N-CSR

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, MD 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, 2006

Date of reporting period: August 31, 2006

Item 1. Reports to Stockholders.

Table of Contents

Management’s Discussions of Fund Performance	1
Shareholder Expenses (Unaudited)	23
Schedules of Investments	25
iShares MSCI Austria Index Fund	25
iShares MSCI Belgium Index Fund	31
iShares MSCI EMU Index Fund	37
iShares MSCI France Index Fund	46
iShares MSCI Germany Index Fund	53
iShares MSCI Italy Index Fund	60
iShares MSCI Netherlands Index Fund	66
iShares MSCI Spain Index Fund	72
iShares MSCI Sweden Index Fund	79
iShares MSCI Switzerland Index Fund	86
iShares MSCI United Kingdom Index Fund	93
Financial Statements	97
Financial Highlights	105
Notes to the Financial Statements	116
Report of Independent Registered Public Accounting Firm	125
Tax Information (Unaudited)	126
Board Review and Approval of Investment Advisory Contracts (Unaudited)	127
Supplemental Information (Unaudited)	130
Director and Officer Information (Unaudited)	136
iShares Family of Funds	140

Management’s Discussion of Fund Performance

iSHARES^® MSCI AUSTRIA INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
18.00	%	17.28	%	17.59	%	31.64	%	31.65	%	32.73	%	13.06	%	13.11	%	13.70	%

Cumulative Total Returns

Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
18.00	%	17.28	%	17.59	%	295.33	%	295.40	%	311.99	%	241.33	%	242.83	%	261.02	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 1

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI AUSTRIA INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	42.46	%
Energy	14.52
Communications	14.10
Industrial	11.44
Basic Materials	10.28
Utilities	5.63
Consumer Cyclical	1.36
Short-Term and Other Net Assets	0.21
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Erste Bank der Oesterreichischen Sparkassen AG	18.66	%
OMV AG	14.52
Telekom Austria AG	14.10
Wienerberger Baustoffindustrie AG	4.98
Voestalpine AG	4.95
Meinl European Land Ltd.	4.91
Raiffeisen International Bank Holding AG	4.85
Oesterreichische Elektrizitaetswirtschafts AG Class A	4.80
CA Immobilien Anlagen AG	4.22
Boehler-Uddeholm AG	3.98
TOTAL	79.97	%

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 securities in the aggregate in the Austrian market, as measured by the MSCI Austria Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 18.00%, while the Index returned 17.59%.

The Austrian stock market enjoyed double-digit gains for the reporting period but trailed the broad performance of European equities overall. Austria continued to benefit from its central location in Europe; the Austrian economy is tied to both the established economies of the Euro zone in western Europe and the “new economies” of eastern Europe, where demand growth in recent years has been considerably higher than in the Euro zone. However, a global shift toward risk aversion in the last few months of the reporting period led to increased volatility and substantial declines in developing markets, including many of those in eastern Europe. Consequently, the Austrian stock market suffered a sharp decline in May and June 2006, causing it to lag other Euro zone markets.

On the positive side, currency fluctuations enhanced Austrian stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 3.6% against the euro. In local-currency terms, the Index returned just 12.97%.

Within the Fund, the ten largest holdings accounted for approximately 80% of net assets as of August 31, 2006. Among the Fund’s ten largest holdings as of August 31, 2006, two of the top performers for the reporting period were steelmakers Voestalpine AG and Boehler-Uddeholm AG. Both companies reported strong operating results due to healthy demand for steel and higher prices. Strong demand also helped electric utility Oesterreichische Elektrizitaetswirtschafts AG produce a robust return. The weakest performer among the ten largest holdings was energy producer OMV AG, which declined modestly as declining oil prices led to a drop in share price late in the reporting period.

2 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI BELGIUM INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06					Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
25.66%	25.39	%	26.73	%	17.61	%	17.73	%	15.04	%	10.10	%	10.10	%	10.42	%

Cumulative Total Returns

Year Ended 8/31/06					Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
25.66%	25.39	%	26.73	%	124.99	%	126.16	%	101.52	%	161.71	%	161.64	%	169.55	%

“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 n investment over the periods indicated.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 3

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI BELGIUM INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	53.08	%
Consumer Non-Cyclical	16.94
Basic Materials	9.02
Diversified	8.08
Communications	6.85
Industrial	4.28
Consumer Cyclical	1.13
Short-Term and Other Net Assets	0.62
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Fortis	24.65	%
KBC Groupe	14.34
Dexia Group	9.46
InBev	4.97
Belgacom SA	4.91
Solvay SA	4.85
Groupe Bruxelles Lambert SA	4.84
Cofinimmo	4.19
Umicore	4.17
UCB SA	4.05
TOTAL	80.43	%

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 securities in the aggregate in the Belgian market, as measured by the MSCI Belgium Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 25.66%, while the Index returned 26.73%.

Belgium’s stock market enjoyed a strong return for the reporting period and surpassed the broad performance of European equities. Financial stocks, which comprise more than half of the Index, historically have had the greatest impact on Belgian stock performance. Relatively low interest rates, a favorable investment environment, and increased merger activity provided a strong boost to financial stocks during the reporting period. Economic conditions in Belgium also improved after a downturn in the first half of 2005. Consumer confidence began to pick up due to employment growth and tax relief, while manufacturing activity increased as growth accelerated within Belgium’s main trading partners.

Currency fluctuations also enhanced Belgian stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 3.6% against the euro. In local-currency terms, the Index returned 21.76%.

The ten largest Fund holdings represented approximately 80% of the net assets of the Fund as of August 31, 2006. Each of the Fund’s ten largest holdings as of August 31, 2006, posted positive results for the reporting period. The top performer was materials and metals company Umicore, which reported strong earnings growth due to healthy demand and soaring prices for many precious metals. The Fund’s largest holding, banking and insurance company Fortis, also produced a robust gain for the reporting period as it continued to increase its market share. The weakest performers among the ten largest holdings were biotechnology firm UCB SA and telecommunications services provider Belgacom SA.

4 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI EMU INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06					Five Years Ended 8/31/06						Inception to 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
25.18%	24.44	%	25.68	%	11.51	%	11.45	%	11.88	%	3.39	%	3.43	%	3.74	%

Cumulative Total Returns

Year Ended 8/31/06					Five Years Ended 8/31/06						Inception to 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
25.18%	24.44	%	25.68	%	72.43	%	71.94	%	75.28	%	22.59	%	22.88	%	25.09	%

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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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 shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (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, an 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 tables 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

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 5

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI EMU INDEX FUND

PORTFOLIO ALLOCATION As of 8/31/06
Sector	Percentage of Net Assets
Financial	33.68	%
Communications	12.03
Consumer Non-Cyclical	11.78
Industrial	10.43
Utilities	8.80
Energy	7.48
Consumer Cyclical	6.37
Basic Materials	5.65
Technology	2.51
Diversified	0.90
Short-Term and Other Net Assets	0.37
TOTAL	100.00	%

TOP TEN FUND HOLDINGS As of 8/31/06
Security	Percentage of Net Assets
Total SA (France)	3.86	%
Banco Santander Central Hispano SA (Spain)	2.40
Sanofi-Aventis (France)	2.38
BNP Paribas SA (France)	2.30
Nokia OYJ (Finland)	2.28
ING Groep NV (Netherlands)	2.18
ENI SpA (Italy)	2.10
E.ON AG (Germany)	2.04
Banco Bilbao Vizcaya Argentaria SA (Spain)	2.02
Telefonica SA (Spain)	1.94
TOTAL	23.50	%

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 securities in the aggregate in the European Monetary Union (“EMU”) markets, as measured by the MSCI EMU Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 25.18%, while the Index returned 25.68%.

European stocks enjoyed strong returns during the reporting period. Economic conditions across the continent showed gradual improvement, business and consumer confidence reached multi-year highs in several EMU countries (particularly Germany, Italy, and the Netherlands), and unemployment figures generally decreased. Stocks also benefited from improved corporate earnings growth and increased merger-and-acquisition activity. For U.S. investors, the U.S. dollar’s 3.6% decline against the euro for the reporting period enhanced returns; in local-currency terms, the Index returned 20.75%.

Despite their strong overall performance, EMU stocks gave back some gains in the last few months of the reporting period. Signs of rising inflation led the European Central Bank to raise borrowing costs four times during the reporting period, and the Bank of England also boosted its central rate in August 2006. As a result, volatility in many European markets increased as investors appeared to grow concerned about the impact of higher inflation and rising interest rates on economic growth and corporate earnings.

As of August 31, 2006, the ten largest Fund holdings accounted for approximately 24% of the net assets of the Fund. Each of the Fund’s ten largest holdings as of August 31, 2006, registered positive returns for the reporting period. The best performers were financial stocks, led by ING Groep NV (Netherlands) and BNP Paribas SA (France), both of which posted large gains for the reporting period. Two Spanish commercial banks, Banco Bilbao Vizcaya Argentaria SA and Banco Santander Central Hispano SA, also posted strong returns due to rising profits and strong revenue growth in their Latin American operations. Utilities firm E.ON AG also enjoyed robust earnings amid increasing demand and rising prices. Two of the weaker performers amongst the ten largest holdings were energy stocks Total SA (France), the Fund’s largest holding, and ENI SpA (Italy). Oil prices were up during the reporting period, although they did trend downward towards the end of the reporting period.

6 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI FRANCE INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06					Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
24.13%	23.99	%	24.48	%	10.92	%	10.91	%	11.23	%	11.32	%	11.44	%	11.72	%

Cumulative Total Returns
Year Ended 8/31/06					Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
24.13%	23.99	%	24.48	%	67.90	%	67.85	%	70.24	%	192.23	%	195.45	%	202.89	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 7

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI FRANCE INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	22.38	%
Consumer Non-Cyclical	19.50
Energy	13.48
Industrial	12.23
Communications	10.09
Consumer Cyclical	7.20
Utilities	5.80
Basic Materials	4.22
Technology	2.69
Diversified	2.19
Short-Term and Other Net Assets	0.22
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Total SA	12.95	%
Sanofi-Aventis	7.91
BNP Paribas SA	7.67
AXA	5.36
Societe Generale Class A	4.85
Suez SA	3.78
Vivendi Universal SA	3.45
Carrefour SA	3.21
France Telecom	3.12
Groupe Danone	2.85
TOTAL	55.15	%

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 securities in the aggregate in the French market, as measured by the MSCI France Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 24.13%, while the Index returned 24.48%.

France’s stock market posted healthy gains for the reporting period, essentially matching the broad performance of European equities. The strong performance of the French stock market resulted primarily from improving economic conditions. In June 2006, the country’s unemployment rate fell to a four-year low of 9%, benefiting from relaxed labor laws. Better employment figures also seemed to spark an increase in consumer confidence, which helped lift earnings in the retail sector. By the second quarter of 2006, the French economy was growing at its fastest pace in five years.

Within the Fund, the ten largest holdings as of August 31, 2006 accounted for approximately 55% of Fund net assets. Nearly all of the Fund’s ten largest holdings as of August 31, 2006, gained ground for the reporting period. Two of the top performers were Societe Generale and BNP Paribas SA, both of which reported better-than-expected earnings and appeared to benefit from speculation about potential industry consolidation. Utilities company Suez SA, which agreed to merge with Gaz de France in a transaction that would form the world’s second-largest energy group, also produced a strong gain. On the downside, the only holding to decline for the reporting period was telecommunications services provider France Telecom SA. Fierce competition, particularly from internet-based phone companies, led to disappointing results at the French telecom company.

8 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI GERMANY INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
24.82	%	24.00	%	25.10	%	10.18	%	10.27	%	10.40	%	7.93	%	8.05	%	8.33	%

Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
24.82	%	24.00	%	25.10	%	62.40	%	63.05	%	64.04	%	114.52	%	116.94	%	122.52	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 9

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI GERMANY INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	26.85	%
Industrial	14.83
Utilities	14.82
Consumer Cyclical	14.38
Basic Materials	11.18
Technology	6.20
Consumer Non-Cyclical	6.09
Communications	5.11
Energy	0.26
Short-Term and Other Net Assets	0.28
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
E.ON AG	9.53	%
Siemens AG	8.73
Allianz AG	8.37
Deutsche Bank AG	7.09
DaimlerChrysler AG	5.79
RWE AG	4.98
BASF AG	4.84
SAP AG	4.82
Deutsche Telekom AG	4.73
Bayer AG	4.36
TOTAL	63.24	%

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 securities in the aggregate in the German market, as measured by the MSCI Germany Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 24.82%, while the Index returned 25.10%.

Germany’s stock market rallied sharply for the reporting period, mirroring the broad performance of European equities. The German economy was struggling as the reporting period began, but economic conditions improved markedly over the one-year period. Business confidence reached its highest level in 15 years as companies increased their investment in plants and equipment. In August 2006, consumer confidence rose to its highest level since 2001, while spending rose late in the period in advance of a 3% increase in the value added tax in 2007. Retailers also enjoyed a strong boost from the World Cup soccer tournament, which Germany hosted in June and July 2006. Finally, by the end of the reporting period, the unemployment rate had fallen to its lowest level in two years, although it still remained above 10%.

The favorable economic environment contributed to solid earnings growth and strong stock market performance. Currency fluctuations also enhanced German stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 3.6% against the euro. In local-currency terms, the Index returned 20.19%.

The ten largest Fund holdings represented approximately 63% of the net assets of the Fund as of August 31, 2006. Nine of the Fund’s ten largest holdings as of August 31, 2006, posted positive returns for the reporting period. Utilities firms E.ON AG and RWE AG were among the top performers, enjoying robust earnings amid increasing demand and rising prices. Pharmaceutical conglomerate Bayer AG produced the best return among the ten largest Fund holdings due to strong results from its drug business and a favorable acquisition of competitor Schering AG. Deutsche Telekom AG, the country’s largest telecommunications services provider, was the only holding to decline for the reporting period. Fierce competition, both in Europe and for its T-Mobile wireless unit in the U.S., led to lowered profit guidance at Deutsche Telekom.

10 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI ITALY INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
20.61	%	20.39	%	20.48	%	13.63	%	13.63	%	13.44	%	12.84	%	12.88	%	12.78	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
20.61	%	20.39	%	20.48	%	89.47	%	89.47	%	87.86	%	234.81	%	235.97	%	232.83	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 11

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI ITALY INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	48.25	%
Energy	17.29
Communications	13.55
Utilities	9.65
Consumer Cyclical	4.29
Consumer Non-Cyclical	4.16
Industrial	2.69
Short-Term and Other Net Assets	0.12
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
ENI SpA	17.28	%
UniCredito Italiano SpA	13.01
Enel SpA	8.37
Telecom Italia SpA	6.70
Sanpaolo IMI SpA	4.90
Assicurazioni Generali SpA	4.75
Banca Intesa SpA	4.71
Capitalia SpA	3.44
Banca Popolare di Verona e Novara Scrl	3.37
Telecom Italia SpA RNC (Preferred)	3.26
TOTAL	69.79	%

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 securities in the aggregate in the Italian market, as measured by the MSCI Italy Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 20.61%, while the Index returned 20.48%.

The Italian stock market enjoyed strong gains for the reporting period but trailed the broad performance of European equities. Along with the rest of the European Union (“EU”), Italy benefited from gradually improving economic conditions, though Italy’s economy remains the weakest in the EU following its 2005 recession. However, the modest economic recovery helped boost tax revenues, assisting the country’s struggle as the world’s third-largest debt load and its current budget deficit that exceeds EU restrictions. Through a combination of higher tax revenues and budget cuts, Italy appears to be on track to potentially reduce its deficit in 2006.

Currency fluctuations enhanced Italian stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 3.6% against the euro. In local-currency terms, the Index returned 15.76%.

The ten largest Fund holdings accounted for approximately 70% of the Fund’s net assets as of August 31, 2006. All but one of the Fund’s ten largest holdings as of August 31, 2006, produced positive returns for the reporting period. The five best performers were financial services stocks, led by commercial banks Banca Popolare di Verona e Novara Scrl, Capitalia SpA, and Sanpaolo IMI SpA. These companies benefited from an environment of low interest rates, improving economic growth, and increased merger activity. The only stock among the ten largest holdings to decline for the reporting period was telecommunications services provider Telecom Italia SpA, which faced increasing competition and a substantial amount of debt.

12 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI NETHERLANDS INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
29.53	%	29.08	%	30.15	%	7.12	%	7.18	%	7.55	%	6.50	%	6.49	%	7.92	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
29.53	%	29.08	%	30.15	%	41.05	%	41.43	%	43.89	%	87.65	%	87.49	%	114.25	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 13

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI NETHERLANDS INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	41.05	%
Consumer Non-Cyclical	20.48
Industrial	14.07
Communications	11.09
Basic Materials	6.53
Technology	3.58
Energy	1.61
Consumer Cyclical	1.17
Short-Term and Other Net Assets	0.42
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
ING Groep NV	19.24	%
ABN AMRO Holding NV	11.98
Koninklijke Philips Electronics NV	9.52
Unilever NV	8.72
Koninklijke KPN NV	4.87
Aegon NV	4.73
Akzo Nobel NV	4.57
TNT NV	4.55
Reed Elsevier NV	4.04
Koninklijke Ahold NV	4.00
TOTAL	76.22	%

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 securities in the aggregate in the Dutch market, as measured by the MSCI Netherlands Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 29.53%, while the Index returned 30.15%.

The Netherlands’ stock market enjoyed very strong returns for the reporting period, posting the best results in the European Union (“EU”). The Dutch economy, which is largely dependent on exports to other European countries, showed substantial improvement as economic activity in the Euro zone increased. An export-led recovery in the manufacturing sector and increased business investment sparked by buoyant corporate profits boosted the Dutch economy to its fastest growth rate in more than five years. Rising employment growth led to increased consumer confidence and greater consumer spending. Inflation increased modestly over the past year, but remains below most other EU countries.

Currency fluctuations also enhanced Dutch stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 3.6% against the euro. In local-currency terms, the Index returned 25.05%.

The ten largest Fund holdings accounted for approximately 76% of Fund net assets as of August 31, 2006. Each of the Fund’s ten largest holdings as of August 31, 2006, gained for the reporting period. The top performer was the Fund’s largest holding, financial services provider ING Groep NV, which benefited from an environment of low interest rates, improving economic growth, and increased merger activity. Shipping company TNT NV and chemicals maker Akzo Nobel NV also posted strong returns. The weakest performers among the ten largest holdings included consumer products maker Unilever NV, which struggled with weak revenue growth and declining profit margins, and grocery chain Koninklijke Ahold NV, which reported lower-than-expected earnings and admitted to overstating profits in 2003.

14 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI SPAIN INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
28.09	%	27.73	%	28.32	%	17.32	%	17.36	%	17.27	%	15.02	%	15.05	%	15.26	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
28.09	%	27.73	%	28.32	%	122.21	%	122.68	%	121.76	%	305.43	%	306.35	%	313.96	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 15

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI SPAIN INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	41.90	%
Communications	16.88
Utilities	15.10
Industrial	7.66
Consumer Non-Cyclical	7.59
Energy	5.59
Consumer Cyclical	3.08
Basic Materials	1.37
Technology	0.70
Short-Term and Other Net Assets	0.13
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Banco Santander Central Hispano SA	18.56	%
Telefonica SA	15.84
Banco Bilbao Vizcaya Argentaria SA	14.83
Iberdrola SA	4.92
Endesa SA	4.83
Repsol YPF SA	4.82
Banco Popular Espanol SA	4.61
Altadis SA	3.27
Actividades de Construcciones y Servicios SA	3.09
Inditex SA	2.52
TOTAL	77.29	%

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 securities in the aggregate in the Spanish market, as measured by the MSCI Spain Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 28.09%, while the Index returned 28.32%.

The Spanish stock market posted strong returns and outpaced the broad performance of European equities during the reporting period. Spain’s economy continued to show signs of improvement and grew at a faster rate than its European neighbors. Spain has posted better economic growth than the Euro zone in every quarter since the first quarter of 2003. The main drivers of this growth appear to be low interest rates, a housing and construction boom, and solid consumer spending. In addition, during the first two quarters of 2006, exports outpaced imports for the first time in two years, industrial production surged to its fastest growth rate in six years, and employment growth remained solid. Spain has created over half of all new jobs in the Euro zone over the past four years. The flip side to this robust economic growth is inflation, which at 4% is the highest in the European Union.

Currency fluctuations enhanced Spanish stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 3.6% against the euro. In local-currency terms, the Index returned 23.29%.

Within the Fund, the ten largest holdings accounted for approximately 77% of Fund net assets as of August 31, 2006. Nine of the Fund’s ten largest holdings as of August 31, 2006, delivered positive returns for the reporting period. The top performer was fashion retailer Inditex SA, which reported better-than-expected earnings due to strong sales across Europe and improving profit margins. Endesa SA, Spain’s largest electric utility, posted a healthy return amid rising demand and higher power prices, while construction company Actividades de Construcciones y Servicios SA benefited from the country’s housing boom. The only holding to decline during the reporting period was oil producer Repsol YPF SA, which fell slightly.

16 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI SWEDEN INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
22.16	%	20.80	%	22.18	%	16.24	%	16.26	%	16.00	%	10.39	%	10.38	%	11.79	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
22.16	%	20.80	%	22.18	%	112.20	%	112.40	%	110.02	%	168.69	%	168.58	%	204.71	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 17

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI SWEDEN INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Communications	25.47	%
Financial	21.78
Consumer Cyclical	17.68
Industrial	17.54
Consumer Non-Cyclical	8.28
Basic Materials	7.62
Energy	0.90
Technology	0.58
Short-Term and Other Net Assets	0.15
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Telefonaktiebolaget LM Ericsson Class B	18.28	%
Nordea Bank AB	9.68
Hennes & Mauritz AB Class B	6.84
Svenska Handelsbanken AB Class A	4.90
Volvo AB Class B	4.59
Skandinaviska Enskilda Banken AB Class A	4.45
TeliaSonera AB	4.29
Sandvik AB	4.09
Atlas Copco AB Class A	3.20
Svenska Cellulosa AB Class B	2.97
TOTAL	63.29	%

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 securities in the aggregate in the Swedish market, as measured by the MSCI Sweden Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 22.16%, while the Index returned 22.18%.

Sweden’s stock market delivered strong gains for the reporting period, though it lagged the broad performance of European equities. Improving economic conditions, both in Sweden and across Europe, appeared to provide the impetus for the rally in the Swedish stock market. Exports surged as economic activity in the Euro zone – particularly among Sweden’s main trading partners – increased. Unemployment remained well below the levels in most European countries, and better-than-expected manufacturing growth boosted consumer confidence. By the second quarter of 2006, the Swedish economy was growing at its fastest rate in six years. This level of growth led the Riksbank, the Swedish central bank, to raise its benchmark interest rate three times in an effort to keep inflation below its 2% target.

Currency fluctuations enhanced Swedish stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 4.2% against the Swedish krona. In local-currency terms, the Index returned 16.38%.

The ten largest Fund holdings represented approximately 63% of the net assets of the Fund as of August 31, 2006. All but one of the Fund’s ten largest holdings as of August 31, 2006, posted double-digit gains for the reporting period. The top performer was the Class A shares of industrial equipment maker Atlas Copco AB, which benefited from the increased investment in plants and equipment by manufacturing companies around the world. Other strong performers among the ten largest holdings included the Class A shares of financial services provider Skandinaviska Enskilda Banken AB and the Class B shares of automaker Volvo AB. The Fund’s largest holding, the Class B shares of wireless telecommunications firm Telefonaktiebolaget LM Ericsson, was the only holding in the top ten to decline during the reporting period.

18 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI SWITZERLAND INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06					Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
28.36%	28.41	%	29.11	%	12.08	%	12.13	%	13.17	%	8.07	%	8.22	%	9.47	%
Cumulative Total Returns
Year Ended 8/31/06					Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV	MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
28.36%	28.41	%	29.11	%	76.84	%	77.29	%	85.64	%	117.23	%	120.39	%	147.09	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 19

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI SWITZERLAND INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Consumer Non-Cyclical	46.88	%
Financial	27.90
Industrial	9.14
Basic Materials	6.40
Consumer Cyclical	6.04
Communications	2.69
Technology	0.56
Short-Term and Other Net Assets	0.39
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Roche Holding AG Genusschein	13.54	%
Nestle SA Registered	12.81
Novartis AG	12.28
UBS AG Registered	10.44
Credit Suisse Group	4.81
Zurich Financial Services AG	4.75
Swiss Reinsurance Co.	4.33
Compagnie Financiere Richemont AG Class A	3.72
ABB Ltd.	3.25
Syngenta AG	3.15
TOTAL	73.08	%

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 securities in the aggregate in the Swiss market, as measured by the MSCI Switzerland Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 28.36%, while the Index returned 29.11%.

Switzerland’s stock market posted strong returns and outpaced the broad performance of European equities during the reporting period. The Swiss economy, which is largely dependent on exports to other European countries, showed substantial improvement as economic activity in the Euro zone increased. This export-led recovery boosted the Swiss economy to its fastest growth rate in five years (as of the fourth quarter 2005), and manufacturing growth in Switzerland reached an all-time high in August 2006. Although the upbeat economic environment provided a lift to Switzerland’s stock market, it also led to the highest year-over-year inflation figures since 2000. As a result, the Swiss National Bank raised its benchmark interest rate three times during the reporting period. Nonetheless, Swiss interest rates remain the lowest in Europe.

Currency fluctuations enhanced Swiss stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 1.7% against the Swiss franc. The Swiss currency also fell 2% against the euro, which made Swiss exports to Euro zone countries less expensive.

The ten largest Fund holdings accounted for approximately 73% of Fund net assets as of August 31, 2006. Each of the Fund’s ten largest holdings as of August 31, 2006 posted double-digit gains for the reporting period. With manufacturing activity in high gear, the top performer among the ten largest holdings was industrial equipment maker ABB Ltd. Financial conglomerate UBS AG and agricultural chemicals manufacturer Syngenta AG also posted strong returns as both companies reported better-than-expected earnings. The lowest return among the Fund’s ten largest holdings came from pharmaceutical company Novartis AG, though it still performed well for the reporting period.

20 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^® MSCI UNITED KINGDOM INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns

Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
20.61	%	20.41	%	21.36	%	10.34	%	10.36	%	11.15	%	8.68	%	8.70	%	9.40	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
20.61	%	20.41	%	21.36	%	63.52	%	63.73	%	69.63	%	129.96	%	130.33	%	145.46	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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

(AT NET ASSET VALUE)

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 21

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI UNITED KINGDOM INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	26.78	%
Consumer Non-Cyclical	21.98
Energy	17.74
Communications	8.84
Basic Materials	7.68
Consumer Cyclical	7.15
Utilities	4.42
Industrial	3.64
Technology	0.63
Diversified	0.16
Short-Term and Other Net Assets	0.98
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
BP PLC	7.97	%
HSBC Holdings PLC	7.32
GlaxoSmithKline PLC	5.79
Royal Dutch Shell PLC Class A	4.69
Vodafone Group PLC	4.01
Royal Bank of Scotland Group PLC	3.81
AstraZeneca PLC	3.57
Royal Dutch Shell PLC Class B	3.47
Barclays PLC	2.86
HBOS PLC	2.56
TOTAL	46.05	%

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 securities in the aggregate in the British market, as measured by the MSCI United Kingdom Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 20.61%, while the Index returned 21.36%.

The United Kingdom’s stock market enjoyed a strong return for the reporting period, though it modestly trailed the broad performance of European equities. Economic conditions in the United Kingdom (“U.K.”), which were sluggish as the reporting period began, showed significant signs of improvement as the reporting period progressed. The housing market picked up as mortgage approvals reached record levels, consumer spending surged, and exports increased. Although the upbeat economic environment provided a lift to the stock market, it also led to the highest monthly inflation figures since 1997. The Bank of England (“BOE”) raised its benchmark interest rate in August 2006 — for the first time in two years — after inflation came in above the BOE’s 2% target for three straight months.

Currency fluctuations enhanced U.K. stock returns for U.S. investors; for the reporting period, the U.S. dollar declined by 4.7% against the British pound. In local-currency terms, the Index returned just 14.75%.

The ten largest Fund holdings represented approximately 46% of the net assets of the Fund as of August 31, 2006. Among the Fund’s ten largest holdings as of August 31, 2006, the top performer for the reporting period was pharmaceutical company AstraZeneca PLC. Favorable news regarding the company’s cholesterol drug, as well as efforts to cut the time and costs of drug development, helped boost AstraZeneca’s stock price. Several financial stocks in the top ten also posted strong returns during the reporting period—Barclays PLC, HBOS PLC, and Royal Bank of Scotland Group PLC all rose sharply after reporting better-than-expected profits. The only stock among the Fund’s ten largest holdings to decline for the reporting period was telecommunications services provider Vodafone Group PLC.

22 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Shareholder Expenses (Unaudited)

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, 2006 to August 31, 2006.

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 (3/1/06)		Ending Account Value (8/31/06)		Annualized Expense Ratio		Expenses Paid During Period a (3/1/06 to 8/31/06)
Austria
Actual	$	1,000.00	$	1,036.30	0.52	%	$	2.67
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Belgium
Actual		1,000.00		1,107.20	0.52			2.76
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
EMU
Actual		1,000.00		1,106.30	0.53			2.81
Hypothetical (5% return before expenses)		1,000.00		1,022.53	0.53			2.70
France
Actual		1,000.00		1,127.80	0.52			2.79
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65

SHAREHOLDER EXPENSES 23

Shareholder Expenses (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Index Fund	Beginning Account Value (3/1/06)		Ending Account Value (8/31/06)		Annualized Expense Ratio		Expenses Paid During Period a (3/1/06 to 8/31/06)
Germany
Actual	$	1,000.00	$	1,074.40	0.52	%	$	2.72
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Italy
Actual		1,000.00		1,121.40	0.52			2.78
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Netherlands
Actual		1,000.00		1,113.80	0.52			2.77
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Spain
Actual		1,000.00		1,125.60	0.52			2.79
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Sweden
Actual		1,000.00		1,089.20	0.52			2.74
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Switzerland
Actual		1,000.00		1,109.50	0.52			2.76
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
United Kingdom
Actual		1,000.00		1,127.00	0.52			2.79
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65

^a 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 (365 days).

24 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI AUSTRIA INDEX FUND

August 31, 2006

Security	Shares		Value
COMMON STOCKS – 99.79%
BANKS – 23.52%
Erste Bank der Oesterreichischen Sparkassen AG		1,209,852	$	73,097,274
Raiffeisen International Bank Holding AG		210,798		18,996,171
				92,093,445
BUILDING MATERIALS – 4.98%
Wienerberger Baustoffindustrie AG		406,728		19,508,088
				19,508,088
CHEMICALS – 0.15%
Lenzing AG		2,750		605,358
				605,358
DIVERSIFIED FINANCIAL SERVICES – 0.01%
GHV-Split Vermoegensverwaltung1		39,564		50,644
				50,644
ELECTRIC – 5.63%
EVN AG		29,549		3,249,477
Oesterreichische Elektrizitaetswirtschafts AG Class A		373,212		18,784,344
				22,033,821
ENGINEERING & CONSTRUCTION – 1.56%
Flughafen Wien AG2		75,439		6,111,643
				6,111,643
ENTERTAINMENT – 1.36%
bwin Interactive Entertainment AG2,3		142,744		5,308,000
				5,308,000
ENVIRONMENTAL CONTROL – 0.23%
BWT AG		13,986		538,516
Christ Water Technology AG3		21,798		344,038
				882,554
FOREST PRODUCTS & PAPER – 1.19%
Mayr-Melnhof Karton AG		26,495		4,646,006
				4,646,006
INSURANCE – 3.47%
Wiener Staedtische Allgemeine Versicherung AG		222,162		13,604,666
				13,604,666
Security	Shares or Principal		Value
IRON & STEEL – 8.94%
Boehler-Uddeholm AG2		290,178	$	15,600,579
Voestalpine AG		512,316		19,398,271
				34,998,850
MACHINERY – 3.14%
Andritz AG		78,120		12,313,693
				12,313,693
MACHINERY – CONSTRUCTION & MINING – 0.07%
Palfinger AG		2,772		273,219
				273,219
MANUFACTURING – 1.46%
RHI AG3		166,320		5,707,793
				5,707,793
OIL & GAS – 14.52%
OMV AG		1,067,472		56,870,298
				56,870,298
REAL ESTATE – 15.46%
CA Immobilien Anlagen AG3		598,719		16,515,710
Immoeast Immobilien Anlagen AG3		889,688		10,477,375
Immofinanz Immobilien Anlagen AG3		1,237,314		14,333,605
Meinl European Land Ltd.3		891,954		19,238,415
				60,565,105
TELECOMMUNICATIONS – 14.10%
Telekom Austria AG		2,256,156		55,218,416
				55,218,416
TOTAL COMMON STOCKS (Cost: $356,458,550)				390,791,599
SHORT-TERM INVESTMENTS – 2.77%
CERTIFICATES OF DEPOSIT4 – 0.12%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	63,189		63,189
Societe Generale
5.33%, 12/08/06		90,270		90,270
Washington Mutual Bank
5.36%, 11/13/06		225,675		225,675
Wells Fargo Bank N.A.
4.78%, 12/05/06		72,216		72,216
				451,350

SCHEDULES OF INVESTMENTS 25

Schedule of Investments (Continued)

iSHARES^® MSCI AUSTRIA INDEX FUND

August 31, 2006

Security	Principal		Value
COMMERCIAL PAPER4 – 0.45%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/065	$	26,339	$	26,029
Amsterdam Funding Corp.
5.27%, 09/15/065		90,270		90,085
Atlantis One Funding
5.30%, 11/14/065		123,858		122,508
Barton Capital Corp.
5.27%, 09/06/065		45,496		45,463
Cancara Asset Securitisation Ltd.
5.30%, 11/14/065		45,760		45,261
CC USA Inc.
5.03%, 10/24/065		18,054		17,920
Charta LLC
5.30%, 11/06/065		90,270		89,393
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/065		158,542		157,839
Curzon Funding LLC
5.29%, 11/17/065		90,270		89,249
Edison Asset Securitization LLC
5.22%, 12/11/065		66,594		65,619
Falcon Asset Securitization Corp.
5.30%, 11/06/065		90,270		89,393
Five Finance Inc.
5.19%, 12/01/065		40,622		40,089
General Electric Capital Services Inc.
5.22%, 12/11/06		9,027		8,895
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/065		90,270		89,943
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/065		43,330		42,971
KKR Pacific Funding Trust
5.29%, 09/14/065		90,270		90,098
Landale Funding LLC
5.31%, 11/15/065		70,411		69,632
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/065		117,010		116,339
Security	Shares or Principal		Value
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/065	$	80,340	$	80,243
Mont Blanc Capital Corp.
5.29%, 11/15/065		58,224		57,582
Monument Gardens Funding LLC
5.28%, 09/21/065		45,363		45,230
Nestle Capital Corp.
5.19%, 08/09/07		54,162		51,492
Park Granada LLC
5.30%, 09/01/065		20,629		20,628
Regency Markets LLC
5.28%, 09/15/06		45,135		45,042
Solitaire Funding Ltd.
5.27%, 09/05/065		67,703		67,663
Sydney Capital Corp.
5.27%, 09/12/065		20,654		20,621
Tulip Funding Corp.
5.29%, 11/15/065		47,610		47,086
White Pine Finance LLC
5.12%, 10/27/065		17,061		16,925
				1,749,238
MEDIUM-TERM NOTES4 – 0.10%
Bank of America N.A.
5.28%, 04/20/07		22,568		22,568
Cullinan Finance Corp.
5.71%, 06/28/075		67,703		67,702
K2 USA LLC
5.39%, 06/04/075		67,703		67,702
Marshall & Ilsley Bank
5.18%, 12/15/06		90,270		90,359
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/075		105,616		105,615
US Bank N.A.
2.85%, 11/15/06		18,054		17,986
				371,932
MONEY MARKET FUNDS – 0.02%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares
5.30%6,7		97,265		97,265
				97,265

26 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI AUSTRIA INDEX FUND

August 31, 2006

Security	Principal		Value
REPURCHASE AGREEMENTS4 – 0.56%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $112,855 (collateralized by U.S. Government obligations, value $115,204, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	112,838	$	112,838
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $180,567 (collateralized by non-U.S. Government debt securities, value $186,133, 3.80% to 9.13%, 11/1/06 to 6/15/26).		180,540		180,540
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $135,425 (collateralized by non-U.S. Government debt securities, value $149,089, 0.08% to 6.43%, 9/25/20 to 7/25/36).		135,405		135,405
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $270,850 (collateralized by non-U.S. Government debt securities, value $282,977, 4.35% to 7.50%, 9/15/08 to 8/25/35).		270,810		270,810
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $54,170 (collateralized by non-U.S. Government debt securities, value $66,117, 0.00% to 10.00%, 6/1/28 to 8/24/36).		54,162		54,162
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $180,567 (collateralized by non-U.S. Government debt securities, value $184,326, 0.00% to 8.57%, 11/15/06 to 2/15/38).		180,540		180,540
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $90,283 (collateralized by non-U.S. Government debt securities, value $94,873, 5.36% to 9.01%, 10/27/10 to 2/18/20).		90,270		90,270
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $22,571 (collateralized by non-U.S. Government debt securities, value $23,719, 6.63% to 10.50%, 1/15/07 to 4/15/16).		22,568		22,568
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $180,567 (collateralized by non-U.S. Government debt securities, value $189,748, 0.51% to 8.89%, 8/5/18 to 9/25/46).		180,540		180,540
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $90,283 (collateralized by non-U.S. Government debt securities, value $94,876, 4.11% to 9.79%, 4/28/31 to 9/25/46).		90,270		90,270

SCHEDULES OF INVESTMENTS 27

Schedule of Investments (Continued)

iSHARES^® MSCI AUSTRIA INDEX FUND

August 31, 2006

Security	Principal		Value
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $99,312 (collateralized by non-U.S. Government debt securities, value $104,361, 3.44% to 15.15%, 12/1/08 to 3/1/36).	$	99,297	$	99,297
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $180,567 (collateralized by non-U.S. Government debt securities, value $189,750, 6.38% to 10.25%, 5/1/07 to 10/15/16).		180,540		180,540
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $180,567 (collateralized by non-U.S. Government debt securities, value $186,166, 0.00% to 10.13%, 10/15/06 to 7/1/26).		180,540		180,540
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $90,283 (collateralized by non-U.S. Government debt securities, value $94,917, 4.05% to 7.24%, 6/20/29 to 1/14/41).		90,270		90,270
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $31,600 (collateralized by non-U.S. Government debt securities, value $48,453, 0.00% to 10.00%, 9/1/06 to 8/31/36).		31,595		31,594
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $65,868 (collateralized by non-U.S. Government debt securities, value $98,375, 0.00% to 10.00%, 9/1/06 to 8/31/36).8		63,189		63,189
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $234,737 (collateralized by non-U.S. Government debt securities, value $246,671, 0.06% to 7.68%, 10/15/11 to 3/15/45).		234,702		234,702
				2,198,075
TIME DEPOSITS4 – 0.00%
KBC Bank
5.31%, 09/01/06		19,048		19,048
				19,048
VARIABLE & FLOATING RATE NOTES 4 – 1.52%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/075		231,091		231,121
American Express Bank
5.30%, 02/28/07		90,270		90,270
American Express Centurion Bank
5.42%, 07/19/07		99,297		99,398
American Express Credit Corp.
5.51%, 07/05/07		27,081		27,096
ASIF Global Financing
5.51%, 05/03/075		9,027		9,030
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/075		58,676		58,676
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/075		130,892		130,897
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/075		230,189		230,200

28 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI AUSTRIA INDEX FUND

August 31, 2006

Security	Principal		Value
BMW US Capital LLC
5.33%, 09/14/075	$	90,270	$	90,270
BNP Paribas
5.36%, 05/18/075		167,000		167,000
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/075		65,897		65,897
CC USA Inc.
5.48%, 07/30/075		45,135		45,141
Commodore CDO Ltd.
5.38%, 06/12/075		22,568		22,568
Credit Agricole SA
5.48%, 07/23/07		90,270		90,270
Credit Suisse First Boston NY
5.51%, 04/24/07		45,135		45,137
Cullinan Finance Corp.
5.36%, 04/25/075		22,568		22,568
DEPFA Bank PLC
5.37%, 06/15/07		90,270		90,270
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/075		103,811		103,817
Eli Lilly Services Inc.
5.37%, 08/31/075		90,270		90,270
Fifth Third Bancorp
5.30%, 09/21/075		180,540		180,540
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/075		90,270		90,263
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		94,784		94,806
Granite Master Issuer PLC
5.30%, 09/20/06		315,945		315,945
Harrier Finance Funding LLC
5.33%, 7/25/075		27,081		27,086
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		135,405		135,426
HBOS Treasury Services PLC
5.53%, 07/24/075		90,270		90,270
Holmes Financing PLC
5.40%, 07/16/075		157,973		157,973
JP Morgan Chase & Co.
5.36%, 08/02/07		67,703		67,702
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/075		67,703		67,699
Kestrel Funding
LLC 5.31%, 07/11/075		36,108		36,105
Kommunalkredit Austria AG
5.33%, 09/09/075		54,162		54,162
Leafs LLC
5.33%, 01/22/07 - 02/20/075		94,185		94,185
Lexington Parker Capital Co. LLC
5.46%, 01/10/075		112,838		112,812
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/075		99,297		99,290
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/075		39,775		39,775
Marshall & Ilsley Bank
5.31%, 09/14/07		49,649		49,648
Metropolitan Life Global Funding I
5.42%, 08/06/075		135,405		135,405
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/075,8		9,027		9,027
Monumental Global Funding II
5.49%, 12/27/065		18,054		18,056
Mound Financing PLC
5.39%, 05/08/075		84,854		84,854
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/075		270,810		270,805
National City Bank of Indiana
5.37%, 05/21/07		45,135		45,138
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/075		297,891		297,961
Newcastle Ltd.
5.35%, 04/24/075		31,820		31,814
Northern Rock PLC
5.43%, 08/03/075		108,324		108,327

SCHEDULES OF INVESTMENTS 29

Schedule of Investments (Continued)

iSHARES^® MSCI AUSTRIA INDEX FUND

August 31, 2006

Security	Principal		Value
Principal Life Global Funding I
5.80%, 02/08/07	$	40,622	$	40,705
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/075		157,973		157,970
Skandinaviska Enskilda Bank NY
5.33%, 09/18/075		90,270		90,270
Strips III LLC
5.38%, 07/24/075		21,950		21,950
SunTrust Bank
5.37%, 05/01/07		90,270		90,274
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/075		220,259		220,240
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/065		126,378		126,378
US Bank N.A.
5.26%, 09/29/06		40,622		40,621
Wachovia Asset Securitization Inc.
5.31%, 09/25/065		134,702		134,702
Wachovia Bank N.A.
5.36%, 05/22/07		180,540		180,540
Wells Fargo & Co.
5.34%, 09/14/075		45,135		45,138
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/075		67,703		67,702
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/075		270,810		270,753
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/075		57,250		57,250
				5,969,463
TOTAL SHORT-TERM INVESTMENTS (Cost: $ 10,856,371)				10,856,371
TOTAL INVESTMENTS IN SECURITIES – 102.56% (Cost: $ 367,314,921)				401,647,970
Other Assets, Less Liabilities – (2.56)%				(10,010,581	)
NET ASSETS – 100.00%			$	391,637,389

¹ Security valued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.

² All or a portion of this security represents a security on loan. See Note 5.

³ Non-income earning security.

⁴ All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁵ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁶ Affiliated issuer. See Note 2.

⁷ The rate quoted is the annualized seven-day yield of the fund at period end.

⁸ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

30 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI BELGIUM INDEX FUND

August 31, 2006

Security	Shares		Value
COMMON STOCKS – 99.38%
BANKS – 48.89%
Banque Nationale de Belgique		167	$	675,722
Dexia Group		561,788		14,418,290
Fortis		966,596		37,588,907
KBC Groupe		203,239		21,866,119
				74,549,038
BEVERAGES – 4.97%
InBev		146,125		7,581,027
				7,581,027
CHEMICALS – 4.85%
Solvay SA		61,122		7,397,518
				7,397,518
ELECTRICAL COMPONENTS & EQUIPMENT – 1.22%
Bekaert NV		19,038		1,866,711
				1,866,711
ELECTRONICS – 0.71%
Barco NV		12,191		1,075,191
				1,075,191
FOOD – 6.85%
Colruyt SA		25,885		4,396,894
Delhaize Group		79,492		6,049,259
				10,446,153
HOLDING COMPANIES – DIVERSIFIED – 8.08%
Groupe Bruxelles Lambert SA		70,308		7,375,316
Sofina SA		51,654		4,939,142
				12,314,458
MANUFACTURING – 1.49%
AGFA-Gevaert NV		96,860		2,270,177
				2,270,177
MINING – 4.17%
Umicore		43,754		6,356,829
				6,356,829
PHARMACEUTICALS – 5.12%
Omega Pharma SA		28,128		1,619,876
UCB SA		105,544		6,182,249
				7,802,125
REAL ESTATE INVESTMENT TRUSTS – 4.19%
Cofinimmo1		36,573		6,385,603
				6,385,603
Security	Shares or Principal		Value
RETAIL – 1.13%
SA D’Ieteren NV		5,177	$	1,726,286
				1,726,286
TELECOMMUNICATIONS – 6.85%
Belgacom SA		212,091		7,484,899
Mobistar SA		36,046		2,962,232
				10,447,131
TRANSPORTATION – 0.86%
Compagnie Maritime Belge SA		16,118		545,300
Euronav SA		22,232		770,645
				1,315,945
TOTAL COMMON STOCKS (Cost: $ 138,313,569)				151,534,192
SHORT-TERM INVESTMENTS – 0.08%
CERTIFICATES OF DEPOSIT2– 0.00%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	366		366
Societe Generale
5.33%, 12/08/06		523		523
Washington Mutual Bank
5.36%, 11/13/06		1,309		1,309
Wells Fargo Bank N.A.
4.78%, 12/05/06		419		419
				2,617
COMMERCIAL PAPER2 – 0.01%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/063		153		151
Amsterdam Funding Corp.
5.27%, 09/15/063		523		522
Atlantis One Funding
5.30%, 11/14/063		718		710
Barton Capital Corp.
5.27%, 09/06/063		264		264
Cancara Asset Securitisation Ltd.
5.30%, 11/14/063		265		262
CC USA Inc.
5.03%, 10/24/063		105		104
Charta LLC
5.30%, 11/06/063		523		518

SCHEDULES OF INVESTMENTS 31

Schedule of Investments (Continued)

iSHARES^® MSCI BELGIUM INDEX FUND

August 31, 2006

Security	Principal		Value
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/063	$	919	$	915
Curzon Funding LLC
5.29%, 11/17/063		523		517
Edison Asset Securitization LLC
5.22%, 12/11/063		386		380
Falcon Asset Securitization Corp.
5.30%, 11/06/063		523		518
Five Finance Inc.
5.19%, 12/01/063		236		232
General Electric Capital Services Inc.
5.22%, 12/11/06		52		52
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/063		523		521
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/063		251		249
KKR Pacific Funding Trust
5.29%, 09/14/063		523		522
Landale Funding LLC
5.31%, 11/15/063		408		404
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/063		678		675
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/063		466		465
Mont Blanc Capital Corp.
5.29%, 11/15/063		338		334
Monument Gardens Funding LLC
5.28%, 09/21/063		263		262
Nestle Capital Corp.
5.19%, 08/09/07		314		299
Park Granada LLC
5.30%, 09/01/063		120		120
Regency Markets LLC
5.28%, 09/15/06		262		261
Solitaire Funding Ltd.
5.27%, 09/05/063		393		392
Sydney Capital Corp.
5.27%, 09/12/063		120		120
Tulip Funding Corp.
5.29%, 11/15/063		276		273
Security	Shares or Principal		Value
White Pine Finance LLC
5.12%, 10/27/063	$	99	$	98
				10,140
MEDIUM-TERM NOTES2 – 0.00%
Bank of America N.A.
5.28%, 04/20/07		131		131
Cullinan Finance Corp.
5.71%, 06/28/073		393		393
K2 USA LLC
5.39%, 06/04/073		393		393
Marshall & Ilsley Bank
5.18%, 12/15/06		523		524
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/073		612		612
US Bank N.A.
2.85%, 11/15/06		105		104
				2,157
MONEY MARKET FUNDS – 0.04%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%4,5		61,136		61,136
				61,136
REPURCHASE AGREEMENTS2– 0.01%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $654 (collateralized by U.S. Government obligations, value $668, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	654		654
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,047 (collateralized by non-U.S. Government debt securities, value $1,079, 3.80% to 9.13%, 11/1/06 to 6/15/26).		1,047		1,047

32 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI BELGIUM INDEX FUND

August 31, 2006

Security	Principal		Value
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $785 (collateralized by non-U.S. Government debt securities, value $864, 0.08% to 6.43%, 9/25/20 to 7/25/36).	$	785	$	785
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,570 (collateralized by non-U.S. Government debt securities, value $1,641, 4.35% to 7.50%, 9/15/08 to 8/25/35).		1,570		1,570
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $314 (collateralized by non-U.S. Government debt securities, value $383, 0.00% to 10.00%, 6/1/28 to 8/24/36).		314		314
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $1,047 (collateralized by non-U.S. Government debt securities, value $1,069, 0.00% to 8.57%, 11/15/06 to 2/15/38).		1,047		1,047
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $523 (collateralized by non-U.S. Government debt securities, value $550, 5.36% to 9.01%, 10/27/10 to 2/18/20).		523		523
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $131 (collateralized by non-U.S. Government debt securities, value $138, 6.63% to 10.50%, 1/15/07 to 4/15/16).		131		131
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,047 (collateralized by non-U.S. Government debt securities, value $1,100, 0.51% to 8.89%, 8/5/18 to 9/25/46).		1,047		1,047
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $523 (collateralized by non-U.S. Government debt securities, value $550, 4.11% to 9.79%, 4/28/31 to 9/25/46).		523		523
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $576 (collateralized by non-U.S. Government debt securities, value $605, 3.44% to 15.15%, 12/1/08 to 3/1/36).		576		576
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $1,047 (collateralized by non-U.S. Government debt securities, value $1,100, 6.38% to 10.25%, 5/1/07 to 10/15/16).		1,047		1,047

SCHEDULES OF INVESTMENTS 33

Schedule of Investments (Continued)

iSHARES^® MSCI BELGIUM INDEX FUND

August 31, 2006

Security	Principal		Value
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,047 (collateralized by non-U.S. Government debt securities, value $1,079, 0.00% to 10.13%, 10/15/06 to 7/1/26).	$	1,047	$	1,047
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $ 523 (collateralized by non-U.S. Government debt securities, value $550, 4.05% to 7.24%, 6/20/29 to 1/14/41).		523		523
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $183 (collateralized by non-U.S. Government debt securities, value $281, 0.00% to 10.00%, 9/1/06 to 8/31/36).		183		183
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $382 (collateralized by non-U.S. Government debt securities, value $570, 0.00% to 10.00%, 9/1/06 to 8/31/36).6		366		366
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $1,361 (collateralized by non-U.S. Government debt securities, value $1,430, 0.06% to 7.68%, 10/15/11 to 3/15/45).		1,361		1,361
				12,744
TIME DEPOSITS2 – 0.00%
KBC Bank
5.31%, 09/01/06		110		110
				110
VARIABLE & FLOATING RATE NOTES2 – 0.02%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/073		1,340		1,347
American Express Bank
5.30%, 02/28/07		523		524
American Express Centurion Bank
5.42%, 07/19/07		576		576
American Express Credit Corp.
5.51%, 07/05/07		157		157
ASIF Global Financing
5.51%, 05/03/073		52		52
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/073		340		340
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/073		759		759
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/073		1,335		1,335
BMW US Capital LLC
5.33%, 09/14/073		523		523
BNP Paribas
5.36%, 05/18/073		968		968
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/073		382		382
CC USA Inc.
5.48%, 07/30/073		262		262
Commodore CDO Ltd.
5.38%, 06/12/073		131		131
Credit Agricole SA
5.48%, 07/23/07		523		523
Credit Suisse First Boston NY
5.51%, 04/24/07		262		262
Cullinan Finance Corp.
5.36%, 04/25/073		131		131

34 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI BELGIUM INDEX FUND

August 31, 2006

Security	Principal		Value
DEPFA Bank PLC
5.37%, 06/15/07	$	523	$	523
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/073		602		602
Eli Lilly Services Inc.
5.37%, 08/31/073		523		523
Fifth Third Bancorp
5.30%, 09/21/073		1,047		1,047
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/073		523		523
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		550		550
Granite Master Issuer PLC
5.30%, 09/20/06		1,832		1,832
Harrier Finance Funding LLC
5.33%, 07/25/073		157		157
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		785		785
HBOS Treasury Services PLC
5.53%, 07/24/073		523		523
Holmes Financing PLC
5.40%, 07/16/073		916		916
JP Morgan Chase & Co.
5.36%, 08/02/07		393		393
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/073		393		392
Kestrel Funding LLC
5.31%, 07/11/073		209		209
Kommunalkredit Austria AG
5.33%, 09/09/073		314		314
Leafs LLC
5.33%, 01/22/07 - 02/20/073		546		546
Lexington Parker Capital Co. LLC
5.46%, 01/10/073		654		654
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/073		576		576
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/073		231		231
Marshall & Ilsley Bank
5.31%, 09/14/07		288		288
Metropolitan Life Global Funding I
5.42%, 08/06/073		785		785
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/073,6		52		52
Monumental Global Funding II
5.49%, 12/27/063		105		105
Mound Financing PLC
5.39%, 05/08/073		492		492
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/073		1,570		1,571
National City Bank of Indiana
5.37%, 05/21/07		262		262
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/073		1,727		1,727
Newcastle Ltd.
5.35%, 04/24/073		185		184
Northern Rock PLC
5.43%, 08/03/073		628		628
Principal Life Global Funding I
5.80%, 02/08/07		236		236
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/073		916		916
Skandinaviska Enskilda Bank NY
5.33%, 09/18/073		523		523
Strips III LLC
5.38%, 07/24/073		127		127
SunTrust Bank
5.37%, 05/01/07		523		523
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/073		1,277		1,276
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/063		733		732

SCHEDULES OF INVESTMENTS 35

Schedule of Investments (Continued)

iSHARES^® MSCI BELGIUM INDEX FUND

August 31, 2006

Security	Principal		Value
US Bank N.A.
5.26%, 09/29/06	$	236	$	236
Wachovia Asset Securitization Inc.
5.31%, 09/25/063		781		781
Wachovia Bank N.A.
5.36%, 05/22/07		1,047		1,047
Wells Fargo & Co.
5.34%, 09/14/073		262		262
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/073		393		392
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/073		1,570		1,571
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/073		332		332
				34,616
TOTAL SHORT-TERM INVESTMENTS (Cost: $ 123,520)				123,520
TOTAL INVESTMENTS IN SECURITIES – 99.46% (Cost: $ 138,437,089)				151,657,712
Other Assets, Less Liabilities – 0.54%				826,498
NET ASSETS – 100.00%			$	152,484,210

¹ All or a portion of this security represents a security on loan. See Note 5.

² All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

³ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁴ Affiliated issuer. See Note 2.

⁵ The rate quoted is the annualized seven-day yield of the fund at period end.

