

CNOOC Ltd.

   35,649,000      16,682,011

Denway Motors Ltd.1

   10,692,000      4,215,143

Lenovo Group Ltd.1

   10,164,000      3,192,559

Shanghai Industrial Holdings Ltd.1

   972,000      1,788,242

Shenzhen Investment Ltd.

   2,430,000      295,963

TCL International Holdings Ltd.1

   4,860,000      1,744,627
         

            83,682,401
HUNGARY – 2.31%            

Gedeon Richter Rt

   120,946      12,917,280

MATAV Rt

   1,017,698      4,109,460

Mol Magyar Olaj-es Gazipari Rt

   186,824      8,113,384

OTP Bank Rt

   923,820      20,093,597
         

            45,233,721
INDIA – 5.42%            

HDFC Bank Ltd. ADR1

   613,470      17,244,642

ICICI Bank Ltd. ADR

   948,231      11,568,418

Infosys Technologies Ltd. ADR1

   558,536      29,155,579

Mahanagar Telephone Nigam Ltd. ADR

   1,552,242      10,182,708

Satyam Computer Services Ltd. ADR1

   710,056      13,931,299

Videsh Sanchar Nigam Ltd. ADR1

   1,546,167      11,426,174

Wipro Ltd. ADR1

   731,808      12,616,370
         

            106,125,190
INDONESIA – 2.58%            

PT Aneka Tambang Tbk

   18,232,455      2,430,994

PT Astra International Inc. Tbk

   6,685,230      4,528,129

PT Bank Central Asia Tbk

   12,150,000      2,332,800

PT Bank Danamon Indonesia Tbk

   3,761,987      1,344,283

PT Bank Mandiri Tbk

   12,757,500      1,701,000

PT Bank Pan Indonesia Tbk

   49,309,918      1,393,827

PT Bank Rakyat Indonesia Tbk

   11,163,061      2,054,003

PT Bumi Resources Tbk

   22,143,000      1,476,200

PT Gudang Garam Tbk

   2,430,987      3,306,142

PT Hanjaya Mandala Sampoerna Tbk

   6,563,667      3,710,660

PT Kalbe Farma Tbk

   73,669,156      3,103,927

PT Matahari Putra Prima Tbk

   21,271,194      1,134,464

PT Perusahaan Gas Negara Tbk

   6,790,500      832,968

PT Ramayana Lestari Sentosa Tbk

   4,861,974      2,035,546

PT Semen Gresik (Persero) Tbk

   137,000      146,133

PT Telekomunikasi Indonesia Tbk

   22,243,593      18,150,772

PT Tempo Scan Pacific Tbk

   293,376      208,101

PT United Tractors Tbk

   4,782,771      701,473
         

            50,591,422
ISRAEL – 4.74%            

Alvarion Ltd.

   217,800      2,443,716

AudioCodes Ltd.1

   207,646      2,352,629

Bank Hapoalim Ltd.

   2,810,997      7,625,676

Bank Leumi Le-Israel

   3,680,249      7,408,505

Check Point Software Technologies Ltd.1

   289,798      5,083,057

Clal Industries and Investments Ltd.

   131,890      545,289

Clal Insurance Co. Ltd.

   23,958      379,154

ECI Telecom Ltd.

   118,822      819,872

Elbit Systems Ltd.

   185,372      3,888,181

Elite Industries Ltd.

   54,450      507,903

Given Imaging Ltd.1

   36,542      1,297,241

Israel Chemicals Ltd.

   2,139,671      3,908,459

Israel Corp. Ltd. (The)

   2,662      474,840

Israel Discount Bank Class A

   4,218,835      4,618,480

Koor Industries Ltd.

   78,465      3,183,358

Lipman Electronic Engineering Ltd.

   25,652      546,644

Makhteshim-Agan Industries Ltd.

   850,996      3,390,437

M-Systems Flash Disk Pioneers Ltd.1

   204,974      2,398,196

NICE Systems Ltd.

   24,300      467,089

 

40

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Orbotech Ltd.

   186,098    $ 3,105,976

Supersol Ltd.

   475,673      1,095,846

Teva Pharmaceutical Industries Ltd.

   1,182,148      32,696,598

United Mizrahi Bank Ltd.

   1,324,396      4,526,899
         

            92,827,045

MEXICO – 7.25%

           

Alfa SA de CV Class A

   1,021,189      3,348,205

America Movil SA de CV Series L

   17,116,500      29,390,679

Cemex SA de CV Series CPO

   2,139,671      12,144,002

Consorcio Ara SA de CV2

   1,701,000      4,556,717

Controladora Comercial Mexicana SA de CV

   2,357,100      2,575,409

Fomento Economico Mexicano SA de CV Class UBD

   1,482,300      6,410,650

Grupo Carso SA de CV Series A1

   72,931      334,052

Grupo Continental SA

   1,288,675      1,973,957

Grupo Financiero Banorte SA de CV Series O

   730,114      2,875,439

Grupo Mexico SA de CV Series B2

   1,093,500      3,902,236

Grupo Modelo SA de CV Series C

   3,185,222      7,601,114

Grupo Televisa SA Series CPO

   5,008,807      12,054,043

Industrias Penoles SA de CV Series CP

   218,824      897,937

Kimberly-Clark de Mexico SA de CV Class A

   1,774,954      4,879,545

Telefonos de Mexico SA de CV Series L

   18,017,181      29,259,820

TV Azteca SA de CV Series CPO2

   2,332,800      1,348,191

Vitro SA de CV Series A

   3,549,939      3,117,947

Wal-Mart de Mexico SA de CV Series V

   4,829,890      15,343,825
         

            142,013,768

PERU – 0.38%

           

Companhia de Minas Buenaventura SA ADR

   326,292      7,413,354
         

            7,413,354

PHILIPPINE ISLANDS – 1.72%

           

ABS-CBN Broadcasting Corp.

   6,904,496      2,427,483

Ayala Corp.

   36,650,480      3,523,143

Ayala Land Inc. Class B

   6,852,327      646,503

Bank of the Philippine Islands

   4,785,207      3,535,133

Equitable PCI Bank

   2,856,509      2,135,708

Filinvest Land Inc.

   60,141,112      1,006,366

Globe Telecom Inc.

   138,572      2,158,442

Jollibee Foods Corp.

   10,455,293      4,653,001

Manila Electric Co. Class B

   2,674,612      1,011,758

Megaworld Corp.

   41,331,068      794,616

Metropolitan Bank & Trust Co.

   40      18

Petron Corp.

   48,603,600      2,249,566

Philippine Long Distance Telephone Co.

   301,475      6,788,890

SM Prime Holdings Inc.

   26,989,306      2,738,568
         

            33,669,195

RUSSIA – 4.46%

           

JSC MMC Norilsk Nickel ADR7

   167,844      9,466,402

LUKOIL ADR7

   350,779      41,777,779

Rostelecom ADR1

   176,039      2,147,676

Surgutneftegaz ADR1,7

   891,533      31,052,094

Tatneft ADR1

   65,641      1,712,574

YUKOS ADR7

   67,000      1,124,260
         

            87,280,785

SOUTH AFRICA – 15.96%

           

African Bank Investments Ltd.

   2,355,723      4,190,311

Alexander Forbes Ltd.

   2,341,006      3,794,848

Anglo American Platinum Corp. Ltd.1

   131,768      5,849,757

Anglo American PLC

   3,303,868      74,850,448

AngloGold Ashanti Ltd.

   266,726      9,416,805

Anglovaal Industries Ltd.

   985,472      3,018,783

Barloworld Ltd.

   511,308      5,761,217

Bidvest Group Ltd.

   603,984      5,430,752

Bidvest Group Ltd. Warrants (Expiring 12/8/06)2

   18,430      23,535

FirstRand Ltd.1

   6,953,985      11,168,165

Foschini Ltd.

   2,264,666      8,199,579

Gold Fields Ltd.

   853,580      10,355,168

Impala Platinum Holdings Ltd.

   114,515      9,608,507

Imperial Holdings Ltd.

   632,415      7,295,872

Investec Ltd.

   212,263      3,795,781

Iscor Ltd.

   869,221      6,137,598

JD Group Ltd.

   688,336      4,705,245

Liberty Group Ltd.

   420,881      3,477,702

Metro Cash & Carry Ltd.2

   7,879,126      3,077,668

 

SCHEDULE OF INVESTMENTS

  41


Schedule of Investments (Continued)

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

MTN Group Ltd.

   2,525,560    $ 11,572,519

Nampak Ltd.

   1,865,169      3,922,985

Naspers Ltd.

   948,015      6,973,118

Nedcor Ltd.

   762,785      6,418,567

Network Healthcare Holdings Ltd.2

   4,187,228      3,006,941

New Africa Capital Ltd.

   2,144,045      2,464,142

Old Mutual PLC

   8,509,629      16,261,781

Pick’n Pay Stores Ltd.

   1,109,342      3,199,905

Sanlam Ltd.

   6,597,044      8,890,214

Sappi Ltd.

   470,484      6,622,294

Sasol Ltd.

   1,393,470      23,863,533

Shoprite Holdings Ltd.

   2,820,511      4,025,518

Standard Bank Group Ltd.

   2,333,466      15,561,699

Steinhoff International Holdings Ltd.

   406,802      500,538

Telkom South Africa Ltd.

   293,213      3,491,024

Tiger Brands Ltd.

   389,260      5,590,724

Tongaat-Hulett Group Ltd.

   352,299      2,418,789

Truworths International Ltd.

   2,162,757      3,444,165

Woolworths Holdings Ltd.

   3,539,496      4,216,819
         

            312,603,016

SOUTH KOREA – 16.18%

           

Kookmin Bank ADR1

   1,204,806      38,493,552

Korea Electric Power Corp. ADR1

   3,787,300      38,024,492

KT Corp. ADR1

   1,289,647      22,594,615

POSCO ADR

   1,556,060      56,298,251

Samsung Electronics Co. Ltd. GDR3

   705,523      136,695,081

SK Telecom Co. Ltd. ADR1

   1,315,162      24,856,562
         

            316,962,553

TAIWAN – 9.51%

           

AU Optronics Corp. ADR1

   1,704,653      21,120,648

Chunghwa Telecom Co. Ltd. ADR1

   1,964,220      33,509,593

Siliconware Precision Industries Co. ADR1

   8,691,165      31,288,194

Taiwan Semiconductor Manufacturing Co. Ltd. ADR1

   7,655,567      57,799,531

United Microelectronics Corp. ADR1

   11,167,751      42,437,454
         

            186,155,420

THAILAND – 3.54%

           

Advanced Info Service PCL

   1,871,100      4,200,428

Bangkok Bank PCL

   1,749,600      4,158,713

Bangkok Expressway PCL

   4,519,800      2,571,891

Banpu PCL

   729,000      2,467,923

Charoen Pokphand Foods PCL

   28,000      2,555

Electricity Generating PCL

   1,613,300      2,788,898

Kasikornbank PCL

   3,474,900      4,004,687

Kiatnakin Finance PCL

   753,300      551,636

Kim Eng Securities Thailand PCL

   259,800      219,879

Krung Thai Bank PCL

   1,876,900      365,015

Land and House PCL

   6,126,700      1,456,286

National Finance PCL

   3,037,500      904,322

National Petrochemical PCL

   972,000      2,450,420

PTT Exploration & Production PCL

   777,600      5,227,563

PTT PCL

   3,990,800      14,372,629

Ratchaburi Electricity Generating Holding PCL

   7,997,800      7,344,918

Sahaviriya Steel Industry PCL

   3,475,300      2,232,036

Shin Corp. PCL

   2,867,400      2,461,214

Siam Cement PCL

   729,000      4,235,726

Siam City Cement PCL

   145,800      728,125

Siam Makro PCL

   3,280,500      3,780,648

Thai Airways International PCL

   164,600      211,431

Thai Union Frozen Products PCL

   2,916,000      1,680,288

TISCO Finance PCL

   607,500      341,308

United Broadcasting Corp. PCL

   1,287,900      606,071
         

            69,364,610

TURKEY – 0.93%

           

Adana Cimento TAS Class A

   354,047,980      1,195,075

Akbank TAS

   722,370,497      3,074,936

Akcansa Cimento AS

   129,651,500      364,335

Arcelik AS

   218,042,250      1,138,431

Dogan Yayin Holding AS

   347,996,400      1,249,871

Eregli Demir ve Celik Fabrikalari TAS

   516,670,000      1,769,770

Hurriyet Gazetecilik ve Matbaacilik AS

   499,681,748      947,187

Trakya Cam Sanayii AS

   289,263,921      735,905

Tupras Turkiye Petrol Rafinerileri AS

   199,166,000      1,536,632

Turk Sise ve Cam Fabrikalari

   1,235,693,164      2,732,748

Turkiye Garanti Bankasi AS

   552,970,323      1,811,359

Vestel Elektronik Sanayi ve Ticaret AS

   454,234,000      1,646,544

Yapi VE Kredi Bankasi AS

   25,410,000      60,842
         

            18,263,635

 

42

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

VENEZUELA – 0.22%

             

Companhia Anonima Nacional Telefonos de Venezuela ADR

     215,179    $ 4,264,848
           

              4,264,848
           

TOTAL COMMON STOCKS
(Cost: $1,868,020,265)

            1,894,833,948

PREFERRED STOCKS – 1.54%

             

BRAZIL – 1.44%

             

Petroleo Brasileiro SA ADR

     1,013,170      28,257,311
           

              28,257,311

THAILAND – 0.10%

             

Siam Commercial Bank PCL

     1,628,100      1,876,322
           

              1,876,322
           

TOTAL PREFERRED STOCKS
(Cost: $28,536,529)

            30,133,633

EXCHANGE-TRADED FUNDS – 1.17%

             

iShares MSCI Malaysia Index Fund1,4

     850,996      5,488,924

iShares MSCI South Korea Index Fund1,4

     298,628      7,241,729

iShares MSCI Taiwan Index Fund1,4

     965,096      10,268,622
           

TOTAL EXCHANGE-TRADED FUNDS
(Cost: $23,268,153)

            22,999,275

SHORT-TERM INVESTMENTS – 22.94%

             

FLOATING RATE NOTES – 5.87%

             

Beta Finance Inc.

             

1.45%, 05/04/053,5

   $ 1,944,473      1,944,212

1.52%, 10/12/043,5

     1,620,394      1,620,376

1.56%, 09/15/043,5

     3,240,788      3,240,776

1.64%, 03/15/053,5

     1,620,394      1,621,094

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/045

     2,430,591      2,430,555

1.38%, 11/22/045

     810,197      810,211

1.40%, 10/29/045

     3,240,788      3,240,775

CC USA Inc.

             

1.45%, 05/04/053,5

     3,240,788      3,240,353

1.61%, 07/29/053,5

     3,240,788      3,239,904

Security


   Principal

   Value

Den Danske Bank NY

             

1.51%, 08/12/055

   $ 3,240,788    $ 3,239,869

1.56%, 08/26/055

     3,240,788      3,239,832

Depfa Bank PLC

             

1.27%, 06/15/055

     3,240,788      3,240,788

Dorada Finance Inc.

             

1.61%, 07/29/053,5

     2,689,854      2,689,120

Five Finance Inc.

             

1.42%, 04/29/053,5

     2,592,631      2,592,460

Gemini Securitization Corp.

             

1.53%, 09/09/045

     1,620,394      1,619,843

HBOS Treasury Services PLC

             

1.24%, 04/01/055

     2,074,104      2,073,984

1.58%, 04/22/055

     3,240,788      3,240,788

K2 USA LLC

             

1.45%, 06/10/053,5

     3,240,788      3,240,482

1.57%, 09/27/043,5

     3,500,051      3,500,014

1.61%, 07/25/053,5

     1,620,394      1,620,103

Links Finance LLC

             

1.55%, 04/15/053,5

     3,240,788      3,240,387

1.68%, 04/25/055

     3,240,788      3,242,154

Nationwide Building Society

             

1.59%, 07/28/055

     3,240,788      3,240,788

1.63%, 12/09/043,5

     2,689,854      2,677,797

Nordea Bank PLC

             

2.11%, 06/07/055

     3,240,788      3,240,296

Northern Rock PLC

             

1.56%, 01/13/053,5

     3,078,749      3,078,749

Permanent Financing PLC

             

1.52%, 03/10/055

     3,240,788      3,240,788

1.53%, 12/10/045

     1,620,394      1,620,394

1.55%, 06/10/055

     1,458,355      1,458,355

Sigma Finance Inc.

             

1.52%, 10/07/045

     3,240,788      3,240,724

1.57%, 11/15/045

     3,240,788      3,240,737

1.59%, 09/15/055

     2,430,591      2,430,808

Tango Finance Corp.

             

1.52%, 04/07/053,5

     1,189,369      1,189,298

1.56%, 01/18/053,5

     1,425,947      1,425,892

1.59%, 07/25/053,5

     3,240,788      3,240,497

1.66%, 05/17/053,5

     2,689,854      2,689,759

1.70%, 02/25/053,5

     1,814,841      1,814,666

 

SCHEDULE OF INVESTMENTS

  43


Schedule of Investments (Continued)

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

WhistleJacket Capital LLC

             

1.26%, 10/20/045

   $ 802,743    $ 801,367

1.48%, 06/15/053,5

     1,620,394      1,620,102

1.56%, 09/15/043,5

     1,620,394      1,620,382

1.56%, 07/15/053,5

     2,430,591      2,430,162

White Pine Finance LLC

             

1.46%, 07/05/055

     1,620,394      1,620,096

1.55%, 04/15/053,5

     2,430,591      2,430,290

1.55%, 07/11/055

     810,197      810,119

1.56%, 11/15/043,5

     1,944,473      1,944,473

1.57%, 06/15/053,5

     1,328,723      1,328,723

1.58%, 03/29/055

     1,393,539      1,393,359

1.58%, 08/26/053,5

     1,620,394      1,620,075

1.68%, 05/20/055

     1,458,355      1,458,250
           

              115,075,026

MONEY MARKET FUNDS – 4.77%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares4,5

     53,993,452      53,993,452

Barclays Global Investors Funds

             

Prime Money Market Fund, Institutional Shares4,5

     35,648,671      35,648,671

BlackRock Temp Cash Money Market Fund5

     1,636,001      1,636,001

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares5

     2,178,453      2,178,453
           

              93,456,577

COMMERCIAL PAPER – 4.21%

             

Alpine Securitization Corp.

             

1.50%, 09/08/045

     1,620,394      1,619,921

1.51%, 09/02/045

     1,458,355      1,458,294

1.54%, 09/14/045

     1,620,394      1,619,493

Amsterdam Funding Corp.

             

1.49%, 09/08/045

     648,158      647,970

1.53%, 09/16/045

     1,594,403      1,593,387

1.54%, 09/15/045

     1,620,394      1,619,424

1.54%, 09/22/045

     810,197      809,469

Barton Capital Corp.

             

1.53%, 09/08/045

     1,620,394      1,619,912

1.53%, 09/09/045

     3,784,949      3,783,662

Security


   Principal

   Value

1.53%, 09/13/045

   $ 2,333,238    $ 2,332,048

1.53%, 09/14/045

     810,197      809,749

1.54%, 09/17/045

     972,236      971,572

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/045

     1,620,394      1,619,918

1.53%, 09/15/045

     648,158      647,772

Cantabric Finance LLC

             

1.55%, 09/17/045

     648,158      647,711

Corporate Asset Funding

             

1.42%, 09/03/045

     972,236      972,160

CRC Funding LLC

             

1.42%, 09/03/045

     1,620,394      1,620,266

Delaware Funding Corp.

             

1.50%, 09/09/045

     1,620,394      1,619,854

1.53%, 09/10/045

     2,592,631      2,591,639

1.53%, 09/20/045

     1,101,868      1,100,978

Edison Asset Securitization

             

1.07%, 09/21/045

     1,620,394      1,619,431

1.45%, 11/09/045

     3,240,788      3,231,781

1.52%, 09/08/045

     3,240,788      3,239,830

1.59%, 12/02/045

     3,240,788      3,227,620

Falcon Asset Securitization Corp.

             

1.48%, 09/03/045

     972,236      972,157

1.53%, 09/07/045

     1,620,394      1,619,981

1.53%, 09/17/045

     972,236      971,575

1.53%, 09/21/045

     810,197      809,508

1.53%, 09/22/045

     1,620,394      1,618,948

1.54%, 09/14/045

     2,430,591      2,429,241

Ford Credit Auto Receivables

             

1.85%, 01/14/055

     1,620,394      1,609,153

GIRO Funding US Corp.

             

1.54%, 09/09/045

     1,620,394      1,619,841

1.55%, 10/15/045

     2,125,147      2,121,121

Grampian Funding LLC

             

1.26%, 10/22/045

     3,240,788      3,235,026

1.44%, 10/27/045

     3,240,788      3,233,529

1.59%, 11/30/045

     1,620,394      1,613,953

Jupiter Securitization Corp.

             

1.47%, 09/02/045

     810,197      810,164

1.53%, 09/20/045

     810,197      809,543

1.53%, 09/23/045

     1,134,276      1,133,215

1.54%, 09/15/045

     1,944,473      1,943,308

 

44

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Preferred Receivables Funding Corp.

             

1.47%, 09/01/045

   $ 2,258,505    $ 2,258,505

1.51%, 09/08/045

     1,296,315      1,295,935

1.52%, 09/09/045

     810,197      809,923

1.53%, 09/21/045

     1,620,394      1,619,017

Receivables Capital Corp.

             

1.54%, 09/14/045

     972,236      971,696

Scaldis Capital LLC

             

1.48%, 09/01/045

     1,782,434      1,782,434

Sydney Capital Corp.

             

1.25%, 10/22/045

     1,078,534      1,076,624

1.55%, 09/16/045

     972,236      971,609

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/045

     1,296,315      1,295,539

1.54%, 09/23/045

     810,197      809,435

Windmill Funding Corp.

             

1.52%, 09/09/045

     810,197      809,923

1.52%, 09/10/045

     1,134,276      1,133,845
           

              82,408,609

TIME DEPOSITS – 3.70%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/055

     3,240,788      3,240,788

1.33%, 02/10/055

     1,620,394      1,620,286

1.39%, 02/02/055

     1,620,394      1,620,289

1.39%, 04/08/055

     2,268,552      2,268,348

1.40%, 10/25/045

     3,240,788      3,240,716

Bank of New York

             

1.39%, 11/01/045

     3,240,788      3,240,734

1.60%, 12/03/045

     810,197      810,092

Bank of Nova Scotia

             

1.13%, 10/06/045

     3,240,788      3,240,788

1.24%, 10/07/045

     2,430,591      2,430,567

1.42%, 10/29/045

     2,430,591      2,430,620

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/055

     3,240,788      3,240,844

1.49%, 08/09/055

     3,240,788      3,239,878

1.54%, 06/23/055

     3,240,788      3,240,003

1.56%, 06/10/055

     1,620,394      1,620,786

Norddeutsche Landesbank

             

1.59%, 07/27/055

     3,240,788      3,239,760

Prudential Funding LLC

             

1.60%, 12/01/045

     1,620,394      1,613,840

SouthTrust Bank

             

1.55%, 09/01/045

     6,481,576      6,481,576

Toronto-Dominion Bank

             

1.22%, 03/23/055

     5,671,379      5,670,827

1.34%, 02/10/055

     1,296,315      1,296,229

1.41%, 11/01/045

     2,430,591      2,430,551

1.53%, 09/13/045

     1,620,394      1,620,394

1.77%, 05/10/055

     1,620,394      1,620,284

1.90%, 05/11/055

     1,620,394      1,620,283

UBS Finance (Delaware)

             

1.10%, 09/08/045

     3,240,788      3,240,095

1.11%, 12/17/045

     4,861,182      4,845,145

1.14%, 09/29/045

     3,240,788      3,237,927
           

              72,401,650

REPURCHASE AGREEMENTS – 3.27%

             

Banc of America Securities LLC

             

1.59%, 09/01/045,6

     9,722,365      9,722,365

Bank of America, N.A.

             

1.59%, 09/01/045,6

     18,634,532      18,634,532

Goldman Sachs & Co.

             

1.59%, 09/01/045,6

     16,203,941      16,203,941

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/045,6

     3,240,788      3,240,788

1.59%, 09/01/045,6

     16,203,941      16,203,941
           

              64,005,567

U.S. GOVERNMENT AGENCY NOTES – 0.60%

             

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/055

     2,268,552      2,273,042

1.80%, 01/18/055

     1,506,967      1,496,493

1.80%, 01/19/055

     1,620,394      1,609,051

2.06%, 05/31/055

     1,615,630      1,590,484

Federal National Mortgage Association
2.33%, 07/22/05
5

     4,861,182      4,759,462
           

              11,728,532

 

SCHEDULE OF INVESTMENTS

  45


Schedule of Investments (Continued)

 

iSHARES® MSCI EMERGING MARKETS INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

MEDIUM-TERM NOTES – 0.52%

               

CC USA Inc.

               

1.29%, 04/15/053,5

   $ 3,240,788    $ 3,240,588  

1.51%, 02/15/053,5

     2,106,512      2,108,010  

Dorada Finance Inc.

               

1.48%, 01/18/053,5

     2,430,591      2,430,545  

K2 USA LLC

               

1.46%, 01/12/053,5

     1,620,394      1,620,336  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,5

     810,197      810,128  
           


              10,209,607  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $449,285,568)

            449,285,568  
           


TOTAL INVESTMENTS IN SECURITIES – 122.40%
(Cost $2,369,110,515)

            2,397,252,424  

Other Assets, Less Liabilities – (22.40%)

            (438,656,074 )
           


NET ASSETS – 100.00%

          $ 1,958,596,350  
           



ADR - American Depositary Receipts

GDR - Global Depositary Receipts

1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
4 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
5 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.
7 Security valued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.

 

SECTOR DIVERSIFICATION

 

Sectors


   % of
Net Assets


    Value

Communications

   16.76 %   $ 328,338,755

Basic Materials

   15.83       310,008,888

Financial

   15.82       309,793,561

Energy

   12.63       247,414,073

Industrial

   10.62       207,981,415

Technology

   9.97       195,200,876

Consumer Non-Cyclical

   5.89       115,403,503

Consumer Cyclical

   4.30       84,246,151

Utilities

   4.04       79,054,467

Diversified

   2.43       47,525,892

Exchange-Traded Funds

   1.17       22,999,275

Short-Term and Other Net Assets

   0.54       10,629,494
    

 

TOTAL

   100.00 %   $ 1,958,596,350
    

 

 

See notes to financial statements.

 

46

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI HONG KONG INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.72%

           

AIRLINES – 1.29%

           

Cathay Pacific Airways Ltd.

   3,300,000    $ 5,796,191
         

            5,796,191

APPAREL – 0.89%

           

Yue Yuen Industrial Holdings Ltd.1

   1,650,000      3,976,949
         

            3,976,949

BANKS – 15.48%

           

Bank of East Asia Ltd.

   4,290,100      11,770,350

BOC Hong Kong Holdings Ltd.1

   11,825,000      21,224,495

Hang Seng Bank Ltd.

   2,750,000      36,666,902
         

            69,661,747

CHEMICALS – 0.46%

           

Kingboard Chemical Holdings Co. Ltd.

   1,108,000      2,081,065
         

            2,081,065

DISTRIBUTION & WHOLESALE – 4.22%

           

Esprit Holdings Ltd.

   2,477,000      11,940,487

Li & Fung Ltd.

   5,500,000      7,051,327
         

            18,991,814

DIVERSIFIED FINANCIAL SERVICES – 1.60%

           

Hong Kong Exchanges & Clearing Ltd.1

   3,300,000      7,213,508
         

            7,213,508

ELECTRIC – 12.14%

           

CLP Holdings Ltd.

   6,050,200      34,982,791

Hongkong Electric Holdings Ltd.

   4,400,000      19,630,895
         

            54,613,686

ELECTRICAL COMPONENTS & EQUIPMENT – 1.05%

           

Johnson Electric Holdings Ltd.

   4,675,000      4,734,966
         

            4,734,966

ENGINEERING & CONSTRUCTION – 2.52%

           

Cheung Kong Infrastructure Holdings Ltd.

   1,650,000      4,093,296

New World Development Co. Ltd.

   7,700,800      7,256,570
         

            11,349,866

GAS – 4.63%

           

Hong Kong & China Gas Co. Ltd.

   11,550,663      20,806,135
         

            20,806,135

HAND & MACHINE TOOLS – 0.96%

           

Techtronic Industries Co. Ltd.1

   2,750,000      4,336,566
         

            4,336,566

HOLDING COMPANIES – DIVERSIFIED – 21.03%

           

Hutchison Whampoa Ltd.

   7,700,800      60,471,413

Swire Pacific Ltd. Class A

   3,025,000      21,427,221

Wharf Holdings Ltd. (The)

   3,850,000      12,710,017
         

            94,608,651

LODGING – 0.68%

           

Shangri-La Asia Ltd.1

   3,300,000      3,067,327
         

            3,067,327

MEDIA – 1.29%

           

SCMP Group Ltd.

   3,300,000      1,248,085

Television Broadcasts Ltd.

   1,100,000      4,555,157
         

            5,803,242

REAL ESTATE – 25.68%

           

Cheung Kong Holdings Ltd.

   4,950,000      42,678,158

Hang Lung Properties Ltd.1

   4,400,000      6,402,605

Henderson Land Development Co. Ltd.1

   2,200,000      10,746,223

Hopewell Holdings Ltd.

   2,200,000      4,766,697

Hysan Development Co. Ltd.

   2,200,000      3,807,717

Kerry Properties Ltd.

   1,650,000      2,982,711

Sino Land Co. Ltd.1

   4,400,000      3,271,816

Sun Hung Kai Properties Ltd.

   4,400,000      40,897,698
         

            115,553,625

RETAIL – 0.69%

           

Giordano International Ltd.

   5,500,000      3,084,956
         

            3,084,956

SEMICONDUCTORS – 0.41%

           

ASM Pacific Technology Ltd.1

   550,000      1,836,870
         

            1,836,870

TELECOMMUNICATIONS – 1.98%

           

PCCW Ltd.1,2

   11,554,576      7,703,100

SmarTone Telecommunications Holdings Ltd.

   1,102,000      1,200,905
         

            8,904,005

TEXTILES – 0.42%

           

Texwinca Holdings Ltd.1

   2,200,000      1,889,756
         

            1,889,756

 

SCHEDULE OF INVESTMENTS

  47


Schedule of Investments (Continued)

 

iSHARES® MSCI HONG KONG INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

TRANSPORTATION – 2.30%

             

MTR Corp. Ltd.1

     4,400,083    $ 6,741,196

Orient Overseas International Ltd.1

     1,100,000      3,603,228
           

              10,344,424
           

TOTAL COMMON STOCKS
(COST: $412,484,746)

            448,655,349

SHORT-TERM INVESTMENTS – 12.81%

             

FLOATING RATE NOTES – 3.31%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 251,670      251,637

1.52%, 10/12/043,4

     209,725      209,723

1.56%, 09/15/043,4

     419,451      419,449

1.64%, 03/15/053,4

     209,725      209,816

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     314,588      314,583

1.38%, 11/22/043

     104,863      104,865

1.40%, 10/29/043

     419,451      419,449

CC USA Inc.

             

1.45%, 05/04/053,4

     419,451      419,395

1.61%, 07/29/053,4

     419,451      419,336

Den Danske Bank NY

             

1.51%, 08/12/053

     419,451      419,332

1.56%, 08/26/053

     419,451      419,327

Depfa Bank PLC

             

1.27%, 06/15/053

     419,451      419,451

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     348,144      348,049

Five Finance Inc.

             

1.42%, 04/29/053,4

     335,561      335,539

Gemini Securitization Corp.

             

1.53%, 09/09/043

     209,725      209,655

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     268,449      268,433

1.58%, 04/22/053

     419,451      419,451

K2 USA LLC

             

1.45%, 06/10/053,4

     419,451      419,411

1.57%, 09/27/043,4

     453,007      453,002

1.61%, 07/25/053,4

     209,725      209,688

Security


   Principal

   Value

Links Finance LLC

             

1.55%, 04/15/053,4

   $ 419,451    $ 419,399

1.68%, 04/25/053

     419,451      419,628

Nationwide Building Society

             

1.59%, 07/28/053

     419,451      419,451

1.63%, 12/09/043,4

     348,144      346,584

Nordea Bank PLC

             

2.11%, 06/07/053

     419,451      419,387

Northern Rock PLC

             

1.56%, 01/13/053,4

     398,478      398,478

Permanent Financing PLC

             

1.52%, 03/10/053

     419,451      419,451

1.53%, 12/10/043

     209,725      209,725

1.55%, 06/10/053

     188,753      188,753

Sigma Finance Inc.

             

1.52%, 10/07/043

     419,451      419,443

1.57%, 11/15/043

     419,451      419,444

1.59%, 09/15/053

     314,588      314,616

Tango Finance Corp.

             

1.52%, 04/07/053,4

     153,938      153,929

1.56%, 01/18/053,4

     184,558      184,551

1.59%, 07/25/053,4

     419,451      419,413

1.66%, 05/17/053,4

     348,144      348,132

1.70%, 02/25/053,4

     234,892      234,870

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     103,898      103,720

1.48%, 06/15/053,4

     209,725      209,688

1.56%, 09/15/043,4

     209,725      209,724

1.56%, 07/15/053,4

     314,588      314,533

White Pine Finance LLC

             

1.46%, 07/05/053

     209,725      209,687

1.55%, 04/15/053,4

     314,588      314,549

1.55%, 07/11/053

     104,863      104,853

1.56%, 11/15/043,4

     251,670      251,670

1.57%, 06/15/053,4

     171,975      171,975

1.58%, 03/29/053

     180,364      180,341

1.58%, 08/26/053,4

     209,725      209,684

1.68%, 05/20/053

     188,753      188,739
           

              14,894,008

 

48

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI HONG KONG INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

MONEY MARKET FUNDS – 2.58%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     6,498,491    $ 6,498,491

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     4,613,959      4,613,959

BlackRock Temp Cash Money Market Fund3

     211,745      211,745

Short-Term Investment Co. - Prime Money Market Portfolio, Institutional Shares3

     281,954      281,954
           

              11,606,149

COMMERCIAL PAPER – 2.37%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

   $ 209,725      209,664

1.51%, 09/02/043

     188,753      188,745

1.54%, 09/14/043

     209,725      209,609

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     83,890      83,866

1.53%, 09/16/043

     206,361      206,230

1.54%, 09/15/043

     209,725      209,600

1.54%, 09/22/043

     104,863      104,769

Barton Capital Corp.

             

1.53%, 09/08/043

     209,725      209,663

1.53%, 09/09/043

     489,881      489,714

1.53%, 09/13/043

     301,988      301,834

1.53%, 09/14/043

     104,863      104,805

1.54%, 09/17/043

     125,835      125,749

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     209,725      209,664

1.53%, 09/15/043

     83,890      83,840

Cantabric Finance LLC

             

1.55%, 09/17/043

     83,890      83,832

Corporate Asset Funding

             

1.42%, 09/03/043

     125,835      125,826

CRC Funding LLC

             

1.42%, 09/03/043

     209,725      209,709

Security


   Principal

   Value

Delaware Funding Corp.

             

1.50%, 09/09/043

   $ 209,725    $ 209,656

1.53%, 09/10/043

     335,561      335,433

1.53%, 09/20/043

     142,613      142,498

Edison Asset Securitization

             

1.07%, 09/21/043

     209,725      209,601

1.45%, 11/09/043

     419,451      418,286

1.52%, 09/08/043

     419,451      419,327

1.59%, 12/02/043

     419,451      417,746

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     125,835      125,825

1.53%, 09/07/043

     209,725      209,672

1.53%, 09/17/043

     125,835      125,750

1.53%, 09/21/043

     104,863      104,774

1.53%, 09/22/043

     209,725      209,538

1.54%, 09/14/043

     314,588      314,413

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     209,725      208,270

GIRO Funding US Corp.

             

1.54%, 09/09/043

     209,725      209,654

1.55%, 10/15/043

     275,055      274,534

Grampian Funding LLC

             

1.26%, 10/22/043

     419,451      418,705

1.44%, 10/27/043

     419,451      418,511

1.59%, 11/30/043

     209,725      208,892

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     104,863      104,858

1.53%, 09/20/043

     104,863      104,778

1.53%, 09/23/043

     146,808      146,671

1.54%, 09/15/043

     251,670      251,520

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     292,315      292,315

1.51%, 09/08/043

     167,780      167,731

1.52%, 09/09/043

     104,863      104,827

1.53%, 09/21/043

     209,725      209,547

Receivables Capital Corp.

             

1.54%, 09/14/043

     125,835      125,765

Scaldis Capital LLC

             

1.48%, 09/01/043

     230,698      230,698

 

SCHEDULES OF INVESTMENTS

  49


Schedule of Investments (Continued)

 

iSHARES® MSCI HONG KONG INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Sydney Capital Corp.

             

1.25%, 10/22/043

   $ 139,593    $ 139,346

1.55%, 09/16/043

     125,835      125,754

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     167,780      167,680

1.54%, 09/23/043

     104,863      104,764

Windmill Funding Corp.

             

1.52%, 09/09/043

     104,863      104,827

1.52%, 09/10/043

     146,808      146,753
           

              10,666,038

TIME DEPOSITS – 2.08%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     419,451      419,451

1.33%, 02/10/053

     209,725      209,704

1.39%, 02/02/053

     209,725      209,712

1.39%, 04/08/053

     293,616      293,589

1.40%, 10/25/043

     419,451      419,442

Bank of New York

             

1.39%, 11/01/043

     419,451      419,444

1.60%, 12/03/043

     104,863      104,849

Bank of Nova Scotia

             

1.13%, 10/06/043

     419,451      419,451

1.24%, 10/07/043

     314,588      314,585

1.42%, 10/29/043

     314,588      314,592

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     419,451      419,458

1.49%, 08/09/053

     419,451      419,333

1.54%, 06/23/053

     419,451      419,349

1.56%, 06/10/053

     209,725      209,776

Norddeutsche Landesbank

             

1.59%, 07/27/053

     419,451      419,318

Prudential Funding LLC

             

1.60%, 12/01/043

     209,725      208,877

SouthTrust Bank

             

1.55%, 09/01/043

     838,902      838,902

Toronto-Dominion Bank

             

1.22%, 03/23/053

     734,039      733,968

1.34%, 02/10/053

     167,780      167,769

1.41%, 11/01/043

     314,588      314,583

1.53%, 09/13/043

     209,725      209,725

1.77%, 05/10/053

     209,725      209,711

1.90%, 05/11/053

     209,725      209,712

UBS Finance (Delaware)

             

1.10%, 09/08/043

     419,451      419,361

1.11%, 12/17/043

     629,176      627,100

1.14%, 09/29/043

     419,451      419,081
           

              9,370,842

REPURCHASE AGREEMENTS – 1.84%

             

Banc of America Securities LLC

             

1.59%, 09/01/043,6

     1,258,352      1,258,352

Bank of America, N.A.