⁶ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

36 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 98.32%
AUSTRIA – 1.72%
Andritz AG	5,124	$	807,672
Boehler-Uddeholm AG	19,355		1,040,565
Erste Bank der Oesterreichischen Sparkassen AG	92,582		5,593,653
Flughafen Wien AG1	5,057		409,690
Immoeast Immobilien Anlagen AG2	129,148		1,520,906
Immofinanz Immobilien Anlagen AG2	228,732		2,649,735
Mayr-Melnhof Karton AG	4,357		764,018
Meinl European Land Ltd.2	67,005		1,445,220
Oesterreichische Elektrizitaetswirtschafts AG Class A	38,900		1,957,898
OMV AG	81,730		4,354,221
Raiffeisen International Bank Holding AG	21,006		1,892,967
RHI AG2	16,590		569,338
Telekom Austria AG	160,657		3,932,009
Voestalpine AG	41,278		1,562,945
Wiener Staedtische Allgemeine Versicherung AG	14,220		870,799
Wienerberger Baustoffindustrie AG	32,294		1,548,932
			30,920,568
BELGIUM – 3.69%
AGFA-Gevaert NV	40,915		958,954
Barco NV	6,238		550,163
Bekaert NV	7,400		725,584
Belgacom SA	60,295		2,127,870
Cofinimmo	4,010		700,141
Colruyt SA	7,800		1,324,929
Compagnie Maritime Belge SA	11,712		396,237
Delhaize Group	36,566		2,782,635
Dexia Group	271,911		6,978,596
Euronav SA	10,851		376,136
Fortis	555,621		21,606,944
Groupe Bruxelles Lambert SA	34,621		3,631,746
InBev	83,635		4,339,019
KBC Groupe	88,303		9,500,361
Mobistar SA	14,782		1,214,773
Omega Pharma SA	10,693		615,804
SA D’Ieteren NV	1,215		405,145
Solvay SA	31,509		3,813,494
UCB SA	41,190		2,412,708
Umicore	12,448		1,808,516
			66,269,755
FINLAND – 4.48%
Amer Group OYJ	29,250		649,609
Cargotec Corp. Class B	20,329		880,849
Elisa OYJ Class A	71,965		1,458,241
Fortum OYJ	205,781		5,531,609
KCI Konecranes OYJ	32,760		649,984
Kesko OYJ Class B	30,342		1,283,250
Kone OYJ	38,220		1,732,871
Metso OYJ	57,961		2,154,564
Neste Oil OYJ1	68,853		2,168,128
Nokia OYJ	1,952,002		40,853,094
Nokian Renkaat OYJ1	64,574		1,129,934
OKO Bank Class A	36,177		587,190
Oriola-KD OYJ2	2,080		5,006
Orion OYJ2	40,456		736,911
Outokumpu OYJ	56,405		1,433,194
Rautaruukki OYJ	42,401		1,237,479
Sampo OYJ Class A	185,979		3,844,708
SanomaWSOY OYJ	15,171		376,353
Stora Enso OYJ Class R	297,196		4,511,849
UPM-Kymmene OYJ1	250,905		5,941,662
Uponor OYJ	34,621		941,285
Wartsila OYJ Class B	28,528		1,178,047
YIT OYJ	53,040		1,150,801
			80,436,618
FRANCE – 28.50%
Accor SA	96,861		6,193,147
Air France - KLM	54,071		1,474,249
Alcatel SA Class A2	300,000		3,759,507
Alstom2	52,904		4,984,175
AXA	787,725		29,241,494
BNP Paribas SA	389,009		41,305,033
Bouygues SA1	95,694		5,034,467
Cap Gemini SA	61,073		3,342,827
Carrefour SA	292,917		18,057,515
Casino Guichard Perrachon SA	19,404		1,662,910
CNP Assurances	15,840		1,635,259

SCHEDULES OF INVESTMENTS 37

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Shares	Value
Compagnie de Saint-Gobain	144,411	$	10,712,249
Compagnie Generale des Etablissements Michelin Class B	70,053		4,752,581
Compagnie Generale d’Optique Essilor International SA	45,124		4,667,087
Credit Agricole SA	293,695		11,921,193
Dassault Systemes SA1	26,854		1,485,664
France Telecom	788,503		16,724,487
Gaz de France	93,127		3,461,778
Gecina SA	3,523		459,079
Groupe Danone	107,753		14,813,599
Hermes International	30,342		2,571,160
Imerys SA	16,138		1,227,052
Klepierre	10,198		1,432,018
Lafarge SA	78,967		10,158,712
Lagardere S.C.A.	54,600		3,997,750
L’Air Liquide SA	56,056		11,817,963
L’Oreal SA	138,095		14,441,987
LVMH Moet Hennessy Louis Vuitton SA	112,032		11,522,717
M6-Metropole Television	28,786		899,448
Neopost SA	14,393		1,681,168
PagesJaunes SA	57,961		1,661,181
Pernod Ricard SA	34,232		7,462,320
PPR SA	31,898		4,401,586
PSA Peugeot Citroen SA	72,698		4,101,025
Publicis Groupe	64,194		2,532,527
Renault SA	85,969		10,003,056
Sanofi-Aventis	477,303		42,798,568
Schneider Electric SA	105,808		11,275,341
SCOR	416,880		997,883
Societe BIC SA	11,426		709,939
Societe des Autoroutes Paris-Rhin-Rhone	13,654		995,361
Societe Generale Class A	167,055		26,943,683
Societe Television Francaise1	56,016		1,790,431
Sodexho Alliance SA	49,595		2,641,573
STMicroelectronics NV	324,815		5,342,766
Suez SA	488,973		20,892,872
Technip SA	42,401		2,444,564
Thales SA	68,853		2,989,549
Total SA	1,027,349		69,303,561
Unibail Holding	21,395		4,173,728
Valeo SA	34,514		1,261,771
Vallourec SA	16,727		3,746,994
Veolia Environnement	133,038		7,450,419
Vinci SA	92,582		10,014,060
Vivendi Universal SA	536,820		18,450,150
Zodiac SA	27,619		1,676,826
			511,500,009
GERMANY – 20.44%
Adidas-Salomon AG	93,360		4,445,603
Allianz AG	194,500		32,956,122
ALTANA AG	33,150		1,956,192
BASF AG	248,182		20,436,700
Bayer AG	337,263		16,694,361
Beiersdorf AG	25,285		1,398,214
Bilfinger Berger AG	15,560		852,472
Celesio AG	33,540		1,700,142
Commerzbank AG	293,306		10,249,685
Continental AG	62,629		6,694,049
DaimlerChrysler AG	424,010		22,361,465
Deutsche Bank AG	253,239		28,898,738
Deutsche Boerse AG	49,792		7,550,833
Deutsche Lufthansa AG	106,197		2,101,593
Deutsche Post AG	329,094		8,336,672
Deutsche Postbank AG	26,841		2,093,078
Deutsche Telekom AG	1,259,971		18,370,087
Douglas Holding AG	13,650		608,748
E.ON AG	289,027		36,686,127
Fresenius Medical Care AG & Co. KGaA	29,564		3,897,113
Heidelberger Druckmaschinen AG	30,342		1,216,446
Hochtief AG	24,896		1,415,901
Hypo Real Estate Holding AG	65,352		4,048,845
Infineon Technologies AG2	363,715		4,269,308
IVG Immobilien AG	41,623		1,346,906
KarstadtQuelle AG1,2	31,509		697,763
Linde AG	50,548		4,457,456
MAN AG	65,741		5,024,702
Merck KGaA	23,340		2,315,120
METRO AG	73,162		4,296,709

38 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Shares	Value
Muenchener Rueckversicherungs-Gesellschaft AG	93,360	$	14,051,453
Puma AG	5,835		2,022,107
Rheinmetall AG	16,338		1,095,865
RWE AG	204,614		18,737,481
Salzgitter AG	21,006		1,880,329
SAP AG	110,087		21,009,295
Siemens AG	393,668		33,349,076
Solarworld AG1	17,116		1,011,992
Suedzucker AG	29,953		745,739
ThyssenKrupp AG	170,428		5,798,596
TUI AG1	113,588		2,215,870
Volkswagen AG	83,246		6,643,956
Wincor Nixdorf AG	6,630		922,847
			366,861,756
GREECE – 1.43%
Coca-Cola Hellenic Bottling SA ADR	141,985		4,753,658
Hellenic Telecommunications Organization SA ADR2	689,706		7,931,619
National Bank of Greece SA ADR	1,553,346		12,923,839
			25,609,116
IRELAND – 2.72%
Allied Irish Banks PLC	416,619		10,879,180
Bank of Ireland	465,633		8,821,296
C&C Group PLC	143,152		1,597,868
CRH PLC	253,628		8,788,452
DCC PLC	39,780		998,040
DEPFA Bank PLC	176,217		3,275,227
Elan Corp. PLC2	198,001		3,294,865
Fyffes PLC	152,976		321,140
Grafton Group PLC	101,643		1,389,555
Greencore Group PLC	94,233		493,348
IAWS Group PLC	57,572		1,163,645
Independent News & Media PLC	287,085		918,708
Irish Life & Permanent PLC	132,696		3,414,136
Kerry Group PLC Class A	59,517		1,325,614
Kingspan Group PLC	58,353		1,044,233
Paddy Power PLC	48,625		886,955
Ryanair Holdings PLC2	21,760		208,904
			48,821,166
ITALY – 11.25%
Alleanza Assicurazioni SpA1	185,820		2,248,956
Arnoldo Mondadori Editore SpA	48,352		467,601
Assicurazioni Generali SpA	476,136		17,924,745
Autogrill SpA	79,750		1,207,654
Autostrade SpA	139,438		3,944,576
Autostrade SpA Rights2,3	138,364		167
Banca Fideuram SpA1	147,723		947,355
Banca Intesa SpA	1,842,693		12,336,206
Banca Monte dei Paschi di Siena SpA1	544,989		3,311,919
Banca Popolare di Milano Scrl	205,392		2,860,483
Banca Popolare di Verona e Novara Scrl	176,217		5,233,144
Banche Popolari Unite Scrl	156,767		4,420,751
Benetton Group SpA	25,620		383,044
Bulgari SpA1	69,729		873,376
Capitalia SpA	803,674		7,005,739
Enel SpA	2,076,284		18,524,499
ENI SpA	1,229,935		37,627,641
Fiat SpA1,2	255,962		3,663,062
Finmeccanica SpA	175,080		3,872,641
Fondiaria-Sai SpA	35,010		1,480,673
Gruppo Editoriale L’Espresso SpA1	76,461		406,421
Italcementi SpA	41,748		1,029,245
Lottomatica SpA	37,733		1,458,664
Luxottica Group SpA	60,392		1,747,861
Mediaset SpA	351,267		4,055,747
Mediobanca SpA	229,060		4,990,404
Mediolanum SpA	128,474		924,227
Pirelli SpA	1,248,468		1,087,508
Sanpaolo IMI SpA	524,761		10,989,344
Seat Pagine Gialle SpA1	1,951,224		910,399
Snam Rete Gas SpA	453,185		2,120,264
Telecom Italia SpA	4,774,586		13,201,291
Terna SpA	514,160		1,462,740
Tiscali SpA1,2	139,397		407,724
UniCredito Italiano SpA	3,621,201		28,831,680
			201,957,751
NETHERLANDS – 11.12%
ABN AMRO Holding NV	846,075		24,107,987
Aegon NV	671,803		11,987,584

SCHEDULES OF INVESTMENTS 39

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Shares	Value
Akzo Nobel NV	127,203	$	7,320,666
ASML Holding NV2	231,844		5,062,929
Buhrmann NV	53,607		728,741
Corio NV	18,672		1,256,002
Euronext NV	41,623		3,740,222
Fugro NV	24,896		1,099,450
Hagemeyer NV1,2	253,239		1,280,426
Heineken NV	105,030		4,868,205
ING Groep NV2	905,981		39,139,908
Koninklijke Ahold NV1,2	728,719		6,986,648
Koninklijke DSM NV	73,132		2,890,758
Koninklijke KPN NV	886,531		10,928,163
Koninklijke Numico NV	79,434		3,686,898
Koninklijke Philips Electronics NV	579,999		19,763,426
Mittal Steel Co. NV French1	322,229		10,744,823
Oce NV	43,179		748,926
QIAGEN NV2	79,758		1,141,413
Randstad Holdings NV	22,125		1,188,070
Reed Elsevier NV	323,259		5,180,622
Rodamco Europe NV	20,228		2,184,062
SBM Offshore NV	59,041		1,618,070
TNT NV	192,555		7,234,189
Unilever NV	791,226		18,858,501
Vedior NV	78,578		1,452,430
Wereldhave NV	9,725		1,020,776
Wolters Kluwer NV CVA	131,871		3,332,141
			199,552,036
PORTUGAL – 1.06%
Banco BPI SA Registered	186,720		1,398,214
Banco Comercial Portugues SA Class R	1,138,992		3,499,120
Banco Espirito Santo SA	121,757		1,868,702
Brisa-Auto Estradas de Portugal SA	153,655		1,581,356
CIMPOR-Cimentos de Portugal SGPS SA	114,763		778,583
Energias de Portugal SA	849,187		3,413,186
Jeronimo Martins SGPS SA	20,106		359,284
Portugal Telecom SGPS SA	354,379		4,450,040
PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA	44,612		551,069
Sonae Industria SGPS SA2	65,352		557,135
Sonae SGPS SA	411,453		684,685
			19,141,374
SPAIN – 11.91%
Abertis Infraestructuras SA1	117,478		2,864,696
Acciona SA	13,226		2,019,742
Acerinox SA	95,305		1,793,329
Actividades de Construcciones y Servicios SA	111,643		5,003,231
Altadis SA	122,535		5,803,484
Antena 3 de Television SA1	39,289		903,242
Banco Bilbao Vizcaya Argentaria SA	1,589,065		36,288,035
Banco Popular Espanol SA	412,729		6,471,844
Banco Santander Central Hispano SA	2,781,350		43,114,834
Cintra Concesiones de Infraestructuras de Transporte SA1	110,865		1,471,635
Corporacion Mapfre SA	54,992		1,100,939
Ebro Puleva SA	39,289		842,389
Endesa SA	441,904		15,363,304
Fadesa SA	24,118		777,363
Fomento de Construcciones y Contratas SA	20,280		1,580,928
Gamesa Corporacion Tecnologica SA	92,582		1,949,483
Gas Natural SDG SA	88,773		2,969,253
Grupo Ferrovial SA	29,640		2,302,999
Iberdrola SA	376,941		13,982,946
Iberia Lineas Aereas de Espana SA	210,939		526,524
Inditex SA	104,252		4,698,696
Indra Sistemas SA	63,796		1,325,375
Inmobiliaria Colonial SA	16,727		1,343,565
Metrovacesa SA	26,466		2,503,570
NH Hoteles SA1	61,073		1,325,873
Promotora de Informaciones SA	38,610		638,048
Repsol YPF SA	435,291		12,503,439
Sacyr Vallehermoso SA1	55,338		2,133,563
Sociedad General de Aguas de Barcelona SA Class B	30,869		865,354
Sogecable SA1,2	23,729		779,708
Telefonica SA	2,035,248		34,909,937
Union Fenosa SA	68,464		2,989,310
Zeltia SA1,2	81,764		611,226
			213,757,864
TOTAL COMMON STOCKS (Cost: $1,588,588,174)			1,764,828,013

40 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
PREFERRED STOCKS – 1.31%
GERMANY – 0.73%
Henkel KGaA		27,619	$	3,524,410
Porsche AG		3,900		3,994,804
ProSiebenSat.1 Media AG		41,234		1,106,302
RWE AG		18,672		1,542,099
Volkswagen AG		51,870		2,944,007
				13,111,622
ITALY – 0.58%
Banca Intesa SpA RNC		454,741		2,894,449
Telecom Italia SpA RNC		2,707,051		6,653,108
Unipol SpA		277,357		836,985
				10,384,542
TOTAL PREFERRED STOCKS (Cost: $ 20,720,467)				23,496,164
SHORT-TERM INVESTMENTS – 2.19%
CERTIFICATES OF DEPOSIT4 – 0.09%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	224,877		224,877
Societe Generale
5.33%, 12/08/06		321,258		321,258
Washington Mutual Bank
5.36%, 11/13/06		803,145		803,145
Wells Fargo Bank N.A.
4.78%, 12/05/06		257,006		257,006
				1,606,286
COMMERCIAL PAPER4 – 0.35%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/065		93,737		92,635
Amsterdam Funding Corp.
5.27%, 09/15/065		321,258		320,600
Atlantis One Funding
5.30%, 11/14/065		440,792		435,990
Barton Capital Corp.
5.27%, 09/06/065		161,914		161,796
Cancara Asset Securitisation Ltd.
5.30%, 11/14/065		162,852		161,078
CC USA Inc.
5.03%, 10/24/065		64,252		63,776
Security	Principal		Value
Charta LLC
5.30%, 11/06/065	$	321,258	$	318,136
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/065		564,229		561,726
Curzon Funding LLC
5.29%, 11/17/065		321,258		317,623
Edison Asset Securitization LLC
5.22%, 12/11/065		236,998		233,528
Falcon Asset Securitization Corp.
5.30%, 11/06/065		321,258		318,136
Five Finance Inc.
5.19%, 12/01/065		144,566		142,670
General Electric Capital Services Inc.
5.22%, 12/11/06		32,126		31,655
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/065		321,258		320,094
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/065		154,204		152,932
KKR Pacific Funding Trust
5.29%, 09/14/065		321,258		320,644
Landale Funding LLC
5.31%, 11/15/065		250,581		247,812
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/065		416,421		414,032
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/065		285,920		285,572
Mont Blanc Capital Corp.
5.29%, 11/15/065		207,211		204,928
Monument Gardens Funding LLC
5.28%, 09/21/065		161,442		160,968
Nestle Capital Corp.
5.19%, 08/09/07		192,755		183,251
Park Granada LLC
5.30%, 09/01/065		73,414		73,414
Regency Markets LLC
5.28%, 09/15/06		160,629		160,300
Solitaire Funding Ltd.
5.27%, 09/05/065		240,944		240,802

SCHEDULES OF INVESTMENTS 41

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Sydney Capital Corp.
5.27%, 09/12/065	$	73,504	$	73,385
Tulip Funding Corp.
5.29%, 11/15/065		169,438		167,571
White Pine Finance LLC
5.12%, 10/27/065		60,718		60,234
				6,225,288
MEDIUM-TERM NOTES4 – 0.07%
Bank of America N.A.
5.28%, 04/20/07		80,315		80,315
Cullinan Finance Corp.
5.71%, 06/28/075		240,944		240,944
K2 USA LLC
5.39%, 06/04/075		240,944		240,944
Marshall & Ilsley Bank
5.18%, 12/15/06		321,258		321,576
Sigma Finance Inc.
5.13% - 5.51%,
03/30/07 - 06/18/075		375,872		375,872
US Bank N.A.
2.85%, 11/15/06		64,252		64,009
				1,323,660
MONEY MARKET FUNDS – 0.05%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%6,7		946,384		946,384
				946,384
REPURCHASE AGREEMENTS4 – 0.44%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $401,632 (collateralized by U.S. Government obligations, value $409,993, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	401,573		401,573
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $642,612 (collateralized by non-U.S. Government debt securities, value $662,420, 3.80% to 9.13%, 11/1/06 to 6/15/26).		642,516		642,516
Security	Principal		Value
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $481,959 (collateralized by non-U.S. Government debt securities, value $530,588, 0.08% to 6.43%, 9/25/20 to 7/25/36).	$	481,887	$	481,887
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $963,917 (collateralized by non-U.S. Government debt securities, value $1,007,076, 4.35% to 7.50%, 9/15/08 to 8/25/35).		963,774		963,774
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $192,784 (collateralized by non-U.S. Government debt securities, value $235,302, 0.00% to 10.00%, 6/1/28 to 8/24/36).		192,755		192,755
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $642,611 (collateralized by non-U.S. Government debt securities, value $655,989, 0.00% to 8.57%, 11/15/06 to 2/15/38).		642,516		642,516
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $321,306 (collateralized by non-U.S. Government debt securities, value $337,641, 5.36% to 9.01%, 10/27/10 to 2/18/20).		321,258		321,258

42 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Principal		Value
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $80,327 (collateralized by non-U.S. Government debt securities, value $84,413, 6.63% to 10.50%, 1/15/07 to 4/15/16).	$	80,315	$	80,315
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $642,612 (collateralized by non-U.S. Government debt securities, value $675,285, 0.51% to 8.89%, 8/5/18 to 9/25/46).		642,516		642,516
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $321,306 (collateralized by non-U.S. Government debt securities, value $337,651, 4.11% to 9.79%, 4/28/31 to 9/25/46).		321,258		321,258
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $353,438 (collateralized by non-U.S. Government debt securities, value $371,405, 3.44% to 15.15%, 12/1/08 to 3/1/36).		353,384		353,384
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $642,611 (collateralized by non-U.S. Government debt securities, value $675,294, 6.38% to 10.25%, 5/1/07 to 10/15/16).		642,516		642,516
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $642,612 (collateralized by non-U.S. Government debt securities, value $662,540, 0.00% to 10.13%, 10/15/06 to 7/1/26).		642,516		642,516
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $321,306 (collateralized by non-U.S. Government debt securities, value $337,797, 4.05% to 7.24%, 6/20/29 to 1/14/41).		321,258		321,258
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $112,457 (collateralized by non-U.S. Government debt securities, value $172,438, 0.00% to 10.00%, 9/1/06 to 8/31/36).		112,440		112,440
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $234,415 (collateralized by non-U.S. Government debt securities, value $350,102, 0.00% to 10.00%, 9/1/06 to 8/31/36).8		224,881		224,881
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $835,396 (collateralized by non-U.S. Government debt securities, value $877,867, 0.06% to 7.68%, 10/15/11 to 3/15/45).		835,271		835,271
				7,822,634

SCHEDULES OF INVESTMENTS 43

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Principal		Value
TIME DEPOSITS4 – 0.01%
KBC Bank
5.31%, 09/01/06	$	67,789 $	67,789
			67,789
VARIABLE & FLOATING RATE NOTES4 – 1.18%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/075		822,421	822,527
American Express Bank
5.30%, 02/28/07		321,258	321,257
American Express Centurion Bank
5.42%, 07/19/07		353,384	353,742
American Express Credit Corp.
5.51%, 07/05/07		96,377	96,431
ASIF Global Financing
5.51%, 05/03/075		32,126	32,138
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/075		208,818	208,818
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/075		465,824	465,844
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/075		819,208	819,250
BMW US Capital LLC
5.33%, 09/14/075		321,258	321,258
BNP Paribas
5.36%, 05/18/075		594,327	594,327
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/075		234,518	234,519
CC USA Inc.
5.48%, 07/30/075		160,629	160,650
Commodore CDO Ltd.
5.38%, 06/12/075		80,315	80,315
Credit Agricole SA
5.48%, 07/23/07		321,258	321,258
Credit Suisse First Boston NY
5.51%, 04/24/07		160,629	160,636
Cullinan Finance Corp.
5.36%, 04/25/075		80,315	80,315
DEPFA Bank PLC
5.37%, 06/15/07		321,258	321,258
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/075		369,447	369,470
Eli Lilly Services Inc.
5.37%, 08/31/075		321,258	321,258
Fifth Third Bancorp
5.30%, 09/21/075		642,516	642,516
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/075		321,258	321,234
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		337,321	337,400
Granite Master Issuer PLC
5.30%, 09/20/06		1,124,403	1,124,403
Harrier Finance Funding LLC
5.33%, 07/25/075		96,377	96,395
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		481,887	481,962
HBOS Treasury Services PLC
5.53%, 07/24/075		321,258	321,258
Holmes Financing PLC
5.40%, 07/16/075		562,202	562,202
JP Morgan Chase & Co.
5.36%, 08/02/07		240,944	240,944
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/075		240,944	240,933
Kestrel Funding LLC
5.31%, 07/11/075		128,503	128,491
Kommunalkredit Austria AG
5.33%, 09/09/075		192,755	192,755
Leafs LLC
5.33%, 01/22/07 - 02/20/075		335,192	335,193
Lexington Parker Capital Co. LLC
5.46%, 01/10/075		401,573	401,483
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/075		353,384	353,359

44 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI EMU INDEX FUND

August 31, 2006

Security	Principal		Value
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/075	$	141,555	$	141,555
Marshall & Ilsley Bank
5.31%, 09/14/07		176,692		176,692
Metropolitan Life Global Funding I
5.42%, 08/06/075		481,887		481,887
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/075,8		32,126		32,126
Monumental Global Funding II
5.49%, 12/27/065		64,252		64,258
Mound Financing PLC
5.39%, 05/08/075		301,983		301,983
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/075		963,774		963,759
National City Bank of Indiana
5.37%, 05/21/07		160,629		160,639
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/075		1,060,152		1,060,398
Newcastle Ltd.
5.35%, 04/24/075		113,243		113,222
Northern Rock PLC
5.43%, 08/03/075		385,510		385,519
Principal Life Global Funding I
5.80%, 02/08/07		144,566		144,862
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/075		562,202		562,191
Skandinaviska Enskilda Bank NY
5.33%, 09/18/075		321,258		321,258
Strips III LLC
5.38%, 07/24/075		78,117		78,117
SunTrust Bank
5.37%, 05/01/07		321,258		321,271
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/075		783,870		783,801
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/065		449,761		449,761
US Bank N.A.
5.26%, 09/29/06		144,566		144,563
Wachovia Asset Securitization Inc.
5.31%, 09/25/065		479,385		479,385
Wachovia Bank N.A.
5.36%, 05/22/07		642,516		642,516
Wells Fargo & Co.
5.34%, 09/14/075		160,629		160,639
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/075		240,944		240,942
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/075		963,774		963,576
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/075		203,745		203,745
				21,244,464
TOTAL SHORT-TERM INVESTMENTS (Cost: $39,236,505)				39,236,505
TOTAL INVESTMENTS IN SECURITIES – 101.82% (Cost: $1,648,545,146)				1,827,560,682
Other Assets, Less Liabilities – (1.82)%				(32,639,695	)
NET ASSETS – 100.00%			$	1,794,920,987

ADR – American 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 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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁵ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁶ Affiliated issuer. See Note 2.

⁷ The rate quoted is the annualized seven-day yield of the fund at period end.

⁸ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 45

Schedule of Investments

iSHARES^® MSCI FRANCE INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.78%
ADVERTISING – 0.78%
PagesJaunes SA	22,916	$	656,780
Publicis Groupe	25,137		991,683
			1,648,463
AEROSPACE & DEFENSE – 1.71%
European Aeronautic Defense and Space Co.	60,395		1,819,845
Safran SA	30,464		664,092
Thales SA	15,708		682,030
Zodiac SA	7,514		456,196
			3,622,163
AIRLINES – 0.28%
Air France - KLM	22,134		603,485
			603,485
APPAREL – 0.48%
Hermes International	11,882		1,006,872
			1,006,872
AUTO MANUFACTURERS – 2.62%
PSA Peugeot Citroen SA	28,196		1,590,587
Renault SA	34,000		3,956,123
			5,546,710
AUTO PARTS & EQUIPMENT – 1.07%
Compagnie Generale des Etablissements Michelin Class B	26,478		1,796,338
Valeo SA	12,716		464,874
			2,261,212
BANKS – 14.63%
BNP Paribas SA	153,068		16,252,783
Credit Agricole SA	110,264		4,475,658
Societe Generale Class A	63,735		10,279,582
			31,008,023
BEVERAGES – 1.42%
Pernod Ricard SA	13,787		3,005,463
			3,005,463
BUILDING MATERIALS – 3.88%
Compagnie de Saint-Gobain	57,274		4,248,522
Imerys SA	5,780		439,482
Lafarge SA	27,527		3,541,212
			8,229,216
CHEMICALS – 2.20%
L’Air Liquide SA	22,066		4,652,048
			4,652,048
COMMERCIAL SERVICES – 0.14%
Societe des Autoroutes Paris-Rhin-Rhone	4,046		294,949
			294,949
COMPUTERS – 0.90%
Atos Origin SA1	12,308		645,792
Cap Gemini SA	23,162		1,267,771
			1,913,563
COSMETICS & PERSONAL CARE – 2.62%
L’Oreal SA	53,023		5,545,150
			5,545,150
DIVERSIFIED FINANCIAL SERVICES – 0.71%
Euronext NV	16,678		1,498,677
			1,498,677
ENGINEERING & CONSTRUCTION – 2.93%
Bouygues SA	37,357		1,965,354
Vinci SA	39,272		4,247,825
			6,213,179
FOOD – 6.38%
Carrefour SA	110,333		6,801,721
Casino Guichard Perrachon SA	7,956		681,824
Groupe Danone2	43,918		6,037,731
			13,521,276
FOOD SERVICE – 0.44%
Sodexho Alliance SA	17,360		924,644
			924,644
GAS – 0.64%
Gaz de France	36,458		1,355,241
			1,355,241
HAND & MACHINE TOOLS – 2.09%
Schneider Electric SA	41,637		4,437,012
			4,437,012
HEALTH CARE – PRODUCTS – 0.88%
Compagnie Generale d’Optique Essilor International SA	18,033		1,865,118
			1,865,118

46 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI FRANCE INDEX FUND

August 31, 2006

Security	Shares		Value
HOLDING COMPANIES – DIVERSIFIED – 2.19%
LVMH Moet Hennessy Louis Vuitton SA		45,101	$	4,638,729
				4,638,729
HOME FURNISHINGS – 0.37%
Thomson		48,427		774,242
				774,242
HOUSEHOLD PRODUCTS & WARES – 0.15%
Societe BIC SA		5,032		312,656
				312,656
INSURANCE – 5.90%
AXA		306,102		11,362,950
CNP Assurances		7,570		781,497
SCOR		150,348		359,887
				12,504,334
IRON & STEEL – 2.02%
Mittal Steel Co. NV French		128,177		4,274,101
				4,274,101
LODGING – 1.15%
Accor SA		37,984		2,428,640
				2,428,640
MACHINERY – 0.90%
Alstom1		20,274		1,910,048
				1,910,048
MEDIA – 4.72%
Lagardere S.C.A.		22,358		1,637,027
M6-Metropole Television		12,036		376,077
Societe Television Francaise 1		21,488		686,818
Vivendi Universal SA		212,412		7,300,461
				10,000,383
METAL FABRICATE & HARDWARE – 0.72%
Vallourec SA		6,780		1,518,779
				1,518,779
OFFICE & BUSINESS EQUIPMENT – 0.32%
Neopost SA		5,882		687,044
				687,044
OIL & GAS – 12.95%
Total SA		406,708		27,435,967
				27,435,967
Security	Shares or Principal		Value
OIL & GAS SERVICES – 0.53%
Technip SA		19,382	$	1,117,439
				1,117,439
PHARMACEUTICALS – 7.91%
Sanofi-Aventis		186,966		16,764,774
				16,764,774
REAL ESTATE – 1.14%
Gecina SA		2,278		296,844
Klepierre		3,366		472,659
Unibail Holding		8,424		1,643,351
				2,412,854
RETAIL – 0.79%
PPR SA		12,209		1,684,712
				1,684,712
SEMICONDUCTORS – 0.97%
STMicroelectronics NV		125,546		2,065,061
				2,065,061
SOFTWARE – 0.50%
Business Objects SA1		17,408		485,549
Dassault Systemes SA		10,440		577,580
				1,063,129
TELECOMMUNICATIONS – 4.59%
Alcatel SA Class A1		249,479		3,126,393
France Telecom		311,308		6,602,976
				9,729,369
WATER – 5.16%
Suez SA		187,276		8,001,942
Veolia Environnement		52,530		2,941,795
				10,943,737
TOTAL COMMON STOCKS (Cost: $203,910,784)				211,418,462
SHORT-TERM INVESTMENTS – 1.28%
CERTIFICATES OF DEPOSIT3 – 0.05%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	15,018		15,018
Societe Generale
5.33%, 12/08/06		21,454		21,454

SCHEDULES OF INVESTMENTS 47

Schedule of Investments (Continued)

iSHARES^® MSCI FRANCE INDEX FUND

August 31, 2006

Security	Principal		Value
Washington Mutual Bank
5.36%, 11/13/06	$	53,636	$	53,636
Wells Fargo Bank N.A.
4.78%, 12/05/06		17,164		17,164
				107,272
COMMERCIAL PAPER3 – 0.20%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		6,261		6,187
Amsterdam Funding Corp.
5.27%, 09/15/064		21,454		21,410
Atlantis One Funding
5.30%, 11/14/064		29,437		29,116
Barton Capital Corp.
5.27%, 09/06/064		10,813		10,805
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		10,876		10,757
CC USA Inc.
5.03%, 10/24/064		4,291		4,259
Charta LLC
5.30%, 11/06/064		21,454		21,246
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		37,681		37,513
Curzon Funding LLC
5.29%, 11/17/064		21,454		21,212
Edison Asset Securitization LLC
5.22%, 12/11/064		15,827		15,596
Falcon Asset Securitization Corp.
5.30%, 11/06/064		21,454		21,246
Five Finance Inc.
5.19%, 12/01/064		9,654		9,528
General Electric Capital Services Inc.
5.22%, 12/11/06		2,145		2,114
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		21,454		21,376
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		10,298		10,213
KKR Pacific Funding Trust
5.29%, 09/14/064		21,454		21,413
Landale Funding LLC
5.31%, 11/15/064		16,734		16,549
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		27,810		27,650
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		19,094		19,071
Mont Blanc Capital Corp.
5.29%, 11/15/064		13,838		13,686
Monument Gardens Funding LLC
5.28%, 09/21/064		10,781		10,750
Nestle Capital Corp.
5.19%, 08/09/07		12,873		12,238
Park Granada LLC
5.30%, 09/01/064		4,903		4,903
Regency Markets LLC
5.28%, 09/15/06		10,727		10,705
Solitaire Funding Ltd.
5.27%, 09/05/064		16,091		16,081
Sydney Capital Corp.
5.27%, 09/12/064		4,909		4,901
Tulip Funding Corp.
5.29%, 11/15/064		11,315		11,191
White Pine Finance LLC
5.12%, 10/27/064		4,055		4,023
				415,739
MEDIUM-TERM NOTES3 – 0.04%
Bank of America N.A.
5.28%, 04/20/07		5,364		5,364
Cullinan Finance Corp.
5.71%, 06/28/074		16,091		16,091
K2 USA LLC
5.39%, 06/04/074		16,091		16,091
Marshall & Ilsley Bank
5.18%, 12/15/06		21,454		21,476
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		25,102		25,102
US Bank N.A.
2.85%, 11/15/06		4,291		4,275
				88,399

48 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI FRANCE INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
MONEY MARKET FUNDS – 0.07%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		160,863	$	160,863
				160,863
REPURCHASE AGREEMENTS3 – 0.25%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $26,822 (collateralized by U.S. Government obligations, value $27,380, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	26,818		26,818
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $42,915 (collateralized by non-U.S. Government debt securities, value $44,238, 3.80% to 9.13%, 11/1/06 to 6/15/26).		42,909		42,909
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $32,187 (collateralized by non-U.S. Government debt securities, value $35,434, 0.08% to 6.43%, 9/25/20 to 7/25/36).		32,182		32,182
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $64,373 (collateralized by non-U.S. Government debt securities, value $67,255, 4.35% to 7.50%, 9/15/08 to 8/25/35).		64,363		64,363

Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $12,875 (collateralized by non-U.S. Government debt securities, value $15,714, 0.00% to 10.00%, 6/1/28 to 8/24/36).	$	12,873	$	12,873
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $42,915 (collateralized by non-U.S. Government debt securities, value $43,808, 0.00% to 8.57%, 11/15/06 to 2/15/38).		42,909		42,909
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $21,457 (collateralized by non-U.S. Government debt securities, value $22,548, 5.36% to 9.01%, 10/27/10 to 2/18/20).		21,454		21,454
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $5,365 (collateralized by non-U.S. Government debt securities, value $5,637, 6.63% to 10.50%, 1/15/07 to 4/15/16).		5,364		5,364
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $42,915 (collateralized by non-U.S. Government debt securities, value $45,097, 0.51% to 8.89%, 8/5/18 to 9/25/46).		42,909		42,909

SCHEDULES OF INVESTMENTS 49

Schedule of Investments (Continued)

iSHARES^® MSCI FRANCE INDEX FUND

August 31, 2006

Security	Principal		Value
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $21,457 (collateralized by non-U.S. Government debt securities, value $22,549, 4.11% to 9.79%, 4/28/31 to 9/25/46).	$	21,454	$	21,454
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $23,604 (collateralized by non-U.S. Government debt securities, value $24,803, 3.44% to 15.15%, 12/1/08 to 3/1/36).		23,600		23,600
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $42,915 (collateralized by non-U.S. Government debt securities, value $45,098, 6.38% to 10.25%, 5/1/07 to 10/15/16).		42,909		42,909
Merrill Lynch & Co. Inc. Repurchase Agreement, 5. 36%, due 9/1/06, maturity value $42,915 (collateralized by non-U.S. Government debt securities, value $44,246, 0.00% to 10.13%, 10/15/06 to 7/1/26).		42,909		42,909
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $21,457 (collateralized by non-U.S. Government debt securities, value $22,559, 4.05% to 7.24%, 6/20/29 to 1/14/41).		21,454		21,454
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $7,510 (collateralized by non-U.S. Government debt securities, value $11,516, 0.00% to 10.00%, 9/1/06 to 8/31/36).		7,509		7,509
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $15,655 (collateralized by non-U.S. Government debt securities, value $23,381, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		15,018		15,018
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $55,789 (collateralized by non-U.S. Government debt securities, value $58,626, 0.06% to 7.68%, 10/15/11 to 3/15/45).		55,781		55,781
				522,415
TIME DEPOSITS3 – 0.00%
KBC Bank
5.31%, 09/01/06		4,527		4,527
				4,527
VARIABLE & FLOATING RATE NOTES3 – 0.67%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		54,923		54,931
American Express Bank
5.30%, 02/28/07		21,454		21,454
American Express Centurion Bank
5.42%, 07/19/07		23,600		23,624
American Express Credit Corp.
5.51%, 07/05/07		6,436		6,440
ASIF Global Financing
5.51%, 05/03/074		2,145		2,146

50 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI FRANCE INDEX FUND

August 31, 2006

Security	Principal		Value
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074	$	13,945	$	13,945
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		31,109		31,110
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		54,709		54,712
BMW US Capital LLC
5.33%, 09/14/074		21,454		21,454
BNP Paribas
5.36%, 05/18/074		39,691		39,691
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		15,662		15,661
CC USA Inc.
5.48%, 07/30/074		10,727		10,729
Commodore CDO Ltd.
5.38%, 06/12/074		5,364		5,364
Credit Agricole SA
5.48%, 07/23/07		21,454		21,454
Credit Suisse First Boston NY
5.51%, 04/24/07		10,727		10,728
Cullinan Finance Corp.
5.36%, 04/25/074		5,364		5,364
DEPFA Bank PLC
5.37%, 06/15/07		21,454		21,454
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		24,673		24,674
Eli Lilly Services Inc.
5.37%, 08/31/074		21,454		21,454
Fifth Third Bancorp
5.30%, 09/21/074		42,909		42,909
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		21,454		21,452
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		22,527		22,533
Granite Master Issuer PLC
5.30%, 09/20/06		75,090		75,090
Harrier Finance Funding LLC
5.33%, 07/25/074		6,436		6,438
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		32,182		32,186
HBOS Treasury Services PLC
5.53%, 07/24/074		21,454		21,454
Holmes Financing PLC
5.40%, 07/16/074		37,545		37,545
JP Morgan Chase & Co.
5.36%, 08/02/07		16,091		16,091
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		16,091		16,090
Kestrel Funding LLC
5.31%, 07/11/074		8,582		8,581
Kommunalkredit Austria AG
5.33%, 09/09/074		12,873		12,873
Leafs LLC
5.33%, 01/22/07 - 02/20/074		22,385		22,385
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		26,818		26,812
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		23,600		23,598
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		9,453		9,453
Marshall & Ilsley Bank
5.31%, 09/14/07		11,800		11,800
Metropolitan Life Global Funding I
5.42%, 08/06/074		32,182		32,182
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		2,145		2,145
Monumental Global Funding II
5.49%, 12/27/064		4,291		4,291
Mound Financing PLC
5.39%, 05/08/074		20,167		20,167
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		64,363		64,363

SCHEDULES OF INVESTMENTS 51

Schedule of Investments (Continued)

iSHARES^® MSCI FRANCE INDEX FUND

August 31, 2006

Security	Principal		Value
National City Bank of Indiana
5.37%, 05/21/07	$	10,727	$	10,728
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		70,799		70,815
Newcastle Ltd.
5.35%, 04/24/074		7,563		7,561
Northern Rock PLC
5.43%, 08/03/074		25,745		25,746
Principal Life Global Funding I
5.80%, 02/08/07		9,654		9,674
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		37,545		37,544
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		21,454		21,454
Strips III LLC
5.38%, 07/24/074		5,217		5,217
SunTrust Bank
5.37%, 05/01/07		21,454		21,455
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		52,349		52,343
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		30,036		30,036
US Bank N.A.
5.26%, 09/29/06		9,654		9,654
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		32,014		32,015
Wachovia Bank N.A.
5.36%, 05/22/07		42,909		42,909
Wells Fargo & Co.
5.34%, 09/14/074		10,727		10,728
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		16,091		16,091
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		64,363		64,350
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		13,607		13,607
				1,418,754
TOTAL SHORT-TERM INVESTMENTS (Cost: $2,717,969)				2,717,969
TOTAL INVESTMENTS IN SECURITIES – 101.06% (Cost: $206,628,753)				214,136,431
Other Assets, Less Liabilities – (1.06)%				(2,250,670	)
NET ASSETS – 100.00%			$	211,885,761

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

52 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI GERMANY INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 96.26%
AIRLINES – 0.59%
Deutsche Lufthansa AG	237,639	$	4,702,774
			4,702,774
APPAREL – 1.75%
Adidas-Salomon AG	206,564		9,836,136
Puma AG	12,091		4,190,111
			14,026,247
AUTO MANUFACTURERS – 7.51%
DaimlerChrysler AG	881,174		46,471,407
Volkswagen AG	173,229		13,825,600
			60,297,007
AUTO PARTS & EQUIPMENT – 1.80%
Continental AG	135,600		14,493,494
			14,493,494
BANKS – 12.32%
Commerzbank AG	624,664		21,829,111
DEPFA Bank PLC	362,052		6,729,216
Deutsche Bank AG	498,556		56,893,445
Deutsche Postbank AG	62,715		4,890,556
Hypo Real Estate Holding AG	138,086		8,555,038
			98,897,366
BIOTECHNOLOGY – 0.27%
QIAGEN NV1,2	151,011		2,161,112
			2,161,112
CHEMICALS – 9.20%
BASF AG	471,888		38,857,908
Bayer AG	707,380		35,014,980
			73,872,888
COMPUTERS – 0.28%
Wincor Nixdorf AG	15,933		2,217,756
			2,217,756
COSMETICS & PERSONAL CARE – 0.41%
Beiersdorf AG	60,003		3,318,056
			3,318,056
DIVERSIFIED FINANCIAL SERVICES – 2.11%
Deutsche Boerse AG	104,412		15,833,821
MLP AG2	64,523		1,106,742
			16,940,563
ELECTRIC – 14.50%
E.ON AG	602,742		76,505,896
RWE AG	436,180		39,943,086
			116,448,982
ENERGY – ALTERNATE SOURCES – 0.26%
Solarworld AG2	34,804		2,057,804
			2,057,804
ENGINEERING & CONSTRUCTION – 1.87%
Bilfinger Berger AG	36,838		2,018,212
Hochtief AG	44,070		2,506,376
Linde AG	119,328		10,522,659
			15,047,247
FOOD – 1.43%
METRO AG	160,234		9,410,334
Suedzucker AG	83,846		2,087,512
			11,497,846
HEALTH CARE – PRODUCTS – 1.06%
Fresenius Medical Care AG & Co. KGaA	64,297		8,475,602
			8,475,602
INSURANCE – 12.05%
Allianz AG	396,517		67,185,927
Muenchener Rueckversicherungs-Gesellschaft AG	196,281		29,541,916
			96,727,843
IRON & STEEL – 1.98%
Salzgitter AG	39,550		3,540,275
ThyssenKrupp AG	362,843		12,345,272
			15,885,547
LEISURE TIME – 0.57%
TUI AG2	235,040		4,585,151
			4,585,151
MACHINERY – DIVERSIFIED – 1.85%
Heidelberger Druckmaschinen AG	60,116		2,410,121
MAN AG	128,707		9,837,306
Rheinmetall AG	38,759		2,599,745
			14,847,172
MANUFACTURING – 8.73%
Siemens AG	826,934		70,052,646
			70,052,646

SCHEDULES OF INVESTMENTS 53

Schedule of Investments (Continued)

iSHARES^® MSCI GERMANY INDEX FUND

August 31, 2006

Security	Shares	Value
MEDIA – 0.10%
Premiere AG1	61,133	$	768,447
			768,447
PHARMACEUTICALS – 1.87%
ALTANA AG	76,501		4,514,347
Celesio AG 2	102,830		5,212,451
Merck KGaA	53,449		5,301,664
			15,028,462
REAL ESTATE – 0.37%
IVG Immobilien AG	92,434		2,991,133
			2,991,133
RETAIL – 0.35%
Douglas Holding AG	32,205		1,436,245
KarstadtQuelle AG1,2	62,941		1,393,820
			2,830,065
SEMICONDUCTORS – 1.10%
Infineon Technologies AG1	755,744		8,870,967
			8,870,967
SOFTWARE – 4.82%
SAP AG	202,722		38,688,005
			38,688,005
TELECOMMUNICATIONS – 4.73%
Deutsche Telekom AG	2,604,085		37,966,959
			37,966,959
TRANSPORTATION – 2.38%
Deutsche Post AG	753,032		19,075,949
			19,075,949
TOTAL COMMON STOCKS (Cost: $713,318,605)			772,773,090
PREFERRED STOCKS – 3.46%
AUTO MANUFACTURERS – 1.81%
Porsche AG	8,023		8,218,030
Volkswagen AG	110,966		6,298,143
			14,516,173
ELECTRIC – 0.32%
RWE AG	30,962		2,557,115
			2,557,115

Security	Shares or Principal		Value
HOUSEHOLD PRODUCTS & WARES – 1.05%
Henkel KGaA		65,879	$	8,406,700
				8,406,700
MEDIA – 0.28%
ProSiebenSat.1 Media AG		84,411		2,264,734
				2,264,734
TOTAL PREFERRED STOCKS (Cost: $22,781,337)				27,744,722
SHORT-TERM INVESTMENTS – 1.38%
CERTIFICATES OF DEPOSIT3 – 0.0 6%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	65,105		65,105
Societe Generale
5.33%, 12/08/06		93,007		93,007
Washington Mutual Bank
5.36%, 11/13/06		232,518		232,518
Wells Fargo Bank N.A.
4.78%, 12/05/06		74,406		74,406
				465,036
COMMERCIAL PAPER3 – 0.22%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		27,138		26,819
Amsterdam Funding Corp.
5.27%, 09/15/064		93,007		92,816
Atlantis One Funding
5.30%, 11/14/064		127,613		126,223
Barton Capital Corp.
5.27%, 09/06/064		46,876		46,841
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		47,147		46,634
CC USA Inc.
5.03%, 10/24/064		18,601		18,464
Charta LLC
5.30%, 11/06/064		93,007		92,103
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		163,349		162,624
Curzon Funding LLC
5.29%, 11/17/064		93,007		91,955

54 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI GERMANY INDEX FUND

August 31, 2006

Security	Principal		Value
Edison Asset Securitization LLC
5.22%, 12/11/064	$	68,613	$	67,608
Falcon Asset Securitization Corp.
5.30%, 11/06/064		93,007		92,103
Five Finance Inc.
5.19%, 12/01/064		41,853		41,304
General Electric Capital Services Inc.
5.22%, 12/11/06		9,301		9,164
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		93,007		92,670
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		44,643		44,274
KKR Pacific Funding Trust
5.29%, 09/14/064		93,007		92,829
Landale Funding LLC
5.31%, 11/15/064		72,546		71,744
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		120,558		119,866
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		82,776		82,676
Mont Blanc Capital Corp.
5.29%, 11/15/064		59,990		59,328
Monument Gardens Funding LLC
5.28%, 09/21/064		46,739		46,602
Nestle Capital Corp.
5.19%, 08/09/07		55,804		53,053
Park Granada LLC
5.30%, 09/01/064		21,254		21,254
Regency Markets LLC
5.28%, 09/15/06		46,504		46,408
Solitaire Funding Ltd.
5.27%, 09/05/064		69,755		69,714
Sydney Capital Corp.
5.27%, 09/12/064		21,280		21,246
Tulip Funding Corp.
5.29%, 11/15/064		49,054		48,513
White Pine Finance LLC
5.12%, 10/27/064		17,578		17,438
				1,802,273
MEDIUM-TERM NOTES3 – 0.05%
Bank of America N.A.
5.28%, 04/20/07		23,252		23,252
Security	Shares or Principal		Value
Cullinan Finance Corp.
5.71%, 06/28/074	$	69,755	$	69,755
K2 USA LLC
5.39%, 06/04/074		69,755		69,755
Marshall & Ilsley Bank
5.18%, 12/15/06		93,007		93,099
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		108,818		108,818
US Bank N.A.
2.85%, 11/15/06		18,601		18,531
				383,210
MONEY MARKET FUNDS – 0.00%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		19,872		19,872
				19,872
REPURCHASE AGREEMENTS3 – 0.28%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $116,276 (collateralized by U.S. Government obligations, value $118,697, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	116,259		116,259
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $186,042 (collateralized by non-U.S. Government debt securities, value $191,777, 3.80% to 9.13%, 11/1/06 to 6/15/26).		186,014		186,014
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $139,532 (collateralized by non-U.S. Government debt securities, value $153,610, 0.08% to 6.43%, 9/25/20 to 7/25/36).		139,511		139,511

SCHEDULES OF INVESTMENTS 55

Schedule of Investments (Continued)

iSHARES^® MSCI GERMANY INDEX FUND

August 31, 2006

Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $279,063 (collateralized by non-U.S. Government debt securities, value $291,558, 4.35% to 7.50%, 9/15/08 to 8/25/35).	$	279,021	$	279,021
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $55,812 (collateralized by non-U.S. Government debt securities, value $68,122, 0.00% to 10.00%, 6/1/28 to 8/24/36).		55,804		55,804
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $186,042 (collateralized by non-U.S. Government debt securities, value $189,915, 0.00% to 8.57%, 11/15/06 to 2/15/38).		186,014		186,014
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $93,021 (collateralized by non-U.S. Government debt securities, value $97,750, 5.36% to 9.01%, 10/27/10 to 2/18/20).		93,007		93,007
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $23,255 (collateralized by non-U.S. Government debt securities, value $24,438, 6.63% to 10.50%, 1/15/07 to 4/15/16).		23,252		23,252
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $186,042 (collateralized by non-U.S. Government debt securities, value $195,501, 0.51% to 8.89%, 8/5/18 to 9/25/46).		186,014		186,014
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $93,021 (collateralized by non-U.S. Government debt securities, value $97,753, 4.11% to 9.79%, 4/28/31 to 9/25/46).		93,007		93,007
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $102,324 (collateralized by non-U.S. Government debt securities, value $107,525, 3.44% to 15.15%, 12/1/08 to 3/1/36).		102,308		102,308
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $186,043 (collateralized by non-U.S. Government debt securities, value $195,504, 6.38% to 10.25%, 5/1/07 to 10/15/16).		186,015		186,015
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $186,042 (collateralized by non-U.S. Government debt securities, value $191,811, 0.00% to 10.13%, 10/15/06 to 7/1/26).		186,014		186,014

56 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI GERMANY INDEX FUND

August 31, 2006

Security	Principal		Value
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $93,021 (collateralized by non-U.S. Government debt securities, value $97,795, 4.05% to 7.24%, 6/20/29 to 1/14/41).	$	93,007	$	93,007
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $32,557 (collateralized by non-U.S. Government debt securities, value $49,922, 0.00% to 10.00%, 9/1/06 to 8/31/36).		32,552		32,552
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $67,865 (collateralized by non-U.S. Government debt securities, value $101,358, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		65,105		65,105
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $241,854 (collateralized by non-U.S. Government debt securities, value $254,150, 0.06% to 7.68%, 10/15/11 to 3/15/45).		241,818		241,818
				2,264,722
TIME DEPOSITS3 – 0.00%
KBC Bank
5.31%, 09/01/06		19,625		19,625
				19,625
VARIABLE & FLOATING RATE NOTES 3 – 0.77%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		238,098		238,134
American Express Bank
5.30%, 02/28/07		93,007		93,007
American Express Centurion Bank
5.42%, 07/19/07		102,308		102,411
American Express Credit Corp.
5.51%, 07/05/07		27,902		27,918
ASIF Global Financing
5.51%, 05/03/074		9,301		9,304
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		60,455		60,455
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		134,860		134,866
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		237,168		237,185
BMW US Capital LLC
5.33%, 09/14/074		93,007		93,007
BNP Paribas
5.36%, 05/18/074		172,063		172,063
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		67,895		67,896
CC USA Inc.
5.48%, 07/30/074		46,504		46,510
Commodore CDO Ltd.
5.38%, 06/12/074		23,252		23,252
Credit Agricole SA
5.48%, 07/23/07		93,007		93,007
Credit Suisse First Boston NY
5.51%, 04/24/07		46,504		46,506
Cullinan Finance Corp.
5.36%, 04/25/074		23,252		23,252
DEPFA Bank PLC
5.37%, 06/15/07		93,007		93,007
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		106,958		106,965
Eli Lilly Services Inc.
5.37%, 08/31/074		93,007		93,007
Fifth Third Bancorp
5.30%, 09/21/074		186,014		186,014

SCHEDULES OF INVESTMENTS 57

Schedule of Investments (Continued)

iSHARES^® MSCI GERMANY INDEX FUND

August 31, 2006

Security	Principal		Value
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074	$	93,007	$	93,000
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		97,657		97,680
Granite Master Issuer PLC
5.30%, 09/20/06		325,525		325,525
Harrier Finance Funding LLC
5.33%, 07/25/074		27,902		27,907
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		139,511		139,532
HBOS Treasury Services PLC
5.53%, 07/24/074		93,007		93,007
Holmes Financing PLC
5.40%, 07/16/074		162,762		162,762
JP Morgan Chase & Co.
5.36%, 08/02/07		69,755		69,755
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		69,755		69,752
Kestrel Funding LLC
5.31%, 07/11/074		37,203		37,199
Kommunalkredit Austria AG
5.33%, 09/09/074		55,804		55,804
Leafs LLC
5.33%, 01/22/07 - 02/20/074		97,041		97,041
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		116,259		116,233
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		102,308		102,300
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		40,982		40,982
Marshall & Ilsley Bank
5.31%, 09/14/07		51,154		51,154
Metropolitan Life Global Funding I
5.42%, 08/06/074		139,511		139,511
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		9,301		9,301
Monumental Global Funding II
5.49%, 12/27/064		18,601		18,603
Mound Financing PLC
5.39%, 05/08/074		87,427		87,427
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		279,021		279,016
National City Bank of Indiana
5.37%, 05/21/07		46,504		46,506
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		306,923		306,995
Newcastle Ltd.
5.35%, 04/24/074		32,785		32,779
Northern Rock PLC
5.43%, 08/03/074		111,609		111,611
Principal Life Global Funding I
5.80%, 02/08/07		41,853		41,939
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		162,762		162,759
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		93,007		93,007
Strips III LLC
5.38%, 07/24/074		22,615		22,615
SunTrust Bank
5.37%, 05/01/07		93,007		93,011
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		226,937		226,917
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		130,210		130,210
US Bank N.A.
5.26%, 09/29/06		41,853		41,852
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		138,786		138,786
Wachovia Bank N.A.
5.36%, 05/22/07		186,014		186,014
Wells Fargo & Co.
5.34%, 09/14/074		46,504		46,506

58 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI GERMANY INDEX FUND

August 31, 2006

Security	Principal		Value
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074	$	69,755	$	69,755
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		279,021		278,964
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		58,986		58,986
				6,150,469
TOTAL SHORT-TERM INVESTMENTS (Cost: $11,105,207)				11,105,207
TOTAL INVESTMENTS IN SECURITIES – 101.10% (Cost: $747,205,149)				811,623,019
Other Assets, Less Liabilities – (1.10)%				(8,828,425	)
NET ASSETS – 100.00%			$	802,794,594

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 59

Schedule of Investments

iSHARES^® MSCI ITALY INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 94.31%
AEROSPACE & DEFENSE – 1.83%
Finmeccanica SpA	121,056	$	2,677,670
			2,677,670
APPAREL – 0.35%
Benetton Group SpA	34,592		517,184
			517,184
AUTO MANUFACTURERS – 1.75%
Fiat SpA1,2	179,136		2,563,608
			2,563,608
AUTO PARTS & EQUIPMENT – 0.66%
Pirelli SpA	1,111,776		968,439
			968,439
BANKS – 36.02%
Banca Intesa SpA	1,030,176		6,896,680
Banca Monte dei Paschi di Siena SpA2	445,600		2,707,928
Banca Popolare di Milano Scrl	167,328		2,330,368
Banca Popolare di Verona e Novara Scrl	166,080		4,932,104
Banche Popolari Unite Scrl	163,232		4,603,061
Capitalia SpA	576,896		5,028,883
Sanpaolo IMI SpA	342,592		7,174,431
UniCredito Italiano SpA	2,390,784		19,035,209
			52,708,664
BUILDING MATERIALS – 0.86%
Italcementi SpA	51,264		1,263,851
			1,263,851
COMMERCIAL SERVICES – 2.85%
Autostrade SpA	147,104		4,161,440
Autostrade SpA Rights1,3	147,104		177
			4,161,617
DIVERSIFIED FINANCIAL SERVICES – 3.63%
Banca Fideuram SpA2	132,864		852,064
Mediobanca SpA	204,736		4,460,471
			5,312,535
ELECTRIC – 9.65%
Enel SpA	1,372,896		12,248,907
Terna SpA	658,656		1,873,818
			14,122,725
ENTERTAINMENT – 0.45%
Lottomatica SpA	16,960		655,631
			655,631
HEALTH CARE – PRODUCTS – 1.31%
Luxottica Group SpA	66,080		1,912,483
			1,912,483
INSURANCE – 6.29%
Assicurazioni Generali SpA	184,640		6,951,007
Fondiaria-Sai SpA	36,576		1,546,903
Mediolanum SpA	98,688		709,950
			9,207,860
MEDIA – 3.46%
Arnoldo Mondadori Editore SpA	63,520		614,288
Gruppo Editoriale L’Espresso SpA2	54,592		290,179
Mediaset SpA	303,904		3,508,891
Seat Pagine Gialle SpA2	1,376,740		642,357
			5,055,715
OIL & GAS – 17.29%
ENI SpA	826,720		25,292,006
			25,292,006
RETAIL – 1.08%
Autogrill SpA	60,576		917,302
Bulgari SpA	52,544		658,129
			1,575,431
TELECOMMUNICATIONS – 6.83%
Telecom Italia SpA	3,547,872		9,809,540
Tiscali SpA 1,2	64,049		187,338
			9,996,878
TOTAL COMMON STOCKS (Cost: $117,401,596)			137,992,297
PREFERRED STOCKS – 5.57%
BANKS – 0.32%
Banca Intesa SpA RNC	72,608		462,153
			462,153
INSURANCE – 1.99%
Unipol SpA	964,928		2,911,881
			2,911,881

60 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI ITALY INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
TELECOMMUNICATIONS – 3.26%
Telecom Italia SpA RNC		1,943,264	$	4,775,952
				4,775,952
TOTAL PREFERRED STOCKS (Cost: $7,346,668)				8,149,986
SHORT-TERM INVESTMENTS – 2.20%
CERTIFICATES OF DEPOSIT4– 0.09%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	18,921		18,921
Societe Generale
5.33%, 12/08/06		27,029		27,029
Washington Mutual Bank
5.36%, 11/13/06		67,574		67,574
Wells Fargo Bank N.A.
4.78%, 12/05/06		21,624		21,624
				135,148
COMMERCIAL PAPER4 – 0.36%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/065		7,887		7,800
Amsterdam Funding Corp.
5.27%, 09/15/065		27,029		26,974
Atlantis One Funding
5.30%, 11/14/065		37,087		36,683
Barton Capital Corp.
5.27%, 09/06/065		13,623		13,613
Cancara Asset Securitisation Ltd.
5.30%, 11/14/065		13,702		13,552
CC USA Inc.
5.03%, 10/24/065		5,406		5,366
Charta LLC
5.30%, 11/06/065		27,029		26,767
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/065		47,472		47,262
Curzon Funding LLC
5.29%, 11/17/065		27,029		26,724
Edison Asset Securitization LLC
5.22%, 12/11/065		19,940		19,648
Security	Principal		Value
Falcon Asset Securitization Corp.
5.30%, 11/06/065	$	27,029	$	26,767
Five Finance Inc.
5.19%, 12/01/065		12,163		12,004
General Electric Capital Services Inc.
5.22%, 12/11/06		2,703		2,663
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/065		27,029		26,932
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/065		12,974		12,867
KKR Pacific Funding Trust
5.29%, 09/14/065		27,029		26,978
Landale Funding LLC
5.31%, 11/15/065		21,083		20,850
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/065		35,036		34,836
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/065		24,056		24,027
Mont Blanc Capital Corp.
5.29%, 11/15/065		17,434		17,242
Monument Gardens Funding LLC
5.28%, 09/21/065		13,583		13,543
Nestle Capital Corp.
5.19%, 08/09/07		16,218		15,418
Park Granada LLC
5.30%, 09/01/065		6,177		6,177
Regency Markets LLC
5.28%, 09/15/06		13,515		13,487
Solitaire Funding Ltd.
5.27%, 09/05/065		20,272		20,260
Sydney Capital Corp.
5.27%, 09/12/065		6,184		6,174
Tulip Funding Corp.
5.29%, 11/15/065		14,256		14,099
White Pine Finance LLC
5.12%, 10/27/065		5,109		5,068
				523,781

SCHEDULES OF INVESTMENTS 61

Schedule of Investments (Continued)

iSHARES^® MSCI ITALY INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
MEDIUM-TERM NOTES4 – 0.08%
Bank of America N.A.
5.28%, 04/20/07	$	6,757	$	6,757
Cullinan Finance Corp.
5.71%, 06/28/075		20,272		20,272
K2 USA LLC
5.39%, 06/04/075		20,272		20,272
Marshall & Ilsley Bank
5.18%, 12/15/06		27,029		27,056
Sigma Finance Inc.
5.13% - 5.51%,
03/30/07 - 06/18/075		31,624		31,624
US Bank N.A.
2.85%, 11/15/06		5,406		5,385
				111,366
MONEY MARKET FUNDS – 0.00%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%6,7		1,089		1,089
				1,089
REPURCHASE AGREEMENTS4 – 0.45%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $33,792 (collateralized by U.S. Government obligations, value $34,495, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	33,787		33,787
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $54,067 (collateralized bynon-U.S. Government debtsecurities, value $55,734, 3.80% to 9.13%, 11/1/06 to 6/15/26).		54,059		54,059
Security	Principal		Value
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $40,550 (collateralized bynon-U.S. Government debtsecurities, value $44,642, 0.08% to 6.43%, 9/25/20 to 7/25/36).	$	40,544	$	40,544
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $81,100 (collateralized bynon-U.S. Government debtsecurities, value $84,732, 4.35% to 7.50%, 9/15/08 to 8/25/35).		81,088		81,088
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $16,220 (collateralized bynon-U.S. Government debtsecurities, value $19,797, 0.00% to 10.00%, 6/1/28 to 8/24/36).		16,218		16,218
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $54,067 (collateralized bynon-U.S. Government debtsecurities, value $55,192, 0.00% to 8.57%, 11/15/06 to 2/15/38).		54,059		54,059
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $27,033 (collateralized bynon-U.S. Government debtsecurities, value $28,408, 5.36% to 9.01%, 10/27/10 to 2/18/20).		27,029		27,029

62 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI ITALY INDEX FUND

August 31, 2006

Security	Principal		Value
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $6,758 (collateralized by non-U.S. Government debt securities, value $7,102, 6.63% to 10.50%, 1/15/07 to 4/15/16).	$	6,757	$	6,757
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $54,067 (collateralized by non-U.S. Government debt securities, value $56,816, 0.51% to 8.89%, 8/5/18 to 9/25/46).		54,059		54,059
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $27,033 (collateralized by non-U.S. Government debt securities, value $28,409, 4.11% to 9.79%, 4/28/31 to 9/25/46).		27,029		27,029
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $29,737 (collateralized by non-U.S. Government debt securities, value $31,249, 3.44% to 15.15%, 12/1/08 to 3/1/36).		29,732		29,732
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $54,067 (collateralized by non-U.S. Government debt securities, value $56,817, 6.38% to 10.25%, 5/1/07 to 10/15/16).		54,059		54,059
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $54,067 (collateralized by non-U.S. Government debt securities, value $55,744, 0.00% to 10.13%, 10/15/06 to 7/1/26).		54,059		54,059
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $27,033 (collateralized by non-U.S. Government debt securities, value $28,421, 4.05% to 7.24%, 6/20/29 to 1/14/41).		27,029		27,029
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $9,461 (collateralized by non-U.S. Government debt securities, value $14,508, 0.00% to 10.00%, 9/1/06 to 8/31/36).		9,460		9,460
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $19,723 (collateralized by non-U.S. Government debt securities, value $29,456, 0.00% to 10.00%, 9/1/06 to 8/31/36).8		18,921		18,921
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $70,288 (collateralized by non-U.S. Government debt securities, value $73,860, 0.06% to 7.68%, 10/15/11 to 3/15/45).		70,277		70,277
				658,166

SCHEDULES OF INVESTMENTS 63

Schedule of Investments (Continued)

iSHARES^® MSCI ITALY INDEX FUND

August 31, 2006

Security	Principal		Value
TIME DEPOSITS4 – 0.00%
KBC Bank
5.31%, 09/01/06	$	5,703	$	5,703
				5,703
VARIABLE & FLOATING RATE NOTES4 – 1.22%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/075		69,195		69,204
American Express Bank
5.30%, 02/28/07		27,029		27,030
American Express Centurion Bank
5.42%, 07/19/07		29,732		29,763
American Express Credit Corp.
5.51%, 07/05/07		8,109		8,113
ASIF Global Financing
5.51%, 05/03/075		2,703		2,704
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/075		17,569		17,569
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/075		39,193		39,195
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/075		68,925		68,928
BMW US Capital LLC
5.33%, 09/14/075		27,029		27,029
BNP Paribas
5.36%, 05/18/075		50,004		50,004
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/075		19,731		19,731
CC USA Inc.
5.48%, 07/30/075		13,515		13,516
Commodore CDO Ltd.
5.38%, 06/12/075		6,757		6,757
Credit Agricole SA
5.48%, 07/23/07		27,029		27,029
Credit Suisse First Boston NY
5.51%, 04/24/07		13,515		13,515
Cullinan Finance Corp.
5.36%, 04/25/075		6,757		6,757
DEPFA Bank PLC
5.37%, 06/15/07		27,029		27,029
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/075		31,084		31,086
Eli Lilly Services Inc.
5.37%, 08/31/075		27,029		27,029
Fifth Third Bancorp
5.30%, 09/21/075		54,059		54,059
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/075		27,029		27,027
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		28,381		28,388
Granite Master Issuer PLC
5.30%, 09/20/06		94,603		94,603
Harrier Finance Funding LLC
5.33%, 07/25/075		8,109		8,110
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		40,544		40,550
HBOS Treasury Services PLC
5.53%, 07/24/075		27,029		27,029
Holmes Financing PLC
5.40%, 07/16/075		47,302		47,302
JP Morgan Chase & Co.
5.36%, 08/02/07		20,272		20,272
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/075		20,272		20,271
Kestrel Funding LLC
5.31%, 07/11/075		10,812		10,811
Kommunalkredit Austria AG
5.33%, 09/09/075		16,218		16,218
Leafs LLC
5.33%, 01/22/07 - 02/20/075		28,202		28,201
Lexington Parker Capital Co. LLC
5.46%, 01/10/075		33,787		33,779
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/075		29,732		29,730

64 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI ITALY INDEX FUND

August 31, 2006

Security	Principal		Value
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/075	$	11,910	$	11,910
Marshall & Ilsley Bank
5.31%, 09/14/07		14,866		14,866
Metropolitan Life Global Funding I
5.42%, 08/06/075		40,544		40,544
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/075,8		2,703		2,703
Monumental Global Funding II
5.49%, 12/27/065		5,406		5,406
Mound Financing PLC
5.39%, 05/08/075		25,408		25,408
Natexis Banques Populaires
5.31% - 5.40%,
02/05/07 - 09/14/075		81,088		81,087
National City Bank of Indiana
5.37%, 05/21/07		13,515		13,516
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/075		89,197		89,217
Newcastle Ltd.
5.35%, 04/24/075		9,528		9,526
Northern Rock PLC
5.43%, 08/03/075		32,435		32,436
Principal Life Global Funding I
5.80%, 02/08/07		12,163		12,188
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/075		47,302		47,300
Skandinaviska Enskilda Bank NY
5.33%, 09/18/075		27,029		27,029
Strips III LLC
5.38%, 07/24/075		6,572		6,572
SunTrust Bank
5.37%, 05/01/07		27,029		27,031
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/075		65,952		65,946
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/065		37,841		37,841
US Bank N.A.
5.26%, 09/29/06		12,163		12,163
Wachovia Asset Securitization Inc.
5.31%, 09/25/065		40,334		40,334
Wachovia Bank N.A.
5.36%, 05/22/07		54,059		54,059
Wells Fargo & Co.
5.34%, 09/14/075		13,515		13,516
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/075		20,272		20,272
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/075		81,088		81,073
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/075		17,142		17,143
				1,787,424
TOTAL SHORT-TERM INVESTMENTS
(Cost: $3,222,677)				3,222,677
TOTAL INVESTMENTS
IN SECURITIES – 102.08%
(Cost: $127,970,941)				149,364,960
Other Assets, Less Liabilities – (2.08)%				(3,041,246	)
NET ASSETS – 100.00%			$	146,323,714

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁵ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁶ Affiliated issuer. See Note 2.

⁷ The rate quoted is the annualized seven-day yield of the fund at period end.

⁸ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 65

Schedule of Investments

iSHARES^® MSCI NETHERLANDS INDEX FUND

August 31, 2006

Security	Shares		Value
COMMON STOCKS – 99.58%
BANKS – 11.98%
ABN AMRO Holding NV		462,462	$	13,177,352
				13,177,352
BEVERAGES – 3.97%
Heineken NV		94,148		4,363,817
				4,363,817
CHEMICALS – 6.53%
Akzo Nobel NV		87,360		5,027,660
Koninklijke DSM NV		54,418		2,151,032
				7,178,692
COMMERCIAL SERVICES – 1.68%
Randstad Holdings NV		16,471		884,461
Vedior NV		52,325		967,171
				1,851,632
COMPUTERS – 0.27%
Getronics NV1		43,225		297,123
				297,123
DISTRIBUTION & WHOLESALE – 1.17%
Buhrmann NV		35,126		477,507
Hagemeyer NV2		159,615		807,045
				1,284,552
ELECTRONICS – 9.52%
Koninklijke Philips Electronics NV		307,307		10,471,465
				10,471,465
FOOD – 14.83%
Koninklijke Ahold NV2		459,368		4,404,225
Koninklijke Numico NV		49,868		2,314,604
Unilever NV		402,311		9,588,894
				16,307,723
INSURANCE – 23.97%
Aegon NV		291,746		5,205,886
ING Groep NV2		489,762		21,158,545
				26,364,431
MEDIA – 6.22%
Reed Elsevier NV		277,104		4,440,931
Wolters Kluwer NV CVA1		95,004		2,400,579
				6,841,510
Security	Shares or Principal		Value
OFFICE & BUSINESS EQUIPMENT – 0.49%
Oce NV		30,940	$	536,644
				536,644
OIL & GAS SERVICES – 1.61%
Fugro NV		16,016		707,294
SBM Offshore NV		38,948		1,067,404
				1,774,698
REAL ESTATE INVESTMENT TRUSTS – 5.10%
Corio NV		23,653		1,591,057
Rodamco Europe NV		26,936		2,908,340
Wereldhave NV		10,556		1,108,001
				5,607,398
SEMICONDUCTORS – 2.82%
ASML Holding NV2		142,233		3,106,035
				3,106,035
TELECOMMUNICATIONS – 4.87%
Koninklijke KPN NV		434,798		5,359,703
				5,359,703
TRANSPORTATION – 4.55%
TNT NV		133,315		5,008,574
				5,008,574
TOTAL COMMON STOCKS (Cost: $96,570,671)				109,531,349
SHORT-TERM INVESTMENTS – 1.89%
CERTIFICATES OF DEPOSIT3 – 0.08%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	12,189		12,189
Societe Generale
5.33%, 12/08/06		17,414		17,414
Washington Mutual Bank
5.36%, 11/13/06		43,534		43,534
Wells Fargo Bank N.A.
4.78%, 12/05/06		13,931		13,931
				87,068
COMMERCIAL PAPER3 – 0.31%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		5,081		5,021

66 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI NETHERLANDS INDEX FUND

August 31, 2006

Security	Principal		Value
Amsterdam Funding Corp.
5.27%, 09/15/064	$	17,414	$	17,378
Atlantis One Funding
5.30%, 11/14/064		23,893		23,632
Barton Capital Corp.
5.27%, 09/06/064		8,776		8,770
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		8,827		8,731
CC USA Inc.
5.03%, 10/24/064		3,483		3,457
Charta LLC
5.30%, 11/06/064		17,414		17,244
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		30,584		30,448
Curzon Funding LLC
5.29%, 11/17/064		17,414		17,217
Edison Asset Securitization LLC
5.22%, 12/11/064		12,846		12,658
Falcon Asset Securitization Corp.
5.30%, 11/06/064		17,414		17,244
Five Finance Inc.
5.19%, 12/01/064		7,836		7,733
General Electric Capital Services Inc.
5.22%, 12/11/06		1,741		1,716
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		17,414		17,350
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		8,358		8,290
KKR Pacific Funding Trust
5.29%, 09/14/064		17,414		17,380
Landale Funding LLC
5.31%, 11/15/064		13,583		13,432
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		22,572		22,442
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		15,498		15,479
Security	Shares or Principal		Value
Mont Blanc Capital Corp.
5.29%, 11/15/064	$	11,232	$	11,108
Monument Gardens Funding LLC
5.28%, 09/21/064		8,751		8,725
Nestle Capital Corp.
5.19%, 08/09/07		10,448		9,933
Park Granada LLC
5.30%, 09/01/064		3,979		3,979
Regency Markets LLC
5.28%, 09/15/06		8,707		8,689
Solitaire Funding Ltd.
5.27%, 09/05/064		13,060		13,053
Sydney Capital Corp.
5.27%, 09/12/064		3,984		3,978
Tulip Funding Corp.
5.29%, 11/15/064		9,184		9,083
White Pine Finance LLC
5.12%, 10/27/064		3,291		3,265
				337,435
MEDIUM-TERM NOTES3 – 0.06%
Bank of America N.A.
5.28%, 04/20/07		4,353		4,353
Cullinan Finance Corp.
5.71%, 06/28/074		13,060		13,060
K2 USA LLC
5.39%, 06/04/074		13,060		13,060
Marshall & Ilsley Bank
5.18%, 12/15/06		17,414		17,431
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		20,374		20,374
US Bank N.A.
2.85%, 11/15/06		3,483		3,470
				71,748
MONEY MARKET FUNDS – 0.01%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		6,254		6,254
				6,254

SCHEDULES OF INVESTMENTS 67

Schedule of Investments (Continued)

iSHARES^® MSCI NETHERLANDS INDEX FUND

August 31, 2006

Security	Principal		Value
REPURCHASE AGREEMENTS3 – 0.38%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $21,770 (collateralized by U.S. Government obligations, value $22,223, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	21,767	$	21,767
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $34,832 (collateralized by non-U.S. Government debt securities, value $35,906, 3.80% to 9.13%, 11/1/06 to 6/15/26).		34,827		34,827
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $26,124 (collateralized by non-U.S. Government debt securities, value $28,760, 0.08% to 6.43%, 9/25/20 to 7/25/36).		26,120		26,120
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $52,249 (collateralized by non-U.S. Government debt securities, value $54,588, 4.35% to 7.50%, 9/15/08 to 8/25/35).		52,241		52,241
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $10,450 (collateralized by non-U.S. Government debt securities, value $12,754, 0.00% to 10.00%, 6/1/28 to 8/24/36).		10,448		10,448
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $34,832 (collateralized by non-U.S. Government debt securities, value $35,557, 0.00% to 8.57%, 11/15/06 to 2/15/38).		34,827		34,827
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $17,417 (collateralized by non-U.S. Government debt securities, value $18,302, 5.36% to 9.01%, 10/27/10 to 2/18/20).		17,414		17,414
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $4,354 (collateralized by non-U.S. Government debt securities, value $4,576, 6.63% to 10.50%, 1/15/07 to 4/15/16).		4,353		4,353
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $34,832 (collateralized by non-U.S. Government debt securities, value $36,603, 0.51% to 8.89%, 8/5/18 to 9/25/46).		34,827		34,827
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $17,417 (collateralized by non-U.S. Government debt securities, value $18,302, 4.11% to 9.79%, 4/28/31 to 9/25/46).		17,414		17,414

68 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI NETHERLANDS INDEX FUND

August 31, 2006

Security	Principal		Value
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $19,158 (collateralized by non-U.S. Government debt securities, value $20,132, 3.44% to 15.15%, 12/1/08 to 3/1/36).	$	19,155	$	19,155
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $34,832 (collateralized by non-U.S. Government debt securities, value $36,604, 6.38% to 10.25%, 5/1/07 to 10/15/16).		34,827		34,827
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $34,832 (collateralized by non-U.S. Government debt securities, value $35,912, 0.00% to 10.13%, 10/15/06 to 7/1/26).		34,827		34,827
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $17,417 (collateralized by non-U.S. Government debt securities, value $18,310, 4.05% to 7.24%, 6/20/29 to 1/14/41).		17,414		17,414
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $6,096 (collateralized by non-U.S. Government debt securities, value $9,347, 0.00% to 10.00%, 9/1/06 to 8/31/36).		6,095		6,095
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $12,706 (collateralized by non-U.S. Government debt securities, value $18,977, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		12,189		12,189
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $45,282 (collateralized by non-U.S. Government debt securities, value $47,584, 0.06% to 7.68%, 10/15/11 to 3/15/45).		45,275		45,275
				424,020
TIME DEPOSITS3 – 0.00%
KBC Bank
5.31%, 09/01/06		3,674		3,674
				3,674
VARIABLE & FLOATING RATE NOTES 3 – 1.05%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		44,579		44,588
American Express Bank
5.30%, 02/28/07		17,414		17,414
American Express Centurion Bank
5.42%, 07/19/07		19,155		19,174
American Express Credit Corp.
5.51%, 07/05/07		5,224		5,227
ASIF Global Financing
5.51%, 05/03/074		1,741		1,742
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		11,319		11,319
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		25,250		25,250

SCHEDULES OF INVESTMENTS 69

Schedule of Investments (Continued)

iSHARES^® MSCI NETHERLANDS INDEX FUND

August 31, 2006

Security	Principal		Value
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074	$	44,405	$	44,407
BMW US Capital LLC
5.33%, 09/14/074		17,414		17,414
BNP Paribas
5.36%, 05/18/074		32,215		32,215
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		12,712		12,711
CC USA Inc.
5.48%, 07/30/074		8,707		8,708
Commodore CDO Ltd.
5.38%, 06/12/074		4,353		4,353
Credit Agricole SA
5.48%, 07/23/07		17,414		17,414
Credit Suisse First Boston NY
5.51%, 04/24/07		8,707		8,707
Cullinan Finance Corp.
5.36%, 04/25/074		4,353		4,353
DEPFA Bank PLC
5.37%, 06/15/07		17,414		17,414
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		20,026		20,027
Eli Lilly Services Inc.
5.37%, 08/31/074		17,414		17,414
Fifth Third Bancorp
5.30%, 09/21/074		34,827		34,827
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		17,414		17,412
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		18,284		18,288
Granite Master Issuer PLC
5.30%, 09/20/06		60,947		60,947
Harrier Finance Funding LLC
5.33%, 07/25/074		5,224		5,225
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		26,120		26,125
HBOS Treasury Services PLC
5.53%, 07/24/074		17,414		17,414
Holmes Financing PLC
5.40%, 07/16/074		30,474		30,474
JP Morgan Chase & Co.
5.36%, 08/02/07		13,060		13,060
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		13,060		13,060
Kestrel Funding LLC
5.31%, 07/11/074		6,965		6,965
Kommunalkredit Austria AG
5.33%, 09/09/074		10,448		10,448
Leafs LLC
5.33%, 01/22/07 - 02/20/074		18,169		18,168
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		21,767		21,762
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		19,155		19,154
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		7,673		7,673
Marshall & Ilsley Bank
5.31%, 09/14/07		9,577		9,577
Metropolitan Life Global Funding I
5.42%, 08/06/074		26,120		26,120
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		1,741		1,741
Monumental Global Funding II
5.49%, 12/27/064		3,483		3,483
Mound Financing PLC
5.39%, 05/08/074		16,369		16,369
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		52,241		52,240
National City Bank of Indiana
5.37%, 05/21/07		8,707		8,707
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		57,465		57,478
Newcastle Ltd.
5.35%, 04/24/074		6,138		6,137
Northern Rock PLC
5.43%, 08/03/074		20,896		20,897

70 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI NETHERLANDS INDEX FUND

August 31, 2006

Security	Principal		Value
Principal Life Global Funding I
5.80%, 02/08/07	$	7,836	$	7,852
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		30,474		30,474
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		17,414		17,414
Strips III LLC
5.38%, 07/24/074		4,234		4,234
SunTrust Bank
5.37%, 05/01/07		17,414		17,414
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		42,489		42,485
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		24,379		24,379
US Bank N.A.
5.26%, 09/29/06		7,836		7,836
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		25,985		25,984
Wachovia Bank N.A.
5.36%, 05/22/07		34,827		34,827
Wells Fargo & Co.
5.34%, 09/14/074		8,707		8,707
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		13,060		13,061
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		52,241		52,229
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		11,044		11,043
				1,151,541
TOTAL SHORT-TERM INVESTMENTS (Cost: $2,081,740)				2,081,740
TOTAL INVESTMENTS IN SECURITIES – 101.47% (Cost: $98,652,411)				111,613,089
Other Assets, Less Liabilities – (1.47)%				(1,621,804	)
NET ASSETS – 100.00%			$	109,991,285

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 71

Schedule of Investments

iSHARES^® MSCI SPAIN INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.87%
AGRICULTURE – 3.27%
Altadis SA	123,119	$	5,831,144
			5,831,144
AIRLINES – 0.25%
Iberia Lineas Aereas de Espana SA	179,935		449,135
			449,135
BANKS – 38.84%
Banco Bilbao Vizcaya Argentaria SA	1,156,778		26,416,289
Banco Popular Espanol SA	524,064		8,217,645
Banco Santander Central Hispano SA	2,132,561		33,057,693
Bankinter SA	22,048		1,495,795
			69,187,422
BIOTECHNOLOGY – 0.27%
Zeltia SA1,2	63,867		477,437
			477,437
COMMERCIAL SERVICES – 2.36%
Abertis Infraestructuras SA2	132,299		3,226,105
Cintra Concesiones de Infraestructurasde Transporte SA2	73,140		970,869
			4,196,974
COMPUTERS – 0.70%
Indra Sistemas SA	59,943		1,245,328
			1,245,328
ELECTRIC – 11.70%
Endesa SA	247,563		8,606,814
Iberdrola SA	236,062		8,756,920
Union Fenosa SA	79,522		3,472,130
			20,835,864
ENERGY – ALTERNATE SOURCES – 0.77%
Gamesa Corporacion Tecnologica SA	65,614		1,381,622
			1,381,622
ENGINEERING & CONSTRUCTION – 7.66%
Acciona SA	13,621		2,080,062
Actividades de Construcciones y Servicios SA	122,854		5,505,647
Fomento de Construcciones y Contratas SA	28,461		2,218,679
Grupo Ferrovial SA2	24,645		1,914,893
Sacyr Vallehermoso SA2	50,032		1,928,989
			13,648,270
FOOD – 0.98%
Ebro Puleva SA	72,080		1,545,456
Viscofan SA	13,250		193,860
			1,739,316
FOREST PRODUCTS & PAPER – 0.38%
Grupo Empresarial ENCE SA	15,476		682,456
			682,456
GAS – 2.40%
Gas Natural SDG SA	128,048		4,282,912
			4,282,912
INSURANCE – 0.86%
Corporacion Mapfre SA	76,744		1,536,413
			1,536,413
IRON & STEEL – 0.99%
Acerinox SA	93,386		1,757,220
			1,757,220
LODGING – 0.31%
NH Hoteles SA2	25,566		555,029
			555,029
MEDIA – 1.04%
Antena 3 de Television SA	37,789		868,758
Promotora de Informaciones SA	36,146		597,329
Sogecable SA1,2	11,713		384,876
			1,850,963
OIL & GAS – 4.82%
Repsol YPF SA	298,867		8,584,752
			8,584,752
PHARMACEUTICALS – 0.71%
FAES FARMA SA2	46,428		1,271,805
			1,271,805
REAL ESTATE – 2.20%
Fadesa SA	7,261		234,034
Inmobiliaria Colonial SA	20,352		1,634,736
Metrovacesa SA2	21,620		2,045,159
			3,913,929

72 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SPAIN INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
RETAIL – 2.52%
Inditex SA		99,640	$	4,490,831
				4,490,831
TELECOMMUNICATIONS – 15.84%
Telefonica SA		1,644,802		28,212,746
				28,212,746
WATER – 1.00%
Sociedad General de Aguas de Barcelona SA Class B		63,282		1,773,990
				1,773,990
TOTAL COMMON STOCKS (Cost: $148,715,376)				177,905,558
SHORT-TERM INVESTMENTS – 4.18%
CERTIFICATES OF DEPOSIT3 – 0.17%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	42,748		42,748
Societe Generale
5.33%, 12/08/06		61,068		61,068
Washington Mutual Bank
5.36%, 11/13/06		152,670		152,670
Wells Fargo Bank N.A.
4.78%, 12/05/06		48,854		48,854
				305,340
COMMERCIAL PAPER3 – 0.66%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		17,818		17,609
Amsterdam Funding Corp.
5.27%, 09/15/064		61,068		60,943
Atlantis One Funding
5.30%, 11/14/064		83,790		82,877
Barton Capital Corp.
5.27%, 09/06/064		30,778		30,756
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		30,957		30,619
CC USA Inc.
5.03%, 10/24/064		12,214		12,123
Charta LLC
5.30%, 11/06/064		61,068		60,475
Security	Principal		Value
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064	$	107,254	$	106,779
Curzon Funding LLC
5.29%, 11/17/064		61,068		60,377
Edison Asset Securitization LLC
5.22%, 12/11/064		45,051		44,391
Falcon Asset Securitization Corp.
5.30%, 11/06/064		61,068		60,475
Five Finance Inc.
5.19%, 12/01/064		27,481		27,120
General Electric Capital Services Inc.
5.22%, 12/11/06		6,107		6,017
Giro Funding Corp.
5.28% - 5.34%,
09/11/06 - 10/10/064		61,068		60,847
Grampian Funding LLC
5.03% - 5.30%,
10/17/06 - 11/16/064		29,313		29,071
KKR Pacific Funding Trust
5.29%, 09/14/064		61,068		60,951
Landale Funding LLC
5.31%, 11/15/064		47,633		47,107
Lexington Parker Capital Co. LLC
5.19% - 5.27%,
09/15/06 - 11/15/064		79,158		78,703
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		54,350		54,285
Mont Blanc Capital Corp.
5.29%, 11/15/064		39,389		38,955
Monument Gardens Funding LLC
5.28%, 09/21/064		30,688		30,598
Nestle Capital Corp.
5.19%, 08/09/07		36,641		34,834
Park Granada LLC
5.30%, 09/01/064		13,955		13,955
Regency Markets LLC
5.28%, 09/15/06		30,534		30,471
Solitaire Funding Ltd.
5.27%, 09/05/064		45,801		45,774
Sydney Capital Corp.
5.27%, 09/12/064		13,972		13,950

SCHEDULES OF INVESTMENTS 73

Schedule of Investments (Continued)

iSHARES^® MSCI SPAIN INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Tulip Funding Corp.
5.29%, 11/15/064	$	32,208	$	31,853
White Pine Finance LLC
5.12%, 10/27/064		11,542		11,450
				1,183,365
MEDIUM-TERM NOTES3 – 0.14%
Bank of America N.A.
5.28%, 04/20/07		15,267		15,267
Cullinan Finance Corp.
5.71%, 06/28/074		45,801		45,801
K2 USA LLC
5.39%, 06/04/074		45,801		45,801
Marshall & Ilsley Bank
5.18%, 12/15/06		61,068		61,128
Sigma Finance Inc.
5.13% - 5.51%,
03/30/07 - 06/18/074		71,450		71,450
US Bank N.A.
2.85%, 11/15/06		12,214		12,167
				251,614
MONEY MARKET FUNDS – 0.09%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		160,146		160,146
				160,146
REPURCHASE AGREEMENTS3– 0.84%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $76,346 (collateralized by U.S. Government obligations, value $77,936, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	76,335		76,335
Security	Principal		Value
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $122,154 (collateralized by non-U.S. Government debt securities, value $125,919, 3.80% to 9.13%, 11/1/06 to 6/15/26).	$	122,136	$	122,136
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $91,616 (collateralized by non-U.S. Government debt securities, value $100,859, 0.08% to 6.43%, 9/25/20 to 7/25/36).		91,602		91,602
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $183,231 (collateralized by non-U.S. Government debt securities, value $191,435, 4.35% to 7.50%, 9/15/08 to 8/15/35).		183,204		183,204
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $36,647 (collateralized by non-U.S. Government debt securities, value $44,729, 0.00% to 10.00%, 6/1/28 to 8/24/36).		36,641		36,641
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $122,154 (collateralized by non-U.S. Government debt securities, value $124,697, 0.00% to 8.57%, 11/15/06 to 2/15/38).		122,136		122,136

74 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SPAIN INDEX FUND

August 31, 2006

Security	Principal		Value
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $61,077 (collateralized by non-U.S. Government debt securities, value $64,182, 5.36% to 9.01%, 10/27/10 to 2/18/20).	$	61,068	$	61,068
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $15,269 (collateralized by non-U.S. Government debt securities, value $16,046, 6.63% to 10.50%, 1/15/07 to 4/15/16).		15,267		15,267
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $122,154 (collateralized by non-U.S. Government debt securities, value $128,365, 0.51% to 8.89%, 8/5/18 to 9/25/46).		122,136		122,136
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $61,077 (collateralized by non-U.S. Government debt securities, value $64,184, 4.11% to 9.79%, 4/28/31 to 9/25/46).		61,068		61,068
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $67,185 (collateralized by non-U.S. Government debt securities, value $70,600, 3.44% to 15.15%, 12/1/08 to 3/1/36).		67,175		67,175
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $122,154 (collateralized by non-U.S. Government debt securities, value $128,367, 6.38% to 10.25%, 5/1/07 to 10/15/16).		122,136		122,136
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $122,154 (collateralized by non-U.S. Government debt securities, value $125,942, 0.00% to 10.13%, 10/15/06 to 7/1/26).		122,136		122,136
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $61,077 (collateralized by non-U.S. Government debt securities, value $64,212, 4.05% to 7.24%, 6/20/29 to 1/14/41).		61,068		61,068
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $21,377 (collateralized by non-U.S. Government debt securities, value $32,779, 0.00% to 10.00%, 9/1/06 to 8/31/36).		21,374		21,374
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $44,560 (collateralized by non-U.S. Government debt securities, value $66,551, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		42,748		42,748

SCHEDULES OF INVESTMENTS 75

Schedule of Investments (Continued)

iSHARES^® MSCI SPAIN INDEX FUND

August 31, 2006

Security	Principal		Value
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $158,801 (collateralized by non-U.S. Government debt securities, value $166,874, 0.06% to 7.68%, 10/15/11 to 3/15/45).	$	158,777	$	158,777
				1,487,007
TIME DEPOSITS3 – 0.01%
KBC Bank
5.31%, 09/01/06		12,886		12,886
				12,886
VARIABLE & FLOATING RATE NOTES 3 – 2.27%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		156,334		156,352
American Express Bank
5.30%, 02/28/07		61,068		61,068
American Express Centurion Bank
5.42%, 07/19/07		67,175		67,243
American Express Credit Corp.
5.51%, 07/05/07		18,320		18,331
ASIF Global Financing
5.51%, 05/03/074		6,107		6,109
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		39,694		39,694
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		88,549		88,553
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		155,723		155,731
BMW US Capital LLC
5.33%, 09/14/074		61,068		61,068
BNP Paribas
5.36%, 05/18/074		112,976		112,976
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		44,580		44,579
CC USA Inc.
5.48%, 07/30/074		30,534		30,538
Commodore CDO Ltd.
5.38%, 06/12/074		15,267		15,267
Credit Agricole SA
5.48%, 07/23/07		61,068		61,068
Credit Suisse First Boston NY
5.51%, 04/24/07		30,534		30,535
Cullinan Finance Corp.
5.36%, 04/25/074		15,267		15,267
DEPFA Bank PLC
5.37%, 06/15/07		61,068		61,068
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		70,228		70,233
Eli Lilly Services Inc.
5.37%, 08/31/074		61,068		61,068
Fifth Third Bancorp
5.30%, 09/21/074		122,136		122,136
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		61,068		61,063
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		64,121		64,137
Granite Master Issuer PLC
5.30%, 09/20/06		213,738		213,738
Harrier Finance Funding LLC
5.33%, 07/25/074		18,320		18,324
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		91,602		91,616
HBOS Treasury Services PLC
5.53%, 07/24/074		61,068		61,068
Holmes Financing PLC
5.40%, 07/16/074		106,869		106,869
JP Morgan Chase & Co.
5.36%, 08/02/07		45,801		45,801
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		45,801		45,799

76 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SPAIN INDEX FUND

August 31, 2006

Security	Principal		Value
Kestrel Funding LLC
5.31%, 07/11/074	$	24,427	$	24,425
Kommunalkredit Austria AG
5.33%, 09/09/074		36,641		36,641
Leafs LLC
5.33%, 01/22/07 - 02/20/074		63,717		63,717
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		76,335		76,318
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		67,175		67,170
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		26,908		26,908
Marshall & Ilsley Bank
5.31%, 09/14/07		33,587		33,587
Metropolitan Life Global Funding I
5.42%, 08/06/074		91,602		91,602
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		6,107		6,107
Monumental Global Funding II
5.49%, 12/27/064		12,214		12,215
Mound Financing PLC
5.39%, 05/08/074		57,404		57,404
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		183,204		183,201
National City Bank of Indiana
5.37%, 05/21/07		30,534		30,536
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		201,524		201,571
Newcastle Ltd.
5.35%, 04/24/074		21,526		21,522
Northern Rock PLC
5.43%, 08/03/074		73,282		73,283
Principal Life Global Funding I
5.80%, 02/08/07		27,481		27,537
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		106,869		106,867
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		61,068		61,068
Strips III LLC
5.38%, 07/24/074		14,849		14,849
SunTrust Bank
5.37%, 05/01/07		61,068		61,070
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		149,006		148,992
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		85,495		85,495
US Bank N.A.
5.26%, 09/29/06		27,481		27,480
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		91,126		91,126
Wachovia Bank N.A.
5.36%, 05/22/07		122,136		122,136
Wells Fargo & Co.
5.34%, 09/14/074		30,534		30,536
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		45,801		45,801
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		183,204		183,166
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		38,730		38,730
				4,038,359
TOTAL SHORT-TERM INVESTMENTS (Cost: $7,438,717)				7,438,717
TOTAL INVESTMENTS IN SECURITIES – 104.05% (Cost: $156,154,093)				185,344,275
Other Assets, Less Liabilities – (4.05)%				(7,214,218	)
NET ASSETS – 100.00%			$	178,130,057

SCHEDULES OF INVESTMENTS 77

Schedule of Investments (Continued)

iSHARES^® MSCI SPAIN INDEX FUND

August 31, 2006

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

78 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI SWEDEN INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.85%
AGRICULTURE – 1.89%
Swedish Match AB	169,106	$	2,863,984
			2,863,984
AIRLINES – 0.34%
SAS AB1	41,502		507,794
			507,794
AUTO MANUFACTURERS – 8.39%
Scania AB Class B	56,082		2,667,212
Volvo AB Class A	53,173		3,091,240
Volvo AB Class B	121,992		6,948,709
			12,707,161
BANKS – 19.03%
Nordea Bank AB	1,164,678		14,652,873
Skandinaviska Enskilda Banken AB Class A	260,106		6,742,597
Svenska Handelsbanken AB Class A	284,108		7,423,707
			28,819,177
COMMERCIAL SERVICES – 2.05%
Securitas AB Class B	175,812		3,099,090
			3,099,090
COMPUTERS – 0.41%
WM-Data AB Class B	174,985		614,483
			614,483
COSMETICS & PERSONAL CARE – 0.53%
Oriflame Cosmetics SA SDR	23,339		806,674
			806,674
DIVERSIFIED FINANCIAL SERVICES – 0.85%
D Carnegie AB	35,256		628,779
OMHEX AB	43,566		662,546
			1,291,325
ENGINEERING & CONSTRUCTION – 2.20%
Skanska AB Class B	211,152		3,327,941
			3,327,941
FOOD – 0.34%
Axfood AB	16,986		520,164
			520,164
FOREST PRODUCTS & PAPER – 4.05%
Billerud AB	23,952		370,882
Holmen AB Class B	29,850		1,252,502
Svenska Cellulosa AB Class B	104,910		4,503,540
			6,126,924
HAND & MACHINE TOOLS – 4.09%
Sandvik AB	565,032		6,190,815
			6,190,815
HEALTH CARE – PRODUCTS – 1.78%
Elekta AB Class B	48,774		863,125
Getinge AB Class B	100,305		1,830,510
			2,693,635
HEALTH CARE – SERVICES – 0.61%
Capio AB1	54,288		919,423
			919,423
HOME FURNISHINGS – 2.11%
Electrolux AB Series B	151,488		2,345,696
Nobia AB	27,528		856,313
			3,202,009
HOUSEHOLD PRODUCTS & WARES – 1.08%
Husqvarna AB1	151,045		1,634,053
			1,634,053
IRON & STEEL – 1.56%
SSAB Svenskt Stal AB Class A	84,789		1,635,269
SSAB Svenskt Stal AB Class B	39,849		727,222
			2,362,491
MACHINERY – 5.08%
Atlas Copco AB Class A	188,196		4,852,491
Atlas Copco AB Class B	117,208		2,835,769
			7,688,260
MANUFACTURING – 1.75%
Alfa Laval AB	53,205		1,761,706
Trelleborg AB Class B	45,322		883,494
			2,645,200
MEDIA – 1.74%
Eniro AB2	97,362		1,140,788
Modern Times Group MTG AB Class B1	28,576		1,493,375
			2,634,163

SCHEDULES OF INVESTMENTS 79

Schedule of Investments (Continued)

iSHARES^® MSCI SWEDEN INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
METAL FABRICATE & HARDWARE – 4.42%
Assa Abloy AB Class B		175,266	$	3,077,350
Hoganas AB Class B2		14,364		369,372
SKF AB		226,989		3,248,035
				6,694,757
MINING – 2.01%
Boliden AB		162,162		3,049,043
				3,049,043
OIL & GAS – 0.90%
Lundin Petroleum AB1,2		123,006		1,364,730
				1,364,730
REAL ESTATE – 1.90%
Castellum AB		87,282		941,228
Fabege AB		45,006		896,001
Kungsleden AB		76,511		743,097
Wihlborgs Fastigheter AB		18,780		298,586
				2,878,912
RETAIL – 6.84%
Hennes & Mauritz AB Class B		266,058		10,354,527
				10,354,527
SOFTWARE – 0.17%
Telelogic AB1		138,430		262,196
				262,196
TELECOMMUNICATIONS – 23.73%
Tele2 AB Class B2		178,248		1,768,162
Telefonaktiebolaget LM Ericsson Class B2		8,308,170		27,682,031
TeliaSonera AB		1,047,852		6,490,132
				35,940,325
TOTAL COMMON STOCKS (Cost: $148,507,108)				151,199,256
SHORT-TERM INVESTMENTS – 2.82%
CERTIFICATES OF DEPOSIT3 – 0.12%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	24,918		24,918
Societe Generale
5.33%, 12/08/06		35,597		35,597
Security	Principal		Value
Washington Mutual Bank
5.36%, 11/13/06	$	88,993	$	88,993
Wells Fargo Bank N.A.
4.78%, 12/05/06		28,478		28,478
				177,986
COMMERCIAL PAPER3 – 0.46%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		10,387		10,265
Amsterdam Funding Corp.
5.27%, 09/15/064		35,597		35,524
Atlantis One Funding
5.30%, 11/14/064		48,842		48,310
Barton Capital Corp.
5.27%, 09/06/064		17,941		17,928
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		18,045		17,848
CC USA Inc.
5.03%, 10/24/064		7,119		7,067
Charta LLC
5.30%, 11/06/064		35,597		35,251
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		62,520		62,242
Curzon Funding LLC
5.29%, 11/17/064		35,597		35,194
Edison Asset Securitization LLC
5.22%, 12/11/064		26,261		25,876
Falcon Asset Securitization Corp.
5.30%, 11/06/064		35,597		35,251
Five Finance Inc.
5.19%, 12/01/064		16,019		15,809
General Electric Capital Services Inc.
5.22%, 12/11/06		3,560		3,508
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		35,597		35,468
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		17,087		16,946
KKR Pacific Funding Trust
5.29%, 09/14/064		35,597		35,529

80 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SWEDEN INDEX FUND

August 31, 2006

Security	Principal		Value
Landale Funding LLC
5.31%, 11/15/064	$	27,766	$	27,459
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		46,142		45,877
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		31,681		31,643
Mont Blanc Capital Corp.
5.29%, 11/15/064		22,960		22,707
Monument Gardens Funding LLC
5.28%, 09/21/064		17,889		17,836
Nestle Capital Corp.
5.19%, 08/09/07		21,358		20,305
Park Granada LLC
5.30%, 09/01/064		8,135		8,135
Regency Markets LLC
5.28%, 09/15/06		17,799		17,762
Solitaire Funding Ltd.
5.27%, 09/05/064		26,698		26,682
Sydney Capital Corp.
5.27%, 09/12/064		8,145		8,132
Tulip Funding Corp.
5.29%, 11/15/064		18,775		18,568
White Pine Finance LLC
5.12%, 10/27/064		6,728		6,674
				689,796
MEDIUM-TERM NOTES3 – 0.10%
Bank of America N.A.
5.28%, 04/20/07		8,899		8,899
Cullinan Finance Corp.
5.71%, 06/28/074		26,698		26,698
K2 USA LLC
5.39%, 06/04/074		26,698		26,698
Marshall & Ilsley Bank
5.18%, 12/15/06		35,597		35,632
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		41,649		41,649
US Bank N.A.
2.85%, 11/15/06		7,119		7,092
				146,668

Security	Shares or Principal		Value
MONEY MARKET FUNDS – 0.02%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		24,228	$	24,228
				24,228
REPURCHASE AGREEMENTS3 – 0.57%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $44,503 (collateralized by U.S. Government obligations, value $45,429, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	44,496		44,496
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $71,205 (collateralized by non-U.S. Government debt securities, value $73,400, 3.80% to 9.13%, 11/1/06 to 6/15/26).		71,194		71,194
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $53,404 (collateralized by non-U.S. Government debt securities, value $58,792, 0.08% to 6.43%, 9/25/20 to 7/25/36).		53,396		53,396
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $106,807 (collateralized by non-U.S. Government debt securities, value $111,589, 4.35% to 7.50%, 9/15/08 to 8/25/35).		106,791		106,791

SCHEDULES OF INVESTMENTS 81

Schedule of Investments (Continued)

iSHARES^® MSCI SWEDEN INDEX FUND

August 31, 2006

Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $21,361 (collateralized by non-U.S. Government debt securities, value $26,073, 0.00% to 10.00%, 6/1/28 to 8/24/36).	$	21,358	$	21,358
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $71,205 (collateralized by non-U.S. Government debt securities, value $72,687, 0.00% to 8.57%, 11/15/06 to 2/15/38).		71,194		71,194
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $35,602 (collateralized by non-U.S. Government debt securities, value $37,412, 5.36% to 9.01%, 10/27/10 to 2/18/20).		35,597		35,597
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $8,900 (collateralized by non-U.S. Government debt securities, value $9,353, 6.63% to 10.50%, 1/15/07 to 4/15/16).		8,899		8,899
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $71,205 (collateralized by non-U.S. Government debt securities, value $74,825, 0.51% to 8.89%, 8/5/18 to 9/25/46).		71,194		71,194
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $35,602 (collateralized by non-U.S. Government debt securities, value $37,414, 4.11% to 9.79%, 4/28/31 to 9/25/46).		35,597		35,597
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $39,163 (collateralized by non-U.S. Government debt securities, value $41,154, 3.44% to 15.15%, 12/1/08 to 3/1/36).		39,157		39,157
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $71,206 (collateralized by non-U.S. Government debt securities, value $74,826, 6.38% to 10.25%, 5/1/07 to 10/15/16).		71,194		71,195
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $71,205 (collateralized by non-U.S. Government debt securities, value $73,413, 0.00% to 10.13%, 10/15/06 to 7/1/26).		71,194		71,194
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $35,602 (collateralized by non-U.S. Government debt securities, value $37,430, 4.05% to 7.24%, 6/20/29 to 1/14/41).		35,597		35,597

82 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SWEDEN INDEX FUND

August 31, 2006

Security	Principal		Value
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $12,461 (collateralized by non-U.S. Government debt securities, value $19,107, 0.00% to 10.00%, 9/1/06 to 8/31/36).	$	12,459	$	12,459
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $25,974 (collateralized by non-U.S. Government debt securities, value $38,793, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		24,918		24,918
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $92,567 (collateralized by non-U.S. Government debt securities, value $97,272, 0.06% to 7.68%, 10/15/11 to 3/15/45).		92,553		92,552
				866,788
TIME DEPOSITS3 – 0.00%
KBC Bank
5.31%, 09/01/06		7,511		7,511
				7,511
VARIABLE & FLOATING RATE NOTES 3 – 1.55%
Allstate Life Global Funding II
5.34% - 5.47%,
09/04/07 - 09/27/074		91,132		91,143
American Express Bank
5.30%, 02/28/07		35,597		35,597
American Express Centurion Bank
5.42%, 07/19/07		39,157		39,196
American Express Credit Corp.
5.51%, 07/05/07		10,679		10,685
ASIF Global Financing
5.51%, 05/03/074		3,560		3,561
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		23,138		23,138
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		51,616		51,618
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		90,773		90,777
BMW US Capital LLC
5.33%, 09/14/074		35,597		35,597
BNP Paribas
5.36%, 05/18/074		65,855		65,855
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		25,986		25,986
CC USA Inc.
5.48%, 07/30/074		17,799		17,801
Commodore CDO Ltd.
5.38%, 06/12/074		8,899		8,899
Credit Agricole SA
5.48%, 07/23/07		35,597		35,597
Credit Suisse First Boston NY
5.51%, 04/24/07		17,799		17,799
Cullinan Finance Corp.
5.36%, 04/25/074		8,899		8,899
DEPFA Bank PLC
5.37%, 06/15/07		35,597		35,597
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		40,937		40,939
Eli Lilly Services Inc.
5.37%, 08/31/074		35,597		35,597
Fifth Third Bancorp
5.30%, 09/21/074		71,194		71,194
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		35,597		35,594
General Electric Capital Corp.
5.29% - 5.49%,
07/09/07 - 09/24/07		37,377		37,385

SCHEDULES OF INVESTMENTS 83

Schedule of Investments (Continued)

iSHARES^® MSCI SWEDEN INDEX FUND

August 31, 2006

Security	Principal		Value
Granite Master Issuer PLC
5.30%, 09/20/06	$	124,590	$	124,590
Harrier Finance Funding LLC
5.33%, 07/25/074		10,679		10,681
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		53,396		53,404
HBOS Treasury Services PLC
5.53%, 07/24/074		35,597		35,597
Holmes Financing PLC
5.40%, 07/16/074		62,295		62,295
JP Morgan Chase & Co.
5.36%, 08/02/07		26,698		26,698
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		26,698		26,697
Kestrel Funding LLC
5.31%, 07/11/074		14,239		14,238
Kommunalkredit Austria AG
5.33%, 09/09/074		21,358		21,358
Leafs LLC
5.33%, 01/22/07 - 02/20/074		37,141		37,141
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		44,496		44,486
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		39,157		39,154
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		15,685		15,685
Marshall & Ilsley Bank
5.31%, 09/14/07		19,578		19,578
Metropolitan Life Global Funding I
5.42%, 08/06/074		53,396		53,396
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		3,560		3,560
Monumental Global Funding II
5.49%, 12/27/064		7,119		7,120
Mound Financing PLC
5.39%, 05/08/074		33,461		33,461
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		106,791		106,790
National City Bank of Indiana
5.37%, 05/21/07		17,799		17,800
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		117,470		117,498
Newcastle Ltd.
5.35%, 04/24/074		12,548		12,546
Northern Rock PLC
5.43%, 08/03/074		42,717		42,718
Principal Life Global Funding I
5.80%, 02/08/07		16,019		16,052
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		62,295		62,294
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		35,597		35,597
Strips III LLC
5.38%, 07/24/074		8,656		8,656
SunTrust Bank
5.37%, 05/01/07		35,597		35,599
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		86,857		86,849
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		49,836		49,836
US Bank N.A.
5.26%, 09/29/06		16,019		16,018
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		53,118		53,118
Wachovia Bank N.A.
5.36%, 05/22/07		71,194		71,194
Wells Fargo & Co.
5.34%, 09/14/074		17,799		17,800
WhistleJacket Capital Ltd.
5.29% - 5.35%,
04/18/07 - 06/13/074		26,698		26,698

84 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SWEDEN INDEX FUND

August 31, 2006

Security	Principal		Value
White Pine Finance LLC
5.29% - 5.35%,
05/22/07 - 08/20/074	$	106,791	$	106,770
Wind Master Trust
5.31% - 5.32%,
09/25/06 - 07/25/074		22,576		22,576
				2,354,002
TOTAL SHORT-TERM INVESTMENTS (Cost: $4,266,979)				4,266,979
TOTAL INVESTMENTS IN SECURITIES – 102.67% (Cost: $152,774,087)				155,466,235
Other Assets, Less Liabilities – (2.67)%				(4,039,674	)
NET ASSETS – 100.00%			$	151,426,561

SDR - Swedish Depositary Receipts

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 85

Schedule of Investments

iSHARES^® MSCI SWITZERLAND INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.61%
BANKS – 6.95%
Banque Cantonale Vaudoise	1,541	$	582,742
Credit Suisse Group	162,676		9,057,713
Julius Baer Holding AG	24,254		2,327,141
Vontobel Holding AG Registered	28,207		1,118,717
			13,086,313
BUILDING MATERIALS – 3.65%
Geberit AG Registered	938		1,090,954
Holcim Ltd. Registered	71,500		5,781,702
			6,872,656
CHEMICALS – 6.40%
Ciba Specialty Chemicals AG Registered	23,450		1,311,389
Clariant AG Registered1	43,062		523,890
Givaudan SA Registered	4,489		3,613,555
Lonza Group AG Registered	10,454		680,852
Syngenta AG1,2	40,468		5,930,952
			12,060,638
COMMERCIAL SERVICES – 1.79%
Adecco SA Registered	30,485		1,778,982
SGS SA	1,742		1,589,481
			3,368,463
COMPUTERS – 0.34%
Logitech International SA1	29,815		643,237
			643,237
DIVERSIFIED FINANCIAL SERVICES – 10.44%
UBS AG Registered	348,065		19,662,377
			19,662,377
ENGINEERING & CONSTRUCTION – 3.25%
ABB Ltd.	461,764		6,123,396
			6,123,396
FOOD – 12.81%
Nestle SA Registered	70,283		24,126,915
			24,126,915
HAND & MACHINE TOOLS – 0.91%
Schindler Holding AG Participation Certificates	25,996		1,353,618
Schindler Holding AG Registered	6,700		355,935
			1,709,553
HEALTH CARE – PRODUCTS – 5.00%
Nobel Biocare Holding AG	11,904		2,896,468
Phonak Holding AG Registered	22,847		1,361,981
Straumann Holding AG Registered	5,494		1,138,503
Synthes Inc.	36,850		4,016,903
			9,413,855
INSURANCE – 9.08%
Swiss Reinsurance Co.2	107,066		8,154,019
Zurich Financial Services AG	39,329		8,947,471
			17,101,490
LEISURE TIME – 0.05%
Kuoni Reisen Holding AG Registered1	187		97,826
			97,826
MACHINERY – 0.22%
Rieter Holding AG	967		415,678
			415,678
MANUFACTURING – 0.49%
Sulzer AG Registered	1,139		921,029
			921,029
PHARMACEUTICALS – 27.28%
Novartis AG	405,886		23,126,235
Roche Holding AG Genusschein	138,556		25,498,484
Serono SA	3,953		2,750,861
			51,375,580
REAL ESTATE – 1.43%
PSP Swiss Property AG1	52,059		2,700,169
			2,700,169
RETAIL – 5.99%
Compagnie Financiere Richemont AG Class A	147,266		6,999,300
Swatch Group (The) AG Class B	13,070		2,546,262
Swatch Group (The) AG Registered	43,820		1,727,282
			11,272,844
SEMICONDUCTORS – 0.22%
Unaxis Holding AG Class R1,2	1,398		411,593
			411,593

86 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SWITZERLAND INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
TELECOMMUNICATIONS – 2.69%
Swisscom AG Registered		15,008	$	5,024,171
Swisscom AG Warrants (Expires 9/13/06)1		15,008		38,100
				5,062,271
TRANSPORTATION – 0.62%
Kuehne & Nagel International AG Registered		16,501		1,158,329
				1,158,329
TOTAL COMMON STOCKS (Cost: $ 151,067,673)				187,584,212
SHORT-TERM INVESTMENTS – 1.90%
CERTIFICATES OF DEPOSIT3 – 0.08%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	20,906		20,906
Societe Generale
5.33%, 12/08/06		29,866		29,866
Washington Mutual Bank
5.36%, 11/13/06		74,664		74,664
Wells Fargo Bank N.A.
4.78%, 12/05/06		23,892		23,892
				149,328
COMMERCIAL PAPER3 – 0.31%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		8,714		8,612
Amsterdam Funding Corp.
5.27%, 09/15/064		29,866		29,804
Atlantis One Funding
5.30%, 11/14/064		40,978		40,532
Barton Capital Corp.
5.27%, 09/06/064		15,052		15,041
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		15,139		14,975
CC USA Inc.
5.03%, 10/24/064		5,973		5,929
Charta LLC
5.30%, 11/06/064		29,866		29,575
Security	Principal		Value
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064	$	52,453	$	52,221
Curzon Funding LLC
5.29%, 11/17/064		29,866		29,528
Edison Asset Securitization LLC
5.22%, 12/11/064		22,032		21,710
Falcon Asset Securitization Corp.
5.30%, 11/06/064		29,866		29,575
Five Finance Inc.
5.19%, 12/01/064		13,440		13,263
General Electric Capital Services Inc.
5.22%, 12/11/06		2,987		2,943
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		29,866		29,757
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		14,335		14,217
KKR Pacific Funding Trust
5.29%, 09/14/064		29,866		29,809
Landale Funding LLC
5.31%, 11/15/064		23,295		23,038
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		38,712		38,490
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		26,580		26,549
Mont Blanc Capital Corp.
5.29%, 11/15/064		19,263		19,051
Monument Gardens Funding LLC
5.28%, 09/21/064		15,008		14,964
Nestle Capital Corp.
5.19%, 08/09/07		17,919		17,036
Park Granada LLC
5.30%, 09/01/064		6,825		6,825
Regency Markets LLC
5.28%, 09/15/06		14,933		14,902

SCHEDULES OF INVESTMENTS 87

Schedule of Investments (Continued)

iSHARES^® MSCI SWITZERLAND INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Solitaire Funding Ltd.
5.27%, 09/05/064	$	22,399	$	22,386
Sydney Capital Corp.
5.27%, 09/12/064		6,833		6,822
Tulip Funding Corp.
5.29%, 11/15/064		15,752		15,578
White Pine Finance LLC
5.12%, 10/27/064		5,645		5,600
				578,732
MEDIUM-TERM NOTES3 – 0.06%
Bank of America N.A.
5.28%, 04/20/07		7,466		7,466
Cullinan Finance Corp.
5.71%, 06/28/074		22,399		22,399
K2 USA LLC
5.39%, 06/04/074		22,399		22,399
Marshall & Ilsley Bank
5.18%, 12/15/06		29,866		29,895
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		34,943		34,943
US Bank N.A.
2.85%, 11/15/06		5,973		5,951
				123,053
MONEY MARKET FUNDS – 0.01%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		22,983		22,983
				22,983
REPURCHASE AGREEMENTS3 – 0.39%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $37,337 (collateralized by U.S. Government obligations, value $38,115, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	37,332		37,332
Security	Principal		Value
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $59,740 (collateralized by non-U.S. Government debt securities, value $61,582, 3.80% to 9.13%, 11/1/06 to 6/15/26).	$	59,731	$	59,731
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $44,805 (collateralized by non-U.S. Government debt securities, value $49,326, 0.08% to 6.43%, 9/25/20 to 7/25/36).		44,798		44,798
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $89,610 (collateralized by non-U.S. Government debt securities, value $93,622, 4.35% to 7.50%, 9/15/08 to 8/25/35).		89,597		89,597
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $17,922 (collateralized by non-U.S. Government debt securities, value $21,875, 0.00% to 10.00%, 6/1/28 to 8/24/36).		17,919		17,919
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $59,740 (collateralized by non-U.S. Government debt securities, value $60,984, 0.00% to 8.57%, 11/15/06 to 2/15/38).		59,731		59,731

88 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SWITZERLAND INDEX FUND

August 31, 2006

Security	Principal		Value
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $29,870 (collateralized by non-U.S. Government debt securities, value $31,389, 5.36% to 9.01%, 10/27/10 to 2/18/20).	$	29,866	$	29,866
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $7,467 (collateralized by non-U.S. Government debt securities, value $7,847, 6.63% to 10.50%, 1/15/07 to 4/15/16).		7,466		7,466
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $59,740 (collateralized by non-U.S. Government debt securities, value $62,778, 0.51% to 8.89%, 8/5/18 to 9/25/46).		59,731		59,731
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $29,870 (collateralized by non-U.S. Government debt securities, value $31,390, 4.11% to 9.79%, 4/28/31 to 9/25/46).		29,866		29,866
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $32,857 (collateralized by non-U.S. Government debt securities, value $34,528, 3.44% to 15.15%, 12/1/08 to 3/1/36).		32,852		32,852
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $59,740 (collateralized by non-U.S. Government debt securities, value $62,778, 6.38% to 10.25%, 5/1/07 to 10/15/16).		59,731		59,731
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $59,740 (collateralized by non-U.S. Government debt securities, value $61,593, 0.00% to 10.13%, 10/15/06 to 7/1/26).		59,731		59,731
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $29,870 (collateralized by non-U.S. Government debt securities, value $31,403, 4.05% to 7.24%, 6/20/29 to 1/14/41).		29,866		29,866
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $10,455 (collateralized by non-U.S. Government debt securities, value $16,031, 0.00% to 10.00%, 9/1/06 to 8/31/36).		10,453		10,453
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $21,792 (collateralized by non-U.S. Government debt securities, value $32,547, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		20,906		20,906

SCHEDULES OF INVESTMENTS 89

Schedule of Investments (Continued)

iSHARES^® MSCI SWITZERLAND INDEX FUND

August 31, 2006

Security	Principal		Value
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $77,663 (collateralized by non-U.S. Government debt securities, value $81,611, 0.06% to 7.68%, 10/15/11 to 3/15/45).	$	77,651	$	77,651
				727,227
TIME DEPOSITS3 – 0.00%
KBC Bank
5.31%, 09/01/06		6,302		6,302
				6,302
VARIABLE & FLOATING RATE NOTES 3 – 1.05%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		76,456		76,461
American Express Bank
5.30%, 02/28/07		29,866		29,866
American Express Centurion Bank
5.42%, 07/19/07		32,852		32,885
American Express Credit Corp.
5.51%, 07/05/07		8,960		8,965
ASIF Global Financing
5.51%, 05/03/074		2,987		2,988
Australia & New Zealand Banking
Group Ltd.
5.32%, 09/21/074		19,413		19,413
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		43,305		43,307
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		76,157		76,161
BMW US Capital LLC
5.33%, 09/14/074		29,866		29,866
BNP Paribas
5.36%, 05/18/074		55,251		55,251
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		21,802		21,802
CC USA Inc.
5.48%, 07/30/074		14,933		14,935
Commodore CDO Ltd.
5.38%, 06/12/074		7,466		7,466
Credit Agricole SA
5.48%, 07/23/07		29,866		29,866
Credit Suisse First Boston NY
5.51%, 04/24/07		14,933		14,933
Cullinan Finance Corp.
5.36%, 04/25/074		7,466		7,466
DEPFA Bank PLC
5.37%, 06/15/07		29,866		29,866
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		34,345		34,348
Eli Lilly Services Inc.
5.37%, 08/31/074		29,866		29,866
Fifth Third Bancorp
5.30%, 09/21/074		59,731		59,731
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		29,866		29,863
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		31,359		31,366
Granite Master Issuer PLC
5.30%, 09/20/06		104,530		104,530
Harrier Finance Funding LLC
5.33%, 07/25/074		8,960		8,961
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		44,798		44,806
HBOS Treasury Services PLC
5.53%, 07/24/074		29,866		29,866
Holmes Financing PLC
5.40%, 07/16/074		52,265		52,265
JP Morgan Chase & Co.
5.36%, 08/02/07		22,399		22,399
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		22,399		22,398
Kestrel Funding LLC
5.31%, 07/11/074		11,946		11,945

90 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SWITZERLAND INDEX FUND

August 31, 2006

Security	Principal		Value
Kommunalkredit Austria AG
5.33%, 09/09/074	$	17,919	$	17,919
Leafs LLC
5.33%, 01/22/07 - 02/20/074		31,161		31,161
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		37,332		37,324
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		32,852		32,850
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		13,160		13,160
Marshall & Ilsley Bank
5.31%, 09/14/07		16,426		16,426
Metropolitan Life Global Funding I
5.42%, 08/06/074		44,798		44,798
Metropolitan Life Insurance
Funding Agreement
5.57%, 08/01/074,7		2,987		2,987
Monumental Global Funding II
5.49%, 12/27/064		5,973		5,974
Mound Financing PLC
5.39%, 05/08/074		28,074		28,074
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		89,597		89,595
National City Bank of Indiana
5.37%, 05/21/07		14,933		14,934
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		98,556		98,580
Newcastle Ltd.
5.35%, 04/24/074		10,528		10,526
Northern Rock PLC
5.43%, 08/03/074		35,839		35,840
Principal Life Global Funding I
5.80%, 02/08/07		13,440		13,467
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		52,265		52,265
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		29,866		29,866
Strips III LLC
5.38%, 07/24/074		7,262		7,262
SunTrust Bank
5.37%, 05/01/07		29,866		29,867
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		72,872		72,866
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		41,812		41,812
US Bank N.A.
5.26%, 09/29/06		13,440		13,439
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		44,566		44,566
Wachovia Bank N.A.
5.36%, 05/22/07		59,731		59,731
Wells Fargo & Co.
5.34%, 09/14/074		14,933		14,934
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		22,399		22,399
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		89,597		89,578
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		18,941		18,941
				1,974,982
TOTAL SHORT-TERM INVESTMENTS (Cost: $3,582,607)				3,582,607
TOTAL INVESTMENTS
IN SECURITIES – 101.51% (Cost: $154,650,280)				191,166,819
Other Assets, Less Liabilities – (1.51)%				(2,847,664	)
NET ASSETS – 100.00%			$	188,319,155

SCHEDULES OF INVESTMENTS 91

Schedule of Investments (Continued)

iSHARES^® MSCI SWITZERLAND INDEX FUND

August 31, 2006

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

92 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI UNITED KINGDOM INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.02%
ADVERTISING – 0.58%
Aegis Group PLC	254,123	$	617,518
WPP Group PLC	365,441		4,448,791
			5,066,309
AEROSPACE & DEFENSE – 1.54%
BAE Systems PLC	990,091		6,977,632
Cobham PLC	352,628		1,152,015
Meggitt PLC	130,345		779,138
Rolls-Royce Group PLC1	540,882		4,488,309
			13,397,094
AGRICULTURE – 2.75%
British American Tobacco PLC	481,011		13,175,353
Gallaher Group PLC	200,194		3,457,655
Imperial Tobacco Group PLC	213,504		7,350,711
			23,983,719
AIRLINES – 0.16%
British Airways PLC1	177,154		1,384,119
			1,384,119
APPAREL – 0.14%
Burberry Group PLC	132,223		1,203,466
			1,203,466
AUTO PARTS & EQUIPMENT – 0.15%
GKN PLC	223,419		1,296,178
TI Automotive Ltd. Class A1,2	52,283		1
			1,296,179
BANKS – 18.50%
Barclays PLC3	1,993,229		24,928,590
HBOS PLC	1,169,262		22,307,840
HSBC Holdings PLC	3,522,578		63,855,496
Lloyds TSB Group PLC	1,720,456		17,066,428
Royal Bank of Scotland Group PLC	980,952		33,250,656
			161,409,010
BEVERAGES – 2.68%
Diageo PLC	864,834		15,381,161
SABMiller PLC	275,341		5,418,089
Scottish & Newcastle PLC	244,372		2,558,901
			23,358,151
BUILDING MATERIALS – 0.45%
Hanson PLC	219,656		2,765,960
Travis Perkins PLC	36,019		1,155,138
			3,921,098
CHEMICALS – 1.04%
BOC Group PLC	156,621		4,811,354
Imperial Chemical Industries PLC	365,165		2,585,643
Johnson Matthey PLC	68,174		1,713,035
			9,110,032
COMMERCIAL SERVICES – 1.56%
Aggreko PLC	76,615		410,968
Brambles Industries PLC	210,144		1,838,737
Bunzl PLC	108,584		1,347,694
Capita Group PLC	200,461		2,085,749
Davis Service Group PLC	51,342		472,919
De La Rue PLC	49,750		508,174
Group 4 Securicor PLC	358,200		1,185,549
Hays PLC	446,954		1,158,361
Intertek Group PLC	46,765		614,672
Michael Page International PLC	107,659		707,015
Rank Group PLC	188,055		763,708
Rentokil Initial PLC	561,777		1,605,548
Serco Group PLC	140,693		942,020
			13,641,114
COMPUTERS – 0.12%
LogicaCMG PLC	359,934		1,066,340
			1,066,340
DISTRIBUTION & WHOLESALE – 0.61%
Inchcape PLC	142,990		1,350,423
Wolseley PLC	183,876		4,004,749
			5,355,172
DIVERSIFIED FINANCIAL SERVICES – 1.62%
AMVESCAP PLC	226,513		2,335,270
Cattles PLC	98,704		616,758
Close Brothers Group PLC	39,402		685,029
Collins Stewart Tullett PLC	67,265		998,635
ICAP PLC	146,066		1,285,702
Investec PLC	21,094		1,074,519
London Stock Exchange Group PLC	51,130		1,121,372
Man Group PLC	540,882		4,344,271

SCHEDULES OF INVESTMENTS 93

Schedule of Investments (Continued)

iSHARES^® MSCI UNITED KINGDOM INDEX FUND

August 31, 2006

Security	Shares	Value
Provident Financial PLC	81,324	$	1,013,222
Schroders PLC	37,213		643,433
			14,118,211
ELECTRIC – 2.79%
International Power PLC	460,212		2,779,370
National Grid PLC	835,368		10,137,790
Scottish & Southern Energy PLC	263,024		6,023,746
Scottish Power PLC	454,861		5,368,652
			24,309,558
ELECTRONICS – 0.11%
Electrocomponents PLC	130,743		594,376
Premier Farnell PLC	109,052		389,456
			983,832
ENGINEERING & CONSTRUCTION – 0.18%
AMEC PLC	99,898		613,768
Balfour Beatty PLC	135,992		965,512
			1,579,280
ENTERTAINMENT – 0.59%
EMI Group PLC	246,461		1,255,227
Ladbrokes PLC	192,035		1,396,280
PartyGaming PLC	300,490		653,027
Sportingbet PLC	114,027		549,290
William Hill PLC	109,848		1,327,861
			5,181,685
FOOD – 4.41%
Cadbury Schweppes PLC	643,435		6,841,656
J Sainsbury PLC	449,939		3,051,111
Tate & Lyle PLC	150,842		2,101,719
Tesco PLC	2,428,393		17,425,810
Unilever PLC	379,084		9,056,697
			38,476,993
FOOD SERVICE – 0.37%
Compass Group PLC	658,889		3,199,063
			3,199,063
GAS – 0.72%
Centrica PLC	1,115,007		6,256,686
			6,256,686
HEALTH CARE – PRODUCTS – 0.32%
Smith & Nephew PLC	288,229		2,495,930
SSL International PLC	56,914		314,492
			2,810,422
HOLDING COMPANIES – DIVERSIFIED – 0.16%
Tomkins PLC	262,680		1,421,524
			1,421,524
HOME BUILDERS – 0.90%
Barratt Developments PLC	75,421		1,425,296
Bellway PLC	34,029		786,448
Berkeley Group Holdings (The) PLC1	27,263		664,824
Bovis Homes Group PLC	35,820		570,631
Persimmon PLC	86,167		2,040,587
Taylor Woodrow PLC	180,692		1,178,902
Wimpey (George) PLC	124,176		1,183,369
			7,850,057
HOME FURNISHINGS – 0.03%
MFI Furniture Group PLC	178,702		287,231
			287,231
HOUSEHOLD PRODUCTS & WARES – 0.90%
Reckitt Benckiser PLC	188,270		7,806,968
			7,806,968
INSURANCE – 4.49%
Aviva PLC	781,566		10,971,520
Friends Provident PLC	519,589		1,838,305
Legal & General Group PLC	1,996,015		4,992,687
Old Mutual PLC	1,596,854		4,973,834
Prudential PLC	744,044		8,343,095
Resolution PLC	211,871		2,397,912
Royal & Sun Alliance Insurance Group PLC	901,669		2,375,427
Standard Life PLC1	649,138		3,247,413
			39,140,193
IRON & STEEL – 0.23%
Corus Group PLC	273,414		2,039,992
			2,039,992
LEISURE TIME – 0.33%
Carnival PLC	52,649		2,256,296
First Choice Holidays PLC	150,643		608,193
			2,864,489
LODGING – 0.23%
InterContinental Hotels Group PLC	116,664		2,039,375
			2,039,375

94 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI UNITED KINGDOM INDEX FUND

August 31, 2006

Security	Shares	Value
MANUFACTURING – 0.82%
BBA Group PLC	146,265	$	741,451
Charter PLC1	49,551		722,924
Cookson Group PLC	57,113		593,704
FKI PLC	175,120		322,279
IMI PLC	107,951		1,038,502
Invensys PLC1	238,535		921,071
Smiths Group PLC	174,247		2,850,418
			7,190,349
MEDIA – 2.68%
British Sky Broadcasting Group PLC	359,792		3,835,941
Daily Mail & General Trust PLC Class A	91,739		1,005,128
EMAP PLC	77,411		1,054,291
ITV PLC	1,265,640		2,545,865
Pearson PLC	248,551		3,531,676
Reed Elsevier PLC	383,793		4,113,730
Reuters Group PLC	402,378		3,092,149
Trinity Mirror PLC	86,366		749,122
United Business Media PLC	87,560		1,027,627
Yell Group PLC	237,805		2,397,406
			23,352,935
MINING – 6.41%
Anglo American PLC	438,878		18,966,924
BHP Billiton PLC	750,024		14,280,848
Rio Tinto PLC	322,710		16,309,804
Xstrata PLC	140,889		6,319,252
			55,876,828
OIL & GAS – 17.74%
BG Group PLC	1,070,785		13,982,589
BP PLC	6,125,757		69,563,089
Royal Dutch Shell PLC Class A	1,182,607		40,940,825
Royal Dutch Shell PLC Class B	847,472		30,305,955
			154,792,458
PACKAGING & CONTAINERS – 0.20%
Rexam PLC	171,529		1,771,667
			1,771,667
PHARMACEUTICALS – 9.36%
AstraZeneca PLC	481,238		31,159,769
GlaxoSmithKline PLC	1,785,258		50,529,928
			81,689,697
REAL ESTATE – 1.87%
British Land Co. PLC	160,195		4,159,359
Brixton PLC	76,814		769,278
Great Portland Estates PLC	48,755		523,977
Hammerson PLC	87,661		2,120,988
Land Securities Group PLC	144,239		5,196,458
Liberty International PLC	78,406		1,695,721
Slough Estates PLC	143,877		1,798,049
			16,263,830
RETAIL – 3.64%
Boots Group PLC	253,869		3,723,135
Carphone Warehouse Group PLC	119,400		638,766
DSG International PLC	562,573		2,193,701
Enterprise Inns PLC	96,913		1,887,673
GUS PLC	267,674		4,966,818
HMV Group PLC	120,594		348,670
Kesa Electricals PLC	159,001		936,064
Kingfisher PLC	723,698		3,248,734
Marks & Spencer Group PLC	516,643		5,822,690
Mitchells & Butlers PLC	152,552		1,624,990
Next PLC	71,043		2,252,691
Punch Taverns PLC	81,789		1,438,290
Signet Group PLC	544,457		1,108,134
Whitbread PLC	67,660		1,575,281
			31,765,637
SEMICONDUCTORS – 0.22%
ARM Holdings PLC	439,095		991,829
CSR PLC1	40,910		912,015
			1,903,844
SOFTWARE – 0.29%
Misys PLC	152,633		717,843
Sage Group PLC	397,801		1,810,350
			2,528,193
TELECOMMUNICATIONS – 5.58%
BT Group PLC	2,558,665		11,997,068
Cable & Wireless PLC	724,562		1,691,772
Vodafone Group PLC	16,174,018		34,995,652
			48,684,492

SCHEDULES OF INVESTMENTS 95

Schedule of Investments (Continued)

iSHARES^® MSCI UNITED KINGDOM INDEX FUND

August 31, 2006

Security	Shares	Value
TRANSPORTATION – 0.34%
Arriva PLC	59,103	$	668,916
FirstGroup PLC	123,498		1,097,038
National Express Group PLC	40,795		639,797
Stagecoach Group PLC	243,576		537,449
			2,943,200
VENTURE CAPITAL – 0.30%
3i Group PLC	142,456		2,578,305
			2,578,305
WATER – 0.91%
Kelda Group PLC	109,450		1,717,570
Severn Trent PLC	106,508		2,664,114
United Utilities PLC	270,640		3,534,087
			7,915,771
TOTAL COMMON STOCKS (Cost: $736,920,477)			863,814,568
SHORT-TERM INVESTMENTS – 0.01%
MONEY MARKET FUNDS – 0.01%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%3,4	116,892		116,892
			116,892
TOTAL SHORT-TERM INVESTMENTS (Cost: $116,892)			116,892
TOTAL INVESTMENTS IN SECURITIES – 99.03% (Cost: $737,037,369)			863,931,460
Other Assets, Less Liabilities – 0.97%			8,477,480
NET ASSETS – 100.00%		$	872,408,940

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 Affiliated issuer. See Note 2.