             

1.59%, 09/01/043,6

     2,411,842      2,411,842

Goldman Sachs & Co.

             

1.59%, 09/01/043,6

     2,097,254      2,097,254

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/043,6

     419,451      419,451

1.59%, 09/01/043,6

     2,097,254      2,097,254
           

              8,284,153

U.S. GOVERNMENT AGENCY NOTES – 0.34%

             

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/053

     293,616      294,197

1.80%, 01/18/053

     195,045      193,689

1.80%, 01/19/053

     209,725      208,257

2.06%, 05/31/053

     209,109      205,854

Federal National Mortgage Association

             

2.33%, 07/22/053

     629,176      616,011
           

              1,518,008

 

50

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI HONG KONG INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

MEDIUM-TERM NOTES – 0.29%

               

CC USA Inc.

               

1.29%, 04/15/053,4

   $ 419,451    $ 419,425  

1.51%, 02/15/053,4

     272,643      272,837  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     314,588      314,582  

K2 USA LLC

               

1.46%, 01/12/053,4

     209,725      209,718  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     104,863      104,854  
           


              1,321,416  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $57,660,614)

            57,660,614  
           


TOTAL INVESTMENTS IN SECURITIES – 112.53%
(Cost: $470,145,360)

            506,315,963  

Other Assets, Less Liabilities – (12.53%)

            (56,393,170 )
           


NET ASSETS - 100.00%

          $ 449,922,793  
           



(1) All or a portion of this security represents a security on loan. See Note 5.
(2) Non-income earning security.
(3) All or a portion of this security represents an investment of securities lending collateral. See Note 5.
(4) Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(5) Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
(6) Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   42.76 %   $ 192,428,880

Diversified

   21.03       94,608,651

Utilities

   16.77       75,419,821

Consumer Cyclical

   8.19       36,806,993

Industrial

   6.83       30,765,822

Communications

   3.27       14,707,247

Basic Materials

   0.46       2,081,065

Technology

   0.41       1,836,870

Short-Term and Other Net Assets

   0.28       1,267,444
    

 

TOTAL

   100.00 %   $ 449,922,793
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  51


Schedule of Investments

 

iSHARES® MSCI MALAYSIA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.83%

           

AGRICULTURE – 9.54%

           

British American Tobacco (Malaysia) Bhd

   639,800    $ 8,544,697

Golden Hope Plantations Bhd

   1,508,100      1,389,039

Highlands & Lowlands Bhd

   868,300      822,600

IOI Corp. Bhd

   3,610,300      8,218,183

Kuala Lumpur Kepong Bhd

   1,416,700      2,423,303
         

            21,397,822

AIRLINES – 0.72%

           

Malaysian Airline System Bhd1

   1,416,700      1,603,108
         

            1,603,108

AUTO MANUFACTURERS – 2.56%

           

DRB-Hicom Bhd

   2,239,300      1,213,936

Oriental Holdings Bhd

   868,700      946,426

Proton Holdings Bhd1

   1,416,700      2,889,322

Tan Chong Motor Holdings Bhd

   1,919,400      691,994
         

            5,741,678

AUTO PARTS & EQUIPMENT – 0.60%

           

UMW Holdings Bhd

   1,051,100      1,355,366
         

            1,355,366

BANKS – 24.85%

           

AMMB Holdings Bhd

   5,164,100      4,457,435

CIMB Bhd

   959,700      1,262,763

Commerce Asset Holdings Bhd

   8,226,000      9,957,789

Hong Leong Bank Bhd

   2,650,600      3,473,681

Malayan Banking Bhd

   9,094,300      24,889,663

Public Bank Bhd

   5,529,700      9,895,253

RHB Capital Bhd

   3,518,900      1,777,971
         

            55,714,555

BEVERAGES – 0.47%

           

Guinness Anchor Bhd

   776,900      1,042,682
         

            1,042,682

BUILDING MATERIALS – 2.65%

           

Jaya Tiasa Holdings Bhd

   411,300      430,783

Malayan Cement Bhd

   6,489,400      1,374,728

OYL Industries Bhd

   411,433      3,870,718

WTK Holdings Bhd

   182,800      254,958
         

            5,931,187

CHEMICALS – 0.52%

           

Malaysian Oxygen Bhd

   365,600      1,173,768
         

            1,173,768

COMMERCIAL SERVICE – 2.06%

           

PLUS Expressways Bhd

   7,037,800      4,611,611
         

            4,611,611

DIVERSIFIED FINANCIAL SERVICES – 1.19%

           

Hong Leong Credit Bhd

   1,188,600      1,313,716

OSK Holdings Bhd

   1,462,400      615,747

TA Enterprise Bhd

   3,747,400      739,618
         

            2,669,081

ELECTRIC – 7.44%

           

Malakoff Bhd

   2,924,800      4,849,010

Tenaga Nasional Bhd

   4,387,200      11,545,263

TIME Engineering Bhd1

   1,553,800      294,404
         

            16,688,677

ELECTRONIC – 0.24%

           

Hong Leong Industries Bhd

   502,700      539,741

Hume Industries Bhd

   667      790
         

            540,531

ENGINEERING & CONSTRUCTION – 6.30%

           

Gamuda Bhd

   3,061,900      4,149,680

IJM Corp. Bhd

   1,659,300      2,095,958

Malaysia Airports Holdings Bhd

   1,553,800      547,919

Malaysian Resources Corp. Bhd1

   2,793,200      529,238

MMC Corp. Bhd

   1,599,500      795,541

Road Builder (Malaysia) Holdings Bhd

   2,194,100      1,379,973

Transmile Group Bhd

   594,100      1,094,395

YTL Corp. Bhd

   2,925,420      3,541,298
         

            14,134,002

ENTERTAINMENT – 7.05%

           

Berjaya Sports Toto Bhd

   2,924,800      2,647,714

Magnum Corp. Bhd

   4,844,200      3,059,495

Resorts World Bhd

   2,787,700      6,492,407

Tanjong PLC

   1,096,800      3,607,895
         

            15,807,511

ENVIRONMENTAL CONTROL – 0.21%

           

Puncak Niaga Holding Bhd1

   776,900      468,184
         

            468,184

 

52

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI MALAYSIA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

 

FOOD – 1.81%

             

Nestle (Malaysia) Bhd

   411,300    $ 2,446,153  

PPB Group Bhd

   960,033      1,616,898  
         


            4,063,051  

GAS – 1.87%

             

Petronas Gas Bhd

   2,239,300      4,183,955  
         


            4,183,955  

HOLDING COMPANIES – DIVERSIFIED – 5.01%

             

Mulpha International Bhd1

   4,707,100      798,968  

Multi-Purpose Holdings Bhd1

   3,199,000      883,934  

Sime Darby Bhd

   6,535,100      9,544,685  
         


            11,227,587  

INSURANCE – 0.31%

             

MAA Holdings Bhd

   548,400      692,716  
         


            692,716  

LODGING – 3.67%

             

Genting Bhd

   1,965,100      8,222,392  
         


            8,222,392  

MEDIA – 2.77%

             

Astro All Asia Networks PLC1

   3,245,600      3,826,392  

New Straits Times Press Bhd1

   685,500      681,892  

Star Publications (Malaysia) Bhd

   1,005,400      1,706,534  
         


            6,214,818  

OIL & GAS – 0.57%

             

Petronas Dagangan Bhd

   685,500      1,280,803  
         


            1,280,803  

REAL ESTATE – 2.55%

             

Bandar Raya Developments Bhd

   1,188,200      619,115  

IGB Corp. Bhd

   3,336,100      1,053,505  

IOI Properties Bhd

   365,750      745,937  

MK Land Holdings Bhd

   1,645,200      995,779  

SP Setia Bhd

   2,422,600      2,295,095  
         


            5,709,431  

RETAIL – 0.31%

             

Courts Mammoth Bhd

   731,200      375,221  

Edaran Otomobil Nasional Bhd

   411,300      324,711  
         


            699,932  

SEMICONDUCTORS – 1.12%

             

Malaysian Pacific Industries Bhd

   457,000      1,707,737  

Unisem (Malaysia) Bhd

   457,000      811,776  
         


            2,519,513  

TELECOMMUNICATIONS – 9.28%

             

Maxis Communications Bhd

   3,473,200      7,814,700  

Telekom Malaysia Bhd

   4,661,400      13,002,853  
         


            20,817,553  

TRANSPORTATION – 4.16%

             

Malaysia International Shipping Corp. Bhd

   2,604,900      8,568,750  

Malaysian Bulk Carriers Bhd

   1,325,300      756,816  
         


            9,325,566  
         


TOTAL COMMON STOCKS
(Cost: $183,174,054)

          223,837,080  

SHORT-TERM INVESTMENTS – 0.18%

             

MONEY MARKET FUNDS – 0.18%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares2

   393,844      393,844  
         


            393,844  
         


TOTAL SHORT-TERM INVESTMENTS
(Cost: $393,844)

          393,844  
         


TOTAL INVESTMENTS IN SECURITIES – 100.01%
(Cost: $183,567,898)

          224,230,924  

Other Assets, Less Liabilities – (0.01%)

          (12,811 )
         


NET ASSETS – 100.00%

        $ 224,218,113  
         



1 Non-income earning security.
2 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.

 

SCHEDULES OF INVESTMENTS

  53


Schedule of Investments (Continued)

 

iSHARES® MSCI MALAYSIA INDEX FUND

August 31, 2004

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   28.89 %   $ 64,785,783

Consumer Cyclical

   14.91       33,429,987

Consumer Non-Cyclical

   13.88       31,115,166

Industrial

   13.56       30,399,470

Communications

   12.06       27,032,371

Utilities

   9.31       20,872,632

Diversified

   5.01       11,227,587

Technology

   1.12       2,519,513

Energy

   0.57       1,280,803

Basic Materials

   0.52       1,173,768

Short-Term and Other Net Assets

   0.17       381,033
    

 

TOTAL

   100.00 %   $ 224,218,113
    

 

 

See notes to financial statements.

 

54

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI MEXICO INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.93%

           

BEVERAGES – 10.26%

           

Coca-Cola Femsa SA de CV ADR1

   95,073    $ 1,937,588

Fomento Economico Mexicano SA de CV Class UBD

   1,407,000      6,084,992

Grupo Continental SA

   675,494      1,034,703

Grupo Modelo SA de CV Series C

   1,778,381      4,243,873
         

            13,301,156

BUILDING MATERIALS – 9.20%

           

Cemex SA de CV Series CPO

   2,100,651      11,922,539
         

            11,922,539

DIVERSIFIED FINANCIAL SERVICES – 2.18%

           

Grupo Financiero Banorte SA de CV Series O

   716,900      2,823,398
         

            2,823,398

ENGINEERING & CONSTRUCTION – 1.16%

           

Grupo Aeroportuario del Sureste SA de CV ADR

   70,685      1,498,522
         

            1,498,522

ENTERTAINMENT – 1.77%

           

Corporaion Interamericana de Entretenimiento SA de CV Class B1

   1,109,654      2,300,104
         

            2,300,104

FOOD – 1.90%

           

Grupo Bimbo SA Series A

   1,127,744      2,459,434
         

            2,459,434

FOREST PRODUCTS & PAPER – 3.83%

           

Kimberly-Clark de Mexico SA de CV Class A

   1,807,459      4,968,905
         

            4,968,905

HOLDING COMPANIES – DIVERSIFIED – 6.08%

           

Alfa SA de CV Class A

   670,670      2,198,947

Grupo Carso SA de CV Series A1

   1,241,979      5,688,745
         

            7,887,692

HOME BUILDERS – 0.72%

           

Corporacion GEO SA de CV Series B1

   719,647      937,365
         

            937,365

HOUSEWARES – 0.63%

           

Vitro SA de CV Series A

   933,444      819,853
         

            819,853

MEDIA – 6.79%

           

Grupo Televisa SA Series CPO

   2,672,429      6,431,387

TV Azteca SA de CV Series CPO1

   4,093,700      2,365,864
         

            8,797,251

METAL FABRICATE & HARDWARE – 0.00%

           

Hylsamex SA de CV Class B1

   1      2
         

            2

MINING – 3.06%

           

Grupo Mexico SA de CV Series B1

   717,883      2,561,818

Industrias Penoles SA de CV Series CP

   341,700      1,402,154
         

            3,963,972

REAL ESTATE – 1.65%

           

Consorcio Ara SA de CV1

   799,846      2,142,664
         

            2,142,664

RETAIL – 8.38%

           

Controladora Comercial Mexicana SA de CV

   1,427,100      1,559,275

Grupo Sanborns SA Series B11

   673,417      1,129,706

Organizacion Soriana SA de CV Series B

   607,154      1,783,253

Wal-Mart de Mexico SA de CV Series V

   2,011,474      6,390,147
         

            10,862,381

TELECOMMUNICATIONS – 42.32%

           

America Movil SA de CV Series L

   15,302,800      26,276,381

America Telecom SA de CV Series A11

   1,301,688      2,435,199

Carso Global Telecom SA de CV Class A11

   2,357,127      3,453,241

Telefonos de Mexico SA de CV Series L

   13,969,500      22,686,404
         

            54,851,225
         

TOTAL COMMON STOCKS
(Cost: $137,325,177)

          129,536,463

 

SCHEDULES OF INVESTMENTS

  55


Schedule of Investments (Continued)

 

iSHARES® MSCI MEXICO INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

SHORT-TERM INVESTMENTS – 0.07%

           

MONEY MARKET FUNDS – 0.07%

           

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares2

   85,281    $ 85,281
         

            85,281
         

TOTAL SHORT-TERM INVESTMENTS
(Cost: $85,281)

          85,281
         

TOTAL INVESTMENTS IN SECURITIES – 100.00%
(Cost: $137,410,458)

          129,621,744

Other Assets, Less Liabilities – 0.00%

          1,035
         

NET ASSETS – 100.00%

        $ 129,622,779
         


ADR – American Depositary Receipts

1 Non-income earning security.
2 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Communications

   49.10 %   $ 63,648,476

Consumer Non-Cyclical

   12.16       15,760,590

Consumer Cyclical

   11.51       14,919,703

Industrial

   10.35       13,421,063

Basic Materials

   6.89       8,932,877

Diversified

   6.09       7,887,692

Financial

   3.83       4,966,062

Short-Term and Other Net Assets

   0.07       86,316
    

 

TOTAL

   100.00 %   $ 129,622,779
    

 

 

See notes to financial statements.

 

56

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 95.89%

           

AUSTRALIA – 60.36%

           

Alumina Ltd.

   1,238,056    $ 4,747,195

Amcor Ltd.

   930,262      4,815,110

AMP Ltd.

   1,974,067      8,712,421

Ansell Ltd.1

   195,570      1,166,960

Aristocrat Leisure Ltd.1

   311,320      1,545,466

Australia & New Zealand Banking Group Ltd.

   1,941,450      25,157,023

Australian Gas Light Co. Ltd.

   485,470      4,562,863

Australian Stock Exchange Ltd.

   116,616      1,282,988

AXA Asia Pacific Holdings Ltd.

   707,952      1,929,692

BHP Billiton Ltd.

   4,031,594      37,379,930

BHP Steel Ltd.

   807,282      4,474,988

Boral Ltd.

   631,240      3,129,166

Brambles Industries Ltd.1

   1,033,902      4,928,107

Centro Properties Group

   671,488      2,152,737

Coca-Cola Amatil Ltd.1

   498,542      2,548,809

Cochlear Ltd.1

   53,062      720,543

Coles Myer Ltd.

   1,197,034      7,590,664

Commonwealth Bank of Australia

   1,354,758      28,891,203

Commonwealth Property Office Fund

   1,538,196      1,314,298

Computershare Ltd.

   458,638      1,152,967

CSL Ltd.

   209,926      3,831,985

CSR Ltd.1

   1,058,402      1,718,998

Deutsche Office Trust

   1,359,144      1,142,114

Foster’s Group Ltd.

   2,184,572      7,204,108

Futuris Corp. Ltd.1

   607,762      768,216

Gandel Retail Trust

   1,491,243      1,590,092

General Property Trust

   2,151,548      5,393,570

Harvey Norman Holdings Ltd.

   615,158      1,281,462

Iluka Resources Ltd.

   280,360      920,589

ING Industrial Fund

   697,030      959,805

Insurance Australia Group Ltd.

   1,733,674      6,219,108

Investa Property Group1

   1,437,513      2,020,049

John Fairfax Holdings Ltd.

   935,078      2,522,366

Leighton Holdings Ltd.1

   146,200      1,011,744

Lend Lease Corp Ltd.

   413,832      3,255,414

Lion Nathan Ltd.

   299,624      1,502,214

Macquarie Bank Ltd.

   231,856      5,550,281

Macquarie Goodman Industrial Trust

   1,684,310      2,128,982

Macquarie Infrastructure Group

   2,109,752      5,288,795

Mayne Group Ltd.

   728,764      2,094,490

Mirvac Group

   763,336      2,436,414

National Australia Bank Ltd.

   1,617,918      30,447,433

Newcrest Mining Ltd.

   357,502      3,761,506

News Corp. Ltd. (The)1

   1,469,482      11,445,552

OneSteel Ltd.1

   581,446      1,190,705

Orica Ltd.

   300,140      3,433,491

Origin Energy Ltd.

   714,144      2,975,327

Pacific Brands Ltd.

   539,564      1,063,027

PaperlinX Ltd.

   466,550      1,739,519

Patrick Corp. Ltd.1

   518,838      1,934,473

Perpetual Trustees Australia Ltd.1

   38,270      1,243,121

Publishing & Broadcasting Ltd.1

   134,762      1,298,012

QBE Insurance Group Ltd.1

   722,572      6,454,589

Rinker Group Ltd.

   1,039,310      6,385,006

Rio Tinto Ltd.1

   337,464      8,590,722

Santos Ltd.

   630,122      2,936,740

Sonic Healthcare Ltd.

   256,022      1,690,386

Southcorp Ltd.2

   688,517      1,667,653

Stockland Trust Group

   1,359,321      5,384,952

Suncorp-Metway Ltd.1

   582,908      6,133,145

TABCORP Holdings Ltd.1

   550,383      5,841,454

Telstra Corp. Ltd.1

   2,340,576      7,933,429

Toll Holdings Ltd.

   250,862      1,939,751

Transurban Group

   538,360      2,128,912

Wesfarmers Ltd.

   406,694      8,632,840

Westfield Group1,2

   1,534,378      16,718,421

Westpac Banking Corp. Ltd.

   1,895,612      22,555,181

WMC Resources Ltd.

   1,222,748      4,248,142

Woodside Petroleum Ltd.1

   506,368      6,450,595

Woolworths Ltd.

   1,102,176      9,845,515
         

            393,113,525

HONG KONG – 21.75%

           

ASM Pacific Technology Ltd.1

   172,000      574,440

Bank of East Asia Ltd.

   1,444,800      3,963,964

BOC Hong Kong Holdings Ltd.1

   3,956,000      7,100,558

Cathay Pacific Airways Ltd.

   1,118,000      1,963,679

Cheung Kong Holdings Ltd.

   1,634,000      14,088,103

Cheung Kong Infrastructure Holdings Ltd.

   516,000      1,280,085

CLP Holdings Ltd.

   1,935,000      11,188,341

 

SCHEDULES OF INVESTMENTS

  57


Schedule of Investments (Continued)

 

iSHARES® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Esprit Holdings Ltd.

   774,000    $ 3,731,101

Giordano International Ltd.

   1,548,000      868,275

Hang Lung Properties Ltd.1

   1,290,500      1,877,855

Hang Seng Bank Ltd.

   825,600      11,008,071

Henderson Land Development Co. Ltd.1

   774,000      3,780,717

Hong Kong & China Gas Co. Ltd.

   3,956,600      7,126,998

Hong Kong Exchanges & Clearing Ltd.1

   1,204,000      2,631,837

Hongkong Electric Holdings Ltd.

   1,505,000      6,714,658

Hopewell Holdings Ltd.

   688,000      1,490,676

Hutchison Whampoa Ltd.

   2,322,000      18,233,771

Hysan Development Co. Ltd.

   688,000      1,190,777

Johnson Electric Holdings Ltd.

   1,505,000      1,524,305

Kerry Properties Ltd.

   516,000      932,775

Kingboard Chemical Holdings Co. Ltd.

   516,000      969,160

MTR Corp. Ltd.

   1,419,000      2,173,995

New World Development Co. Ltd.

   2,408,799      2,269,844

Orient Overseas International Ltd.1

   344,000      1,126,828

PCCW Ltd.2

   3,784,600      2,523,083

SCMP Group Ltd.

   1,376,000      520,414

Shangri-La Asia Ltd.1

   1,204,000      1,119,110

Sino Land Co. Ltd.1

   1,204,000      895,288

SmarTone Telecommunications Holdings Ltd.

   301,000      328,015

Sun Hung Kai Properties Ltd.

   1,376,000      12,789,826

Swire Pacific Ltd. Class A

   989,000      7,005,461

Techtronic Industries Co. Ltd.1

   1,032,000      1,627,395

Television Broadcasts Ltd.

   258,000      1,068,392

Texwinca Holdings Ltd.

   688,000      590,978

Wharf Holdings Ltd. (The)

   1,290,000      4,258,681

Yue Yuen Industrial Holdings Ltd.

   473,000      1,140,059
         

            141,677,515

NEW ZEALAND – 2.85%

           

Auckland International Airport Ltd.

   266,869      1,290,532

Carter Holt Harvey Ltd.

   675,315      1,090,046

Contact Energy Ltd.1

   328,606      1,250,566

Fisher & Paykel Appliances Holdings Ltd.1

   272,706      751,531

Fisher & Paykel Healthcare Corp. Ltd.1

   104,232      919,870

Fletcher Building Ltd.1

   448,748      1,516,397

Independent Newspapers Ltd.

   130,509      423,884

NGC Holdings Ltd.

   144,449      290,028

Sky City Entertainment Group Ltd.1

   465,432      1,383,431

Sky Network Television Ltd.1,2

   102,168      357,981

Telecom Corp. of New Zealand Ltd.1

   2,067,182      7,758,502

Tenon Ltd.2

   87,418      114,145

Tower Ltd.2

   474,850      576,410

Warehouse Group Ltd. (The)

   154,284      466,686

Waste Management NZ Ltd.

   111,886      367,070
         

            18,557,079

SINGAPORE – 10.93%

           

Allgreen Properties Ltd.

   516,000      319,402

Ascendas Real Estate Investment Trust

   688,000      602,645

Capitaland Ltd.1

   1,131,000      1,050,127

CapitaMall Trust

   602,000      590,592

Chartered Semiconductor Manufacturing Ltd.1,2

   946,000      602,143

City Developments Ltd.

   516,000      1,913,399

ComfortDelGro Corp. Ltd.

   1,806,000      1,328,833

Creative Technology Ltd.1

   64,500      689,276

DBS Group Holdings Ltd.

   1,204,000      10,968,145

Fraser & Neave Ltd.

   172,830      1,412,958

Haw Par Corp. Ltd.

   86,397      252,261

Jardine Cycle & Carriage Ltd.

   86,000      349,032

Keppel Corp. Ltd.1

   602,000      2,495,956

Keppel Land Ltd.1

   430,000      451,984

Neptune Orient Lines Ltd.

   1,118,000      1,841,082

Oversea-Chinese Banking Corp. Ltd.

   1,118,000      8,683,115

Overseas Union Enterprise Ltd.

   86,000      361,587

Parkway Holdings Ltd.

   516,000      385,693

SembCorp Industries Ltd.

   1,032,000      789,465

SembCorp Logistics Ltd.

   344,000      437,922

SembCorp Marine Ltd.

   602,000      358,574

Singapore Airlines Ltd.

   602,000      3,902,129

Singapore Exchange Ltd.

   860,000      893,924

Singapore Land Ltd.

   172,000      435,913

Singapore Post Ltd.

   1,376,000      630,769

Singapore Press Holdings Ltd.

   1,720,500      4,340,308

Singapore Technologies Engineering Ltd.

   1,462,000      1,792,870

 

58

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2004

 

Security


  

Shares or

Principal


   Value

Singapore Telecommunications Ltd.

     6,708,000    $ 8,970,376

SMRT Corp. Ltd.

     860,000      349,032

STATS ChipPAC Ltd.1,2

     1,032,000      680,989

United Overseas Bank Ltd.

     1,290,000      10,018,979

United Overseas Land Ltd.

     344,000      445,958

Venture Corp. Ltd.

     258,000      2,561,243

Wing Tai Holdings Ltd.

     516,333      269,857
           

              71,176,538
           

TOTAL COMMON STOCKS
(Cost: $558,807,693)

            624,524,657

PREFERRED STOCKS – 3.33%

             

AUSTRALIA – 3.31%

             

News Corp. Ltd. (The)1

     2,901,984      21,516,978
           

              21,516,978

NEW ZEALAND – 0.02%

             

Tenon Ltd.2

     117,899      153,172
           

              153,172
           

TOTAL PREFERRED STOCKS
(Cost: $21,497,256)

            21,670,150

SHORT-TERM INVESTMENTS – 12.39%

             

FLOATING RATE NOTES – 3.20%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 352,092      352,045

1.52%, 10/12/043,4

     293,410      293,407

1.56%, 09/15/043,4

     586,820      586,818

1.64%, 03/15/053,4

     293,410      293,537

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     440,115      440,109

1.38%, 11/22/043

     146,705      146,708

1.40%, 10/29/043

     586,820      586,818

CC USA Inc.

             

1.45%, 05/04/053,4

     586,820      586,742

1.61%, 07/29/053,4

     586,820      586,660

Den Danske Bank NY

             

1.51%, 08/12/053

     586,820      586,654

1.56%, 08/26/053

     586,820      586,648

 

Security


   Principal

   Value

Depfa Bank PLC

             

1.27%, 06/15/053

   $ 586,820    $ 586,820

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     487,061      486,928

Five Finance Inc.

             

1.42%, 04/29/053,4

     469,456      469,426

Gemini Securitization Corp.

             

1.53%, 09/09/043

     293,410      293,310

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     375,565      375,543

1.58%, 04/22/053

     586,820      586,820

K2 USA LLC

             

1.45%, 06/10/053,4

     586,820      586,765

1.57%, 09/27/043,4

     633,766      633,759

1.61%, 07/25/053,4

     293,410      293,358

Links Finance LLC

             

1.55%, 04/15/053,4

     586,820      586,748

1.68%, 04/25/053

     586,820      587,068

Nationwide Building Society

             

1.59%, 07/28/053

     586,820      586,820

1.63%, 12/09/043,4

     487,061      484,878

Nordea Bank PLC

             

2.11%, 06/07/053

     586,820      586,731

Northern Rock PLC

             

1.56%, 01/13/053,4

     557,479      557,479

Permanent Financing PLC

             

1.52%, 03/10/053

     586,820      586,820

1.53%, 12/10/043

     293,410      293,410

1.55%, 06/10/053

     264,069      264,070

Sigma Finance Inc.

             

1.52%, 10/07/043

     586,820      586,809

1.57%, 11/15/043

     586,820      586,811

1.59%, 09/15/053

     440,115      440,155

Tango Finance Corp.

             

1.52%, 04/07/053,4

     215,363      215,350

1.56%, 01/18/053,4

     258,201      258,191

1.59%, 07/25/053,4

     586,820      586,768

1.66%, 05/17/053,4

     487,061      487,044

1.70%, 02/25/053,4

     328,619      328,588

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     145,355      145,104

1.48%, 06/15/053,4

     293,410      293,357

 

SCHEDULES OF INVESTMENTS

  59


Schedule of Investments (Continued)

 

iSHARES® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

1.56%, 09/15/043,4

   $ 293,410    $ 293,408

1.56%, 07/15/053,4

     440,115      440,038

White Pine Finance LLC

             

1.46%, 07/05/053

     293,410      293,356

1.55%, 04/15/053,4

     440,115      440,061

1.55%, 07/11/053

     146,705      146,691

1.56%, 11/15/043,4

     352,092      352,092

1.57%, 06/15/053,4

     240,596      240,596

1.58%, 03/29/053

     252,333      252,300

1.58%, 08/26/053,4

     293,410      293,353

1.68%, 05/20/053

     264,069      264,050
           

              20,837,021

MONEY MARKET FUNDS – 2.50%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     9,100,876      9,100,876

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     6,455,025      6,455,025

BlackRock Temp Cash Money Market Fund3

     296,236      296,236

Short-Term Investment Co. – Prime Money Market Portfolio, Institutional Shares3

     394,460      394,460
           

              16,246,597

COMMERCIAL PAPER – 2.29%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

     293,410      293,325

1.51%, 09/02/043

     264,069      264,058

1.54%, 09/14/043

     293,410      293,247

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     117,364      117,330

1.53%, 09/16/043

     288,704      288,520

1.54%, 09/15/043

     293,410      293,235

1.54%, 09/22/043

     146,705      146,573

Barton Capital Corp.

             

1.53%, 09/08/043

     293,410      293,323

1.53%, 09/09/043

     685,353      685,120

1.53%, 09/13/043

     422,487      422,272

1.53%, 09/14/043

     146,705      146,624

1.54%, 09/17/043

     176,046      175,926

Security


   Principal

   Value

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

   $ 293,410    $ 293,324

1.53%, 09/15/043

     117,364      117,294

Cantabric Finance LLC

             

1.55%, 09/17/043

     117,364      117,283

Corporate Asset Funding

             

1.42%, 09/03/043

     176,046      176,032

CRC Funding LLC

             

1.42%, 09/03/043

     293,410      293,387

Delaware Funding Corp.

             

1.50%, 09/09/043

     293,410      293,312

1.53%, 09/10/043

     469,456      469,277

1.53%, 09/20/043

     199,519      199,358

Edison Asset Securitization

             

1.07%, 09/21/043

     293,410      293,236

1.45%, 11/09/043

     586,820      585,190

1.52%, 09/08/043

     586,820      586,647

1.59%, 12/02/043

     586,820      584,436

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     176,046      176,032

1.53%, 09/07/043

     293,410      293,335

1.53%, 09/17/043

     176,046      175,926

1.53%, 09/21/043

     146,705      146,580

1.53%, 09/22/043

     293,410      293,148

1.54%, 09/14/043

     440,115      439,871

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     293,410      291,375

GIRO Funding US Corp.

             

1.54%, 09/09/043

     293,410      293,310

1.55%, 10/15/043

     384,808      384,079

Grampian Funding LLC

             

1.26%, 10/22/043

     586,820      585,777

1.44%, 10/27/043

     586,820      585,506

1.59%, 11/30/043

     293,410      292,244

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     146,705      146,699

1.53%, 09/20/043

     146,705      146,587

1.53%, 09/23/043

     205,387      205,195

1.54%, 09/15/043

     352,092      351,881

 

60

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

   $ 408,955    $ 408,955

1.51%, 09/08/043

     234,728      234,659

1.52%, 09/09/043

     146,705      146,656

1.53%, 09/21/043

     293,410      293,161

Receivables Capital Corp.

             

1.54%, 09/14/043

     176,046      175,948

Scaldis Capital LLC

             

1.48%, 09/01/043

     322,751      322,751

Sydney Capital Corp.

             

1.25%, 10/22/043

     195,294      194,948

1.55%, 09/16/043

     176,046      175,932

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     234,728      234,588

1.54%, 09/23/043

     146,705      146,567

Windmill Funding Corp.

             

1.52%, 09/09/043

     146,705      146,656

1.52%, 09/10/043

     205,387      205,309
           

              14,922,004

TIME DEPOSITS – 2.01%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

     586,820      586,820

1.33%, 02/10/053

     293,410      293,391

1.39%, 02/02/053

     293,410      293,392

1.39%, 04/08/053

     410,774      410,737

1.40%, 10/25/043

     586,820      586,807

Bank of New York

             

1.39%, 11/01/043

     586,820      586,811

1.60%, 12/03/043

     146,705      146,686

Bank of Nova Scotia

             

1.13%, 10/06/043

     586,820      586,820

1.24%, 10/07/043

     440,115      440,111

1.42%, 10/29/043

     440,115      440,121

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     586,820      586,831

1.49%, 08/09/053

     586,820      586,656

1.54%, 06/23/053

     586,820      586,678

1.56%, 06/10/053

     293,410      293,481

Norddeutsche Landesbank

             

1.59%, 07/27/053

     586,820      586,634

Prudential Funding LLC

             

1.60%, 12/01/043

     293,410      292,224

SouthTrust Bank

             

1.55%, 09/01/043

     1,173,641      1,173,641

Toronto-Dominion Bank

             

1.22%, 03/23/053

     1,026,936      1,026,836

1.34%, 02/10/053

     234,728      234,713

1.41%, 11/01/043

     440,115      440,109

1.53%, 09/13/043

     293,410      293,410

1.77%, 05/10/053

     293,410      293,390

1.90%, 05/11/053

     293,410      293,390

UBS Finance (Delaware)

             

1.10%, 09/08/043

     586,820      586,695

1.11%, 12/17/043

     880,231      877,327

1.14%, 09/29/043

     586,820      586,302
           

              13,110,013

REPURCHASE AGREEMENTS – 1.78%

             

Banc of America Securities LLC

             

1.59%, 09/01/043,6

     1,760,461      1,760,461

Bank of America, N.A.

             

1.59%, 09/01/043,6

     3,374,218      3,374,218

Goldman Sachs & Co.

             

1.59%, 09/01/043,6

     2,934,103      2,934,103

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/043,6

     586,820      586,820

1.59%, 09/01/043,6

     2,934,103      2,934,103
           

              11,589,705

U.S. GOVERNMENT AGENCY NOTES – 0.33%

             

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/053

     410,774      411,587

1.80%, 01/18/053

     272,872      270,975

1.80%, 01/19/053

     293,410      291,356

2.06%, 05/31/053

     292,548      287,994

 

SCHEDULES OF INVESTMENTS

  61


Schedule of Investments (Continued)

 

iSHARES® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 

Federal National Mortgage Association

               

2.33%, 07/22/053

   $ 880,231    $ 861,812  
           


              2,123,724  
MEDIUM-TERM NOTES – 0.28%                

CC USA Inc.

               

1.29%, 04/15/053,4

     586,820      586,784  

1.51%, 02/15/053,4

     381,433      381,705  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     440,115      440,107  

K2 USA LLC

               

1.46%, 01/12/053,4

     293,410      293,400  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     146,705      146,693  
           


              1,848,689  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $80,677,753)

            80,677,753  
           


TOTAL INVESTMENTS IN SECURITIES – 111.61%
(Cost: $660,982,702)

            726,872,560  

Other Assets, Less Liabilities – (11.61%)

            (75,622,510 )
           


NET ASSETS – 100.00%

          $ 651,250,050  
           



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   45.11 %   $ 293,756,609

Communications

   11.16       72,712,320

Basic Materials

   10.61       69,112,502

Industrial

   8.68       56,534,840

Consumer Non-Cyclical

   6.11       39,815,358

Diversified

   5.25       34,180,603

Consumer Cyclical

   5.05       32,886,644

Utilities

   4.78       31,133,454

Energy

   1.90       12,362,662

Technology

   0.57       3,699,815

Short-Term and Other Net Assets

   0.78       5,055,243
    

 

TOTAL

   100.00 %   $ 651,250,050
    

 

 

See notes to financial statements.

 

62

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI SINGAPORE INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.08%            

AIRLINES – 3.98%

           

Singapore Airlines Ltd.

   1,044,000    $ 6,767,147
         

            6,767,147

BANKS – 36.63%

           

DBS Group Holdings Ltd.1

   2,610,000      23,776,461

Oversea-Chinese Banking Corp. Ltd.

   2,349,000      18,243,861

United Overseas Bank Ltd.

   2,610,000      20,270,957
         

            62,291,279

BEVERAGES – 2.51%

           

Fraser & Neave Ltd.

   522,000      4,267,570
         

            4,267,570

COMPUTERS – 0.98%

           

Creative Technology Ltd.1

   156,600      1,673,497
         

            1,673,497

DISTRIBUTION & WHOLESALE – 0.62%

           

Jardine Cycle & Carriage Ltd.1

   261,000      1,059,272
         

            1,059,272

DIVERSIFIED FINANCIAL SERVICES – 2.23%

           

Singapore Exchange Ltd.

   3,654,000      3,798,137
         

            3,798,137

ELECTRONICS – 3.05%

           

Venture Corp. Ltd.

   522,000      5,182,049
         

            5,182,049

ENGINEERING & CONSTRUCTION – 4.30%

           

SembCorp Industries Ltd.

   2,871,000      2,196,274

Singapore Technologies Engineering Ltd.1

   4,176,000      5,121,084
         

            7,317,358

HEALTH CARE – SERVICES – 0.92%

           

Parkway Holdings Ltd.

   2,088,000      1,560,711
         

            1,560,711

HOLDING COMPANIES – DIVERSIFIED – 4.71%

           

Haw Par Corp. Ltd.

   522,000      1,524,132

Keppel Corp. Ltd.1

   1,566,000      6,492,803
         

            8,016,935

LODGING – 0.65%

           

Overseas Union Enterprise Ltd.

   261,000      1,097,375
         

            1,097,375

MEDIA – 4.65%

           

Singapore Press Holdings Ltd.

   3,132,000      7,901,101
         

            7,901,101

REAL ESTATE – 9.02%

           

Allgreen Properties Ltd.

   2,349,000      1,454,022

Capitaland Ltd.1

   3,393,000      3,150,381

City Developments Ltd.

   1,566,000      5,806,943

Keppel Land Ltd.1

   1,305,000      1,371,719

Singapore Land Ltd.