⁴ The rate quoted is the annualized seven-day yield of the fund at period end.

See notes to the financial statements.

96 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Assets and Liabilities

iSHARES^®, INC.

August 31, 2006

	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	$	367,217,656		$	138,375,953		$	1,647,598,762		$	206,467,890		$	747,185,277		$	127,969,852
Affiliated issuersa	$	97,265		$	61,136		$	946,384		$	160,863		$	19,872		$	1,089
Foreign currencies, at cost	$	714,082		$	132,348		$	3,269,663		$	82,407		$	469,753		$	16,403
Investments in securities, at value (including securities on loanb) (Note 1):
Unaffiliated issuers	$	401,550,705		$	151,596,576		$	1,826,614,298		$	213,975,568		$	811,603,147		$	149,363,871
Affiliated issuersa		97,265			61,136			946,384			160,863			19,872			1,089
Foreign currencies, at value		716,364			131,759			3,269,663			82,414			472,431			16,698
Receivables:
Investment securities sold		16,492,746			1,628,258			—			503,566			6,740,593			1,662,957
Dividends and interest		740,088			782,030			3,169,472			309,442			1,388,037			67,713
Capital shares sold		33,991			35,009			—			—			—			—
Total Assets		419,631,159			154,234,768			1,833,999,817			215,031,853			820,224,080			151,112,328
LIABILITIES
Payables:
Investment securities purchased		17,059,915			1,625,711			—			501,626			5,991,199			1,502,649
Collateral for securities on loan (Note 5)		10,759,106			62,384			38,290,121			2,557,106			11,085,335			3,221,588
Investment advisory fees (Note 2)		174,749			62,463			788,709			87,360			352,952			64,377
Total Liabilities		27,993,770			1,750,558			39,078,830			3,146,092			17,429,486			4,788,614
NET ASSETS	$	391,637,389		$	152,484,210		$	1,794,920,987		$	211,885,761		$	802,794,594		$	146,323,714
Net assets consist of:
Paid-in capital	$	359,428,584		$	138,689,270		$	1,596,450,918		$	208,253,187		$	758,089,375		$	126,915,465
Undistributed net investment income		5,185,808			3,029,133			35,261,892			2,255,565			16,624,623			3,319,519
Accumulated net realized loss		(7,315,983	)		(2,461,379	)		(15,825,317	)		(6,131,530	)		(36,358,888	)		(5,324,156	)
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies		34,338,980			13,227,186			179,033,494			7,508,539			64,439,484			21,412,886
NET ASSETS	$	391,637,389		$	152,484,210		$	1,794,920,987		$	211,885,761		$	802,794,594		$	146,323,714
Shares outstanding		12,600,000			6,680,000			19,450,000			6,800,000			33,900,000			4,800,000
Net asset value per share	$	31.08		$	22.83		$	92.28		$	31.16		$	23.68		$	30.48

^a See Note 2.

^b Securities on loan with market values of $10,412,559, $60,062, $35,631,227, $2,431,150, $10,603,063 and $3,059,139, respectively. See Note 5.

See notes to the financial statements.

FINANCIAL STATEMENTS 97

Statements of Assets and Liabilities (Continued)

iSHARES^®, INC.

August 31, 2006

	iShares MSCI
	Netherlands Index Fund			Spain Index Fund			Sweden Index Fund			Switzerland Index Fund			United Kingdom Index Fund
ASSETS
Investments, at cost:
Unaffiliated issuers	$	98,646,157		$	155,993,947		$	152,749,859		$	154,627,297		$	716,553,377
Affiliated issuersa	$	6,254		$	160,146		$	24,228		$	22,983		$	20,483,992
Foreign currencies, at cost	$	149,651		$	112,342		$	183,124		$	67,499		$	2,943,414
Investments in securities, at value (including securities on loanb) (Note 1):
Unaffiliated issuers	$	111,606,835		$	185,184,129		$	155,442,007		$	191,143,836		$	838,885,978
Affiliated issuersa		6,254			160,146			24,228			22,983			25,045,482
Foreign currencies, at value		149,107			113,880			181,861			67,707			2,965,031
Receivables:
Investment securities sold		—			943,966			920,183			3,906,712			4,608,920
Dividends and interest		352,633			6,965			1,387			528,972			5,957,699
Capital shares sold		—			921,068			—			—			—
Total Assets		112,114,829			187,330,154			156,569,666			195,670,210			877,463,110
LIABILITIES
Payables:
Investment securities purchased		—			1,852,814			833,967			3,708,973			4,663,142
Collateral for securities on loan (Note 5)		2,075,486			7,278,571			4,242,751			3,559,624			—
Investment advisory fees (Note 2)		48,058			68,712			66,387			82,458			391,028
Total Liabilities		2,123,544			9,200,097			5,143,105			7,351,055			5,054,170
NET ASSETS	$	109,991,285		$	178,130,057		$	151,426,561		$	188,319,155		$	872,408,940
Net assets consist of:
Paid-in capital	$	103,683,759		$	150,183,746		$	152,218,155		$	157,037,300		$	759,238,462
Undistributed net investment income		2,661,198			2,334,982			3,601,501			1,891,106			28,709,755
Accumulated net realized loss		(9,315,389	)		(3,580,470	)		(7,084,055	)		(7,135,226	)		(42,464,193	)
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies		12,961,717			29,191,799			2,690,960			36,525,975			126,924,916
NET ASSETS	$	109,991,285		$	178,130,057		$	151,426,561		$	188,319,155		$	872,408,940
Shares outstanding		4,550,000			3,975,000			5,850,000			8,375,000			39,800,000
Net asset value per share	$	24.17		$	44.81		$	25.88		$	22.49		$	21.92

^a See Note 2.

^b Securities on loan with market values of $2,014,187, $6,915,318, $4,003,482, $3,379,793 and $–, respectively. See Note 5.

See notes to the financial statements.

98 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Operations

iSHARES^®, INC.

Year ended August 31, 2006

	iShares MSCI
	Austria Index Fund			Belgium Index Fund			EMU Index Fund		France Index Fund			Germany Index Fund			Italy Index Fund
NET INVESTMENT INCOME
Dividends from unaffiliated issuersa	$	6,212,692		$	3,699,496		$	42,378,450	$	2,829,359		$	19,896,564		$	3,716,259
Interest from affiliated issuersb		5,972			2,125			34,819		2,712			9,458			1,006
Securities lending incomec		21,742			11,942			161,203		22,425			74,921			23,331
Total investment income		6,240,406			3,713,563			42,574,472		2,854,496			19,980,943			3,740,596
EXPENSES
Investment advisory fees (Note 2)		1,657,316			479,965			6,044,452		615,785			3,393,583			454,018
Proxy fees		9,121			4,737			23,188		3,804			7,967			3,368
Total expenses		1,666,437			484,702			6,067,640		619,589			3,401,550			457,386
Net investment income		4,573,969			3,228,861			36,506,832		2,234,907			16,579,393			3,283,210
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(1,767,172	)		215,637			2,199,810		634,187			(12,662,686	)		603,096
In-kind redemptions		36,185,954			2,357,672			81,329,252		24,291,016			55,824,978			1,576,609
Foreign currency transactions		95,729			(16,948	)		310,136		21,314			100,546			37,349
Net realized gain		34,514,511			2,556,361			83,839,198		24,946,517			43,262,838			2,217,054
Net change in unrealized appreciation (depreciation) on:
Investments		(8,478,971	)		12,278,509			101,401,242		(236,735	)		55,929,496			13,027,183
Translation of assets and liabilities in foreign currencies		(55,913	)		8,644			8,495		(201	)		22,169			2,548
Net change in unrealized appreciation (depreciation)		(8,534,884	)		12,287,153			101,409,737		(236,936	)		55,951,665			13,029,731
Net realized and unrealized gain		25,979,627			14,843,514			185,248,935		24,709,581			99,214,503			15,246,785
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	30,553,596		$	18,072,375		$	221,755,767	$	26,944,488		$	115,793,896		$	18,529,995

^a Net of foreign withholding tax of $1,096,345, $637,505, $6,673,782, $427,381, $3,325,509 and $591,525, respectively.

^b See Note 2.

^c Includes income earned from affiliated issuer. See Note 2.

See notes to the financial statements.

FINANCIAL STATEMENTS 99

Statements of Operations (Continued)

iSHARES^®, INC.

Year ended August 31, 2006

	iShares MSCI
	Netherlands Index Fund			Spain Index Fund		Sweden Index Fund			Switzerland Index Fund			United Kingdom Index Fund
NET INVESTMENT INCOME
Dividends from unaffiliated issuersa	$	2,932,533		$	3,354,121	$	4,104,707		$	2,593,804		$	33,910,912
Dividends from affiliated issuersb		—			—		—			—			864,528
Interest from affiliated issuersb		1,308			1,178		1,417			3,020			14,531
Securities lending incomec		6,081			29,975		22,082			6,709			2,520
Total investment income		2,939,922			3,385,274		4,128,206			2,603,533			34,792,491
EXPENSES
Investment advisory fees (Note 2)		475,006			564,200		601,452			743,036			3,483,995
Proxy fees		3,950			4,339		4,272			4,249			21,875
Total expenses		478,956			568,539		605,724			747,285			3,505,870
Net investment income		2,460,966			2,816,735		3,522,482			1,856,248			31,286,621
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(827,424	)		522,494		(10,654	)		(143,788	)		(6,158,845	)
Investments in affiliated issuersb		—			—		—			—			336,803
In-kind redemptions		8,776,610			6,611,529		18,200,594			6,343,889			11,468,021
Foreign currency transactions		52,929			20,139		78,203			36,394			451,592
Net realized gain		8,002,115			7,154,162		18,268,143			6,236,495			6,097,571
Net change in unrealized appreciation (depreciation) on:
Investments		11,681,890			15,104,399		(9,542,737	)		25,586,381			85,769,779
Translation of assets and liabilities in foreign currencies		(341	)		1,558		(398	)		8,124			23,468
Net change in unrealized appreciation (depreciation)		11,681,549			15,105,957		(9,543,135	)		25,594,505			85,793,247
Net realized and unrealized gain		19,683,664			22,260,119		8,725,008			31,831,000			91,890,818
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	22,144,630		$	25,076,854	$	12,247,490		$	33,687,248		$	123,177,439

^a Net of foreign withholding tax of $513,491, $534,296, $688,006, $488,944 and $186,239, respectively.

^b See Note 2.

^c Includes income earned from affiliated issuers. See Note 2.

See notes to the financial statements.

100 2006 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
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	4,573,969		$	1,963,799		$	3,228,861		$	2,019,162		$	36,506,832		$	11,759,160
Net realized gain		34,514,511			22,454,551			2,556,361			6,943,446			83,839,198			11,776,485
Net change in unrealized appreciation (depreciation)		(8,534,884	)		30,930,253			12,287,153			(4,222	)		101,409,737			76,359,243
Net increase in net assets resulting from operations		30,553,596			55,348,603			18,072,375			8,958,386			221,755,767			99,894,888
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(2,357,719	)		(642,119	)		(2,145,588	)		(821,720	)		(12,287,252	)		(7,926,598	)
Total distributions to shareholders		(2,357,719	)		(642,119	)		(2,145,588	)		(821,720	)		(12,287,252	)		(7,926,598	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		289,063,151			143,898,493			103,356,773			45,733,499			1,281,531,733			174,100,562
Cost of shares redeemed		(122,573,813	)		(59,573,023	)		(13,758,909	)		(31,723,211	)		(243,363,438	)		(45,390,429	)
Net increase in net assets from capital share transactions		166,489,338			84,325,470			89,597,864			14,010,288			1,038,168,295			128,710,133
INCREASE IN NET ASSETS		194,685,215			139,031,954			105,524,651			22,146,954			1,247,636,810			220,678,423
NET ASSETS
Beginning of year		196,952,174			57,920,220			46,959,559			24,812,605			547,284,177			326,605,754
End of year	$	391,637,389		$	196,952,174		$	152,484,210		$	46,959,559		$	1,794,920,987		$	547,284,177
Undistributed net investment income included in net assets at end of year	$	5,185,808		$	1,903,837		$	3,029,133		$	1,784,303		$	35,261,892		$	10,321,106
SHARES ISSUED AND REDEEMED
Shares sold		9,400,000			6,600,000			4,880,000			2,560,000			15,050,000			2,450,000
Shares redeemed		(4,200,000	)		(2,600,000	)		(680,000	)		(1,760,000	)		(2,900,000	)		(650,000	)
Net increase in shares outstanding		5,200,000			4,000,000			4,200,000			800,000			12,150,000			1,800,000

See notes to the financial statements.

FINANCIAL STATEMENTS 101

Statements of Changes in Net Assets (Continued)

iSHARES^®, INC.

	iShares MSCI France Index Fund						iShares MSCI Germany Index Fund						iShares MSCI Italy Index Fund
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	2,234,907		$	1,242,600		$	16,579,393		$	2,593,698		$	3,283,210		$	1,168,264
Net realized gain (loss)		24,946,517			5,071,907			43,262,838			(4,797,168	)		2,217,054			(764,798	)
Net change in unrealized appreciation (depreciation)		(236,936	)		9,136,196			55,951,665			40,534,750			13,029,731			7,988,683
Net increase in net assets resulting from operations		26,944,488			15,450,703			115,793,896			38,331,280			18,529,995			8,392,149
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(1,093,386	)		(838,342	)		(2,745,191	)		(1,573,473	)		(1,062,571	)		(869,122	)
Total distributions to shareholders		(1,093,386	)		(838,342	)		(2,745,191	)		(1,573,473	)		(1,062,571	)		(869,122	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		193,944,708			23,987,143			611,158,486			179,271,889			90,441,632			7,723,603
Cost of shares redeemed		(89,235,841	)		(18,474,473	)		(236,206,028	)		—			(4,111,384	)		—
Net increase in net assets from capital share transactions		104,708,867			5,512,670			374,952,458			179,271,889			86,330,248			7,723,603
INCREASE IN NET ASSETS		130,559,969			20,125,031			488,001,163			216,029,696			103,797,672			15,246,630
NET ASSETS
Beginning of year		81,325,792			61,200,761			314,793,431			98,763,735			42,526,042			27,279,412
End of year	$	211,885,761		$	81,325,792		$	802,794,594		$	314,793,431		$	146,323,714		$	42,526,042
Undistributed net investment income included in net assets at end of year	$	2,255,565		$	1,092,730		$	16,624,623		$	2,547,987		$	3,319,519		$	1,061,531
SHARES ISSUED AND REDEEMED
Shares sold		6,800,000			1,000,000			28,500,000			9,900,000			3,300,000			300,000
Shares redeemed		(3,200,000	)		(800,000	)		(11,100,000	)		—			(150,000	)		—
Net increase in shares outstanding		3,600,000			200,000			17,400,000			9,900,000			3,150,000			300,000

See notes to the financial statements.

102 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Changes in Net Assets (Continued)

iSHARES^®, INC.

	iShares MSCI Netherland Index Fund						iShares MSCI Spain Index Fund						iShares MSCI Sweden Index Fund
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	2,460,966		$	1,468,147		$	2,816,735		$	1,393,949		$	3,522,482		$	1,249,124
Net realized gain		8,002,115			1,088,579			7,154,162			7,090,342			18,268,143			1,298,242
Net change in unrealized appreciation (depreciation)		11,681,549			4,968,136			15,105,957			5,676,241			(9,543,135	)		7,896,047
Net increase in net assets resulting from operations		22,144,630			7,524,862			25,076,854			14,160,532			12,247,490			10,443,413
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(1,617,341	)		(561,271	)		(1,611,053	)		(1,053,358	)		(1,227,638	)		(420,504	)
Total distributions to shareholders		(1,617,341	)		(561,271	)		(1,611,053	)		(1,053,358	)		(1,227,638	)		(420,504	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		63,102,133			29,691,702			102,462,370			23,479,415			133,924,232			26,763,849
Cost of shares redeemed		(37,612,147	)		(946,288	)		(14,743,172	)		(15,097,858	)		(55,030,029	)		(3,032,449	)
Net increase in net assets from capital share transactions		25,489,986			28,745,414			87,719,198			8,381,557			78,894,203			23,731,400
INCREASE IN NET ASSETS		46,017,275			35,709,005			111,184,999			21,488,731			89,914,055			33,754,309
NET ASSETS
Beginning of year		63,974,010			28,265,005			66,945,058			45,456,327			61,512,506			27,758,197
End of year	$	109,991,285		$	63,974,010		$	178,130,057		$	66,945,058		$	151,426,561		$	61,512,506
Undistributed net investment income included in net assets at end of year	$	2,661,198		$	1,453,405		$	2,334,982		$	1,109,161		$	3,601,501		$	1,228,454
SHARES ISSUED AND REDEEMED
Shares sold		2,850,000			1,600,000			2,475,000			675,000			5,250,000			1,350,000
Shares redeemed		(1,650,000	)		(50,000	)		(375,000	)		(450,000	)		(2,250,000	)		(150,000	)
Net increase in shares outstanding		1,200,000			1,550,000			2,100,000			225,000			3,000,000			1,200,000

See notes to the financial statements.

FINANCIAL STATEMENTS 103

Statements of Changes in Net Assets (Continued)

iSHARES^®, INC.

	iShares MSCI Switzerland Index Fund						iShares MSCI United Kingdom Index Fund
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	1,856,248		$	773,878		$	31,286,621		$	17,268,103
Net realized gain		6,236,495			1,299,897			6,097,571			37,482,537
Net change in unrealized appreciation		25,594,505			7,731,463			85,793,247			44,274,754
Net increase in net assets resulting from operations		33,687,248			9,805,238			123,177,439			99,025,394
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(773,209	)		(269,799	)		(16,085,262	)		(10,962,863	)
Total distributions to shareholders		(773,209	)		(269,799	)		(16,085,262	)		(10,962,863	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		94,447,210			31,861,760			344,797,700			96,935,420
Cost of shares redeemed		(18,366,262	)		(3,993,200	)		(44,331,266	)		(173,017,720	)
Net increase (decrease) in net assets from capital share transactions		76,080,948			27,868,560			300,466,434			(76,082,300	)
INCREASE IN NET ASSETS		108,994,987			37,403,999			407,558,611			11,980,231
NET ASSETS
Beginning of year		79,324,168			41,920,169			464,850,329			452,870,098
End of year	$	188,319,155		$	79,324,168		$	872,408,940		$	464,850,329
Undistributed net investment income included in net assets at end of year	$	1,891,106		$	771,673		$	28,709,755		$	13,056,804
SHARES ISSUED AND REDEEMED
Shares sold		4,750,000			1,875,000			17,200,000			5,600,000
Shares redeemed		(875,000	)		(250,000	)		(2,200,000	)		(9,600,000	)
Net increase (decrease) in shares outstanding		3,875,000			1,625,000			15,000,000			(4,000,000	)

See notes to the financial statements.

104 2006 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, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	26.62		$	17.04		$	10.61		$	8.19		$	8.18
Income from investment operations:
Net investment incomea		0.44			0.29			0.21			0.09			0.13
Net realized and unrealized gain (loss)b		4.31			9.38			6.39			2.43			(0.12	)
Total from investment operations		4.75			9.67			6.60			2.52			0.01
Less distributions from:
Net investment income		(0.29	)		(0.09	)		(0.17	)		(0.10	)		—
Total distributions		(0.29	)		(0.09	)		(0.17	)		(0.10	)		—
Net asset value, end of year	$	31.08		$	26.62		$	17.04		$	10.61		$	8.19
Total return		18.00	%		56.82	%		62.70	%		31.15	%		0.12	%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	391,637		$	196,952		$	57,920		$	22,288		$	14,740
Ratio of expenses to average net assets		0.54	%		0.57	%		0.77	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		1.48	%		1.26	%		1.37	%		0.98	%		1.57	%
Portfolio turnover ratec		32	%		21	%		11	%		26	%		32	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 105

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Belgium Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	18.94		$	14.77		$	11.16		$	10.43		$	11.81
Income from investment operations:
Net investment incomea		0.75			0.71			0.37			0.41			0.25
Net realized and unrealized gain (loss)b		3.95			3.75			4.25			0.43			(1.56	)
Total from investment operations		4.70			4.46			4.62			0.84			(1.31	)
Less distributions from:
Net investment income		(0.81	)		(0.29	)		(1.01	)		(0.11	)		(0.07	)
Total distributions		(0.81	)		(0.29	)		(1.01	)		(0.11	)		(0.07	)
Net asset value, end of year	$	22.83		$	18.94		$	14.77		$	11.16		$	10.43
Total return		25.66	%		30.22	%		42.88	%		8.25	%		(11.10	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	152,484		$	46,960		$	24,813		$	21,871		$	10,427
Ratio of expenses to average net assets		0.54	%		0.57	%		0.78	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		3.60	%		3.89	%		2.79	%		4.10	%		2.26	%
Portfolio turnover ratec		10	%		10	%		21	%		8	%		18	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

106 2006 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, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	74.97		$	59.38		$	50.12		$	46.02		$	56.74
Income from investment operations:
Net investment incomea		2.73			1.76			1.36			0.93			0.75
Net realized and unrealized gain (loss)b		15.90			15.13			8.69			3.62			(11.47	)
Total from investment operations		18.63			16.89			10.05			4.55			(10.72	)
Less distributions from:
Net investment income		(1.32	)		(1.30	)		(0.79	)		(0.45	)		–
Total distributions		(1.32	)		(1.30	)		(0.79	)		(0.45	)		–
Net asset value, end of year	$	92.28		$	74.97		$	59.38		$	50.12		$	46.02
Total return		25.18	%		28.54	%		20.07	%		10.05	%		(18.89	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	1,794,921		$	547,284		$	326,606		$	165,388		$	131,168
Ratio of expenses to average net assets		0.54	%		0.58	%		0.79	%		0.84	%		0.84	%
Ratio of expenses to average net assets exclusive of foreign taxes		n/a			0.57	%		0.79	%		n/a			n/a
Ratio of net investment income to average net assets		3.23	%		2.50	%		2.29	%		2.08	%		1.44	%
Portfolio turnover ratec		8	%		8	%		11	%		7	%		3	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 107

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI France Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	25.41		$	20.40		$	16.90		$	15.52		$	19.53
Income from investment operations:
Net investment incomea		0.55			0.47			0.24			0.23			0.18
Net realized and unrealized gain (loss)b		5.52			4.84			3.54			1.33			(4.19	)
Total from investment operations		6.07			5.31			3.78			1.56			(4.01	)
Less distributions from:
Net investment income		(0.32	)		(0.30	)		(0.28	)		(0.18	)		—
Total distributions		(0.32	)		(0.30	)		(0.28	)		(0.18	)		—
Net asset value, end of year	$	31.16		$	25.41		$	20.40		$	16.90		$	15.52
Total return		24.13	%		26.13	%		22.44	%		10.22	%		(20.53	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	211,886		$	81,326		$	61,201		$	54,075		$	49,674
Ratio of expenses to average net assets		0.54	%		0.57	%		0.79	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		1.95	%		1.98	%		1.23	%		1.56	%		1.00	%
Portfolio turnover ratec		10	%		7	%		9	%		9	%		3	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover reates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

108 2006 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, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	19.08		$	14.96		$	12.57		$	12.07		$	15.19
Income from investment operations:
Net investment incomea		0.57			0.28			0.19			0.21			0.11
Net realized and unrealized gain (loss)b		4.15			4.03			2.40			0.41			(3.23	)
Total from investment operations		4.72			4.31			2.59			0.62			(3.12	)
Less distributions from:
Net investment income		(0.12	)		(0.19	)		(0.20	)		(0.12	)		—
Total distributions		(0.12	)		(0.19	)		(0.20	)		(0.12	)		—
Net asset value, end of year	$	23.68		$	19.08		$	14.96		$	12.57		$	12.07
Total return		24.82	%		28.89	%		20.55	%		5.39	%		(20.54	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	802,795		$	314,793		$	98,764		$	101,800		$	94,160
Ratio of expenses to average net assets		0.54	%		0.57	%		0.80	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		2.62	%		1.54	%		1.27	%		1.98	%		0.77	%
Portfolio turnover ratec		12	%		9	%		9	%		11	%		9	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 109

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Italy Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	25.77		$	20.21		$	16.67		$	15.15		$	17.79
Income from investment operations:
Net investment incomea		1.07			0.78			0.56			0.43			0.37
Net realized and unrealized gain (loss)b		4.15			5.42			3.59			1.47			(3.01	)
Total from investment operations		5.22			6.20			4.15			1.90			(2.64	)
Less distributions from:
Net investment income		(0.51	)		(0.64	)		(0.61	)		(0.38	)		—
Total distributions		(0.51	)		(0.64	)		(0.61	)		(0.38	)		—
Net asset value, end of year	$	30.48		$	25.77		$	20.21		$	16.67		$	15.15
Total return		20.61	%		30.74	%		25.09	%		12.79	%		(14.84	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	146,324		$	42,526		$	27,279		$	29,997		$	29,538
Ratio of expenses to average net assets		0.54	%		0.57	%		0.83	%		0.84	%		0.84	%
Ratio of expenses to average net assets exclusive of foreign taxes		n/a			n/a			0.79	%		n/a			n/a
Ratio of net investment income to average net assets		3.87	%		3.18	%		2.85	%		2.84	%		2.34	%
Portfolio turnover ratec		15	%		18	%		9	%		22	%		10	%

^a Based on average shares outstanding throughout the period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

110 2006 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, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	19.10		$	15.70		$	14.31		$	14.69		$	18.59
Income from investment operations:
Net investment incomea		0.60			0.57			0.39			0.30			0.25
Net realized and unrealized gain (loss)b		4.95			3.09			1.37			(0.43	)		(4.11	)
Total from investment operations		5.55			3.66			1.76			(0.13	)		(3.86	)
Less distributions from:
Net investment income		(0.48	)		(0.26	)		(0.37	)		(0.25	)		(0.04	)
Total distributions		(0.48	)		(0.26	)		(0.37	)		(0.25	)		(0.04	)
Net asset value, end of year	$	24.17		$	19.10		$	15.70		$	14.31		$	14.69
Total return		29.53	%		23.40	%		12.28	%		(0.78	)%		(20.79	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	109,991		$	63,974		$	28,265		$	18,599		$	19,103
Ratio of expenses to average net assets		0.54	%		0.57	%		0.78	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		2.78	%		3.13	%		2.45	%		2.37	%		1.48	%
Portfolio turnover ratec		17	%		6	%		9	%		18	%		15	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 111

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Spain Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	35.70		$	27.55		$	22.39		$	17.95		$	21.33
Income from investment operations:
Net investment incomea		1.07			0.79			0.44			0.24			0.17
Net realized and unrealized gain (loss)b		8.78			7.97			4.99			4.36			(3.55	)
Total from investment operations		9.85			8.76			5.43			4.60			(3.38	)
Less distributions from:
Net investment income		(0.74	)		(0.61	)		(0.27	)		(0.16	)		—
Total distributions		(0.74	)		(0.61	)		(0.27	)		(0.16	)		—
Net asset value, end of year	$	44.81		$	35.70		$	27.55		$	22.39		$	17.95
Total return		28.09	%		31.85	%		24.28	%		25.81	%		(15.85	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	178,130		$	66,945		$	45,456		$	50,372		$	18,850
Ratio of expenses to average net assets		0.54	%		0.57	%		0.80	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		2.67	%		2.33	%		1.64	%		1.22	%		0.85	%
Portfolio turnover ratec		6	%		8	%		6	%		17	%		14	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

112 2006 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, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	21.58		$	16.82		$	12.59		$	9.88		$	12.88
Income from investment operations:
Net investment incomea		0.76			0.46			0.28			0.25			0.12
Net realized and unrealized gain (loss)b		3.96			4.45			4.20			2.58			(3.12	)
Total from investment operations		4.72			4.91			4.48			2.83			(3.00	)
Less distributions from:
Net investment income		(0.42	)		(0.15	)		(0.25	)		(0.12	)		—
Total distributions		(0.42	)		(0.15	)		(0.25	)		(0.12	)		—
Net asset value, end of year	$	25.88		$	21.58		$	16.82		$	12.59		$	9.88
Total return		22.16	%		29.21	%		35.81	%		29.04	%		(23.29	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	151,427		$	61,513		$	27,758		$	16,992		$	8,154
Ratio of expenses to average net assets		0.54	%		0.58	%		0.92	%		0.84	%		0.84	%
Ratio of expenses to average net assets exclusive of foreign taxes		n/a			0.57	%		0.79	%		n/a			n/a
Ratio of net investment income to average net assets		3.13	%		2.28	%		1.74	%		2.44	%		0.98	%
Portfolio turnover ratec		14	%		6	%		9	%		12	%		31	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 113

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Switzerland Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	17.63		$	14.58		$	12.23		$	11.59		$	12.95
Income from investment operations:
Net investment incomea		0.27			0.22			0.09			0.05			0.03
Net realized and unrealized gain (loss)b		4.71			2.92			2.31			0.62			(1.38	)
Total from investment operations		4.98			3.14			2.40			0.67			(1.35	)
Less distributions from:
Net investment income		(0.12	)		(0.09	)		(0.05	)		(0.03	)		(0.01	)
Total distributions		(0.12	)		(0.09	)		(0.05	)		(0.03	)		(0.01	)
Net asset value, end of year	$	22.49		$	17.63		$	14.58		$	12.23		$	11.59
Total return		28.36	%		21.54	%		19.56	%		5.89	%		(10.47	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	188,319		$	79,324		$	41,920		$	33,643		$	31,883
Ratio of expenses to average net assets		0.54	%		0.57	%		0.79	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		1.34	%		1.34	%		0.64	%		0.43	%		0.20	%
Portfolio turnover ratec		11	%		5	%		4	%		10	%		12	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capitail share transactions in Creation Units.

See notes to the financial statements.

114 2006 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, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	18.74		$	15.72		$	13.00		$	12.77		$	15.11
Income from investment operations:
Net investment incomea		0.97			0.60			0.48			0.39			0.48
Net realized and unrealized gain (loss)b		2.79			2.76			2.72			0.12			(2.60	)
Total from investment operations		3.76			3.36			3.20			0.51			(2.12	)
Less distributions from:
Net investment income		(0.58	)		(0.34	)		(0.48	)		(0.28	)		(0.22	)
Total distributions		(0.58	)		(0.34	)		(0.48	)		(0.28	)		(0.22	)
Net asset value, end of year	$	21.92		$	18.74		$	15.72		$	13.00		$	12.77
Total return		20.61	%		21.53	%		24.77	%		4.20	%		(14.19	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	872,409		$	464,850		$	452,870		$	150,809		$	120,067
Ratio of expenses to average net assets		0.54	%		0.57	%		0.77	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		4.81	%		3.39	%		3.11	%		3.23	%		3.39	%
Portfolio turnover ratec		10	%		11	%		6	%		6	%		14	%

^a Based on average shares outstanding throughout each period.

^b The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 115

Notes to the Financial Statements

iSHARES^®, INC.

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, 2006, 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 uses 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 securities of 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; less 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.

1. SIGNIFICANT ACCOUNTING POLICIES

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 the 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 the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

SECURITY VALUATION

The securities and other assets of each Fund are generally valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service or a major market maker (or dealer), (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service or a major market maker (or dealer) or (iii) based on amortized cost. In the case of shares of funds that are not traded on an exchange, a market valuation means such fund’s published net asset value per share. The investment adviser may use various pricing services or discontinue the use of any pricing service. A price obtained from a pricing service based on such pricing service’s valuation matrix may be considered a market valuation. In the event that current market valuations are not readily available or such valuations

116 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

do not reflect current market values, the affected investments will be valued using fair value pricing pursuant to the pricing policy and procedures approved by the Board of Directors of the Company (the “Board”).

SECURITY TRANSACTIONS AND INCOME RECOGNITION

Security transactions are accounted for on trade date. Dividend income is recognized on the ex-dividend date, net of any foreign taxes withheld at source, 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. Foreign currencies, as well as investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates deemed appropriate by the investment adviser. Any use of a different rate from the rates used by MSCI may adversely affect a Fund’s ability to track its underlying index. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars on the respective dates of such transactions.

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 may levy taxes on stock dividends at a rate of 27.0%, based on the par value of stock dividends received by the iShares MSCI Italy Index Fund. These taxes are paid by the Fund receiving the stock dividends and, if any, are disclosed in the Statements of Operations.

The iShares MSCI EMU Index Fund and iShares MSCI Sweden Index Fund may pay foreign taxes on certain taxable corporate events (i.e., spin-offs and tender offers) by Swedish companies whose securities are held by the Funds. The foreign taxes paid by the Funds, if any, are disclosed in their respective 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 capital 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 117

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

As of August 31, 2006, the tax year-end of the Funds, the components of net distributable earnings (accumulated losses) on a tax basis were as follows:

iShares MSCI Index Fund	Undistributed Ordinary Income		Unrealized Appreciation		Capital and Other Losses			Net Distributable Earnings (Accumulated Losses)
Austria	$	8,422,066	$	27,134,667	$	(3,347,928	)	$	32,208,805
Belgium		3,751,320		12,108,101		(2,064,481	)		13,794,940
EMU		36,694,677		167,686,962		(5,911,570	)		198,470,069
France		2,255,571		6,597,389		(5,220,386	)		3,632,574
Germany		17,227,480		56,757,848		(29,280,109	)		44,705,219
Italy		3,319,814		20,681,938		(4,593,503	)		19,408,249
Netherlands		3,061,890		11,301,130		(8,055,494	)		6,307,526
Spain		2,336,743		28,955,727		(3,346,159	)		27,946,311
Sweden		3,600,238		1,898,617		(6,290,449	)		(791,594	)
Switzerland		1,891,314		35,601,342		(6,210,801	)		31,281,855
United Kingdom		28,754,432		115,300,323		(30,884,277	)		113,170,478

For the years ended August 31, 2006 and August 31, 2005, the tax characterization of distributions paid for each Fund represents ordinary income. 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, 2006.

From November 1, 2005 to August 31, 2006, certain Funds incurred net realized capital losses. As permitted by tax regulations, these Funds have elected to defer these losses and treat them as arising in the year ending August 31, 2007, as follows:

iShares MSCI Index Fund	Deferred Net Realized Capital Losses
France	$	146,138
Germany		4,212,074
Netherlands		260,715
Sweden		17,347
Switzerland		187,183
United Kingdom		1,615,947

118 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

The Funds had tax basis net capital loss carryforwards as of August 31, 2006, the tax year-end of the Funds, as follows:

iShares MSCI Index Fund	Expiring 2008		Expiring 2009		Expiring 2010		Expiring 2011		Expiring 2012		Expiring 2013		Expiring 2014		Total
Austria	$	491,457	$	336,553	$	1,291,324	$	370,948	$	855,364	$	—	$	—	$	3,345,646
Belgium		—		59,876		1,677,678		117,767		175,781		33,969		—		2,065,071
EMU		—		—		—		—		4,037,607		1,873,963		—		5,911,570
France		—		—		2,436,748		236,944		2,400,550		—		—		5,074,242
Germany		—		—		8,697,227		5,469,732		8,656,712		2,241,687		—		25,065,358
Italy		—		—		2,675,493		848,408		541,980		527,327		—		4,593,208
Netherlands		—		60,885		3,222,792		1,497,810		2,481,175		129,137		403,525		7,795,324
Spain		—		—		1,083,394		678,910		1,582,094		—		—		3,344,398
Sweden		—		89,443		3,350,244		1,577,551		1,149,514		—		107,613		6,274,365
Switzerland		—		—		2,501,682		1,018,305		2,149,171		354,252		—		6,023,410
United Kingdom		—		—		9,945,254		6,448,554		4,272,059		1,517,783		7,063,063		29,246,713

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.

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

Each Fund reclassifies at the end of its tax year 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.

As of August 31, 2006, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

iShares MSCI Index Fund	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation
Austria	$	374,519,234	$	36,135,232	$	(9,006,496	)	$	27,128,736
Belgium		139,556,174		12,112,182		(10,644	)		12,101,538
EMU		1,659,891,678		180,712,586		(13,043,582	)		167,669,004
France		207,539,903		14,396,235		(7,799,707	)		6,596,528
Germany		754,886,785		71,526,066		(14,789,832	)		56,736,234
Italy		128,701,889		21,381,785		(718,714	)		20,663,071
Netherlands		100,312,998		11,553,517		(253,426	)		11,300,091
Spain		156,390,165		29,040,184		(86,074	)		28,954,110
Sweden		153,566,430		6,480,583		(4,580,778	)		1,899,805
Switzerland		155,574,913		35,979,071		(387,165	)		35,591,906
United Kingdom		748,661,962		128,059,190		(12,789,692	)		115,269,498

NOTES TO THE FINANCIAL STATEMENTS 119

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 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.

2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

Pursuant to an Investment Advisory Agreement with the Company, Barclays Global Fund Advisors (“BGFA”) manages the investment of each Fund’s assets. BGFA is a California corporation indirectly owned by Barclays Bank PLC. Under the Investment Advisory Agreement, BGFA is responsible for all 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 execution of portfolio transactions, distribution fees and extraordinary expenses.

For its investment advisory services to each Fund, BGFA is entitled to an annual investment advisory fee based on each Fund’s allocable portion of the aggregate of the average daily 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 Average Daily Net Assets
0.59%	First $7 billion
0.54	Over $7 billion, up to and including $11 billion
0.49	Over $11 billion

The Board approved a change to the investment advisory fee rates for each Fund effective September 1, 2006. For its investment advisory services to each Fund, BGFA will be entitled to be paid annual investment advisory fees based on each Fund’s allocable portion of the aggregate of the average daily 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 Average Daily Net Assets
0.59%	First $7 billion
0.54	Over $7 billion, up to and including $11 billion
0.49	Over $11 billion, up to and including $24 billion
0.44	Over $24 billion

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 and expenses are Covered Expenses as defined above.

SEI Investments Distribution Co. (“SEI”) serves as each Fund’s underwriter and distributor of the shares of each Fund, pursuant to a Distribution Agreement with the Company. SEI does not currently receive a fee from the Funds for its distribution services.

120 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission (“SEC”), the Funds are permitted to lend portfolio securities to Barclays Capital, Inc. (“BarCap”). Pursuant to the same exemptive order, Barclays Global Investors, N.A. (“BGI”) serves as securities lending agent for the Company. BarCap and BGI are affiliates 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, 2006, BGI earned securities lending agent fees as follows:

iShares MSCI Index Fund	Securities Lending Agent Fees
Austria	$	21,742
Belgium		11,942
EMU		161,203
France		22,425
Germany		74,921
Italy		23,331
iShares MSCI Index Fund	Securities Lending Agent Fees
Netherlands	$	6,081
Spain		29,975
Sweden		22,082
Switzerland		6,709
United Kingdom		2,520

Cross trades for the year ended August 31, 2006, if any, were executed by the Funds pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment adviser. At its regularly scheduled quarterly meetings, the Board reviews such transactions as of the most recent calendar quarter, for compliance with the requirements and restrictions set forth by Rule 17a-7.

Each Fund may invest in the Institutional Shares of certain money market funds managed by BGFA, the Funds’ investment adviser, including the Government Money Market Fund (“GMMF”), Institutional Money Market Fund (“IMMF”), Prime Money Market Fund (“PMMF”) and Treasury Money Market Fund (“TMMF”) of Barclays Global Investors Funds. The GMMF, IMMF, PMMF and TMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (collectively, the “Master Portfolios”), respectively, which are also managed by BGFA. While the GMMF, IMMF, PMMF and TMMF 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 GMMF, IMMF, PMMF and TMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Funds from temporary cash investments are recorded as interest from affiliated issuers in the accompanying Statements of Operations. Income distributions earned by the Funds from the investment of securities lending collateral are included in securities lending income in the accompanying Statements of Operations.

NOTES TO THE FINANCIAL STATEMENTS 121

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

The following table provides information about the direct investment by each Fund (exclusive of investments of securities lending collateral) in issuers of which BGFA is an affiliate, for the year ended August 31, 2006.

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	2	30,725	30,630	97	$	97,265	$	5,972	$	—
Belgium
IMMF	3	12,342	12,284	61		61,136		2,125		—
EMU
IMMF	12	180,589	179,655	946		946,384		34,819		—
France
IMMF	150	14,954	14,943	161		160,863		2,712		—
Germany
IMMF	34	52,923	52,937	20		19,872		9,458		—
Italy
IMMF	4	5,633	5,636	1		1,089		1,006		—
Netherlands
IMMF	2	8,496	8,492	6		6,254		1,308		—
Spain
IMMF	6	6,330	6,176	160		160,146		1,178		—
Sweden
IMMF	7	7,592	7,575	24		24,228		1,417		—
Switzerland
IMMF	42	17,323	17,342	23		22,983		3,020		—
United Kingdom
Barclays PLC	1,224	949	180	1,993		24,928,590		864,528		336,803
IMMF	28	76,753	76,664	117		116,892		14,531		—

As of August 31, 2006, certain directors and officers of the Company are also officers of BGI and/or BGFA.

122 2006 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, 2006, were as follows:

iShares MSCI Index Fund	Purchases		Sales
Austria	$	118,513,092	$	97,652,694
Belgium		22,280,587		9,266,707
EMU		147,088,682		86,617,708
France		16,928,146		11,928,197
Germany		86,732,155		73,914,939
Italy		18,261,552		13,201,117
Netherlands		15,105,650		16,375,379
Spain		8,914,610		6,817,782
Sweden		17,900,969		15,353,455
Switzerland		17,197,127		15,168,552
United Kingdom		78,171,122		65,323,757

In-kind transactions (see Note 4) for the year ended August 31, 2006, were as follows:

iShares MSCI Index Fund	In-kind Purchases		In-kind Sales
Austria	$	270,508,973	$	122,033,737
Belgium		90,596,166		13,508,179
EMU		1,232,848,319		236,280,696
France		186,916,549		86,357,327
Germany		609,121,722		235,124,080
Italy		87,535,369		4,098,602
Netherlands		57,654,446		30,167,078
Spain		101,235,495		14,567,347
Sweden		133,207,842		54,695,231
Switzerland		89,229,052		14,556,116
United Kingdom		342,024,021		43,764,903

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

iShares MSCI Index Fund	Authorized Shares
Netherlands	255,000,000
Spain	127,800,000
Sweden	63,600,000
Switzerland	318,625,000
United Kingdom	943,200,000

NOTES TO THE FINANCIAL STATEMENTS 123

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

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 contribution of a designated portfolio of equity securities constituting a portfolio sampling representation of the corresponding MSCI Index and an amount of cash. Investors purchasing and redeeming Creation Units pay a purchase transaction fee and a redemption transaction fee directly to Investors Bank, the administrator, 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 of at least 102% of the market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other 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, 2006, certain Funds had loaned securities which were collateralized by cash. Pursuant to an exemptive order issued by the SEC, the cash collateral received was invested in a joint account with other investment funds managed by BGFA. The joint account 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 or non-U.S. Government debt securities. The market value of the securities on loan as of August 31, 2006 and the value of the related collateral are disclosed in the Statements of Assets and Liabilities. Securities lending income, as disclosed in the Funds’ Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to BGI as securities lending agent.

6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, (“FIN 48”) “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact of applying the various provisions of FIN 48.

124 2006 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 Fund Series (the “Funds”) at August 31, 2006, the results of each of their operations for the year then ended and the changes in each of their net assets and the financial highlights for each of the periods presented, 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

October 23, 2006

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 125

Tax Information (Unaudited)

iSHARES^®, INC.

For the fiscal year ended August 31, 2006, 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	$	7,309,037	$	1,086,360
Belgium		4,337,002		637,505
EMU		49,052,232		6,137,955
France		3,256,740		328,514
Germany		23,222,073		3,320,588
Italy		4,307,784		590,430
Netherlands		3,446,024		462,295
Spain		3,888,418		534,296
Sweden		4,792,713		640,272
Switzerland		3,065,137		260,004

Under Section 854(b)(2) of the Code, the Funds hereby designate the following maximum amounts as qualified dividend income for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended August 31, 2006:

iShares MSCI Index Fund	Qualified Dividend Income
Austria	$	7,034,145
Belgium		3,113,815
EMU		43,885,591
France		2,584,085
Germany		20,548,068
Italy		3,910,244

iShares MSCI Index Fund	Qualified Dividend Income
Netherlands	$	3,242,904
Spain		3,372,688
Sweden		4,240,510
Switzerland		2,111,318
United Kingdom		31,757,730

In January 2007, shareholders will receive Form 1099-DIV which will include their share of qualified dividend income distributed during the calendar year 2006. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their income tax returns.

126 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Board Review and Approval of Investment Advisory Contracts^* (Unaudited)

iSHARES^®, INC.

Under Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), the Company’s Board of Directors (the “Board”), including a majority of Directors who are not interested persons of the Company (as that term is defined in the 1940 Act) (the “Independent Directors”), is required annually to consider the Investment Advisory Contract between the Company and BGFA (the “Advisory Contract”) on behalf of the Funds. As required by Section 15(c), the Board requested and BGFA provided such information as the Board deemed reasonably necessary to evaluate the terms of the Advisory Contract. At a meeting held on June 14-15, 2006, the Board approved the selection of BGFA and the continuance of the Advisory Contract, based on its review of qualitative and quantitative information provided by BGFA. In selecting BGFA and approving the Advisory Contract for the Funds, the Board, including the Independent Directors, advised by their independent counsel, considered the following factors, none of which was controlling, and made the following conclusions:

NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY BGFA

The Board determined that there would be no diminution in the scope of services required of BGFA under the Advisory Contract for the coming year as compared to the scope of services provided by BGFA over the past year. In reviewing the scope of these services, the Board considered BGFA’s investment philosophy and experience, noting that BGFA and its affiliates have committed significant resources over time, including over the past year, to the support of the Funds. The Board also considered BGFA’s compliance program and its compliance record with respect to the Funds. In that regard, the Board noted that BGFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and has made appropriate officers available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons responsible for the day-to-day management of the Funds. In addition to the above considerations, the Board reviewed and considered BGFA’s investment processes and strategies, and matters related to BGFA’s portfolio transaction policies and procedures. The Board further noted that BGFA does not serve as investment adviser for any other series of registered investment companies with substantially similar investment objectives and strategies as the Funds; therefore, no comparative performance information was available. However, the Board also noted that the Funds had met their investment objectives consistently since their respective inception dates. Based on this review, the Board concluded that the nature, extent and quality of services to be provided by BGFA to the Funds under the Advisory Contract were appropriate and mitigated in favor of the Board’s approval of the Advisory Contract for the coming year.

FUNDS’ EXPENSES AND PERFORMANCE OF THE FUNDS

The Board reviewed statistical information prepared by Lipper Inc. (“Lipper”), an independent provider of investment company data, regarding the expense ratio components, including advisory fees, waivers/reimbursements, and gross and net total expenses of each Fund in comparison with the same information for other registered funds objectively selected solely by Lipper as comprising each Fund’s applicable peer group (the “Lipper Peer Group”). In addition, the Board reviewed statistical information prepared by Lipper regarding the performance of each Fund for the one-, three- and five-year, and “last quarter” periods ended March 31, 2006, as applicable, and a comparison of each Fund’s performance to that of the funds in its Lipper Peer Group for the same periods. Because there are few, if any, exchange traded funds or index funds that track indices similar to those tracked by the Funds, the Lipper Peer Groups included mutual funds, closed-end funds, exchange traded funds, and funds with differing investment objective classifications, investment focuses and other characteristics (e.g., actively managed funds and funds sponsored by “at cost” service providers). In support of its review of the statistical information, the Board was provided with a detailed description of the methodology used by Lipper to determine the applicable Lipper Peer Groups and to prepare this information. The Board further noted that due to the limitations in providing comparable funds in the various Lipper Peer Groups, the statistical information may or may not provide meaningful direct comparisons to the Funds. The Board noted that most of the Funds generally performed in line with the funds in their respective Lipper Peer Groups over relevant periods; however, certain of the Funds may have underperformed or outperformed funds in their respective Lipper Peer Groups over relevant periods, but any such Funds also performed in line with their relevant benchmarks over such periods. The Board also noted that the investment advisory fees and overall expenses for the Funds were generally lower than or in line with the investment advisory fee rates and overall expenses of the funds in their respective Lipper Peer Groups. The Board also reviewed statistical information from Lipper displaying the effects of the proposed extension of breakpoints in the investment advisory fee rates for certain of the Funds (as discussed below) at various

BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS 127

Board Review and Approval of Investment Advisory Contracts* (Unaudited) (Continued)

iSHARES^®, INC.

assets levels of such Funds as compared to their Lipper Peer Groups. Based on this review, the Board concluded that the investment advisory fees and expense levels and the historical performance of each Fund, as managed by BGFA, as compared to the investment advisory fees and expense levels and performance of the funds in the relevant Lipper Peer Group, were satisfactory for the purposes of approving the Advisory Contract for the coming year.

COSTS OF SERVICES PROVIDED TO FUNDS AND PROFITS REALIZED BY BGFA AND AFFILIATES

The Board reviewed information about the profitability to BGFA of the Funds based on the fees payable to BGFA and its affiliates (including fees under the Advisory Contract), and all other sources of revenue and expense to BGFA and its affiliates for the last calendar year. The Board discussed the sources of direct and ancillary revenue with management, including the revenues to BGI from securities lending by the Company (including any securities lending by the Funds). The Board also discussed BGFA’s profit margin as reflected in the Funds’ profitability analysis and reviewed information regarding economies of scale (as discussed below). Based on this review, the Board concluded that the profits to be realized by BGFA and its affiliates under the Advisory Contract and from other relationships between the Funds and BGFA and/or its affiliates, if any, were within the range the Board considered reasonable and appropriate.

ECONOMIES OF SCALE

In connection with its review of the Funds’ profitability analysis, the Board reviewed information regarding economies of scale or other efficiencies that may result from increases in the Funds’ assets. The Board was also presented with materials regarding the proposed extension of breakpoints in the investment advisory fee rates at certain asset levels of the Funds on an aggregated basis with certain other iShares funds. The Board noted that the Advisory Contract already provided for breakpoints in the Funds’ investment advisory fee rates as the assets of the Funds, on an aggregated basis with the assets of certain other iShares funds, increase. The Board also discussed the substantial growth in assets of certain iShares funds, including the iShares funds in the group with which the Funds’ assets are aggregated for the purpose of applying breakpoints in the investment advisory fee rates, over the last few years. The Board further noted that as of July 1, 2004, Fund shareholders were no longer paying distribution fees pursuant to the Funds’ distribution plan under 12b-1 of the 1940 Act because such plan had been terminated as of that date, benefiting the Funds’ shareholders by lowering the Funds’ overall expenses. The Board also reviewed BGFA’s historic profitability as investment adviser to the iShares fund complex and noted that BGFA had made a significant investment in the iShares funds and had incurred operating losses during earlier years when the iShares funds, including the Funds, had not yet reached scale. In light of this history, the Board determined that the proposed extension of breakpoints was appropriate and warranted at this juncture for the Funds. Based on this review, the Board, recognizing its responsibility to consider this issue at least annually, concluded that the structure of the investment advisory fees, with the proposed extension of breakpoints for the Funds, reflects the current sharing and potential further sharing of economies of scale with the Funds’ shareholders.

FEES AND SERVICES PROVIDED FOR OTHER COMPARABLE FUNDS/ACCOUNTS MANAGED BY BGFA AND ITS AFFILIATES

The Board considered the Funds’ annual investment advisory fee rates under the Advisory Contract in comparison to the investment advisory/management fee rates for other funds/accounts for which BGFA (or its affiliate, BGI) provides investment advisory/management services, including other funds registered under the 1940 Act, collective funds and separate accounts (together, the “Other Accounts”). The Board noted that comparative investment advisory/management fee information was not available, as BGFA and its affiliates do not manage any Other Accounts with substantially similar investment objectives and strategies as the Funds. However, the Board noted that BGFA provided the Board with general information regarding how the level of services provided to the Other Accounts differed from the level of services provided to the Funds. Based on this review, the Board determined that the investment advisory fee rates under the Advisory Contract, with the proposed extension of breakpoints, do not constitute fees that are so disproportionately large as to bear no reasonable relationship to the services rendered

128 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Board Review and Approval of Investment Advisory Contracts* (Unaudited) (Continued)

iSHARES^®, INC.

and that could not have been the product of arm’s-length bargaining, and concluded that the investment advisory fee rates under the Advisory Contract, with the proposed extension of breakpoints, are fair and reasonable.

OTHER BENEFITS TO BGFA AND/OR ITS AFFILIATES

The Board reviewed any ancillary revenue received by BGFA and/or its affiliates in connection with the services provided to the Funds by BGFA, such as any payment of revenue to BGI, the Company’s securities lending agent, for loaning any portfolio securities, and payment of advisory fees and/or administration fees to BGFA and BGI in connection with any investments by the Funds in other funds for which BGFA provides investment advisory services and/or BGI provides administration services. The Board noted that BGFA does not use soft dollars or consider the value of research or other services that may be provided to BGFA (including its affiliates) in selecting brokers for portfolio transactions for the Funds. The Board further noted that any portfolio transactions on behalf of the Funds placed through a BGFA affiliate are reported to the Board pursuant to Rule 17e-1 under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Funds’ shareholders.

Based on this analysis, the Board determined that the Advisory Contract, including the investment advisory fee rates, with the proposed extension of breakpoints, are fair and reasonable in light of all relevant circumstances, and concluded that it is in the best interest of the Funds and their shareholders to approve the Advisory Contract, with the fee schedule to the Advisory Contract as proposed to be amended to reflect the extension of breakpoints, for the coming year.

* Denotes the Board’s approval of Investment Advisory Contracts for all series of the Company, including the Funds.

BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS 129

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. The information shown for each Fund is for five calendar years (or for each full calendar quarter completed after the inception date of such Fund if less than five years) through the date of the most recent calendar quarter-end. 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, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 2.5%	3	0.21	%
Greater than 2.0% and Less than 2.5%	2	0.14
Greater than 1.5% and Less than 2.0%	24	1.74
Greater than 1.0% and Less than 1.5%	64	4.63
Greater than 0.5% and Less than 1.0%	231	16.74
Between 0.5% and –0.5%	803	58.16
Less than –0.5% and Greater than –1.0%	170	12.31
Less than –1.0% and Greater than –1.5%	62	4.49
Less than –1.5% and Greater than –2.0%	11	0.80
Less than –2.0% and Greater than –2.5%	6	0.43
Less than –2.5% and Greater than –3.0%	2	0.14
Less than –3.0% and Greater than –3.5%	1	0.07
Less than –3.5% and Greater than –4.0%	2	0.14
	1,381	100.00	%

130 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Belgium Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.0%	1	0.07	%
Greater than 2.5% and Less than 3.0%	4	0.29
Greater than 2.0% and Less than 2.5%	11	0.80
Greater than 1.5% and Less than 2.0%	19	1.38
Greater than 1.0% and Less than 1.5%	70	5.07
Greater than 0.5% and Less than 1.0%	201	14.55
Between 0.5% and –0.5%	817	59.17
Less than –0.5% and Greater than –1.0%	188	13.61
Less than –1.0% and Greater than –1.5%	49	3.55
Less than –1.5% and Greater than –2.0%	9	0.65
Less than –2.0% and Greater than –2.5%	8	0.58
Less than –2.5% and Greater than –3.0%	2	0.14
Less than –3.0%	2	0.14
	1,381	100.00	%

iShares MSCI EMU Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5%	2	0.14	%
Greater than 3.0% and Less than 3.5%	2	0.14
Greater than 2.5% and Less than 3.0%	3	0.21
Greater than 2.0% and Less than 2.5%	8	0.58
Greater than 1.5% and Less than 2.0%	27	1.96
Greater than 1.0% and Less than 1.5%	84	6.08
Greater than 0.5% and Less than 1.0%	329	23.82
Between 0.5% and –0.5%	789	57.15
Less than –0.5% and Greater than –1.0%	100	7.24
Less than –1.0% and Greater than –1.5%	28	2.03
Less than –1.5% and Greater than –2.0%	8	0.58
Less than –2.0% and Greater than –2.5%	1	0.07
	1,381	100.00	%

SUPPLEMENTAL INFORMATION 131

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI France Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 2.5%	1	0.07	%
Greater than 2.0% and Less than 2.5%	2	0.14
Greater than 1.5% and Less than 2.0%	9	0.65
Greater than 1.0% and Less than 1.5%	26	1.88
Greater than 0.5% and Less than 1.0%	125	9.05
Between 0.5% and –0.5%	1,065	77.14
Less than –0.5% and Greater than –1.0%	121	8.76
Less than –1.0% and Greater than –1.5%	24	1.74
Less than –1.5% and Greater than –2.0%	4	0.29
Less than –2.0% and Greater than –2.5%	1	0.07
Less than –2.5% and Greater than –3.0%	2	0.14
Less than –3.0%	1	0.07
	1,381	100.00	%

iShares MSCI Germany Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 2.5%	1	0.07	%
Greater than 2.0% and Less than 2.5%	2	0.14
Greater than 1.5% and Less than 2.0%	15	1.09
Greater than 1.0% and Less than 1.5%	37	2.68
Greater than 0.5% and Less than 1.0%	162	11.73
Between 0.5% and –0.5%	937	67.87
Less than –0.5% and Greater than –1.0%	155	11.22
Less than –1.0% and Greater than –1.5%	52	3.77
Less than –1.5% and Greater than –2.0%	10	0.72
Less than –2.0% and Greater than –2.5%	3	0.21
Less than –2.5% and Greater than –3.0%	3	0.21
Less than –3.0%	4	0.29
	1,381	100.00	%

132 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Italy Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 2.5%	1	0.07	%
Greater than 2.0% and Less than 2.5%	3	0.21
Greater than 1.5% and Less than 2.0%	7	0.51
Greater than 1.0% and Less than 1.5%	21	1.52
Greater than 0.5% and Less than 1.0%	124	8.98
Between 0.5% and –0.5%	1,071	77.57
Less than –0.5% and Greater than –1.0%	124	8.98
Less than –1.0% and Greater than –1.5%	20	1.45
Less than –1.5% and Greater than –2.0%	4	0.29
Less than –2.0% and Greater than –2.5%	3	0.21
Less than –2.5% and Greater than –3.0%	1	0.07
Less than –3.0% and Greater than –3.5%	1	0.07
Less than –3.5%	1	0.07
	1,381	100.00	%

iShares MSCI Netherlands Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 4.0%	2	0.14	%
Greater than 3.5% and Less than 4.0%	1	0.07
Greater than 3.0% and Less than 3.5%	1	0.07
Greater than 2.5% and Less than 3.0%	3	0.21
Greater than 2.0% and Less than 2.5%	5	0.35
Greater than 1.5% and Less than 2.0%	10	0.72
Greater than 1.0% and Less than 1.5%	41	2.97
Greater than 0.5% and Less than 1.0%	208	15.08
Between 0.5% and –0.5%	911	65.99
Less than –0.5% and Greater than –1.0%	136	9.85
Less than –1.0% and Greater than –1.5%	45	3.26
Less than –1.5% and Greater than –2.0%	12	0.87
Less than –2.0% and Greater than –2.5%	3	0.21
Less than –2.5%	3	0.21
	1,381	100.00	%

SUPPLEMENTAL INFORMATION 133

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Spain Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.0%	3	0.21	%
Greater than 2.5% and Less than 3.0%	2	0.14
Greater than 2.0% and Less than 2.5%	4	0.29
Greater than 1.5% and Less than 2.0%	8	0.58
Greater than 1.0% and Less than 1.5%	38	2.75
Greater than 0.5% and Less than 1.0%	164	11.89
Between 0.5% and –0.5%	967	70.03
Less than –0.5% and Greater than –1.0%	147	10.64
Less than –1.0% and Greater than –1.5%	35	2.53
Less than –1.5% and Greater than –2.0%	8	0.58
Less than –2.0% and Greater than –2.5%	4	0.29
Less than –2.5%	1	0.07
	1,381	100.00	%

iShares MSCI Sweden Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5%	5	0.35	%
Greater than 3.0% and Less than 3.5%	2	0.14
Greater than 2.5% and Less than 3.0%	4	0.29
Greater than 2.0% and Less than 2.5%	20	1.45
Greater than 1.5% and Less than 2.0%	32	2.32
Greater than 1.0% and Less than 1.5%	79	5.72
Greater than 0.5% and Less than 1.0%	237	17.18
Between 0.5% and –0.5%	770	55.78
Less than –0.5% and Greater than –1.0%	138	9.99
Less than –1.0% and Greater than –1.5%	58	4.20
Less than –1.5% and Greater than –2.0%	13	0.94
Less than –2.0% and Greater than –2.5%	14	1.01
Less than –2.5% and Greater than –3.0%	5	0.35
Less than –3.0% and Greater than –3.5%	1	0.07
Less than –3.5%	3	0.21
	1,381	100.00	%

134 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Switzerland Index Fund

Period Covered: January 1, 2001 through June 30, 2006

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%	5	0.35
Greater than 2.0% and Less than 2.5%	7	0.51
Greater than 1.5% and Less than 2.0%	36	2.61
Greater than 1.0% and Less than 1.5%	93	6.73
Greater than 0.5% and Less than 1.0%	269	19.50
Between 0.5% and –0.5%	819	59.32
Less than –0.5% and Greater than –1.0%	101	7.31
Less than –1.0% and Greater than –1.5%	27	1.96
Less than –1.5% and Greater than –2.0%	14	1.01
Less than –2.0% and Greater than –2.5%	3	0.21
Less than –2.5% and Greater than –3.0%	1	0.07
Less than –3.0% and Greater than –3.5%	1	0.07
Less than –3.5% and Greater than –4.0%	1	0.07
Less than –4.0%	2	0.14
	1,381	100.00	%

iShares MSCI United Kingdom Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 4.0% and Less than 4.5%	2	0.14	%
Greater than 3.5% and Less than 4.0%	4	0.29
Greater than 3.0% and Less than 3.5%	2	0.14
Greater than 2.5% and Less than 3.0%	1	0.07
Greater than 2.0% and Less than 2.5%	8	0.58
Greater than 1.5% and Less than 2.0%	45	3.26
Greater than 1.0% and Less than 1.5%	168	12.18
Greater than 0.5% and Less than 1.0%	348	25.21
Between 0.5% and –0.5%	696	50.41
Less than –0.5% and Greater than –1.0%	83	6.01
Less than –1.0% and Greater than –1.5%	14	1.01
Less than –1.5% and Greater than –2.0%	5	0.35
Less than –2.0% and Greater than –2.5%	2	0.14
Less than –2.5%	3	0.21
	1,381	100.00	%

SUPPLEMENTAL INFORMATION 135

Director and Officer 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 111 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 an additional 25 portfolios within the fund complex.

Unless otherwise noted in the tables below, the address for each Director and Officer is c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, California 94105. The Board has designated George G.C. Parker as its Lead Director. Additional information about the Funds’ Directors and Officers may be found in the Funds’ combined Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-474-2737.

Interested Directors and Officers

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
*Lee T. Kranefuss, 1961	Director, Chairman and President (since 2003).	Chief Executive Officer, Global Index and Markets Group of BGI (since 2005); Chief Executive Officer of Intermediary Investor and Exchange Traded Products Business of BGI (since 2003); Chief Executive Officer of the Individual Investor Business of BGI (1999-2003).	Trustee (since 2003) of iShares Trust; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.
*John E. Martinez, 1962	Director (since 2003).	Co-Chief Executive Officer of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); Chief Executive Officer of Capital Markets Group of BGI (1996-2001).	Trustee (since 2003) of iShares Trust; Director (since 2005) of Real Estate Equity Exchange; Director (since 2003) of Larkin Street Youth Services.

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

136 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Director and Officer Information (Unaudited) (Continued)

iSHARES^®, INC.

Independent Directors

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Richard K. Lyons, 1961	Director (since 2002).	Executive Associate Dean (since 2005); Sylvan Coleman Chair in Finance (since 2004); Acting Dean (2004-2005) and Professor (since 1993), University of California, Berkeley: Haas School of Business; Consultant for IMF World Bank, Federal Reserve Bank and Citibank N.A. (since 2000).	Trustee (since 2000) of iShares Trust; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.; Trustee (since 1995) and Chairman of Matthews Asian Funds (oversees 8 portfolios).
George G. C. Parker, 1939	Director (since 2002).	Dean Witter Distinguished Professor of Finance (since 1994); Formerly Senior Associate Dean for Academic Affairs, Director of MBA Program, Stanford University: Graduate School of Business (1993-2001).	Trustee (since 2000) of iShares Trust; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (since 1999) of Tejon Ranch Company; Director (since 2003) of First Republic Bank; Director (since 2004) of Threshold Pharmaceuticals.
Cecilia H. Herbert, 1949	Director (since 2005).	Member of Finance Council, Archdiocese of San Francisco (since 1991); Chair of Investment Committee, Archdiocese of San Francisco (1994-2005).	Trustee (since 2005) of iShares Trust; Trustee (2004-2005) of Pacific Select Funds; Trustee (1992-2003) of the Montgomery Funds; Trustee (since 2005) of the Thacher School; Director (since 1998) of Catholic Charities CYO; Director (since 2005) of Women’s Forum West (professional association).
Charles A. Hurty, 1943	Director (since 2005).	Partner, KPMG LLP (1968-2001).	Trustee (since 2005) of iShares Trust; Director (since 2002) of GMAM Absolute Return Strategy Fund (1 portfolio); Director (since 2002) of Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC (2 portfolios); Director (since 2005) of CSFB Alternative Investments Fund (15 portfolios).
John E. Kerrigan, 1955	Director (since 2005).	Chief Investment Officer, Santa Clara University (since 2002); Managing Director, Merrill Lynch (1994-2002).	Trustee (since 2005) of iShares Trust; Member (since 2004) of Advisory Council for Commonfund Distressed Debt Partners II.

DIRECTOR AND OFFICER INFORMATION 137

Director and Officer Information (Unaudited) (Continued)

iSHARES^®, INC.

Officer

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Michael A. Latham, 1965	Secretary, Treasurer and Principal Financial Officer (since 2002).	Chief Operating Officer of the Intermediary Investor 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).	None.

138 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes:

NOTES 139

The iShares^® Family of Funds

The following is a list of iShares Funds being offered, along with their respective exchange trading symbols. Please call 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 100 (OEF)

iShares S&P 500 (IVV)

iShares S&P 500 Growth (IVW)

iShares S&P 500 Value (IVE)

iShares S&P MidCap 400 (IJH)

iShares S&P MidCap 400 Growth (IJK)

iShares S&P MidCap 400 Value (IJJ)

iShares S&P SmallCap 600 (IJR)

iShares S&P SmallCap 600 Growth (IJT)

iShares S&P SmallCap 600 Value (IJS)

iShares Domestic Sector Index Funds

iShares Cohen & Steers Realty Majors (ICF)

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

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

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

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

iShares Dow Jones Transportation Average (IYT)

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

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

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 Domestic Subsector Index Funds

iShares Dow Jones U.S. Aerospace & Defense (ITA)

iShares Dow Jones U.S. Broker-Dealers (IAI)

iShares Dow Jones U.S. Health Care Providers (IHF)

iShares Dow Jones U.S. Home Construction (ITB)

iShares Dow Jones U.S. Insurance (IAK)

iShares Dow Jones U.S. Medical Devices (IHI)

iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO)

iShares Dow Jones U.S. Oil Equipment & Services (IEZ)

iShares Dow Jones U.S. Pharmaceuticals (IHE)

iShares Dow Jones U.S. Regional Banks (IAT)

iShares Global Index Funds

iShares S&P Global 100 (IOO)

iShares S&P Global Consumer Discretionary Sector (RXI)

iShares S&P Global Consumer Staples Sector (KXI)

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 Industrials Sector (EXI)

iShares S&P Global Materials Sector (JXI)

iShares S&P Global Technology Sector (IXN)

iShares S&P Global Telecommunications Sector (IXP)

iShares S&P Global Utilities Sector (MXI)

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 Russell Microcap™ (IWC)

iShares International Country 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 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 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/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 Specialty Index Funds

iShares KLD Select Social^SM (KLD)

iShares Dow Jones Select Dividend (DVY)

iShares International Index Funds

iShares MSCI EAFE (EFA)

iShares MSCI EAFE Growth (EFG)

iShares MSCI EAFE Value (EFV)

iShares MSCI Emerging Markets (EEM)

iShares MSCI EMU (EZU)

iShares MSCI Pacific ex-Japan (EPP)

iShares S&P Europe 350 (IEV)

iShares S&P Latin America 40 (ILF)

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 NYSE Index Funds

iShares NYSE Composite (NYC)

iShares NYSE 100 (NY)

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, KLD Research & Analytics, Inc., 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 a deposit of a bank and it 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 2006 Annual Report.

3467-iS-0906

140 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Table of Contents

Management’s Discussions of Fund Performance	1
Shareholder Expenses (Unaudited)	27
Schedules of Investments	29
iShares MSCI Australia Index Fund	29
iShares MSCI Brazil Index Fund	36
iShares MSCI Canada Index Fund	38
iShares MSCI Emerging Markets Index Fund	41
iShares MSCI Hong Kong Index Fund	51
iShares MSCI Malaysia Index Fund	58
iShares MSCI Mexico Index Fund	60
iShares MSCI Pacific ex-Japan Index Fund	66
iShares MSCI Singapore Index Fund	74
iShares MSCI South Africa Index Fund	80
iShares MSCI South Korea Index Fund	82
iShares MSCI Taiwan Index Fund	90
Financial Statements	93
Financial Highlights	101
Notes to the Financial Statements	113
Report of Independent Registered Public Accounting Firm	122
Tax Information (Unaudited)	123
Board Review and Approval of Investment Advisory Contracts (Unaudited)	124
Supplemental Information (Unaudited)	127
Director and Officer Information (Unaudited)	134
iShares Family of Funds	140

Management’s Discussion of Fund Performance

iSHARES^® MSCI AUSTRALIA INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
22.35	%	20.56	%	21.71	%	21.77	%	21.42	%	21.32	%	10.85	%	10.85	%	11.01	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
22.35	%	20.56	%	21.71	%	167.74	%	163.94	%	162.87	%	180.17	%	180.14	%	184.18	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 1

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI AUSTRALIA INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	49.15	%
Basic Materials	18.39
Consumer Non-Cyclical	10.61
Industrial	8.27
Consumer Cyclical	4.71
Energy	4.27
Communications	1.88
Utilities	1.48
Technology	0.43
Short-Term and Other Net Assets	0.81
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
BHP Billiton Ltd.	11.86	%
Commonwealth Bank of Australia	7.22
National Australia Bank Ltd.	7.15
Australia & New Zealand Banking Group Ltd.	6.12
Westpac Banking Corp. Ltd.	5.25
Westfield Group	3.35
Woolworths Ltd.	2.99
Rio Tinto Ltd.	2.56
Woodside Petroleum Ltd.	2.42
QBE Insurance Group Ltd.	2.34
TOTAL	51.26	%

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 securities in the aggregate in the Australian market, as measured by the MSCI Australia Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 22.35%, while the Index returned 21.71%.

The Australian market posted sound gains for the reporting period. Australia’s economy continued to appear strong during the reporting period: now in its 15^th year of uninterrupted expansion, the longest expansion in Australia since 1945, the Australian economy grew at an annualized rate of 2.6% in the second quarter of 2006. Export trade remained healthy for most of the reporting period, due in part to demand from China for coal and iron ore.

Inflation levels rose during the reporting period, reaching 4.0% for the second quarter of 2006, compared with 2.5% for the second quarter of 2005. In response, the Reserve Bank of Australia increased short-term interest rates twice during the reporting period, bringing the rate to 6.00% in August 2006.

The Fund’s ten largest holdings accounted for approximately 51% of the Fund’s net assets as of August 31, 2006. All of the Fund’s ten largest holdings as of August 31, 2006 delivered gains for the reporting period. Metals and mining company Rio Tinto Ltd. posted the strongest gains, followed by QBE Insurance Group Ltd. BHP Billiton Ltd., a metals and mining company that represents the Fund’s largest holding at almost 12% of Fund net assets, performed well. Woodside Petroleum Ltd. and retailer Woolworths Ltd. also contributed to positive Fund performance. Real estate conglomerate Westfield Group delivered the most modest gains among the ten largest holdings.

2 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^®MSCI BRAZIL INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
41.13	%	42.51	%	43.63	%	30.17	%	30.57	%	32.64	%	13.93	%	14.05	%	16.55	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
41.13	%	42.51	%	43.63	%	273.69	%	279.44	%	310.62	%	122.92	%	124.37	%	156.42	%

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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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 shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 3

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI BRAZIL INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Basic Materials	25.41	%
Energy	23.83
Financial	18.35
Consumer Non-Cyclical	9.86
Utilities	7.74
Communications	6.08
Industrial	4.71
Consumer Cyclical	3.66
Short-Term and Other Net Assets	0.36
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Petroleo Brasileiro SA Preferred	13.42	%
Petroleo Brasileiro SA	10.41
Companhia Vale do Rio Doce Class A Preferred	8.62
Banco Bradesco SA Preferred	7.52
Companhia Vale do Rio Doce ADR	7.02
Banco Itau Holding Financeira SA Preferred	4.93
Companhia de Bebidas das Americas Preferred	4.79
Unibanco Uniao de Bancos Brasileiros SA	4.33
Gerdau SA Preferred	2.33
Companhia Energetica de Minas Gerais Preferred	2.11
TOTAL	65.48	%

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 securities in the aggregate in the Brazilian market, as measured by the MSCI Brazil Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 41.13%, while the Index returned 43.63%.

Brazil’s market delivered robust gains for the reporting period, fueled largely by escalating oil prices and a strengthening currency. Oil prices, which continued to climb during the reporting period, reached a high of $77.03 per barrel on August 7^th following news of increased violence in the Middle East and the shutdown of BP’s largest oil field in the U.S. The increase in oil prices benefited the Brazilian market whose largest company, oil company Petroleo Brasileiro SA, represented more than 27% of the Index as of August 31, 2006. The Brazilian currency, the real, continued to appreciate against the U.S. dollar during the reporting period, largely because Brazil’s high interest rate levels continued to attract strong currency inflows. The real dipped in July, however, as the Brazilian central bank cut its benchmark rate to a 20-year low of 14.75%.

The Fund’s ten largest holdings accounted for approximately 65% of the Fund’s net assets as of August 31, 2006. Performance among the Fund’s ten largest holdings as of August 31, 2006 was strong for the reporting period. Gerdau SA and Unibanco Uniao de Bancos Brasilieros SA delivered the strongest gains among the ten largest holdings. Oil company Petroleo Brasileiro SA, whose preferred and common shares are the two largest Fund holdings, performed well, as did Banco Bradesco SA and Banco Itau Holding Financeira SA. Companhia Vale do Rio Doce, the world’s largest iron ore producer, also contributed positively to Fund performance for the reporting period.

4 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^®MSCI CANADA INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
22.46	%	22.16	%	22.84	%	19.09	%	18.97	%	19.58	%	13.86	%	13.92	%	14.46	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
22.46	%	22.16	%	22.84	%	139.50	%	138.31	%	144.48	%	266.28	%	268.05	%	285.82	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 5

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI CANADA INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	30.11	%
Energy	29.74
Basic Materials	17.38
Communications	6.24
Industrial	4.79
Consumer Cyclical	3.77
Technology	2.68
Consumer Non-Cyclical	2.20
Diversified	1.99
Utilities	0.72
Short-Term and Other Net Assets	0.38
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Royal Bank of Canada	6.10	%
Manulife Financial Corp.	5.51
EnCana Corp.	4.75
Bank of Nova Scotia	4.51
Suncor Energy Inc.	3.80
Bank of Montreal	3.25
Barrick Gold Corp.	3.08
Canadian Natural Resources Ltd.	3.01
Canadian Imperial Bank of Commerce	2.60
Sun Life Financial Inc.	2.56
TOTAL	39.17	%

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 securities in the aggregate in the Canadian market, as measured by the MSCI Canada Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 22.46%, while the Index returned 22.84%.

The Canadian market generally delivered healthy gains for the reporting period, fueled by rising oil prices and continued economic growth in the U.S. Oil companies represent a relatively large part of the Canadian economy, accounting for more than 20% of the Index. During the reporting period, oil prices continued to escalate, reaching a high of $77.03 per barrel on August 7^th following news of increased violence in the Middle East and the shutdown of BP’s largest oil field in the U.S. The Canadian economy and market also benefited from the expansion of the U.S. economy during the reporting period, as the U.S. subsequently increased its demand for Canadian exports.

The Fund’s ten largest holdings accounted for approximately 39% of the Fund’s net assets as of August 31, 2006. All of the Fund’s ten largest holdings as of August 31, 2006 had positive returns for the reporting period. Royal Bank of Canada, the Fund’s largest holding, posted the strongest returns, followed by oil and gas exploration company Suncor Energy Inc., Manulife Financial Corp., and mining company Barrack Gold Corp. Bank of Montreal, Bank of Nova Scotia, and Canadian Imperial Bank of Commerce also performed well. Canadian Natural Resources Ltd. delivered a modest gain.

6 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^®MSCI EMERGING MARKETS INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns												Cumulative Total Returns
Year Ended 8/31/06						Inception to 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
26.44	%	26.28	%	30.58	%	37.70	%	37.76	%	37.35	%	197.01	%	197.48	%	194.17	%

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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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 shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 7

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI EMERGING MARKETS INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	18.76	%
Energy	18.10
Communications	13.54
Basic Materials	12.12
Industrial	10.79
Technology	10.14
Consumer Non-Cyclical	4.88
Utilities	4.70
Consumer Cyclical	3.92
Diversified	2.25
Exchange-Traded Funds	0.57
Short-Term and Other Net Assets	0.23
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Samsung Electronics Co. Ltd. GDR (South Korea)	5.54	%
OAO Gazprom ADR (Russia)	5.42
Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)	3.53
Kookmin Bank ADR (South Korea)	3.15
POSCO ADR (South Korea)	2.61
LUKOIL ADR (Russia)	2.45
United Microelectronics Corp. ADR (Taiwan)	2.05
Korea Electric Power Corp. ADR (South Korea)	1.95
Petroleo Brasileiro SA Preferred ADR (Brazil)	1.70
Chunghwa Telecom Co. Ltd. ADR (Taiwan)	1.70
TOTAL	30.10	%

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 Index is designed to measure equity market performance in the global emerging markets. The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 26.44%, while the Index returned 30.58%.

Emerging markets, as represented by the Index, delivered strong gains for the reporting period. Constituent markets generally benefited for much of the reporting period from rising commodities prices and strong export growth. Although rising interest rates in the U.S. and higher oil prices led to a pullback in market strength toward the end of the reporting period, emerging markets as a group overcame the setbacks to deliver healthy returns for the reporting period.

The Russian market delivered exceptional returns during the reporting period, as the Russian economy surged. According to the Economy Ministry, Russia’s economy grew at a 5.5% annualized pace in the first quarter of 2006 and a 7.1% pace in the second quarter of 2006. Because oil and gas exports represent more than 60% of Russia’s export trade, the rise in oil and gas prices during the reporting period played a large role in supporting economic growth and strong market returns. Another major factor benefiting returns for Russia was the liberalization of shares of gas company OAO Gazprom, whose market capitalization grew as MSCI removed the limited investability factor from Gazprom shares. Towards the end of the reporting period, Russia catapulted into the top five emerging markets in terms of market capitalization for the first time.

The South Korean market delivered very strong gains for the reporting period. Because South Korea depends heavily on exports for its economic health, it is sensitive to the economic cycles of its export markets, particularly the U.S., China and Japan. During much of the reporting period, this relationship benefited South Korea, as export demand from each of these countries continued to be strong. In May 2006, higher global inflation and rising oil prices appeared to lead to concerns that economic growth would slow globally, dampening export demand. As a result, the South Korean market dropped 7.63% in May 2006, its largest monthly decline for the year to date. However, South Korea overcame this setback in the final months of the reporting period as its export demand increased. In August 2006, exports rose 18.7% from a year earlier, driven largely by demand for computer and electronic products in the U.S., Japan and China.

The Taiwanese market delivered modest gains for the reporting period. Because Taiwan’s exports account for almost half of its output, it is sensitive to the economic cycles of its two major export markets, China and the U.S. For much of the reporting period, ongoing economic growth in China and the U.S. translated into strong demand for exports from Taiwan. In May 2006, however, concerns surfaced that higher interest rates in the U.S. and

8 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI EMERGING MARKETS INDEX FUND

rising oil prices would slow demand for exports, which led to declines among many emerging markets that are dependent on export activity. Although Taiwan participated in the general decline, its 6.69% drop in the month of May 2006 was less than the decline of the overall emerging markets for the month of May. As the reporting period came to a close, the Taiwanese market appeared to be driven higher by one of its leading technology constituents, Hon Hai Precision Industry Co. Ltd., which makes Apple’s iPod music players. Taiwan’s broad market received a further boost when the U.S. Federal Reserve Board suggested that it would hold off further interest rate increases in the U.S., a pause that could help export growth in Taiwan.

The Fund’s ten largest holdings accounted for approximately 30% of the Fund’s net assets as of August 31, 2006. Performance was mostly positive among the Fund’s ten largest holdings as of August 31, 2006. The strongest performer was the ADR shares of integrated oil and gas company LUKOIL (Russia). Kookmin Bank ADR (South Korea) also performed well, as did Samsung Electronics Co, Ltd. GDR (South Korea), the Fund’s largest holding. The ADR shares of oil company Petroleo Brasileiro SA (Brazil) delivered strong gains. United Microelectonics Corp. ADR (Taiwan) and Chunghwa Telecom Co. Ltd. ADR (Taiwan) were the only securities among the Fund’s ten largest holdings to post losses for the reporting period.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 9

Management’s Discussion of Fund Performance

iSHARES^® MSCI HONG KONG INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
12.20	%	11.43	%	12.82	%	11.73	%	11.52	%	12.60	%	3.56	%	3.63	%	5.41	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
12.20	%	11.43	%	12.82	%	74.11	%	72.50	%	80.99	%	41.84	%	42.80	%	69.32	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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.

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, an 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 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI HONG KONG INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	43.63	%
Diversified	18.17
Utilities	13.32
Consumer Cyclical	10.22
Industrial	6.69
Communications	6.12
Basic Materials	0.91
Technology	0.69
Short-Term and Other Net Assets	0.25
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Hutchison Whampoa Ltd.	9.85	%
Cheung Kong Holdings Ltd.	8.36
Sun Hung Kai Properties Ltd.	7.62
CLP Holdings Ltd.	5.73
Swire Pacific Ltd. Class A	5.19
Hang Seng Bank Ltd.	5.00
Hong Kong & China Gas Co. Ltd.	4.22
Esprit Holdings Ltd.	4.18
BOC Hong Kong Holdings Ltd.	4.12
Hong Kong Exchanges & Clearing Ltd.	3.83
TOTAL	58.10	%

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 securities in the aggregate in the Hong Kong market, as measured by the MSCI Hong Kong Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 12.20%, while the Index returned 12.82%.

The Hong Kong market delivered positive returns for the reporting period. Hong Kong’s economy continued to expand during the reporting period, albeit at a more moderate pace than in previous years, with an annualized gross domestic product (GDP) growth of 5.2% for the second quarter of 2006. A major contributor to Hong Kong’s economic state and its market returns is mainland China, which is Hong Kong’s main trading partner and its leading source of tourists. As the Chinese economy continued to expand during the reporting period, Hong Kong’s economy benefited. A strong real estate market also contributed positively to market returns during the reporting period.

The Fund’s ten largest holdings accounted for approximately 58% of the Fund’s net assets as of August 31, 2006. Performance among the Fund’s ten largest holdings as of August 31, 2006 was mostly positive for the reporting period. Hong Kong Exchanges & Clearing Ltd. was the strongest performer among the Fund’s ten largest holdings. Real estate development company Swire Pacific Ltd. performed well, as did Hong Kong & China Gas Co. Ltd. and retail clothing company Esprit Holdings Ltd. The largest Fund holding at almost 10% of the Fund’s net assets, Hutchison Whampoa Ltd., detracted from Fund performance with a modest decline. Hang Seng Bank Ltd. also declined for the reporting period.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 11

Management’s Discussion of Fund Performance

iSHARES^®MSCI MALAYSIA INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
12.35	%	11.12	%	13.07	%	10.98	%	11.56	%	11.95	%	(3.37	)%	(3.64	)%	(2.29	)%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
12.35	%	11.12	%	13.07	%	68.32	%	72.82	%	75.82	%	(29.02	)%	(30.99	)%	(20.68	)%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. As the Fund has a NAV which is determined prior to the opening of the regular trading day on the stock exchange on which it is listed, the market return is calculated using the midpoint of the bid/ask spread as of the opening of regular trading on the exchange. 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, an 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 tables 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.

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, an 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 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI MALAYSIA INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	29.53	%
Consumer Non-Cyclical	14.88
Consumer Cyclical	14.34
Industrial	14.22
Communications	10.18
Utilities	9.17
Diversified	5.22
Energy	1.63
Technology	0.42
Short-Term and Other Net Assets	0.41
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Malayan Banking Bhd	10.81	%
Bumiputra-Commerce Holdings Bhd	7.18
IOI Corp. Bhd	5.69
Malaysia International Shipping Corp. Bhd	4.82
Tenaga Nasional Bhd	4.70
Sime Darby Bhd	4.48
Genting Bhd	4.43
Telekom Malaysia Bhd	3.91
Maxis Communications Bhd	3.91
Public Bank Bhd	3.53
TOTAL	53.46	%

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 securities in the aggregate in the Malaysian market, as measured by the MSCI Malaysia Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 12.35%, while the Index returned 13.07%.

The Malaysian market delivered positive returns for the reporting period due, in part, to the expansion of the Malaysian economy. For the second quarter of 2006, gross domestic product (GDP) growth was 5.9%, rising from 4.1% in the second quarter of 2005. Exports play an important role in Malaysia’s economy, and the country experienced rising foreign demand for some of its leading export commodities during the reporting period. In particular, demand rose for crude petroleum and natural gas as increased violence in the Middle East and the shutdown of BP’s largest oil field in the U.S. curtailed supply. Oil prices, which continued to climb during the reporting period, reached a high of $77.03 per barrel on August 7^th.

The Fund’s ten largest holdings accounted for approximately 53% of the Fund’s net assets as of August 31, 2006. Among the Fund’s ten largest holdings as of August 31, 2006, performance was mostly positive for the reporting period. Agriculture company IOI Corp. Bhd was the strongest performer, followed by casino and gaming company Genting Bhd. Bumiputra-Commerce Holdings Bhd also performed well. Malayan Banking Bhd, the Fund’s largest holding at almost 11% of Fund net assets, also contributed positively to Fund performance. Telecommunications companies Telekom Malaysia Bhd and Maxis Communications Bhd both declined for the reporting period.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 13

Management’s Discussion of Fund Performance

iSHARES^®MSCI MEXICO INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
44.11	%	43.28	%	43.06	%	23.88	%	23.92	%	23.86	%	15.92	%	15.92	%	17.54	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
44.11	%	43.28	%	43.06	%	191.71	%	192.19	%	191.51	%	338.04	%	338.01	%	403.40	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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.

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, an 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 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI MEXICO INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Communications	45.81	%
Industrial	17.83
Consumer Cyclical	10.34
Consumer Non-Cyclical	9.66
Basic Materials	6.44
Financial	5.47
Diversified	4.40
Short-Term and Other Net Assets	0.05
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
America Movil SA de CV Series L	24.52	%
Cemex SA de CV Series CPO	14.62
Telefonos de Mexico SA de CV Series L	9.07
Wal-Mart de Mexico SA de CV Series V	4.86
Fomento Economico Mexicano SA de CV Class UBD	4.77
Grupo Televisa SA Series CPO	4.71
America Telecom SA de CV Series A1	4.19
Grupo Financiero Banorte SA de CV Series O	4.03
Grupo Carso SA de CV Series A1	3.05
Grupo Mexico SA de CV Series B	2.98
TOTAL	76.80	%

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 securities in the aggregate in the Mexican market, as measured by the MSCI Mexico Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 44.11%, while the Index returned 43.06%.

Mexico’s market posted robust gains for the reporting period, fueled by continued economic expansion in the U.S. and escalating oil prices. Mexico relies on the U.S. for approximately 80% of its exports, so its economic health is closely tied to the economic cycle of the U.S. This benefited the Mexican economy during the reporting period, as continued economic growth in the U.S. translated into ongoing demand for exports from Mexico. Rising oil prices also provided a boost to economic growth, with oil accounting for approximately 15% of Mexico’s export earnings. Oil prices continued to climb during the reporting period, reaching a high of $77.03 per barrel on August 7^th following news of increased violence in the Middle East and the shutdown of BP’s largest oil field in the U.S.

The Fund’s ten largest holdings accounted for approximately 77% of the Fund’s net assets as of August 31, 2006. All of the Fund’s ten largest holdings as of August 31, 2006 posted strong gains for the reporting period. The Series A1 shares of America Telecom SA de CV and Series B shares of Grupo Mexico SA de CV delivered the strongest returns, followed by largest Fund holding America Movil SA de CV Series L, the wireless telephone carrier. The Series V shares of Wal-Mart de Mexico SA de CV and Series O shares of diversified bank Grupo Financiero Banorte SA de CV also performed well. The most modest gains, albeit double-digit gains, among the Fund’s ten largest holdings came from Grupo Televisa SA Series CPO.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 15

Management’s Discussion of Fund Performance

iSHARES^®MSCI PACIFIC EX-JAPAN INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns												Cumulative Total Returns
Year Ended 8/31/06						Inception to 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
19.17	%	17.49	%	19.01	%	20.90	%	20.83	%	20.82	%	151.10	%	150.43	%	150.26	%

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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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 shares of the Fund did not trade in the secondary market until one day after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (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, an 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 tables 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.

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, an 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 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI PACIFIC EX-JAPAN INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	47.44	%
Basic Materials	12.50
Industrial	8.39
Consumer Non-Cyclical	7.16
Consumer Cyclical	6.21
Communications	5.29
Diversified	4.56
Utilities	3.98
Energy	2.91
Technology	0.74
Short-Term and Other Net Assets	0.82
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
BHP Billiton Ltd. (Australia)	7.93	%
Commonwealth Bank of Australia (Australia)	4.83
National Australia Bank Ltd. (Australia)	4.77
Australia & New Zealand Banking Group Ltd. (Australia)	4.09
Westpac Banking Corp. Ltd. (Australia)	3.52
Westfield Group (Australia)	2.22
Hutchison Whampoa Ltd. (Hong Kong)	2.11
Woolworths Ltd. (Australia)	2.00
Cheung Kong Holdings Ltd. (Hong Kong)	1.77
Rio Tinto Ltd. (Australia)	1.71
TOTAL	34.95	%

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 securities in the aggregate in the Australia, Hong Kong, New Zealand and Singapore markets, as measured by the MSCI Pacific ex-Japan Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 19.17%, while the Index returned 19.01%.

The markets comprising the Index — Australia, Hong Kong, New Zealand and Singapore, all delivered gains for the reporting period.

Australia’s economy continued to appear strong during the reporting period: now in its 15^th year of uninterrupted expansion, the longest expansion in Australia since 1945, the Australian economy grew at an annualized rate of 2.6% in the second quarter of 2006. Export trade remained healthy for most of the reporting period, due in part to demand from China for coal and iron ore. Inflation levels rose during the reporting period, reaching 4.0% for the second quarter of 2006, compared with 2.5% for the second quarter of 2005. In response, the Reserve Bank of Australia increased short-term interest rates twice during the reporting period, bringing the rate to 6.00% in August 2006.

Hong Kong’s economy continued to expand during the reporting period, albeit at a more moderate pace than in previous years, with an annualized gross domestic product (“GDP”) growth of 5.2% for the second quarter of 2006. A major contributor to Hong Kong’s economic state and its market returns is mainland China, which is Hong Kong’s main trading partner and its leading source of tourists. As the Chinese economy continued to expand during the reporting period, Hong Kong’s economy benefited. A strong real estate market also contributed positively to market returns during the reporting period.

Singapore’s market posted solid gains for the reporting period, although it gave back some of those gains in the final months of the reporting period. The Singaporean economy, which depends heavily on exports, continued to benefit from strong export trade to the U.S. and to its Asian neighbors for much of the reporting period. By May 2006, however, global inflation and interest rate concerns hampered export growth and weighed on market performance. During the month of May alone, the Singapore market suffered its largest single-month loss in more than three years. For the second quarter of 2006, annualized GDP growth was reported at 8.1%, exceeding many analysts’ expectations, but down in comparison from the heady 14% for the second quarter of 2005.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 17

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI PACIFIC EX-JAPAN INDEX FUND

The Fund’s ten largest holdings accounted for approximately 35% of the Fund’s net assets as of August 31, 2006. Nine of the Fund’s ten largest holdings as of August 31, 2006 posted gains for the reporting period. Metals and mining companies were some of the strongest performers, with Rio Tinto Ltd. (Australia) delivering the best return, followed by BHP Billiton Ltd. (Australia), the Fund’s largest holding. Retailer Woolworths Ltd. (Australia) also performed well. Banks as a group performed well: Australia & New Zealand Banking Group Ltd. (Australia), Commonwealth Bank of Australia (Australia), and National Australia Bank Ltd. (Australia) all contributed positively to Fund performance. Detracting from Fund performance, Hutchison Whampoa Ltd. (Hong Kong) declined for the reporting period.

18 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^®MSCI SINGAPORE INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
21.61	%	20.41	%	21.55	%	14.00	%	14.12	%	13.68	%	(0.07	)%	(0.11	)%	0.46	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
21.61	%	20.41	%	21.55	%	92.56	%	93.57	%	89.83	%	(0.73	)%	(1.11	)%	4.65	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 19

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI SINGAPORE INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Financial	52.05	%
Communications	15.90
Industrial	11.77
Diversified	5.84
Consumer Cyclical	5.54
Consumer Non-Cyclical	4.96
Technology	2.13
Energy	0.34
Short-Term and Other Net Assets	1.47
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
DBS Group Holdings Ltd.	13.36	%
United Overseas Bank Ltd.	11.98
Singapore Telecommunications Ltd.	11.73
Oversea-Chinese Banking Corp.	10.36
Keppel Corp. Ltd.	4.75
Singapore Airlines Ltd.	4.68
Singapore Press Holdings Ltd.	4.17
CapitaLand Ltd.	3.85
City Developments Ltd.	3.19
Fraser and Neave Ltd.	2.78
TOTAL	70.85	%

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 securities in the aggregate in the Singaporean market, as measured by the MSCI Singapore Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 21.61%, while the Index returned 21.55%.

Singapore’s market posted solid gains for the reporting period, although it gave back some of those gains in the final months of the reporting period. The Singaporean economy, which depends heavily on exports, continued to benefit from strong export trade to the U.S. and to its Asian neighbors for much of the reporting period. By May 2006, however, global inflation and interest rate concerns hampered export growth and weighed on market performance. During the month of May alone, the Singapore market suffered its largest single-month loss in more than three years. For the second quarter of 2006, annualized gross domestic product (GDP) growth was reported at 8.1%, exceeding many analysts’ expectations, but down in comparison from the heady 14% for the second quarter of 2005.

The Fund’s ten largest holdings accounted for approximately 71% of the Fund’s net assets as of August 31, 2006. CapitaLand Ltd. was the strongest performer among the Fund’s ten largest holdings, followed by industrial conglomerate Keppel Corp. Ltd. and beverage producer and distributor Fraser and Neave Ltd. Banking company DBS Group Holdings Ltd., the Fund’s largest holding, also performed well, as did City Developments Ltd., which operates hotels and resorts. Singapore Press Holdings Ltd. posted a slight decline.

20 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^®MSCI SOUTH AFRICA INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns												Cumulative Total Returns
Year Ended 8/31/06						Inception to 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
20.06	%	18.94	%	21.61	%	31.74	%	32.11	%	33.32	%	167.94	%	170.62	%	179.96	%

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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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 shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 21

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI SOUTH AFRICA INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Basic Materials	27.55	%
Financial	20.75
Communications	12.77
Energy	12.00
Consumer Cyclical	8.87
Diversified	7.82
Consumer Non-Cyclical	5.28
Industrial	4.83
Short-Term and Other Net Assets	0.13
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Sasol Ltd.	12.00	%
Standard Bank Group Ltd.	7.86
Impala Platinum Holdings Ltd.	7.05
MTN Group Ltd.	6.32
Gold Fields Ltd.	5.73
Anglo Platinum Ltd.	4.39
FirstRand Ltd.	4.15
AngloGold Ashanti Ltd.	4.09
Telkom South Africa Ltd.	3.37
Naspers Ltd.	3.08
TOTAL	58.04	%

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 securities in the aggregate in the South African market, as measured by the MSCI South Africa Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 20.06%, while the Index returned 21.61%.

The South African market logged robust gains through April 2006, followed by a loss of almost half of those gains in the final four months of the reporting period. For much of the reporting period, the South African market benefited from its exposure to commodities, particularly precious metals and oil, as escalating oil prices and gold prices during the reporting period boosted share prices for some of the major constituents of the Index. In the final months of the reporting period, however, the market lost ground as some international investors took profits, evidently concerned about South Africa’s ability to continue attracting the level of foreign investment needed to finance its current account deficit.

The South African currency, the rand, depreciated sharply, losing approximately 10% in the final three weeks of May 2006 alone. Concerned with the potential impact of a weaker rand and higher oil prices on inflation, the South African Reserve Bank raised short-term interest rates in both June and August 2006, bringing the rate to 8.00% by the end of the reporting period.

The Fund’s ten largest holdings accounted for approximately 58% of the Fund’s net assets as of August 31, 2006. All of the Fund’s ten largest holdings as of August 31, 2006 posted positive results for the reporting period. Metals companies Anglo Platinum Ltd. and Impala Platinum Holdings Ltd. both delivered strong gains. Gold Fields Ltd. and AngloGold Ashanti Ltd. also performed well. The most modest gains among the Fund’s ten largest holdings as of August 31, 2006 came from Telkom South Africa Ltd.

22 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^®MSCI SOUTH KOREA INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
33.16	%	33.95	%	34.88	%	28.76	%	28.59	%	31.08	%	14.26	%	14.18	%	15.01	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
33.16	%	33.95	%	34.88	%	253.88	%	251.56	%	286.90	%	132.04	%	131.04	%	142.02	%

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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. As the Fund has a NAV which is determined prior to the opening of the regular trading day on the stock exchange on which it is listed, the market return is calculated using the midpoint of the bid/ask spread as of the opening of regular trading on the exchange. Since shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 23

Management’s Discussion of Fund Performance (Continued)

iSHARES^®MSCI SOUTH KOREA INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Industrial	39.40	%
Financial	20.12
Consumer Cyclical	14.38
Basic Materials	7.53
Communications	6.86
Consumer Non-Cyclical	5.23
Utilities	2.95
Energy	2.94
Technology	0.50
Short-Term and Other Net Assets	0.09
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Samsung Electronics Co. Ltd.	22.05	%
Kookmin Bank	8.09
POSCO	5.46
Hyundai Motor Co. Ltd.	3.81
Shinhan Financial Group Ltd.	2.98
Korea Electric Power Corp.	2.95
Shinsegae Co. Ltd.	2.16
SK Corp.	2.04
LG Electronics Inc.	2.04
KT&G Corp.	1.99
TOTAL	53.57	%

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 securities in the aggregate in the South Korean market, as measured by the MSCI Korea Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 33.16%, while the Index returned 34.88%.

The South Korean market delivered very strong gains for the reporting period. Because South Korea depends heavily on exports for its economic health, it is sensitive to the economic cycles of its export markets, particularly the U.S., China and Japan. During much of the reporting period, this relationship benefited South Korea, as export demand from each of these countries continued to be strong. In May 2006, higher global inflation and rising oil prices appeared to lead to concerns that economic growth would slow globally, dampening export demand. As a result, many emerging markets that rely on exports suffered market declines and South Korea was no exception. The South Korean market dropped 7.63% in May 2006, its largest monthly decline for the year to date. However, South Korea overcame this setback in the final months of the reporting period as its export demand increased. In August 2006, exports rose 18.7% from a year earlier, driven largely by demand for computer and electronic products in the U.S., Japan and China.

The Fund’s ten largest holdings accounted for approximately 54% of the Fund’s net assets as of August 31, 2006. All of the Fund’s ten largest holdings as of August 31, 2006 posted double-digit gains for the reporting period. The strongest performer among the Fund’s ten largest holdings was Kookmin Bank, followed by Shinhan Financial Group Ltd., Shinsegae Co. Ltd. and KT&G Corp. The common shares of Samsung Electronics Co. Ltd., the largest Fund holding, also contributed positively to Fund performance. The most modest gains among the ten largest holdings came from LG Electronics Inc.

24 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Management’s Discussion of Fund Performance

iSHARES^®MSCI TAIWAN INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
9.84	%	10.14	%	11.79	%	7.31	%	7.40	%	8.50	%	(5.88	)%	(5.93	)%	(4.87	)%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Inception to 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
9.84	%	10.14	%	11.79	%	42.30	%	42.89	%	50.38	%	(31.33	)%	(31.53	)%	(26.62	)%

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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. As the Fund has a NAV which is determined prior to the opening of the regular trading day on the stock exchange on which it is listed, the market return is calculated using the midpoint of the bid/ask spread as of the opening of regular trading on the exchange. Since shares of the Fund did not trade in the secondary market until several days after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund (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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSIONS OF FUND PERFORMANCE 25

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI TAIWAN INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Technology	35.82	%
Industrial	25.08
Financial	17.84
Basic Materials	9.90
Communications	4.02
Consumer Cyclical	3.49
Energy	1.26
Consumer Non-Cyclical	1.13
Short-Term and Other Net Assets	1.46
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Taiwan Semiconductor Manufacturing Co. Ltd.	14.04	%
Hon Hai Precision Industry Co. Ltd.	8.61
Cathay Financial Holding Co. Ltd.	3.95
United Microelectronics Corp.	3.74
AU Optronics Corp.	3.15
MediaTek Inc.	2.90
High Tech Computer Corp.	2.68
Chunghwa Telecom Co. Ltd.	2.61
Nan Ya Plastic Corp.	2.58
China Steel Corp.	2.58
TOTAL	46.84	%

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 securities in the aggregate in the Taiwanese market, as measured by the MSCI Taiwan Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 9.84%, while the Index returned 11.79%.

The Taiwanese market delivered gains for the reporting period, although its returns were generally more moderate than other Asian markets. Because Taiwan’s exports account for almost half of its output, it is sensitive to the economic cycles of its two major export markets, China and the U.S. For much of the reporting period, ongoing economic growth in China and the U.S. translated into strong demand for exports from Taiwan. In May 2006, however, concerns surfaced that higher interest rates in the U.S. and rising oil prices would slow demand for exports, which led to declines among many emerging markets that are dependent on export activity. Although Taiwan participated in the general decline, its 6.69% drop in the month of May 2006 was less than the decline of the overall emerging markets. As the reporting period came to a close, the Taiwanese market appeared to be driven higher by one of its leading technology constituents, Hon Hai Precision Industry Co. Ltd., which makes Apple’s iPod music players. Taiwan’s broad market received a further boost when the U.S. Federal Reserve Board suggested that it would hold off further interest rate increases in the U.S., a pause that could help export growth in Taiwan.

The Fund’s ten largest holdings accounted for approximately 47% of the Fund’s net assets as of August 31, 2006. Eight of the Fund’s ten largest holdings as of August 31, 2006 delivered gains for the reporting period. High Tech Computer Corp. was the strongest performer, followed by electronics manufacturer Hon Hai Precision Industry Co. Ltd. Semiconductor company MediaTek Inc. performed well, as did Nan Ya Plastic Corp. The Fund’s largest holding, Taiwan Semiconductor Manufacturing Co Ltd., also contributed positively to Fund performance. On the negative side, United Microelectronics Corp. and Chunghwa Telecom Co. Ltd. both declined for the reporting period.

26 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Shareholder Expenses (Unaudited)

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, 2006 to August 31, 2006.

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 (3/1/06)		Ending Account Value (8/31/06)		Annualized Expense Ratio		Expenses Paid During Period a (3/1/06 to 8/31/06)
Australia
Actual	$	1,000.00	$	1,086.60	0.52	%	$	2.73
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Brazil
Actual		1,000.00		928.30	0.68			3.31
Hypothetical (5% return before expenses)		1,000.00		1,021.78	0.68			3.47
Canada
Actual		1,000.00		1,061.50	0.52			2.70
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Emerging Markets
Actual		1,000.00		998.20	0.75			3.78
Hypothetical (5% return before expenses)		1,000.00		1,021.42	0.75			3.82

SHAREHOLDER EXPENSES 27

Shareholder Expenses (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Index Fund	Beginning Account Value (3/1/06)		Ending Account Value (8/31/06)		Annualized Expense Ratio		Expenses Paid During Period a (3/1/06 to 8/31/06)
Hong Kong
Actual	$	1,000.00	$	1,065.30	0.52	%	$	2.71
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Malaysia
Actual		1,000.00		1,057.30	0.52			2.70
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Mexico
Actual		1,000.00		1,077.50	0.52			2.72
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
Pacific ex-Japan
Actual		1,000.00		1,076.70	0.50			2.62
Hypothetical (5% return before expenses)		1,000.00		1,022.68	0.50			2.55
Singapore
Actual		1,000.00		1,063.00	0.52			2.70
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65
South Africa
Actual		1,000.00		911.50	0.68			3.28
Hypothetical (5% return before expenses)		1,000.00		1,021.78	0.68			3.47
South Korea
Actual		1,000.00		983.80	0.68			3.40
Hypothetical (5% return before expenses)		1,000.00		1,021.78	0.68			3.47
Taiwan
Actual		1,000.00		987.40	0.91			4.56
Hypothetical (5% return before expenses)		1,000.00		1,020.62	0.91			4.63

^a 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 (365 days).

28 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^®MSCI AUSTRALIA INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.19%
AIRLINES – 0.40%
Qantas Airways Ltd.	1,039,065	$	2,729,578
			2,729,578
APPAREL – 0.30%
Billabong International Ltd.	183,804		2,077,356
			2,077,356
BANKS – 27.46%
Australia & New Zealand Banking Group Ltd.	2,017,074		41,974,226
Commonwealth Bank of Australia	1,419,075		49,545,695
Macquarie Office Trust	2,117,244		2,312,072
National Australia Bank Ltd.	1,768,557		49,052,287
Suncorp-Metway Ltd.	612,786		9,593,058
Westpac Banking Corp. Ltd.	2,018,982		36,031,763
			188,509,101
BEVERAGES – 2.18%
Coca-Cola Amatil Ltd.	574,149		2,871,840
Foster’s Group Ltd.	2,225,841		10,113,593
Lion Nathan Ltd.	325,950		1,986,316
			14,971,749
BIOTECHNOLOGY – 0.39%
Sonic Healthcare Ltd.	292,401		2,699,601
			2,699,601
BUILDING MATERIALS – 2.73%
Boral Ltd.	646,971		3,359,604
CSR Ltd.	1,017,759		2,448,217
James Hardie Industries NV	511,662		2,617,896
Rinker Group Ltd.	981,507		10,343,484
			18,769,201
COMMERCIAL SERVICES – 2.52%
ABC Learning Centres Ltd.	392,730		1,946,405
Brambles Industries Ltd.1	1,074,840		9,808,579
Sydney Roads Group2	1,028,094		812,583
Transurban Group	882,609		4,711,290
			17,278,857
COMPUTERS – 0.43%
Computershare Ltd.	494,490		2,945,415
			2,945,415
DIVERSIFIED FINANCIAL SERVICES – 3.67%
Australian Stock Exchange Ltd.	190,164		4,792,218
Babcock & Brown Ltd.	224,826		3,450,936
Challenger Financial Services Group Ltd.	441,702		1,183,943
Macquarie Bank Ltd.	268,233		13,273,381
Perpetual Ltd.	44,679		2,484,554
			25,185,032
ENGINEERING & CONSTRUCTION – 1.13%
Downer EDI Ltd.	330,134		1,419,361
Leighton Holdings Ltd.	155,979		2,359,636
Multiplex Group	694,512		1,792,631
WorleyParsons Ltd.	156,615		2,162,351
			7,733,979
ENTERTAINMENT – 1.75%
Aristocrat Leisure Ltd.	388,278		3,884,261
TABCORP Holdings Ltd.	577,965		6,682,235
UNiTAB Ltd.	137,217		1,472,240
			12,038,736
FOOD – 3.26%
Goodman Fielder Ltd.2	1,161,336		1,880,131
Woolworths Ltd.	1,298,076		20,519,408
			22,399,539
FOREST PRODUCTS & PAPER – 0.19%
PaperlinX Ltd.	490,515		1,288,561
			1,288,561
GAS – 1.48%
Alinta Ltd.	288,744		2,429,903
Australian Gas Light Co. Ltd.	502,758		7,743,891
			10,173,794
HEALTH CARE – PRODUCTS – 0.34%
Cochlear Ltd.	60,579		2,326,936
			2,326,936
HEALTH CARE – SERVICES – 0.14%
DCA Group Ltd.	480,975		929,260
			929,260
HOUSEHOLD PRODUCTS & WARES – 0.15%
Pacific Brands Ltd.	553,797		1,023,435
			1,023,435

SCHEDULES OF INVESTMENTS 29

Schedule of Investments (Continued)

iSHARES^®MSCI AUSTRALIA INDEX FUND

August 31, 2006

Security	Shares	Value
INSURANCE – 6.17%
AMP Ltd.	2,060,799	$	14,242,249
AXA Asia Pacific Holdings Ltd.	957,021		4,786,931
Insurance Australia Group Ltd.	1,757,586		7,207,509
QBE Insurance Group Ltd.	883,404		16,096,230
			42,332,919
INVESTMENT COMPANIES – 1.44%
Macquarie Airports	737,919		1,679,265
Macquarie Communications Infrastructure Group	352,821		1,624,673
Macquarie Infrastructure Group	2,725,419		6,555,989
			9,859,927
IRON & STEEL – 0.88%
BlueScope Steel Ltd.	765,744		3,970,523
OneSteel Ltd.	635,523		2,067,451
			6,037,974
MANUFACTURING – 2.76%
Ansell Ltd.	177,126		1,274,171
Futuris Corp. Ltd.	673,842		1,101,200
Orica Ltd.	343,917		5,901,346
Wesfarmers Ltd.	416,898		10,693,852
			18,970,569
MEDIA – 0.95%
APN News & Media Ltd.	319,749		1,218,440
John Fairfax Holdings Ltd.	1,033,659		3,188,989
Publishing & Broadcasting Ltd.	149,301		2,093,292
			6,500,721
MINING – 17.32%
Alumina Ltd.	1,285,992		6,236,003
BHP Billiton Ltd.	3,847,323		81,382,827
Iluka Resources Ltd.	255,036		1,423,683
Newcrest Mining Ltd.	365,223		5,438,599
Paladin Resources Ltd.2	472,548		1,912,565
Rio Tinto Ltd.	315,615		17,582,365
Zinifex Ltd.	543,462		4,938,676
			118,914,718
OIL & GAS – 4.27%
Caltex Australia Ltd.	150,573		2,632,008
Origin Energy Ltd.	870,684		4,434,869
Santos Ltd.	654,126		5,589,666
Woodside Petroleum Ltd.	515,001		16,620,034
			29,276,577
PACKAGING & CONTAINERS – 0.73%
Amcor Ltd.	972,285		4,982,077
			4,982,077
PHARMACEUTICALS – 1.63%
CSL Ltd.	199,863		7,761,001
Mayne Pharma Ltd.2	702,144		1,646,110
Symbion Health Ltd.	721,860		1,791,557
			11,198,668
REAL ESTATE – 10.41%
Centro Properties Group	907,254		5,307,036
CFS Retail Property Trust	1,489,035		2,160,493
Commonwealth Property Office Fund	1,585,230		1,718,996
DB RREEF Trust	2,908,905		3,476,468
GPT Group	2,142,843		7,478,266
ING Industrial Fund3	911,388		1,579,878
Investa Property Group	1,673,316		3,028,452
Lend Lease Corp. Ltd.	396,705		4,759,247
Macquarie Goodman Group	1,520,040		7,359,336
Mirvac Group	980,394		3,421,458
Stockland Trust Group	1,483,311		8,200,968
Westfield Group	1,646,922		22,977,667
			71,468,265
RETAIL – 2.26%
Coles Myer Ltd.	1,309,524		13,990,252
Harvey Norman Holdings Ltd.	587,664		1,543,767
			15,534,019
TELECOMMUNICATIONS – 0.93%
Telstra Corp. Ltd.1	2,334,120		6,416,823
			6,416,823
TRANSPORTATION – 0.92%
Toll Holdings Ltd.	576,375		6,289,726
			6,289,726
TOTAL COMMON STOCKS (Cost: $595,945,854)			680,863,113

30 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^®MSCI AUSTRALIA INDEX FUND

August 31, 2006

Security	Principal		Value
SHORT-TERM INVESTMENTS – 1.78%
CERTIFICATES OF DEPOSIT4 – 0.08%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	71,279	$	71,279
Societe Generale
5.33%, 12/08/06		101,827		101,827
Washington Mutual Bank
5.36%, 11/13/06		254,569		254,569
Wells Fargo Bank N.A.
4.78%, 12/05/06		81,462		81,462
				509,137
COMMERCIAL PAPER4 – 0.29%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/065		29,711		29,362
Amsterdam Funding Corp.
5.27%, 09/15/065		101,827		101,619
Atlantis One Funding
5.30%, 11/14/065		139,715		138,193
Barton Capital Corp.
5.27%, 09/06/065		51,321		51,282
Cancara Asset Securitisation Ltd.
5.30%, 11/14/065		51,618		51,056
CC USA Inc.
5.03%, 10/24/065		20,365		20,215
Charta LLC
5.30%, 11/06/065		101,827		100,838
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/065		178,841		178,047
Curzon Funding LLC
5.29%, 11/17/065		101,827		100,675
Edison Asset Securitization LLC
5.22%, 12/11/065		75,120		74,020
Falcon Asset Securitization Corp.
5.30%, 11/06/065		101,827		100,838
Five Finance Inc.
5.19%, 12/01/065		45,822		45,221
General Electric Capital Services Inc.
5.22%, 12/11/06		10,183		10,034
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/065		101,827		101,458
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/065		48,877		48,474
KKR Pacific Funding Trust
5.29%, 09/14/065		101,827		101,633
Landale Funding LLC
5.31%, 11/15/065		79,425		78,548
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/065		131,991		131,233
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/065		90,626		90,517
Mont Blanc Capital Corp.
5.29%, 11/15/065		65,679		64,955
Monument Gardens Funding LLC
5.28%, 09/21/065		51,171		51,021
Nestle Capital Corp.
5.19%, 08/09/07		61,096		58,084
Park Granada LLC
5.30%, 09/01/065		23,270		23,270
Regency Markets LLC
5.28%, 09/15/06		50,914		50,809
Solitaire Funding Ltd.
5.27%, 09/05/065		76,371		76,326
Sydney Capital Corp.
5.27%, 09/12/065		23,298		23,261
Tulip Funding Corp.
5.29%, 11/15/065		53,706		53,114
White Pine Finance LLC
5.12%, 10/27/065		19,245		19,092
				1,973,195
MEDIUM-TERM NOTES4 – 0.06%
Bank of America N.A.
5.28%, 04/20/07		25,457		25,457
Cullinan Finance Corp.
5.71%, 06/28/075		76,371		76,371
K2 USA LLC
5.39%, 06/04/075		76,371		76,371

SCHEDULES OF INVESTMENTS 31

Schedule of Investments (Continued)

iSHARES^®MSCI AUSTRALIA INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Marshall & Ilsley Bank
5.18%, 12/15/06	$	101,827	$	101,928
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/075		119,138		119,139
US Bank N.A.
2.85%, 11/15/06		20,365		20,288
				419,554
MONEY MARKET FUNDS – 0.01%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%6,7		31,715		31,715
				31,715
REPURCHASE AGREEMENTS4 – 0.36%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $127,303 (collateralized by U.S. Government obligations, value $129,953, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	127,284		127,284
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $203,685 (collateralized by non-U.S. Government debt securities, value $209,964, 3.80% to 9.13%, 11/1/06 to 6/15/26).		203,655		203,655
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $152,764 (collateralized by non-U.S. Government debt securities, value $168,178, 0.08% to 6.43%, 9/25/20 to 7/25/36).		152,741		152,741

Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $305,527 (collateralized by non-U.S. Government debt securities, value $319,208, 4.35% to 7.50%, 9/15/08 to 8/25/35).	$	305,482	$	305,482
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $61,105 (collateralized by non-U.S. Government debt securities, value $74,582, 0.00% to 10.00%, 6/1/28 to 8/24/36).		61,096		61,096
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $ 203,685 (collateralized by non-U.S. Government debt securities, value $207,925, 0.00% to 8.57%, 11/15/06 to 2/15/38).		203,655		203,655
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $101,842 (collateralized by non-U.S. Government debt securities, value $107,020, 5.36% to 9.01%, 10/27/10 to 2/18/20).		101,827		101,827
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $25,461 (collateralized by non-U.S. Government debt securities, value $26,756, 6.63% to 10.50%, 1/15/07 to 4/15/16).		25,457		25,457

32 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^®MSCI AUSTRALIA INDEX FUND

August 31, 2006

Security	Principal		Value
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $203,685 (collateralized by non-U.S. Government debt securities, value $214,042, 0.51% to 8.89%, 8/5/18 to 9/25/46).	$	203,655	$	203,655
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $101,842 (collateralized by non-U.S. Government debt securities, value $107,023, 4.11% to 9.79%, 4/28/31 to 9/25/46).		101,827		101,827
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $112,027 (collateralized by non-U.S. Government debt securities, value $117,722, 3.44% to 15.15%, 12/1/08 to 3/1/36).		112,010		112,010
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $ 203,685 (collateralized by non-U.S. Government debt securities, value $214,045, 6.38% to 10.25%, 5/1/07 to 10/15/16).		203,655		203,655
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $ 203,685 (collateralized by non-U.S. Government debt securities, value $210,002, 0.00% to 10.13%, 10/15/06 to 7/1/26).		203,655		203,655
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $ 101,842 (collateralized by non-U.S. Government debt securities, value $107,070, 4.05% to 7.24%, 6/20/29 to 1/14/41).		101,827		101,827
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $ 35,645 (collateralized by non-U.S. Government debt securities, value $54,657, 0.00% to 10.00%, 9/1/06 to 8/31/36).		35,640		35,640
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $ 74,301 (collateralized by non-U.S. Government debt securities, value $110,970, 0.00% to 10.00%, 9/1/06 to 8/31/36).8		71,279		71,279
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $ 264,791 (collateralized by non-U.S. Government debt securities, value $278,253, 0.06% to 7.68%, 10/15/11 to 3/15/45).		264,751		264,751
				2,479,496
TIME DEPOSITS4 – 0.00%
KBC Bank
5.31%, 09/01/06		21,487		21,487
				21,487
VARIABLE & FLOATING RATE NOTES 4 – 0.98%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/075		260,678		260,712
American Express Bank
5.30%, 02/28/07		101,827		101,827
American Express Centurion Bank
5.42%, 07/19/07		112,010		112,124

SCHEDULES OF INVESTMENTS 33

Schedule of Investments (Continued)

iSHARES^®MSCI AUSTRALIA INDEX FUND

August 31, 2006

Security	Principal		Value
American Express Credit Corp.
5.51%, 07/05/07	$	30,548	$	30,565
ASIF Global Financing
5.51%, 05/03/075		10,183		10,187
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/075		66,188		66,188
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/075		147,650		147,656
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/075		259,660		259,674
BMW US Capital LLC
5.33%, 09/14/075		101,827		101,827
BNP Paribas
5.36%, 05/18/075		188,381		188,381
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/075		74,334		74,334
CC USA Inc.
5.48%, 07/30/075		50,914		50,920
Commodore CDO Ltd.
5.38%, 06/12/075		25,457		25,457
Credit Agricole SA
5.48%, 07/23/07		101,827		101,827
Credit Suisse First Boston NY
5.51%, 04/24/07		50,914		50,916
Cullinan Finance Corp.
5.36%, 04/25/075		25,457		25,457
DEPFA Bank PLC
5.37%, 06/15/07		101,827		101,827
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/075		117,102		117,109
Eli Lilly Services Inc.
5.37%, 08/31/075		101,827		101,827
Fifth Third Bancorp
5.30%, 09/21/075		203,655		203,655
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/075		101,827		101,819
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		106,919		106,943
Granite Master Issuer PLC
5.30%, 09/20/06		356,396		356,396
Harrier Finance Funding LLC
5.33%, 07/25/075		30,548		30,554
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		152,741		152,765
HBOS Treasury Services PLC
5.53%, 07/24/075		101,827		101,827
Holmes Financing PLC
5.40%, 07/16/075		178,198		178,198
JP Morgan Chase & Co.
5.36%, 08/02/07		76,371		76,371
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/075		76,371		76,368
Kestrel Funding LLC
5.31%, 07/11/075		40,731		40,727
Kommunalkredit Austria AG
5.33%, 09/09/075		61,096		61,096
Leafs LLC
5.33%, 01/22/07 - 02/20/075		106,244		106,244
Lexington Parker Capital Co. LLC
5.46%, 01/10/075		127,284		127,256
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/075		112,010		112,002
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/075		44,868		44,868
Marshall & Ilsley Bank
5.31%, 09/14/07		56,005		56,005
Metropolitan Life Global Funding I
5.42%, 08/06/075		152,741		152,741
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/075,8		10,183		10,183
Monumental Global Funding II
5.49%, 12/27/065		20,365		20,368

34 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^®MSCI AUSTRALIA INDEX FUND

August 31, 2006

Security	Principal		Value
Mound Financing PLC
5.39%, 05/08/075	$	95,718	$	95,718
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/075		305,482		305,478
National City Bank of Indiana
5.37%, 05/21/07		50,914		50,917
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/075		336,031		336,108
Newcastle Ltd.
5.35%, 04/24/075		35,894		35,887
Northern Rock PLC
5.43%, 08/03/075		122,193		122,196
Principal Life Global Funding I
5.80%, 02/08/07		45,822		45,916
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/075		178,198		178,194
Skandinaviska Enskilda Bank NY
5.33%, 09/18/075		101,827		101,827
Strips III LLC
5.38%, 07/24/075		24,760		24,760
SunTrust Bank
5.37%, 05/01/07		101,827		101,832
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/075		248,459		248,438
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/065		142,558		142,558
US Bank N.A.
5.26%, 09/29/06		45,822		45,821
Wachovia Asset Securitization Inc.
5.31%, 09/25/065		151,948		151,948
Wachovia Bank N.A.
5.36%, 05/22/07		203,655		203,655
Wells Fargo & Co.
5.34%, 09/14/075		50,914		50,917
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/075		76,371		76,370
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/075		305,482		305,427
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/075		64,580		64,580
				6,733,748
TOTAL SHORT-TERM INVESTMENTS (Cost: $12,168,332)				12,168,332
TOTAL INVESTMENTS IN SECURITIES – 100.97% (Cost: $608,114,186)				693,031,445
Other Assets, Less Liabilities – (0.97)%				(6,624,439	)
NET ASSETS – 100.00%			$	686,407,006

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁵ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁶ Affiliated issuer. See Note 2.