   522,000      1,322,947

United Overseas Land Ltd.1

   1,305,000      1,691,787

Wing Tai Holdings Ltd.1

   1,044,000      545,639
         

            15,343,438

REAL ESTATE INVESTMENT TRUSTS – 1.86%

           

Ascendas Real Estate Investment Trust

   1,566,000      1,371,719

CapitaMall Trust

   1,827,000      1,792,379
         

            3,164,098

SEMICONDUCTORS – 2.09%

           

Chartered Semiconductor Manufacturing Ltd.1,2

   2,871,000      1,827,434

STATS ChipPAC Ltd.1,2

   2,610,000      1,722,269
         

            3,549,703

SHIPBUILDING – 0.82%

           

SembCorp Marine Ltd.

   2,349,000      1,399,153
         

            1,399,153

TELECOMMUNICATIONS – 12.05%

           

Datacraft Asia Ltd.1,2

   783,000      591,165

Singapore Telecommunications Ltd.

   14,877,000      19,894,496
         

            20,485,661

TRANSPORTATION – 8.01%

           

ComfortDelGro Corp. Ltd.

   5,220,000      3,840,813

Neptune Orient Lines Ltd.1

   2,871,000      4,727,858

SembCorp Logistics Ltd.

   1,044,000      1,329,043

Singapore Post Ltd.

   4,176,000      1,914,310

SMRT Corp. Ltd.

   4,437,000      1,800,762
         

            13,612,786
         

TOTAL COMMON STOCKS
(COST: $148,352,494)

          168,487,270

 

SCHEDULES OF INVESTMENTS

  63


Schedule of Investments (Continued)

 

iSHARES® MSCI SINGAPORE INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

SHORT-TERM INVESTMENTS – 12.55%

             

FLOATING RATE NOTES – 3.24%

             

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 93,113    $ 93,101

1.52%, 10/12/043,4

     77,595      77,594

1.56%, 09/15/043,4

     155,189      155,189

1.64%, 03/15/053,4

     77,595      77,628

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     116,392      116,390

1.38%, 11/22/043

     38,797      38,798

1.40%, 10/29/043

     155,189      155,188

CC USA Inc.

             

1.45%, 05/04/053,4

     155,189      155,168

1.61%, 07/29/053,4

     155,189      155,147

Den Danske Bank NY

             

1.51%, 08/12/053

     155,189      155,145

1.56%, 08/26/053

     155,189      155,143

Depfa Bank PLC

             

1.27%, 06/15/053

     155,189      155,190

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     128,807      128,772

Five Finance Inc.

             

1.42%, 04/29/053,4

     124,151      124,143

Gemini Securitization Corp.

             

1.53%, 09/09/043

     77,595      77,568

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     99,321      99,315

1.58%, 04/22/053

     155,189      155,190

K2 USA LLC

             

1.45%, 06/10/053,4

     155,189      155,174

1.57%, 09/27/043,4

     167,604      167,602

1.61%, 07/25/053,4

     77,595      77,581

Links Finance LLC

             

1.55%, 04/15/053,4

     155,189      155,170

1.68%, 04/25/053

     155,189      155,255

Nationwide Building Society

             

1.59%, 07/28/053

     155,189      155,190

1.63%, 12/09/043,4

     128,807      128,230

Nordea Bank PLC

             

2.11%, 06/07/053

     155,189      155,166

Security


  

Shares or

Principal


   Value

Northern Rock PLC

             

1.56%, 01/13/053,4

   $ 147,430    $ 147,430

Permanent Financing PLC

             

1.52%, 03/10/053

     155,189      155,190

1.53%, 12/10/043

     77,595      77,595

1.55%, 06/10/053

     69,835      69,835

Sigma Finance Inc.

             

1.52%, 10/07/043

     155,189      155,186

1.57%, 11/15/043

     155,189      155,187

1.59%, 09/15/053

     116,392      116,402

Tango Finance Corp.

             

1.52%, 04/07/053,4

     56,954      56,951

1.56%, 01/18/053,4

     68,283      68,281

1.59%, 07/25/053,4

     155,189      155,175

1.66%, 05/17/053,4

     128,807      128,803

1.70%, 02/25/053,4

     86,906      86,897

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     38,440      38,374

1.48%, 06/15/053,4

     77,595      77,581

1.56%, 09/15/043,4

     77,595      77,594

1.56%, 07/15/053,4

     116,392      116,371

White Pine Finance LLC

             

1.46%, 07/05/053

     77,595      77,580

1.55%, 04/15/053,4

     116,392      116,377

1.55%, 07/11/053

     38,797      38,794

1.56%, 11/15/043,4

     93,113      93,113

1.57%, 06/15/053,4

     63,628      63,628

1.58%, 03/29/053

     66,731      66,723

1.58%, 08/26/053,4

     77,595      77,579

1.68%, 05/20/053

     69,835      69,830
           

              5,510,513

MONEY MARKET FUNDS – 2.53%

             

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     2,412,796      2,412,796

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     1,707,080      1,707,080

BlackRock Temp Cash Money Market Fund3

     78,342      78,342

 

64

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SINGAPORE INDEX FUND

August 31, 2004

 

Security


   Shares or
Principal


   Value

Short-Term Investment Co. – Prime Money Market Portfolio, Institutional Shares3

     104,318    $ 104,318
           

              4,302,536

COMMERCIAL PAPER – 2.32%

             

Alpine Securitization Corp.

             

1.50%, 09/08/043

   $ 77,595      77,572

1.51%, 09/02/043

     69,835      69,832

1.54%, 09/14/043

     77,595      77,552

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     31,038      31,029

1.53%, 09/16/043

     76,350      76,301

1.54%, 09/15/043

     77,595      77,548

1.54%, 09/22/043

     38,797      38,762

Barton Capital Corp.

             

1.53%, 09/08/043

     77,595      77,571

1.53%, 09/09/043

     181,247      181,185

1.53%, 09/13/043

     111,730      111,673

1.53%, 09/14/043

     38,797      38,776

1.54%, 09/17/043

     46,557      46,525

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     77,595      77,572

1.53%, 09/15/043

     31,038      31,019

Cantabric Finance LLC

             

1.55%, 09/17/043

     31,038      31,016

Corporate Asset Funding

             

1.42%, 09/03/043

     46,557      46,553

CRC Funding LLC

             

1.42%, 09/03/043

     77,595      77,588

Delaware Funding Corp.

             

1.50%, 09/09/043

     77,595      77,569

1.53%, 09/10/043

     124,151      124,104

1.53%, 09/20/043

     52,764      52,722

Edison Asset Securitization

             

1.07%, 09/21/043

     77,595      77,548

1.45%, 11/09/043

     155,189      154,758

1.52%, 09/08/043

     155,189      155,143

1.59%, 12/02/043

     155,189      154,559

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

     46,557      46,553

1.53%, 09/07/043

     77,595      77,575

Security


   Principal

   Value

1.53%, 09/17/043

   $ 46,557    $ 46,525

1.53%, 09/21/043

     38,797      38,764

1.53%, 09/22/043

     77,595      77,525

1.54%, 09/14/043

     116,392      116,327

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     77,595      77,056

GIRO Funding US Corp.

             

1.54%, 09/09/043

     77,595      77,568

1.55%, 10/15/043

     101,765      101,572

Grampian Funding LLC

             

1.26%, 10/22/043

     155,189      154,913

1.44%, 10/27/043

     155,189      154,841

1.59%, 11/30/043

     77,595      77,286

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     38,797      38,796

1.53%, 09/20/043

     38,797      38,766

1.53%, 09/23/043

     54,316      54,266

1.54%, 09/15/043

     93,113      93,058

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     108,151      108,151

1.51%, 09/08/043

     62,076      62,057

1.52%, 09/09/043

     38,797      38,784

1.53%, 09/21/043

     77,595      77,529

Receivables Capital Corp.

             

1.54%, 09/14/043

     46,557      46,531

Scaldis Capital LLC

             

1.48%, 09/01/043

     85,354      85,355

Sydney Capital Corp.

             

1.25%, 10/22/043

     51,647      51,555

1.55%, 09/16/043

     46,557      46,527

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     62,076      62,038

1.54%, 09/23/043

     38,797      38,761

Windmill Funding Corp.

             

1.52%, 09/09/043

     38,797      38,784

1.52%, 09/10/043

     54,316      54,296
           

              3,946,236

 

SCHEDULES OF INVESTMENTS

  65


Schedule of Investments (Continued)

 

iSHARES® MSCI SINGAPORE INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

TIME DEPOSITS – 2.04%

             

Abbey National Treasury Services PLC

             

1.25%, 01/06/053

   $ 155,189    $ 155,190

1.33%, 02/10/053

     77,595      77,589

1.39%, 02/02/053

     77,595      77,590

1.39%, 04/08/053

     108,632      108,623

1.40%, 10/25/043

     155,189      155,186

Bank of New York

             

1.39%, 11/01/043

     155,189      155,187

1.60%, 12/03/043

     38,797      38,792

Bank of Nova Scotia

             

1.13%, 10/06/043

     155,189      155,190

1.24%, 10/07/043

     116,392      116,391

1.42%, 10/29/043

     116,392      116,393

National City Bank (Cleveland, Ohio)

             

1.25%, 01/06/053

     155,189      155,192

1.49%, 08/09/053

     155,189      155,145

1.54%, 06/23/053

     155,189      155,151

1.56%, 06/10/053

     77,595      77,613

Norddeutsche Landesbank

             

1.59%, 07/27/053

     155,189      155,140

Prudential Funding LLC

             

1.60%, 12/01/043

     77,595      77,281

SouthTrust Bank

             

1.55%, 09/01/043

     310,378      310,379

Toronto-Dominion Bank

             

1.22%, 03/23/053

     271,581      271,554

1.34%, 02/10/053

     62,076      62,072

1.41%, 11/01/043

     116,392      116,390

1.53%, 09/13/043

     77,595      77,595

1.77%, 05/10/053

     77,595      77,589

1.90%, 05/11/053

     77,595      77,589

UBS Finance (Delaware)

             

1.10%, 09/08/043

     155,189      155,156

1.11%, 12/17/043

     232,784      232,016

1.14%, 09/29/043

     155,189      155,053
           

              3,467,046

REPURCHASE AGREEMENTS – 1.80%

             

Banc of America Securities LLC

             

1.59%, 09/01/043,6

     465,567      465,567

Bank of America, N.A.

             

1.59%, 09/01/043,6

     892,338      892,338

Goldman Sachs & Co.

             

1.59%, 09/01/043,6

     775,946      775,946

Merrill Lynch Government Securities Inc.

             

1.57%, 09/01/043,6

     155,190      155,190

1.59%, 09/01/043,6

     775,946      775,946
           

              3,064,987

U.S. GOVERNMENT AGENCY NOTES – 0.33%

             

Federal Home Loan Mortgage Corp.

             

1.63%, 04/15/053

     108,632      108,847

1.80%, 01/18/053

     72,163      71,662

1.80%, 01/19/053

     77,595      77,051

2.06%, 05/31/053

     77,366      76,162

Federal National Mortgage Association

             

2.33%, 07/22/053

     232,784      227,913
           

              561,635

MEDIUM-TERM NOTES – 0.29%

             

CC USA Inc.

             

1.29%, 04/15/053,4

     155,189      155,179

1.51%, 02/15/053,4

     100,873      100,945

Dorada Finance Inc.

             

1.48%, 01/18/053,4

     116,392      116,390

K2 USA LLC

             

1.46%, 01/12/053,4

     77,595      77,592

WhistleJacket Capital LLC

             

1.32%, 02/04/053,4

     38,797      38,784
           

              488,890
           

TOTAL SHORT-TERM INVESTMENTS
(Cost: $21,341,843)

            21,341,843
           

 

66

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SINGAPORE INDEX FUND

August 31, 2004

 

Security


   Value

 

TOTAL INVESTMENTS IN SECURITIES – 111.63%
(Cost: $169,694,337)

   $ 189,829,113  

Other Assets, Less Liabilities – (11.63%)

     (19,782,603 )
    


NET ASSETS – 100.00%

   $ 170,046,510  
    



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Financial

   49.74 %   $ 84,596,952

Communications

   16.70       28,386,762

Industrial

   16.18       27,511,346

Consumer Cyclical

   5.25       8,923,794

Diversified

   4.71       8,016,935

Consumer Non-Cyclical

   3.43       5,828,281

Technology

   3.07       5,223,200

Short-Term and Other Net Assets

   0.92       1,559,240
    

 

TOTAL

   100.00 %   $ 170,046,510
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  67


Schedule of Investments

 

iSHARES® MSCI SOUTH AFRICA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.68%

           

BANKS – 10.41%

           

FirstRand Ltd.

   2,223,794    $ 3,571,434

Nedcor Ltd.

   14,247      119,883

Standard Bank Group Ltd.

   896,055      5,975,719
         

            9,667,036

DISTRIBUTION & WHOLESALE – 0.57%

           

Metro Cash & Carry Ltd.1

   1,345,953      525,743
         

            525,743

DIVERSIFIED FINANCIAL SERVICES – 1.69%

           

African Bank Investments Ltd.

   339,936      604,671

Alexander Forbes Ltd.

   278,070      450,761

Investec Ltd.

   28,489      509,453
         

            1,564,885

ELECTRONICS – 0.35%

           

Reunert Ltd.

   83,390      328,236
         

            328,236

ENGINEERING & CONSTRUCTION – 0.56%

           

Aveng Ltd.

   153,109      186,318

Murray & Roberts Holdings Ltd.

   182,482      337,206
         

            523,524

FOOD – 2.50%

           

Shoprite Holdings Ltd.

   342,875      489,361

Tiger Brands Ltd.

   127,778      1,835,204
         

            2,324,565

FOREST PRODUCTS & PAPER – 2.42%

           

Sappi Ltd.

   159,991      2,251,952
         

            2,251,952

HEALTH CARE – SERVICES – 0.71%

           

Network Healthcare Holdings Ltd.1

   915,213      657,235
         

            657,235

HOLDING COMPANIES – DIVERSIFIED – 6.58%

           

Anglovaal Industries Ltd.

   266,569      816,577

Barloworld Ltd.

   159,750      1,800,000

Bidvest Group Ltd.

   197,963      1,779,994

Bidvest Group Ltd. Warrants (Expiring 12/8/06)1

   17,071      21,800

Imperial Holdings Ltd.

   138,849      1,601,835

Tongaat-Hulett Group Ltd.

   13,082      89,817
         

            6,110,023

HOME FURNISHINGS – 0.55%

           

Steinhoff International Holdings Ltd.

   418,159      514,512
         

            514,512

INSURANCE – 10.22%

           

Liberty Group Ltd.

   115,785      956,721

New Africa Capital Ltd.

   449,190      516,252

Old Mutual PLC

   2,818,737      5,386,567

Sanlam Ltd.

   1,955,584      2,635,356
         

            9,494,896

IRON & STEEL – 1.13%

           

Iscor Ltd.

   149,067      1,052,567
         

            1,052,567

MEDIA – 1.63%

           

Naspers Ltd.

   205,933      1,514,739
         

            1,514,739

MINING – 40.14%

           

Anglo American Platinum Corp. Ltd.

   49,197      2,184,070

Anglo American PLC

   986,482      22,349,143

AngloGold Ashanti Ltd.

   91,140      3,217,713

Gold Fields Ltd.

   281,387      3,413,634

Harmony Gold Mining Co. Ltd.

   181,970      2,241,187

Impala Platinum Holdings Ltd.

   46,183      3,875,036
         

            37,280,783

OIL & GAS – 7.59%

           

Sasol Ltd.

   411,385      7,045,074
         

            7,045,074

PACKAGING & CONTAINERS – 1.04%

           

Nampak Ltd.

   458,490      964,336
         

            964,336

RETAIL – 4.88%

           

Edgars Consolidated Stores Ltd.

   29,109      730,322

Foschini Ltd.

   166,981      604,581

JD Group Ltd.

   101,866      696,323

Massmart Holdings Ltd.

   112,747      591,324

Pick’n Pay Stores Ltd.

   184,760      532,941

Truworths International Ltd.

   364,901      581,101

Woolworths Holdings Ltd.

   665,725      793,119
         

            4,529,711

 

68

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SOUTH AFRICA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

TELECOMMUNICATIONS – 6.71%

           

MTN Group Ltd.

   931,067    $ 4,266,298

Telkom South Africa Ltd.

   165,044      1,965,031
         

            6,231,329
         

TOTAL COMMON STOCKS
(Cost: $66,324,470)

          92,581,146

SHORT-TERM INVESTMENTS – 0.06%

           

MONEY MARKET FUNDS – 0.06%

           

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares2

   57,702      57,702
         

            57,702
         

TOTAL SHORT-TERM INVESTMENTS
(Cost: $57,702)

          57,702
         

TOTAL INVESTMENTS IN SECURITIES – 99.74%
(Cost: $66,382,172)

          92,638,848

Other Assets, Less Liabilities – 0.26%

          243,358
         

NET ASSETS – 100.00%

        $ 92,882,206
         


1 Non-income earning security.
2 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Basic Materials

   43.70 %   $ 40,585,302

Financial

   22.31       20,726,817

Communications

   8.34       7,746,068

Energy

   7.58       7,045,074

Diversified

   6.58       6,110,023

Consumer Cyclical

   6.00       5,569,966

Consumer Non-Cyclical

   3.21       2,981,800

Industrial

   1.96       1,816,096

Short-Term and Other Net Assets

   0.32       301,060
    

 

TOTAL

   100.00 %   $ 92,882,206
    

 

 

See notes to financial statements.

 

SCHEDULES OF INVESTMENTS

  69


Schedule of Investments

 

iSHARES® MSCI SOUTH KOREA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 98.47%

           

ADVERTISING – 0.65%

           

Cheil Communications Inc.

   15,660    $ 2,046,126
         

            2,046,126

AGRICULTURE – 1.52%

           

KT&G Corp.

   187,920      4,796,499
         

            4,796,499

AIRLINES – 0.35%

           

Korean Air Co. Ltd.1

   78,300      1,108,035
         

            1,108,035

AUTO MANUFACTURERS – 5.47%

           

Hyundai Motor Co. Ltd.

   326,250      14,133,676

Kia Motors Corp.

   354,960      3,112,468
         

            17,246,144

AUTO PARTS & EQUIPMENT – 3.28%

           

Hankook Tire Co. Ltd.

   373,230      3,434,682

Hyundai Mobis Co.

   140,946      6,925,853
         

            10,360,535

BANKS – 8.52%

           

Hana Bank

   245,733      5,514,779

Kookmin Bank1

   608,139      19,429,192

Korea Exchange Bank1

   328,860      1,927,165
         

            26,871,136

BEVERAGES – 0.45%

           

Hite Brewery Co. Ltd.

   20,880      1,432,061
         

            1,432,061

CHEMICALS – 2.90%

           

Hanwha Chemical Corp.

   87,560      600,533

Honam Petrochemical Corp.

   39,150      1,509,103

Kumgang Korea Chemical Co. Ltd.

   13,050      1,404,870

LG Chem Ltd.

   99,180      3,771,397

LG Petrochemical Co. Ltd.

   73,080      1,690,829

Samsung Fine Chemicals Co. Ltd.

   13,050      172,210
         

            9,148,942

COMMERCIAL SERVICES – 0.66%

           

S1 Corp.

   80,910      2,082,720
         

            2,082,720

COMPUTERS – 0.00%

           

Gateway Inc.1

   7      19
         

            19

COSMETICS & PERSONAL CARE – 0.63%

           

Amorepacific Corp.

   10,440      1,984,946
         

            1,984,946

DISTRIBUTION & WHOLESALE – 1.32%

           

Hyosung Corp.

   5      41

Samsung Corp.

   344,520      4,157,510
         

            4,157,551

DIVERSIFIED FINANCIAL SERVICES – 4.51%

           

Daewoo Securities Co. Ltd.1

   148,770      446,885

Daishin Securities Co. Ltd.

   83,520      1,044,136

Dongwon Financial Holding Co. Ltd.

   5      26

Hyundai Securities Co. Ltd.1

   354,960      1,342,059

LG Investment & Securities Co. Ltd.1

   193,140      1,279,384

Samsung Securities Co.

   109,620      1,884,339

Shinhan Financial Group Ltd.

   485,460      8,218,492
         

            14,215,321

ELECTRIC – 2.69%

           

Korea Electric Power Corp.

   482,850      8,488,703
         

            8,488,703

ELECTRICAL COMPONENTS & EQUIPMENT – 26.40%

           

LG Cable Ltd.

   46,980      672,978

LG Electronics Inc.

   253,176      12,088,970

Samsung Electronics Co. Ltd.

   180,090      70,513,166
         

            83,275,114

ELECTRONICS – 7.64%

           

Daeduck Electronics Co. Ltd.

   548,141      4,596,989

Samsung Electro-Mechanics Co. Ltd.1

   281,880      7,463,941

Samsung SDI Co. Ltd.

   117,450      12,032,035
         

            24,092,965

ENGINEERING & CONSTRUCTION – 1.29%

           

Daelim Industrial Co. Ltd.

   67,860      2,577,484

Daewoo Engineering & Construction Co. Ltd.

   86,130      363,782

LG Engineering & Construction Co. Ltd.

   60,030      1,130,921
         

            4,072,187

 

70

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI SOUTH KOREA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

FOOD – 1.13%

           

Cheil Jedang Corp.

   36,540    $ 1,865,305

Nong Shim Co. Ltd.

   8,172      1,709,816
         

            3,575,121

HOLDING COMPANIES – DIVERSIFIED – 0.00%

           

GS Holdings Corp.1

   2      37

LG Corp.

   3      40
         

            77

HOME BUILDERS – 0.08%

           

Hyundai Development Co.

   23,490      255,936
         

            255,936

HOUSEHOLD PRODUCTS & WARES – 0.19%

           

LG Household & Health Care Ltd.

   23,490      589,366
         

            589,366

INSURANCE – 1.53%

           

Samsung Fire & Marine Insurance Co. Ltd.

   80,910      4,825,730
         

            4,825,730

INTERNET – 2.45%

           

Daum Communications Corp.1

   36,801      1,038,358

NCsoft Corp.1

   48,044      3,470,296

NHN Corp.

   37,584      3,213,981
         

            7,722,635

IRON & STEEL – 7.13%

           

POSCO

   156,600      22,500,586
         

            22,500,586

LODGING – 0.94%

           

Kangwon Land Inc.

   270,062      2,954,188
         

            2,954,188

MACHINERY – DIVERSIFIED – 0.41%

           

Daewoo Heavy Industries & Machinery Ltd.1

   167,040      1,293,568
         

            1,293,568

MANUFACTURING – 0.39%

           

Cheil Industries Inc.

   91,350      1,245,123
         

            1,245,123

MINING – 0.05%

           

Poongsan Corp.

   18,270      172,890
         

            172,890

OIL & GAS – 3.77%

           

SK Corp.

   195,750      7,426,553

S-Oil Corp.

   104,620      4,468,728
         

            11,895,281

PHARMACEUTICALS – 0.20%

           

Dong-A Pharmaceutical Co. Ltd.

   9      128

YuHan Corp.

   10,756      637,787
         

            637,915

RETAIL – 2.30%

           

Hyundai Department Store Co. Ltd.

   36,540      1,089,681

Shinsegae Department Store Co. Ltd.

   23,490      6,158,771
         

            7,248,452

SHIPBUILDING – 2.24%

           

Daewoo Shipbuilding & Marine Engineering Co. Ltd.

   245,340      2,758,304

Hyundai Heavy Industries Co. Ltd.

   114,840      2,592,213

Samsung Heavy Industries Co. Ltd.

   388,890      1,711,744
         

            7,062,261

TELECOMMUNICATIONS – 6.85%

           

KT Corp.

   229,380      7,258,672

KT Corp. ADR

   101,949      1,768,815

SK Telecom Co. Ltd.

   80,020      12,053,193

SK Telecom Co. Ltd. ADR

   28,971      544,655
         

            21,625,335

TRANSPORTATION – 0.53%

           

Hanjin Shipping Co. Ltd.

   96,570      1,672,589
         

            1,672,589
         

TOTAL COMMON STOCKS
(Cost: $259,913,019)

          310,656,057

PREFERRED STOCKS – 1.26%

           

AUTO MANUFACTURERS – 0.45%

           

Hyundai Motor Co. Ltd.

   60,030      1,430,589
         

            1,430,589

ELECTRICAL COMPONENTS & EQUIPMENT – 0.81%

           

LG Electronics Inc.

   96,570      2,544,515
         

            2,544,515
         

TOTAL PREFERRED STOCKS
(Cost: $4,423,036)

          3,975,104

 

SCHEDULES OF INVESTMENTS   71


Schedule of Investments (Continued)

 

iSHARES® MSCI SOUTH KOREA INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

SHORT-TERM INVESTMENTS – 0.23%

           

MONEY MARKET FUNDS – 0.23%

           

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares2

   720,743    $ 720,743
         

            720,743
         

TOTAL SHORT-TERM INVESTMENTS
(Cost: $720,743)

          720,743
         

TOTAL INVESTMENTS IN SECURITIES – 99.96%
(Cost: $265,056,798)

          315,351,904

OTHER ASSETS, LESS LIABILITIES – 0.04%

          111,798
         

NET ASSETS – 100.00%

        $ 315,463,702
         


ADR - American Depositary Receipts

1 Non-income earning security.

2 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Industrial

   39.71 %   $ 125,258,418

Financial

   14.56       45,912,187

Consumer Cyclical

   14.19       44,761,430

Basic Materials

   10.08       31,822,418

Communications

   9.95       31,394,096

Consumer Non-Cyclical

   4.78       15,098,628

Energy

   3.77       11,895,281

Utilities

   2.69       8,488,703

Short-Term and Other Net Assets

   0.27       832,541
    

 

TOTAL

   100.00 %   $ 315,463,702
    

 

 

See notes to financial statements.

 

72

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI TAIWAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.31%

           

AIRLINES – 0.44%

           

China Airlines

   1,539,196    $ 809,389

EVA Airways Corp.

   2,281,273      911,437
         

            1,720,826

APPAREL – 0.68%

           

Pou Chen Corp.

   2,928,616      2,658,468
         

            2,658,468

AUTO MANUFACTURERS – 0.81%

           

China Motor Co. Ltd.

   1,464,330      1,707,811

Yulon Motor Co. Ltd.

   1,486,835      1,467,616
         

            3,175,427

AUTO PARTS & EQUIPMENT – 0.27%

           

Cheng Shin Rubber Industry Co. Ltd.

   804,661      1,040,102
         

            1,040,102

BANKS – 11.39%

           

Chang Hwa Commercial Bank Ltd.1

   7,320,446      3,978,503

Chinatrust Financial Holding Co. Ltd.

   10,248,123      10,808,097

E.Sun Financial Holding Co. Ltd.

   1,512,071      861,756

First Financial Holding Co. Ltd.1

   8,052,050      5,606,157

Hua Nan Financial Holdings Co. Ltd.

   6,913,379      4,833,679

International Bank of Taipei

   3,844,756      2,541,334

Mega Financial Holding Co. Ltd.

   18,300,136      11,074,700

Taishin Financial Holdings Co. Ltd.

   6,230,310      4,740,453
         

            44,444,679

BUILDING MATERIALS – 1.09%

           

Asia Cement Corp.

   2,342,453      1,355,650

Taiwan Cement Corp.

   3,031,513      1,513,975

Taiwan Glass Industrial Corp.

   1,584,492      1,391,784
         

            4,261,409

CHEMICALS – 9.40%

           

China Synthetic Rubber Corp.1

   236      76

Eternal Chemical Co. Ltd.

   732,100      443,045

Formosa Chemicals & Fibre Co.

   4,754,001      7,611,429

Formosa Plastic Co.

   8,052,273      12,064,216

Nan Ya Plastic Corp.

   10,980,571      15,161,188

Oriental Union Chemical Corp.

   845,962      839,998

Taiwan Styrene Monomer Corp.

   732,600      544,500
         

            36,664,452

COMMERCIAL SERVICES – 0.19%

           

Taiwan Secom Co. Ltd.

   732,486      753,144
         

            753,144

COMPUTERS – 9.51%

           

Acer Inc.

   4,619,787      6,147,954

Advantech Co. Ltd.

   769,792      1,560,389

Arima Computer Corp.1

   2,196,600      671,112

Benq Corp.

   4,412,019      4,510,525

CMC Magnetics Corp.

   5,856,400      2,890,350

Compal Electronics Inc.

   5,856,914      5,540,324

Inventec Co. Ltd.

   3,848,525      2,057,672

Lite-On Technology Corp.

   4,392,894      4,103,820

Prodisc Technology Inc.

   967,902      483,382

Quanta Computer Inc.

   4,037,123      6,878,764

Ritek Corp.

   4,506,389      1,721,006

Systex Corp.1

   1,464,772      555,099
         

            37,120,397

DISTRIBUTION & WHOLESALE – 0.00%

           

Aurora Corp.1

   610      371
         

            371

DIVERSIFIED FINANCIAL SERVICES – 2.87%

           

Fubon Financial Holding Co. Ltd.

   8,052,000      7,380,212

Polaris Securities Co. Ltd.

   777,666      365,530

SinoPac Holdings Co.

   6,898,641      3,465,534
         

            11,211,276

ELECTRICAL COMPONENTS & EQUIPMENT – 2.63%

           

Delta Electronics Inc.

   2,309,224      2,957,761

Pacific Electric Wire & Cable Co. Ltd.1,2

   986      15

Phoenixtec Power Co. Ltd.

   734,438      765,939

Tatung Co. Ltd.1

   8,784,120      3,651,448

Walsin Lihwa Corp.1

   5,856,779      2,873,332
         

            10,248,495

ELECTRONICS – 14.63%

           

Asustek Computer Inc.

   4,392,171      9,806,257

AU Optronics Corp.

   8,052,740      10,337,977

Chi Mei Optoelectronics Corp.

   4,392,674      5,561,817

Chunghwa Picture Tubes Ltd.1

   7,320,873      3,182,988

Compeq Manufacturing Co. Ltd.1

   1,464,200      501,114

Elitegroup Computer Systems Co. Ltd.

   769,215      273,428

Gigabyte Technology Co. Ltd.

   1,537,921      1,915,624

 

SCHEDULE OF INVESTMENTS   73


Schedule of Investments (Continued)

 

iSHARES® MSCI TAIWAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Hon Hai Precision Industry Co. Ltd.

   4,800,773    $ 15,725,211

Micro Star International Co. Ltd.

   807,113      647,303

Picvue Electronics Ltd.1

   1,464,040      341,925

Quanta Display Inc.1

   5,124,000      2,649,307

Synnex Technology International Corp.

   1,613,436      2,393,611

WU’S Printed Circuit Co. Ltd.

   754,503      367,942

Ya Hsin Industrial Co. Ltd.

   1,691,347      1,575,079

Yageo Corp.1

   4,392,100      1,825,741
         

            57,105,324

ENGINEERING & CONSTRUCTION – 0.25%

           

BES Engineering Corp.1

   2,196,366      319,389

Continental Engineering Corp.

   1,494,262      643,095
         

            962,484

FOOD – 0.78%

           

Uni-President Enterprises Co.

   6,588,637      3,058,181
         

            3,058,181

FOREST PRODUCTS & PAPER – 0.19%

           

Yuen Foong Yu Paper Manufacturing Co. Ltd.

   1,584,320      753,995
         

            753,995

HAND & MACHINE TOOLS – 0.11%

           

Shihlin Electric & Engineering Corp.

   732,080      425,828
         

            425,828

HOME FURNISHINGS – 0.82%

           

Nien Made Enterprise Co. Ltd.

   942,560      1,481,403

Sampo Corp.

   2,308,955      593,518

Teco Electric and Machinery Co. Ltd.

   3,660,092      1,118,242
         

            3,193,163

INSURANCE – 5.01%

           

Cathay Financial Holding Co. Ltd.

   9,517,055      16,635,275

Shin Kong Financial Holding Co. Ltd.

   3,930,153      2,897,968
         

            19,533,243

INVESTMENT COMPANIES – 2.33%

           

China Development Financial Holding Co.1

   20,496,338      9,092,089
         

            9,092,089

IRON & STEEL – 3.68%

           

China Steel Corp.

   15,372,706      14,361,106

Tung Ho Steel Enterprise Corp.

   210      176
         

            14,361,282

LEISURE TIME – 0.25%

           

Giant Manufacturing Co. Ltd.

   732,914      968,893
         

            968,893

MANUFACTURING – 0.17%

           

Premier Image Technology Corp.

   769,857      678,487
         

            678,487

METAL FABRICATE & HARDWARE – 0.27%

           

Yieh Phui Enterprise

   1,464,000      1,032,197
         

            1,032,197

MULTIPLE UTILITIES – 0.35%

           

Fu Sheng Industrial Co. Ltd.

   883,000      1,361,854
         

            1,361,854

OFFICE & BUSINESS EQUIPMENT – 0.25%

           

Kinpo Electronics Inc.

   2,376,733      987,978
         

            987,978

REAL ESTATE – 0.29%

           

Cathay Real Estate Development Co. Ltd.

   2,196,493      1,135,672
         

            1,135,672

RETAIL – 0.59%

           

Far Eastern Department Stores Co. Ltd.

   160      79

President Chain Store Corp.

   1,562,640      2,318,253
         

            2,318,332

SEMICONDUCTORS – 24.45%

           

Advanced Semiconductor Engineering Inc.1

   6,195,727      4,513,926

Macronix International Co. Ltd.1

   9,516,200      2,418,188

MediaTek Inc.

   1,026,036      7,234,096

Realtek Semiconductor Corp.

   1,541,860      1,798,233

Siliconware Precision Industries Co. Ltd.

   4,035,577      2,963,849

Taiwan Semiconductor Manufacturing Co. Ltd.

   35,136,717      48,514,268

United Microelectronics Corp.1

   34,003,390      23,075,156

Via Technologies Inc.1

   2,196,502      1,509,934

Winbond Electronics Corp.1

   8,052,280      3,382,715
         

            95,410,365

TELECOMMUNICATIONS – 3.38%

           

Accton Technology Corp.1

   1,464,259      679,650

Chunghwa Telecom Co. Ltd.

   3,660,000      5,806,110

 

74

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI TAIWAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

D-Link Corp.

   770,853    $ 874,117

Microelectronics Technology Inc.1

   420      160

Taiwan Cellular Corp.

   4,392,920      4,129,655

Zyxel Communications Corp.

   843,817      1,685,651
         

            13,175,343

TEXTILES – 1.12%

           

Far Eastern Textile Ltd.

   4,701,807      2,790,144

Formosa Taffeta Co. Ltd.

   2,241,777      935,171

Nien Hsing Textile Co. Ltd.

   732,800      630,759
         

            4,356,074

TRANSPORTATION – 1.11%

           

Evergreen Marine Corp. Ltd.

   1,464,319      1,329,244

Wan Hai Lines Ltd.

   1,083,986      974,441

Yang Ming Marine Transport Corp.

   2,306,667      2,019,350
         

            4,323,035
         

TOTAL COMMON STOCKS
(Cost: $378,436,735)

          387,532,865

SHORT-TERM INVESTMENTS – 0.09%

           

MONEY MARKET FUNDS – 0.09%

           

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3

   365,977      365,977
         

            365,977
         

TOTAL SHORT-TERM INVESTMENTS
(Cost: $365,977)

          365,977
         

TOTAL INVESTMENTS IN SECURITIES – 99.40%
(Cost: $378,802,712)

          387,898,842

OTHER ASSETS, LESS LIABILITIES – 0.60%

          2,329,235
         

NET ASSETS – 100.00%

        $ 390,228,077
         


1 Non-income earning security.
2 Security valued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.
3 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.

 

SECTOR DIVERSIFICATION

 

Sector


   % of
Net Assets


    Value

Technology

   34.21 %   $ 133,518,740

Financial

   21.89       85,416,959

Industrial

   20.26       79,037,259

Basic Materials

   13.27       51,779,729

Consumer Cyclical

   5.33       20,793,510

Communications

   3.38       13,175,343

Consumer Non-Cyclical

   0.97       3,811,325

Short-Term and Other Net Assets

   0.69       2,695,212
    

 

TOTAL

   100.00 %   $ 390,228,077
    

 

 

See notes to financial statements.

 

SCHEDULE OF INVESTMENTS

  75


Statements of Assets and Liabilities

 

iSHARES®, INC.

August 31, 2004

 

     iShares MSCI

 
    

Australia

Index Fund


   

Brazil

Index Fund


   

Canada

Index Fund


    Emerging Markets
Index Fund


    Hong Kong
Index Fund


   

Malaysia

Index Fund


 

ASSETS

                                                

Investments, at cost:

                                                

Unaffiliated issuers

   $ 175,272,548     $ 169,496,982     $ 262,998,434     $ 2,256,200,239     $ 459,032,910     $ 183,174,054  
    


 


 


 


 


 


Affiliates of the investment adviser

   $ 4,000,684     $ 980,912     $ 199,282     $ 112,910,276     $ 11,112,450     $ 393,844  
    


 


 


 


 


 


Foreign currency, at cost

   $ 310,049     $ —       $ 725,559     $ 2,569,044     $ 588,089     $ —    
    


 


 


 


 


 


Investments in securities, at value (including securities on loana) (Note 1):

                                                

Unaffiliated issuers

   $ 193,975,799     $ 207,713,393     $ 324,498,457     $ 2,284,611,027     $ 495,203,513     $ 223,837,080  

Affiliates of the investment adviser

     4,000,684       980,912       199,282       112,641,397       11,112,450       393,844  

Foreign currency, at value

     310,023       —         727,279       2,516,769       588,061       —    

Receivables:

                                                

Investment securities sold

     306,342       —         962,038       1,660,304       —         438,014  

Dividends and interest

     1,275,022       1,056,398       383,680       4,520,610       878,703       225,259  

Reimbursement of distribution fees

     —         —         91,294       —         —         —    
    


 


 


 


 


 


Total Assets

     199,867,870       209,750,703       326,862,030       2,405,950,107       507,782,727       224,894,197  
    


 


 


 


 


 


LIABILITIES

                                                

Payables:

                                                

Investment securities purchased

     237,477       —         1,245,753       1,115,767       —         437,979  

Collateral for securities on loan (Note 5)

     20,455,679       —         —         443,853,797       57,447,396       —    

Investment advisory fees (Note 2)

     176,288       247,119       318,462       2,384,193       412,538       238,105  
    


 


 


 


 


 


Total Liabilities

     20,869,444       247,119       1,564,215       447,353,757       57,859,934       676,084  
    


 


 


 


 


 


NET ASSETS

   $ 178,998,426     $ 209,503,584     $ 325,297,815     $ 1,958,596,350     $ 449,922,793     $ 224,218,113  
    


 


 


 


 


 


Net assets consist of:

                                                

Paid-in capital

   $ 167,552,582     $ 226,966,877     $ 275,892,723     $ 1,931,226,972     $ 420,462,955     $ 216,015,575  

Undistributed net investment income

     3,368,610       4,543,117       1,875,638       24,561,384       8,931,316       2,754,991  

Accumulated net realized loss

     (10,620,148 )     (60,232,239 )     (13,972,850 )     (25,258,562 )     (15,642,028 )     (35,215,479 )

Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies

     18,697,382       38,225,829       61,502,304       28,066,556       36,170,550       40,663,026  
    


 


 


 


 


 


NET ASSETS

   $ 178,998,426     $ 209,503,584     $ 325,297,815     $ 1,958,596,350     $ 449,922,793     $ 224,218,113  
    


 


 


 


 


 


Shares outstanding

     13,200,000       12,350,000       22,700,000       12,100,000       41,250,000       34,275,000  
    


 


 


 


 


 


Net asset value per share

   $ 13.56     $ 16.96     $ 14.33     $ 161.87     $ 10.91     $ 6.54  
    


 


 


 


 


 



a Securities on loan with market values of $19,423,901, $-, $-, $420,759,267, $54,155,831 and $-, respectively. See Note 5.