⁷ The rate quoted is the annualized seven-day yield of the fund at period end.

⁸ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 35

Schedule of Investments

iSHARES^®MSCI BRAZIL INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 38.85%
AEROSPACE & DEFENSE – 1.87%
Empresa Brasileira de Aeronautica SA	4,702,149	$	46,056,046
			46,056,046
AGRICULTURE – 0.84%
Souza Cruz SA	1,263,000		20,657,093
			20,657,093
BANKS – 4.84%
Banco Nossa Caixa SA	631,500		12,677,149
Unibanco Uniao de Bancos Brasileiros SA	14,903,420		106,820,593
			119,497,742
CHEMICALS – 0.47%
Braskem SA Class A	1,768,236		11,510,449
			11,510,449
COMMERCIAL SERVICES – 0.77%
Cia de Concessoes Rodoviarias	1,955,700		19,064,196
			19,064,196
COSMETICS & PERSONAL CARE – 0.89%
Natura Cosmeticos SA	1,768,200		22,030,303
			22,030,303
ELECTRIC – 2.26%
Centrais Eletricas Brasileiras SA	1,515,600,000		33,098,491
EDP - Energias do Brasil SA	802,600		10,149,538
Tractebel Energia SA	1,389,300		12,512,128
			55,760,157
FOOD – 0.89%
Cosan SA Industria e Comercio1	270,230		14,249,179
Perdigao SA	740,200		7,771,582
			22,020,761
HEALTH CARE – SERVICES – 0.44%
Diagnosticos da America SA1	562,200		10,782,277
			10,782,277
INTERNET – 0.35%
Submarino SA	428,130		8,750,394
			8,750,394
IRON & STEEL – 2.41%
Companhia Siderurgica Nacional SA	1,784,584		52,130,172
Gerdau SA	623,800		7,396,527
			59,526,699
MINING – 7.02%
Companhia Vale do Rio Doce ADR	8,085,726		173,357,965
			173,357,965
OIL & GAS – 10.41%
Petroleo Brasileiro SA	11,591,200		257,029,316
			257,029,316
REAL ESTATE – 1.06%
Cyrela Brazil Realty SA	1,010,400		17,822,268
Gafisa SA1	631,500		8,251,050
			26,073,318
RETAIL – 0.64%
Lojas Renner SA	263,620		15,695,416
			15,695,416
TELECOMMUNICATIONS – 1.16%
Brasil Telecom Participacoes SA	884,100,000		8,638,851
Tele Norte Leste Participacoes SA	794,138		19,973,886
			28,612,737
TRANSPORTATION – 1.63%
All America Latina Logistica SA	480,080		40,321,792
			40,321,792
WATER – 0.90%
Companhia de Saneamento Basico do Estado de Sao Paulo	202,080,000		22,161,849
			22,161,849
TOTAL COMMON STOCKS (Cost: $762,296,817)			958,908,510
PREFERRED STOCKS – 60.79%
AIRLINES – 1.70%
Gol Linhas Aereas Inteligentes SA	594,500		20,531,472
Tam SA	687,900		21,343,197
			41,874,669
BANKS – 12.45%
Banco Bradesco SA	5,719,500		185,516,773
Banco Itau Holding Financeira SA	4,041,570		121,662,007
			307,178,780
BEVERAGES – 4.79%
Companhia de Bebidas das Americas	263,250,000		118,296,663
			118,296,663

36 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^®MSCI BRAZIL INDEX FUND

August 31, 2006

Security	Shares	Value
BUILDING MATERIALS – 0.65%
Duratex SA	1,596,920	$	16,021,363
			16,021,363
ELECTRIC – 4.29%
Centrais Eletricas Brasileiras SA Class B	1,263,000,000		25,224,636
Companhia Energetica de Minas Gerais	1,263,000,000		52,158,427
Companhia Paranaense de Energia Class B	2,020,800,000		21,735,624
Eletropaulo Metropolitana de Sao Paulo SA1	151,560,000		6,717,298
			105,835,985
FOOD – 1.24%
Companhia Brasileira de Distribuicao Grupo Pao de Acucar	454,680,000		12,305,851
Sadia SA	6,791,000		18,221,302
			30,527,153
FOREST PRODUCTS & PAPER – 2.75%
Aracruz Celulose SA Class B	6,315,000		32,562,179
Klabin SA	7,754,000		15,413,924
Votorantim Celulose e Papel SA	1,227,800		19,966,790
			67,942,893
GAS – 0.29%
Cia de Gas de Sao Paulo Class A	50,520,000		7,237,350
			7,237,350
IRON & STEEL – 4.14%
Gerdau SA	3,983,273		57,527,904
Usinas Siderurgicas de Minas Gerais SA Class A	1,425,400		44,710,867
			102,238,771
MACHINERY – 0.56%
Weg SA	3,283,800		13,944,274
			13,944,274
MINING – 8.62%
Companhia Vale do Rio Doce Class A	11,448,400		212,727,619
			212,727,619
OIL & GAS – 13.42%
Petroleo Brasileiro SA	16,506,700		331,212,366
			331,212,366
RETAIL – 1.13%
Lojas Americanas SA	631,500,000		27,994,635
			27,994,635
TELECOMMUNICATIONS – 4.57%
Brasil Telecom Participacoes SA	2,904,900,000		17,377,896
Embratel Participacoes SA	4,546,800,000		14,300,232
Tele Norte Leste Participacoes SA	3,099,939		40,213,861
Telemig Celular Participacoes SA	2,652,300,000		4,418,440
Telesp Celular Participacoes SA1	5,052,083		15,842,276
TIM Participacoes SA	7,199,100,000		20,693,669
			112,846,374
TEXTILES – 0.19%
Companhia de Tecidos Norte de Minas	50,520,400		4,573,004
			4,573,004
TOTAL PREFERRED STOCKS (Cost: $1,203,861,689)			1,500,451,899
SHORT-TERM INVESTMENTS – 0.20%
MONEY MARKET FUNDS – 0.20%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%2,3	4,889,243		4,889,243
			4,889,243
TOTAL SHORT-TERM INVESTMENTS (Cost: $4,889,243)			4,889,243
TOTAL INVESTMENTS IN SECURITIES – 99.84% (Cost: $1,971,047,749)			2,464,249,652
Other Assets, Less Liabilities – 0.16%			4,045,272
NET ASSETS – 100.00%		$	2,468,294,924

ADR – American Depositary Receipts

¹ Non-income earning security.

² Affiliatedissuer. See Note 2.

³ Therate quoted is the annualized seven-day yield of the fund at period end.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 37

Schedule of Investments

iSHARES^®MSCI CANADA INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.62%
AEROSPACE & DEFENSE – 0.23%
CAE Inc.	294,806	$	2,515,713
			2,515,713
AIRLINES – 0.23%
ACE Aviation Holdings Inc. Class A1	96,782		2,590,156
			2,590,156
APPAREL – 0.32%
Gildan Activewear Inc.1	70,468		3,526,099
			3,526,099
AUTO PARTS & EQUIPMENT – 0.86%
Magna International Inc. Class A	132,016		9,435,917
			9,435,917
BANKS – 17.43%
Bank of Montreal	592,734		35,742,969
Bank of Nova Scotia	1,166,736		49,697,329
Canadian Imperial Bank of Commerce	396,048		28,668,201
National Bank of Canada	196,240		10,604,652
Royal Bank of Canada	1,522,198		67,183,832
			191,896,983
BEVERAGES – 0.15%
Cott Corp.1	96,336		1,625,060
			1,625,060
CHEMICALS – 2.03%
Agrium Inc.	160,560		3,713,967
Methanex Corp.	137,814		3,273,509
NOVA Chemicals Corp.	102,580		3,258,342
Potash Corp. of Saskatchewan Inc.	123,988		12,143,506
			22,389,324
COMMERCIAL SERVICES – 0.27%
Quebecor World Inc.	115,960		1,287,342
Ritchie Bros. Auctioneers Inc.	34,788		1,699,040
			2,986,382
COMPUTERS – 1.67%
CGI Group Inc.1	351,894		2,219,651
Research In Motion Ltd.1	197,132		16,212,875
			18,432,526
DIVERSIFIED FINANCIAL SERVICES – 1.09%
CI Financial Income Fund	76,180		2,069,680
IGM Financial Inc.	140,490		6,291,825
TSX Group Inc.	81,618		3,647,896
			12,009,401
ELECTRIC – 0.72%
Fortis Inc.	120,866		2,735,890
TransAlta Corp.	235,488		5,152,195
			7,888,085
ENGINEERING & CONSTRUCTION – 0.44%
SNC-Lavalin Group Inc.	177,954		4,889,225
			4,889,225
ENTERTAINMENT – 0.19%
Intrawest Corp.	59,584		2,055,843
			2,055,843
FOOD – 1.12%
George Weston Ltd.	61,102		4,316,645
Loblaw Companies Ltd.	129,340		5,984,779
Saputo Inc.	58,872		2,002,629
			12,304,053
FOREST PRODUCTS & PAPER – 0.27%
Canfor Corp.1	120,420		1,233,769
Domtar Inc.1	276,966		1,759,505
			2,993,274
HAND & MACHINE TOOLS – 0.35%
Finning International Inc.	106,594		3,816,156
			3,816,156
HEALTH CARE – SERVICES – 0.32%
MDS Inc.	173,940		3,493,690
			3,493,690
HOLDING COMPANIES – DIVERSIFIED – 1.99%
Brookfield Asset Management Inc. Class A	415,672		18,503,444
Onex Corp.	152,532		3,386,698
			21,890,142
INSURANCE – 10.96%
Fairfax Financial Holdings Ltd.	21,408		2,568,574
Great-West Lifeco Inc.	317,998		8,387,296
Manulife Financial Corp.	1,869,632		60,684,068
Power Corp. of Canada	403,184		11,800,330
Power Financial Corp.	294,360		9,169,656

38 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^®MSCI CANADA INDEX FUND

August 31, 2006

Security	Shares	Value
Sun Life Financial Inc.	685,948	$	28,136,385
			120,746,309
IRON & STEEL – 0.61%
Algoma Steel Inc.1	45,046		1,495,783
IPSCO Inc.	57,088		5,238,875
			6,734,658
LODGING – 0.19%
Four Seasons Hotels Inc.	33,450		2,104,208
			2,104,208
MANUFACTURING – 0.47%
Bombardier Inc. Class B1	1,705,950		5,165,120
			5,165,120
MEDIA – 3.33%
Astral Media Inc. Class A	58,872		2,019,605
Rogers Communications Inc. Class B	258,680		13,286,560
Shaw Communications Inc. Class B	206,498		6,177,728
Thomson Corp.	281,426		11,284,935
Yellow Pages Income Fund	296,590		3,909,990
			36,678,818
MINING – 14.47%
Aber Diamond Corp.	72,252		2,595,147
Agnico-Eagle Mines Ltd.	137,368		5,196,403
Alcan Inc.	442,432		19,818,243
Barrick Gold Corp.	1,017,772		33,933,376
Bema Gold Corp.1	539,660		2,912,875
Cameco Corp.	414,334		16,890,714
Eldorado Gold Corp.1	403,184		1,987,309
First Quantum Minerals Ltd.	76,747		4,156,337
Glamis Gold Ltd.1	194,456		8,883,910
Goldcorp Inc.	429,944		11,835,809
Inco Ltd.	225,676		17,527,384
Ivanhoe Mines Ltd.1	290,346		1,813,109
Kinross Gold Corp.1	409,428		5,718,526
Meridian Gold Inc.1	117,298		3,455,257
Novelis Inc.	94,998		1,975,719
Pan American Silver Corp.1	87,416		2,000,781
Teck Cominco Ltd. Class B	235,488		15,617,857
Yamana Gold Inc.1	299,712		3,057,211
			159,375,967
OIL & GAS – 26.63%
ARC Energy Trust	113,104		2,966,846
Canadian Natural Resources Ltd.	632,874		33,093,650
Canadian Oil Sands Trust	267,154		8,136,792
Canetic Resources Trust	237,718		4,868,962
Duvernay Oil Corp.1	49,506		1,838,826
EnCana Corp.	1,000,378		52,283,779
Enerplus Resources Fund	143,612		8,314,549
Ensign Resource Service Group	149,856		3,085,569
First Calgary Petroleums Ltd.1	264,032		2,374,444
Harvest Energy Trust	122,204		3,771,558
Husky Energy Inc.	149,856		10,327,539
Imperial Oil Ltd.	411,658		15,427,670
Nexen Inc.	307,740		17,855,714
Niko Resources Ltd.	41,924		2,389,073
OPTI Canada Inc.1	186,874		3,423,427
Penn West Energy Trust	276,520		11,449,510
Petro-Canada	608,790		25,893,118
Precision Drilling Trust	71,360		2,587,544
PrimeWest Energy Trust	97,228		2,953,418
Provident Energy Trust	232,366		3,036,096
Shell Canada Ltd.	247,084		7,993,076
Suncor Energy Inc.	541,890		41,822,824
Talisman Energy Inc.	1,300,536		22,735,209
Western Oil Sands Inc. Class A1	175,278		4,659,339
			293,288,532
OIL & GAS SERVICES – 0.25%
Trican Well Service Ltd.	136,030		2,761,663
			2,761,663
PHARMACEUTICALS – 0.34%
Biovail Corp.	173,494		2,817,177
QLT Inc.1	119,974		914,602
			3,731,779
PIPELINES – 2.86%
Enbridge Inc.	392,926		12,884,503
TransCanada Corp.	574,002		18,589,441
			31,473,944
REAL ESTATE – 0.63%
Brookfield Properties Corp.	138,260		4,835,207
MI Developments Inc. Class A	62,440		2,134,691
			6,969,898

SCHEDULES OF INVESTMENTS 39

Schedule of Investments (Continued)

iSHARES^®MSCI CANADA INDEX FUND

August 31, 2006

Security	Shares	Value
RETAIL – 1.98%
Alimentation Couche Tard Inc. Class B	166,358	$	3,500,301
Canadian Tire Corp. Class A	93,660		5,848,739
RONA Inc.1	145,842		2,858,359
Shoppers Drug Mart Corp.	227,906		9,576,262
			21,783,661
SEMICONDUCTORS – 0.59%
ATI Technologies Inc.1	302,834		6,464,643
			6,464,643
SOFTWARE – 0.42%
Cognos Inc. 1	113,284		3,623,863
Open Text Corp.1	61,994		1,006,652
			4,630,515
TELECOMMUNICATIONS – 2.91%
BCE Inc.	342,087		8,498,616
Nortel Networks Corp.1	5,134,352		10,687,410
TELUS Corp.	71,806		3,510,228
TELUS Corp. NVS	197,132		9,357,886
			32,054,140
TRANSPORTATION – 3.30%
Canadian National Railway Co.	639,118		27,154,236
Canadian Pacific Railway Ltd.	186,874		9,143,734
			36,297,970
TOTAL COMMON STOCKS (Cost: $934,915,744)			1,096,999,854
SHORT-TERM INVESTMENTS – 0.04%
MONEY MARKET FUNDS – 0.04%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%2,3	400,763		400,763
			400,763
TOTAL SHORT-TERM INVESTMENTS (Cost: $400,763)			400,763
TOTAL INVESTMENTS IN SECURITIES – 99.66% (Cost: $935,316,507)			1,097,400,617
Other Assets, Less Liabilities – 0.34%			3,760,118
NET ASSETS – 100.00%		$	1,101,160,735

NVS  – Non-Voting Shares

¹ Non-incomeearning security.

² Affiliated issuer. SeeNote 2.

³ Therate quoted is the annualized seven-day yield of the fund at period end.

See notes to the financial statements.

40 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 97.50%
ARGENTINA – 1.05%
BBVA Banco Frances SA ADR	887,223	$	6,529,958
Petrobras Energia Participaciones SA ADR1	1,669,311		17,477,686
Tenaris SA ADR	2,778,867		102,012,208
			126,019,852
BRAZIL – 8.56%
Aracruz Celulose SA ADR	543,844		28,241,819
Banco Bradesco SA ADR	5,014,737		164,082,195
Banco Itau Holding Financiera SA ADR	5,584,761		170,000,125
Brasil Telecom Participacoes SA ADR	654,544		19,767,229
Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR	797,012		21,965,651
Companhia de Bebidas das Americas ADR	858,312		38,503,876
Companhia Vale do Rio Doce ADR	5,472,558		117,331,644
Companhia Vale do Rio Doce Sponsored ADR	7,502,859		135,051,462
Empresa Brasileira de Aeronautica SA ADR	1,118,754		43,183,904
Gerdau SA Sponsored ADR	1,599,591		23,226,061
Petroleo Brasileiro SA ADR	2,119,572		190,040,826
Tele Norte Leste Participacoes SA ADR	1,726,452		22,253,966
Uniao de Bancos Brasileiros SA ADR	535,626		38,752,541
Votorantim Celulose e Papel ADR2	755,118		12,180,053
			1,024,581,352
CHILE – 1.88%
Banco Santander Chile SA ADR	1,622,512		70,676,623
Compania de Telecomunicaciones de Chile SA ADR	1,959,516		14,382,847
Enersis SA Chile ADR	4,772,130		58,983,527
LAN Airlines SA Sponsored ADR	439,914		15,335,402
Sociedad Quimica y Minera de Chile SA ADR	594,894		65,438,340
			224,816,739
CHINA – 5.91%
Aluminum Corp. of China Ltd. Class H2	16,380,000		11,689,845
Angang New Steel Co. Ltd. Class H2	14,742,000		12,113,207
Bank of China Ltd. Class H1,2	131,859,000		57,140,172
Bank of Communications Co. Ltd. Class H2	38,599,000		24,320,584
Beijing Capital International Airport Co. Ltd. Class H	13,108,000		8,579,383
China Construction Bank Class H2	164,619,000		71,336,488
China Eastern Airlines Corp. Ltd. Class H1,2	57,330,000		7,740,573
China Life Insurance Co. Ltd. Class H	49,959,000		88,653,254
China Petroleum and Chemical Corp. Class H	134,316,000		79,966,963
China Shipping Development Co. Ltd. Class H	14,760,000		13,076,980
Cofco International Ltd.2	4,920,000		3,315,112
COSCO Pacific Ltd.	6,552,000		14,693,397
Datang International Power Generation Co. Ltd. Class H	6,560,000		4,377,972
Guangshen Railway Co. Ltd. Class H	52,486,363		21,394,769
Huadian Power International Corp. Ltd.	27,880,000		6,919,137
Huaneng Power International Inc. Class H2	19,656,000		13,067,351
Hunan Non-Ferrous Metal Corp. Ltd. Class H1,2	22,960,000		8,296,216
Jiangsu Expressway Co. Ltd. Class H	4,920,000		2,872,254
Jiangxi Copper Co. Ltd.	16,398,000		15,561,415
Maanshan Iron & Steel Co. Ltd. Class H2	18,018,000		5,606,913
PetroChina Co. Ltd. Class H	122,864,000		138,556,245

SCHEDULES OF INVESTMENTS 41

Schedule of Investments (Continued)

iSHARES^®MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Shares	Value
Ping An Insurance (Group) Co. of China Ltd. Class H	9,418,500	$	30,822,751
Shanghai Forte Land Co. Class H	4,914,000		1,592,346
Sinopec Shanghai Petrochemical Co. Ltd. Class H	19,680,000		9,287,376
Sinotrans Ltd.	19,656,000		6,217,733
Travelsky Technology Ltd. Class H	1,640,000		1,919,054
Tsingtao Brewery Co. Ltd. Class H2	3,280,000		3,922,461
Weichai Power Co. Ltd. Class H	3,277,000		8,040,011
Xinao Gas Holdings Ltd.	3,288,000		3,128,711
Yanzhou Coal Mining Co. Ltd. Class H2	19,656,800		13,876,726
Zhejiang Expressway Co. Ltd. Class H	19,680,000		12,678,407
Zijin Mining Group Co. Ltd. Class H	14,760,000		6,984,512
			707,748,318
CZECH REPUBLIC – 2.11%
CEZ AS	4,519,426		168,641,719
Komercni Banka AS	232,268		34,813,461
Philip Morris CR AS	30,988		12,984,466
Unipetrol AS1	3,444,900		31,976,446
Zentiva NV	84,285		4,480,969
			252,897,061
EGYPT – 0.29%
Orascom Telecom Holding SAE GDR	645,372		34,527,402
			34,527,402
HONG KONG – 4.42%
Air China Ltd.	24,570,000		8,783,181
Beijing Enterprises Holdings Ltd.	3,280,000		5,288,996
Brilliance China Automotive Holdings Ltd.1,2	21,198,000		3,216,465
Chaoda Modern Agriculture2	1,638,000		827,767
China Everbright Pacific Ltd.1,2	18,246,000		11,566,886
China Mengniu Dairy Co. Ltd.	3,276,000		4,195,707
China Merchants Holdings International Co. Ltd.	6,552,000		19,293,510
China Mobile Ltd.	29,895,000		201,049,089
China Overseas Land & Investment Ltd.	26,208,000		18,029,743
China Resources Enterprises Ltd.	11,480,000		26,128,652
China Resources Land Ltd.2	26,240,000		15,757,328
China Resources Power Holdings Co.	4,914,000		4,353,677
China Travel International Investment Hong Kong Ltd.	57,616,951		14,076,858
Citic Pacific Ltd.	9,020,000		28,822,708
CNOOC Ltd.	101,556,000		88,800,695
Denway Motors Ltd.	31,122,000		9,924,784
Global Bio-Chem Technology Group Co. Ltd.2	19,656,000		6,546,313
GOME Electrical Appliances Holdings Ltd.2	7,295,000		5,609,554
Guangdong Investment Ltd.	11,470,110		4,454,269
Guangzhou Investment Co. Ltd.	27,846,000		5,191,976
Lenovo Group Ltd.2	34,398,000		14,375,350
Shanghai Industrial Holdings Ltd.	3,280,000		6,402,469
Shenzhen Investment Ltd.	26,230,000		9,309,133
Sinochem Hong Kong Holding Ltd.2	27,702,000		10,152,146
TPV Technology Ltd.	6,588,000		7,039,738
			529,196,994
HUNGARY – 2.02%
BorsodChem Rt	686,827		9,033,738
Gedeon Richter Rt2	391,578		83,309,489
Magyar Telekom Telecommunications PLC1	2,916,459		11,871,339
Mol Magyar Olaj-es Gazipari Rt	584,225		59,047,227
OTP Bank Rt2	2,699,269		77,857,677
			241,119,470
INDIA – 5.21%
HDFC Bank Ltd. ADR	2,076,165		118,092,265
ICICI Bank Ltd. ADR	3,325,140		88,747,987
Infosys Technologies Ltd. ADR	3,297,684		147,901,127
Mahanagar Telephone Nigam Ltd. ADR	4,907,623		32,537,540
Satyam Computer Services Ltd. ADR2	2,402,974		91,721,518
Videsh Sanchar Nigam Ltd. ADR2	4,781,322		85,442,224

42 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Shares	Value
Wipro Ltd. ADR2	4,663,746	$	59,136,299
			623,578,960
INDONESIA – 2.59%
PT Aneka Tambang Tbk	53,683,455		31,866,622
PT Astra Agro Lestari Tbk	2,047,500		2,070,683
PT Astra International Inc. Tbk	22,552,730		27,518,446
PT Bank Central Asia Tbk	41,000,000		20,506,760
PT Bank Danamon Indonesia Tbk	12,705,487		6,843,672
PT Bank Internasional Indonesia Tbk	115,069,500		2,340,096
PT Bank Mandiri Tbk	43,050,000		9,937,892
PT Bank Pan Indonesia Tbk1	207,281,522		10,481,422
PT Bank Pan Indonesia Tbk Warrants (Expires 7/10/09)1	41,987,604		807,720
PT Bank Rakyat Indonesia Tbk	37,705,061		18,029,792
PT Berlian Laju Tanker Tbk	21,730,000		4,753,512
PT Bumi Resources Tbk3	118,063,500		9,733,717
PT Indosat Tbk	1,228,500		594,196
PT Kalbe Farma Tbk1	249,077,156		30,665,759
PT Perusahaan Gas Negara Tbk	22,946,500		31,908,676
PT Ramayana Lestari Sentosa Tbk	82,009,870		7,031,736
PT Semen Gresik (Persero) Tbk	425,500		1,185,712
PT Telekomunikasi Indonesia Tbk	96,234,500		83,571,788
PT United Tractors Tbk	16,034,271		10,134,886
			309,983,087
ISRAEL – 3.85%
AudioCodes Ltd.1,2	702,712		6,984,957
Bank Hapoalim Ltd.	9,512,852		41,874,860
Bank Leumi Le-Israel	12,454,688		44,436,181
Check Point Software Technologies Ltd.1	1,325,961		24,649,615
Clal Industries and Investments Ltd.	446,355		2,214,387
Clal Insurance Co. Ltd.	81,081		1,473,170
ECI Telecom Ltd.1	402,129		2,875,222
Elbit Systems Ltd.	627,354		18,041,459
Elite Industries Ltd.	184,275		1,776,455
Israel Chemicals Ltd.	6,698,601		32,019,436
Israel Corp. Ltd. (The)	9,009		3,596,168
Israel Discount Bank Class A1	14,061,871		22,968,153
Koor Industries Ltd.1	265,413		13,386,206
Makhteshim-Agan Industries Ltd.	2,879,728		14,735,180
Mizrahi Tefahot Bank Ltd.	4,481,740		25,006,959
msystems Ltd.1	550,281		24,421,471
NICE Systems Ltd.1	164,000		4,118,790
Orbotech Ltd.1	553,581		13,291,480
Super-Sol Ltd.1	1,609,478		4,838,761
Teva Pharmaceutical Industries Ltd.	4,542,174		157,997,712
			460,706,622
MEXICO – 7.29%
Alfa SA de CV Class A2	3,521,700		17,169,972
America Movil SA de CV Series L2	102,538,800		191,418,916
Carso Infraestructura y Construccion SA de CV1,2	2,767,200		2,026,250
Cemex SA de CV Series CPO1,2	39,434,342		113,694,357
Consorcio Ara SA de CV	5,740,000		26,743,794
Controladora Comercial Mexicana SA de CV2	9,172,800		17,241,426
Corporacion GEO SA de CV Series B1,2	5,480,700		22,290,968
Desarrolladora Homex SA de CV1,2	1,059,900		6,545,848
Empresas ICA Sociedad Controladora SA de CV1,2	5,043,600		17,129,774
Fomento Economico Mexicano SA de CV Class UBD2	5,002,000		47,133,195
Grupo Carso SA de CV Series A12	738,741		2,161,706
Grupo Financiero Banorte SA de CV Series O2	9,844,456		28,870,034
Grupo Mexico SA de CV Series B	11,070,000		35,314,839
Grupo Modelo SA de CV Series C2	10,756,198		45,334,391
Grupo Televisa SA Series CPO2	16,953,300		64,555,146
Industrias Penoles SA de CV Series CP2	738,988		6,286,825
Kimberly-Clark de Mexico SA de CV Class A2	6,060,600		22,833,301
Telefonos de Mexico SA de CV Series L2	63,851,100		77,358,035
TV Azteca SA de CV Series CPO2	10,237,500		6,736,339
Urbi Desarrollos Urbanos SA de CV1,2	3,336,300		8,854,606

SCHEDULES OF INVESTMENTS 43

Schedule of Investments (Continued)

iSHARES^®MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Shares	Value
Wal-Mart de Mexico SA de CV Series V2	32,760,000	$	112,104,695
			871,804,417
PERU – 0.34%
Companhia de Minas Buenaventura SA ADR	1,449,632		40,517,214
			40,517,214
PHILIPPINE ISLANDS – 1.42%
Ayala Corp.	2,481,570		21,500,262
Ayala Land Inc. Class B	30,303,000		8,055,341
Bank of the Philippine Islands	19,461,300		20,310,109
Equitable PCI Bank1	9,599,600		14,932,921
Filinvest Land Inc.1	254,921,500		6,826,686
Globe Telecom Inc.	475,020		9,213,246
Jollibee Foods Corp.	32,186,700		20,281,075
Manila Electric Co. Class B1	9,090,900		4,833,205
Megaworld Corp.	168,028,600		5,558,492
Metropolitan Bank & Trust Co.	40		30
Petron Corp.	164,619,000		12,965,954
Philippine Long Distance Telephone Co.	647,010		24,333,742
SM Investments Corp.	1,564,290		6,838,090
SM Prime Holdings Inc.	91,728,000		14,269,000
			169,918,153
RUSSIA – 10.65%
JSC MMC Norilsk Nickel ADR	511,056		69,759,144
LUKOIL ADR	3,504,704		293,343,725
Mobile Telesystems OJSC ADR	737,100		26,977,860
OAO Gazprom ADR	13,771,997		648,661,059
Polyus Gold ADR1	464,607		19,745,798
Rostelecom ADR2	586,379		16,917,034
Surgutneftegaz ADR2	1,743,708		132,521,808
Tatneft ADR	215,397		22,377,594
Vimpel-Communications Sponsored ADR1	819,000		44,488,080
			1,274,792,102
SOUTH AFRICA – 9.85%
African Bank Investments Ltd.	7,972,241		28,118,459
Alexander Forbes Ltd.1	7,922,327		15,515,015
Anglo Platinum Ltd.	431,614		48,369,502
AngloGold Ashanti Ltd.	902,580		40,921,550
AVI Ltd.	3,302,608		7,333,531
Barloworld Ltd.	1,729,932		32,571,188
Bidvest Group Ltd.	2,043,599		30,923,252
Consol Ltd.	3,302,608		7,054,114
Edgars Consolidated Stores Ltd.	3,464,370		13,617,232
FirstRand Ltd.	21,645,363		53,588,035
Foschini Ltd.	4,727,528		29,506,069
Gold Fields Ltd.	2,698,651		52,400,990
Impala Platinum Holdings Ltd.	387,436		71,737,456
Imperial Holdings Ltd.1	1,969,357		38,922,798
Investec Ltd.	718,292		35,067,793
JD Group Ltd.	2,329,324		21,516,363
Liberty Group Ltd.	606,861		5,975,182
Metropolitan Holdings Ltd.	7,255,688		12,146,484
Mittal Steel South Africa Ltd.	2,941,228		31,125,616
MTN Group Ltd.	8,547,132		67,808,037
Nampak Ltd.	5,671,848		13,499,156
Naspers Ltd.	2,821,833		48,726,520
Nedbank Group Ltd.	2,581,489		39,545,833
Network Healthcare Holdings Ltd.1	14,170,482		22,995,096
Pick’n Pay Stores Ltd.	3,754,310		15,829,545
Reunert Ltd.	1,299,753		13,015,557
Sanlam Ltd.	13,116,285		27,560,571
Sappi Ltd.	335,465		4,268,920
Sasol Ltd.	3,520,466		122,068,863
Shoprite Holdings Ltd.	9,545,446		32,700,765
SPAR Group Ltd. (The)	1,317,076		6,831,989
Standard Bank Group Ltd.	7,364,530		79,498,109
Steinhoff International Holdings Ltd.	1,376,739		4,493,019
Telkom South Africa Ltd.	991,960		18,711,035
Tiger Brands Ltd.	1,264,289		26,741,203
Tongaat-Hulett Group Ltd.	1,191,834		15,497,148
Truworths International Ltd.	7,319,406		23,267,793
Woolworths Holdings Ltd.	10,639,793		19,523,504
			1,178,993,292
SOUTH KOREA – 16.09%
Kookmin Bank ADR	4,686,348		377,625,922
Korea Electric Power Corp. ADR2	12,045,852		233,930,446
KT Corp. ADR	5,794,425		128,056,793

44 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^®MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Shares	Value
LG.Philips LCD Co. Ltd. ADR1,2	4,828,824	$	95,948,733
POSCO ADR	5,022,108		311,923,128
Samsung Electronics Co. Ltd. GDR	1,951,677		663,570,180
SK Telecom Co. Ltd. ADR2	5,251,584		115,009,690
			1,926,064,892
TAIWAN – 10.41%
AU Optronics Corp. ADR2	12,112,491		176,600,123
Chunghwa Telecom Co. Ltd. ADR	11,769,856		203,736,207
Siliconware Precision Industries Co. ADR2,4	33,801,769		198,416,383
Taiwan Semiconductor Manufacturing Co. Ltd. ADR	45,356,544		422,269,425
United Microelectronics Corp. ADR2	80,353,802		245,079,097
			1,246,101,235
THAILAND – 2.50%
Advanced Info Service PCL	6,314,000		15,201,304
Aromatics Thailand PCL	8,271,900		6,656,690
Bangkok Bank PCL	7,705,800		22,549,561
Bangkok Expressway PCL	15,252,000		8,642,395
Banpu PCL	2,460,000		9,554,669
Charoen Pokphand Foods PCL	28,000		3,710
Electricity Generating PCL	3,310,700		6,869,769
Kasikornbank PCL	11,726,000		20,276,403
Kiatnakin Bank PCL	6,145,600		4,659,473
Krung Thai Bank PCL	14,018,400		4,251,390
PTT Chemical PCL	5,005,568		10,320,072
PTT Exploration & Production PCL	13,120,000		37,346,103
PTT PCL	11,138,400		69,929,832
Ratchaburi Electricity Generating Holding PCL	27,038,800		23,917,002
Siam Cement PCL	2,460,000		15,313,648
Siam City Cement PCL	492,000		3,062,730
Siam Makro PCL	10,902,700		20,302,979
Thai Airways International PCL	2,293,200		2,684,246
Thai Union Frozen Products PCL	9,840,000		6,387,231
Thanachart Capital PCL	14,754,500		5,573,660
Tisco Bank PCL	6,217,200		3,440,217
United Broadcasting Corp. PCL1,3	5,658,800		2,709,721
			299,652,805
TURKEY – 1.06%
Adana Cimento TAS Class A	2,729,732		17,509,027
Akbank TAS	3,193,281		17,431,764
Akcansa Cimento AS	429,167		2,313,492
Arcelik AS	769,596		4,962,594
Dogan Yayin Holding AS1	2,228,483		7,329,436
Eregli Demir ve Celik Fabrikalari TAS	1,425,472		6,954,708
Hurriyet Gazetecilik ve Matbaacilik AS	1,777,237		4,220,256
Ihlas Holding1	9,705,866		4,039,971
Tofas Turk Otomobil Fabrik	5,802,952		15,838,832
Trakya Cam Sanayii AS	137,672		336,312
Tupras-Turkiye Petrol Rafinerileri AS	707,726		12,918,233
Turk Sise ve Cam Fabrikalari AS1	2,692,243		8,230,125
Turkiye Garanti Bankasi AS	3,862,404		11,280,170
Yapi ve Kredi Bankasi AS1	7,132,672		13,919,783
			127,284,703
TOTAL COMMON STOCKS (Cost: $9,958,427,885)			11,670,304,670
PREFERRED STOCKS – 1.70%
BRAZIL – 1.70%
Petroleo Brasileiro SA ADR	2,530,710		204,025,840
			204,025,840
TOTAL PREFERRED STOCKS (Cost: $144,921,183)			204,025,840
EXCHANGE-TRADED FUNDS – 0.57%
iShares MSCI Malaysia Index Fund2,4	1,039,160		8,011,924
iShares MSCI South Korea Index Fund2,4	545,647		25,023,371
iShares MSCI Taiwan Index Fund2,4	2,811,594		35,144,925
TOTAL EXCHANGE-TRADED FUNDS (Cost: $62,015,338)			68,180,220

SCHEDULES OF INVESTMENTS 45

Schedule of Investments (Continued)

iSHARES^® MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Principal		Value
SHORT-TERM INVESTMENTS – 5.97%
CERTIFICATES OF DEPOSIT5 – 0.25%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	4,159,989	$	4,159,989
Societe Generale
5.33%, 12/08/06		5,942,846		5,942,846
Washington Mutual Bank
5.36%, 11/13/06		14,857,115		14,857,115
Wells Fargo Bank N.A.
4.78%, 12/05/06		4,754,277		4,754,277
				29,714,227
COMMERCIAL PAPER5 – 0.96%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/066		1,734,004		1,713,630
Amsterdam Funding Corp.
5.27%, 09/15/066		5,942,846		5,930,666
Atlantis One Funding
5.30%, 11/14/066		8,154,060		8,065,226
Barton Capital Corp.
5.27%, 09/06/066		2,995,194		2,993,002
Cancara Asset Securitisation Ltd.
5.30%, 11/14/066		3,012,548		2,979,727
CC USA Inc.
5.03%, 10/24/066		1,188,569		1,179,768
Charta LLC
5.30%, 11/06/066		5,942,846		5,885,101
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/066		10,437,480		10,391,181
Curzon Funding LLC
5.29%, 11/17/066		5,942,846		5,875,604
Edison Asset Securitization LLC
5.22%, 12/11/066		4,384,156		4,319,950
Falcon Asset Securitization Corp.
5.30%, 11/06/066		5,942,846		5,885,101
Five Finance Inc.
5.19%, 12/01/066		2,674,281		2,639,196
General Electric Capital Services Inc.
5.22%, 12/11/06		594,285		585,581
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/066		5,942,846		5,921,314
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/066		2,852,566		2,829,032
KKR Pacific Funding Trust
5.29%, 09/14/066		5,942,846		5,931,494
Landale Funding LLC
5.31%, 11/15/066		4,635,420		4,584,189
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/066		7,703,236		7,659,037
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/066		5,289,133		5,282,698
Mont Blanc Capital Corp.
5.29%, 11/15/066		3,833,136		3,790,891
Monument Gardens Funding LLC
5.28%, 09/21/066		2,986,458		2,977,698
Nestle Capital Corp.
5.19%, 08/09/07		3,565,708		3,389,900
Park Granada LLC
5.30%, 09/01/066		1,358,059		1,358,059
Regency Markets LLC
5.28%, 09/15/06		2,971,423		2,965,327
Solitaire Funding Ltd.
5.27%, 09/05/066		4,457,135		4,454,525
Sydney Capital Corp.
5.27%, 09/12/066		1,359,723		1,357,534
Tulip Funding Corp.
5.29%, 11/15/066		3,134,376		3,099,832
White Pine Finance LLC
5.12%, 10/27/066		1,123,198		1,114,252
				115,159,515
MEDIUM-TERM NOTES5 – 0.21%
Bank of America N.A.
5.28%, 04/20/07		1,485,712		1,485,712
Cullinan Finance Corp.
5.71%, 06/28/076		4,457,135		4,457,135
K2 USA LLC
5.39%, 06/04/076		4,457,135		4,457,135

46 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Marshall & Ilsley Bank
5.18%, 12/15/06	$	5,942,846	$	5,948,729
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/076		6,953,130		6,953,130
US Bank N.A.
2.85%, 11/15/06		1,188,569		1,184,075
				24,485,916
MONEY MARKET FUNDS – 0.05%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%4,7		5,823,368		5,823,368
				5,823,368
REPURCHASE AGREEMENTS5 – 1.21%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $7,429,652 (collateralized by U.S. Government obligations, value $7,584,322, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	7,428,558		7,428,558
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $11,887,462 (collateralized by non-U.S. Government debt securities, value $12,253,885, 3.80% to 9.13%, 11/1/06 to 6/15/26).		11,885,692		11,885,692
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $8,915,599 (collateralized by non-U.S. Government debt securities, value $9,815,163, 0.08% to 6.43%, 9/25/20 to 7/25/36).		8,914,269		8,914,269
Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $17,831,192 (collateralized by non-U.S. Government debt securities, value $18,629,571, 4.35% to 7.50%, 9/15/08 to 8/25/35).	$	17,828,538	$	17,828,538
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $3,566,249 (collateralized by non-U.S. Government debt securities, value $4,352,771, 0.00% to 10.00%, 6/1/28 to 8/24/36).		3,565,708		3,565,708
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $11,887,458 (collateralized by non-U.S. Government debt securities, value $12,134,915, 0.00% to 8.57%, 11/15/06 to 2/15/38).		11,885,692		11,885,692
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $5,943,731 (collateralized by non-U.S. Government debt securities, value $6,245,912, 5.36% to 9.01%, 10/27/10 to 2/18/20).		5,942,846		5,942,846
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $1,485,935 (collateralized by non-U.S. Government debt securities, value $1,561,528, 6.63% to 10.50%, 1/15/07 to 4/15/16).		1,485,712		1,485,712

SCHEDULES OF INVESTMENTS 47

Schedule of Investments (Continued)

iSHARES^® MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Principal		Value
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $11,887,462 (collateralized by non-U.S. Government debt securities, value $12,491,872, 0.51% to 8.89%, 8/5/18 to 9/25/46).	$	11,885,692	$	11,885,692
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $5,943,734 (collateralized by non-U.S. Government debt securities, value $6,246,090, 4.11% to 9.79%, 4/28/31 to 9/25/46).		5,942,846		5,942,846
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $6,538,122 (collateralized by non-U.S. Government debt securities, value $6,870,503, 3.44% to 15.15%, 12/1/08 to 3/1/36).		6,537,131		6,537,131
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $11,887,452 (collateralized by non-U.S. Government debt securities, value $12,492,048, 6.38% to 10.25%, 5/1/07 to 10/15/16).		11,885,692		11,885,692
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $11,887,462 (collateralized by non-U.S. Government debt securities, value $12,256,100, 0.00% to 10.13%, 10/15/06 to 7/1/26).		11,885,692		11,885,692
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $ 5,943,731 (collateralized by non-U.S. Government debt securities, value $6,248,793, 4.05% to 7.24%, 6/20/29 to 1/14/41).		5,942,846		5,942,846
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $ 2,080,311 (collateralized by non-U.S. Government debt securities, value $3,189,877, 0.00% to 10.00%, 9/1/06 to 8/31/36).		2,079,996		2,079,996
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $ 4,336,361 (collateralized by non-U.S. Government debt securities, value $6,476,416, 0.00% to 10.00%, 9/1/06 to 8/31/36).8		4,159,992		4,159,992
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $ 15,453,709 (collateralized by non-U.S. Government debt securities, value $16,239,372, 0.06% to 7.68%, 10/15/11 to 3/15/45).		15,451,400		15,451,400
				144,708,302
TIME DEPOSITS5 – 0.01%
KBC Bank
5.31%, 09/01/06		1,254,000		1,254,000
				1,254,000
VARIABLE & FLOATING RATE NOTES5 – 3.28%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/076		15,213,686		15,215,653
American Express Bank
5.30%, 02/28/07		5,942,846		5,942,824
American Express Centurion Bank
5.42%, 07/19/07		6,537,131		6,543,754

48 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Principal		Value
American Express Credit Corp.
5.51%, 07/05/07	$	1,782,854	$	1,783,848
ASIF Global Financing
5.51%, 05/03/076		594,285		594,508
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/076		3,862,850		3,862,850
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/076		8,617,127		8,617,481
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/076		15,154,257		15,155,030
BMW US Capital LLC
5.33%, 09/14/076		5,942,846		5,942,846
BNP Paribas
5.36%, 05/18/076		10,994,265		10,994,265
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/076		4,338,278		4,338,278
CC USA Inc.
5.48%, 07/30/076		2,971,423		2,971,812
Commodore CDO Ltd.
5.38%, 06/12/076		1,485,712		1,485,712
Credit Agricole SA
5.48%, 07/23/07		5,942,846		5,942,846
Credit Suisse First Boston NY
5.51%, 04/24/07		2,971,423		2,971,556
Cullinan Finance Corp.
5.36%, 04/25/076		1,485,712		1,485,712
DEPFA Bank PLC
5.37%, 06/15/07		5,942,846		5,942,846
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/076		6,834,273		6,834,711
Eli Lilly Services Inc.
5.37%, 08/31/076		5,942,846		5,942,846
Fifth Third Bancorp
5.30%, 09/21/076		11,885,692		11,885,692
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/076		5,942,846		5,942,395
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		6,239,988		6,241,453
Granite Master Issuer PLC
5.30%, 09/20/06		20,799,961		20,799,961
Harrier Finance Funding LLC
5.33%, 07/25/076		1,782,854		1,783,183
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		8,914,269		8,915,662
HBOS Treasury Services PLC
5.53%, 07/24/076		5,942,846		5,942,846
Holmes Financing PLC
5.40%, 07/16/076		10,399,981		10,399,981
JP Morgan Chase & Co.
5.36%, 08/02/07		4,457,135		4,457,135
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/076		4,457,135		4,456,939
Kestrel Funding LLC
5.31%, 07/11/076		2,377,138		2,376,921
Kommunalkredit Austria AG
5.33%, 09/09/076		3,565,708		3,565,708
Leafs LLC
5.33%, 01/22/07 - 02/20/076		6,200,608		6,200,608
Lexington Parker Capital Co. LLC
5.46%, 01/10/076		7,428,558		7,426,901
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/076		6,537,131		6,536,671
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/076		2,618,583		2,618,583
Marshall & Ilsley Bank
5.31%, 09/14/07		3,268,565		3,268,565
Metropolitan Life Global Funding I
5.42%, 08/06/076		8,914,269		8,914,269
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/076,8		594,285		594,285

SCHEDULES OF INVESTMENTS 49

Schedule of Investments (Continued)

iSHARES^® MSCI EMERGING MARKETS INDEX FUND

August 31, 2006

Security	Principal		Value
Monumental Global Funding II
5.49%, 12/27/066	$	1,188,569	$	1,188,696
Mound Financing PLC
5.39%, 05/08/076		5,586,275		5,586,275
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/076		17,828,538		17,828,254
National City Bank of Indiana
5.37%, 05/21/07		2,971,423		2,971,603
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/076		19,611,392		19,615,963
Newcastle Ltd.
5.35%, 04/24/076		2,094,853		2,094,454
Northern Rock PLC
5.43%, 08/03/076		7,131,415		7,131,584
Principal Life Global Funding I
5.80%, 02/08/07		2,674,281		2,679,761
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/076		10,399,981		10,399,786
Skandinaviska Enskilda Bank NY
5.33%, 09/18/076		5,942,846		5,942,846
Strips III LLC
5.38%, 07/24/076		1,445,052		1,445,052
SunTrust Bank
5.37%, 05/01/07		5,942,846		5,943,089
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/076		14,500,544		14,499,259
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/066		8,319,984		8,319,984
US Bank N.A.
5.26%, 09/29/06		2,674,281		2,674,227
Wachovia Asset Securitization Inc.
5.31%, 09/25/066		8,867,986		8,867,987
Wachovia Bank N.A.
5.36%, 05/22/07		11,885,692		11,885,692
Wells Fargo & Co.
5.34%, 09/14/076		2,971,423		2,971,605
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/076		4,457,135		4,457,108
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/076		17,828,538		17,824,878
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/076		3,769,012		3,769,012
				392,994,251
TOTAL SHORT-TERM INVESTMENTS (Cost: $714,139,579)				714,139,579
TOTAL INVESTMENTS IN SECURITIES – 105.74% (Cost: $10,879,503,985)				12,656,650,309
Other Assets, Less Liabilities – (5.74)%				(687,270,151	)
NET ASSETS – 100.00%			$	11,969,380,158

ADR – American Depositary Receipts

GDR – Global Depositary Receipts

¹ Non-incomeearning security.

² Allor a portion of this security represents a security on loan. See Note 5.

³ Securityvalued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.

⁴ Affiliatedissuer. See Note 2.

⁵ Allor a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁶ Thissecurity or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁷ The rate quoted is the annualized seven-day yield of the fund at period end.