 

See notes to financial statements.

 

76

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Assets and Liabilities (Continued)

 

iSHARES®, INC.

August 31, 2004

 

     iShares MSCI

 
    

Mexico

Index Fund


    Pacific ex-Japan
Index Fund


    Singapore
Index Fund


    South Africa
Index Fund


    South Korea
Index Fund


   

Taiwan

Index Fund


 

ASSETS

                                                

Investments, at cost:

                                                

Unaffiliated issuers

   $ 137,325,177     $ 645,426,801     $ 165,574,461     $ 66,324,470     $ 264,336,055     $ 378,436,735  
    


 


 


 


 


 


Affiliates of the investment adviser

   $ 85,281     $ 15,555,901     $ 4,119,876     $ 57,702     $ 720,743     $ 365,977  
    


 


 


 


 


 


Foreign currency, at cost

   $ 333,494     $ 2,417,494     $ 1,421,098     $ 186,632     $ —       $ 3,200,196  
    


 


 


 


 


 


Investments in securities, at value (including securities on loana) (Note 1):

                                                

Unaffiliated issuers

   $ 129,536,463     $ 711,316,659     $ 185,709,237     $ 92,581,146     $ 314,631,161     $ 387,532,865  

Affiliates of the investment adviser

     85,281       15,555,901       4,119,876       57,702       720,743       365,977  

Foreign currency, at value

     333,494       2,421,227       1,421,988       178,099       —         3,192,836  

Cash

     —         —         —         —         587       —    

Receivables:

                                                

Investment securities sold

     —         4,344,276       2,365,582       833,470       —         409,827  

Dividends and interest

     5,271       3,537,484       368,820       183,843       71,054       2,238,753  

Capital shares sold

     5,876       —         —         —         389,987       —    

Reimbursement of distribution fees

     —         —         —         —         —         98,218  
    


 


 


 


 


 


Total Assets

     129,966,385       737,175,547       193,985,503       93,834,260       315,813,532       393,838,476  
    


 


 


 


 


 


LIABILITIES

                                                

Payables:

                                                

Investment securities purchased

     202,778       5,013,042       2,436,120       839,035       —         2,747,106  

Collateral for securities on loan (Note 5)

     —         80,370,106       21,254,482       —         —         —    

Foreign taxes on stock dividends

     —         —         —         —         —         385,073  

Investment advisory fees (Note 2)

     140,828       542,349       137,990       113,019       349,830       478,220  

Custodian fees

     —         —         2,167       —         —         —    

Accrued expenses

     —         —         108,234       —         —         —    
    


 


 


 


 


 


Total Liabilities

     343,606       85,925,497       23,938,993       952,054       349,830       3,610,399  
    


 


 


 


 


 


NET ASSETS

   $ 129,622,779     $ 651,250,050     $ 170,046,510     $ 92,882,206     $ 315,463,702     $ 390,228,077  
    


 


 


 


 


 


Net assets consist of:

                                                

Paid-in capital

   $ 143,246,119     $ 578,544,440     $ 165,222,145     $ 66,156,734     $ 286,230,625     $ 436,584,410  

Undistributed net investment income

     1,235,457       14,410,596       4,042,788       1,344,870       1,634,773       4,632,113  

Accumulated net realized loss

     (7,069,227 )     (7,584,156 )     (19,353,521 )     (866,231 )     (22,696,802 )     (60,074,566 )

Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies

     (7,789,570 )     65,879,170       20,135,098       26,246,833       50,295,106       9,086,120  
    


 


 


 


 


 


NET ASSETS

   $ 129,622,779     $ 651,250,050     $ 170,046,510     $ 92,882,206     $ 315,463,702     $ 390,228,077  
    


 


 


 


 


 


Shares outstanding

     6,700,000       8,600,000       26,100,000       1,550,000       13,050,000       36,600,000  
    


 


 


 


 


 


Net asset value per share

   $ 19.35     $ 75.73     $ 6.52     $ 59.92     $ 24.17     $ 10.66  
    


 


 


 


 


 



a Securities on loan with market values of $-, $76,033,491, $19,855,109, $-, $- and $-, respectively. See Note 5.

 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  77


Statements of Operations

 

iSHARES®, INC.

Year Ended August 31, 2004

 

     iShares MSCI

 
     Australia
Index Fund


   

Brazil

Index Fund


   

Canada

Index Fund


   

Emerging
Markets

Index Fund


    Hong Kong
Index Fund


    Malaysia
Index Fund


 

NET INVESTMENT INCOME

                                                

Dividendsa

   $ 6,459,328     $ 10,949,012     $ 5,303,731     $ 37,752,347b     $ 14,855,386     $ 5,523,994  

Interestb

     1,440       7,763       2,115       21,011       2,312       4,561  

Securities lending incomeb

     35,332       —         —         1,612,316       208,399       —    
    


 


 


 


 


 


Total investment income

     6,496,100       10,956,775       5,305,846       39,385,674       15,066,097       5,528,555  
    


 


 


 


 


 


EXPENSES (Note 2)

                                                

Investment advisory fees

     915,983       1,782,540       2,058,670       10,195,674       2,474,937       1,177,810  

Distribution fees

     314,500       518,750       739,089       —         876,349       399,705  

Stock dividend taxes

     —         —         —         302,416       —         —    
    


 


 


 


 


 


Total expenses

     1,230,483       2,301,290       2,797,759       10,498,090       3,351,286       1,577,515  

Less reimbursement of distribution fees

     —         —         (331,405 )     —         —         —    
    


 


 


 


 


 


Net expenses

     1,230,483       2,301,290       2,466,354       10,498,090       3,351,286       1,577,515  
    


 


 


 


 


 


Net investment income

     5,265,617       8,655,485       2,839,492       28,887,584       11,714,811       3,951,040  
    


 


 


 


 


 


NET REALIZED AND UNREALIZED GAIN (LOSS)

                                                

Net realized gain (loss) from:

                                                

Investments

     (1,769,194 )     45,418,023       (7,647,811 )     (24,783,142 )     (1,023,760 )     (8,023,460 )

In-kind redemptions

     11,407,062       —         100,774,741       59,382,027       24,557,258       —    

Foreign currency transactions

     48,557       (310,291 )     80,273       (30,236 )     6,585       (9,152 )
    


 


 


 


 


 


Net realized gain (loss)

     9,686,425       45,107,732       93,207,203       34,568,649       23,540,083       (8,032,612 )
    


 


 


 


 


 


Net change in unrealized appreciation (depreciation) on:

                                                

Investments

     7,651,304       22,990,386       (24,883,855 )     (1,667,217 )     25,672,038       10,040,748  

Translation of assets and liabilities in foreign currencies

     5       33,892       2,118       (73,121 )     31       —    
    


 


 


 


 


 


Net change in unrealized appreciation (depreciation)

     7,651,309       23,024,278       (24,881,737 )     (1,740,338 )     25,672,069       10,040,748  
    


 


 


 


 


 


Net realized and unrealized gain

     17,337,734       68,132,010       68,325,466       32,828,311       49,212,152       2,008,136  
    


 


 


 


 


 


NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 22,603,351     $ 76,787,495     $ 71,164,958     $ 61,715,895     $ 60,926,963     $ 5,959,176  
    


 


 


 


 


 



a Net of foreign withholding tax of $52,607, $1,470,957, $935,953, $4,547,228, $- and $1,676,097, respectively.
b Includes income earned from affiliates of the Funds’ investment adviser. See Note 2.

 

See notes to financial statements.

 

78

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Operations (Continued)

 

iSHARES®, INC.

Year Ended August 31, 2004

 

     iShares MSCI

 
    

Mexico

Index Fund


    Pacific ex-Japan
Index Fund


    Singapore
Index Fund


    South Africa
Index Fund


    South Korea
Index Fund


   

Taiwan

Index Fund


 

NET INVESTMENT INCOME

                                                

Dividendsa

   $ 2,218,004     $ 22,120,292     $ 6,814,159     $ 2,781,059     $ 4,530,372     $ 9,206,062  

Interestb

     726       3,144       1,096       209       3,956       1,871  

Securities lending incomeb

     —         144,332       71,380       —         —         —    
    


 


 


 


 


 


Total investment income

     2,218,730       22,267,768       6,886,635       2,781,268       4,534,328       9,207,933  
    


 


 


 


 


 


EXPENSES (Note 2)

                                                

Investment advisory fees

     598,057       2,664,892       751,097       647,324       1,851,713       2,810,061  

Distribution fees

     194,535       —         328,530       180,539       507,356       787,666  

Custodian fees and expenses

     —         —         111,362       —         —         —    

Directors’ fees

     —         —         4,985       —         —         —    

Professional fees

     —         —         28,837       —         —         —    

Federal and state registration fees

     —         —         1,669       —         —         —    

Insurance

     —         —         1,524       —         —         —    

Printing

     —         —         34,904       —         —         —    

AMEX listing fee

     —         —         450       —         —         —    

Stock dividend taxes

     —         —         —         —         1,580       1,020,279  
    


 


 


 


 


 


Total expenses

     792,592       2,664,892       1,263,358       827,863       2,360,649       4,618,006  

Less reimbursement of distribution fees

     —         —         —         —         —         (98,218 )
    


 


 


 


 


 


Net expenses

     792,592       2,664,892       1,263,358       827,863       2,360,649       4,519,788  
    


 


 


 


 


 


Net investment income

     1,426,138       19,602,876       5,623,277       1,953,405       2,173,679       4,688,145  
    


 


 


 


 


 


NET REALIZED AND UNREALIZED GAIN (LOSS)

                                                

Net realized gain (loss) from:

                                                

Investments

     (163,467 )     (4,591,423 )     (4,108,531 )     (438,406 )     (14,435,168 )     (20,138,794 )

In-kind redemptions

     10,599,999       17,435,458       4,389,133       7,768,296       —         —    

Foreign currency transactions

     286       51,192       (16,112 )     (13,440 )     133,044       (56,032 )
    


 


 


 


 


 


Net realized gain (loss)

     10,436,818       12,895,227       264,490       7,316,450       (14,302,124 )     (20,194,826 )
    


 


 


 


 


 


Net change in unrealized appreciation (depreciation) on:

                                                

Investments

     (648,455 )     43,122,222       23,413,236       13,796,315       4,228,087       (8,410,390 )

Translation of assets and liabilities in foreign currencies

     3,551       (4,594 )     206       (11,584 )     —         (17,075 )
    


 


 


 


 


 


Net change in unrealized appreciation (depreciation)

     (644,904 )     43,117,628       23,413,442       13,784,731       4,228,087       (8,427,465 )
    


 


 


 


 


 


Net realized and unrealized gain (loss)

     9,791,914       56,012,855       23,677,932       21,101,181       (10,074,037 )     (28,622,291 )
    


 


 


 


 


 


NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

   $ 11,218,052     $ 75,615,731     $ 29,301,209     $ 23,054,586     $ (7,900,358 )   $ (23,934,146 )
    


 


 


 


 


 



a Net of foreign withholding tax of $-, $764,179, $1,298,086, $57,040, $895,875 and $2,272,445, respectively.
b Includes income earned from affiliates of the Funds’ investment adviser. See Note 2.

 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  79


Statements of Changes in Net Assets

 

iSHARES®, INC.

 

    

iShares MSCI

Australia

Index Fund


   

iShares MSCI

Brazil

Index Fund


   

iShares MSCI

Canada

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                                

OPERATIONS:

                                                

Net investment income

   $ 5,265,617     $ 2,634,052     $ 8,655,485     $ 2,200,072     $ 2,839,492     $ 4,043,853  

Net realized gain (loss)

     9,686,425       3,417,876       45,107,732       (38,109,067 )     93,207,203       43,873,019  

Net change in unrealized appreciation (depreciation)

     7,651,309       12,038,862       23,024,278       53,071,314       (24,881,737 )     100,028,939  
    


 


 


 


 


 


Net increase in net assets resulting from operations

     22,603,351       18,090,790       76,787,495       17,162,319       71,164,958       147,945,811  
    


 


 


 


 


 


DISTRIBUTIONS TO SHAREHOLDERS:

                                                

From net investment income

     (4,470,639 )     (2,180,684 )     (5,717,313 )     (733,550 )     (4,394,348 )     (1,067,330 )
    


 


 


 


 


 


Total distributions to shareholders

     (4,470,639 )     (2,180,684 )     (5,717,313 )     (733,550 )     (4,394,348 )     (1,067,330 )
    


 


 


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                                

Proceeds from shares sold

     106,224,512       8,283,804       265,754,092       52,276,580       98,535,887       505,287,212  

Cost of shares redeemed

     (32,899,563 )     (13,383,892 )     (230,355,301 )     (49,458,528 )     (343,415,496 )     (215,179,302 )
    


 


 


 


 


 


Net increase (decrease) in net assets from capital share transactions

     73,324,949       (5,100,088 )     35,398,791       2,818,052       (244,879,609 )     290,107,910  
    


 


 


 


 


 


INCREASE (DECREASE) IN NET ASSETS

     91,457,661       10,810,018       106,468,973       19,246,821       (178,108,999 )     436,986,391  

NET ASSETS:

                                                

Beginning of year

     87,540,765       76,730,747       103,034,611       83,787,790       503,406,814       66,420,423  
    


 


 


 


 


 


End of year

   $ 178,998,426     $ 87,540,765     $ 209,503,584     $ 103,034,611     $ 325,297,815     $ 503,406,814  
    


 


 


 


 


 


Undistributed net investment income included in net assets at end of year

   $ 3,368,610     $ 2,067,131     $ 4,543,117     $ 1,915,236     $ 1,875,638     $ 3,350,221  
    


 


 


 


 


 


SHARES ISSUED AND REDEEMED:

                                                

Shares sold

     8,000,000       800,000       18,600,000       5,350,000       7,200,000       53,800,000  

Shares redeemed

     (2,600,000 )     (1,200,000 )     (14,700,000 )     (7,000,000 )     (25,600,000 )     (19,700,000 )
    


 


 


 


 


 


Net increase (decrease) in shares outstanding

     5,400,000       (400,000 )     3,900,000       (1,650,000 )     (18,400,000 )     34,100,000  
    


 


 


 


 


 


 

See notes to financial statements.

 

80

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets (Continued)

 

iSHARES®, INC.

 

    

iShares MSCI

Emerging Markets

Index Fund


   

iShares MSCI

Hong Kong

Index Fund


   

iShares MSCI

Malaysia

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the Period
April 7, 2003a

to

August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                                

OPERATIONS:

                                                

Net investment income

   $ 28,887,584     $ 707,065     $ 11,714,811     $ 4,118,499     $ 3,951,040     $ 1,483,772  

Net realized gain (loss)

     34,568,649       (485,246 )     23,540,083       (1,557,634 )     (8,032,612 )     (1,306,184 )

Net change in unrealized appreciation (depreciation)

     (1,740,338 )     29,806,894       25,672,069       32,371,162       10,040,748       4,269,454  
    


 


 


 


 


 


Net increase in net assets resulting from operations

     61,715,895       30,028,713       60,926,963       34,932,027       5,959,176       4,447,042  
    


 


 


 


 


 


DISTRIBUTIONS TO SHAREHOLDERS:

                                                

From net investment income

     (4,998,228 )     —         (6,211,899 )     (2,327,202 )     (2,163,298 )     (1,342,811 )
    


 


 


 


 


 


Total distributions to shareholders

     (4,998,228 )     —         (6,211,899 )     (2,327,202 )     (2,163,298 )     (1,342,811 )
    


 


 


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                                

Proceeds from shares sold

     1,833,607,273       267,817,496       262,371,854       168,140,088       180,819,437       22,654,462  

Cost of shares redeemed

     (229,574,799 )     —         (117,791,065 )     (49,620,095 )     (60,126,782 )     (19,290,970 )
    


 


 


 


 


 


Net increase in net assets from capital share transactions

     1,604,032,474       267,817,496       144,580,789       118,519,993       120,692,655       3,363,492  
    


 


 


 


 


 


INCREASE IN NET ASSETS

     1,660,750,141       297,846,209       199,295,853       151,124,818       124,488,533       6,467,723  

NET ASSETS:

                                                

Beginning of period

     297,846,209       —         250,626,940       99,502,122       99,729,580       93,261,857  
    


 


 


 


 


 


End of period

   $ 1,958,596,350     $ 297,846,209     $ 449,922,793     $ 250,626,940     $ 224,218,113     $ 99,729,580  
    


 


 


 


 


 


Undistributed net investment income included in net assets at end of period

   $ 24,561,384     $ 702,264     $ 8,931,316     $ 3,358,893     $ 2,754,991     $ 976,401  
    


 


 


 


 


 


SHARES ISSUED AND REDEEMED:

                                                

Shares sold

     11,350,000       2,200,000       25,650,000       21,525,000       26,925,000       3,975,000  

Shares redeemed

     (1,450,000 )     —         (12,150,000 )     (6,225,000 )     (9,300,000 )     (3,750,000 )
    


 


 


 


 


 


Net increase in shares outstanding

     9,900,000       2,200,000       13,500,000       15,300,000       17,625,000       225,000  
    


 


 


 


 


 


 

 


a Commencement of operations.

 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  81


Statements of Changes in Net Assets (Continued)

 

iSHARES®, INC.

 

    

iShares MSCI

Mexico

Index Fund


   

iShares MSCI

Pacific Ex-Japan

Index Fund


   

iShares MSCI

Singapore

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                                

OPERATIONS:

                                                

Net investment income

   $ 1,426,138     $ 791,154     $ 19,602,876     $ 5,444,061     $ 5,623,277     $ 2,205,148  

Net realized gain (loss)

     10,436,818       (11,129,490 )     12,895,227       188,729       264,490       (4,645,255 )

Net change in unrealized appreciation (depreciation)

     (644,904 )     16,146,586       43,117,628       27,848,209       23,413,442       11,587,071  
    


 


 


 


 


 


Net increase in net assets resulting from operations

     11,218,052       5,808,250       75,615,731       33,480,999       29,301,209       9,146,964  
    


 


 


 


 


 


DISTRIBUTIONS TO SHAREHOLDERS:

                                                

From net investment income

     (788,654 )     (1,985,056 )     (9,962,572 )     (2,734,116 )     (3,170,833 )     (1,331,268 )
    


 


 


 


 


 


Total distributions to shareholders

     (788,654 )     (1,985,056 )     (9,962,572 )     (2,734,116 )     (3,170,833 )     (1,331,268 )
    


 


 


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                                

Proceeds from shares sold

     228,974,858       35,186,944       424,290,639       104,747,751       49,430,368       17,230,968  

Cost of shares redeemed

     (169,936,912 )     (49,848,527 )     (61,991,273 )     (17,225,922 )     (13,716,664 )     (4,970,610 )
    


 


 


 


 


 


Net increase (decrease) in net assets from capital share transactions

     59,037,946       (14,661,583 )     362,299,366       87,521,829       35,713,704       12,260,358  
    


 


 


 


 


 


INCREASE (DECREASE) IN NET ASSETS

     69,467,344       (10,838,389 )     427,952,525       118,268,712       61,844,080       20,076,054  

NET ASSETS:

                                                

Beginning of year

     60,155,435       70,993,824       223,297,525       105,028,813       108,202,430       88,126,376  
    


 


 


 


 


 


End of year

   $ 129,622,779     $ 60,155,435     $ 651,250,050     $ 223,297,525     $ 170,046,510     $ 108,202,430  
    


 


 


 


 


 


Undistributed net investment income included in net assets at end of year

   $ 1,235,457     $ 597,687     $ 14,410,596     $ 4,181,906     $ 4,042,788     $ 1,491,917  
    


 


 


 


 


 


SHARES ISSUED AND REDEEMED:

                                                

Shares sold

     12,300,000       2,500,000       5,900,000       1,900,000       8,200,000       3,500,000  

Shares redeemed

     (9,600,000 )     (3,700,000 )     (900,000 )     (300,000 )     (2,200,000 )     (1,000,000 )
    


 


 


 


 


 


Net increase (decrease) in shares outstanding

     2,700,000       (1,200,000 )     5,000,000       1,600,000       6,000,000       2,500,000  
    


 


 


 


 


 


 

See notes to financial statements.

 

82

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets (Continued)

 

iSHARES®, INC.

 

    

iShares MSCI

South Africa

Index Fund


   

iShares MSCI

South Korea

Index Fund


   

iShares MSCI

Taiwan

Index Fund


 
    

For the

year ended
August 31, 2004


   

For the period
February 3, 2003a
to

August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


   

For the

year ended
August 31, 2004


   

For the

year ended
August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                                                

OPERATIONS:

                                                

Net investment income

   $ 1,953,405     $ 1,528,524     $ 2,173,679     $ 1,123,273     $ 4,688,145     $ 643,699  

Net realized gain (loss)

     7,316,450       (473,013 )     (14,302,124 )     (4,733,350 )     (20,194,826 )     (15,291,942 )

Net change in unrealized appreciation (depreciation)

     13,784,731       12,462,102       4,228,087       18,288,979       (8,427,465 )     52,075,339  
    


 


 


 


 


 


Net increase (decrease) in net assets resulting from operations

     23,054,586       13,517,613       (7,900,358 )     14,678,902       (23,934,146 )     37,427,096  
    


 


 


 


 


 


DISTRIBUTIONS TO SHAREHOLDERS:

                                                

From net investment income

     (2,182,948 )     —         (1,814,739 )     —         (637,002 )     —    
    


 


 


 


 


 


Total distributions to shareholders

     (2,182,948 )     —         (1,814,739 )     —         (637,002 )     —    
    


 


 


 


 


 


CAPITAL SHARE TRANSACTIONS:

                                                

Proceeds from shares sold

     14,747,859       68,396,211       213,845,316       66,418,682       223,498,562       55,256,747  

Cost of shares redeemed

     (24,651,115 )     —         (43,152,032 )     (22,948,093 )     (43,426,617 )     —    
    


 


 


 


 


 


Net increase (decrease) in net assets from capital share transactions

     (9,903,256 )     68,396,211       170,693,284       43,470,589       180,071,945       55,256,747  
    


 


 


 


 


 


INCREASE IN NET ASSETS

     10,968,382       81,913,824       160,978,187       58,149,491       155,500,797       92,683,843  

NET ASSETS:

                                                

Beginning of period

     81,913,824       —         154,485,515       96,336,024       234,727,280       142,043,437  
    


 


 


 


 


 


End of period

   $ 92,882,206     $ 81,913,824     $ 315,463,702     $ 154,485,515     $ 390,228,077     $ 234,727,280  
    


 


 


 


 


 


Undistributed net investment income included in net assets at end of period

   $ 1,344,870     $ 1,587,853     $ 1,634,773     $ 1,142,788     $ 4,632,113     $ 637,002  
    


 


 


 


 


 


SHARES ISSUED AND REDEEMED:

                                                

Shares sold

     250,000       1,750,000       8,150,000       3,300,000       18,800,000       5,650,000  

Shares redeemed

     (450,000 )     —         (1,800,000 )     (1,150,000 )     (3,950,000 )     —    
    


 


 


 


 


 


Net increase (decrease) in shares outstanding

     (200,000 )     1,750,000       6,350,000       2,150,000       14,850,000       5,650,000  
    


 


 


 


 


 



a Commencement of operations.

 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  83


Financial Highlights

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Australia Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 11.22     $ 9.36     $ 9.24     $ 9.93     $ 9.99  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.45       0.32       0.23       0.24       0.23  

Net realized and unrealized gain (loss)

     2.32       1.81       (0.07 )     (0.71 )     (0.04 )
    


 


 


 


 


Total from investment operations

     2.77       2.13       0.16       (0.47 )     0.19  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.43 )     (0.27 )     (0.04 )     (0.20 )     (0.23 )

Return of capital

     —         —         —         (0.02 )     (0.02 )
    


 


 


 


 


Total distributions

     (0.43 )     (0.27 )     (0.04 )     (0.22 )     (0.25 )
    


 


 


 


 


Net asset value, end of year

   $ 13.56     $ 11.22     $ 9.36     $ 9.24     $ 9.93  
    


 


 


 


 


Total return

     24.95 %     23.33 %     1.74 %     (4.77 )%     1.84 %
    


 


 


 


 


Ratios/Supplemental Data:

                                        

Net assets, end of year (000s)

   $ 178,998     $ 87,541     $ 76,731     $ 57,312     $ 61,574  

Ratio of expenses to average net assets

     0.79 %     0.84 %     0.84 %     0.84 %     0.95 %

Ratio of net investment income to average net assets

     3.37 %     3.21 %     2.47 %     2.54 %     2.22 %

Portfolio turnover rateb

     9 %     8 %     5 %     23 %     36 %

a Based on average shares outstanding throughout each period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

84

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Brazil Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


   

Period From
Jul. 10, 2000g
to

Aug. 31, 2000


 

Net asset value, beginning of period

   $ 12.19     $ 8.30     $ 11.20     $ 19.25     $ 20.22  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomec

     0.55       0.32       0.38       0.68       0.02  

Net realized and unrealized gain (loss)

     4.49       3.68       (3.28 )     (8.09 )     (0.63 )
    


 


 


 


 


Total from investment operations

     5.04       4.00       (2.90 )     (7.41 )     (0.61 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.27 )     (0.11 )     —         (0.56 )     (0.02 )

Net realized gain

     —         —         —         —         (0.34 )

Return of capital

     —         —         —         (0.08 )     —    
    


 


 


 


 


Total distributions

     (0.27 )     (0.11 )     —         (0.64 )     (0.36 )
    


 


 


 


 


Net asset value, end of period

   $ 16.96     $ 12.19     $ 8.30     $ 11.20     $ 19.25  
    


 


 


 


 


Total return

     41.42 %     48.85 %     (25.89 )%     (38.52 )%     (2.97 )%e
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of period (000s)

   $ 209,504     $ 103,035     $ 83,788     $ 14,004     $ 18,283  

Ratio of expenses to average net assetsf

     0.96 %     0.99 %     0.99 %     0.99 %     0.99 %a

Ratio of net investment income to average net assetsf

     3.59 %     3.59 %     3.50 %     4.44 %     0.77 %b

Portfolio turnover rated

     106 %     85 %     103 %     43 %     64 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was 1.40%.
b Ratio of net investment income to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was 0.37%.
c Based on average shares outstanding throughout each period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Not annualized.
f Annualized for periods of less than one year.
g Commencement of operations.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  85


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Canada Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 12.25     $ 9.49     $ 10.70     $ 16.94     $ 13.22  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomec

     0.11       0.10       0.07       0.05       0.70  

Net realized and unrealized gain (loss)

     2.17       2.69       (1.27 )     (5.92 )     8.08  
    


 


 


 


 


Total from investment operations

     2.28       2.79       (1.20 )     (5.87 )     8.78  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.20 )     (0.03 )     (0.01 )     (0.02 )     (0.55 )

Net realized gain

     —         —         —         (0.31 )     (4.39 )

Return of capital

     —         —         —         (0.04 )     (0.12 )
    


 


 


 


 


Total distributions

     (0.20 )     (0.03 )     (0.01 )     (0.37 )     (5.06 )
    


 


 


 


 


Net asset value, end of year

   $ 14.33     $ 12.25     $ 9.49     $ 10.70     $ 16.94  
    


 


 


 


 


Total return

     18.70 %     29.47 %     (11.23 )%     (34.95 )%     67.21 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 325,298     $ 503,407     $ 66,420     $ 28,889     $ 22,028  

Ratio of expenses to average net assets

     0.70 %e     0.84 %     0.84 %     0.84 %     1.17 %a

Ratio of net investment income to average net assets

     0.81 %f     0.98 %     0.70 %     0.44 %     4.07 %b

Portfolio turnover rated

     10 %     10 %     5 %     63 %     64 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the year ended August 31, 2000 was 1.19%.
b Ratio of net investment income to average net assets prior to waived fees and reimbursed expenses for the year ended August 31, 2000 was 4.05%.
c Based on average shares outstanding throughout each period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Ratio of expenses to average net assets prior to reimbursed distribution fees for the year ended August 31, 2004 was 0.80%.
f Ratio of net investment income to average net assets prior to reimbursed distribution fees for the year ended August 31, 2004 was 0.71%.

 

See notes to financial statements.

 

86

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Emerging Markets Index Fund

 
     Year ended
Aug. 31, 2004


   

Period from
Apr. 7, 2003e
to

Aug. 31, 2003


 

Net asset value, beginning of period

   $ 135.38     $ 101.25  
    


 


Income from investment operations:

                

Net investment incomea

     3.38       0.78  

Net realized and unrealized gain

     23.92       33.35  
    


 


Total from investment operations

     27.30       34.13  
    


 


Less distributions from:

                

Net investment income

     (0.81 )     —    
    


 


Total distributions

     (0.81 )     —    
    


 


Net asset value, end of period

   $ 161.87     $ 135.38  
    


 


Total return

     20.21 %     33.72 %b
    


 


Ratios/Supplemental data:

                

Net assets, end of period (000s)

   $ 1,958,596     $ 297,846  

Ratio of expenses to average net assetsc

     0.76 %     0.78 %

Ratio of expenses to average net assets exclusive of foreign taxes on stock dividendsc

     0.74 %     0.72 %

Ratio of net investment income to average net assetsc

     2.10 %     1.58 %

Portfolio turnover rated

     8 %     10 %

a Based on average shares outstanding throughout each period.
b Not annualized.
c Annualized for periods of less than one year.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Commencement of operations.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  87


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Hong Kong Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 9.03     $ 7.99     $ 8.93     $ 13.24     $ 11.83  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.28       0.23       0.23       0.23       0.33  

Net realized and unrealized gain (loss)

     1.75       0.95       (1.11 )     (4.30 )     1.42  
    


 


 


 


 


Total from investment operations

     2.03       1.18       (0.88 )     (4.07 )     1.75  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.15 )     (0.14 )     (0.06 )     (0.23 )     (0.32 )

Return of capital

     —         —         —         (0.01 )     (0.02 )
    


 


 


 


 


Total distributions

     (0.15 )     (0.14 )     (0.06 )     (0.24 )     (0.34 )
    


 


 


 


 


Net asset value, end of year

   $ 10.91     $ 9.03     $ 7.99     $ 8.93     $ 13.24  
    


 


 


 


 


Total return

     22.69 %     15.14 %     (9.94 )%     (30.88 )%     14.73 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 449,923     $ 250,627     $ 99,502     $ 52,946     $ 79,479  

Ratio of expenses to average net assets

     0.80 %     0.84 %     0.84 %     0.84 %     0.94 %

Ratio of net investment income to average net assets

     2.78 %     3.06 %     2.56 %     2.11 %     2.57 %

Portfolio turnover rateb

     5 %     10 %     15 %     43 %     21 %

a Based on average shares outstanding throughout each period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

88

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Malaysia Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 5.99     $ 5.68     $ 5.11     $ 5.96     $ 5.59  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.13       0.10       0.08       0.06       0.05  

Net realized and unrealized gain (loss)

     0.52       0.30       0.52       (0.85 )     0.37  
    


 


 


 


 


Total from investment operations

     0.65       0.40       0.60       (0.79 )     0.42  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.10 )     (0.09 )     (0.03 )     (0.06 )     (0.05 )

Return of capital

     —         —         —         (0.00 )c     (0.00 )c
    


 


 


 


 


Total distributions

     (0.10 )     (0.09 )     (0.03 )     (0.06 )     (0.05 )
    


 


 


 


 


Net asset value, end of year

   $ 6.54     $ 5.99     $ 5.68     $ 5.11     $ 5.96  
    


 


 


 


 


Total return

     11.01 %     7.39 %     11.82 %     (13.22 )%     7.57 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 224,218     $ 99,730     $ 93,262     $ 80,877     $ 99,206  

Ratio of expenses to average net assets

     0.79 %     0.84 %     0.84 %     0.84 %     0.96 %

Ratio of net investment income to average net assets

     1.97 %     1.91 %     1.53 %     1.19 %     0.81 %

Portfolio turnover rateb

     39 %     35 %     37 %     37 %     18 %

a Based on average shares outstanding throughout each period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Rounds to less than $0.01.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  89


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Mexico Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 15.04     $ 13.65     $ 15.35     $ 16.72     $ 13.39  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomec

     0.26       0.19       0.32       0.17       0.06  

Net realized and unrealized gain (loss)

     4.26       1.72       (1.95 )     (1.36 )     3.69  
    


 


 


 


 


Total from investment operations

     4.52       1.91       (1.63 )     (1.19 )     3.75  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.21 )     (0.52 )     (0.07 )     (0.15 )     —    

Net realized gain

     —         —         —         (0.03 )     (0.42 )
    


 


 


 


 


Total distributions

     (0.21 )     (0.52 )     (0.07 )     (0.18 )     (0.42 )
    


 


 


 


 


Net asset value, end of year

   $ 19.35     $ 15.04     $ 13.65     $ 15.35     $ 16.72  
    


 


 


 


 


Total return

     30.28 %     14.60 %     (10.67 )%     (7.02 )%     28.20 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 129,623     $ 60,155     $ 70,994     $ 46,056     $ 40,127  

Ratio of expenses to average net assets

     0.78 %     0.84 %     0.84 %     0.84 %     1.04 %a

Ratio of net investment income to average net assets

     1.40 %     1.43 %     2.05 %     1.12 %     0.35 %b

Portfolio turnover rated

     12 %     13 %     8 %     34 %     24 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the year ended August 31, 2000 was 1.04%.
b Ratio of net investment income to average net assets prior to waived fees and reimbursed expenses for the year ended August 31, 2000 was 0.35%.
c Based on average shares outstanding throughout each period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

90

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Pacific ex-Japan Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


   

Period from
Oct. 25, 2001e
to

Aug. 31, 2002


 

Net asset value, beginning of period

   $ 62.03     $ 52.51     $ 50.03  
    


 


 


Income from investment operations:

                        

Net investment incomea

     2.68       1.87       1.35  

Net realized and unrealized gain

     12.53       8.53       1.40  
    


 


 


Total from investment operations

     15.21       10.40       2.75  
    


 


 


Less distributions from:

                        

Net investment income

     (1.51 )     (0.88 )     (0.27 )
    


 


 


Total distributions

     (1.51 )     (0.88 )     (0.27 )
    


 


 


Net asset value, end of period

   $ 75.73     $ 62.03     $ 52.51  
    


 


 


Total return

     24.74 %     20.15 %     5.51 %c
    


 


 


Ratios/Supplemental data:

                        

Net assets, end of period (000s)

   $ 651,250     $ 223,298     $ 105,029  

Ratio of expenses to average net assetsd

     0.50 %     0.50 %     0.50 %

Ratio of net investment income to average net assetsd

     3.68 %     3.47 %     2.87 %

Portfolio turnover rateb

     8 %     8 %     5 %

a Based on average shares outstanding throughout each period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Not annualized.
d Annualized for periods of less than one year.
e Commencement of operations.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  91


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Singapore Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


    Year ended
Aug. 31, 2000


 

Net asset value, beginning of year

   $ 5.38     $ 5.01     $ 5.34     $ 7.58     $ 7.93  
    


 


 


 


 


Income from investment operations:

                                        

Net investment incomea

     0.22       0.12       0.07       0.07       0.13  

Net realized and unrealized gain (loss)

     1.04       0.33       (0.36 )     (2.16 )     (0.21 )
    


 


 


 


 


Total from investment operations

     1.26       0.45       (0.29 )     (2.09 )     (0.08 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.12 )     (0.08 )     (0.04 )     (0.07 )     (0.11 )

Net realized gain

     —         —         —         (0.06 )     (0.14 )

Return of capital

     —         —         —         (0.02 )     (0.02 )
    


 


 


 


 


Total distributions

     (0.12 )     (0.08 )     (0.04 )     (0.15 )     (0.27 )
    


 


 


 


 


Net asset value, end of year

   $ 6.52     $ 5.38     $ 5.01     $ 5.34     $ 7.58  
    


 


 


 


 


Total return

     23.47 %     9.30 %     (5.42 )%     (27.89 )%     (1.29 )%
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 170,047     $ 108,202     $ 88,126     $ 73,704     $ 88,719  

Ratio of expenses to average net assets

     0.79 %     0.84 %     0.84 %     0.84 %     0.94 %

Ratio of net investment income to average net assets

     3.50 %     2.67 %     1.44 %     1.15 %     1.60 %

Portfolio turnover rateb

     9 %     14 %     9 %     32 %     52 %

a Based on average shares outstanding throughout each period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

 

See notes to financial statements.

 

92

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI South Africa Index Fund

 
     Year ended
Aug. 31, 2004


   

Period from
Feb. 3, 2003e
to

Aug. 31, 2003


 

Net asset value, beginning of period

   $ 46.81     $ 38.72  
    


 


Income from investment operations:

                

Net investment incomea

     1.23       0.89  

Net realized and unrealized gain

     13.24       7.20  
    


 


Total from investment operations

     14.47       8.09  
    


 


Less distributions from:

                

Net investment income

     (1.36 )     —    
    


 


Total distributions

     (1.36 )     —    
    


 


Net asset value, end of period

   $ 59.92     $ 46.81  
    


 


Total return

     31.30 %     20.89 %b
    


 


Ratios/Supplemental data:

                

Net assets, end of period (000s)

   $ 92,882     $ 81,914  

Ratio of expenses to average net assetsc

     0.95 %     0.99 %

Ratio of net investment income to average net assetsc

     2.23 %     3.86 %

Portfolio turnover rated

     13 %     17 %

a Based on average shares outstanding throughout each period.
b Not annualized.
c Annualized for periods of less than one year.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Commencement of operations.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  93


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI South Korea Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


   

Period from
May 9, 2000h
to

Aug. 31, 2000


 

Net asset value, beginning of period

   $ 23.06     $ 21.17     $ 13.25     $ 18.16     $ 20.36  
    


 


 


 


 


Income from investment operations:

                                        

Net investment income (loss)c

     0.22       0.19       (0.00 )e     0.09       (0.04 )

Net realized and unrealized gain (loss)

     1.13       1.70       7.92       (4.90 )     (2.16 )
    


 


 


 


 


Total from investment operations

     1.35       1.89       7.92       (4.81 )     (2.20 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.24 )     —         —         (0.03 )     —    

Return of capital

     —         —         —         (0.07 )     —    
    


 


 


 


 


Total distributions

     (0.24 )     —         —         (0.10 )     —    
    


 


 


 


 


Net asset value, end of period

   $ 24.17     $ 23.06     $ 21.17     $ 13.25     $ 18.16  
    


 


 


 


 


Total return

     5.83 %     8.93 %     59.77 %     (26.49 )%     (10.81 )%g
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of period (000s)

   $ 315,464     $ 154,486     $ 96,336     $ 37,767     $ 13,622  

Ratio of expenses to average net assetsg

     0.94 %     0.99 %     1.00 %     1.01 %     0.99 %a

Ratio of expenses to average net assets exclusive of foreign taxes on stock dividendsg

     0.94 %     0.99 %     0.99 %     0.99 %     0.99 %

Ratio of net investment income (loss) to average net assetsg

     0.87 %     0.98 %     (0.01 )%     0.64 %     (0.63 )%b

Portfolio turnover rated

     29 %     39 %     25 %     39 %     55 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was 1.38%.
b Ratio of net investment loss to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was (1.02)%.
c Based on average shares outstanding throughout each period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Rounds to less than $0.01.
f Not annualized.
g Annualized for periods of less than one year.
h Commencement of operations.

 

See notes to financial statements.

 

94

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights (Continued)

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Taiwan Index Fund

 
     Year ended
Aug. 31, 2004


    Year ended
Aug. 31, 2003


    Year ended
Aug. 31, 2002


    Year ended
Aug. 31, 2001


   

Period from
Jun. 20, 2000g
to

Aug. 31, 2000


 

Net asset value, beginning of period

   $ 10.79     $ 8.82     $ 9.01     $ 16.41     $ 19.59  
    


 


 


 


 


Income from investment operations:

                                        

Net investment income (loss)c

     0.14       0.04       (0.03 )     (0.03 )     (0.01 )

Net realized and unrealized gain (loss)

     (0.25 )     1.93       (0.16 )     (7.37 )     (2.31 )
    


 


 


 


 


Total from investment operations

     (0.11 )     1.97       (0.19 )     (7.40 )     (2.32 )
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.02 )     —         —         —         (0.32 )

Net realized gain

     —         —         —         —         (0.10 )

Return of capital

     —         —         —         —         (0.44 )
    


 


 


 


 


Total distributions

     (0.02 )     —         —         —         (0.86 )
    


 


 


 


 


Net asset value, end of period

   $ 10.66     $ 10.79     $ 8.82     $ 9.01     $ 16.41  
    


 


 


 


 


Total return

     (1.10 )%     22.45 %     (2.11 )%     (45.09 )%     (12.10 )%e
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of period (000s)

   $ 390,228     $ 234,727     $ 142,043     $ 110,786     $ 42,667  

Ratio of expenses to average net assetsf

     1.19 %h     1.31 %     1.33 %     1.60 %     1.56 %a

Ratio of expenses to average net assets exclusive of foreign taxes on stock dividendsf

     0.92 %     0.99 %     0.99 %     0.99 %     0.99 %

Ratio of net investment income (loss) to average net assetsf

     1.23 %i     0.43 %     (0.28 )%     (0.23 )%     (0.28 )%b

Portfolio turnover rated

     19 %     15 %     11 %     30 %     52 %

a Ratio of expenses to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was 2.16%.
b Ratio of net investment loss to average net assets prior to waived fees and reimbursed expenses for the period ended August 31, 2000 was (0.89)%.
c Based on average shares outstanding throughout each period.
d Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
e Not annualized.
f Annualized for periods of less than one year.
g Commencement of operations.
h Ratio of expenses to average net assets prior to reimbursed distribution fees for the year ended August 31, 2004 was 1.22%.
i Ratio of net investment income to average net assets prior to reimbursed distribution fees for the year ended August 31, 2004 was 1.21%.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  95


Notes to the Financial Statements

 

iSHARES®, INC.

 

1. SIGNIFICANT ACCOUNTING POLICIES

 

iShares, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company was incorporated under the laws of the State of Maryland on September 1, 1994 pursuant to amended and restated Articles of Incorporation. As of August 31, 2004, the Company offered 24 investment portfolios or funds.

 

These financial statements relate only to the iShares MSCI Australia, iShares MSCI Brazil, iShares MSCI Canada, iShares MSCI Emerging Markets, iShares MSCI Hong Kong, iShares MSCI Malaysia, iShares MSCI Mexico, iShares MSCI Pacific ex-Japan, iShares MSCI Singapore, iShares MSCI South Africa, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds (each a “Fund”, collectively the “Funds”).

 

The investment objective of each Fund is to seek investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in a particular market, as measured by a particular equity securities index compiled by Morgan Stanley Capital International Inc. (“MSCI”). The investment adviser utilizes a “passive” or index approach to achieve each Fund’s investment objective. Each of the Funds is classified as a non-diversified fund under the 1940 Act. 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 affecting these companies.

 

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 securities of U.S. issuers. 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 of the Fund; less publicly available information about issuers; the imposition of withholding or other taxes; higher transaction and custody costs; settlement delays and risk of loss attendant in settlement procedures; difficulties in enforcing contractual obligations; lesser regulation of securities markets; different accounting, disclosure and reporting requirements; more substantial governmental involvement in the economy; higher inflation rates; greater social, economic and political uncertainties; the risk of nationalization or expropriation of assets; and the risk of war.

 

Under the Company’s organizational documents, the Funds’ officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred.

 

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 that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

96

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

SECURITY VALUATION

 

Portfolio securities for which market prices are readily available are valued using the official closing price 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. Short-term investments and debt securities maturing in 60 days or less are valued at amortized cost. Securities of investment companies, other than investment companies whose shares are traded on an exchange, are valued at the investment company’s published net asset value per share. Any securities, including restricted securities or other assets for which market quotations are not readily available, or for which a significant event has occurred since the time of the most recent market quotation, are valued in accordance with fair value pricing policies approved by the Company’s Board of Directors (the “Board”).

 

SECURITY TRANSACTIONS, INCOME RECOGNITION 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 prior to December 28, 2001 were allocated to the Funds based on the ratio of average net assets of each Fund to the combined net assets of all funds offered by the Company, or other appropriate method. Other expenses, directly related to a specific fund, were charged to that fund. The expenses for the iShares MSCI Singapore Index Fund are still allocated to that Fund using this methodology. Additional details of the current expense structure may be found in Note 2.

 

FOREIGN CURRENCY TRANSLATION

 

The accounting records of the Funds are maintained in U.S. dollars. 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 currencies, investment securities 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, the exchange rates as of 4:00 p.m. London 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. With respect to the iShares MSCI Brazil Index Fund, currency values are converted into U.S. dollars as of the close of the Brazilian markets (3:00 p.m. Eastern Standard Time or 4:00 p.m. Eastern Daylight Saving Time).

 

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 may levy taxes on stock dividends at rates of 16.5% and up to 20.0%, respectively, based on the par value of stock dividends received by the iShares MSCI Emerging Markets, iShares MSCI South Korea, and iShares MSCI Taiwan Index Funds. These taxes are paid by the Funds receiving the stock dividends and, if any, are disclosed in their respective Statements of Operations.

 

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. Dividends and distributions are paid in U.S. dollars and cannot be automatically reinvested in additional shares of the Funds.

 

NOTES TO THE FINANCIAL STATEMENTS

  97


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

At August 31, 2004, the tax year-end of the Funds, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

 

iShares MSCI Index Fund


   Undistributed
Ordinary
Income


   Unrealized
Appreciation
(Depreciation)


    Capital and
Other Losses


    Total
Distributable
Earnings
(Accumulated
Losses)


 

Australia

   $ 5,429,570    $ 14,568,318     $ (8,552,044 )   $ 11,445,844  

Brazil

     4,543,117      34,654,996       (56,661,406 )     (17,463,293 )

Canada

     1,875,638      56,305,316       (8,775,862 )     49,405,092  

Emerging Markets

     24,561,384      25,136,070       (22,328,076 )     27,369,378  

Hong Kong

     8,935,684      35,590,687       (15,066,533 )     29,459,838  

Malaysia

     2,837,795      34,334,322       (28,969,579 )     8,202,538  

Mexico

     1,235,457      (8,061,393 )     (6,797,404 )     (13,623,340 )

Pacific ex-Japan

     18,973,843      59,784,427       (6,052,660 )     72,705,610  

Singapore

     4,608,572      17,491,740       (17,275,947 )     4,824,365  

South Africa

     1,344,870      26,207,263       (826,661 )     26,725,472  

South Korea

     1,634,773      43,579,808       (15,981,504 )     29,233,077  

Taiwan

     4,632,113      (8,554,539 )     (42,433,907 )     (46,356,333 )

 

The differences between the components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Statements of Assets and Liabilities are primarily due to differing treatments of wash sales.

 

For the years ended August 31, 2004 and August 31, 2003, the tax characterization of distributions paid for each Fund was equal to the book characterization of distributions paid. The total distributions and distributions per share are disclosed in the accompanying Statements of Changes in Net Assets and the Financial Highlights for all 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 by complying with the provisions applicable to regulated investment companies, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, and to annually distribute substantially all of its net income and any net gains (taking into account any capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income and excise taxes. Accordingly, no provision for federal income taxes was required for the year ended August 31, 2004.

 

From November 1, 2003 to August 31, 2004, certain Funds incurred net realized capital losses and net foreign currency losses. As permitted by tax regulations, these Funds have elected to defer those losses and treat them as arising in the year ending August 31, 2005, as follows:

 

iShares MSCI Index Fund


  

Deferred

Net Realized
Capital/net Foreign
Currency Losses


Australia

   $ 402,651

Canada

     5,510,655

Emerging Markets

     21,487,298

Hong Kong

     807,840

Malaysia

     6,822,635

Mexico

     12,912

Pacific ex-Japan

     3,160,085

Singapore

     3,780,444

South Africa

     133,060

South Korea

     10,890,832

Taiwan

     12,082,009

 

98

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

The Funds had tax basis net capital loss carryforwards at August 31, 2004, the tax year-end of the Funds, as follows:

 

iShares MSCI Index
Fund


  

Expiring

in 2007


  

Expiring

in 2008


  

Expiring

in 2009


  

Expiring

in 2010


  

Expiring

in 2011


  

Expiring

in 2012


   Total

Australia

   $ 674,889    $ 630,985    $ 1,971,994    $ 3,625,203    $ 650,082    $ 596,240    $ 8,149,393

Brazil

     —        —        —        —        56,661,406      —        56,661,406

Canada

     —        —        —        780,114      21,276      2,463,817      3,265,207

Emerging Markets

     —        —        —        —        —        840,778      840,778

Hong Kong

     4,085,707      —        —        4,971,970      2,870,602      2,330,414      14,258,693

Malaysia

     8,654,333      —        —        9,819,029      2,898,105      775,477      22,146,944

Mexico

     —        —        —        1,319,032      2,329,290      3,136,170      6,784,492

Pacific ex-Japan

     —        —        —        —        329,461      2,563,114      2,892,575

Singapore

     —        —        —        4,810,766      4,428,316      4,256,421      13,495,503

South Africa

     —        —        —        —        —        693,601      693,601

South Korea

     —        —        556,540      666,642      504,041      3,363,449      5,090,672

Taiwan

     —        —        —        12,532,361      8,689,663      9,129,874      30,351,898

 

Net capital loss carryforwards may be applied against any net realized taxable gains in each succeeding year, or until their respective expiration dates, whichever occurs first.

 

If any of the Funds own shares in certain foreign investment entities, referred to, under U.S. tax law, as “passive foreign investment companies”, such Funds may elect to mark-to-market annually the shares of the passive foreign investment companies, and would be required to distribute to shareholders any such mark-to-market gains.

 

At August 31, 2004, the aggregate unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

iShares MSCI Index Fund


  

Tax

Cost


   Unrealized
Appreciation


   Unrealized
Depreciation


    Net Unrealized
Appreciation
(Depreciation)


 

Australia

   $ 183,402,296    $ 17,826,492    $ (3,252,305 )   $ 14,574,187  

Brazil

     174,048,727      35,546,190      (900,612 )     34,645,578  

Canada

     268,394,704      58,845,751      (2,542,716 )     56,303,035  

Emerging Markets

     2,372,041,001      120,847,171      (95,635,748 )     25,211,423  

Hong Kong

     470,725,223      46,451,492      (10,860,752 )     35,590,740  

Malaysia

     189,896,602      37,786,317      (3,451,995 )     34,334,322  

Mexico

     137,682,281      667,369      (8,727,906 )     (8,060,537 )

Pacific ex-Japan

     667,077,445      66,259,242      (6,464,127 )     59,795,115  

Singapore

     172,337,695      19,870,766      (2,379,348 )     17,491,418  

South Africa

     66,421,742      26,782,064      (564,958 )     26,217,106  

South Korea

     271,772,096      54,484,325      (10,904,517 )     43,579,808  

Taiwan

     396,443,371      26,162,354      (34,706,883 )     (8,544,529 )

 

NOTES TO THE FINANCIAL STATEMENTS

  99


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

For the year ended August 31, 2004, 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. These reclassifications have no effect on net assets or net asset values per share.

 

REPURCHASE AGREEMENTS

 

Each Fund may enter into repurchase agreements with banks and securities dealers. These transactions involve the purchase of securities with a simultaneous commitment to resell the securities to the bank or the dealer at an agreed-upon date and price. A repurchase agreement is accounted for as an investment by the Funds, collateralized by securities, which are delivered to the Funds’ custodian or to an agent bank under a tri-party agreement. The securities are marked-to-market daily and additional securities are acquired as needed, to ensure that their value equals or exceeds the repurchase price plus accrued interest. At August 31, 2004 a portion of certain Funds’ cash collateral for securities on loan was invested in repurchase agreements as disclosed in each Fund’s Schedule of Investments. For further information, see Note 5, below.

 

2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

 

Pursuant to an Investment Advisory Agreement with the Company, as amended on December 28, 2001, Barclays Global Fund Advisors (“BGFA”) manages the investment of each Fund’s assets. BGFA is a California corporation indirectly owned by Barclays Bank PLC.

 

Under the Investment Advisory Agreement, BGFA is responsible for all of the expenses (“Covered Expenses”) of each of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except interest, taxes, brokerage commissions and other expenses connected with the executions of portfolio transactions, distribution fees and extraordinary expenses.

 

Prior to December 28, 2001 and pursuant to the prior investment advisory agreement, the investment advisory fee earned by and 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 investment advisory fee tables below. These fee reduction and reimbursement provisions still apply to the iShares MSCI Singapore Index Fund.

 

For its investment advisory services to the iShares MSCI Australia, iShares MSCI Canada, iShares MSCI Hong Kong, iShares MSCI Malaysia, iShares MSCI Mexico and iShares MSCI Singapore Index Funds, BGFA is entitled to an annual investment advisory fee based on each Fund’s allocable portion of the aggregate net assets of all the funds offered by the Company (except for the iShares MSCI Brazil, iShares MSCI Emerging Markets, iShares MSCI Pacific ex-Japan, iShares MSCI South Africa, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds) as follows:

 

Investment Advisory Fee


  

Aggregate Net Assets


0.59%

   First $7 billion

0.54

   Over $7 billion, up to and including $11 billion

0.49

   Over $11 billion

 

100

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

For its investment advisory services to the iShares MSCI Brazil, iShares MSCI South Africa, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, BGFA is entitled to an annual investment advisory fee based on each Fund’s allocable portion of the aggregate net assets of these four Funds as follows:

 

Investment Advisory Fee

  

Aggregate 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 advisory services to the iShares MSCI Pacific ex-Japan Index Fund, BGFA is entitled to an annual investment advisory fee based on the average net assets of the Fund of 0.50%. For its investment advisory services to the iShares MSCI Emerging Markets Index Fund, BGFA is entitled to an annual investment advisory fee based on the average net assets of the Fund excluding any investments in other iShares Funds, of 0.75%.

 

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.

 

Investors Bank & Trust Company (“Investors Bank”) serves as administrator, custodian and transfer agent for the Company. As compensation for its services, Investors Bank receives certain out-of-pocket costs, transaction fees, and asset-based fees, which are accrued daily and paid monthly. These fees are Covered Expenses as defined above.

 

BGI serves as securities lending agent for the Company. BGI is an affiliate of BGFA, the Funds’ investment adviser. As securities lending agent, BGI receives, as fees, a share of the income earned on investment of the cash collateral received for the loan of securities. For the year ended August 31, 2004, BGI earned securities lending agent fees as follows:

 

iShares MSCI Index Fund


   Securities Lending
Agent Fees


Australia

   $ 35,359

Emerging Markets

     1,628,142

Hong Kong

     208,626

Pacific ex-Japan Index

     144,839

Singapore

     71,444

 

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. Prior to July 1, 2004, the Company had in effect a distribution plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor was 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 expenses and services. At the Board meeting held on March 16, 2004, the Directors voted to terminate the Plan, effective July 1, 2004.

 

For the year ended August 31, 2004, the Distributor voluntarily reimbursed the iShares MSCI Canada Index Fund and iShares MSCI Taiwan Index Fund for distribution fees in the amount of $331,405 and $98,218, respectively.

 

NOTES TO THE FINANCIAL STATEMENTS

  101


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

Pursuant to Rule 17a-7 of the 1940 Act, certain Funds executed cross trades for the year ended August 31, 2004. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment adviser. The Board reviewed all such transactions executed during the first ten months of the fiscal year and concluded that they were in compliance with the requirements and restrictions set forth by Rule 17a-7. The Board is scheduled at its next meeting to review all such transactions executed during the last two months of the fiscal year.

 

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission, each Fund may invest in the Institutional Shares of the Institutional Money Market Fund (“IMMF”) and Prime Money Market Fund (“PMMF”) of Barclays Global Investors Funds. The IMMF and PMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Money Market Master Portfolio and Prime Money Market Master Portfolio (collectively, the “Master Portfolios”), respectively, which are managed by BGFA, the Funds’ investment adviser. The IMMF and PMMF are open-end money market funds available to institutional and accredited investors, including other investment companies managed by BGFA. The IMMF and PMMF seek a high level of income consistent with liquidity and the preservation of capital. While the IMMF and PMMF do not directly charge an investment advisory fee, the Master Portfolios in which they invest do charge an investment advisory fee. Income distributions from the IMMF and PMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Funds from temporary cash investments or from investment of securities lending collateral are recorded as either interest income or securities lending income, respectively, in the accompanying Statements of Operations.

 

The iShares MSCI Emerging Markets Index Fund, in order to improve its portfolio liquidity and its ability to track the MSCI Emerging Markets Index, may invest in the shares of other iShares Funds that invest in securities in the Fund’s benchmark index. As of August 31, 2004, the iShares MSCI Emerging Markets Index Fund held shares of the iShares MSCI Malaysia, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds.

 

The following table provides information about the investments of each Fund in shares of issuers affiliated with BGFA for the year ended August 31, 2004, including income earned from affiliated issuers and net realized gains from sales of affiliated issuers.

 

iShares MSCI Index Fund and

Name of Affiliated Issuer


   Number of
Shares Held
Beginning
of Year
(In 000’s)


   Gross
Additions
(In 000’s)


   Gross
Reductions
(In 000’s)


   Number of
Shares Held
End of Year
(In 000’s)


   Value At
End of Year


   Dividend
and
Interest
Income


   Net
Realized
Gain


Australia

                                        

IMMF

   1    24,501    24,382    120    $ 119,722    $ 1,440    $ —  

Brazil

                                        

IMMF

   370    107,818    107,207    981      980,912      7,763      —  

Canada

                                        

IMMF

   308    30,190    30,299    199      199,282      2,115      —  

Emerging Markets

                                        

IMMF

   886    198,500    193,954    5,432      5,431,771      21,011      —  

iShares MSCI Malaysia Index Fund

   295    966    408    851      5,488,924      52,919      108,056

iShares MSCI South Korea Index Fund

   123    353    177    299      7,241,729      43,908      82,820

iShares MSCI Taiwan Index Fund

   392    1,297    724    965      10,268,622      15,757      5,575

Hong Kong

                                        

IMMF

   148    42,385    42,320    213      213,217      2,312      —  

 

102

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

iShares MSCI Index Fund and

Name of Affiliated Issuer


   Number of
Shares Held
Beginning
of Year
(In 000’s)


   Gross
Additions
(In 000’s)


   Gross
Reductions
(In 000’s)


   Number of
Shares Held
End of Year
(In 000’s)


   Value At
End of Year


   Dividend
and
Interest
Income


   Net
Realized
Gain


Malaysia

                                        

IMMF

   174    45,498    45,278    394    $ 393,844    $ 4,561    $ —  

Mexico

                                        

IMMF

   27    6,177    6,119    85      85,281      726      —  

Pacific Ex-japan

                                        

IMMF

   359    55,916    55,967    308      307,648      3,144      —  

Singapore

                                        

IMMF

   28    15,257    15,198    87      87,362      1,096      —  

South Africa

                                        

IMMF

   13    3,225    3,180    58      57,702      209      —  

South Korea

                                        

IMMF

   246    38,006    37,531    721      720,743      3,956      —  

Taiwan

                                        

IMMF

   226    28,776    28,636    366      365,977      1,871      —  

 

Certain Funds invested cash collateral from securities on loan in the IMMF and PMMF. Due to the nature of the structure of the joint account used for the investment of the cash collateral for securities on loan, the information reported above for these Funds does not include the Funds’ holdings of the IMMF and PMMF in connection with the investment of collateral for securities on loan.

 

As of August 31, 2004, certain directors and officers of the Company are also officers of BGI.

 

3. INVESTMENT PORTFOLIO TRANSACTIONS

 

Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the year ended August 31, 2004, were as follows:

 

iShares MSCI Index Fund


   Purchases

   Sales

Australia

   $ 14,768,995    $ 14,421,073

Brazil

     279,960,556      243,070,923

Canada

     33,702,225      37,174,564

Emerging Markets

     143,536,841      111,263,465

Hong Kong

     26,702,890      21,583,667

Malaysia

     199,838,254      77,629,758

Mexico

     12,971,679      12,300,994

Pacific ex-Japan

     51,607,841      43,011,130

Singapore

     16,057,621      14,734,199

South Africa

     11,180,726      11,470,917

South Korea

     243,990,938      73,615,641

Taiwan

     254,102,662      72,002,981

 

NOTES TO THE FINANCIAL STATEMENTS

  103


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

In-kind transactions (see Note 4) for the year ended August 31, 2004, were as follows:

 

iShares MSCI Index Fund


  

In-kind

Purchases


  

In-kind

Sales


Australia

   $ 105,452,914    $ 32,807,809

Canada

     97,159,404      339,738,649

Emerging Markets

     1,810,567,056      224,647,444

Hong Kong

     261,689,199      116,865,940

Mexico

     228,413,647      169,460,634

Pacific ex-Japan

     420,883,626      61,513,894

Singapore

     49,322,629      13,553,027

South Africa

     14,738,796      24,635,199

 

4. CAPITAL SHARE TRANSACTIONS

 

The Company has authorized 10.9 billion shares of $.001 par value capital stock. The number of shares authorized to each Fund are as follows:

 

iShares MSCI Index Fund


   Authorized
Shares


Australia

   127,800,000

Brazil

   500,000,000

Canada

   340,200,000

Emerging Markets

   500,000,000

Hong Kong

   191,400,000

Malaysia

   127,800,000

Mexico

   255,000,000

Pacific ex-Japan

   500,000,000

Singapore

   191,400,000

South Africa

   200,000,000

South Korea

   200,000,000

Taiwan

   200,000,000

 

The Company issues and redeems capital shares of each Fund only in aggregations of a specified number of shares (each, a “Creation Unit”) at net asset value. Except when aggregated in Creation Units, shares of each Fund are not redeemable. Transactions in capital shares for each Fund are disclosed in detail in the Statements of Changes in Net Assets.

 

The consideration for the purchase of Creation Units of a Fund generally consists of the in-kind deposit of a designated portfolio of equity securities constituting a portfolio sampling representation of the corresponding MSCI Index and an amount of cash (except for the iShares MSCI Brazil, iShares MSCI Malaysia, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds which are offered in Creation Units solely for cash in U.S. dollars). A purchase transaction fee and a redemption transaction fee are charged to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units.

 

5. LOANS OF PORTFOLIO SECURITIES

 

Each Fund may lend its investment securities to approved borrowers such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each Fund is required to have a value 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 may not return the securities when due.

 

104

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

As of August 31, 2004, certain Funds had loaned securities which were collateralized by cash. The cash collateral received was invested in a joint account with other funds managed by BGFA, which invests in securities with remaining maturities of 397 days or less, repurchase agreements and money market mutual funds including money market funds managed by BGFA. Repurchase agreements held in the joint account are fully collateralized by U.S. Government securities. Income from the joint account is allocated daily to each Fund, based on each Fund’s portion of the total cash collateral received. The market value of the securities on loan at August 31, 2004, and the value of the related collateral received are disclosed in the Statements of Assets and Liabilities. Securities lending income, which is disclosed in the Funds’ Statements of Operations, is presented net of rebates paid to, or fees paid by, borrowers.

 

NOTES TO THE FINANCIAL STATEMENTS

  105


Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors of

iShares, Inc.

 

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the iShares MSCI Australia Index Fund, iShares MSCI Brazil Index Fund, iShares MSCI Canada Index Fund, iShares MSCI Emerging Markets Index Fund, iShares MSCI Hong Kong Index Fund, iShares MSCI Malaysia Index Fund, iShares MSCI Mexico Index Fund, iShares MSCI Pacific ex-Japan Index Fund, iShares MSCI Singapore Index Fund, iShares MSCI South Africa Index Fund, iShares MSCI South Korea Index Fund and iShares MSCI Taiwan Index Fund, each a portfolio of the iShares MSCI Index Fund Series (the “Funds”), at August 31, 2004, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the periods presented, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

The financial statements of the Funds as of August 31, 2000 and the year then ended were audited by other auditors, whose report dated October 13, 2000 expressed an unqualified opinion on those statements.

 

PricewaterhouseCoopers LLP

San Francisco, California

October 22, 2004

 

106

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Tax Information (Unaudited)

 

iSHARES®, INC.

 

For the year ended August 31, 2004, certain of the Funds earned foreign source income and paid foreign taxes which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code (the “Code”) as follows:

 

iShares MSCI Index Fund


   Foreign Source
Income Earned


   Foreign
Taxes Paid


Australia

   $ 6,511,935    $ 47,468

Brazil

     12,419,969      1,334,273

Canada

     6,239,684      935,953

Emerging Markets

     42,299,575      4,572,123

Malaysia

     7,200,091      1,571,800

Pacific ex-Japan

     22,884,471      567,415

Singapore

     8,112,245      1,057,649

South Africa

     2,838,099      57,040

South Korea

     5,426,247      897,455

Taiwan

     11,478,507      3,292,724

 

Under Section 854(b)(2) of the Code, certain of the Funds hereby designate the following maximum amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended August 31, 2004:

 

iShares MSCI Index Fund


   Qualified
Dividend
Income


Australia

   $ 4,752,630

Brazil

     254,583

Canada

     3,855,718

Emerging Markets

     31,005,416

Pacific ex-Japan

     10,722,179

South Africa

     1,997,005

South Korea

     3,204,178

 

In January 2005, shareholders will receive Form 1099-DIV which will include their share of qualified dividends distributed during the calendar year 2004. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.

 

TAX INFORMATION

  107


S upplemental Information (Unaudited)

 

iSHARES®, INC.

 

The tables that follow present information about the differences between the daily market price on secondary markets for shares of an iShares Fund and that Fund’s net asset value. Net asset value, or “NAV”, is the price per share at which each Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The “Market Price” of each iShares Fund generally is determined using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of such Fund is listed for trading, as of the time that the Fund’s NAV is calculated. In the case of the iShares MSCI Malaysia, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds, the NAVs of which are determined prior to the opening of the regular trading day on the American Stock Exchange (the “AMEX”), the Market Price is determined using the midpoint of the bid/ask spread as of the opening of regular trading on the AMEX. Each Fund’s Market Price may be at, above or below its NAV. The NAV of each Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of each Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand.

 

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

 

The following information shows the frequency distributions of premiums and discounts for each of the iShares Funds included in this report. Except as noted below, the information shown for each Fund is for the period from January 1, 1999 through June 30, 2004, the date of the most recent calendar quarter end. The information shown for the iShares MSCI Brazil, iShare MSCI Emerging Markets, iShares MSCI Pacific ex-Japan, iShares MSCI South Africa, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds is for each full calendar quarter completed after the inception date of each Fund through June 30, 2004. Each line in the table shows the number of trading days in which the iShares Fund traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by each table. All data presented here represents past performance, which cannot be used to predict future results.

 

iShares MSCI Australia Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 2.5%

   11    0.80 %

Greater than 2.0% and Less than 2.5%

   17    1.23  

Greater than 1.5% and Less than 2.0%

   65    4.71  

Greater than 1.0% and Less than 1.5%

   151    10.94  

Greater than 0.5% and Less than 1.0%

   308    22.32  

Between 0.5% and – 0.5%

   630    45.65  

Less than – 0.5% and Greater than – 1.0%

   115    8.33  

Less than – 1.0% and Greater than – 1.5%

   43    3.12  

Less than – 1.5% and Greater than – 2.0%

   25    1.81  

Less than – 2.0% and Greater than – 2.5%

   7    0.51  

Less than – 2.5%

   8    0.58  
    
  

     1,380    100.00 %
    
  

 

108

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI Brazil Index Fund

Period Covered: October 1, 2000 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 3.0%

   7    0.75 %

Greater than 2.5% and Less than 3.0%

   14    1.49  

Greater than 2.0% and Less than 2.5%

   23    2.45  

Greater than 1.5% and Less than 2.0%

   37    3.94  

Greater than 1.0% and Less than 1.5%

   86    9.16  

Greater than 0.5% and Less than 1.0%

   157    16.72  

Between 0.5% and – 0.5%

   368    39.19  

Less than – 0.5% and Greater than – 1.0%

   108    11.50  

Less than – 1.0% and Greater than – 1.5%

   38    4.05  

Less than – 1.5% and Greater than – 2.0%

   36    3.83  

Less than – 2.0% and Greater than – 2.5%

   25    2.66  

Less than – 2.5% and Greater than – 3.0%

   11    1.17  

Less than – 3.0% and Greater than – 3.5%

   8    0.85  

Less than – 3.5% and Greater than – 4.0%

   7    0.75  

Less than – 4.0% and Greater than – 4.5%

   6    0.64  

Less than – 4.5%

   8    0.85  
    
  

     939    100.00 %
    
  

 

iShares MSCI Canada Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 3.0%

   6    0.43 %

Greater than 2.5% and Less than 3.0%

   17    1.23  

Greater than 2.0% and Less than 2.5%

   25    1.81  

Greater than 1.5% and Less than 2.0%

   56    4.06  

Greater than 1.0% and Less than 1.5%

   117    8.48  

Greater than 0.5% and Less than 1.0%

   237    17.17  

Between 0.5% and – 0.5%

   725    52.55  

Less than – 0.5% and Greater than – 1.0%

   134    9.71  

Less than – 1.0% and Greater than – 1.5%

   45    3.26  

Less than – 1.5% and Greater than – 2.0%

   10    0.72  

Less than – 2.0%

   8    0.58  
    
  

     1,380    100.00 %
    
  

 

SUPPLEMENTAL INFORMATION

  109


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI Emerging Markets Index Fund

Period Covered: April 1, 2003 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 1.5%

   12    4.78 %

Greater than 1.0% and Less than 1.5%

   27    10.76  

Greater than 0.5% and Less than 1.0%

   82    32.67  

Between 0.5% and – 0.5%

   112    44.61  

Less than – 0.5% and Greater than – 1.0%

   13    5.18  

Less than – 1.0% and Greater than – 1.5%

   3    1.20  

Less than – 1.5%

   2    0.80  
    
  

     251    100.00 %
    
  

 

iShares MSCI Hong Kong Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 3.5%

   13    0.94 %

Greater than 3.0% and Less than 3.5%

   6    0.43  

Greater than 2.5% and Less than 3.0%

   10    0.72  

Greater than 2.0% and Less than 2.5%

   31    2.25  

Greater than 1.5% and Less than 2.0%

   65    4.71  

Greater than 1.0% and Less than 1.5%

   132    9.57  

Greater than 0.5% and Less than 1.0%

   213    15.43  

Between 0.5% and – 0.5%

   464    33.64  

Less than – 0.5% and Greater than – 1.0%

   171    12.39  

Less than – 1.0% and Greater than – 1.5%

   104    7.54  

Less than – 1.5% and Greater than – 2.0%

   78    5.65  

Less than – 2.0% and Greater than – 2.5%

   41    2.97  

Less than – 2.5% and Greater than – 3.0%

   26    1.88  

Less than – 3.0% and Greater than – 3.5%

   11    0.80  

Less than – 3.5% and Greater than – 4.0%

   9    0.65  

Less than – 4.0%

   6    0.43  
    
  

     1,380    100.00 %
    
  

 

110

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI Malaysia Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 6.0%

   147    10.65 %

Greater than 5.5% and Less than 6.0%

   4    0.29  

Greater than 5.0% and Less than 5.5%

   6    0.43  

Greater than 4.5% and Less than 5.0%

   3    0.22  

Greater than 4.0% and Less than 4.5%

   10    0.72  

Greater than 3.5% and Less than 4.0%

   16    1.16  

Greater than 3.0% and Less than 3.5%

   15    1.09  

Greater than 2.5% and Less than 3.0%

   19    1.38  

Greater than 2.0% and Less than 2.5%

   42    3.04  

Greater than 1.5% and Less than 2.0%

   63    4.57  

Greater than 1.0% and Less than 1.5%

   84    6.09  

Greater than 0.5% and Less than 1.0%

   111    8.04  

Between 0.5% and – 0.5%

   258    18.69  

Less than – 0.5% and Greater than – 1.0%

   104    7.54  

Less than – 1.0% and Greater than – 1.5%

   107    7.75  

Less than – 1.5% and Greater than – 2.0%

   89    6.45  

Less than – 2.0% and Greater than – 2.5%

   84    6.09  

Less than – 2.5% and Greater than – 3.0%

   62    4.49  

Less than – 3.0% and Greater than – 3.5%

   47    3.41  

Less than – 3.5% and Greater than – 4.0%

   27    1.96  

Less than – 4.0% and Greater than – 4.5%

   27    1.96  

Less than – 4.5% and Greater than – 5.0%

   14    1.01  

Less than – 5.0% and Greater than – 5.5%

   4    0.29  

Less than – 5.5% and Greater than – 6.0%

   8    0.58  

Less than – 6.0%

   29    2.10  
    
  

     1,380    100.00 %
    
  

 

iShares MSCI Mexico Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 2.5%

   5    0.36 %

Greater than 2.0% and Less than 2.5%

   13    0.94  

Greater than 1.5% and Less than 2.0%

   48    3.48  

Greater than 1.0% and Less than 1.5%

   118    8.55  

Greater than 0.5% and Less than 1.0%

   206    14.93  

Between 0.5% and – 0.5%

   602    43.63  

Less than – 0.5% and Greater than – 1.0%

   203    14.71  

Less than – 1.0% and Greater than – 1.5%

   111    8.04  

Less than – 1.5% and Greater than – 2.0%

   41    2.97  

Less than – 2.0% and Greater than – 2.5%

   16    1.16  

Less than – 2.5% and Greater than – 3.0%

   12    0.87  

Less than – 3.0%

   5    0.36  
    
  

     1,380    100.00 %
    
  

 

SUPPLEMENTAL INFORMATION

  111


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI Pacific ex-Japan Index Fund

Period Covered: January 1, 2002 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 3.0%

   4    0.64 %

Greater than 2.5% and Less than 3.0%

   6    0.96  

Greater than 2.0% and Less than 2.5%

   10    1.59  

Greater than 1.5% and Less than 2.0%

   55    8.77  

Greater than 1.0% and Less than 1.5%

   163    26.00  

Greater than 0.5% and Less than 1.0%

   155    24.72  

Between 0.5% and – 0.5%

   208    33.17  

Less than – 0.5% and Greater than – 1.0%

   19    3.03  

Less than – 1.0% and Greater than – 1.5%

   5    0.80  

Less than – 1.5%

   2    0.32  
    
  

     627    100.00 %
    
  

 

iShares MSCI Singapore Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 3.0%

   10    0.72 %

Greater than 2.5% and Less than 3.0%

   14    1.01  

Greater than 2.0% and Less than 2.5%

   32    2.32  

Greater than 1.5% and Less than 2.0%

   64    4.64  

Greater than 1.0% and Less than 1.5%

   137    9.93  

Greater than 0.5% and Less than 1.0%

   133    9.64  

Between 0.5% and – 0.5%

   366    26.52  

Less than – 0.5% and Greater than – 1.0%

   180    13.04  

Less than – 1.0% and Greater than – 1.5%

   155    11.23  

Less than – 1.5% and Greater than – 2.0%

   93    6.74  

Less than – 2.0% and Greater than – 2.5%

   76    5.51  

Less than – 2.5% and Greater than – 3.0%

   43    3.12  

Less than – 3.0% and Greater than – 3.5%

   30    2.17  

Less than – 3.5% and Greater than – 4.0%

   23    1.67  

Less than – 4.0% and Greater than – 4.5%

   10    0.72  

Less than – 4.5% and Greater than – 5.0%

   7    0.51  

Less than – 5.0%

   7    0.51  
    
  

     1,380    100.00 %
    
  

 

112

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI South Africa Index Fund

Period Covered: April 1, 2003 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 1.5%

   2    0.64 %

Greater than 1.0% and Less than 1.5%

   19    6.05  

Greater than 0.5% and Less than 1.0%

   52    16.56  

Between 0.5% and – 0.5%

   212    67.51  

Less than – 0.5% and Greater than – 1.0%

   20    6.37  

Less than – 1.0% and Greater than – 1.5%

   7    2.23  

Less than – 1.5%

   2    0.64  
    
  

     314    100.00 %
    
  

 

iShares MSCI South Korea Index Fund

Period Covered: July 1, 2000 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 4.5%

   10    1.00 %

Greater than 4.0% and Less than 4.5%

   3    0.30  

Greater than 3.5% and Less than 4.0%

   8    0.80  

Greater than 3.0% and Less than 3.5%

   8    0.80  

Greater than 2.5% and Less than 3.0%

   19    1.90  

Greater than 2.0% and Less than 2.5%

   43    4.29  

Greater than 1.5% and Less than 2.0%

   81    8.08  

Greater than 1.0% and Less than 1.5%

   116    11.58  

Greater than 0.5% and Less than 1.0%

   160    15.97  

Between 0.5% and – 0.5%

   300    29.93  

Less than – 0.5% and Greater than – 1.0%

   88    8.78  

Less than – 1.0% and Greater than – 1.5%

   62    6.19  

Less than – 1.5% and Greater than – 2.0%

   43    4.29  

Less than – 2.0% and Greater than – 2.5%

   27    2.69  

Less than – 2.5% and Greater than – 3.0%

   12    1.20  

Less than – 3.0% and Greater than – 3.5%

   12    1.20  

Less than – 3.5%

   10    1.00  
    
  

     1,002    100.00 %
    
  

 

SUPPLEMENTAL INFORMATION

  113


Supplemental Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

iShares MSCI Taiwan Index Fund

Period Covered: July 1, 2000 through June 30, 2004

 

     Number
of Days


   Percentage of
Total Days


 

Greater than 6.0%

   8    0.80 %

Greater than 5.0% and Less than 6.0%

   5    0.50  

Greater than 4.5% and Less than 5.0%

   9    0.90  

Greater than 4.0% and Less than 4.5%

   4    0.40  

Greater than 3.5% and Less than 4.0%

   17    1.70  

Greater than 3.0% and Less than 3.5%

   25    2.50  

Greater than 2.5% and Less than 3.0%

   42    4.19  

Greater than 2.0% and Less than 2.5%

   54    5.39  

Greater than 1.5% and Less than 2.0%

   113    11.28  

Greater than 1.0% and Less than 1.5%

   127    12.67  

Greater than 0.5% and Less than 1.0%

   142    14.17  

Between 0.5% and – 0.5%

   226    22.53  

Less than – 0.5% and Greater than – 1.0%

   70    6.99  

Less than – 1.0% and Greater than – 1.5%

   60    5.99  

Less than – 1.5% and Greater than – 2.0%

   40    3.99  

Less than – 2.0% and Greater than – 2.5%

   15    1.50  

Less than – 2.5% and Greater than – 3.0%

   21    2.10  

Less than – 3.0% and Greater than – 3.5%

   12    1.20  

Less than – 3.5% and Greater than – 4.5%

   5    0.50  

Less than – 4.5%

   7    0.70  
    
  

     1,002    100.00 %
    
  

 

114

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


DIRECTOR INFORMATION (Unaudited)

 

iSHARES®, INC.