⁸ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

50 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments

iSHARES^® MSCI HONG KONG INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.75%
AIRLINES – 1.05%
Cathay Pacific Airways Ltd.	4,974,000	$	9,286,975
			9,286,975
APPAREL – 0.68%
Yue Yuen Industrial Holdings Ltd.	2,072,500		5,996,239
			5,996,239
BANKS – 13.28%
Bank of East Asia Ltd.	6,466,300		28,769,599
BOC Hong Kong Holdings Ltd.	16,580,000		36,371,852
Hang Seng Bank Ltd.	3,481,800		44,100,338
Wing Hang Bank Ltd.	829,000		7,963,005
			117,204,794
CHEMICALS – 0.91%
Kingboard Chemical Holdings Co. Ltd.	2,487,000		8,026,965
			8,026,965
DISTRIBUTION & WHOLESALE – 6.53%
Esprit Holdings Ltd.	4,438,500		36,926,859
Li & Fung Ltd.	8,723,000		20,751,021
			57,677,880
DIVERSIFIED FINANCIAL SERVICES – 3.83%
Hong Kong Exchanges & Clearing Ltd.	4,974,000		33,770,817
			33,770,817
ELECTRIC – 9.10%
CLP Holdings Ltd.	8,000,700		50,616,831
Hongkong Electric Holdings Ltd.	6,217,500		29,741,344
			80,358,175
ELECTRICAL COMPONENTS & EQUIPMENT – 0.60%
Johnson Electric Holdings Ltd.	7,046,500		5,255,370
			5,255,370
ENGINEERING & CONSTRUCTION – 3.10%
Cheung Kong Infrastructure Holdings Ltd.	2,053,000		6,507,403
New World Development Co. Ltd.	11,606,800		20,835,301
			27,342,704
GAS – 4.22%
Hong Kong & China Gas Co. Ltd.	16,051,663		37,276,887
			37,276,887
HAND & MACHINE TOOLS – 0.76%
Techtronic Industries Co. Ltd.	4,559,500		6,718,986
			6,718,986
HOLDING COMPANIES – DIVERSIFIED – 18.17%
Hutchison Whampoa Ltd.	9,574,800		86,984,874
Melco International Development Ltd.	3,316,000		7,990,721
Swire Pacific Ltd. Class A	4,188,500		45,834,230
Wharf Holdings Ltd. (The)	5,803,000		19,625,023
			160,434,848
LODGING – 1.28%
Shangri-La Asia Ltd.	5,726,000		11,338,978
			11,338,978
MEDIA – 0.80%
Television Broadcasts Ltd.	1,240,000		7,039,702
			7,039,702
REAL ESTATE – 24.28%
Cheung Kong Holdings Ltd.	6,682,000		73,807,670
Hang Lung Properties Ltd.	8,290,000		17,674,247
Henderson Land Development Co. Ltd.	3,316,000		18,740,245
Hopewell Holdings Ltd.	2,804,000		8,004,475
Hysan Development Co. Ltd.	2,613,000		7,089,633
Kerry Properties Ltd.1	2,072,500		7,781,785
Shun Tak Holdings Ltd.	4,127,000		5,014,968
Sino Land Co. Ltd.1	5,334,000		8,998,885
Sun Hung Kai Properties Ltd.	6,168,000		67,257,711
			214,369,619
REAL ESTATE INVESTMENT TRUSTS – 2.24%
Link REIT (The)	9,533,500		19,785,989
			19,785,989
RETAIL – 0.43%
Giordano International Ltd.	6,632,000		3,760,841
			3,760,841
SEMICONDUCTORS – 0.69%
ASM Pacific Technology Ltd.1	829,000		4,295,971
Solomon Systech International Ltd.	8,290,000		1,758,897
			6,054,868

SCHEDULES OF INVESTMENTS 51

Schedule of Investments (Continued)

iSHARES^® MSCI HONG KONG INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
TELECOMMUNICATIONS – 5.32%
Foxconn International Holdings Ltd.1,2		9,408,000	$	24,860,565
Hutchinson Telecommunications International Ltd.2		6,632,000		11,700,394
PCCW Ltd.		16,600,576		10,395,706
				46,956,665
TEXTILES – 0.25%
Texwinca Holdings Ltd.		3,316,000		2,166,108
				2,166,108
TRANSPORTATION – 2.23%
MTR Corp. Ltd.		6,217,583		15,894,243
Orient Overseas International Ltd.1		940,200		3,802,268
				19,696,511
TOTAL COMMON STOCKS (Cost: $775,991,753)				880,519,921
SHORT-TERM INVESTMENTS – 3.78%
CERTIFICATES OF DEPOSIT3 – 0.15%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	191,621		191,621
Societe Generale
5.33%, 12/08/06		273,744		273,744
Washington Mutual Bank
5.36%, 11/13/06		684,361		684,361
Wells Fargo Bank N.A.
4.78%, 12/05/06		218,995		218,995
				1,368,721
COMMERCIAL PAPER3 – 0.60%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		79,873		78,934
Amsterdam Funding Corp.
5.27%, 09/15/064		273,744		273,183
Atlantis One Funding
5.30%, 11/14/064		375,599		371,507
Barton Capital Corp.
5.27%, 09/06/064		137,967		137,866
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		138,766		137,255
Security	Principal		Value
CC USA Inc.
5.03%, 10/24/064	$	54,749	$	54,343
Charta LLC
5.30%, 11/06/064		273,744		271,084
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		480,780		478,648
Curzon Funding LLC
5.29%, 11/17/064		273,744		270,647
Edison Asset Securitization LLC
5.22%, 12/11/064		201,947		198,989
Falcon Asset Securitization Corp.
5.30%, 11/06/064		273,744		271,084
Five Finance Inc.
5.19%, 12/01/064		123,185		121,569
General Electric Capital Services Inc.
5.22%, 12/11/06		27,374		26,974
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		273,744		272,752
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		131,397		130,313
KKR Pacific Funding Trust
5.29%, 09/14/064		273,744		273,221
Landale Funding LLC
5.31%, 11/15/064		213,521		211,161
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		354,833		352,796
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		243,632		243,336
Mont Blanc Capital Corp.
5.29%, 11/15/064		176,565		174,619
Monument Gardens Funding LLC
5.28%, 09/21/064		137,565		137,161
Nestle Capital Corp.
5.19%, 08/09/07		164,247		156,148
Park Granada LLC
5.30%, 09/01/064		62,556		62,556

52 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI HONG KONG INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Regency Markets LLC
5.28%, 09/15/06	$	136,872	$	136,591
Solitaire Funding Ltd.
5.27%, 09/05/064		205,308		205,188
Sydney Capital Corp.
5.27%, 09/12/064		62,633		62,532
Tulip Funding Corp.
5.29%, 11/15/064		144,378		142,787
White Pine Finance LLC
5.12%, 10/27/064		51,738		51,326
				5,304,570
MEDIUM-TERM NOTES3 – 0.13%
Bank of America N.A.
5.28%, 04/20/07		68,436		68,436
Cullinan Finance Corp.
5.71%, 06/28/074		205,308		205,308
K2 USA LLC
5.39%, 06/04/074		205,308		205,308
Marshall & Ilsley Bank
5.18%, 12/15/06		273,744		274,015
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		320,281		320,280
US Bank N.A.
2.85%, 11/15/06		54,749		54,542
				1,127,889
MONEY MARKET FUNDS – 0.08%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		697,658		697,658
				697,658
Security	Principal		Value
REPURCHASE AGREEMENTS3 – 0.76%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $342,230 (collateralized by U.S. Government obligations, value $349,355, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	342,180	$	342,180
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $547,571 (collateralized by non-U.S. Government debt securities, value $564,449, 3.80% to 9.13%, 11/1/06 to 6/15/26).		547,489		547,489
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $410,677 (collateralized by non-U.S. Government debt securities, value $452,114, 0.08% to 6.43%, 9/25/20 to 7/25/36).		410,616		410,616
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $821,355 (collateralized by non-U.S. Government debt securities, value $858,131, 4.35% to 7.50%, 9/15/08 to 8/25/35).		821,233		821,233
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $164,272 (collateralized by non-U.S. Government debt securities, value $200,501, 0.00% to 10.00%, 6/1/28 to 8/24/36).		164,247		164,247

SCHEDULES OF INVESTMENTS 53

Schedule of Investments (Continued)

iSHARES^® MSCI HONG KONG INDEX FUND

August 31, 2006

Security	Principal		Value
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $ 547,570 (collateralized by non-U.S. Government debt securities, value $558,968, 0.00% to 8.57%, 11/15/06 to 2/15/38).	$	547,489	$	547,489
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $273,785 (collateralized by non-U.S. Government debt securities, value $287,704, 5.36% to 9.01%, 10/27/10 to 2/18/20).		273,744		273,744
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $68,446 (collateralized by non-U.S. Government debt securities, value $71,928, 6.63% to 10.50%, 1/15/07 to 4/15/16).		68,436		68,436
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $547,571 (collateralized by non-U.S. Government debt securities, value $575,411, 0.51% to 8.89%, 8/5/18 to 9/25/46).		547,489		547,489
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $273,785 (collateralized by non-U.S. Government debt securities, value $287,713, 4.11% to 9.79%, 4/28/31 to 9/25/46).		273,744		273,744
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $301,165 (collateralized by non-U.S. Government debt securities, value $316,475, 3.44% to 15.15%, 12/1/08 to 3/1/36).		301,119		301,119
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $ 547,569 (collateralized by non-U.S. Government debt securities, value $575,419, 6.38% to 10.25%, 5/1/07 to 10/15/16).		547,488		547,488
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $547,571 (collateralized by non-U.S. Government debt securities, value $564,551, 0.00% to 10.13%, 10/15/06 to 7/1/26).		547,489		547,489
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $273,785 (collateralized by non-U.S. Government debt securities, value $287,837, 4.05% to 7.24%, 6/20/29 to 1/14/41).		273,744		273,744
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $ 95,825 (collateralized by non-U.S. Government debt securities, value $146,935, 0.00% to 10.00%, 9/1/06 to 8/31/36).		95,810		95,810

54 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI HONG KONG INDEX FUND

August 31, 2006

Security	Principal		Value
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $199,745 (collateralized by non-U.S. Government debt securities, value $298,322, 0.00% to 10.00%, 9/1/06 to 8/31/36).7	$	191,621	$	191,621
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $711,841 (collateralized by non-U.S. Government debt securities, value $748,031, 0.06% to 7.68%, 10/15/11 to 3/15/45).		711,735		711,735
				6,665,673
TIME DEPOSITS3 – 0.01%
KBC Bank
5.31%, 09/01/06		57,763		57,763
				57,763
VARIABLE & FLOATING RATE NOTES3 – 2.05%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		700,794		700,886
American Express Bank
5.30%, 02/28/07		273,744		273,743
American Express Centurion Bank
5.42%, 07/19/07		301,119		301,424
American Express Credit Corp.
5.51%, 07/05/07		82,123		82,169
ASIF Global Financing
5.51%, 05/03/074		27,374		27,385
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		177,934		177,934
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		396,929		396,946
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		698,048		698,083
BMW US Capital LLC
5.33%, 09/14/074		273,744		273,744
BNP Paribas
5.36%, 05/18/074		506,427		506,427
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		199,833		199,833
CC USA Inc.
5.48%, 07/30/074		136,872		136,890
Commodore CDO Ltd.
5.38%, 06/12/074		68,436		68,436
Credit Agricole SA
5.48%, 07/23/07		273,744		273,744
Credit Suisse First Boston NY
5.51%, 04/24/07		136,872		136,878
Cullinan Finance Corp.
5.36%, 04/25/074		68,436		68,436
DEPFA Bank PLC
5.37%, 06/15/07		273,744		273,744
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		314,806		314,826
Eli Lilly Services Inc.
5.37%, 08/31/074		273,744		273,744
Fifth Third Bancorp
5.30%, 09/21/074		547,489		547,489
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		273,744		273,724
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		287,431		287,499
Granite Master Issuer PLC
5.30%, 09/20/06		958,105		958,105
Harrier Finance Funding LLC
5.33%, 07/25/074		82,123		82,138
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		410,616		410,680
HBOS Treasury Services PLC
5.53%, 07/24/074		273,744		273,744
Holmes Financing PLC
5.40%, 07/16/074		479,052		479,052

SCHEDULES OF INVESTMENTS 55

Schedule of Investments (Continued)

iSHARES^® MSCI HONG KONG INDEX FUND

August 31, 2006

Security	Principal		Value
JP Morgan Chase & Co.
5.36%, 08/02/07	$	205,308	$	205,308
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		205,308		205,299
Kestrel Funding LLC
5.31%, 07/11/074		109,498		109,488
Kommunalkredit Austria AG
5.33%, 09/09/074		164,247		164,247
Leafs LLC
5.33%, 01/22/07 - 02/20/074		285,618		285,617
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		342,180		342,104
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		301,119		301,097
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		120,619		120,619
Marshall & Ilsley Bank
5.31%, 09/14/07		150,559		150,559
Metropolitan Life Global Funding I
5.42%, 08/06/074		410,616		410,616
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		27,374		27,374
Monumental Global Funding II
5.49%, 12/27/064		54,749		54,755
Mound Financing PLC
5.39%, 05/08/074		257,320		257,320
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		821,233		821,220
National City Bank of Indiana
5.37%, 05/21/07		136,872		136,880
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		903,356		903,566
Newcastle Ltd.
5.35%, 04/24/074		96,495		96,476
Northern Rock PLC
5.43%, 08/03/074		328,493		328,501
Principal Life Global Funding I
5.80%, 02/08/07		123,185		123,437
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		479,052		479,043
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		273,744		273,744
Strips III LLC
5.38%, 07/24/074		66,563		66,563
SunTrust Bank
5.37%, 05/01/07		273,744		273,755
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		667,936		667,877
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		383,242		383,242
US Bank N.A.
5.26%, 09/29/06		123,185		123,182
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		408,485		408,485
Wachovia Bank N.A.
5.36%, 05/22/07		547,489		547,489
Wells Fargo & Co.
5.34%, 09/14/074		136,872		136,881
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		205,308		205,307
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		821,233		821,064
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		173,611		173,612
				18,102,430
TOTAL SHORT-TERM INVESTMENTS (Cost: $33,324,704)				33,324,704
TOTAL INVESTMENTS IN SECURITIES – 103.53% (Cost: $809,316,457)				913,844,625
Other Assets, Less Liabilities – (3.53)%				(31,132,646	)
NET ASSETS – 100.00%			$	882,711,979

56 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI HONG KONG INDEX FUND

August 31, 2006

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 57

Schedule of Investments

iSHARES^® MSCI MALAYSIA INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.59%
AGRICULTURE – 11.22%
British American Tobacco (Malaysia) Bhd	901,600	$	10,164,738
Golden Hope Plantations Bhd	2,962,400		3,862,950
Highlands & Lowlands Bhd	1,030,400		1,321,241
IOI Corp. Bhd	4,636,800		21,288,215
Kuala Lumpur Kepong Bhd	1,738,800		5,385,037
			42,022,181
AIRLINES – 0.94%
AirAsia Bhd1	5,731,600		2,102,054
Malaysian Airline System Bhd	1,738,800		1,426,562
			3,528,616
AUTO MANUFACTURERS – 1.30%
DRB-Hicom Bhd	4,186,000		1,694,415
Proton Holdings Bhd	1,738,800		2,333,516
Tan Chong Motor Holdings Bhd	2,318,400		856,567
			4,884,498
AUTO PARTS & EQUIPMENT – 0.77%
UMW Holdings Bhd	1,416,800		2,867,471
			2,867,471
BANKS – 25.42%
AMMB Holdings Bhd	9,660,000		6,429,503
Bumiputra-Commerce Holdings Bhd	15,456,032		26,872,753
Hong Leong Bank Bhd	3,348,800		4,867,177
Malayan Banking Bhd	13,299,600		40,466,047
Public Bank Bhd	7,212,800		13,226,406
RHB Capital Bhd	4,443,600		3,307,651
			95,169,537
BEVERAGES – 0.40%
Guinness Anchor Bhd	966,000		1,482,722
			1,482,722
BUILDING MATERIALS – 2.46%
Lafarge Malayan Cement Bhd	8,050,000		1,760,459
OYL Industries Bhd	4,894,430		7,446,022
			9,206,481
COMMERCIAL SERVICES – 2.15%
PLUS Expressways Bhd	10,497,200		8,041,865
			8,041,865
DIVERSIFIED FINANCIAL SERVICES – 1.66%
Bursa Malaysia Bhd	2,189,600		3,509,546
Hong Leong Credit Bhd	1,481,200		1,826,854
TA Enterprise Bhd	4,701,200		874,850
			6,211,250
ELECTRIC – 7.38%
Malakoff Bhd	3,799,600		10,012,529
Tenaga Nasional Bhd	7,084,050		17,609,089
			27,621,618
ENGINEERING & CONSTRUCTION – 5.93%
Gamuda Bhd	3,928,400		4,332,873
IJM Corp. Bhd	2,447,200		3,955,675
Malaysian Resources Corp. Bhd1	5,280,800		1,083,131
MMC Corp. Bhd	2,157,800		1,875,838
Road Builder (Malaysia) Holdings Bhd	2,769,200		1,730,280
Transmile Group Bhd	901,600		2,963,695
YTL Corp. Bhd	4,379,288		6,245,928
			22,187,420
ENTERTAINMENT – 6.90%
Berjaya Sports Toto Bhd	4,701,200		5,747,188
Magnum Corp. Bhd	5,989,200		3,498,174
Resorts World Bhd	3,413,200		11,034,252
Tanjong PLC	1,545,600		5,542,494
			25,822,108
FOOD – 1.11%
PPB Group Bhd	3,348,866		4,166,750
			4,166,750
GAS – 1.79%
Petronas Gas Bhd	2,769,200		6,695,431
			6,695,431
HOLDING COMPANIES – DIVERSIFIED – 5.22%
Mulpha International Bhd1	5,280,800		1,750,224
Multi-Purpose Holdings Bhd1	4,057,200		1,025,046
Sime Darby Bhd	10,368,400		16,759,571
			19,534,841
INSURANCE – 0.22%
Kurnia Asia Bhd	2,640,431		817,737
			817,737

58 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI MALAYSIA INDEX FUND

August 31, 2006

Security	Shares	Value
LODGING – 4.43%
Genting Bhd	2,481,900	$	16,586,455
			16,586,455
MEDIA – 2.36%
Astro All Asia Networks PLC	3,348,800		4,330,423
Media Prima Bhd	3,413,200		1,594,867
Star Publications (Malaysia) Bhd	3,091,360		2,905,761
			8,831,051
OIL & GAS – 1.37%
Petronas Dagangan Bhd	1,738,800		1,993,408
Shell Refining Co.	1,056,400		3,128,161
			5,121,569
OIL & GAS SERVICES – 0.26%
Scomi Group Bhd	4,186,000		989,356
			989,356
REAL ESTATE – 2.23%
IGB Corp. Bhd	4,636,800		1,801,309
IOI Properties Bhd	579,650		1,322,755
KLCC Property Holdings Bhd	2,962,400		1,770,519
SP Setia Bhd	3,348,800		3,438,866
			8,333,449
SEMICONDUCTORS – 0.42%
Malaysian Pacific Industries Bhd	579,600		1,590,318
			1,590,318
TELECOMMUNICATIONS – 7.82%
Maxis Communications Bhd	6,118,000		14,626,026
Telekom Malaysia Bhd	5,924,800		14,647,020
			29,273,046
TRANSPORTATION – 5.83%
Malaysia International Shipping Corp. Bhd	7,856,800		18,035,849
Malaysian Bulk Carriers Bhd	1,674,400		1,082,606
Pos Malaysia & Services Holdings Bhd	2,189,600		2,712,463
			21,830,918
TOTAL COMMON STOCKS (Cost: $267,510,586)			372,816,688
SHORT-TERM INVESTMENTS – 0.00%
MONEY MARKET FUNDS – 0.00%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%2,3	463		463
			463
TOTAL SHORT-TERM INVESTMENTS (Cost: $463)			463
TOTAL INVESTMENTS IN SECURITIES – 99.59% (Cost: $267,511,049)			372,817,151
Other Assets, Less Liabilities – 0.41%			1,516,791
NET ASSETS – 100.00%		$	374,333,942

¹ Non-income earning security.

² Affiliated issuer. See Note 2.

³ The rate quoted is the annualized seven-day yield of the fund at period end.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 59

Schedule of Investments

iSHARES^® MSCI MEXICO INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.95%
BEVERAGES – 8.40%
Coca-Cola Femsa SA de CV ADR	222,000	$	6,553,440
Fomento Economico Mexicano SA de CV Class UBD	3,866,536		36,433,865
Grupo Modelo SA de CV Series C	5,032,000		21,208,484
			64,195,789
BUILDING MATERIALS – 14.62%
Cemex SA de CV Series CPO1,2	38,757,476		111,742,864
			111,742,864
DIVERSIFIED FINANCIAL SERVICES – 4.03%
Grupo Financiero Banorte SA de CV Series O2	10,489,500		30,761,702
			30,761,702
ENGINEERING & CONSTRUCTION – 3.67%
Carso Infraestructura y Construccion SA de CV1,2	4,791,500		3,508,519
Empresas ICA Sociedad Controladora SA de CV1	1,979,974		6,724,663
Grupo Aeroportuario del Pacifico SA de CV Class H2	3,052,500		10,333,755
Grupo Aeroportuario del Sureste SA de CV ADR	210,900		7,451,097
			28,018,034
FOOD – 1.26%
Grupo Bimbo SA de CV Series A2	2,923,000		9,619,441
			9,619,441
FOREST PRODUCTS & PAPER – 2.24%
Kimberly-Clark de Mexico SA de CV Class A	4,532,500		17,076,186
			17,076,186
HOLDING COMPANIES – DIVERSIFIED – 4.40%
Alfa SA de CV Class A2	2,127,500		10,372,580
Grupo Carso SA de CV Series A12	7,955,030		23,278,036
			33,650,616
HOME BUILDERS – 3.07%
Corporacion GEO SA de CV Series B1,2	3,126,500		12,716,023
Desarrolladora Homex SA de CV1,2	333,030		2,056,764
Urbi Desarrollos Urbanos SA de CV1	3,274,500		8,690,588
			23,463,375
MEDIA – 5.58%
Grupo Televisa SA Series CPO2	9,453,500		35,997,244
TV Azteca SA de CV Series CPO2	10,045,500		6,610,002
			42,607,246
MINING – 3.74%
Grupo Mexico SA de CV Series B	7,141,000		22,780,783
Industrias Penoles SA de CV Series CP	684,500		5,823,276
			28,604,059
REAL ESTATE – 1.44%
Consorcio Ara SA de CV	2,368,000		11,032,980
			11,032,980
RETAIL – 7.27%
Controladora Comercial Mexicana SA de CV	4,033,000		7,580,528
Grupo Sanborns SA de CV Series B11,2	1,406,093		3,311,714
Organizacion Soriana SA de CV Series B2	1,591,006		7,579,031
Wal-Mart de Mexico SA de CV Series V	10,841,000		37,097,894
			55,569,167
TELECOMMUNICATIONS – 40.23%
America Movil SA de CV Series L2	100,362,500		187,356,210
America Telecom SA de CV Series A11,2	4,699,000		32,035,064
Carso Global Telecom SA de CV Class A11,2	6,706,435		18,714,775
Telefonos de Mexico SA de CV Series L2	57,183,500		69,279,984
			307,386,033
TOTAL COMMON STOCKS (Cost: $743,736,543)			763,727,492

60 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI MEXICO INDEX FUND

August 31, 2006

Security	Principal		Value
SHORT-TERM INVESTMENTS – 10.30%
CERTIFICATES OF DEPOSIT3 – 0.43%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	458,520	$	458,520
Societe Generale
5.33%, 12/08/06		655,029		655,029
Washington Mutual Bank
5.36%, 11/13/06		1,637,573		1,637,573
Wells Fargo Bank N.A.
4.78%, 12/05/06		524,023		524,023
				3,275,145
COMMERCIAL PAPER3 – 1.66%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		191,124		188,879
Amsterdam Funding Corp.
5.27%, 09/15/064		655,029		653,687
Atlantis One Funding
5.30%, 11/14/064		898,752		888,961
Barton Capital Corp.
5.27%, 09/06/064		330,135		329,893
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		332,047		328,430
CC USA Inc.
5.03%, 10/24/064		131,006		130,036
Charta LLC
5.30%, 11/06/064		655,029		648,664
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		1,150,434		1,145,331
Curzon Funding LLC
5.29%, 11/17/064		655,029		647,618
Edison Asset Securitization LLC
5.22%, 12/11/064		483,228		476,151
Falcon Asset Securitization Corp.
5.30%, 11/06/064		655,029		648,664
Five Finance Inc.
5.19%, 12/01/064		294,763		290,896
General Electric Capital Services Inc.
5.22%, 12/11/06		65,503		64,544
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		655,029		652,656
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		314,414		311,820
KKR Pacific Funding Trust
5.29%, 09/14/064		655,029		653,778
Landale Funding LLC
5.31%, 11/15/064		510,923		505,276
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		849,062		844,190
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		582,976		582,266
Mont Blanc Capital Corp.
5.29%, 11/15/064		422,494		417,837
Monument Gardens Funding LLC
5.28%, 09/21/064		329,172		328,206
Nestle Capital Corp.
5.19%, 08/09/07		393,017		373,640
Park Granada LLC
5.30%, 09/01/064		149,687		149,687
Regency Markets LLC
5.28%, 09/15/06		327,515		326,843
Solitaire Funding Ltd.
5.27%, 09/05/064		491,272		490,984
Sydney Capital Corp.
5.27%, 09/12/064		149,871		149,629
Tulip Funding Corp.
5.29%, 11/15/064		345,475		341,668
White Pine Finance LLC
5.12%, 10/27/064		123,800		122,814
				12,693,048
MEDIUM-TERM NOTES3 – 0.35%
Bank of America N.A.
5.28%, 04/20/07		163,757		163,757
Cullinan Finance Corp.
5.71%, 06/28/074		491,272		491,272
K2 USA LLC
5.39%, 06/04/074		491,272		491,272

SCHEDULES OF INVESTMENTS 61

Schedule of Investments (Continued)

iSHARES^® MSCI MEXICO INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Marshall & Ilsley Bank
5.18%, 12/15/06	$	655,029	$	655,677
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		766,384		766,384
US Bank N.A.
2.85%, 11/15/06		131,006		130,510
				2,698,872
MONEY MARKET FUNDS – 0.08%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		592,868		592,868
				592,868
REPURCHASE AGREEMENTS3 – 2.09%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $818,907 (collateralized by U.S. Government obligations, value $835,955, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	818,786		818,786
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,310,253 (collateralized by non-U.S. Government debt securities, value $1,350,641, 3.80% to 9.13%, 11/1/06 to 6/15/26).		1,310,058		1,310,058
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $982,691 (collateralized by non-U.S. Government debt securities, value $1,081,841, 0.08% to 6.43%, 9/25/20 to 7/25/36).		982,544		982,544
Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,965,380 (collateralized by non-U.S. Government debt securities, value $2,053,378, 4.35% to 7.50%, 9/15/08 to 8/25/35).	$	1,965,087	$	1,965,087
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $393,077 (collateralized by non-U.S. Government debt securities, value $479,769, 0.00% to 10.00%, 6/1/28 to 8/24/36).		393,017		393,017
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $ 1,310,253 (collateralized by non-U.S. Government debt securities, value $1,337,528, 0.00% to 8.57%, 11/15/06 to 2/15/38).		1,310,058		1,310,058
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $655,127 (collateralized by non-U.S. Government debt securities, value $688,433, 5.36% to 9.01%, 10/27/10 to 2/18/20).		655,029		655,029
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $163,782 (collateralized by non-U.S. Government debt securities, value $172,114, 6.63% to 10.50%, 1/15/07 to 4/15/16).		163,757		163,757

62 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI MEXICO INDEX FUND

August 31, 2006

Security	Principal		Value
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,310,253 (collateralized by non-U.S. Government debt securities, value $1,376,872, 0.51% to 8.89%, 8/5/18 to 9/25/46).	$	1,310,058	$	1,310,058
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $655,127 (collateralized by non-U.S. Government debt securities, value $688,453, 4.11% to 9.79%, 4/28/31 to 9/25/46).		655,029		655,029
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $720,641 (collateralized by non-U.S. Government debt securities, value $757,277, 3.44% to 15.15%, 12/1/08 to 3/1/36).		720,532		720,532
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $ 1,310,253 (collateralized by non-U.S. Government debt securities, value $1,376,891, 6.38% to 10.25%, 5/1/07 to 10/15/16).		1,310,058		1,310,058
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $ 1,310,253 (collateralized by non-U.S. Government debt securities, value $1,350,885, 0.00% to 10.13%, 10/15/06 to 7/1/26).		1,310,058		1,310,058
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $ 655,127 (collateralized by non-U.S. Government debt securities, value $688,751, 4.05% to 7.24%, 6/20/29 to 1/14/41).		655,029		655,029
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $ 229,295 (collateralized by non-U.S. Government debt securities, value $351,593, 0.00% to 10.00%, 9/1/06 to 8/31/36).		229,260		229,260
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $ 477,960 (collateralized by non-U.S. Government debt securities, value $713,840, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		458,520		458,520
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $ 1,703,330 (collateralized by non-U.S. Government debt securities, value $1,789,927, 0.06% to 7.68%, 10/15/11 to 3/15/45).		1,703,075		1,703,075
				15,949,955
TIME DEPOSITS3 – 0.02%
KBC Bank
5.31%, 09/01/06		138,218		138,218
				138,218
VARIABLE & FLOATING RATE NOTES3 – 5.67%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		1,676,874		1,677,090
American Express Bank
5.30%, 02/28/07		655,029		655,026
American Express Centurion Bank
5.42%, 07/19/07		720,532		721,262

SCHEDULES OF INVESTMENTS 63

Schedule of Investments (Continued)

iSHARES^® MSCI MEXICO INDEX FUND

August 31, 2006

Security	Principal		Value
American Express Credit Corp.
5.51%, 07/05/07	$	196,509	$	196,618
ASIF Global Financing
5.51%, 05/03/074		65,503		65,528
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		425,769		425,769
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		949,792		949,831
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		1,670,324		1,670,408
BMW US Capital LLC
5.33%, 09/14/074		655,029		655,029
BNP Paribas
5.36%, 05/18/074		1,211,804		1,211,804
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		478,171		478,171
CC USA Inc.
5.48%, 07/30/074		327,515		327,557
Commodore CDO Ltd.
5.38%, 06/12/074		163,757		163,757
Credit Agricole SA
5.48%, 07/23/07		655,029		655,029
Credit Suisse First Boston NY
5.51%, 04/24/07		327,515		327,529
Cullinan Finance Corp.
5.36%, 04/25/074		163,757		163,757
DEPFA Bank PLC
5.37%, 06/15/07		655,029		655,029
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		753,283		753,331
Eli Lilly Services Inc.
5.37%, 08/31/074		655,029		655,029
Fifth Third Bancorp
5.30%, 09/21/074		1,310,058		1,310,058
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		655,029		654,979
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		687,780		687,941
Granite Master Issuer PLC
5.30%, 09/20/06		2,292,602		2,292,602
Harrier Finance Funding LLC
5.33%, 07/25/074		196,509		196,545
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		982,544		982,697
HBOS Treasury Services PLC
5.53%, 07/24/074		655,029		655,029
Holmes Financing PLC
5.40%, 07/16/074		1,146,301		1,146,301
JP Morgan Chase & Co.
5.36%, 08/02/07		491,272		491,272
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		491,272		491,250
Kestrel Funding LLC
5.31%, 07/11/074		262,012		261,988
Kommunalkredit Austria AG
5.33%, 09/09/074		393,017		393,017
Leafs LLC
5.33%, 01/22/07 - 02/20/074		683,440		683,439
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		818,786		818,604
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		720,532		720,481
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		288,624		288,624
Marshall & Ilsley Bank
5.31%, 09/14/07		360,266		360,266
Metropolitan Life Global Funding I
5.42%, 08/06/074		982,544		982,544
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		65,503		65,503
Monumental Global Funding II
5.49%, 12/27/064		131,006		131,020

64 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI MEXICO INDEX FUND

August 31, 2006

Security	Principal		Value
Mound Financing PLC
5.39%, 05/08/074	$	615,727	$	615,727
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		1,965,087		1,965,059
National City Bank of Indiana
5.37%, 05/21/07		327,515		327,534
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		2,161,596		2,162,100
Newcastle Ltd.
5.35%, 04/24/074		230,898		230,854
Northern Rock PLC
5.43%, 08/03/074		786,035		786,053
Principal Life Global Funding I
5.80%, 02/08/07		294,763		295,367
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		1,146,301		1,146,280
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		655,029		655,029
Strips III LLC
5.38%, 07/24/074		159,276		159,276
SunTrust Bank
5.37%, 05/01/07		655,029		655,056
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		1,598,271		1,598,130
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		917,041		917,041
US Bank N.A.
5.26%, 09/29/06		294,763		294,757
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		977,442		977,442
Wachovia Bank N.A.
5.36%, 05/22/07		1,310,058		1,310,058
Wells Fargo & Co.
5.34%, 09/14/074		327,515		327,535
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		491,272		491,269
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		1,965,087		1,964,684
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		415,426		415,426
				43,316,391
TOTAL SHORT-TERM INVESTMENTS (Cost: $78,664,497)				78,664,497
TOTAL INVESTMENTS IN SECURITIES – 110.25% (Cost: $822,401,040)				842,391,989
Other Assets, Less Liabilities – (10.25)%				(78,284,837	)
NET ASSETS – 100.00%			$	764,107,152

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 All or a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 65

Schedule of Investments

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.18%
AUSTRALIA – 66.23%
ABC Learning Centres Ltd.	796,059	$	3,945,339
Alinta Ltd.	589,885		4,964,132
Alumina Ltd.	2,597,056		12,593,585
Amcor Ltd.	1,973,785		10,113,855
AMP Ltd.	4,214,232		29,124,694
Ansell Ltd.	370,073		2,662,151
APN News & Media Ltd.	629,442		2,398,560
Aristocrat Leisure Ltd.	787,457		7,877,574
Australia & New Zealand Banking Group Ltd.	4,120,732		85,750,218
Australian Gas Light Co. Ltd.	1,025,508		15,795,716
Australian Stock Exchange Ltd.	396,692		9,996,817
AXA Asia Pacific Holdings Ltd.	1,955,272		9,780,090
Babcock & Brown Ltd.	466,377		7,158,591
BHP Billiton Ltd.	7,857,366		166,207,688
Billabong International Ltd.	365,398		4,129,736
BlueScope Steel Ltd.	1,560,702		8,092,526
Boral Ltd.	1,323,025		6,870,231
Brambles Industries Ltd.1	2,192,388		20,006,894
Caltex Australia Ltd.	308,924		5,399,975
Centro Properties Group	1,844,381		10,788,815
CFS Retail Property Trust	3,025,660		4,390,036
Challenger Financial Services Group Ltd.	962,302		2,579,365
Coca-Cola Amatil Ltd.	1,169,311		5,848,786
Cochlear Ltd.	124,542		4,783,857
Coles Myer Ltd.	2,661,945		28,438,792
Commonwealth Bank of Australia	2,899,061		101,218,042
Commonwealth Property Office Fund	3,144,779		3,410,145
Computershare Ltd.	1,002,881		5,973,631
CSL Ltd.	409,343		15,895,445
CSR Ltd.	2,065,789		4,969,250
DB RREEF Trust	6,012,050		7,185,075
Downer EDI Ltd.	660,297		2,838,848
Foster’s Group Ltd.	4,543,165		20,642,858
Futuris Corp. Ltd.	1,319,472		2,156,296
Goodman Fielder Ltd.2	2,419,593		3,917,171
GPT Group	4,350,555		15,182,917
Harvey Norman Holdings Ltd.	1,211,573		3,182,749
Iluka Resources Ltd.	572,220		3,194,293
ING Industrial Fund3	1,681,130		2,914,214
Insurance Australia Group Ltd.	3,598,254		14,755,722
Investa Property Group	3,402,278		6,157,614
James Hardie Industries NV	1,070,201		5,475,635
John Fairfax Holdings Ltd.	2,154,614		6,647,299
Leighton Holdings Ltd.	312,851		4,732,781
Lend Lease Corp. Ltd.	806,531		9,675,905
Lion Nathan Ltd.	666,655		4,062,547
Macquarie Airports	1,523,863		3,467,820
Macquarie Bank Ltd.	548,284		27,131,571
Macquarie Communications Infrastructure Group	740,554		3,410,110
Macquarie Goodman Group	3,050,157		14,767,460
Macquarie Infrastructure Group	5,574,844		13,410,273
Macquarie Office Trust	4,299,691		4,695,346
Mayne Pharma Ltd.2	1,410,167		3,306,003
Mirvac Group	1,963,874		6,853,686
Multiplex Group	1,401,752		3,618,114
National Australia Bank Ltd.	3,603,864		99,955,936
Newcrest Mining Ltd.	745,569		11,102,399
OneSteel Ltd.	1,294,788		4,212,138
Orica Ltd.	702,933		12,061,779
Origin Energy Ltd.	1,777,435		9,053,446
Pacific Brands Ltd.	1,122,374		2,074,184
Paladin Resources Ltd.2	972,961		3,937,909
PaperlinX Ltd.	992,970		2,608,489
Perpetual Ltd.	93,874		5,220,239
Publishing & Broadcasting Ltd.	312,851		4,386,363
Qantas Airways Ltd.	2,140,589		5,623,233
QBE Insurance Group Ltd.	1,787,159		32,563,268
Rinker Group Ltd.	2,062,797		21,738,518
Rio Tinto Ltd.	641,784		35,752,675
Santos Ltd.	1,336,676		11,422,222
Sonic Healthcare Ltd.	593,912		5,483,310
Stockland Trust Group	3,037,254		16,792,449
Suncorp-Metway Ltd.	1,240,184		19,414,863
Sydney Roads Group2	1,808,023		1,429,021
Symbion Health Ltd.	1,436,721		3,565,744
TABCORP Holdings Ltd.	1,177,913		13,618,631
Telstra Corp. Ltd.1	4,855,642		13,348,840

66 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Shares	Value
Toll Holdings Ltd.	1,181,582	$	12,894,083
Transurban Group	1,792,208		9,566,651
UNiTAB Ltd.	266,101		2,855,073
Wesfarmers Ltd.	845,801		21,695,644
Westfield Group	3,325,982		46,403,720
Westpac Banking Corp. Ltd.	4,131,765		73,737,546
Woodside Petroleum Ltd.	1,050,753		33,909,742
Woolworths Ltd.	2,650,163		41,892,597
WorleyParsons Ltd.	324,267		4,477,087
Zinifex Ltd.	1,103,487		10,027,866
			1,387,372,508
HONG KONG – 21.05%
ASM Pacific Technology Ltd.1	467,500		2,422,638
Bank of East Asia Ltd.	3,216,400		14,310,276
BOC Hong Kong Holdings Ltd.	8,228,000		18,049,916
Cathay Pacific Airways Ltd.	2,244,000		4,189,781
Cheung Kong Holdings Ltd.	3,366,000		37,179,979
Cheung Kong Infrastructure Holdings Ltd.	935,000		2,963,674
CLP Holdings Ltd.	4,020,500		25,435,895
Esprit Holdings Ltd.	2,150,500		17,891,452
Foxconn International Holdings Ltd.2	4,675,000		12,353,650
Giordano International Ltd.	3,366,000		1,908,774
Hang Lung Properties Ltd.	4,114,736		8,772,601
Hang Seng Bank Ltd.	1,701,700		21,553,663
Henderson Land Development Co. Ltd.	1,683,000		9,511,409
Hong Kong & China Gas Co. Ltd.	8,041,836		18,675,611
Hong Kong Exchanges & Clearing Ltd.	2,337,500		15,870,383
Hongkong Electric Holdings Ltd.	3,085,500		14,759,456
Hopewell Holdings Ltd.	1,496,000		4,270,576
Hutchinson Telecommunications International Ltd.2	3,179,000		5,608,497
Hutchison Whampoa Ltd.	4,862,000		44,170,161
Hysan Development Co. Ltd.	1,496,000		4,058,971
Kerry Properties Ltd.1	1,122,000		4,212,865
Kingboard Chemical Holdings Co. Ltd.	1,309,000		4,224,888
Li & Fung Ltd.	4,525,600		10,765,886
Link REIT (The)	4,675,000		9,702,575
Melco International Development Ltd.	1,587,000		3,824,268
MTR Corp. Ltd.	3,085,500		7,887,580
New World Development Co. Ltd.	5,797,941		10,407,851
Noble Group Ltd.1	2,244,000		1,541,091
Orient Overseas International Ltd.	561,000		2,268,743
PCCW Ltd.	8,415,845		5,270,218
Shangri-La Asia Ltd.	2,992,000		5,924,943
Shun Tak Holdings Ltd.	1,870,000		2,272,350
Sino Land Co. Ltd.1	2,992,000		5,047,743
Solomon Systech International Ltd.	5,984,000		1,269,631
Sun Hung Kai Properties Ltd.	3,179,000		34,664,764
Swire Pacific Ltd. Class A	2,150,500		23,532,652
Techtronic Industries Co. Ltd.	2,524,500		3,720,162
Television Broadcasts Ltd.	561,000		3,184,897
Texwinca Holdings Ltd.	1,496,000		977,231
Wharf Holdings Ltd. (The)	2,805,000		9,486,161
Wing Hang Bank Ltd.	374,000		3,592,478
Yue Yuen Industrial Holdings Ltd.	1,122,000		3,246,215
			440,982,555
NEW ZEALAND – 1.79%
Auckland International Airport Ltd.	2,219,129		2,803,385
Contact Energy Ltd.	631,686		2,832,270
Fisher & Paykel Appliances Holdings Ltd.	561,561		1,323,251
Fisher & Paykel Healthcare Corp. Ltd.	1,130,789		3,005,041
Fletcher Building Ltd.	1,061,225		6,022,397
Kiwi Income Property Trust	1,326,204		1,215,294
Sky City Entertainment Group Ltd.	967,538		3,293,170
Sky Network Television Ltd. New	443,196		1,621,625
Telecom Corp. of New Zealand Ltd.	4,488,000		12,279,253
Tower Ltd.2	631,312		1,363,643
Vector Ltd.	574,519		827,313
Warehouse Group Ltd. (The)	293,964		962,071
			37,548,713
SINGAPORE – 10.11%
Allgreen Properties Ltd.	1,122,000		1,041,663
Ascendas Real Estate Investment Trust	2,057,000		2,694,531
CapitaLand Ltd.	2,618,000		7,924,253

SCHEDULES OF INVESTMENTS 67

Schedule of Investments (Continued)

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Shares		Value
CapitaMall Trust Management Ltd.1		1,870,000	$	2,806,308
Chartered Semiconductor Manufacturing Ltd.1,2		2,618,000		2,130,891
City Developments Ltd.		1,122,000		7,027,661
ComfortDelGro Corp. Ltd.		4,114,000		3,924,075
COSCO Corp. (Singapore) Ltd.		1,870,000		1,819,344
Creative Technology Ltd.		205,700		1,347,266
DBS Group Holdings Ltd.		2,431,000		27,825,257
Fraser and Neave Ltd.		1,874,150		4,743,175
Haw Par Corp. Ltd.		187,397		703,067
Jardine Cycle & Carriage Ltd.		374,000		2,663,614
Keppel Corp. Ltd.		1,309,000		12,485,693
Keppel Land Ltd.		748,000		2,111,866
Neptune Orient Lines Ltd.		1,122,000		1,376,994
Olam International Ltd.		1,496,000		1,522,065
Oversea-Chinese Banking Corp.		5,610,600		23,011,808
Parkway Holdings Ltd.		1,371,000		2,092,331
SembCorp Industries Ltd.		1,870,240		4,138,646
SembCorp Marine Ltd.		1,122,000		2,468,600
Singapore Airlines Ltd.		1,309,000		10,987,409
Singapore Exchange Ltd.		1,683,000		4,259,405
Singapore Land Ltd.		374,000		1,664,759
Singapore Petroleum Co. Ltd.		374,000		1,151,062
Singapore Post Ltd.		3,366,000		2,183,213
Singapore Press Holdings Ltd.		3,366,517		8,520,118
Singapore Technologies Engineering Ltd.		2,992,000		5,555,539
Singapore Telecommunications Ltd.		15,989,327		25,316,943
SMRT Corp. Ltd.		1,496,000		1,017,881
STATS ChipPAC Ltd.2		3,740,000		2,402,009
Suntec REIT		1,870,000		1,545,848
United Overseas Bank Ltd.		2,618,000		25,970,241
United Overseas Land Ltd.		1,194,000		2,384,052
Want Want Holdings Ltd.		1,122,000		1,683,000
Wing Tai Holdings Ltd.		1,122,333		1,298,897
				211,799,484
TOTAL COMMON STOCKS (Cost: $1,626,476,942)				2,077,703,260
Security	Principal		Value
SHORT-TERM INVESTMENTS – 2.11%
CERTIFICATES OF DEPOSIT4 – 0.09%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	258,749	$	258,749
Societe Generale
5.33%, 12/08/06		369,642		369,642
Washington Mutual Bank
5.36%, 11/13/06		924,105		924,105
Wells Fargo Bank N.A.
4.78%, 12/05/06		295,714		295,714
				1,848,210
COMMERCIAL PAPER4 – 0.34%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/065		107,854		106,588
Atlantis One Funding
5.30%, 11/14/065		507,178		501,655
Bank of America N.A.
5.27%, 09/15/065		369,642		368,884
Barton Capital Corp.
5.27%, 09/06/065		186,300		186,163
Cancara Asset Securitisation Ltd.
5.30%, 11/14/065		187,379		185,338
CC USA Inc.
5.03%, 10/24/065		73,928		73,381
Charta LLC
5.30%, 11/06/065		369,642		366,050
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/065		649,206		646,326
Curzon Funding LLC
5.29%, 11/17/065		369,642		365,460
Edison Asset Securitization LLC
5.22%, 12/11/065		272,692		268,699
Falcon Asset Securitization Corp.
5.30%, 11/06/065		369,642		366,050
Five Finance Inc.
5.19%, 12/01/065		166,339		164,157
General Electric Capital Services Inc.
5.22%, 12/11/06		36,964		36,423

68 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/065	$	369,642	$	368,303
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/065		177,428		175,965
KKR Pacific Funding Trust
5.29%, 09/14/065		369,642		368,936
Landale Funding LLC
5.31%, 11/15/065		288,321		285,134
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/065		479,137		476,388
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/065		328,981		328,581
Mont Blanc Capital Corp.
5.29%, 11/15/065		238,419		235,791
Monument Gardens Funding LLC
5.28%, 09/21/065		185,756		185,211
Nestle Capital Corp.
5.19%, 08/09/07		221,785		210,850
Park Granada LLC
5.30%, 09/01/065		84,471		84,471
Regency Markets LLC
5.28%, 09/15/06		184,821		184,442
Solitaire Funding Ltd.
5.27%, 09/05/065		277,231		277,069
Sydney Capital Corp.
5.27%, 09/12/065		84,574		84,438
Tulip Funding Corp.
5.29%, 11/15/065		194,957		192,808
White Pine Finance LLC
5.12%, 10/27/065		69,862		69,306
				7,162,867
MEDIUM-TERM NOTES4 – 0.07%
Bank of America N.A.
5.28%, 04/20/07		92,410		92,410
Cullinan Finance Corp.
5.71%, 06/28/075		277,231		277,231
K2 USA LLC
5.39%, 06/04/075		277,231		277,231
Security	Shares or Principal		Value
Marshall & Ilsley Bank
5.18%, 12/15/06	$	369,642	$	370,008
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/075		432,481		432,481
US Bank N.A.
2.85%, 11/15/06		73,928		73,649
				1,523,010
MONEY MARKET FUNDS – 0.01%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%6,7		177,436		177,436
				177,436
REPURCHASE AGREEMENTS4 – 0.43%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $462,120 (collateralized by U.S. Government obligations, value $471,741, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	462,052		462,052
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $739,394 (collateralized by non-U.S. Government debt securities, value $762,185, 3.80% to 9.13%, 11/1/06 to 6/15/26).		739,284		739,284
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $554,546 (collateralized by non-U.S. Government debt securities, value $610,498, 0.08% to 6.43%, 9/25/20 to 7/25/36).		554,463		554,463

SCHEDULES OF INVESTMENTS 69

Schedule of Investments (Continued)

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,109,091 (collateralized by non-U.S. Government debt securities, value $1,158,750, 4.35% to 7.50%, 9/15/08 to 8/25/35).	$	1,108,926	$	1,108,926
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $221,819 (collateralized by non-U.S. Government debt securities, value $270,740, 0.00% to 10.00%, 6/1/28 to 8/24/36).		221,785		221,785
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $739,394 (collateralized by non-U.S. Government debt securities, value $754,785, 0.00% to 8.57%, 11/15/06 to 2/15/38).		739,284		739,284
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $369,697 (collateralized by non-U.S. Government debt securities, value $388,492, 5.36% to 9.01%, 10/27/10 to 2/18/20).		369,642		369,642
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $92,424 (collateralized by non-U.S. Government debt securities, value $97,126, 6.63% to 10.50%, 1/15/07 to 4/15/16).		92,410		92,410
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $739,394 (collateralized by non-U.S. Government debt securities, value $776,988, 0.51% to 8.89%, 8/5/18 to 9/25/46).		739,284		739,284
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $369,697 (collateralized by non-U.S. Government debt securities, value $388,504, 4.11% to 9.79%, 4/28/31 to 9/25/46).		369,642		369,642
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $406,668 (collateralized by non-U.S. Government debt securities, value $427,342, 3.44% to 15.15%, 12/1/08 to 3/1/36).		406,606		406,606
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $739,393 (collateralized by non-U.S. Government debt securities, value $776,999, 6.38% to 10.25%, 5/1/07 to 10/15/16).		739,284		739,284
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $739,394 (collateralized by non-U.S. Government debt securities, value $762,323, 0.00% to 10.13%, 10/15/06 to 7/1/26).		739,284		739,284

70 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $369,697 (collateralized by non-U.S. Government debt securities, value $388,672, 4.05% to 7.24%, 6/20/29 to 1/14/41).	$	369,642	$	369,642
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $129,395 (collateralized by non-U.S. Government debt securities, value $198,409, 0.00% to 10.00%, 9/1/06 to 8/31/36).		129,375		129,375
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $269,719 (collateralized by non-U.S. Government debt securities, value $402,830, 0.00% to 10.00%, 9/1/06 to 8/31/36).8		258,749		258,749
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $961,213 (collateralized by non-U.S. Government debt securities, value $1,010,080, 0.06% to 7.68%, 10/15/11 to 3/15/45).		961,069		961,069
				9,000,781
TIME DEPOSITS4 – 0.00%
KBC Bank
5.31%, 09/01/06		77,998		77,998
				77,998
VARIABLE & FLOATING RATE NOTES4 – 1.17%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/075		946,283		946,405
American Express Bank
5.30%, 02/28/07		369,642		369,641
American Express Centurion Bank
5.42%, 07/19/07		406,606		407,018
American Express Credit Corp.
5.51%, 07/05/07		110,893		110,954
ASIF Global Financing
5.51%, 05/03/075		36,964		36,978
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/075		240,267		240,267
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/075		535,981		536,003
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/075		942,587		942,635
BMW US Capital LLC
5.33%, 09/14/075		369,642		369,642
BNP Paribas
5.36%, 05/18/075		683,838		683,838
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/075		269,839		269,838
CC USA Inc.
5.48%, 07/30/075		184,821		184,845
Commodore CDO Ltd.
5.38%, 06/12/075		92,410		92,410
Credit Agricole SA
5.48%, 07/23/07		369,642		369,642
Credit Suisse First Boston NY
5.51%, 04/24/07		184,821		184,829
Cullinan Finance Corp.
5.36%, 04/25/075		92,410		92,410
DEPFA Bank PLC
5.37%, 06/15/07		369,642		369,642
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/075		425,088		425,115
Eli Lilly Services Inc.
5.37%, 08/31/075		369,642		369,642

SCHEDULES OF INVESTMENTS 71

Schedule of Investments (Continued)

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Fifth Third Bancorp
5.30%, 09/21/075	$	739,284	$	739,284
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/075		369,642		369,614
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		388,124		388,215
Granite Master Issuer PLC
5.30%, 09/20/06		1,293,747		1,293,747
Harrier Finance Funding LLC
5.33%, 07/25/075		110,893		110,913
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		554,463		554,550
HBOS Treasury Services PLC
5.53%, 07/24/075		369,642		369,642
Holmes Financing PLC
5.40%, 07/16/075		646,873		646,873
JP Morgan Chase & Co.
5.36%, 08/02/07		277,231		277,231
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/075		277,231		277,220
Kestrel Funding LLC
5.31%, 07/11/075		147,857		147,843
Kommunalkredit Austria AG
5.33%, 09/09/075		221,785		221,785
Leafs LLC
5.33%, 01/22/07 - 02/20/075		385,675		385,675
Lexington Parker Capital Co. LLC
5.46%, 01/10/075		462,052		461,949
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/075		406,606		406,577
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/075		162,874		162,874
Marshall & Ilsley Bank
5.31%, 09/14/07		203,303		203,303
Metropolitan Life Global Funding I
5.42%, 08/06/075		554,463		554,463
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/075,8		36,964		36,964
Monumental Global Funding II
5.49%, 12/27/065		73,928		73,936
Mound Financing PLC
5.39%, 05/08/075		347,463		347,463
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/075		1,108,926		1,108,908
National City Bank of Indiana
5.37%, 05/21/07		184,821		184,832
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/075		1,219,818		1,220,103
Newcastle Ltd.
5.35%, 04/24/075		130,299		130,274
Northern Rock PLC
5.43%, 08/03/075		443,570		443,581
Principal Life Global Funding I
5.80%, 02/08/07		166,339		166,680
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/075		646,873		646,862
Skandinaviska Enskilda Bank NY
5.33%, 09/18/075		369,642		369,642
Strips III LLC
5.38%, 07/24/075		89,881		89,881
SunTrust Bank
5.37%, 05/01/07		369,642		369,657
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/075		901,926		901,846
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/065		517,499		517,499
US Bank N.A.
5.26%, 09/29/06		166,339		166,336
Wachovia Asset Securitization Inc.
5.31%, 09/25/065		551,584		551,584

72 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI PACIFIC EX-JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Wachovia Bank N.A.
5.36%, 05/22/07	$	739,284	$	739,284
Wells Fargo & Co.
5.34%, 09/14/075		184,821		184,832
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/075		277,231		277,230
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/075		1,108,926		1,108,698
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/075		234,431		234,431
				24,444,035
TOTAL SHORT-TERM INVESTMENTS (Cost: $44,234,337)				44,234,337
TOTAL INVESTMENTS IN SECURITIES – 101.29% (Cost: $1,670,711,279)				2,121,937,597
Other Assets, Less Liabilities – (1.29)%				(27,006,675	)
NET ASSETS – 100.00%			$	2,094,930,922

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁵ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁶ Affiliated issuer. See Note 2.

⁷ The rate quoted is the annualized seven-day yield of the fund at period end.

⁸ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 73

Schedule of Investments

iSHARES^® MSCI SINGAPORE INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 98.53%
AIRLINES – 4.68%
Singapore Airlines Ltd.	3,202,000	$	26,876,765
			26,876,765
BANKS – 35.70%
DBS Group Holdings Ltd.	6,707,000		76,768,409
Oversea-Chinese Banking Corp.	14,513,000		59,524,895
United Overseas Bank Ltd.	6,941,000		68,853,873
			205,147,177
BEVERAGES – 2.78%
Fraser and Neave Ltd.	6,310,000		15,969,605
			15,969,605
COMPUTERS – 0.39%
Creative Technology Ltd.1	347,050		2,273,060
			2,273,060
DISTRIBUTION & WHOLESALE – 0.86%
Jardine Cycle & Carriage Ltd.	694,000		4,942,643
			4,942,643
DIVERSIFIED FINANCIAL SERVICES – 2.00%
Singapore Exchange Ltd.	4,546,000		11,505,202
			11,505,202
ELECTRONICS – 1.77%
Venture Corp. Ltd.	1,382,000		10,194,074
			10,194,074
ENGINEERING & CONSTRUCTION – 4.39%
SembCorp Industries Ltd.	5,048,000		11,170,698
Singapore Technologies Engineering Ltd.	7,572,000		14,059,672
			25,230,370
FOOD – 1.34%
Olam International Ltd.	3,786,000		3,851,965
Want Want Holdings Ltd.	2,570,000		3,855,000
			7,706,965
HEALTH CARE – SERVICES – 0.84%
Parkway Holdings Ltd.	3,155,000		4,814,956
			4,814,956
HOLDING COMPANIES – DIVERSIFIED – 5.84%
Haw Par Corp. Ltd.	631,000		2,367,353
Keppel Corp. Ltd.	2,862,000		27,298,741
Noble Group Ltd.1	5,679,000		3,900,114
			33,566,208
MEDIA – 4.17%
Singapore Press Holdings Ltd.	9,465,000		23,954,407
			23,954,407
OIL & GAS – 0.34%
Singapore Petroleum Co. Ltd.	631,000		1,942,032
			1,942,032
REAL ESTATE – 11.01%
Allgreen Properties Ltd.1	2,524,000		2,343,279
CapitaLand Ltd.	7,304,000		22,107,999
City Developments Ltd.	2,929,000		18,345,829
Keppel Land Ltd.1	1,994,000		5,629,760
Singapore Land Ltd.	1,262,000		5,617,449
UOL Group Ltd.	3,155,000		6,299,568
Wing Tai Holdings Ltd.	2,524,000		2,921,073
			63,264,957
REAL ESTATE INVESTMENT TRUSTS – 3.34%
Ascendas Real Estate Investment Trust	5,679,000		7,439,107
CapitaMall Trust Management Ltd.1	5,048,000		7,575,531
Suntec REIT	5,048,000		4,172,962
			19,187,600
SEMICONDUCTORS – 1.74%
Chartered Semiconductor Manufacturing Ltd.1,2	6,310,000		5,135,953
STATS ChipPAC Ltd.2	7,572,000		4,863,106
			9,999,059
SHIPBUILDING – 1.21%
SembCorp Marine Ltd.	3,155,000		6,941,562
			6,941,562
TELECOMMUNICATIONS – 11.73%
Singapore Telecommunications Ltd.	42,561,567		67,390,501
			67,390,501
TRANSPORTATION – 4.40%
ComfortDelGro Corp. Ltd.	10,096,000		9,629,912
COSCO Corp. (Singapore) Ltd.	4,417,000		4,297,348
Neptune Orient Lines Ltd.	3,155,000		3,872,027

74 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SINGAPORE INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
Singapore Post Ltd.		87,572,000	$	4,911,255
SMRT Corp. Ltd.		3,786,000		2,576,001
				25,286,543
TOTAL COMMON STOCKS (Cost: $493,993,836)				566,193,686
SHORT-TERM INVESTMENTS – 1.63%
CERTIFICATES OF DEPOSIT3 – 0.07%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	53,012		53,012
Societe Generale
5.33%, 12/08/06		75,731		75,731
Washington Mutual Bank
5.36%, 11/13/06		189,328		189,328
Wells Fargo Bank N.A.
4.78%, 12/05/06		60,585		60,585
				378,656
COMMERCIAL PAPER3 – 0.26%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		22,097		21,843
Amsterdam Funding Corp.
5.27%, 09/15/064		75,731		75,576
Atlantis One Funding
5.30%, 11/14/064		103,909		102,777
Barton Capital Corp.
5.27%, 09/06/064		38,169		38,141
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		38,390		37,971
CC USA Inc.
5.03%, 10/24/064		15,146		15,034
Charta LLC
5.30%, 11/06/064		75,731		74,995
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		133,007		132,418
Curzon Funding LLC
5.29%, 11/17/064		75,731		74,874
Edison Asset Securitization LLC
5.22%, 12/11/064		55,868		55,050
Security	Principal		Value
Falcon Asset Securitization Corp.
5.30%, 11/06/064	$	75,731	$	74,995
Five Finance Inc.
5.19%, 12/01/064		34,079		33,632
General Electric Capital Services Inc.
5.22%, 12/11/06		7,573		7,462
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		75,731		75,457
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		36,351		36,052
KKR Pacific Funding Trust
5.29%, 09/14/064		75,731		75,586
Landale Funding LLC
5.31%, 11/15/064		59,070		58,417
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		98,164		97,601
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		67,401		67,319
Mont Blanc Capital Corp.
5.29%, 11/15/064		48,847		48,308
Monument Gardens Funding LLC
5.28%, 09/21/064		38,057		37,946
Nestle Capital Corp.
5.19%, 08/09/07		45,439		43,198
Park Granada LLC
5.30%, 09/01/064		17,306		17,306
Regency Markets LLC
5.28%, 09/15/06		37,866		37,788
Solitaire Funding Ltd.
5.27%, 09/05/064		56,798		56,765
Sydney Capital Corp.
5.27%, 09/12/064		17,327		17,299
Tulip Funding Corp.
5.29%, 11/15/064		39,942		39,502

SCHEDULES OF INVESTMENTS 75

Schedule of Investments (Continued)

iSHARES^® MSCI SINGAPORE INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
White Pine Finance LLC
5.12%, 10/27/064	$	14,313	$	14,199
				1,467,511
MEDIUM-TERM NOTES3 – 0.05%
Bank of America N.A.
5.28%, 04/20/07		18,933		18,933
Cullinan Finance Corp.
5.71%, 06/28/074		56,798		56,798
K2 USA LLC
5.39%, 06/04/074		56,798		56,798
Marshall & Ilsley Bank
5.18%, 12/15/06		75,731		75,806
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		88,605		88,606
US Bank N.A.
2.85%, 11/15/06		15,146		15,089
				312,030
MONEY MARKET FUNDS – 0.06%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares
5.30%5,6		345,991		345,991
				345,991
REPURCHASE AGREEMENTS3 – 0.32%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $94,678 (collateralized by U.S. Government obligations, value $96,649, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	94,664		94,664
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $151,485 (collateralized by non-U.S. Government debt securities, value $156,154, 3.80% to 9.13%, 11/1/06 to 6/15/26).		151,462		151,462
Security	Principal		Value
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $113,614 (collateralized by non-U.S. Government debt securities, value $125,077, 0.08% to 6.43%, 9/25/20 to 7/25/36).	$	113,597	$	113,597
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $227,227 (collateralized by non-U.S. Government debt securities, value $237,401, 4.35% to 7.50%, 9/15/08 to 8/25/35).		227,193		227,193
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $45,446 (collateralized by non-U.S. Government debt securities, value $55,468, 0.00% to 10.00%, 6/1/28 to 8/24/36).		45,439		45,439
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $151,485 (collateralized by non-U.S. Government debt securities, value $154,638, 0.00% to 8.57%, 11/15/06 to 2/15/38).		151,462		151,462
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $75,742 (collateralized by non-U.S. Government debt securities, value $79,593, 5.36% to 9.01%, 10/27/10 to 2/18/20).		75,731		75,731

76 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SINGAPORE INDEX FUND

August 31, 2006

Security	Principal		Value
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $18,936 (collateralized by non-U.S. Government debt securities, value $19,899, 6.63% to 10.50%, 1/15/07 to 4/15/16).	$	18,933	$	18,933
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $151,485 (collateralized by non-U.S. Government debt securities, value $159,187, 0.51% to 8.89%, 8/5/18 to 9/25/46).		151,462		151,462
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $75,742 (collateralized by non-U.S. Government debt securities, value $79,595, 4.11% to 9.79%, 4/28/31 to 9/25/46).		75,731		75,731
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $83,317 (collateralized by non-U.S. Government debt securities, value $87,553, 3.44% to 15.15%, 12/1/08 to 3/1/36).		83,304		83,304
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $151,485 (collateralized by non-U.S. Government debt securities, value $159,189, 6.38% to 10.25%, 5/1/07 to 10/15/16).		151,463		151,463
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $151,485 (collateralized by non-U.S. Government debt securities, value $156,183, 0.00% to 10.13%, 10/15/06 to 7/1/26).		151,462		151,462
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $75,742 (collateralized by non-U.S. Government debt securities, value $79,630, 4.05% to 7.24%, 6/20/29 to 1/14/41).		75,731		75,731
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $26,510 (collateralized by non-U.S. Government debt securities, value $40,649, 0.00% to 10.00%, 9/1/06 to 8/31/36).		26,506		26,506
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $55,260 (collateralized by non-U.S. Government debt securities, value $82,531, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		53,012		53,012
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $196,930 (collateralized by non-U.S. Government debt securities, value $206,942, 0.06% to 7.68%, 10/15/11 to 3/15/45).		196,901		196,901
				1,844,053

SCHEDULES OF INVESTMENTS 77

Schedule of Investments (Continued)

iSHARES^® MSCI SINGAPORE INDEX FUND

August 31, 2006

Security	Principal		Value
TIME DEPOSITS3 – 0.00%
KBC Bank
5.31%, 09/01/06	$	15,980	$	15,980
				15,980
VARIABLE & FLOATING RATE NOTES3 – 0.87%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		193,872		193,896
American Express Bank
5.30%, 02/28/07		75,731		75,731
American Express Centurion Bank
5.42%, 07/19/07		83,304		83,389
American Express Credit Corp.
5.51%, 07/05/07		22,719		22,732
ASIF Global Financing
5.51%, 05/03/074		7,573		7,576
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		49,225		49,225
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		109,810		109,815
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		193,114		193,124
BMW US Capital LLC
5.33%, 09/14/074		75,731		75,731
BNP Paribas
5.36%, 05/18/074		140,103		140,103
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		55,284		55,283
CC USA Inc.
5.48%, 07/30/074		37,866		37,871
Commodore CDO Ltd.
5.38%, 06/12/074		18,933		18,933
Credit Agricole SA
5.48%, 07/23/07		75,731		75,731
Credit Suisse First Boston NY
5.51%, 04/24/07		37,866		37,867
Cullinan Finance Corp.
5.36%, 04/25/074		18,933		18,933
DEPFA Bank PLC
5.37%, 06/15/07		75,731		75,731
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		87,091		87,096
Eli Lilly Services Inc.
5.37%, 08/31/074		75,731		75,731
Fifth Third Bancorp
5.30%, 09/21/074		151,462		151,462
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		75,731		75,725
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		79,518		79,537
Granite Master Issuer PLC
5.30%, 09/20/06		265,059		265,059
Harrier Finance Funding LLC
5.33%, 07/25/074		22,719		22,724
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		113,597		113,614
HBOS Treasury Services PLC
5.53%, 07/24/074		75,731		75,731
Holmes Financing PLC
5.40%, 07/16/074		132,530		132,530
JP Morgan Chase & Co.
5.36%, 08/02/07		56,798		56,798
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		56,798		56,796
Kestrel Funding LLC
5.31%, 07/11/074		30,292		30,290
Kommunalkredit Austria AG
5.33%, 09/09/074		45,439		45,439
Leafs LLC
5.33%, 01/22/07 - 02/20/074		79,016		79,016
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		94,664		94,643
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		83,304		83,299

78 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SINGAPORE INDEX FUND

August 31, 2006

Security	Principal		Value
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074	$	33,369	$	33,369
Marshall & Ilsley Bank
5.31%, 09/14/07		41,652		41,652
Metropolitan Life Global Funding I
5.42%, 08/06/074		113,597		113,597
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		7,573		7,573
Monumental Global Funding II
5.49%, 12/27/064		15,146		15,148
Mound Financing PLC
5.39%, 05/08/074		71,187		71,187
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		227,193		227,189
National City Bank of Indiana
5.37%, 05/21/07		37,866		37,868
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		249,913		249,971
Newcastle Ltd.
5.35%, 04/24/074		26,695		26,690
Northern Rock PLC
5.43%, 08/03/074		90,877		90,880
Principal Life Global Funding I
5.80%, 02/08/07		34,079		34,149
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 8/21/074		132,530		132,527
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		75,731		75,731
Strips III LLC
5.38%, 07/24/074		18,415		18,415
SunTrust Bank
5.37%, 05/01/07		75,731		75,734
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		184,784		184,767
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		106,024		106,023
US Bank N.A.
5.26%, 09/29/06		34,079		34,078
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		113,007		113,007
Wachovia Bank N.A.
5.36%, 05/22/07		151,462		151,462
Wells Fargo & Co.
5.34%, 09/14/074		37,866		37,868
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		56,798		56,798
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		227,193		227,147
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		48,029		48,029
				5,008,020
TOTAL SHORT-TERM INVESTMENTS (Cost: $9,372,241)				9,372,241
TOTAL INVESTMENTS IN SECURITIES – 100.16% (Cost: $503,366,077)				575,565,927
Other Assets, Less Liabilities – (0.16)%				(946,164	)
NET ASSETS – 100.00%			$	574,619,763

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 79

Schedule of Investments

iSHARES^® MSCI SOUTH AFRICA INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.87%
BANKS – 13.84%
FirstRand Ltd.	4,992,667	$	12,360,486
Nedbank Group Ltd.	355,508		5,446,027
Standard Bank Group Ltd.	2,170,319		23,428,007
			41,234,520
BUILDING MATERIALS – 0.44%
Pretoria Portland Cement Co. Ltd.	24,278		1,309,867
			1,309,867
DIVERSIFIED FINANCIAL SERVICES – 2.37%
African Bank Investments Ltd.	841,861		2,969,282
Alexander Forbes Ltd.1	627,446		1,228,785
Investec Ltd.	58,438		2,853,006
			7,051,073
ELECTRONICS – 1.04%
Reunert Ltd.	310,917		3,113,482
			3,113,482
ENGINEERING & CONSTRUCTION – 1.61%
Aveng Ltd.	708,698		2,624,443
Murray & Roberts Holdings Ltd.	534,909		2,162,635
			4,787,078
FOOD – 3.46%
Shoprite Holdings Ltd.	770,308		2,638,919
SPAR Group Ltd. (The)	303,536		1,574,514
Tiger Brands Ltd.	288,591		6,104,040
			10,317,473
FOREST PRODUCTS & PAPER – 1.55%
Sappi Ltd.	363,072		4,620,230
			4,620,230
HEALTH CARE – PRODUCTS – 0.59%
Aspen Pharmacare Holdings Ltd.1	379,542		1,754,526
			1,754,526
HEALTH CARE – SERVICES – 1.23%
Network Healthcare Holdings Ltd.1	2,259,562		3,666,696
			3,666,696
HOLDING COMPANIES – DIVERSIFIED – 7.82%
AVI Ltd.	546,987		1,214,599
Barloworld Ltd.	388,143		7,307,963
Bidvest Group Ltd.	460,123		6,962,471
Imperial Holdings Ltd.1	332,999		6,581,464
Tongaat-Hulett Group Ltd.	93,696		1,218,308
			23,284,805
HOME FURNISHINGS – 2.15%
Lewis Group Ltd.	168,299		1,161,286
Steinhoff International Holdings Ltd.	1,608,204		5,248,411
			6,409,697
INSURANCE – 4.09%
Liberty Group Ltd.	198,372		1,953,180
Metropolitan Holdings Ltd.	1,004,365		1,681,371
Sanlam Ltd.	4,067,907		8,547,682
			12,182,233
IRON & STEEL – 1.27%
Mittal Steel South Africa Ltd.	357,033		3,778,310
			3,778,310
MEDIA – 3.08%
Naspers Ltd.	531,920		9,185,026
			9,185,026
MINING – 24.73%
Anglo Platinum Ltd.	116,754		13,084,221
AngloGold Ashanti Ltd.	268,888		12,190,957
Gold Fields Ltd.	878,522		17,058,680
Harmony Gold Mining Co. Ltd.1	597,617		8,122,950
Impala Platinum Holdings Ltd.	113,399		20,996,902
Kumba Resources Ltd.	109,373		2,206,726
			73,660,436
OIL & GAS – 12.00%
Sasol Ltd.	1,031,266		35,758,183
			35,758,183
PACKAGING & CONTAINERS – 1.14%
Consol Ltd.	557,906		1,191,644
Nampak Ltd.	927,139		2,206,617
			3,398,261
REAL ESTATE – 0.45%
Allan Gray Property Trust	1,806,515		1,330,457
			1,330,457
RETAIL – 6.72%
Edgars Consolidated Stores Ltd.	889,502		3,496,323
Ellerine Holdings Ltd.	187,575		1,743,069

80 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH AFRICA INDEX FUND

August 31, 2006

Security	Shares	Value
Foschini Ltd.	364,353	$	2,274,048
JD Group Ltd.	318,176		2,939,046
Massmart Holdings Ltd.	355,447		2,716,877
Pick’n Pay Stores Ltd.	388,082		1,636,296
Truworths International Ltd.	831,979		2,644,793
Woolworths Holdings Ltd.	1,402,756		2,573,989
			20,024,441
TELECOMMUNICATIONS – 9.69%
MTN Group Ltd.	2,372,595		18,822,806
Telkom South Africa Ltd.	532,042		10,035,744
			28,858,550
TRANSPORTATION – 0.60%
Grindrod Ltd.	583,709		1,041,933
Super Group Ltd.1	500,871		756,517
			1,798,450
TOTAL COMMON STOCKS (Cost: $340,521,315)			297,523,794
SHORT-TERM INVESTMENTS – 0.04%
MONEY MARKET FUNDS – 0.04%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%2,3	115,792		115,792
			115,792
TOTAL SHORT-TERM INVESTMENTS (Cost: $115,792)			115,792
TOTAL INVESTMENTS IN SECURITIES – 99.91% (Cost: $340,637,107)			297,639,586
Other Assets, Less Liabilities – 0.09%			258,282
NET ASSETS – 100.00%		$	297,897,868

¹ Non-income earning security.