 

The Board of Directors has responsibility for the overall management and operations of the Company, including general supervision of the duties performed by BGFA and other service providers. Each Director serves until his or her successor is duly elected or appointed and qualified.

 

iShares, Inc., iShares Trust, Barclays Global Investors Funds and Master Investment Portfolio are considered to be members of the same fund complex, as defined in Form N-1A under the 1940 Act. Each Director of iShares, Inc. also serves as a Trustee for iShares Trust and oversees 97 portfolios within the fund complex. In addition, Lee T. Kranefuss and Richard K. Lyons each serves as a Trustee for Barclays Global Investors Funds and Master Investment Portfolio and oversees 124 portfolios within the fund complex.

 

Unless otherwise noted in the tables below, the address for each Director is 45 Fremont Street, San Francisco, California 94105. Additional information about the Funds’ Directors may be found in the Funds’ Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-474-2737.

 

Interested Directors

 

Name and Age


  

Position(s),

Length of Service


  

Principal Occupation(s)

During Past 5 Years


  

Other Directorships Held


*Lee T. Kranefuss (43)

   Director, Chairman, and President (since June 18, 2003)    Chief Executive Officer of the Intermediary Investors and Exchange Traded Products Business of BGI (since 2003); Chief Executive Officer of the Individual Investor Business of BGI (1997-2003).    Trustee (since June 18, 2003) of iShares Trust; Board of Trustees (since 2001) for Barclays Global Investors Funds and Master Investment Portfolio.

*Nathan Most (90)

   Director (since December 16, 1996)    Consultant to BGI (1998-2002), American Stock Exchange (1996-2000) and the Hong Kong Stock Exchange (since 1998); Consultant to the Amsterdam Stock Exchange (1997-1998); Consultant to the Pacific Stock Exchange (1997-1998).    Trustee (Since 2000) and President (2000-2002) of iShares Trust.

*John E. Martinez (42)

   Director (since December 5, 2003)    Co-CEO of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); CEO of Capital Markets Group of BGI (1996-2001).    Trustee (since December 5, 2003) of iShares Trust; Director (since November 2003) of Barclays Global Investors UK Holdings.

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

 

DIRECTOR INFORMATION

  115


Director Information (Unaudited) (Continued)

 

iSHARES®, INC.

Independent Directors

 

Name and Age


  

Position(s),
Length of Service


  

Principal Occupation(s)

During Past 5 Years


  

Other Directorships Held


John B. Carroll (69)

   Director (since December 16, 1996)    Retired Vice President of Investment Management (1984-2000) of Verizon Corporation; Advisory Board member of Ibbotson Associates (1992-1998); former Vice Chairman and Executive Committee Member (1994-1998) of the Committee on Investment of Employee Benefit Assets of the Financial Executive Institute.    Trustee (since 2002) of iShares Trust; Trustee and member of the Executive Committee (since 1991) of The Common Fund Institutional Funds, a non-profit organization; Member of the Board of Managers of JP Morgan Private Equity Funds.

Richard K. Lyons (43)

   Director (since February 28, 2002)    Professor, University of California, Berkeley: Haas School of Business (since 1993); Consultant for IMF World Bank, Federal Reserve Bank, and Citibank N.A. (since 2000).    Trustee (since 2000) of iShares Trust; Director (since 2003) of the BGI Cayman Prime Money Market Fund, Ltd.; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Board of Trustees: Matthews Asian Funds since 1995 (oversees 6 portfolios).

George C. Parker (65)

   Director (since February 28, 2002)    Dean Witter Distinguished Professor of Finance (since 1994); Associate Dean for Academic Affairs, Director of MBA Program, and Professor, Stanford University: Graduate School of Business (1993-2001).    Trustee (since 2000) of iShares Trust; Director (since 1985) of Bailard, Biehl and Kaiser, Inc.; Director (since 1978) of California Casualty Group of Insurance Companies; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (1994-2002) of Dresdner/RCM Mutual Funds; Director (since 1999) of Tyon Ranch Company.

W. Allen Reed (57)

   Director (since December 16, 1996)    President and Chief Executive Officer (since 1994) of General Motors Investment Management Corporation.    Trustee (since 2002) of iShares Trust; Director (since 1994) of General Motors Investment Management Corporation; Director (1995-1998) of Taubman Centers, Inc. (a real estate investment trust); Director (since 1992) of FLIR Systems (an imaging technology company); Director (since 1994) of General Motors Acceptance Corporation; Director (since 1994) of GMAC Insurance Holdings, Inc.; Director (since 1995) of Global Emerging Markets Fund; Director (since 2000) of Temple Inland Industries; Chairman (since 1995) of the Investment Advisory Committee of Howard Hughes Medical Institute.

 

 

116

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Director Information (Unaudited) (Continued)

 

iSHARES®, INC.

Officer

 

Name and Age


  

Position


  

Principal Occupation(s)

During Past 5 Years


  

Directorships Held by Officers


Michael A. Latham (39)

  

Secretary,

Treasurer and

Principal Financial Officer (since February 28, 2002)

   Chief Operating Officer of the Intermediary Investors and Exchange Traded Products Business of BGI (since 2003); Director of Mutual Fund Delivery in the U.S. Individual Investor Business of BGI (2000-2003); Head of Operations, BGI Europe (1997-2000).    None.

 

DIRECTOR INFORMATION

  117


The iShares® Family of Funds

 

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

 

iShares S&P Domestic Index Funds

iShares S&P 1500 (ISI)

iShares S&P 500 (IVV)

iShares S&P 500/BARRA Growth (IVW)

iShares S&P 500/BARRA Value (IVE)

iShares S&P MidCap 400 (IJH)

iShares S&P MidCap 400/BARRA Growth (IJK)

iShares S&P MidCap 400/BARRA Value (IJJ)

iShares S&P SmallCap 600 (IJR)

iShares S&P SmallCap 600/BARRA Growth (IJT)

iShares S&P SmallCap 600/BARRA Value (IJS)

iShares S&P 100 (OEF)

 

iShares Sector and Specialty Index Funds

iShares Cohen & Steers Realty Majors (ICF)

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

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

iShares Dow Jones U.S. Consumer Non-Cyclical Sector (IYK)

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

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

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

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

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

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

iShares Dow Jones Select Dividend (DVY)

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

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

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

iShares Dow Jones Transportation Average (IYT)

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

iShares Goldman Sachs Natural Resources (IGE)

iShares Goldman Sachs Networking (IGN)

iShares Goldman Sachs Semiconductor (IGW)

iShares Goldman Sachs Software (IGV)

iShares Goldman Sachs Technology (IGM)

iShares Nasdaq Biotechnology (IBB)

iShares S&P Global Energy Sector (IXC)

iShares S&P Global Financials Sector (IXG)

iShares S&P Global Healthcare Sector (IXJ)

iShares S&P Global Technology Sector (IXN)

iShares S&P Global Telecommunications Sector (IXP)

 

iShares Russell Index Funds

iShares Russell 3000 (IWV)

iShares Russell 3000 Growth (IWZ)

iShares Russell 3000 Value (IWW)

iShares Russell 1000 (IWB)

iShares Russell 1000 Growth (IWF)

iShares Russell 1000 Value (IWD)

iShares Russell Midcap (IWR)

iShares Russell Midcap Growth (IWP)

iShares Russell Midcap Value (IWS)

iShares Russell 2000 (IWM)

iShares Russell 2000 Growth (IWO)

iShares Russell 2000 Value (IWN)

 

iShares International Index Funds

iShares FTSE/Xinhua China 25 (FXI)

iShares MSCI Australia (EWA)

iShares MSCI Austria (EWO)

iShares MSCI Belgium (EWK)

iShares MSCI Brazil (EWZ)

iShares MSCI Canada (EWC)

iShares MSCI EAFE (EFA)

iShares MSCI Emerging Markets (EEM)

iShares MSCI EMU (EZU)

iShares MSCI France (EWQ)

iShares MSCI Germany (EWG)

iShares MSCI Hong Kong (EWH)

iShares MSCI Italy (EWI)

iShares MSCI Japan (EWJ)

iShares MSCI Malaysia (EWM)

iShares MSCI Mexico (EWW)

iShares MSCI Netherlands (EWN)

iShares MSCI Pacific ex-Japan (EPP)

iShares MSCI Singapore (EWS)

iShares MSCI South Africa (EZA)

iShares MSCI South Korea (EWY)

iShares MSCI Spain (EWP)

iShares MSCI Sweden (EWD)

iShares MSCI Switzerland (EWL)

iShares MSCI Taiwan (EWT)

iShares MSCI United Kingdom (EWU)

iShares S&P Europe 350 (IEV)

iShares S&P Global 100 (IOO)

iShares S&P Latin America 40 (ILF)

iShares S&P/TOPIX 150 (ITF)

 

iShares Bond Funds

iShares Lehman Aggregate (AGG)

iShares Lehman TIPS (TIP)

iShares Lehman 1-3 Year Treasury (SHY)

iShares Lehman 7-10 Year Treasury (IEF)

iShares Lehman 20+ Year Treasury (TLT)

iShares GS $ InvesTop Corporate (LQD)

 

iShares NYSE Index Funds

iShares NYSE 100 (NY)

iShares NYSE Composite (NYC)

 

iShares Morningstar Index Funds

iShares Morningstar Large Core (JKD)

iShares Morningstar Large Growth (JKE)

iShares Morningstar Large Value (JKF)

iShares Morningstar Mid Core (JKG)

iShares Morningstar Mid Growth (JKH)

iShares Morningstar Mid Value (JKI)

iShares Morningstar Small Core (JKJ)

iShares Morningstar Small Growth (JKK)

iShares Morningstar Small Value (JKL)

 

iShares is a registered trademark of Barclays Global Investors, N.A. The iShares Funds are not sponsored, endorsed or issued by Goldman, Sachs & Co. or Lehman Brothers, nor are they sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., Dow Jones & Company, Inc., FTSE/ Xinhua Index Limited, Morgan Stanley Capital International, Morningstar, Inc., The Nasdaq Stock Market, Inc., New York Stock Exchange, Inc., Frank Russell Company, or Standard & Poor’s. None of these companies make any representation regarding the advisability of investing in the iShares Funds. Neither SEI nor BGI, nor any of their affiliates, are affiliated with the companies listed above. “GS $ InvesTop” and “Goldman Sachs®” are trademarks of Goldman, Sachs & Co.

 

An investment in the Fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

 

This advertising section does not constitute part of the 2004 Annual Report.

 

1353-iS-0904

 

118

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares Funds are distributed by SEI Investments Distribution Co. (SEI). Barclays Global Fund Advisors (BGFA) serves as an adviser to the iShares Funds. Barclays Global Investors Services (BGIS) assists in the marketing of the iShares Funds. BGFA and BGIS are subsidiaries of Barclays Global Investors, N.A., a wholly owned subsidiary of Barclays Bank PLC, none of which is affiliated with SEI.

 

The iShares Funds 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 the iShares Funds.

 

©2004 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.

 

Investing involves risk, including possible loss of principal.

 

A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, 2004 is available without charge, upon request, by calling toll-free 1-800- 474-2737; on the Funds’ website at www.iShares.com; and on the Securities and Exchange Commission’s website at www.sec.gov.

 

Beginning January 31, 2005, the Funds will be filing their complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which when filed, will be available on the Commission’s website at www.sec.gov. When filed, the Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily and monthly basis on the Funds’ website at www.iShares.com.

 

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.

 

LOGO   LOGO


iShares®

 

2004 ANNUAL REPORT TO SHAREHOLDERS | AUGUST 31, 2004

 

LOGO

 

iSHARES MSCI JAPAN INDEX FUND

 

                            Electronic delivery of this document may be

                            available to you. See inside for details.


LOGO

 

Dear iShares Shareholder:

 

Electronic delivery is the easiest, most convenient way to receive reporting on your iShares holdings. In addition, it’s a way we can all care for our environment. To that end, we are pleased to offer shareholder reports and prospectuses online.

 

To sign up for electronic delivery, please follow these simple steps:

 

1. Go to www.icsdelivery.com.

 

2. From the main page, select the first letter of your brokerage firm’s name.

 

3. Select your brokerage institution from the list that follows. If your brokerage firm is not listed, electronic delivery may not be available. Please contact your brokerage firm or financial adviser.

 

4. Fill out the appropriate information and provide the e-mail address where you would like your information sent.

 

Your information and email address will be kept confidential and only used to deliver documents to you. If at any time you are not satisfied, you can cancel electronic delivery at www.icsdelivery.com and once again receive physical delivery of your materials. If you have any questions, please contact your brokerage firm or financial adviser.

 

Once you have enrolled, you will no longer receive prospectuses and shareholder reports in the mail. Instead, you will receive e-mail notifications announcing that the shareholder report or prospectus has been posted on the iShares website at www.iShares.com.


Table of Contents

 

Shareholder Letter

   1

Managers’ Discussion & Analysis

   2

Shareholder Expenses

   4

Schedule of Investments

   5

Financial Statements

   14

Financial Highlights

   17

Notes to the Financial Statements

   18

Report of Independent Registered Public Accounting Firm

   24

Tax Information (Unaudited)

   25

Supplemental Information (Unaudited)

   26

Director Information (Unaudited)

   27

iShares Family of Funds

   30


To Our Shareholders:

 

The Japanese market delivered gains during the 12-month reporting period ended August 31, 2004. Following a decade of economic sluggishness, Japan surprised analysts around the world during the reporting period, producing a robust 7.00% gross domestic product (“GDP”) annual growth for the fourth quarter of 2003. The impressive GDP figure – Japan’s highest level in 13 years – outpaced GDP growth during the same period in both the U.S. and Europe. The increase in GDP hinged largely on export trade, which included increased demand to the U.S. and Japan’s Asian neighbors, particularly China. By early 2004 the effects of export growth appeared to be rippling through the economy, as manufacturing levels increased, unemployment dropped, and consumer spending was revived. As the months progressed, however, Japan’s recovery appeared more fragile. In particular GDP growth for the second quarter of 2004 was half of the level predicted by some analysts. Hiring and retail sales growth faltered, bringing into question the resilience of domestic demand.

 

As market conditions change, we encourage you to talk with your financial adviser about what blend of investments or asset allocation can best help you meet your financial goals. One trait many successful investors share is the ability to stay focused on their personal financial goals while ignoring market swings. Regardless of market conditions, a sound, disciplined investment plan is essential.

 

On behalf of the iShares® family of funds, we thank you for making the iShares Funds a part of your portfolio. We look forward to meeting your investment needs in the year ahead.

 

LOGO


Lee T. Kranefuss

President and Chairman of the Board of Directors

iShares, Inc.

 

SHAREHOLDER LETTER

  1


Managers’ Discussion & Analysis

 

iSHARES® MSCI JAPAN INDEX FUND

Performance as of 8/31/04

 

Average Annual Total Returns


 

Year Ended 8/31/04


    Five Years Ended 8/31/04

    Inception to 8/31/04

 

NAV


   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 

19.32%

   19.73 %   20.45 %   (4.89 )%   (4.93 )%   (4.52 )%   (4.13 )%   (4.05 )%   (3.39 )%

Cumulative Total Returns


 

Year Ended 8/31/04


    Five Years Ended 8/31/04

    Inception to 8/31/04

 

NAV


   MARKET

    INDEX

    NAV

    MARKET

    INDEX

    NAV

    MARKET

    INDEX

 

19.32%

   19.73 %   20.45 %   (22.17 )%   (22.33 )%   (20.63 )%   (30.06 )%   (29.58 )%   (25.34 )%

 

Total returns for the periods since inception are calculated from the inception date of the Fund (3/12/96). “Average annual total returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative total returns” represent the total change in value of an investment over the periods indicated.

 

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 of the Fund, and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Since fund shares typically do not trade in the secondary market until several days after fund inception, for the period from inception to the first day of secondary market trading in Fund shares (3/18/96), the NAV of the Fund is used as a proxy for secondary market trading price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively.

 

An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the Index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The returns shown in the 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.

 

GROWTH OF $10,000 INVESTMENT

SINCE INCEPTION AT NET ASSET VALUE

 

LOGO

 

    

iSHARES
MSCI JAPAN

INDEX
FUND


   MSCI JAPAN
INDEX


3/12/1996

   $ 10,000    $ 10,000

3/31/1996

   $ 10,548    $ 10,567

4/30/1996

   $ 11,116    $ 11,168

5/31/1996

   $ 10,548    $ 10,593

6/30/1996

   $ 10,629    $ 10,649

7/31/1996

   $ 10,149    $ 10,172

8/31/1996

   $ 9,689    $ 9,718

9/30/1996

   $ 10,027    $ 10,054

10/31/1996

   $ 9,344    $ 9,380

11/30/1996

   $ 9,527    $ 9,559

12/31/1996

   $ 8,857    $ 8,898

1/31/1997

   $ 7,890    $ 7,929

2/28/1997

   $ 8,060    $ 8,115

3/31/1997

   $ 7,830    $ 7,847

4/30/1997

   $ 8,100    $ 8,132

5/31/1997

   $ 8,959    $ 9,030

6/30/1997

   $ 9,635    $ 9,705

7/31/1997

   $ 9,337    $ 9,409

8/31/1997

   $ 8,529    $ 8,593

9/30/1997

   $ 8,434    $ 8,463

10/31/1997

   $ 7,630    $ 7,675

11/30/1997

   $ 7,170    $ 7,204

12/31/1997

   $ 6,764    $ 6,792

1/31/1998

   $ 7,339    $ 7,398

2/28/1998

   $ 7,366    $ 7,436

3/31/1998

   $ 6,893    $ 6,930

4/30/1998

   $ 6,839    $ 6,902

5/31/1998

   $ 6,453    $ 6,523

6/30/1998

   $ 6,541    $ 6,614

7/31/1998

   $ 6,433    $ 6,527

8/31/1998

   $ 5,682    $ 5,783

9/30/1998

   $ 5,547    $ 5,625

10/31/1998

   $ 6,461    $ 6,569

11/30/1998

   $ 6,752    $ 6,869

12/31/1998

   $ 7,003    $ 7,135

1/31/1999

   $ 7,030    $ 7,186

2/28/1999

   $ 6,868    $ 7,029

3/31/1999

   $ 7,823    $ 8,00194

4/30/1999

   $ 8,121    $ 8,338

5/31/1999

   $ 7,687    $ 7,868

6/30/1999

   $ 8,330    $ 8,613

7/31/1999

   $ 9,130    $ 9,473

8/31/1999

   $ 8,986    $ 9,406

9/30/1999

   $ 9,564    $ 9,977

10/31/1999

   $ 9,965    $ 10,405

11/30/1999

   $ 10,386    $ 10,851

12/31/1999

   $ 11,057    $ 11,524

1/31/2000

   $ 10,557    $ 11,025

2/29/2000

   $ 10,297    $ 10,739

3/31/2000

   $ 11,133    $ 11,625

4/30/2000

   $ 10,297    $ 10,751

5/31/2000

   $ 9,777    $ 10,204

6/30/2000

   $ 10,414    $ 10,905

7/31/2000

   $ 9,195    $ 9,649

8/31/2000

   $ 9,772    $ 10,274

9/30/2000

   $ 9,313    $ 9,764

10/31/2000

   $ 8,782    $ 9,197

11/30/2000

   $ 8,393    $ 8,815

12/31/2000

   $ 7,898    $ 8,279

1/31/2001

   $ 7,778    $ 8,181

2/28/2001

   $ 7,417    $ 7,813

3/31/2001

   $ 7,205    $ 7,581

4/30/2001

   $ 7,714    $ 8,096

5/31/2001

   $ 7,693    $ 8,076

6/30/2001

   $ 7,241    $ 7,593

7/31/2001

   $ 6,597    $ 6,931

8/31/2001

   $ 6,413    $ 6,735

9/30/2001

   $ 5,883    $ 6,192

10/31/2001

   $ 5,933    $ 6,240

11/30/2001

   $ 5,940    $ 6,260

12/31/2001

   $ 5,537    $ 5,837

1/31/2002

   $ 5,091    $ 5,367

2/28/2002

   $ 5,282    $ 5,580

3/31/2002

   $ 5,720    $ 6,038

4/30/2002

   $ 5,911    $ 6,246

5/31/2002

   $ 6,293    $ 6,659

6/30/2002

   $ 5,975    $ 6,312

7/31/2002

   $ 5,558    $ 5,873

8/31/2002

   $ 5,494    $ 5,811

9/30/2002

   $ 5,247    $ 5,551

10/31/2002

   $ 4,893    $ 5,165

11/30/2002

   $ 5,084    $ 5,374

12/31/2002

   $ 4,957    $ 5,235

1/31/2003

   $ 4,759    $ 5,023

2/28/2003

   $ 4,787    $ 5,053

3/31/2003

   $ 4,582    $ 4,824

4/30/2003

   $ 4,540    $ 4,786

5/31/2003

   $ 4,752    $ 5,019

6/30/2003

   $ 5,105    $ 5,388

7/31/2003

   $ 5,303    $ 5,607

8/31/2003

   $ 5,862    $ 6,198

9/30/2003

   $ 6,201    $ 6,566

10/31/2003

   $ 6,484    $ 6,866

11/30/2003

   $ 6,286    $ 6,654

12/31/2003

   $ 6,719    $ 7,116

1/31/2004

   $ 6,832    $ 7,245

2/29/2004

   $ 6,803    $ 7,223

3/31/2004

   $ 7,702    $ 8,193

4/30/2004

   $ 7,284    $ 7,749

5/31/2004

   $ 7,030    $ 7,485

6/30/2004

   $ 7,398    $ 7,880

7/31/2004

   $ 6,952    $ 7,412

8/31/2004

   $ 6,994    $ 7,466

 

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

 

2

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares MSCI Japan Index Fund (the “Fund”) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Japanese equity market, as measured by the MSCI Japan Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which have a similar investment profile as the Index. For the 12-month period ended August 31, 2004 (the “reporting period”), the Fund returned 19.32%, while the Index returned 20.45%.

 

After more than a decade of anemic economic activity, the Japanese economy appeared to be headed toward recovery during the reporting period. Gross domestic product (“GDP”) growth for the fourth quarter of 2003 was a robust 7.0% annual rate - its highest growth level in 13 years, and was followed by an annual rate of 6.6% for the first quarter of 2004.

 

In addition to GDP growth that outpaced the U.S. and Europe, Japan saw export levels grow an annualized 17.9% during the fourth quarter, reassuring to a nation that has relied on an export-led recovery in the recent past. Domestic spending, which has been the laggard for the Japanese economy, finally rebounded when in March, household spending grew at its fastest pace in 22 years.

 

However, by July the picture was less optimistic and some investors worried that the recovery might be stalling. Second quarter annual GDP was reported at a disappointing 1.7%, the lowest level in five quarters. Compounding the concern, retail sales fell, and the trade surplus was lower than expected.

 

Among the Fund’s ten largest holdings as of August 31, 2004, performance during the reporting period was mixed. Banks generally performed well during the reporting period. Japan’s second largest bank, Mitsubishi Tokyo Financial Group Inc. (2.27% of the net assets of the Fund as of August 31, 2004), posted gains during the reporting period. Mizuho Financial Group Inc. (1.70% of the net assets of the Fund as of August 31, 2004), Japan’s largest bank, logged triple-digit gains during the reporting period.

 

Automobile companies generally experienced strong performance during the reporting period. Toyota Motor Corp. (6.37% of the net assets of the Fund as of August 31, 2004) and Honda Motor Co. Ltd. (2.17% of the net assets of the Fund as of August 31, 2004), both posted gains during the reporting period, benefiting from healthy export levels.

 

NTT DoCoMo Inc. (2.03% of the net assets of the Fund as of August 31, 2004), on the other hand, suffered losses, as did Canon Inc. (2.24% of the net assets of the Fund as of August 31, 2004). Sony Corp. (1.80% of the net assets of the Fund as of August 31, 2004) and Matsushita Electric Industrial Co. Ltd. (1.58% of the net assets of the Fund as of August 31, 2004) both experienced moderate declines.

 

MANAGERS’ DISCUSSION & ANALYSIS

  3


Shareholder Expenses

 

iSHARES® MSCI JAPAN INDEX FUND

 

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

 

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from March 1, 2004 to August 31, 2004.

 

Actual Expenses

 

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

 

Hypothetical Example for Comparison Purposes

 

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

 

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

 

     Beginning
Account Value
(March 1, 2004)


   Ending
Account Value
(August 31, 2004)


   Annualized
Expense Ratio


    Expenses Paid
During Period*
(March 1 to
August 31, 2004)


Actual

   $ 1,000.00    $ 1,028.10    0.66 %   $ 3.36

Hypothetical (5% return before expenses)

     1,000.00      1,021.83    0.66       3.35

* Expenses are calculated using the Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days), and divided by the number of days in the year (366 days).

 

4

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

COMMON STOCKS – 99.92%

           
ADVERTISING – 0.25%            

Asatsu-DK Inc.1

   98,800    $ 2,628,785

Dentsu Inc.1

   4,940      11,883,548
         

            14,512,333
AGRICULTURE – 0.41%            

Japan Tobacco Inc.

   2,964      24,037,177
         

            24,037,177
AIRLINES – 0.21%            

All Nippon Airways Co. Ltd.1

   1,976,000      6,409,914

Japan Airlines System Corp.1,2

   1,976,000      5,707,704
         

            12,117,618
APPAREL – 0.37%            

Gunze Ltd.

   988,000      4,654,390

Onward Kashiyama Co. Ltd.1

   988,000      13,819,126

World Co. Ltd.1

   98,800      3,006,898
         

            21,480,414
AUTO MANUFACTURERS – 10.17%            

Hino Motors Ltd.1

   988,000      6,562,959

Honda Motor Co. Ltd.

   2,568,800      127,334,020

Nissan Motors Co. Ltd.1

   8,200,400      89,068,995

Toyota Motor Corp.

   9,484,800      373,359,479
         

            596,325,453
AUTO PARTS & EQUIPMENT – 1.72%            

Aisin Seiki Co. Ltd.

   165,200      3,966,486

Bridgestone Corp.

   1,976,000      37,361,155

Denso Corp.

   1,877,200      46,098,264

NOK Corp.1

   296,400      9,317,782

Toyoda Gosei Co. Ltd.1

   197,600      4,195,253
         

            100,938,940
BANKS – 9.24%            

Bank of Fukuoka Ltd.1

   1,976,000      10,245,059

Bank of Yokohama Ltd. (The)

   3,952,000      23,406,989

Chiba Bank Ltd. (The)

   1,976,000      11,415,408

Gunma Bank Ltd.1

   988,000      5,032,503

Hokuhoku Financial Group Inc.

   1,976,000      4,915,468

Joyo Bank Ltd.

   2,964,000      12,018,589

Mitsubishi Tokyo Financial Group Inc.

   14,820      133,014,716

Mitsui Trust Holdings Inc.1

   1,976,000      14,152,226

Mizuho Financial Group Inc.

   24,700      99,479,703

Resona Holdings Inc.1,2

   13,832,000      22,434,699

77 Bank Ltd. (The)

   988,000      5,923,769

Shinsei Bank Ltd.1

   1,976,000      11,847,537

Shizuoka Bank Ltd. (The)1

   2,964,000      22,362,677

Sumitomo Mitsui Financial Group Inc.1

   12,844      77,360,098

Sumitomo Trust & Banking Co. Ltd. (The)

   3,952,000      23,875,129

UFJ Holdings Inc.1,2

   12,844      64,135,150
         

            541,619,720
BEVERAGES – 0.94%            

Asahi Breweries Ltd.1

   988,000      9,326,785

Coca-Cola West Japan Co. Ltd.1

   197,600      4,762,422

Ito En Ltd.1

   98,800      4,249,269

Kirin Brewery Co. Ltd.

   2,964,000      26,683,967

Sapporo Breweries Ltd.1

   988,000      3,466,035

Takara Holdings Inc.1

   988,000      6,391,909
         

            54,880,387
BUILDING MATERIALS – 1.60%            

Asahi Glass Co. Ltd.1

   2,964,000      28,547,523

Daikin Industries Ltd.1

   988,000      25,657,661

Matsushita Electric Works Ltd.1

   988,000      7,985,384

Nippon Sheet Glass Co. Ltd.1

   988,000      3,556,062

Sumitomo Osaka Cement Co. Ltd.1

   988,000      2,295,686

Taiheiyo Cement Corp.1

   2,964,000      7,022,097

Tostem Inax Holding Corp.

   988,000      18,725,591
         

            93,790,004
CHEMICALS – 3.71%            

Asahi Kasei Corp

   4,940,000      22,101,599

Daicel Chemical Industries Ltd.1

   988,000      4,573,365

Dainippon Ink & Chemical Inc.

   1,976,000      4,609,376

Denki Kagaku Kogyo Kabushiki Kaisha

   1,976,000      6,193,849

Ishihara Sangyo Kaisha Ltd.1

   988,000      2,043,610

JSR Corp.1

   691,600      11,532,443

Kaneka Corp.

   988,000      9,389,804

Mitsubishi Chemical Corp.1

   5,928,000      15,880,742

Mitsubishi Gas Chemical Co. Inc.1

   988,000      4,177,247

Mitsui Chemicals Inc.1

   1,976,000      10,028,994

Nippon Kayaku Co. Ltd.

   988,000      5,338,594

Nippon Sanso Corp.1

   988,000      5,086,519

 

 

SCHEDULE OF INVESTMENTS

  5


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Nippon Shokubai Co. Ltd.

   988,000    $ 7,445,223

Nissan Chemical Industries Ltd.1

   988,000      7,868,350

Nitto Denko Corp.1

   494,000      21,606,451

Shin-Etsu Chemical Co. Ltd.

   1,086,800      37,829,295

Showa Denko K.K.1

   2,964,000      6,833,040

Sumitomo Bakelite Co. Ltd.1

   988,000      6,067,812

Sumitomo Chemical Co. Ltd.1

   3,952,000      17,681,279

Tosoh Corp.1

   1,976,000      7,022,097

Ube Industries Ltd.1,2

   2,964,000      4,024,202
         

            217,333,891
COMMERCIAL SERVICES – 1.17%            

Bellsystem24 Inc.1

   9,880      2,412,720

Benesse Corp.1

   197,600      5,941,774

Dai Nippon Printing Co. Ltd.1

   1,976,000      28,970,650

Kamigumi Co. Ltd.

   988,000      7,436,221

TIS Inc.1

   98,800      3,592,072

Toppan Printing Co. Ltd.1

   1,976,000      20,454,107
         

            68,807,544
COMPUTERS – 1.47%            

CSK Corp.1

   197,600      8,498,538

Fujitsu Ltd.1

   5,928,000      36,622,935

Itochu Techno-Science Corp.1

   98,800      4,312,287

Meitec Corp.1

   98,800      3,556,062

NET One Systems Co. Ltd.1

   1,976      7,112,124

TDK Corp.

   395,200      26,107,795
         

            86,209,741
COSMETICS & PERSONAL CARE – 1.27%            

Aderans Co. Ltd.1

   98,800      1,890,564

Kanebo Ltd.1,2

   1,976,000      1,818,543

Kao Corp.1

   1,976,000      48,434,461

Shiseido Co. Ltd.1

   988,000      12,684,787

Uni-Charm Corp.1

   197,600      9,812,930
         

            74,641,285
DISTRIBUTION & WHOLESALE – 2.04%            

Itochu Corp.1,2

   4,940,000      20,391,088

Marubeni Corp.1

   4,940,000      11,748,508

Mitsubishi Corp.1

   3,952,000      40,800,182

Mitsui & Co. Ltd.1

   3,952,000      32,049,569

Sumitomo Corp.

   1,976,000      14,368,290
         

            119,357,637
DIVERSIFIED FINANCIAL SERVICES – 4.22%            

ACOM Co. Ltd.

   227,240      14,929,158

Aeon Credit Service Co. Ltd.1

   98,890      6,424,764

AIFUL Corp.

   148,200      14,786,915

Credit Saison Co. Ltd.1

   494,000      16,294,865

Daiwa Securities Group Inc.

   3,952,000      25,567,634

Nikko Cordial Corp.

   4,940,000      22,101,599

Nomura Holdings Inc.

   5,928,000      81,456,321

ORIX Corp.1

   296,400      30,330,056

Promise Co. Ltd.

   296,400      18,770,605

Takefuji Corp.1

   237,120      16,636,967
         

            247,298,884
ELECTRIC – 4.06%            

Chubu Electric Power Co. Inc.1

   2,272,400      49,798,369

Kansai Electric Power Co. Inc. (The)1

   2,470,000      45,238,508

Kyushu Electric Power Co. Inc.

   1,482,000      28,223,427

Tohoku Electric Power Co. Inc.1

   1,679,600      28,619,545

Tokyo Electric Power Co. Inc. (The)

   3,754,400      86,380,792
         

            238,260,641
ELECTRICAL COMPONENTS & EQUIPMENT – 4.14%            

Casio Computer Co. Ltd.1

   988,000      12,864,841

Fujikura Ltd.1

   988,000      4,465,333

Furukawa Electric Co. Ltd.1,2

   1,976,000      7,976,381

Hitachi Cable Ltd.

   988,000      4,006,196

Hitachi Ltd.1

   9,880,000      61,938,494

Mitsubishi Electric Corp.

   5,928,000      28,574,532

SANYO Electric Co. Ltd.1

   4,940,000      16,835,026

Sharp Corp.1

   2,964,000      41,322,338

Stanley Electric Co. Ltd.1

   691,600      10,353,992

Sumitomo Electric Industries Ltd.1

   1,976,000      18,095,403

Toshiba Corp.1

   9,880,000      36,460,887
         

            242,893,423
ELECTRONICS – 5.09%            

Advantest Corp.1

   296,400      18,797,613

Alps Electric Co. Ltd.1

   988,000      12,180,637

Dainippon Screen Manufacturing Co. Ltd.1

   988,000      5,536,653

Fanuc Ltd.

   494,000      26,287,849

Hirose Electric Co. Ltd.1

   98,800      9,533,846

Keyence Corp.

   98,820      20,188,112

 

 

6

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Kyocera Corp.1

   592,800    $ 43,320,935

Mabuchi Motor Co. Ltd.1

   98,800      6,923,067

Minebea Co. Ltd.1

   988,000      4,186,250

Murata Manufacturing Co. Ltd.1

   790,400      39,107,677

NEC Corp.

   5,928,000      37,865,306

NGK Insulators Ltd.1

   988,000      8,039,400

Omron Corp.

   889,200      19,040,685

Secom Co. Ltd.

   988,000      36,460,887

Yokogawa Electric Corp.1

   988,000      10,830,234
         

            298,299,151
ENGINEERING & CONSTRUCTION – 0.86%            

Kajima Corp.1

   2,964,000      10,209,048

Nishimatsu Construction Co. Ltd.1

   988,000      3,132,935

Obayashi Corp.

   1,976,000      9,668,887

Okumura Corp.1

   988,000      4,708,406

Shimizu Corp.1

   1,976,000      8,696,597

Taisei Corp.1

   2,964,000      10,128,024

Toda Corp.

   988,000      3,898,164
         

            50,442,061
ENTERTAINMENT – 0.38%            

Oriental Land Co. Ltd.1

   197,600      12,225,650

Toho Co. Ltd.1

   691,600      9,893,954
         

            22,119,604
FOOD – 1.38%            

Ajinomoto Co. Inc.

   1,976,000      22,218,634

Ariake Japan Co., Ltd1

   105,530      2,875,162

Katokichi Co. Ltd.

   197,600      3,637,086

Kikkoman Corp.1

   988,000      8,651,583

Meiji Dairies Corp.1

   988,000      5,338,594

Meiji Seika Kaisha Ltd.1

   988,000      4,078,218

Nichirei Corp.1

   988,000      3,376,008

Nippon Meat Packers Inc.1

   988,000      11,667,484

Nisshin Seifun Group Inc.

   988,000      9,821,933

Nissin Food Products Co. Ltd.1

   296,400      7,508,242

Snow Brand Milk Products Co. Ltd.1,2

   494,000      1,480,942
         

            80,653,886
FOREST PRODUCTS & PAPER – 0.54%            

Nippon Unipac Holding1

   2,964      14,125,218

OJI Paper Co. Ltd.1

   2,964,000      17,825,322
         

            31,950,540
GAS – 0.88%            

Osaka Gas Co. Ltd.

   6,916,000      19,094,701

Tokyo Gas Co. Ltd.1

   8,892,000      32,571,725
         

            51,666,426
HAND & MACHINE TOOLS – 0.68%            

Fuji Electric Holdings Co. Ltd.

   1,976,000      5,005,495

Nidec Corp.1

   98,800      9,452,822

SMC Corp.

   197,600      18,923,650

THK Co. Ltd.1

   395,200      6,716,005
         

            40,097,972
HEALTH CARE – PRODUCTS – 0.91%            

Hoya Corp.1

   395,200      37,991,344

Terumo Corp.

   691,600      15,565,648
         

            53,556,992
HOME BUILDERS – 0.94%            

Daiwa House Industry Co. Ltd.

   1,976,000      20,508,123

Sekisui Chemical Co. Ltd.1

   1,976,000      14,818,425

Sekisui House Ltd.

   1,976,000      19,805,914
         

            55,132,462
HOME FURNISHINGS – 3.79%            

Matsushita Electric Industrial Co. Ltd.1

   6,916,015      92,700,880

Pioneer Corp.

   691,600      15,124,516

Sony Corp.1

   3,062,800      105,493,498

Yamaha Corp.1

   592,800      8,826,235
         

            222,145,129
HOUSEWARES – 0.17%            

Toto Ltd.1

   988,000      9,731,906
         

            9,731,906
INSURANCE – 2.63%            

Millea Holdings Inc.

   4,940      67,970,294

Mitsui Sumitomo Insurance Co. Ltd.

   3,952,000      34,858,408

Sompo Japan Insurance Inc.1

   2,964,000      27,656,258

T&D Holdings Inc.1,2

   526,500      23,891,476
         

            154,376,436
INTERNET – 1.54%            

Rakuten Inc.1

   988      6,797,029

Softbank Corp.1

   790,400      33,706,064

Trend Micro Inc.1

   494,000      21,471,411

Yahoo! Japan Corp.1,2

   2,964      28,358,467
         

            90,332,971

 

 

SCHEDULE OF INVESTMENTS

  7


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

IRON & STEEL – 2.10%            

JFE Holdings Inc.1

   1,679,650    $ 45,608,975

Kobe Steel Ltd.1

   7,904,000      11,379,398

Nippon Steel Corp.

   19,760,000      45,193,494

Nisshin Steel Co. Ltd.1

   2,964,000      6,292,879

Sumitomo Metal Industries Ltd.

   12,844,000      14,863,438
         

            123,338,184
LEISURE TIME – 0.37%            

Namco Ltd.1

   197,600      4,951,479

Sammy Corp.1

   197,600      9,812,930

Shimano Inc.

   296,400      6,752,016
         

            21,516,425
MACHINERY – CONSTRUCTION & MINING – 0.31%            

Komatsu Ltd.1

   2,964,000      18,122,411
         

            18,122,411
MACHINERY – DIVERSIFIED – 0.87%            

Amada Co. Ltd.

   988,000      5,581,666

Ebara Corp.1

   988,000      4,276,277

Kubota Corp.

   2,964,000      14,854,435

Sumitomo Heavy Industries Ltd.1,2

   1,976,000      6,049,807

Toyota Industries Corp.1

   889,200      20,256,048
         

            51,018,233
MANUFACTURING – 2.01%            

Fuji Photo Film Co. Ltd.

   988,000      30,969,247

Ishikawajima-Harima Heavy Industries Co. Ltd.2

   3,952,000      5,869,753

Kawasaki Heavy Industries Ltd.1

   4,940,000      7,472,231

Konica Minolta Holdings Inc.

   1,482,000      19,135,213

Mitsubishi Heavy Industries Ltd.

   9,880,000      26,737,984

Nikon Corp.1

   988,000      9,128,726

Olympus Corp.1

   988,000      18,725,591
         

            118,038,745
MEDIA – 0.04%            

Fuji Television Network Inc.

   1,154      2,523,669
         

            2,523,669
METAL FABRICATE & HARDWARE – 0.24%            

NSK Ltd.1

   1,976,000      8,696,597

NTN Corp.1

   988,000      5,365,602
         

            14,062,199
MINING – 0.57%            

Dowa Mining Co. Ltd.1

   988,000      6,355,897

Mitsubishi Materials Corp.1

   2,964,000      6,265,871

Mitsui Mining & Smelting Co. Ltd.1

   1,976,000      7,994,387

Sumitomo Metal Mining Co. Ltd.1

   1,976,000      12,909,855
         

            33,526,010
OFFICE & BUSINESS EQUIPMENT – 3.11%            

Canon Inc.

   2,766,400      131,583,289

Ricoh Co. Ltd.

   1,976,000      38,711,559

Seiko Epson Corp.1

   296,400      12,126,621
         

            182,421,469
OIL & GAS – 0.91%            

Nippon Mining Holdings Inc.

   1,976,000      9,056,704

Nippon Oil Corp.

   4,940,500      30,747,291

Teikoku Oil Co. Ltd.1

   988,000      5,257,570

TonenGeneral Sekiyu K.K.1

   988,000      8,219,454
         

            53,281,019
PACKAGING & CONTAINERS – 0.28%            

Toyo Seikan Kaisha Ltd.1

   988,000      16,645,970
         

            16,645,970
PHARMACEUTICALS – 5.26%            

Chugai Pharmaceutical Co. Ltd.1

   988,000      14,494,328

Daiichi Pharmaceutical Co. Ltd.1

   889,200      15,345,982

Eisai Co. Ltd.1

   889,200      25,279,548

Fujisawa Pharmaceutical Co. Ltd.

   988,000      23,452,002

Kyowa Hakko Kogyo Co. Ltd.1

   988,000      6,797,029

Sankyo Co. Ltd.1

   988,000      20,616,156

Shionogi & Co. Ltd.1

   988,000      15,934,758

Taisho Pharmaceutical Co. Ltd.

   988,000      18,815,618

Takeda Pharmaceutical Co. Ltd.

   2,964,000      133,419,837

Yamanouchi Pharmaceutical Co. Ltd.1

   988,000      34,120,188
         

            308,275,446
REAL ESTATE – 1.44%            

Daito Trust Construction Co. Ltd.1

   296,400      11,208,347

Leopalace21 Corp.1

   395,200      7,706,301

Mitsubishi Estate Co. Ltd.1

   2,964,000      33,246,927

Mitsui Fudosan Co. Ltd.

   1,976,000      21,786,505

Sumitomo Realty & Development Co. Ltd.1

   988,000      10,776,218
         

            84,724,298
RETAIL – 3.88%            

Aeon Co. Ltd.1

   890,100      14,793,771

Aeon Co. Ltd. When Issued1,2

   848,700      13,881,421

 

 

8

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


   Shares

   Value

Aoyama Trading Co. Ltd.

   197,600    $ 4,762,422

Autobacs Seven Co. Ltd.1

   98,800      2,916,871

Citizen Watch Co. Ltd.1

   988,000      9,902,957

Daimaru Inc. (The)1

   988,000      7,913,363

FamilyMart Co. Ltd1

   197,600      5,563,661

Fast Retailing Co. Ltd.1

   197,600      14,224,247

Isetan Co. Ltd.1

   889,200      9,901,156

Ito-Yokado Co. Ltd.1

   988,000      36,370,860

Lawson Inc.1

   197,600      7,004,091

Marui Co. Ltd.1

   988,000      13,008,884

Mitsukoshi Ltd.1

   988,000      4,717,409

Saizeriya Co. Ltd.1

   197,690      3,089,328

Seven-Eleven Japan Co. Ltd.1

   988,000      30,068,978

Shimachu Co. Ltd.1

   197,600      4,762,422

Shimamura Co. Ltd.1

   98,800      7,220,156

Takashimaya Co. Ltd.1

   988,000      8,975,680

UNY Co. Ltd.1

   988,000      11,163,333

USS Co. Ltd.1

   88,920      6,473,833

Yamada Denki Co. Ltd.1

   296,400      10,668,186
         

            227,383,029
SEMICONDUCTORS – 1.30%            

NEC Electronics Corp.1

   98,800      4,996,492

Rohm Co. Ltd.1

   395,200      40,872,204

Tokyo Electron Ltd.1

   592,852      30,359,727
         

            76,228,423
SHIPBUILDING – 0.08%            

Mitsui Engineering & Shipbuilding Co. Ltd.1

   2,964,000      4,510,347
         

            4,510,347
SOFTWARE – 0.28%            

Capcom Co. Ltd.1

   296,400      3,003,297

Hitachi Software Engineering Co. Ltd.1

   98,800      1,967,088

Konami Corp.1

   296,400      6,603,472

Oracle Corp.1

   98,800      5,104,524
         

            16,678,381
TELECOMMUNICATIONS – 3.69%            

Nippon Telegraph & Telephone Corp.

   17,784      76,810,934

NTT Data Corp.1

   4,940      13,819,126

NTT DoCoMo Inc.

   64,220      118,790,469

Oki Electric Industry Co. Ltd.1,2

   1,976,000      6,806,032
         

            216,226,561
TEXTILES – 0.93%            

Kuraray Co. Ltd.1

   988,000      7,382,204

Mitsubishi Rayon Co. Ltd.

   1,976,000      6,535,952

Nisshinbo Industries Inc.

   988,000      6,977,084

Teijin Ltd.1

   2,964,000      10,290,072

Toray Industries Inc.

   3,952,000      18,653,570

Toyobo Co. Ltd.

   1,976,000      4,843,446
         

            54,682,328
TOYS, GAMES & HOBBIES – 0.86%            

Bandai Co. Ltd.1

   335,999      7,776,550

Nintendo Co. Ltd.1

   395,200      42,492,688
         

            50,269,238
TRANSPORTATION – 4.51%            

Central Japan Railway Co.1

   2,964      24,631,354

East Japan Railway Co.

   10,868      60,804,155

Kawasaki Kisen Kaisha Ltd.1

   1,976,000      12,621,768

Keihin Electric Express Railway Co. Ltd.1

   1,976,000      11,469,425

Keio Electric Railway Co. Ltd.

   1,976,000      10,497,134

Kintetsu Corp.1

   4,940,000      16,970,067

Mitsui O.S.K. Lines Ltd.1

   2,964,000      17,555,242

Nippon Express Co. Ltd.

   2,964,000      15,205,540

Nippon Yusen Kabushiki Kaisha

   3,952,000      20,418,097

Seino Transportation Co. Ltd.1

   988,000      9,299,777

Tobu Railway Co. Ltd.1

   2,964,000      11,127,322

Tokyu Corp.

   2,964,000      14,179,234

West Japan Railway Co.

   5,928      24,469,306

Yamato Transport Co. Ltd.1

   988,000      15,016,484
         

            264,264,905
VENTURE CAPITAL – 0.10%            

JAFCO Co. Ltd.1

   98,800      5,977,785
         

            5,977,785
         

TOTAL COMMON STOCKS
(Cost: $5,594,119,515)

          5,858,725,703

 

 

SCHEDULE OF INVESTMENTS

  9


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

SHORT-TERM INVESTMENTS – 24.01%              
FLOATING RATE NOTES – 6.21%              

Beta Finance Inc.

             

1.45%, 05/04/053,4

   $ 6,151,906    $ 6,151,068

1.52%, 10/12/043,4

     5,126,588      5,126,531

1.56%, 09/15/043,4

     10,253,176      10,253,137

1.64%, 03/15/053,4

     5,126,588      5,128,801

Canadian Imperial Bank of Commerce

             

1.24%, 10/07/043

     7,689,882      7,689,768

1.38%, 11/22/043

     2,563,294      2,563,338

1.40%, 10/29/043

     10,253,176      10,253,135

CC USA Inc.

             

1.45%, 05/04/053,4

     10,253,176      10,251,800

1.61%, 07/29/053,4

     10,253,176      10,250,379

Den Danske Bank NY

             

1.51%, 08/12/053

     10,253,176      10,250,268

1.56%, 08/26/053

     10,253,176      10,250,150

Depfa Bank PLC

             

1.27%, 06/15/053

     10,253,176      10,253,176

Dorada Finance Inc.

             

1.61%, 07/29/053,4

     8,510,136      8,507,815

Five Finance Inc.

             

1.42%, 04/29/053,4

     8,202,541      8,202,001

Gemini Securitization Corp.

             

1.53%, 09/09/043

     5,126,588      5,124,845

HBOS Treasury Services PLC

             

1.24%, 04/01/053

     6,562,033      6,561,651

1.58%, 04/22/053

     10,253,176      10,253,176

K2 USA LLC

             

1.45%, 06/10/053,4

     10,253,176      10,252,206

1.57%, 09/27/043,4

     11,073,430      11,073,312

1.61%, 07/25/053,4

     5,126,588      5,125,667

Links Finance LLC

             

1.55%, 04/15/053,4

     10,253,176      10,251,906

1.68%, 04/25/053

     10,253,176      10,257,497

Nationwide Building Society

             

1.59%, 07/28/053

     10,253,176      10,253,176

1.63%, 12/09/043,4

     8,510,136      8,471,989

Nordea Bank PLC

             

2.11%, 06/07/053

     10,253,176      10,251,620

Security


  

Shares or

Principal


   Value

Northern Rock PLC

             

1.56%, 01/13/053,4

   $ 9,740,517    $ 9,740,517

Permanent Financing PLC

             

1.52%, 03/10/053

     10,253,176      10,253,176

1.53%, 12/10/043

     5,126,588      5,126,588

1.55%, 06/10/053

     4,613,929      4,613,929

Sigma Finance Inc.

             

1.52%, 10/07/043

     10,253,176      10,252,974

1.57%, 11/15/043

     10,253,176      10,253,015

1.59%, 09/15/053

     7,689,882      7,690,569

Tango Finance Corp.

             

1.52%, 04/07/053,4

     3,762,916      3,762,691

1.56%, 01/18/053,4

     4,511,397      4,511,224

1.59%, 07/25/053,4

     10,253,176      10,252,255

1.66%, 05/17/053,4

     8,510,136      8,509,836

1.70%, 02/25/053,4

     5,741,778      5,741,223

WhistleJacket Capital LLC

             

1.26%, 10/20/043

     2,539,712      2,535,356

1.48%, 06/15/053,4

     5,126,588      5,125,665

1.56%, 09/15/043,4

     5,126,588      5,126,549

1.56%, 07/15/053,4

     7,689,882      7,688,524

White Pine Finance LLC

             

1.46%, 07/05/053

     5,126,588      5,125,644

1.55%, 04/15/053,4

     7,689,882      7,688,930

1.55%, 07/11/053

     2,563,294      2,563,046

1.56%, 11/15/043,4

     6,151,906      6,151,906

1.57%, 06/15/053,4

     4,203,802      4,203,803

1.58%, 03/29/053

     4,408,866      4,408,296

1.58%, 08/26/053,4

     5,126,588      5,125,579

1.68%, 05/20/053

     4,613,929      4,613,599
           

              364,073,306
MONEY MARKET FUNDS – 4.80%              

Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares3,5

     156,793,933      156,793,933

Barclays Global Investors Funds Prime Money Market Fund, Institutional Shares3,5

     112,784,935      112,784,935

BlackRock Temp Cash Money Market Fund3

     5,175,964      5,175,964

 

10

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


  

Shares or

Principal


   Value

Short-Term Investment Co. -

             

Prime Money Market Portfolio,

             

Institutional Shares3

     6,892,169    $ 6,892,169
           

              281,647,001
COMMERCIAL PAPER – 4.45%              

Alpine Securitization Corp.

             

1.50%, 09/08/043

   $ 5,126,588      5,125,093

1.51%, 09/02/043

     4,613,929      4,613,736

1.54%, 09/14/043

     5,126,588      5,123,737

Amsterdam Funding Corp.

             

1.49%, 09/08/043

     2,050,635      2,050,041

1.53%, 09/16/043

     5,044,357      5,041,142

1.54%, 09/15/043

     5,126,588      5,123,518

1.54%, 09/22/043

     2,563,294      2,560,991

Barton Capital Corp.

             

1.53%, 09/08/043

     5,126,588      5,125,063

1.53%, 09/09/043

     11,974,787      11,970,715

1.53%, 09/13/043

     7,381,877      7,378,112

1.53%, 09/14/043

     2,563,294      2,561,878

1.54%, 09/17/043

     3,075,953      3,073,847

Blue Ridge Asset Funding Corp.

             

1.51%, 09/08/043

     5,126,588      5,125,083

1.53%, 09/15/043

     2,050,635      2,049,415

Cantabric Finance LLC

             

1.55%, 09/17/043

     2,050,635      2,049,223

Corporate Asset Funding

             

1.42%, 09/03/043

     3,075,953      3,075,710

CRC Funding LLC

             

1.42%, 09/03/043

     5,126,588      5,126,184

Delaware Funding Corp.

             

1.50%, 09/09/043

     5,126,588      5,124,879

1.53%, 09/10/043

     8,202,541      8,199,403

1.53%, 09/20/043

     3,486,080      3,483,265

Edison Asset Securitization

             

1.07%, 09/21/043

     5,126,588      5,123,540

1.45%, 11/09/043

     10,253,176      10,224,681

1.52%, 09/08/043

     10,253,176      10,250,146

1.59%, 12/02/043

     10,253,176      10,211,514

Security


   Principal

   Value

Falcon Asset Securitization Corp.

             

1.48%, 09/03/043

   $ 3,075,953    $ 3,075,700

1.53%, 09/07/043

     5,126,588      5,125,281

1.53%, 09/17/043

     3,075,953      3,073,861

1.53%, 09/21/043

     2,563,294      2,561,115

1.53%, 09/22/043

     5,126,588      5,122,012

1.54%, 09/14/043

     7,689,882      7,685,612

Ford Credit Auto Receivables

             

1.85%, 01/14/053

     5,126,588      5,091,023

GIRO Funding US Corp.

             

1.54%, 09/09/043

     5,126,588      5,124,839

1.55%, 10/15/043

     6,723,520      6,710,783

Grampian Funding LLC

             

1.26%, 10/22/043

     10,253,176      10,234,947

1.44%, 10/27/043

     10,253,176      10,230,209

1.59%, 11/30/043

     5,126,588      5,106,210

Jupiter Securitization Corp.

             

1.47%, 09/02/043

     2,563,294      2,563,189

1.53%, 09/20/043

     2,563,294      2,561,225

1.53%, 09/23/043

     3,588,612      3,585,257

1.54%, 09/15/043

     6,151,906      6,148,221

Preferred Receivables Funding Corp.

             

1.47%, 09/01/043

     7,145,438      7,145,438

1.51%, 09/08/043

     4,101,270      4,100,066

1.52%, 09/09/043

     2,563,294      2,562,428

1.53%, 09/21/043

     5,126,588      5,122,230

Receivables Capital Corp.

             

1.54%, 09/14/043

     3,075,953      3,074,242

Scaldis Capital LLC

             

1.48%, 09/01/043

     5,639,247      5,639,247

Sydney Capital Corp.

             

1.25%, 10/22/043

     3,412,257      3,406,214

1.55%, 09/16/043

     3,075,953      3,073,967

Thames Asset Global Securitization No. 1 Inc.

             

1.54%, 09/15/043

     4,101,270      4,098,814

1.54%, 09/23/043

     2,563,294      2,560,882

Windmill Funding Corp.

             

1.52%, 09/09/043

     2,563,294      2,562,428

1.52%, 09/10/043

     3,588,612      3,587,248
           

              260,723,604

 

 

SCHEDULE OF INVESTMENTS

  11


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

Security


   Principal

   Value

 
TIME DEPOSITS – 3.91%                

Abbey National Treasury Services PLC

               

1.25%, 01/06/053

   $ 10,253,176    $ 10,253,176  

1.33%, 02/10/053

     5,126,588      5,126,245  

1.39%, 02/02/053

     5,126,588      5,126,264  

1.39%, 04/08/053

     7,177,223      7,176,577  

1.40%, 10/25/043

     10,253,176      10,252,948  

Bank of New York

               

1.39%, 11/01/043

     10,253,176      10,253,005  

1.60%, 12/03/043

     2,563,294      2,562,963  

Bank of Nova Scotia

               

1.13%, 10/06/043

     10,253,176      10,253,176  

1.24%, 10/07/043

     7,689,882      7,689,806  

1.42%, 10/29/043

     7,689,882      7,689,974  

National City Bank (Cleveland, Ohio)

               

1.25%, 01/06/053

     10,253,176      10,253,352  

1.49%, 08/09/053

     10,253,176      10,250,294  

1.54%, 06/23/053

     10,253,176      10,250,690  

1.56%, 06/10/053

     5,126,588      5,127,829  

Norddeutsche Landesbank

               

1.59%, 07/27/053

     10,253,176      10,249,923  

Prudential Funding LLC

               

1.60%, 12/01/043

     5,126,588      5,105,854  

SouthTrust Bank

               

1.55%, 09/01/043

     20,506,352      20,506,352  

Toronto-Dominion Bank

               

1.22%, 03/23/053

     17,943,058      17,941,309  

1.34%, 02/10/053

     4,101,270      4,100,997  

1.41%, 11/01/043

     7,689,882      7,689,754  

1.53%, 09/13/043

     5,126,588      5,126,588  

1.77%, 05/10/053

     5,126,588      5,126,237  

1.90%, 05/11/053

     5,126,588      5,126,236  

UBS Finance (Delaware)

               

1.10%, 09/08/043

     10,253,176      10,250,983  

1.11%, 12/17/043

     15,379,764      15,329,023  

1.14%, 09/29/043

     10,253,176      10,244,125  
           


              229,063,680  
REPURCHASE AGREEMENTS – 3.46%                

Banc of America Securities LLC

               

1.59%, 09/01/043,6

     30,759,528      30,759,528  

Bank of America, N.A

               

1.59%, 09/01/043,6

   $ 58,955,761      58,955,761  

Goldman Sachs & Co.

               

1.59%, 09/01/043,6

     51,265,879      51,265,879  

Merrill Lynch Government Securities Inc.

               

1.57%, 09/01/043,6

     10,253,176      10,253,176  

1.59%, 09/01/043,6

     51,265,879      51,265,879  
           


              202,500,223  
U.S. GOVERNMENT AGENCY NOTES – 0.63%                

Federal Home Loan Mortgage Corp.

               

1.63%, 04/15/053

     7,177,223      7,191,431  

1.80%, 01/18/053

     4,767,727      4,734,591  

1.80%, 01/19/053

     5,126,588      5,090,702  

2.06%, 05/31/053

     5,111,516      5,031,958  

Federal National Mortgage Association

               

2.33%, 07/22/053

     15,379,764      15,057,942  
           


              37,106,624  
MEDIUM-TERM NOTES – 0.55%                

CC USA Inc.

               

1.29%, 04/15/053,4

     10,253,176      10,252,541  

1.51%, 02/15/053,4

     6,664,564      6,669,304  

Dorada Finance Inc.

               

1.48%, 01/18/053,4

     7,689,882      7,689,737  

K2 USA LLC

               

1.46%, 01/12/053,4

     5,126,588      5,126,402  

WhistleJacket Capital LLC

               

1.32%, 02/04/053,4

     2,563,294      2,563,075  
           


              32,301,059  
           


TOTAL SHORT-TERM INVESTMENTS
(Cost: $1,407,415,497)

            1,407,415,497  
           


TOTAL INVESTMENTS IN SECURITIES – 123.93%
(Cost: $7,001,535,012)

            7,266,141,200  
Other Assets, Less Liabilities – (23.93%)             (1,402,809,556 )
           


NET ASSETS – 100.00%           $ 5,863,331,644  
           



1 All or a portion of this security represents a security on loan. See Note 5.
2 Non-income earning security.
3 All or a portion of this security represents an investment of securities lending collateral. See Note 5.
4 Security exempt from registration pursuant to Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
5 Issuer is an affiliate of the Fund’s investment adviser. See Note 2.
6 Repurchase agreements held as collateral for securities on loan are fully collateralized by U.S. Government securities, with interest rates ranging from 2.58% to 9.60% and maturity dates ranging from 2/1/07 to 8/1/42.

 

12

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments (Continued)

 

iSHARES® MSCI JAPAN INDEX FUND

August 31, 2004

 

SECTOR DIVERSIFICATION

 

Sector


  

% of

Net Assets


    Value

Consumer Cyclical

   25.81 %   $ 1,513,200,183

Industrial

   20.67       1,212,185,421

Financial

   17.63       1,033,997,123

Consumer Non-Cyclical

   11.34       664,852,717

Basic Materials

   6.93       406,148,625

Technology

   6.17       361,538,014

Communications

   5.52       323,595,534

Utilities

   4.94       289,927,067

Energy

   0.91       53,281,019

Short-Term and Other Net Assets

   0.08       4,605,941
    

 

TOTAL

   100.00 %   $ 5,863,331,644
    

 

 

See notes to financial statements.

 

SCHEDULE OF INVESTMENTS

  13


Statement of Assets and Liabilities

 

iSHARES®, INC.

August 31, 2004

 

    

iShares

MSCI Japan

Index Fund


 

ASSETS

        

Investments, at cost:

        

Unaffiliated issuers

   $ 6,731,956,144  
    


Affiliates of the investment adviser

   $ 269,578,868  
    


Foreign currency, at cost

   $ 1,237,601  
    


Investments in securities, at value (including securities on loana) (Note 1):

        

Unaffiliated issuers

   $ 6,996,562,332  

Affiliates of the investment adviser

     269,578,868  

Foreign currency, at value

     1,236,861  

Receivables:

        

Dividends and interest

     2,026,946  

Capital shares sold

     760,361  

Reimbursement of distribution fees

     2,936,074  
    


Total Assets

     7,273,101,442  
    


LIABILITIES

        

Payables:

        

Collateral for securities on loan (Note 5)

     1,404,260,565  

Investment advisory fees (Note 2)

     5,509,233  
    


Total Liabilities

     1,409,769,798  
    


NET ASSETS

   $ 5,863,331,644  
    


Net assets consist of:

        

Paid-in capital

   $ 5,707,845,846  

Undistributed net investment income

     9,816,919  

Accumulated net realized loss

     (118,920,006 )

Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies

     264,588,885  
    


NET ASSETS

   $ 5,863,331,644  
    


Shares outstanding

     592,800,000  
    


Net asset value per share

   $ 9.89  
    



a Securities on loan with market value of $1,334,878,170. See Note 5.

 

See notes to financial statements.

 

14

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Statement of Operations

 

iSHARES®, INC.

Year ended August 31, 2004

 

    

iShares

MSCI Japan

Index Fund


 

NET INVESTMENT INCOME

        

Dividendsa

   $ 34,225,228  

Interestb

     24,325  

Securities lending incomeb

     1,415,820  
    


Total investment income

     35,665,373  
    


EXPENSES (NOTE 2)

        

Investment advisory fees

     22,799,645  

Distribution fees

     7,356,613  
    


Total expenses

     30,156,258  

Less reimbursement of distribution fees

     (5,182,221 )
    


Net expenses

     24,974,037  
    


Net investment income

     10,691,336  
    


NET REALIZED AND UNREALIZED GAIN (LOSS)

        

Net realized gain (loss) from:

        

Investments

     (37,481,806 )

In-kind redemptions

     73,242,782  

Foreign currency transactions

     (206,736 )
    


Net realized gain

     35,554,240  
    


Net change in unrealized appreciation (depreciation) on:

        

Investments

     309,290,346  

Translation of assets and liabilities in foreign currencies

     (39,229 )
    


Net change in unrealized appreciation (depreciation)

     309,251,117  
    


Net realized and unrealized gain

     344,805,357  
    


NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

   $ 355,496,693  
    



a Net of foreign withholding tax of $2,219,290.
b Includes income earned from affiliates of the Fund’s investment adviser. See Note 2.

 

See notes to financial statements.

 

FINANCIAL STATEMENTS

  15


Statements of Changes in Net Assets

 

iSHARES®, INC.

 

    

iShares MSCI Japan

Index Fund


 
    

For the

year Ended

August 31, 2004


   

For the

year Ended

August 31, 2003


 

INCREASE (DECREASE) IN NET ASSETS

                

OPERATIONS:

                

Net investment income

   $ 10,691,336     $ 212,198  

Net realized gain

     35,554,240       8,673,926  

Net change in unrealized appreciation (depreciation)

     309,251,117       171,100,487  
    


 


Net increase in net assets resulting from operations

     355,496,693       179,986,611  
    


 


DISTRIBUTIONS TO SHAREHOLDERS:

                

From net investment income

     (474,213 )     —    
    


 


Total distributions to shareholders

     (474,213 )     —    
    


 


CAPITAL SHARE TRANSACTIONS:

                

Proceeds from shares sold

     4,011,503,336       1,146,153,031  

Cost of shares redeemed

     (230,049,073 )     (265,660,262 )
    


 


Net increase in net assets from capital share transactions

     3,781,454,263       880,492,769  
    


 


INCREASE IN NET ASSETS

     4,136,476,743       1,060,479,380  

NET ASSETS:

                

Beginning of year

     1,726,854,901       666,375,521  
    


 


End of year

   $ 5,863,331,644     $ 1,726,854,901  
    


 


Undistributed net investment income (accumulated net investment loss) included in net assets at end of year

   $ 9,816,919     $ (240,476 )
    


 


SHARES ISSUED AND REDEEMED:

                

Shares sold

     408,600,000       158,400,000  

Shares redeemed

     (24,000,000 )     (36,000,000 )
    


 


Net increase in shares outstanding

     384,600,000       122,400,000  
    


 


 

See notes to financial statements.

 

16

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights

 

iSHARES®, INC.

(For a share outstanding throughout each period)

 

     iShares MSCI Japan Index Fund

 
    

Year ended

Aug. 31, 2004


   

Year ended

Aug. 31, 2003


   

Year ended

Aug. 31, 2002


   

Year ended

Aug. 31, 2001


   

Year ended

Aug. 31, 2000


 

Net asset value, beginning of year

   $ 8.29     $ 7.77     $ 9.07     $ 13.82     $ 13.22  
    


 


 


 


 


Income from investment operations:

                                        

Net investment income (loss)a

     0.03       0.00c       (0.01 )     (0.01 )     (0.05 )

Net realized and unrealized gain (loss)

     1.57       0.52       (1.29 )     (4.74 )     1.21  
    


 


 


 


 


Total from investment operations

     1.60       0.52       (1.30 )     (4.75 )     1.16  
    


 


 


 


 


Less distributions from:

                                        

Net investment income

     (0.00 )c     —         —         —         (0.00 )c

Net realized gain

     —         —         —         —         (0.53 )

Return of capital

     —         —         —         —         (0.03 )
    


 


 


 


 


Total distributions

     (0.00 )c     —         —         —         (0.56 )
    


 


 


 


 


Net asset value, end of year

   $ 9.89     $ 8.29     $ 7.77     $ 9.07     $ 13.82  
    


 


 


 


 


Total return

     19.32 %     6.69 %     (14.33 )%     (34.37 )%     8.75 %
    


 


 


 


 


Ratios/Supplemental data:

                                        

Net assets, end of year (000s)

   $ 5,863,332     $ 1,726,855     $ 666,376     $ 527,899     $ 787,790  

Ratio of expenses to average net assets

     0.64 %d     0.84 %     0.84 %     0.84 %     0.88 %

Ratio of net investment income (loss) to average net assets

     0.28 %e     0.03 %     (0.12 )%     (0.11 )%     (0.32 )%

Portfolio turnover rateb

     5 %     2 %     2 %     21 %     22 %

a Based on average shares outstanding throughout the period.
b Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.
c Rounds to less than $0.01.
d Ratio of expenses to average net assets prior to reimbursed distribution fees for the year ended August 31, 2004 was 0.78%.
e Ratio of net investment income to average net assets prior to reimbursed distribution fees for the year ended August 31, 2004 was 0.14%.

 

See notes to financial statements.

 

FINANCIAL HIGHLIGHTS

  17


Notes to the Financial Statements

 

iSHARES®, INC.

 

1. SIGNIFICANT ACCOUNTING POLICIES

 

iShares, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Company was incorporated under the laws of the State of Maryland on September 1, 1994 pursuant to amended and restated Articles of Incorporation. As of August 31, 2004, the Company offered 24 investment portfolios or funds.

 

These financial statements relate only to the iShares MSCI Japan Index Fund (the “Fund”).

 

The Fund’s investment objective is to seek investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded equity securities in the aggregate in the Japanese equity market, as measured by the MSCI Japan Index compiled by Morgan Stanley Capital International Inc. (“MSCI”). The investment adviser utilizes a “passive” or index approach to achieve the Fund’s investment objective. The Fund 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 affecting these companies.

 

The Fund invests in the securities of foreign issuers of a single country, which may involve certain considerations and risks not typically associated with securities of U.S. issuers. 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 of the Fund; less publicly available information about issuers; the imposition of withholding or other taxes; higher transaction and custody costs; settlement delays and risk of loss attendant in settlement procedures; difficulties in enforcing contractual obligations; lesser regulation of securities markets; different accounting, disclosure and reporting requirements; more substantial governmental involvement in the economy; higher inflation rates; greater social, economic and political uncertainties; the risk of nationalization or expropriation of assets; and the risk of war.

 

Under the Company’s organizational documents, the Fund’s officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.

 

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 that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

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

 

SECURITY VALUATION

 

Portfolio securities for which market prices are readily available are valued using the official closing price of the primary exchange on which they are traded. The methodology used to determine such closing prices is generally the same as the one used by MSCI in calculating the benchmark index used by the Fund. Short-term investments and debt securities maturing in 60 days or less are valued at amortized cost. Securities in investment companies, other than investment companies whose shares are traded on an exchange, are valued at the investment company’s published net asset value per share. Any securities, including restricted securities or other assets for which market quotations are not readily available, or for which a significant event has occurred since the time of the most recent market quotation, are valued in accordance with fair value pricing policies approved by the Company’s Board of Directors (the “Board”).

 

18

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

SECURITY TRANSACTIONS AND INCOME RECOGNITION

 

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.

 

FOREIGN CURRENCY TRANSLATION

 

The Fund’s accounting records are maintained in U.S. dollars. 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 currencies, investment securities and other assets and liabilities denominated in foreign currency are generally converted into U.S. dollars using the same exchange rate utilized by MSCI in the calculation of the MSCI Japan Index (currently, the exchange rate as of 4:00 p.m. London 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.

 

The 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 Fund as a component of realized and unrealized gains and losses from investments for financial reporting purposes.

 

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. 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. Dividends and distributions are paid in U.S. dollars and cannot be automatically reinvested in additional shares of the Fund.

 

At August 31, 2004, the tax year-end of the Fund, the components of distributable earnings (accumulated losses) on a tax basis consisted of undistributed ordinary income of $12,922,546, unrealized appreciation of $225,179,965 and capital and other losses of $82,616,713, for total distributable earnings of $155,485,798.

 

The differences between the components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Statement of Assets and Liabilities are primarily due to differing treatments of wash sales.

 

For the year ended August 31, 2004, the tax characterization of distributions paid for the Fund was equal to the book characterization of distributions paid. The total distributions and distributions per share are disclosed in the accompanying Statements of Changes in Net Assets and the Financial Highlights for the Fund.

 

FEDERAL INCOME TAXES

 

The Fund is treated as an entity separate from the Company’s other funds for federal income tax purposes. It is the policy of the Fund to qualify as a regulated investment company by complying with the provisions applicable to regulated investment companies, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, and to annually distribute substantially all of its net income and any net gains (taking into account any capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income and excise taxes. Accordingly, no provision for federal income taxes was required for the year ended August 31, 2004.

 

NOTES TO THE FINANCIAL STATEMENTS

  19


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

From November 1, 2003 to August 31, 2004, the Fund incurred net realized capital losses and net foreign currency losses of $7,869,800. As permitted by tax regulations, the Fund has elected to defer those losses and treat them as arising in the year ending August 31, 2005.

 

At August 31, 2004, the tax year-end of the Fund, the Fund had tax basis net capital loss carryforwards of $2,959,030, $62,572,173, $3,621,148 and $5,594,562 expiring in 2009, 2010, 2011 and 2012, respectively. Such losses may be applied against any net realized taxable gains in each succeeding year, or until their respective expiration date, whichever occurs first.

 

If the Fund owns shares in certain foreign investment entities, referred to, under U.S. tax law, as “passive foreign investment companies”, the Fund may elect to mark-to-market annually the shares of the passive foreign investment companies, and would be required to distribute to shareholders any such mark-to-market gains.

 

At August 31, 2004, the cost of investments for federal income tax purposes was $7,040,943,933. Net unrealized appreciation aggregated $225,197,267, of which $430,909,893 represented gross unrealized appreciation on securities and $205,712,626 represented gross unrealized depreciation on securities.

 

REPURCHASE AGREEMENTS

 

The Fund may enter into repurchase agreements with banks and securities dealers. These transactions involve the purchase of securities with a simultaneous commitment to resell the securities to the bank or the dealer at an agreed-upon date and price. A repurchase agreement is accounted for as an investment by the Fund, collateralized by securities, which are delivered to the Fund’s custodian or to an agent bank under a tri-party agreement. The securities are marked-to-market daily and additional securities are acquired as needed, to ensure that their value equals or exceeds the repurchase price plus accrued interest. At August 31, 2004, a portion of the Fund’s cash collateral for securities on loan was invested in repurchase agreements as disclosed in the Fund’s Schedule of Investments. For further information, see Note 5, below.

 

2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

 

Pursuant to an Investment Advisory Agreement with the Company, as amended on December 28, 2001, Barclays Global Fund Advisors (“BGFA”) manages the investment of the Fund’s assets. BGFA is a California corporation indirectly owned by Barclays Bank PLC. Under the Investment Advisory Agreement, BGFA is responsible for all of the expenses (“Covered Expenses”) of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except interest, taxes, brokerage commissions and other expenses connected with the executions of portfolio transactions, distribution fees and extraordinary expenses.

 

For its investment advisory services to the Fund, BGFA is entitled to an annual investment advisory fee based on the Fund’s allocable portion of the aggregate net assets of all the funds offered by the Company (except for the iShares MSCI Brazil, iShares MSCI Emerging Markets, iShares MSCI Pacific ex-Japan, iShares MSCI South Africa, iShares MSCI South Korea, and iShares MSCI Taiwan Index Funds) as follows:

 

Investment

Advisory Fee


  

Aggregate Net Assets


0.59%    First $7 billion
0.54    Over $7 billion, up to and including $11 billion
0.49    Over $11 billion

 

20

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

Barclays Global Investors, N.A. (“BGI”) has a license agreement with MSCI for the use of the MSCI Japan Index. Under a sub-license agreement between BGI and the Fund, the fee for the use of the MSCI Japan Index is paid directly by BGI to MSCI.

 

Investors Bank & Trust Company (“Investors Bank”) serves as administrator, custodian and transfer agent for the Company. As compensation for its services, Investors Bank receives certain out-of-pocket costs, transaction fees, and asset-based fees, which are accrued daily and paid monthly. These fees are Covered Expenses as defined above.

 

BGI serves as securities lending agent for the Company. BGI is an affiliate of BGFA, the Fund’s investment adviser. As securities lending agent, BGI receives, as fees, a share of the income earned on investment of the cash collateral received for the loan of securities. For the year ended August 31, 2004, BGI earned securities lending agent fees of $1,436,206.

 

SEI Investments Distribution Co. (the “Distributor”) serves as the Fund’s underwriter and distributor of the shares of the Fund, pursuant to a Distribution Agreement with the Company. Prior to July 1, 2004, the Company had in effect a distribution plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Distributor was entitled to receive a distribution fee from the Fund, not to exceed 0.25% of the average daily net assets of the Fund, for distribution-related expenses and services. At the Board meeting held on March 16, 2004, the Directors voted to terminate the Plan, effective July 1, 2004.

 

For the year ended August 31, 2004, the Distributor voluntarily reimbursed for distribution fees in the amount of $5,182,221.

 

Pursuant to Rule 17a-7 of the 1940 Act, the Fund executed cross trades for the year ended August 31, 2004. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment adviser. The Board reviewed all such transactions executed during the first ten months of the fiscal year and concluded that they were in compliance with the requirements and restrictions set forth by Rule 17a-7. The Board is scheduled at its next meeting to review all such transactions executed during the last two months of the fiscal year.

 

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission, the Fund may invest in the Institutional Shares of the Institutional Money Market Fund (“IMMF”) and Prime Money Market Fund (“PMMF”) of Barclays Global Investors Funds. The IMMF and PMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Money Market Master Portfolio and Prime Money Market Master Portfolio (collectively the “Master Portfolios”), respectively, which are managed by BGFA, the Fund’s investment adviser. The IMMF and PMMF are open-end money market funds available to institutional and accredited investors, including other investment companies managed by BGFA. The IMMF and PMMF seek a high level of income consistent with liquidity and the preservation of capital. While the IMMF and PMMF do not directly charge an investment advisory fee, the Master Portfolios in which they invest do charge an investment advisory fee. Income distributions from the IMMF and PMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Fund from temporary cash investments or from investment of securities lending collateral are recorded as either interest income or securities lending income, respectively, in the accompanying Statement of Operations.

 

NOTES TO THE FINANCIAL STATEMENTS

  21


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

The following table provides information about the investments of the Fund in shares of issuers affiliated with BGFA for the year ended August 31, 2004, including income earned from affiliated issuers.

 

Name of Affiliated Issuer


  

Number of

Shares Held

Beginning

of Year

(in 000S)


  

Gross

Additions

(in 000S)


  

Gross

Reductions

(in 000S)


  

Number of

Shares Held

End of Year

(in 000S)


  

Value At

End of Year


  

Interest

Income


IMMF

   580    115,632    113,057    3,155    $ 3,154,932    $ 24,325

 

The Fund invested cash collateral from securities on loan in the IMMF and PMMF. Due to the nature of the structure of the joint account used for the investment of the collateral for securities on loan, the information reported above for the Fund does not include the Fund’s holdings of the IMMF and PMMF in connection with the investment of collateral for securities on loan.

 

As of August 31, 2004, certain directors and officers of the Company are also officers of BGI.

 

3. INVESTMENT PORTFOLIO TRANSACTIONS

 

Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the year ended August 31, 2004, aggregated $222,888,889 and $204,256,982, respectively.

 

In-kind purchases and sales for the year ended August 31, 2004, aggregated $3,997,923,915 and $229,374,876, respectively.

 

4. CAPITAL SHARE TRANSACTIONS

 

The Company has authorized 10.9 billion shares of $.001 par value capital stock. At August 31, 2004, 2,124,600,000 shares were authorized to the Fund.

 

The Company issues and redeems capital shares of the Fund only in aggregations of a specified number of shares (each, a “Creation Unit”) at net asset value. Except when aggregated in Creation Units, shares are not redeemable. Transactions in capital shares for the Fund are disclosed in detail in the Statements of Changes in Net Assets.

 

The consideration for the purchase of Creation Units of the Fund generally consists of the in-kind deposit of a designated portfolio of equity securities constituting a portfolio sampling representation of the MSCI Japan Index and an amount of cash. A purchase transaction fee and a redemption transaction fee are charged to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units.

 

5. LOANS OF PORTFOLIO SECURITIES

 

The Fund may lend its investment securities to approved borrowers such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received is required to have a value equal of 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.

 

22

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Notes to the Financial Statements (Continued)

 

iSHARES®, INC.

 

The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required, or may not return the securities when due.

 

As of August 31, 2004, the Fund had loaned securities which were collateralized by cash. The cash collateral received was invested in a joint account with other funds managed by BGFA, which invests in securities with remaining maturities of 397 days or less, repurchase agreements and money market mutual funds including money market funds managed by BGFA. Repurchase agreements held in the joint account are fully collateralized by U.S. Government securities. Income from the joint account is allocated daily to the Fund, based on the Fund’s portion of the total cash collateral received. The market value of the securities on loan at August 31, 2004, and the value of the related collateral received are disclosed in the Statement of Assets and Liabilities. Securities lending income, which is disclosed in the Fund’s Statement of Operations, is presented net of rebates paid to, or fees paid by, borrowers.

 

NOTES TO THE FINANCIAL STATEMENTS

  23


Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors of

iShares, Inc.

 

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statement of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the iShares MSCI Japan Index Fund, a portfolio of the iShares MSCI Index Fund Series (the “Fund”) at August 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

The financial statements of the Funds as of August 31, 2000 and for the year then ended were audited by other auditors, whose report dated October 13, 2000 expressed an unqualified opinion on those statements.

 

PricewaterhouseCoopers LLP

San Francisco, California

October 22, 2004

 

24

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Tax Information (Unaudited)

 

iSHARES®, INC.

 

For the year ended August 31, 2004, the iShares MSCI Japan Index Fund earned foreign source income of $36,444,518 and paid foreign taxes of $1,973,500 which it intends to pass through to its shareholders pursuant to Section 853 of the Internal Revenue Code (the “Code”).

 

Under Section 854(b)(2) of the Code, the Fund hereby designates $14,896,042 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the year ended August 31, 2004.

 

In January 2005, shareholders will receive Form 1099-DIV which will include their share of qualified dividends distributed during the calendar year 2004. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.

 

TAX INFORMATION

  25


Supplemental Information (Unaudited)

 

iSHARES®, INC.

 

The table that follows presents information about the differences between the daily market price on secondary markets for shares of the iShares MSCI Japan Index Fund (the “Fund”) and the Fund’s net asset value. Net asset value, or “NAV”, is the price per share at which the Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The “Market Price” of the Fund is determined using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of the Fund is listed for trading, as of the time that the Fund’s NAV is calculated. The Fund’s Market Price 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.

 

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

 

The following information shows the frequency distributions of premiums and discounts for the Fund, for the period from January 1, 1999 through June 30, 2004, the date of the most recent calendar quarter-end.

 

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

 

iShares MSCI Japan Index Fund

Period Covered: January 1, 1999 through June 30, 2004

 

Premium/Discount Range


  

Number

of Days


  

Percentage of

Total Days


 

Greater than 3.0%

   7    0.51 %

Greater than 2.5% and Less than 3.0%

   12    0.87  

Greater than 2.0% and Less than 2.5%

   32    2.32  

Greater than 1.5% and Less than 2.0%

   63    4.57  

Greater than 1.0% and Less than 1.5%

   171    12.39  

Greater than 0.5% and Less than 1.0%

   262    18.99  

Between 0.5% and - 0.5%

   538    38.97  

Less than – 0.5% and Greater than – 1.0%

   159    11.52  

Less than – 1.0% and Greater than – 1.5%

   80    5.80  

Less than – 1.5% and Greater than – 2.0%

   39    2.83  

Less than – 2.0% and Greater than – 2.5%

   7    0.51  

Less than – 2.5%

   10    0.72  
    
  

     1,380    100.00 %
    
  

 

26

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Director Information (Unaudited)

 

iSHARES®, INC.

 

The Board of Directors has responsibility for the overall management and operations of the Company, including general supervision of the duties performed by BGFA and other service providers. Each Director serves until his or her successor is duly elected or appointed and qualified.

 

iShares, Inc., iShares Trust, Barclays Global Investors Funds and Master Investment Portfolio are considered to be members of the same fund complex, as defined in Form N-1A under the 1940 Act. Each Director of iShares, Inc. also serves as a Trustee for iShares Trust and oversees 97 portfolios within the fund complex. In addition, Lee T. Kranefuss and Richard K. Lyons each serves as a Trustee for Barclays Global Investors Funds and Master Investment Portfolio and oversees 124 portfolios within the fund complex.

 

Unless otherwise noted in the tables below, the address for each Director is 45 Fremont Street, San Francisco, California 94105. Additional information about the Funds’ Directors may be found in the Funds’ Statement of Additional Information, which is available without charge upon request by calling toll-free 1-800-474-2737.

 

Interested Directors

 

Name and Age


  

Position(s),

Length of Service


  

Principal Occupation(s)

During Past 5 Years


  

Other Directorships Held


* Lee T. Kranefuss (43)   

Director,

Chairman, and

President (since

June 18, 2003)

   Chief Executive Officer of the Intermediary Investors and Exchange Traded Products Business BGI (since 2003); Chief Executive Officer of the individual Investor Business of BGI (1997-2003).    Trustee (since June 18, 2003) of iShares Trust; Board of Trustees (since 2001) for Barclays Global Investors Funds and Master Investment Portfolio.
* Nathan Most (90)   

Director (since

December 16, 1996)

   Consultant to BGI (1998-2002), American Stock Exchange (1996-2000) and the Hong Kong Stock Exchange (since 1998); Consultant to the Amsterdam Stock Exchange (1997-1998); Consultant to the Pacific Stock Exchange (1997-1998).    Trustee (since 2000) and President (2000-2002) of iShares Trust.
* John E. Martinez (42)   

Director (since

December 5, 2003)

   Co-CEO of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); CEO of Capital Markets Group of BGI (1996-2001).    Trustee (since December 5, 2003) of iShares Trust; Director (since November 2003) of Barclays Global Investors UK Holdings.

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

 

DIRECTOR INFORMATION

  27


Director Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

Independent Directors

 

Name and Age


  

Position(s),

Length of Service


  

Principal Occupation(s)

During Past 5 Years


  

Other Directorships Held


John B. Carroll (69)   

Director (since

December 16, 1996)

   Retired Vice President of Investment Management (1984-2000) of Verizon Corporation; Advisory Board member of Ibbotson Associates (1992-1998); former Vice Chairman and Executive Committee Member (1994-1998) of the Committee on Investment of Employee Benefit Assets of the Financial Executive Institute.    Trustee (since 2002) of iShares Trust; Trustee and member of the Executive Committee (since 1991) of The Common Fund Institutional Funds, a non-profit organization; Member of the Board of Managers of JP Morgan Private Equity Funds.
Richard K. Lyons (43)   

Director (since

February 28, 2002)

   Professor, University of California, Berkeley: Haas School of Business (since 1993); Consultant for IMF World Bank, Federal Reserve Bank, and Citibank N.A. (since 2000).    Trustee (since 2000) of iShares Trust; Director (since 2003) of the BGI Cayman Prime Money Market Fund, Ltd.; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Board of Trustees: Matthews Asian Funds since 1995 (oversees 6 portfolios).
George C. Parker (65)   

Director (since

February 28, 2002)

   Dean Witter Distinguished Professor of Finance (since 1994); Associate Dean for Academic Affairs, Director of MBA Program, and Professor, Stanford University: Graduate School of Business (1993-2001).    Trustee (since 2000) of iShares Trust; Director (since 1985) of Bailard, Biehl and Kaiser, Inc.; Director (since 1978) of California Casualty Group of Insurance Companies; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (1994-2002) of Dresdner/RCM Mutual Funds; Director (since 1999) of Tyon Ranch Company.

 

28

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


Director Information (Unaudited) (Continued)

 

iSHARES®, INC.

 

Independent Directors (Continued)

 

Name and Age


  

Position(s),

Length of Service


  

Principal Occupation(s)

During Past 5 Years


  

Other Directorships Held


W. Allen Reed (57)    Director (since December 16, 1996)    President and Chief Executive Officer (since 1994) of General Motors Investment Management Corporation.    Trustee (since 2002) of iShares Trust; Director (since 1994) of General Motors Investment Management Corporation; Director (1995-1998) of Taubman Centers, Inc. (a real estate investment trust); Director (since 1992) of FLIR Systems (an imaging technology company); Director (since 1994) of General Motors Acceptance Corporation; Director (since 1994) of GMAC Insurance Holdings, Inc.; Director (since 1995) of Global Emerging Markets Fund; Director (since 2000) of Temple Inland Industries; Chairman (since 1995) of the Investment Advisory Committee of Howard Hughes Medical Institute.

 

Officer

 

Name and Age


  

Position


  

Principal Occupation(s)

During Past 5 Years


  

Directorships Held by Officers


Michael A. Latham (39)    Secretary, Treasurer and Principal Financial Officer (since February 28, 2002)    Chief Operating Officer of the Intermediary Investors and Exchange Traded Products Business of BGI (since 2003); Director of Mutual Fund Delivery in the U.S. Individual Investor Business of BGI (2000-2003); Head of Operations, BGI Europe (1997-2000).    None.

 

DIRECTOR INFORMATION

  29


The iShares® Family of Funds

 

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

 

iShares S&P Domestic Index Funds

iShares S&P 1500 (ISI)

iShares S&P 500 (IVV)

iShares S&P 500/BARRA Growth (IVW)

iShares S&P 500/BARRA Value (IVE)

iShares S&P MidCap 400 (IJH)

iShares S&P MidCap 400/BARRA Growth (IJK)

iShares S&P MidCap 400/BARRA Value (IJJ)

iShares S&P SmallCap 600 (IJR)

iShares S&P SmallCap 600/BARRA Growth (IJT)

iShares S&P SmallCap 600/BARRA Value (IJS)

iShares S&P 100 (OEF)

iShares Sector and Specialty Index Funds

iShares Cohen & Steers Realty Majors (ICF)

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

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

iShares Dow Jones U.S. Consumer Non-Cyclical Sector (IYK)

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

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

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

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

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

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

iShares Dow Jones Select Dividend (DVY)

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

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

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

iShares Dow Jones Transportation Average (IYT)

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

iShares Goldman Sachs Natural Resources (IGE)

iShares Goldman Sachs Networking (IGN)

iShares Goldman Sachs Semiconductor (IGW)

iShares Goldman Sachs Software (IGV)

iShares Goldman Sachs Technology (IGM)

iShares Nasdaq Biotechnology (IBB)

iShares S&P Global Energy Sector (IXC)

iShares S&P Global Financials Sector (IXG)

iShares S&P Global Healthcare Sector (IXJ)

iShares S&P Global Technology Sector (IXN)

iShares S&P Global Telecommunications Sector (IXP)

iShares Russell Index Funds

iShares Russell 3000 (IWV)

iShares Russell 3000 Growth (IWZ)

iShares Russell 3000 Value (IWW)

iShares Russell 1000 (IWB)

iShares Russell 1000 Growth (IWF)

iShares Russell 1000 Value (IWD)

iShares Russell Midcap (IWR)

iShares Russell Midcap Growth (IWP)

iShares Russell Midcap Value (IWS)

iShares Russell 2000 (IWM)

iShares Russell 2000 Growth (IWO)

iShares Russell 2000 Value (IWN)

iShares International Index Funds

iShares FTSE/Xinhua China 25 (FXI)

iShares MSCI Australia (EWA)

iShares MSCI Austria (EWO)

iShares MSCI Belgium (EWK)

iShares MSCI Brazil (EWZ)

iShares MSCI Canada (EWC)

iShares MSCI EAFE (EFA)

iShares MSCI Emerging Markets (EEM)

iShares MSCI EMU (EZU)

iShares MSCI France (EWQ)

iShares MSCI Germany (EWG)

iShares MSCI Hong Kong (EWH)

iShares MSCI Italy (EWI)

iShares MSCI Japan (EWJ)

iShares MSCI Malaysia (EWM)

iShares MSCI Mexico (EWW)

iShares MSCI Netherlands (EWN)

iShares MSCI Pacific ex-Japan (EPP)

iShares MSCI Singapore (EWS)

iShares MSCI South Africa (EZA)

iShares MSCI South Korea (EWY)

iShares MSCI Spain (EWP)

iShares MSCI Sweden (EWD)

iShares MSCI Switzerland (EWL)

iShares MSCI Taiwan (EWT)

iShares MSCI United Kingdom (EWU)

iShares S&P Europe 350 (IEV)

iShares S&P Global 100 (IOO)

iShares S&P Latin America 40 (ILF)

iShares S&P/TOPIX 150 (ITF)

iShares Bond Funds

iShares Lehman Aggregate (AGG)

iShares Lehman TIPS (TIP)

iShares Lehman 1-3 Year Treasury (SHY)

iShares Lehman 7-10 Year Treasury (IEF)

iShares Lehman 20+ Year Treasury (TLT)

iShares GS $ InvesTop Corporate (LQD)

iShares NYSE Index Funds

iShares NYSE 100 (NY)

iShares NYSE Composite (NYC)

iShares Morningstar Index Funds

iShares Morningstar Large Core (JKD)

iShares Morningstar Large Growth (JKE)

iShares Morningstar Large Value (JKF)

iShares Morningstar Mid Core (JKG)

iShares Morningstar Mid Growth (JKH)

iShares Morningstar Mid Value (JKI)

iShares Morningstar Small Core (JKJ)

iShares Morningstar Small Growth (JKK)

iShares Morningstar Small Value (JKL)

 

iShares is a registered trademark of Barclays Global Investors, N.A. The iShares Funds are not sponsored, endorsed or issued by Goldman, Sachs & Co. or Lehman Brothers, nor are they sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., Dow Jones & Company, Inc., FTSE/ Xinhua Index Limited, Morgan Stanley Capital International, Morningstar, Inc., The Nasdaq Stock Market, Inc., New York Stock Exchange, Inc., Frank Russell Company, or Standard & Poor’s. None of these companies make any representation regarding the advisability of investing in the iShares Funds. Neither SEI nor BGI, nor any of their affiliates, are affiliated with the companies listed above. “GS $ InvesTop” and “Goldman Sachs®” are trademarks of Goldman, Sachs & Co.

 

An investment in the Fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

 

This advertising section does not constitute part of the 2004 Annual Report.

 

1353-iS-0904

 

30

  2004 iSHARES ANNUAL REPORT TO SHAREHOLDERS


The iShares Funds are distributed by SEI Investments Distribution Co. (SEI). Barclays Global Fund Advisors (BGFA) serves as an adviser to the iShares Funds. Barclays Global Investors Services (BGIS) assists in the marketing of the iShares Funds. BGFA and BGIS are subsidiaries of Barclays Global Investors, N.A., a wholly owned subsidiary of Barclays Bank PLC, none of which is affiliated with SEI.

 

The iShares Funds 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 the iShares Funds.

 

©2004 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.

 

Investing involves risk, including possible loss of principal.

 

A description of the policies that the Fund uses to determine how to vote proxies relating to portfolio securities and information about how the Fund voted proxies relating to portfolio securities during the most recent twelve month period ended June 30, 2004 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Fund’s website at www.iShares.com; and on the Securities and Exchange Commission’s website at www.sec.gov.

 

Beginning January 31, 2005, the Fund will be filing its complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarter of each fiscal year on Form N-Q, which when filed, will be available on the Commission’s web-site at www.sec.gov. When filed, the Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also discloses its complete schedules of portfolio holdings on a daily and monthly basis on the Fund’s website at www.iShares.com.

 

This report is intended for the Fund’s shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.

 

LOGO   LOGO


Item 2. Code of Ethics.

 

As of August 31, 2004, iShares, Inc. (the “Registrant”) had adopted a code of ethics that applies to persons appointed by the Registrant’s Board of Directors as the Chief Executive Officer, President, Chief Financial Officer, Treasurer and/or Chief Accounting Officer, and any persons performing similar functions. For the fiscal year ended August 31, 2004, there were no amendments to any provision of this code of ethics, nor were there any waivers granted from any provision of this code of ethics. A copy of this code of ethics is filed with this Form N-CSR under Item 11(a)(1).

 

Item 3. Audit Committee Financial Expert.

 

The Registrant’s Board of Directors has determined that the Registrant has more than one audit committee financial expert, as that term is defined under Item 3(b) and 3(c), serving on its audit committee. The audit committee financial experts serving on the Registrant’s audit committee are John B. Carroll, Richard K. Lyons, George C. Parker and W. Allen Reed, all of whom are “independent”, as that term is defined under Item 3(a)(2). Richard K. Lyons holds a PhD in Economics and qualifies as an audit committee financial expert through his many years of university-level (graduate) teaching of accounting and finance-related subjects, his many years of research in the same subjects (including mutual funds), and his extensive experience serving as independent director and as a member of various mutual fund audit committees.

 

Item 4. Principal Accountant Fees and Services.

 

  (a) Audit Fees – The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $295,680 and $324,000 for the fiscal years ended August 31, 2003 and August 31, 2004, respectively.

 

  (b) Audit-Related Fees – There were no fees billed for the fiscal years ended August 31, 2003 and August 31, 2004 for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under (a) of this Item.

 

  (c) Tax Fees – The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for the review of the Registrant’s tax returns and excise tax calculations, were $153,120 and $158,880 for the fiscal years ended August 31, 2003 and August 31, 2004, respectively

 

  (d) All Other Fees – There were no other fees billed for the fiscal years ended August 31, 2003 and August 31, 2004 for products and services provided by the principal accountant, other than the services reported in (a) through (c) of this Item.

 

  (e) (1) The Registrant’s audit committee charter, as most recently amended in June 2004, provides that the audit committee is responsible for the approval, prior to appointment, of the engagement of the principal accountant to annually audit and provide their opinion on the Registrant’s financial statements. The audit committee must also approve, prior to appointment, the engagement of the principal accountant to provide non-audit services to the Registrant or to any entity controlling, controlled by or under common control with the Registrant’s investment adviser (“Adviser Affiliate”) that provides services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant.

 

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

 

  (f) None of the hours expended on the principal accountant’s engagement to audit the Registrant’s financial statements for the fiscal year ended August 31, 2004 were attributable to work performed by persons other than the principal accountant’s full-time, permanent employees.


  (g) The aggregate non-audit fees billed by the Registrant’s principal accountant for services rendered to the Registrant, and rendered to the Registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant for the fiscal years ended August 31, 2003 and August 31, 2004 were $1,419,770 and $992,543 respectively.

 

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

 

Item 5. Audit Committee of Listed Registrants.

 

The Registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act and has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are John B. Carroll, Richard K. Lyons, George C. Parker and W. Allen Reed.

 

Item 6. Schedule of Investments.

 

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

 

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

 

Not applicable to the Registrant.

 

Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable to the Registrant.

 

Item 9. Submission of Matters to a Vote of Security Holders.

 

There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Directors.

 

Item 10. Controls and Procedures.

 

(a) The President and Principal Financial Officer have concluded that, based on their evaluation as of a date within 90 days of the filing date of this report, the disclosure controls and procedures of the Registrant (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are reasonably designed to achieve the purposes described in the attached certification, Section 4(a).

 

(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

Item 11. Exhibits.

 

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

 

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

 

(b) Section 906 Certifications are attached.


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    iShares, Inc.
    By:  

/s/    Lee T. Kranefuss        


   

Lee T. Kranefuss, President

    Date:  

November 5, 2004

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

    By:  

/s/    Lee T. Kranefuss        


   

Lee T. Kranefuss, President

    Date:  

November 5, 2004

 

    By:  

/s/    Michael A. Latham        


   

Michael A. Latham, Principal Financial Officer

    Date:  

November 5, 2004

EX-99.CODEETHICS 2 dex99codeethics.htm CODE OF ETHICS Code of Ethics

Exhibit 99.CoDEETHICS

 

N-CSR Exhibit for Item 11(a)(1): CODE OF ETHICS

 

iShares Trust and iShares, Inc.

 

CODE OF ETHICS FOR SENIOR OFFICERS

 

INTRODUCTION

 

Section 406 of the Sarbanes-Oxley Act of 2002 directed the Securities and Exchange Commission (the “SEC”) to adopt rules requiring companies to disclose whether or not they have adopted a code of ethics for senior financial officers, and if not, why not. The SEC has adopted rules requiring registered investment companies to make such disclosures. These rules extend coverage to chief executive officers as well as senior financial officers, and require disclosure of waivers or substantive changes in any code. This Code of Ethics (this “Code”) addresses these new requirements, and is different in nature and scope from the code of ethics that was previously adopted as required under Section 17(j) of the Investment Company Act of 1940 (the “1940 Act”) and Rule 17j-1 thereunder, which focuses on personal trading activities.

 

POLICY STATEMENT

 

It is the policy of iShares Trust and iShares, Inc. (collectively the “Funds” or each individually a “Fund”) to conduct its affairs in accordance with all applicable laws and governmental rules and regulations. This Code has been adopted by the Funds’ Board of Trustees and Board of Directors (together, the “Board”) and applies to the persons appointed by the Board as Chief Executive Officer, President, Chief Financial Officer, Treasurer and/or Chief Accounting Officer, and any persons performing similar functions, all as identified in Exhibit A, as modified from time to time (“Covered Officers”). Each Covered Officer is personally responsible for adhering to the standards and restrictions imposed by applicable laws, rules and regulations, including those relating to affiliated transactions, accounting and auditing matters. This Code is designed to promote:

 

  honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

  full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund;

 

  compliance with applicable governmental laws, rules and regulations;

 

  prompt internal reporting to the appropriate person of violations of this Code; and

 

  accountability for adherence to this Code.

 

This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide Covered Officers. In this regard, each Covered Officer must:

 

  act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Fund’s policies;

 

  observe both the form and spirit of laws and governmental rules and regulations, and accounting standards;

 

  adhere to high standards of business ethics; and

 

  place the interests of the Fund and its shareholders before the Covered Officer’s own personal interests.


All activities of Covered Officers should be guided by and adhere to these fiduciary standards. Covered Officers should not hesitate to use available resources whenever it is desirable to seek clarification. Covered Officers are encouraged to consult with the Fund’s chief legal officer or, if none, legal counsel to the Fund’s investment adviser (“Adviser”) (“Legal Counsel”), or other appropriate resources, when in doubt about the best course of action in a particular situation.

 

CONFLICTS OF INTEREST

 

Covered Officers should handle ethically actual and apparent conflicts of interest. A “conflict of interest” occurs when an individual’s personal interests actually or potentially interfere with the interests of the Fund or its shareholders. A conflict of interest can arise when a Covered Officer takes actions or has interests that may make it difficult to perform his duties as a Fund officer objectively and effectively. Service to the Fund should never be subordinated to either a direct or indirect personal gain or advantage.

 

Certain conflicts of interests arise out of the relationships between Covered Officers and the Fund that already are subject to conflict of interest provisions in the 1940 Act and the Investment Advisers Act. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as “affiliated persons” of the Fund. The Funds’ and the Adviser’s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Actual or apparent conflicts may arise from, or as a result of, the contractual relationship between the Fund and the Adviser, administrator or other service provider of which the Covered Officers are also officers or employees (the “Employer”). It is recognized by the Board that the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on the Employer and the Fund. The Board recognizes that the participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Employer, and is consistent with the Board’s understanding of the performance by the Covered Officers of their duties as officers of the Fund. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of other investment companies advised or serviced by the Employer and the codes of those investment companies will apply to the Covered Officers acting in those distinct capacities. Nonetheless, each Covered Officer recognizes that, as an Officer of the Fund, he or she has a duty to act in the best interests of the Fund and its shareholders.

 

If a Covered Officer believes that his or her responsibilities as an officer or employee of the Employer are likely to materially compromise his or her objectivity or ability to perform the duties of his role as an officer of the Fund, he or she should consult with Legal Counsel, the Fund’s outside counsel, or counsel to the Directors who are not “interested persons” of the Fund as defined in the 1940 Act (“Independent Directors”), as appropriate. Under appropriate circumstances, a Covered Officer should also consider whether to present the matter to the Board or an appropriate committee thereof.

 

In addition, each Covered Officer must:

 

  avoid conflicts of interest wherever possible;

 

  not use his or her personal influence or personal relationships to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund;

 

  not engage in personal, business or professional relationships or dealings which would impair his or her independence of judgment or adversely affect the performance of his or her duties in the best interests of the Fund and its shareholders; and

 

  not cause the Fund to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit the Fund.


ACCURACY OF REPORTS, RECORDS AND ACCOUNTS

 

All Covered Officers are responsible for the accuracy of the records and reports that they are responsible for maintaining. Each Covered Officer shall seek to obtain additional resources if he believes that existing resources are inadequate to enable the Fund to provide full, fair and accurate financial information and other disclosure to regulators and Fund shareholders. Accurate information is essential to the Fund’s ability to meet legal and regulatory obligations. The books and records of the Fund shall meet the highest standards and accurately reflect the true nature of the transactions they record. The Covered Officers must not create false or misleading documents or accounting, financial or electronic records for any purpose, and must not direct any other person to do so. If a Covered Officer becomes aware that information filed with the SEC or made available to the public contains any false or misleading information or omits to disclose necessary information, he shall promptly report it to Legal Counsel for a determination as to what, if any, corrective action is necessary or appropriate.

 

No undisclosed or unrecorded account or fund shall be established for any purpose. No false or misleading entries shall be made in the Fund’s books or records for any reason. No disbursement of Fund assets shall be made without adequate supporting documentation or for any purpose other than as described in the Fund’s documents or contracts.

 

FUNDS DISCLOSURE CONTROLS AND PROCEDURES

 

Each Covered Officer is required to be familiar, and comply, with the Fund’s disclosure controls and procedures. In addition, each Covered Officer having direct or supervisory authority regarding SEC filings or the Fund’s other public communications should, to the extent appropriate within his area of responsibility, consult with other Fund officers and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.

 

Each Covered Officer must:

 

  familiarize him- or herself with the disclosure requirements applicable to the Fund as well as the business and financial operations of the Fund;

 

  ensure that reasonable steps are taken within his or her areas of responsibility to promote full, fair, accurate, timely and understable disclosure in all regulatory filings, as well as when communicating with the Fund’s shareholders or the general public, in accordance with applicable law;

 

  consistent with his or her responsibilities, exercise appropriate supervision over and assist relevant Fund service providers in developing financial information and other disclosure that complies with relevant law and presents information in a clear, comprehensible and complete manner; and

 

  not knowingly misrepresent, conceal or omit required disclosures of, or cause others to do the same, facts about the Fund, whether to persons within or outside the Fund, including to outside counsel, independent auditors and governmental regulators.

 

CONFIDENTIAL INFORMATION

 

Covered Officers who have access to confidential information are not permitted to use or share that information for their personal benefit or for any other purpose except the conduct of the Fund’s business. Covered Officers should maintain the confidentiality of information entrusted to them by the Fund or its shareholders, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information, including information that might be of use to competitors, or harmful to the Fund or its shareholders if disclosed.

 

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly by the Fund. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board and its counsel.


COMPLIANCE, REPORTING AND RECORDKEEPING

 

Compliance

 

Any Covered Officer who violates the provisions of this Code will be subject to disciplinary action and appropriate sanctions, up to and including termination. Sanctions shall be imposed by the Audit Committee, subject to review by the full Board, in their sole discretion. Depending on the nature and severity of the violation, the Fund may refer such violation to appropriate authorities for civil action or criminal prosecution.

 

All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by the law or this Code, such reports and records shall not be disclosed to anyone other than the Fund’s Adviser, the Directors, the Fund’s outside counsel or counsel to the Independent Directors.

 

Reporting

 

Each Covered Officer shall:

 

  upon receipt of the Code or upon becoming a Covered Officer, sign and submit an Initial Acknowledgement (form attached) confirming that he has received, read and understands the Code;

 

  annually, sign and submit an Annual Acknowledgement (form attached) confirming that he has complied with the requirements of the Code;

 

  not retaliate against any Covered Officer or other person for making reports of violations in good faith; and

 

  notify Legal Counsel, the Fund’s outside counsel or counsel to the Independent Directors, as appropriate, of any actual or potential violation of this Code. Failure to do so is itself a violation of this Code. The Fund will not retaliate against any Covered Officer for making reports of violations in good faith, but will not be precluded from taking appropriate disciplinary action for the violations themselves.

 

Except as described otherwise below, Legal Counsel is authorized to apply this Code to situations presented to it and has the authority to interpret this Code in any particular situation. Legal Counsel shall take all action it considers appropriate to investigate any actual or potential violations reported to it, and Legal Counsel is authorized and encouraged to consult, as appropriate, with the chair of the Audit Committee, the Fund’s outside counsel or counsel to the Independent Directors. The Fund’s Audit Committee is responsible for granting waivers from the terms and provisions of this Code, as it deems appropriate.

 

Recordkeeping

 

The Fund will maintain and preserve for a period of not less than six (6) years from the date such action is taken, the first two (2) years in an easily accessible place, a copy of the information or materials supplied to the Board: (i) that provided the basis for any amendment or waiver to this Code, and (ii) relating to any violation of the Code and sanctions imposed for such violation, together with a written record of the approval or action taken by the Audit Committee and/or Board.

 


EXHIBIT A

 

Covered Officerscovered by this Code of Ethics for Senior Officers:

 

1. Lee T. Kranefuss, President

 

2. Michael A. Latham, Principal Financial Officer

 

 

Current as of: November 5, 2004.


Form of

 

INITIAL ACKNOWLEDGEMENT

 

I acknowledge that I have received and read a copy of the Code of Ethics for Senior Officers (the “Code”) and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code.

 

I also acknowledge my responsibility to report any violation of the Code to Legal Counsel, as defined in the Code.

 

I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Fund has the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in its sole discretion, with or without notice.

 

 

Covered Officer Name and Title:


                                                                             (please print)

 


Signature   Date


Form of

 

ANNUAL ACKNOWLEDGEMENT

 

I acknowledge that I have received and read a copy of the Code of Ethics for Senior Officers (the “Code”) and that I understand it. I further acknowledge that I am responsible for understanding and complying with the policies set forth in the Code during my tenure as a Covered Officer, as defined in the Code.

 

I also acknowledge that I have fully complied with the terms and provisions of the Code during the period of time since the most recent Initial or Annual Acknowledgement provided by me.

 

I further acknowledge that the policies contained in the Code are not intended to create any contractual rights or obligations, express or implied. I also understand that, consistent with applicable law, the Fund has the right to amend, interpret, modify or withdraw any of the provisions of the Code at any time in its sole discretion, with or without notice.

 

 

Covered Officer Name and Title:


                                                                             (please print)

 


Signature   Date
EX-99.CERT 3 dex99cert.htm 302 CERTIFICATIONS 302 Certifications

EX-99.CERT

 

N-CSR Exhibit for Item 11(a)(2): SECTION 302 CERTIFICATIONS

 

I, Lee T. Kranefuss, certify that:

 

  1. I have reviewed this report on Form N-CSR of iShares, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  c. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

  5. The Registrant’s other certifying officer and I have disclosed to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: November 5, 2004  

/s/    Lee T. Kranefuss        


 

President


    Lee T. Kranefuss   [Title]
    [Signature]    


EX-99.CERT

 

N-CSR Exhibit for Item 11(a)(2): SECTION 302 CERTIFICATIONS

 

I, Michael A. Latham, certify that:

 

  1. I have reviewed this report on Form N-CSR of iShares, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;

 

  4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

  c. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

  5. The Registrant’s other certifying officer and I have disclosed to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

 

Date: November 5, 2004  

/s/    Michael A. Latham        


 

Principal Financial Officer


   

Michael A. Latham

[Signature]

  [Title]
EX-99.906 CERT 4 dex99906cert.htm 906 CERTIFICATIONS 906 Certifications

Ex.99.906 CERT

 

N-CSR Exhibit for Item 11(b): CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Lee T. Kranefuss, President, and Michael A. Latham, Principal Financial Officer, of iShares, Inc. (the “Registrant”), each certify that:

 

1. The Registrant’s periodic report on Form N-CSR for the period ended August 31, 2004 (the “Form N-CSR”) fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

Date: November 5, 2004  

/s/    Lee T. Kranefuss        


 

President


   

Lee T. Kranefuss

[Signature]

  [Title]
Date: November 5, 2004  

/s/    Michael A. Latham        


 

Principal Financial Officer


   

Michael A. Latham

[Signature]

  [Title]
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