² Affiliated issuer. See Note 2.

³ The rate quoted is the annualized seven-day yield of the fund at period end.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 81

Schedule of Investments

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 97.16%
ADVERTISING – 0.26%
Cheil Communications Inc.	21,150	$	4,256,396
			4,256,396
AEROSPACE & DEFENSE – 0.39%
Hanjin Heavy Industries & Construction Co. Ltd.	232,650		6,339,501
			6,339,501
AGRICULTURE – 1.99%
KT&G Corp.1	549,900		32,256,225
			32,256,225
AIRLINES – 0.51%
Asiana Airlines2	437,100		2,759,435
Korean Air Co. Ltd.	176,250		5,554,212
			8,313,647
AUTO MANUFACTURERS – 4.70%
Hyundai Motor Co. Ltd.	733,200		61,767,239
Kia Motors Corp.1	902,400		14,359,563
			76,126,802
AUTO PARTS & EQUIPMENT – 1.97%
Hankook Tire Co. Ltd.	507,600		6,757,442
Hyundai Mobis	274,956		25,193,576
			31,951,018
BANKS – 9.47%
Daegu Bank	585,150		9,798,143
Kookmin Bank	1,621,509		131,204,784
Korea Exchange Bank2	465,300		5,637,800
Pusan Bank	535,800		6,882,091
			153,522,818
BEVERAGES – 0.30%
Hite Brewery Co. Ltd.	42,300		4,795,320
			4,795,320
CHEMICALS – 1.78%
Hanwha Chemical Corp.	232,650		2,359,165
Honam Petrochemical Corp.	63,450		3,292,933
KCC Corp.	21,150		5,367,239
Korea Zinc Co. Ltd.	63,450		5,477,223
LG Chem Ltd.	211,500		8,611,779
LG Petrochemical Co. Ltd.	98,715		2,145,755
Samsung Fine Chemicals Co. Ltd.1	63,450		1,583,775
			28,837,869
COMMERCIAL SERVICES – 0.25%
S1 Corp.	98,700		4,029,095
			4,029,095
COSMETICS & PERSONAL CARE – 0.61%
AmorePacific Corp.1,2	19,350		8,412,168
Pacific Corp.1	11,729		1,518,732
			9,930,900
DISTRIBUTION & WHOLESALE – 2.00%
Daewoo International Corp.1	204,450		7,973,869
Hyosung Corp.2	5		91
LG International Corp.	260,850		5,846,404
Samsung Corp.	655,650		18,547,769
			32,368,133
DIVERSIFIED FINANCIAL SERVICES – 8.27%
Daewoo Securities Co. Ltd.1	564,000		9,825,273
Daishin Securities Co. Ltd.1	176,250		3,574,493
Hana Financial Group Inc.	542,851		23,402,157
Hyundai Securities Co. Ltd.	542,850		7,085,562
Korea Investment Holdings Co. Ltd.1	176,255		7,130,858
Mirae Asset Securities Co. Ltd.	63,450		3,992,434
Samsung Securities Co.	267,900		15,630,983
Shinhan Financial Group Ltd.	1,071,600		48,313,947
Tong Yang Investment Bank2	387,750		5,343,409
Woori Investment & Securities Co.1	451,200		9,854,602
			134,153,718
ELECTRIC – 2.95%
Korea Electric Power Corp.	1,247,850		47,759,626
			47,759,626
ELECTRICAL COMPONENTS & EQUIPMENT – 24.27%
LG Electronics Inc.	493,506		33,054,380
LS Cable Ltd.	91,650		3,069,298
Samsung Electronics Co. Ltd.1	528,750		357,449,298
			393,572,976
ELECTRONICS – 3.79%
Daeduck Electronics Co. Ltd.	458,251		3,941,483
Hyundai Autonet Co. Ltd.1,2	479,400		5,434,696
LG.Philips LCD Co. Ltd.1,2	465,300		18,631,357

82 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Shares	Value
Samsung Electro-Mechanics Co. Ltd.1,2	458,250	$	17,610,335
Samsung SDI Co. Ltd.	190,350		15,758,565
			61,376,436
ENGINEERING & CONSTRUCTION – 3.06%
Daelim Industrial Co. Ltd.1	119,850		7,678,378
Daewoo Engineering & Construction Co. Ltd.	733,200		13,421,030
GS Engineering & Construction Corp.	169,200		11,579,158
Hyundai Engineering & Construction Co. Inc.1,2	183,300		9,684,493
Samsung Engineering Co. Ltd.	155,100		7,202,512
			49,565,571
ENVIRONMENTAL CONTROL – 0.28%
Woongjin Coway Co. Ltd.1	197,400		4,516,693
			4,516,693
FOOD – 1.27%
CJ Corp.1	91,650		9,627,301
Lotte Confectionery Co. Ltd.	3,500		4,393,656
Nong Shim Co. Ltd.1	14,102		3,395,333
ORION Corp.	14,109		3,110,877
			20,527,167
HOLDING COMPANIES – DIVERSIFIED – 0.00%
GS Holdings Corp.	2		65
LG Corp.	3		89
			154
HOME BUILDERS – 0.78%
Hyundai Development Co.	310,217		12,711,960
			12,711,960
HOUSEHOLD PRODUCTS & WARES – 0.27%
LG Household & Health Care Ltd.1	56,400		4,334,852
			4,334,852
INSURANCE – 2.38%
Dongbu Insurance Co. Ltd.	183,300		4,127,348
Hyundai Marine & Fire Insurance Co. Ltd.2	345,450		4,598,814
Korean Reinsurance Co.	352,500		4,179,407
Samsung Fire & Marine Insurance Co. Ltd.	183,300		25,736,349
			38,641,918
INTERNET – 1.49%
Daum Communications Corp.1,2	56,643		2,939,663
NCsoft Corp.1,2	70,500		3,908,112
NHN Corp.2	184,005		17,376,655
			24,224,430
IRON & STEEL – 5.63%
Dongkuk Steel Mill Co. Ltd.	162,161		2,816,525
POSCO	352,500		88,537,442
			91,353,967
LODGING – 0.59%
Kangwon Land Inc.	507,602		9,608,275
			9,608,275
MACHINERY – DIVERSIFIED – 0.32%
Doosan Infracore Co. Ltd.1	303,150		5,233,791
			5,233,791
MANUFACTURING – 0.52%
Cheil Industries Inc.1	218,550		8,387,410
			8,387,410
MINING – 0.12%
Poongsan Corp.1	91,668		1,997,342
			1,997,342
MULTIPLE UTILITIES – 0.82%
KT Freetel	458,250		13,273,284
			13,273,284
OIL & GAS – 2.94%
SK Corp.	514,650		33,132,434
S-Oil Corp.	211,500		14,451,950
			47,584,384
PHARMACEUTICALS – 0.54%
Dong-A Pharmaceutical Co. Ltd.	9		658
Hanmi Pharm Co. Ltd.1	28,200		3,314,197
Yuhan Corp.1	35,259		5,482,289
			8,797,144
RETAIL – 3.24%
Hyundai Department Store Co. Ltd.	70,500		5,484,555
Lotte Shopping Co. Ltd.	35,250		12,006,630

SCHEDULES OF INVESTMENTS 83

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Shares		Value
Shinsegae Co. Ltd.		70,500	$	34,975,039
				52,466,224
SEMICONDUCTORS – 0.50%
Samsung Techwin Co. Ltd.		232,650		8,154,243
				8,154,243
SHIPBUILDING – 4.28%
Daewoo Shipbuilding & Marine Engineering Co. Ltd.		472,350		14,590,530
Hyundai Heavy Industries Co. Ltd.		225,600		28,625,273
Hyundai Mipo Dockyard		56,400		5,807,176
Samsung Heavy Industries Co. Ltd.1		853,050		20,405,772
				69,428,751
TELECOMMUNICATIONS – 4.29%
KT Corp.		472,361		20,608,990
KT Corp. ADR		423,000		9,348,300
SK Telecom Co. Ltd.		125,020		24,314,862
SK Telecom Co. Ltd. ADR		699,360		15,315,984
				69,588,136
TRANSPORTATION – 0.33%
Hanjin Shipping Co. Ltd.		232,650		5,323,245
				5,323,245
TOTAL COMMON STOCKS (Cost: $1,063,315,502)				1,575,309,421
PREFERRED STOCKS – 2.75%
AUTO MANUFACTURERS – 0.59%
Hyundai Motor Co. Ltd.		190,350		9,522,449
				9,522,449
ELECTRICAL COMPONENTS & EQUIPMENT – 2.16%
LG Electronics Inc.		148,050		5,735,686
Samsung Electronics Co. Ltd.		56,400		29,329,173
				35,064,859
TOTAL PREFERRED STOCKS (Cost: $39,660,545)				44,587,308
Security	Principal		Value
SHORT-TERM INVESTMENTS – 6.73%
CERTIFICATES OF DEPOSIT3 – 0.28%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	626,931	$	626,931
Societe Generale
5.33%, 12/08/06		895,615		895,615
Washington Mutual Bank
5.36%, 11/13/06		2,239,038		2,239,038
Wells Fargo Bank N.A.
4.78%, 12/05/06		716,492		716,492
				4,478,076
COMMERCIAL PAPER3 – 1.07%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		261,323		258,252
Amsterdam Funding Corp.
5.27%, 09/15/064		895,615		893,780
Atlantis One Funding
5.30%, 11/14/064		1,228,856		1,215,468
Barton Capital Corp.
5.27%, 09/06/064		451,390		451,060
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		454,005		449,059
CC USA Inc.
5.03%, 10/24/064		179,123		177,797
Charta LLC
5.30%, 11/06/064		895,615		886,913
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		1,572,978		1,566,001
Curzon Funding LLC
5.29%, 11/17/064		895,615		885,482
Edison Asset Securitization LLC
5.22%, 12/11/064		660,713		651,037
Falcon Asset Securitization Corp.
5.30%, 11/06/064		895,615		886,913
Five Finance Inc.
5.19%, 12/01/064		403,027		397,739
General Electric Capital Services Inc.
5.22%, 12/11/06		89,562		88,250

84 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Principal		Value
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064	$	895,615	$	892,370
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		429,895		426,349
KKR Pacific Funding Trust
5.29%, 09/14/064		895,615		893,904
Landale Funding LLC
5.31%, 11/15/064		698,580		690,859
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		1,160,914		1,154,254
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		797,098		796,128
Mont Blanc Capital Corp.
5.29%, 11/15/064		577,672		571,305
Monument Gardens Funding LLC
5.28%, 09/21/064		450,073		448,753
Nestle Capital Corp.
5.19%, 08/09/07		537,369		510,874
Park Granada LLC
5.30%, 09/01/064		204,666		204,666
Regency Markets LLC
5.28%, 09/15/06		447,808		446,889
Solitaire Funding Ltd.
5.27%, 09/05/064		671,711		671,318
Sydney Capital Corp.
5.27%, 09/12/064		204,917		204,587
Tulip Funding Corp.
5.29%, 11/15/064		472,365		467,160
White Pine Finance LLC
5.12%, 10/27/064		169,271		167,923
				17,355,090
MEDIUM-TERM NOTES3 – 0.23%
Bank of America N.A.
5.28%, 04/20/07		223,904		223,904
Cullinan Finance Corp.
5.71%, 06/28/074		671,711		671,711
K2 USA LLC
5.39%, 06/04/074		671,711		671,711
Security	Shares or Principal		Value
Marshall & Ilsley Bank
5.18%, 12/15/06	$	895,615	$	896,502
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		1,047,870		1,047,869
US Bank N.A.
2.85%, 11/15/06		179,123		178,446
				3,690,143
MONEY MARKET FUNDS – 0.14%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		2,285,879		2,285,879
				2,285,879
REPURCHASE AGREEMENTS3 – 1.35%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $1,119,684 (collateralized by U.S. Government obligations, value $1,142,993, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	1,119,519		1,119,519
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,791,497 (collateralized by non-U.S. Government debt securities, value $1,846,719, 3.80% to 9.13%, 11/1/06 to 6/15/26).		1,791,230		1,791,230
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $1,343,623 (collateralized by non-U.S. Government debt securities, value $1,479,192, 0.08% to 6.43%, 9/25/20 to 7/25/36).		1,343,423		1,343,423

SCHEDULES OF INVESTMENTS 85

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $2,687,245 (collateralized by non-U.S. Government debt securities, value $2,807,565, 4.35% to 7.50%, 9/15/08 to 8/25/35).	$	2,686,845	$	2,686,845
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $537,451 (collateralized by non-U.S. Government debt securities, value $655,983, 0.00% to 10.00%, 6/1/28 to 8/24/36).		537,369		537,369
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $1,791,496 (collateralized by non-U.S. Government debt securities, value $1,828,789, 0.00% to 8.57%, 11/15/06 to 2/15/38).		1,791,230		1,791,230
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $895,748 (collateralized by non-U.S. Government debt securities, value $941,289, 5.36% to 9.01%, 10/27/10 to 2/18/20).		895,615		895,615
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $223,938 (collateralized by non-U.S. Government debt securities, value $235,330, 6.63% to 10.50%, 1/15/07 to 4/15/16).		223,904		223,904
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,791,497 (collateralized by non-U.S. Government debt securities, value $1,882,585, 0.51% to 8.89%, 8/5/18 to 9/25/46).		1,791,230		1,791,230
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $895,749 (collateralized by non-U.S. Government debt securities, value $941,316, 4.11% to 9.79%, 4/28/31 to 9/25/46).		895,615		895,615
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $985,326 (collateralized by non-U.S. Government debt securities, value $1,035,418, 3.44% to 15.15%, 12/1/08 to 3/1/36).		985,177		985,177
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $1,791,496 (collateralized by non-U.S. Government debt securities, value $1,882,611, 6.38% to 10.25%, 5/1/07 to 10/15/16).		1,791,231		1,791,231
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,791,497 (collateralized by non-U.S. Government debt securities, value $1,847,053, 0.00% to 10.13%, 10/15/06 to 7/1/26).		1,791,230		1,791,230

86 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Principal		Value
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $895,748 (collateralized by non-U.S. Government debt securities, value $941,723, 4.05% to 7.24%, 6/20/29 to 1/14/41).	$	895,615	$	895,615
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $313,513 (collateralized by non-U.S. Government debt securities, value $480,730, 0.00% to 10.00%, 9/1/06 to 8/31/36).		313,465		313,465
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $653,511 (collateralized by non-U.S. Government debt securities, value $976,027, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		626,931		626,931
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $2,328,947 (collateralized by non-U.S. Government debt securities, value $2,447,351, 0.06% to 7.68%, 10/15/11 to 3/15/45).		2,328,599		2,328,599
				21,808,228
TIME DEPOSITS3 – 0.01%
KBC Bank
5.31%, 09/01/06		188,984		188,984
				188,984
VARIABLE & FLOATING RATE NOTES3 – 3.65%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		2,292,778		2,293,075
American Express Bank
5.30%, 02/28/07		895,615		895,612
American Express Centurion Bank
5.42%, 07/19/07		985,177		986,175
American Express Credit Corp.
5.51%, 07/05/07		268,685		268,834
ASIF Global Financing
5.51%, 05/03/074		89,562		89,595
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074		582,150		582,150
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		1,298,642		1,298,696
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		2,283,819		2,283,935
BMW US Capital LLC
5.33%, 09/14/074		895,615		895,615
BNP Paribas
5.36%, 05/18/074		1,656,888		1,656,888
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		653,799		653,799
CC USA Inc.
5.48%, 07/30/074		447,808		447,866
Commodore CDO Ltd.
5.38%, 06/12/074		223,904		223,904
Credit Agricole SA
5.48%, 07/23/07		895,615		895,615
Credit Suisse First Boston NY
5.51%, 04/24/07		447,808		447,828
Cullinan Finance Corp.
5.36%, 04/25/074		223,904		223,904
DEPFA Bank PLC
5.37%, 06/15/07		895,615		895,615
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		1,029,957		1,030,024
Eli Lilly Services Inc.
5.37%, 08/31/074		895,615		895,615
Fifth Third Bancorp
5.30%, 09/21/074		1,791,230		1,791,230

SCHEDULES OF INVESTMENTS 87

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Principal		Value
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074	$	895,615	$	895,547
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		940,396		940,616
Granite Master Issuer PLC
5.30%, 09/20/06		3,134,653		3,134,653
Harrier Finance Funding LLC
5.33%, 07/25/074		268,685		268,734
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		1,343,423		1,343,633
HBOS Treasury Services PLC
5.53%, 07/24/074		895,615		895,615
Holmes Financing PLC
5.40%, 07/16/074		1,567,327		1,567,327
JP Morgan Chase & Co.
5.36%, 08/02/07		671,711		671,711
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		671,711		671,682
Kestrel Funding LLC
5.31%, 07/11/074		358,246		358,213
Kommunalkredit Austria AG
5.33%, 09/09/074		537,369		537,369
Leafs LLC
5.33%, 01/22/07 - 02/20/074		934,461		934,461
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		1,119,519		1,119,269
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		985,177		985,107
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		394,633		394,633
Marshall & Ilsley Bank
5.31%, 09/14/07		492,588		492,588
Metropolitan Life Global Funding I
5.42%, 08/06/074		1,343,423		1,343,423
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		89,562		89,562
Monumental Global Funding II
5.49%, 12/27/064		179,123		179,142
Mound Financing PLC
5.39%, 05/08/074		841,878		841,878
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074		2,686,846		2,686,802
National City Bank of Indiana
5.37%, 05/21/07		447,808		447,835
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		2,955,530		2,956,218
Newcastle Ltd.
5.35%, 04/24/074		315,704		315,644
Northern Rock PLC
5.43%, 08/03/074		1,074,738		1,074,764
Principal Life Global Funding I
5.80%, 02/08/07		403,027		403,853
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		1,567,327		1,567,297
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		895,615		895,615
Strips III LLC
5.38%, 07/24/074		217,776		217,776
SunTrust Bank
5.37%, 05/01/07		895,615		895,652
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		2,185,301		2,185,107
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		1,253,861		1,253,861
US Bank N.A.
5.26%, 09/29/06		403,027		403,019
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		1,336,448		1,336,448
Wachovia Bank N.A.
5.36%, 05/22/07		1,791,230		1,791,230
Wells Fargo & Co.
5.34%, 09/14/074		447,808		447,835

88 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI SOUTH KOREA INDEX FUND

August 31, 2006

Security	Principal		Value
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074	$	671,711	$	671,707
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		2,686,846		2,686,295
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		568,008		568,008
				59,226,104
TOTAL SHORT-TERM INVESTMENTS (Cost: $109,032,504)				109,032,504
TOTAL INVESTMENTS IN SECURITIES – 106.64% (Cost: $1,212,008,551)				1,728,929,233
Other Assets, Less Liabilities – (6.64)%				(107,595,545	)
NET ASSETS – 100.00%			$	1,621,333,688

ADR – American Depositary Receipts

¹ Allor a portion of this security represents a security on loan. See Note 5.

² Non-incomeearning security.

³ Allor a portion of this security (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ Thissecurity or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliatedissuer. See Note 2.

⁶ Therate quoted is the annualized seven-day yield of the fund at period end.

⁷ Theinvestment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

SCHEDULES OF INVESTMENTS 89

Schedule of Investments

iSHARES^® MSCI TAIWAN INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 98.54%
AIRLINES – 0.39%
China Airlines1	9,039,907	$	3,803,242
EVA Airways Corp.	9,039,396		3,542,169
			7,345,411
APPAREL – 0.49%
Pou Chen Corp.	12,654,541		9,244,888
			9,244,888
AUTO MANUFACTURERS – 0.43%
China Motor Co. Ltd.	3,071,759		2,323,414
Yulon Motor Co. Ltd.	6,026,483		5,812,298
			8,135,712
AUTO PARTS & EQUIPMENT – 0.15%
Cheng Shin Rubber Industry Co. Ltd.	3,427,039		2,878,421
			2,878,421
BANKS – 8.02%
Chang Hwa Commercial Bank Ltd.1	30,130,446		17,847,621
Chinatrust Financial Holding Co. Ltd.	43,867,566		28,716,465
E.Sun Financial Holding Co. Ltd.	21,091,378		12,557,443
First Financial Holding Co. Ltd.	30,882,867		19,794,304
Hua Nan Financial Holdings Co. Ltd.	24,104,965		15,157,132
Mega Financial Holding Co. Ltd.	63,273,136		41,996,295
Taishin Financial Holdings Co. Ltd.1	33,143,439		15,806,561
			151,875,821
BUILDING MATERIALS – 1.21%
Asia Cement Corp.	9,761,860		6,479,242
Taiwan Cement Corp.	18,361,156		12,242,630
Taiwan Glass Industrial Corp.	6,026,288		4,164,582
			22,886,454
CHEMICALS – 7.16%
Eternal Chemical Co. Ltd.	3,319,911		4,396,966
Formosa Chemicals & Fibre Co.	21,091,393		30,400,565
Formosa Plastic Co.	30,130,111		41,003,310
Nan Ya Plastic Corp.	36,156,447		48,874,906
Oriental Union Chemical Corp.	3,465,063		1,852,525
Taiwan Fertilizer Co. Ltd.	6,026,000		9,060,966
			135,589,238
COMMERCIAL SERVICES – 0.28%
Taiwan Secom Co. Ltd.	3,013,610		5,346,137
			5,346,137
COMPUTERS – 10.47%
Acer Inc.	18,078,663		27,897,815
Advantech Co. Ltd.	3,057,733		8,638,189
Benq Corp.1	15,065,019		7,802,508
CMC Magnetics Corp.1	21,091,400		5,228,002
Compal Electronics Inc.	24,104,547		21,087,818
Foxconn Technology Co. Ltd.	3,013,065		22,790,194
High Tech Computer Corp.	2,011,200		50,707,655
Inventec Co. Ltd.	12,052,284		7,322,165
Lite-On Technology Corp.1	15,065,011		18,693,976
Mitac International	6,618,059		6,734,659
Quanta Computer Inc.	12,291,075		17,622,683
Ritek Corp.1	18,078,389		3,811,179
			198,336,843
DIVERSIFIED FINANCIAL SERVICES – 3.37%
Fubon Financial Holding Co. Ltd.	27,117,000		20,181,242
Fuhwa Financial Holdings Co. Ltd.1	12,052,821		5,107,438
Polaris Securities Co. Ltd.1	9,499,156		4,039,738
SinoPac Financial Holdings Co. Ltd.	42,182,193		18,451,506
Waterland Financial Holdings	12,052,000		3,404,727
Yuanta Core Pacific Securities Co. Ltd.	18,279,644		12,549,209
			63,733,860
ELECTRICAL COMPONENTS & EQUIPMENT – 2.40%
Delta Electronics Inc.	9,512,834		26,440,593
Pacific Electric Wire & Cable Co. Ltd.1,2	986		—
Phoenixtec Power Co. Ltd.	3,013,438		3,084,838
Tatung Co. Ltd.1	27,117,120		8,566,770
Walsin Lihwa Corp.1	18,078,069		7,358,631
			45,450,832
ELECTRONICS – 19.01%
Asustek Computer Inc.	18,078,556		40,528,476
AU Optronics Corp.	40,340,127		59,676,919
Cheng Uei Precision Industry Co. Ltd.	1,003,000		3,701,838
Chi Mei Optoelectronics Corp.	25,265,216		29,931,453

90 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI TAIWAN INDEX FUND

August 31, 2006

Security	Shares	Value
Chunghwa Picture Tubes Ltd.1	45,195,105	$	8,937,428
Compeq Manufacturing Co. Ltd.1	6,026,200		2,654,310
Gigabyte Technology Co. Ltd.	3,013,017		1,876,271
HannStar Display Corp.1	36,156,000		4,843,498
Hon Hai Precision Industry Co. Ltd.	28,923,376		162,979,534
Micro-Star International Co. Ltd.	3,344,429		1,564,526
Nan Ya Printed Circuit Board Corp.	450,000		3,711,270
Optimax Technology Corp.1	3,013,157		2,425,536
Phoenix Precision Technology Corp.	3,437,814		5,096,152
Quanta Display Inc.1	24,104,541		10,031,355
Synnex Technology International Corp.	6,026,946		5,345,894
Wintek Corp.	6,663,537		5,556,321
Ya Hsin Industrial Co. Ltd.	6,327,461		4,930,115
Yageo Corp.1	18,078,100		6,232,881
			360,023,777
FOOD – 0.85%
Uni-President Enterprises Co.	21,091,637		16,081,412
			16,081,412
FOREST PRODUCTS & PAPER – 0.16%
Yuen Foong Yu Paper Manufacturing Co. Ltd.	9,039,360		3,116,547
			3,116,547
HOME FURNISHINGS – 0.38%
Nien Made Enterprise Co. Ltd.	3,013,443		2,361,690
Teco Electric and Machinery Co. Ltd.	15,065,092		4,850,850
			7,212,540
INSURANCE – 4.83%
Cathay Financial Holding Co. Ltd.	39,169,905		74,841,647
Shin Kong Financial Holding Co. Ltd.	19,220,832		16,640,149
			91,481,796
INVESTMENT COMPANIES – 1.35%
China Development Financial Holding Co.1	66,286,338		25,572,190
			25,572,190
IRON & STEEL – 2.58%
China Steel Corp.	60,260,467		48,874,680
			48,874,680
LEISURE TIME – 0.22%
Giant Manufacturing Co. Ltd.	3,013,914		4,261,777
			4,261,777
MANUFACTURING – 0.63%
Largan Precision Co. Ltd.	320,000		6,629,405
Premier Image Technology Corp.	3,183,879		5,222,645
			11,852,050
METAL FABRICATE & HARDWARE – 1.05%
Catcher Technology Co. Ltd.	2,113,707		16,565,504
Yieh Phui Enterprise	9,039,078		3,349,840
			19,915,344
MULTIPLE UTILITIES – 0.28%
Fu Sheng Industrial Co. Ltd.	6,026,292		5,290,396
			5,290,396
OFFICE & BUSINESS EQUIPMENT – 0.16%
Kinpo Electronics Inc.	9,039,181		3,047,841
			3,047,841
OIL & GAS – 1.26%
Formosa Petrochemical Corp.	12,052,000		23,796,476
			23,796,476
REAL ESTATE – 0.27%
Cathay Real Estate Development Co. Ltd.1	9,039,493		5,066,180
			5,066,180
RETAIL – 0.32%
President Chain Store Corp.	3,013,640		6,133,471
			6,133,471
SEMICONDUCTORS – 25.19%
Advanced Semiconductor Engineering Inc.	24,104,690		24,749,044
Macronix International Co. Ltd.1	21,091,492		6,060,921
MediaTek Inc.	6,026,462		54,919,156
Novatek Microelectronics Corp. Ltd.	3,013,284		14,828,433
Realtek Semiconductor Corp.	6,026,903		7,616,013
Siliconware Precision Industries Co. Ltd.	16,508,240		19,557,150
Taiwan Semiconductor Manufacturing Co. Ltd.	150,650,136		265,880,101
United Microelectronics Corp.	129,559,262		70,840,422

SCHEDULES OF INVESTMENTS 91

Schedule of Investments (Continued)

iSHARES^® MSCI TAIWAN INDEX FUND

August 31, 2006

Security	Shares	Value
Via Technologies Inc.1	6,160,861	$	4,978,096
Winbond Electronics Corp.1	27,117,280		7,520,679
			476,950,015
TELECOMMUNICATIONS – 4.02%
Accton Technology Corp.1	6,026,259		2,947,229
Chunghwa Telecom Co. Ltd.	30,130,800		49,424,763
D-Link Corp.	3,317,001		3,254,530
Taiwan Cellular Corp.	18,078,920		16,804,828
Zyxel Communications Corp.	3,013,250		3,702,490
			76,133,840
TEXTILES – 0.83%
Far Eastern Textile Ltd.	18,078,612		12,685,782
Formosa Taffeta Co. Ltd.	6,026,515		2,983,967
			15,669,749
TRANSPORTATION – 0.78%
Evergreen Marine Corp. Ltd.	6,447,467		3,574,310
U-Ming Marine Transport Corp.	3,013,800		3,172,180
Wan Hai Lines Ltd.	6,628,794		3,574,152
Yang Ming Marine Transport Corp.	9,039,667		4,544,547
			14,865,189
TOTAL COMMON STOCKS (Cost: $1,685,586,827)			1,866,168,887
SHORT-TERM INVESTMENTS – 0.03%
MONEY MARKET FUNDS – 0.03%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares
5.30%3,4	482,401		482,401
			482,401
TOTAL SHORT-TERM INVESTMENTS (Cost: $482,401)			482,401
TOTAL INVESTMENTS IN SECURITIES – 98.57% (Cost: $1,686,069,228)			1,866,651,288
Other Assets, Less Liabilities – 1.43%			27,099,277
NET ASSETS – 100.00%		$	1,893,750,565

¹ Non-incomeearning security.

² Securityvalued at fair value in accordance with procedures approved by the Board of Directors. See Note 1.

³ Affiliatedissuer. See Note 2.

⁴ Therate quoted is the annualized seven-day yield of the fund at period end.

See notes to the financial statements.

92 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Assets and Liabilities

iSHARES^®, INC.

August 31, 2006

	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	$	608,082,471		$	1,966,158,506		$	934,915,744		$	10,653,117,183		$	808,618,799		$	267,510,586
Affiliated issuersa	$	31,715		$	4,889,243		$	400,763		$	226,386,802		$	697,658		$	463
Foreign currencies, at cost	$	1,377,659		$	—		$	2,592,348		$	25,227,070		$	965,384		$	805,517
Investments in securities, at value (including securities on loanb) (Note 1):
Unaffiliated issuers	$	692,999,730		$	2,459,360,409		$	1,096,999,854		$	12,384,230,338		$	913,146,967		$	372,816,688
Affiliated issuersa		31,715			4,889,243			400,763			272,419,971			697,658			463
Foreign currencies, at value		1,384,278			—			2,596,172			25,471,147			965,545			805,103
Receivables:
Investment securities sold		905,182			14,119,254			3,492,243			282,865,328			—			9,889,460
Dividends and interest		4,927,604			4,006,534			1,319,783			37,501,039			905,872			1,209,423
Total Assets		700,248,509			2,482,375,440			1,104,808,815			13,002,487,823			915,716,042			384,721,137
LIABILITIES
Payables:
Investment securities purchased		1,403,197			12,668,088			3,161,430			317,027,569			—			984,284
Collateral for securities on loan (Note 5)		12,136,617			—			—			708,316,211			32,627,046			—
Capital shares redeemed		—			—			—			—			—			9,226,127
Investment advisory fees (Note 2)		301,689			1,412,428			486,650			7,763,885			377,017			176,784
Total Liabilities		13,841,503			14,080,516			3,648,080			1,033,107,665			33,004,063			10,387,195
NET ASSETS	$	686,407,006		$	2,468,294,924		$	1,101,160,735		$	11,969,380,158		$	882,711,979		$	374,333,942
Net assets consist of:
Paid-in capital	$	600,363,943		$	2,008,012,075		$	943,118,491		$	10,162,065,498		$	785,437,675		$	321,892,491
Undistributed net investment income		13,312,374			35,080,996			7,159,513			156,423,079			14,227,248			5,608,095
Accumulated net realized loss		(12,212,302	)		(68,013,321	)		(11,212,421	)		(126,514,429	)		(21,481,264	)		(58,471,267	)
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies		84,942,991			493,215,174			162,095,152			1,777,406,010			104,528,320			105,304,623
NET ASSETS	$	686,407,006		$	2,468,294,924		$	1,101,160,735		$	11,969,380,158		$	882,711,979		$	374,333,942
Shares outstanding		31,800,000			63,150,000			44,600,000			122,850,000			62,175,000			48,300,000
Net asset value per share	$	21.59		$	39.09		$	24.69		$	97.43		$	14.20		$	7.75

^a See Note 2.

^b Securities on loan with market values of $11,576,861, $–, $–, $658,306,726, $30,792,281 and $–, respectively. See Note 5.

See notes to the financial statements.

FINANCIAL STATEMENTS 93

Statements of Assets and Liabilities (Continued)

iSHARES^®, INC.

August 31, 2006

	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	$	821,808,172		$	1,670,533,843		$	503,020,086		$	340,521,315		$	1,209,722,672		$	1,685,586,827
Affiliated issuersa	$	592,868		$	177,436		$	345,991		$	115,792		$	2,285,879		$	482,401
Foreign currencies, at cost	$	145,060		$	7,548,634		$	4,952,678		$	694,584		$	—		$	7,835,150
Investments in securities, at value (including securities on loanb) (Note 1):
Unaffiliated issuers	$	841,799,121		$	2,121,760,161		$	575,219,936		$	297,523,794		$	1,726,643,354		$	1,866,168,887
Affiliated issuersa		592,868			177,436			345,991			115,792			2,285,879			482,401
Foreign currencies, at value		145,060			7,600,093			4,964,977			685,087			—			7,821,519
Receivables:
Investment securities sold		1,437,186			—			1,909,696			—			—			34,747,586
Dividends and interest		82,719			13,116,287			5,438,507			122,742			88,769			23,289,787
Total Assets		844,056,954			2,142,653,977			587,879,107			298,447,415			1,729,018,002			1,932,510,180
LIABILITIES
Payables:
Investment securities purchased		1,542,549			2,800,790			3,973,655			377,219			—			35,973,859
Collateral for securities on loan (Note 5)		78,071,629			44,056,901			9,026,250			—			106,746,625			—
Foreign taxes		—			—			—			—			—			1,686,725
Investment advisory fees (Note 2)		335,624			865,364			259,439			172,328			937,689			1,099,031
Total Liabilities		79,949,802			47,723,055			13,259,344			549,547			107,684,314			38,759,615
NET ASSETS	$	764,107,152		$	2,094,930,922		$	574,619,763		$	297,897,868		$	1,621,333,688		$	1,893,750,565
Net assets consist of:
Paid-in capital	$	747,007,096		$	1,623,444,288		$	501,165,285		$	339,314,380		$	1,180,880,055		$	1,827,014,735
Undistributed net investment income		5,968,807			37,257,104			18,893,779			6,243,135			10,954,387			44,460,389
Accumulated net realized loss		(8,859,746	)		(17,110,244	)		(17,661,261	)		(4,652,374	)		(87,421,436	)		(158,180,336	)
Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies		19,990,995			451,339,774			72,221,960			(43,007,273	)		516,920,682			180,455,777
NET ASSETS	$	764,107,152		$	2,094,930,922		$	574,619,763		$	297,897,868		$	1,621,333,688		$	1,893,750,565
Shares outstanding		18,500,000			18,700,000			63,100,000			3,050,000			35,250,000			150,650,000
Net asset value per share	$	41.30		$	112.03		$	9.11		$	97.67		$	46.00		$	12.57

^a See Note 2.

^b Securities on loan with market values of $71,552,227, $41,641,179, $8,310,276, $–, $102,468,841 and $–, respectively. See Note 5.

See notes to the financial statements.

94 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Operations

iSHARES^®, INC.

Year ended August 31, 2006

	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
Dividends from unaffiliated issuersa	$	23,010,336		$	54,486,448		$	13,601,025		$	262,059,590		$	25,264,722		$	16,579,922
Dividends from affiliated issuersb		—			—			—			7,010,601			—			—
Interest from affiliated issuersb		5,946			165,134			19,579			533,655			22,999			8,001
Securities lending incomec		42,933			1,515			—			6,885,228			155,076			—
Total investment income		23,059,215			54,653,097			13,620,604			276,489,074			25,442,797			16,587,923
EXPENSES
Investment advisory fees (Note 2)		2,886,094			11,373,859			4,487,238			81,638,096			4,007,032			2,225,756
Proxy fees		16,687			17,643			14,588			174,862			26,612			13,719
Foreign taxes (Note 1)		—			—			—			2,163,076			—			—
Total expenses		2,902,781			11,391,502			4,501,826			83,976,034			4,033,644			2,239,475
Less investment advisory fees waived		—			—			—			(409,336	)		—			—
Net expenses		2,902,781			11,391,502			4,501,826			83,566,698			4,033,644			2,239,475
Net investment income		20,156,434			43,261,595			9,118,778			192,922,376			21,409,153			14,348,448
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(1,619,920	)		(13,430,737	)		3,124,230			(119,106,460	)		(7,551,550	)		(17,321,675	)
Investments in affiliated issuersb		—			—			—			25,127,083			—			—
In-kind redemptions		31,951,923			—			84,894,055			1,437,153,843			52,783,229			—
Foreign currency transactions		(77,745	)		(24,163	)		286,027			(2,231,351	)		(2,928	)		(21,741	)
Net realized gain (loss)		30,254,258			(13,454,900	)		88,304,312			1,340,943,115			45,228,751			(17,343,416	)
Net change in unrealized appreciation (depreciation) on:
Investments		40,764,723			276,526,476			43,750,543			666,730,555			17,114,498			40,248,157
Translation of assets and liabilities in foreign currencies		70,590			(36,886	)		(10,151	)		283,659			252			975
Net change in unrealized appreciation (depreciation)		40,835,313			276,489,590			43,740,392			667,014,214			17,114,750			40,249,132
Net realized and unrealized gain		71,089,571			263,034,690			132,044,704			2,007,957,329			62,343,501			22,905,716
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	91,246,005		$	306,296,285		$	141,163,482		$	2,200,879,705		$	83,752,654		$	37,254,164

^a Netof foreign withholding tax of $981,062, $4,538,128, $2,245,643, $26,396,985, $– and $–, respectively.

^b SeeNote 2.

^c Includesincome earned from affiliated issuers. See Note 2.

See notes to the financial statements.

FINANCIAL STATEMENTS 95

Statements of Operations (Continued)

iSHARES^®, INC.

Year ended August 31, 2006

	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
Dividends from unaffiliated issuersa	$	11,494,982		$	76,262,269		$	25,295,985	$	10,217,204		$	19,798,242		$	59,059,225
Interest from affiliated issuersb		17,739			21,949			11,895		6,525			138,813			48,544
Securities lending incomec		311,946			291,724			129,743		—			656,131			—
Total investment income		11,824,667			76,575,942			25,437,623		10,223,729			20,593,186			59,107,769
EXPENSES
Investment advisory fees (Note 2)		2,439,770			9,175,781			2,583,523		2,039,466			10,213,486			11,442,524
Proxy fees		9,395			53,661			13,072		6,679			24,989			33,056
Foreign taxes (Note 1)		—			—			—		—			4,088			2,559,242
Total expenses		2,449,165			9,229,442			2,596,595		2,046,145			10,242,563			14,034,822
Net investment income		9,375,502			67,346,500			22,841,028		8,177,584			10,350,623			45,072,947
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(1,573,090	)		(7,555,835	)		855,163		(2,444,721	)		(55,305,596	)		(75,767,167	)
In-kind redemptions		130,166,917			79,033,066			30,956,975		101,819,127			—			—
Foreign currency transactions		20,000			(235,437	)		14,423		(70,927	)		603,764			(416,985	)
Net realized gain (loss)		128,613,827			71,241,794			31,826,561		99,303,479			(54,701,832	)		(76,184,152	)
Net change in unrealized appreciation (depreciation) on:
Investments		(14,766,061	)		162,853,032			28,353,863		(94,996,383	)		299,045,492			122,954,816
Translation of assets and liabilities in foreign currencies		(1,299	)		259,420			56,529		(12,787	)		—			138,689
Net change in unrealized appreciation (depreciation)		(14,767,360	)		163,112,452			28,410,392		(95,009,170	)		299,045,492			123,093,505
Net realized and unrealized gain		113,846,467			234,354,246			60,236,953		4,294,309			244,343,660			46,909,353
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	123,221,969		$	301,700,746		$	83,077,981	$	12,471,893		$	254,694,283		$	91,982,300

^a Netof foreign withholding tax of $296, $3,974,278, $–, $–, $3,572,689 and $14,426,026, respectively.

^b SeeNote 2.

^c Includesincome earned from affiliated issuers. See Note 2.

See notes to the financial statements.

96 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Changes in Net Assets

iSHARES^®, INC.

	iShares MSCI Australia Index Fund						iShares MSCI Brazil Index Fund						iShares MSCI Canada Index Fund
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	20,156,434		$	12,124,245		$	43,261,595		$	15,454,311		$	9,118,778		$	3,368,699
Net realized gain (loss)		30,254,258			41,358,189			(13,454,900	)		5,767,383			88,304,312			65,992,553
Net change in unrealized appreciation (depreciation)		40,835,313			25,410,296			276,489,590			178,499,755			43,740,392			56,852,456
Net increase in net assets resulting from operations		91,246,005			78,892,730			306,296,285			199,721,449			141,163,482			126,213,708
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(16,397,050	)		(9,320,851	)		(20,219,476	)		(8,052,116	)		(4,108,502	)		(3,453,495	)
Total distributions to shareholders		(16,397,050	)		(9,320,851	)		(20,219,476	)		(8,052,116	)		(4,108,502	)		(3,453,495	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		336,128,324			231,751,585			1,649,177,320			274,248,148			727,046,964			141,711,605
Cost of shares redeemed		(93,925,541	)		(110,966,622	)		(19,244,643	)		(123,135,627	)		(183,241,984	)		(169,468,858	)
Net increase (decrease) in net assets from capital share transactions		242,202,783			120,784,963			1,629,932,677			151,112,521			543,804,980			(27,757,253	)
INCREASE IN NET ASSETS		317,051,738			190,356,842			1,916,009,486			342,781,854			680,859,960			95,002,960
NET ASSETS
Beginning of year		369,355,268			178,998,426			552,285,438			209,503,584			420,300,775			325,297,815
End of year	$	686,407,006		$	369,355,268		$	2,468,294,924		$	552,285,438		$	1,101,160,735		$	420,300,775
Undistributed net investment income included in net assets at end of year	$	13,312,374		$	8,105,304		$	35,080,996		$	12,063,040		$	7,159,513		$	1,859,540
SHARES ISSUED AND REDEEMED
Shares sold		16,200,000			13,800,000			44,050,000			12,300,000			31,900,000			7,900,000
Shares redeemed		(4,600,000	)		(6,800,000	)		(500,000	)		(5,050,000	)		(8,000,000	)		(9,900,000	)
Net increase (decrease) in shares outstanding		11,600,000			7,000,000			43,550,000			7,250,000			23,900,000			(2,000,000	)

See notes to the financial statements.

FINANCIAL STATEMENTS 97

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
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	192,922,376		$	101,750,954		$	21,409,153		$	15,897,761		$	14,348,448		$	8,621,591
Net realized gain (loss)		1,340,943,115			270,957,406			45,228,751			41,822,193			(17,343,416	)		(5,786,512	)
Net change in unrealized appreciation (depreciation)		667,014,214			1,082,325,240			17,114,750			51,243,020			40,249,132			24,392,465
Net increase in net assets resulting from operations		2,200,879,705			1,455,033,600			83,752,654			108,962,974			37,254,164			27,227,544
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(113,762,995	)		(45,604,575	)		(17,872,090	)		(14,195,028	)		(14,088,338	)		(6,156,574	)
Total distributions to shareholders		(113,762,995	)		(45,604,575	)		(17,872,090	)		(14,195,028	)		(14,088,338	)		(6,156,574	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		6,532,568,942			4,407,630,562			385,690,233			251,633,472			210,424,492			155,029,612
Cost of shares redeemed		(3,651,163,544	)		(774,797,887	)		(206,843,656	)		(158,339,373	)		(246,831,356	)		(12,743,715	)
Net increase (decrease) in net assets from capital share transactions		2,881,405,398			3,632,832,675			178,846,577			93,294,099			(36,406,864	)		142,285,897
INCREASE (DECREASE) IN NET ASSETS		4,968,522,108			5,042,261,700			244,727,141			188,062,045			(13,241,038	)		163,356,867
NET ASSETS
Beginning of year		7,000,858,050			1,958,596,350			637,984,838			449,922,793			387,574,980			224,218,113
End of year	$	11,969,380,158		$	7,000,858,050		$	882,711,979		$	637,984,838		$	374,333,942		$	387,574,980
Undistributed net investment income included in net assets at end of year	$	156,423,079		$	79,495,049		$	14,227,248		$	10,655,366		$	5,608,095		$	5,217,709
SHARES ISSUED AND REDEEMED
Shares sold		71,850,000			64,200,000			28,575,000			21,225,000			27,900,000			21,525,000
Shares redeemed		(38,850,000	)		(10,650,000	)		(15,450,000	)		(13,425,000	)		(33,525,000	)		(1,875,000	)
Net increase (decrease) in shares outstanding		33,000,000			53,550,000			13,125,000			7,800,000			(5,625,000	)		19,650,000

See notes to the financial statements.

98 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

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
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	9,375,502		$	3,735,218		$	67,346,500		$	45,282,099		$	22,841,028		$	12,623,106
Net realized gain (loss)		128,613,827			37,753,990			71,241,794			(1,734,816	)		31,826,561			9,360,636
Net change in unrealized appreciation (depreciation)		(14,767,360	)		42,547,925			163,112,452			222,348,152			28,410,392			23,676,470
Net increase in net assets resulting from operations		123,221,969			84,037,133			301,700,746			265,895,435			83,077,981			45,660,212
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(6,377,728	)		(2,048,280	)		(62,872,256	)		(31,933,222	)		(14,378,298	)		(7,420,067	)
Total distributions to shareholders		(6,377,728	)		(2,048,280	)		(62,872,256	)		(31,933,222	)		(14,378,298	)		(7,420,067	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		939,038,789			229,047,163			508,919,684			636,895,214			245,347,020			156,094,475
Cost of shares redeemed		(547,333,327	)		(185,101,346	)		(174,924,729	)		—			(80,563,776	)		(23,244,294	)
Net increase in net assets from capital share transactions		391,705,462			43,945,817			333,994,955			636,895,214			164,783,244			132,850,181
INCREASE IN NET ASSETS		508,549,703			125,934,670			572,823,445			870,857,427			233,482,927			171,090,326
NET ASSETS
Beginning of year		255,557,449			129,622,779			1,522,107,477			651,250,050			341,136,836			170,046,510
End of year	$	764,107,152		$	255,557,449		$	2,094,930,922		$	1,522,107,477		$	574,619,763		$	341,136,836
Undistributed net investment income included in net assets at end of year	$	5,968,807		$	2,951,033		$	37,257,104		$	28,176,254		$	18,893,779		$	9,519,613
SHARES ISSUED AND REDEEMED
Shares sold		24,400,000			9,500,000			4,800,000			7,000,000			28,700,000			21,000,000
Shares redeemed		(14,700,000	)		(7,400,000	)		(1,700,000	)		—			(9,500,000	)		(3,200,000	)
Net increase in shares outstanding		9,700,000			2,100,000			3,100,000			7,000,000			19,200,000			17,800,000

See notes to the financial statements.

FINANCIAL STATEMENTS 99

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
	Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005			Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	8,177,584		$	3,396,007		$	10,350,623		$	7,696,168		$	45,072,947		$	15,942,474
Net realized gain (loss)		99,303,479			11,282,685			(54,701,832	)		(9,230,908	)		(76,184,152	)		(22,426,083	)
Net change in unrealized appreciation (depreciation)		(95,009,170	)		25,755,064			299,045,492			167,580,084			123,093,505			48,276,152
Net increase in net assets resulting from operations		12,471,893			40,433,756			254,694,283			166,045,344			91,982,300			41,792,543
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(4,618,354	)		(2,053,497	)		(7,841,332	)		(1,677,739	)		(16,050,567	)		(4,632,113	)
Total distributions to shareholders		(4,618,354	)		(2,053,497	)		(7,841,332	)		(1,677,739	)		(16,050,567	)		(4,632,113	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		395,411,010			37,191,402			1,159,560,093			331,095,006			1,391,773,216			391,736,531
Cost of shares redeemed		(258,896,840	)		(14,923,708	)		(483,534,641	)		(112,471,028	)		(326,594,755	)		(66,484,667	)
Net increase in net assets from capital share transactions		136,514,170			22,267,694			676,025,452			218,623,978			1,065,178,461			325,251,864
INCREASE IN NET ASSETS		144,367,709			60,647,953			922,878,403			382,991,583			1,141,110,194			362,412,294
NET ASSETS
Beginning of year		153,530,159			92,882,206			698,455,285			315,463,702			752,640,371			390,228,077
End of year	$	297,897,868		$	153,530,159		$	1,621,333,688		$	698,455,285		$	1,893,750,565		$	752,640,371
Undistributed net investment income included in net assets at end of year	$	6,243,135		$	2,645,723		$	10,954,387		$	7,841,332		$	44,460,389		$	15,854,994
SHARES ISSUED AND REDEEMED
Shares sold		3,650,000			500,000			26,100,000			10,700,000			111,950,000			34,150,000
Shares redeemed		(2,450,000	)		(200,000	)		(10,950,000	)		(3,650,000	)		(26,350,000	)		(5,700,000	)
Net increase in shares outstanding		1,200,000			300,000			15,150,000			7,050,000			85,600,000			28,450,000

See notes to the financial statements.

100 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Australia Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	18.28		$	13.56		$	11.22		$	9.36		$	9.24
Income from investment operations:
Net investment incomea		0.75			0.70			0.45			0.32			0.23
Net realized and unrealized gain (loss)b		3.23			4.60			2.32			1.81			(0.07	)
Total from investment operations		3.98			5.30			2.77			2.13			0.16
Less distributions from:
Net investment income		(0.67	)		(0.58	)		(0.43	)		(0.27	)		(0.04	)
Total distributions		(0.67	)		(0.58	)		(0.43	)		(0.27	)		(0.04	)
Net asset value, end of year	$	21.59		$	18.28		$	13.56		$	11.22		$	9.36
Total return		22.35	%		39.58	%		24.95	%		23.33	%		1.74	%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	686,407		$	369,355		$	178,998		$	87,541		$	76,731
Ratio of expenses to average net assets		0.54	%		0.57	%		0.79	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		3.75	%		4.13	%		3.37	%		3.21	%		2.47	%
Portfolio turnover ratec		7	%		17	%		9	%		8	%		5	%

^a Basedon average shares outstanding throughout each period.

^b The amountsreported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolioturnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 101

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Brazil Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	28.18		$	16.96		$	12.19		$	8.30		$	11.20
Income from investment operations:
Net investment incomea		1.00			0.89			0.55			0.32			0.38
Net realized and unrealized gain (loss)b		10.49			10.79			4.49			3.68			(3.28	)
Total from investment operations		11.49			11.68			5.04			4.00			(2.90	)
Less distributions from:
Net investment income		(0.58	)		(0.46	)		(0.27	)		(0.11	)		—
Total distributions		(0.58	)		(0.46	)		(0.27	)		(0.11	)		—
Net asset value, end of year	$	39.09		$	28.18		$	16.96		$	12.19		$	8.30
Total return		41.13	%		69.72	%		41.42	%		48.85	%		(25.89	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	2,468,295		$	552,285		$	209,504		$	103,035		$	83,788
Ratio of expenses to average net assets		0.70	%		0.74	%		0.96	%		0.99	%		0.99	%
Ratio of net investment income to average net assets		2.65	%		3.94	%		3.59	%		3.59	%		3.50	%
Portfolio turnover ratec		15	%		48	%		106	%		85	%		103	%

^a Based onaverage shares outstanding throughout each period.

^b The amountsreported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolioturnover rates include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units solely for cash in U.S. dollars. Excluding such transactions, the portfolio turnover rate for the years ended August 31, 2006 and August 31, 2005 would have been 13% and 9%, respectively. See Note 4.

See notes to the financial statements.

102 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Canada Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	20.30		$	14.33		$	12.25		$	9.49		$	10.70
Income from investment operations:
Net investment incomea		0.25			0.17			0.11			0.10			0.07
Net realized and unrealized gain (loss)b		4.29			6.00			2.17			2.69			(1.27	)
Total from investment operations		4.54			6.17			2.28			2.79			(1.20	)
Less distributions from:
Net investment income		(0.15	)		(0.20	)		(0.20	)		(0.03	)		(0.01	)
Total distributions		(0.15	)		(0.20	)		(0.20	)		(0.03	)		(0.01	)
Net asset value, end of year	$	24.69		$	20.30		$	14.33		$	12.25		$	9.49
Total return		22.46	%		43.35	%		18.70	%		29.47	%		(11.23	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	1,101,161		$	420,301		$	325,298		$	503,407		$	66,420
Ratio of expenses to average net assets		0.54	%		0.57	%		0.70	%c		0.84	%		0.84	%
Ratio of net investment income to average net assets		1.09	%		1.00	%		0.81	%		0.98	%		0.70	%
Portfolio turnover rated		20	%		9	%		10	%		10	%		5	%

^a Based on average shares outstanding throughout eachperiod.

^b The amountsreported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Ratio ofexpenses to average net assets prior to voluntary reimbursed distribution fees for the year ended August 31, 2004 was 0.80%.

^d Portfolioturnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 103

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Emerging Markets Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005b			Year ended Aug. 31, 2004b			Period from Apr. 7, 2003a to Aug. 31, 2003b
Net asset value, beginning of period	$	77.92		$	53.96		$	45.13		$	33.75
Income from investment operations:
Net investment incomec		1.65			1.65			1.13			0.26
Net realized and unrealized gaind		18.85			24.72			7.97			11.12
Total from investment operations		20.50			26.37			9.10			11.38
Less distributions from:
Net investment income		(0.99	)		(2.41	)		(0.27	)		—
Total distributions		(0.99	)		(2.41	)		(0.27	)		—
Net asset value, end of period	$	97.43		$	77.92		$	53.96		$	45.13
Total return		26.44	%		46.17	%		20.21	%		33.72	%e
Ratios/Supplemental data:
Net assets, end of period (000s)	$	11,969,380		$	7,000,858		$	1,958,596		$	297,846
Ratio of expenses to average net assets prior to waived feesf		0.77	%		0.78	%		0.77	%		0.78	%
Ratio of expenses to average net assets after waived feesf		0.77	%		0.77	%		0.76	%		0.78	%
Ratio of expenses to average net assets after waived fees and exclusive of foreign taxesf		0.75	%		0.74	%		0.74	%		0.72	%
Ratio of net investment income to average net assetsf		1.77	%		2.40	%		2.10	%		1.58	%
Portfolio turnover rateg		12	%		9	%		8	%		10	%

^a Commencement ofoperations.

^b Pershare amounts were adjusted to reflect a three-for-one stock split effective June 9, 2005.

^c Basedon average shares outstanding throughout each period.

^d Theamounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^e Notannualized.

^f Annualizedfor periods less than one year.

^g Portfolioturnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

104 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Hong Kong Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	13.01		$	10.91		$	9.03		$	7.99		$	8.93
Income from investment operations:
Net investment incomea		0.38			0.33			0.28			0.23			0.23
Net realized and unrealized gain (loss)b		1.17			2.04			1.75			0.95			(1.11	)
Total from investment operations		1.55			2.37			2.03			1.18			(0.88	)
Less distributions from:
Net investment income		(0.36	)		(0.27	)		(0.15	)		(0.14	)		(0.06	)
Total distributions		(0.36	)		(0.27	)		(0.15	)		(0.14	)		(0.06	)
Net asset value, end of year	$	14.20		$	13.01		$	10.91		$	9.03		$	7.99
Total return		12.20	%		21.96	%		22.69	%		15.14	%		(9.94	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	882,712		$	637,985		$	449,923		$	250,627		$	99,502
Ratio of expenses to average net assets		0.54	%		0.57	%		0.80	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		2.87	%		2.75	%		2.78	%		3.06	%		2.56	%
Portfolio turnover ratec		10	%		6	%		5	%		10	%		15	%

^a Basedon average shares outstanding throughout each period.

^b Theamounts reported may not accord with the change in aggregate gains and losses due to the timing of capital share transactions.

^c Portfolioturnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 105

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Malaysia Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	7.19		$	6.54		$	5.99		$	5.68		$	5.11
Income from investment operations:
Net investment incomea		0.26			0.20			0.13			0.10			0.08
Net realized and unrealized gainb		0.59			0.61			0.52			0.30			0.52
Total from investment operations		0.85			0.81			0.65			0.40			0.60
Less distributions from:
Net investment income		(0.29	)		(0.16	)		(0.10	)		(0.09	)		(0.03	)
Total distributions		(0.29	)		(0.16	)		(0.10	)		(0.09	)		(0.03	)
Net asset value, end of year	$	7.75		$	7.19		$	6.54		$	5.99		$	5.68
Total return		12.35	%		12.39	%		11.01	%		7.39	%		11.82	%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	374,334		$	387,575		$	224,218		$	99,730		$	93,262
Ratio of expenses to average net assets		0.54	%		0.57	%		0.79	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		3.46	%		2.85	%		1.97	%		1.91	%		1.53	%
Portfolio turnover ratec		60	%		15	%		39	%		35	%		37	%

^a Based on average shares outstanding throughout eachperiod.

^b Theamounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolioturnover rates include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units solely for cash in U.S. dollars. Excludingsuch transactions, the portfolio turnover rate for the years ended August 31, 2006 and August 31, 2005 would have been 9% and 9%, respectively. See Note 4.

See notes to the financial statements.

106 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Mexico Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	29.04		$	19.35		$	15.04		$	13.65		$	15.35
Income from investment operations:
Net investment incomea		0.76			0.42			0.26			0.19			0.32
Net realized and unrealized gain (loss)b		11.98			9.55			4.26			1.72			(1.95	)
Total from investment operations		12.74			9.97			4.52			1.91			(1.63	)
Less distributions from:
Net investment income		(0.48	)		(0.28	)		(0.21	)		(0.52	)		(0.07	)
Total distributions		(0.48	)		(0.28	)		(0.21	)		(0.52	)		(0.07	)
Net asset value, end of year	$	41.30		$	29.04		$	19.35		$	15.04		$	13.65
Total return		44.11	%		51.77	%		30.28	%		14.60	%		(10.67	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	764,107		$	255,557		$	129,623		$	60,155		$	70,994
Ratio of expenses to average net assets		0.54	%		0.57	%		0.78	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		2.06	%		1.70	%		1.40	%		1.43	%		2.05	%
Portfolio turnover ratec		12	%		9	%		12	%		13	%		8	%

^a Based on average shares outstanding throughout eachperiod.

^b Theamounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transaction.

^c Portfolioturnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 107

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Pacific ex-Japan Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Period from Oct. 25, 2001a to Aug. 31, 2002
Net asset value, beginning of period	$	97.57		$	75.73		$	62.03		$	52.51		$	50.03
Income from investment operations:
Net investment incomeb		3.83			3.70			2.68			1.87			1.35
Net realized and unrealized gainc		14.33			21.15			12.53			8.53			1.40
Total from investment operations		18.16			24.85			15.21			10.40			2.75
Less distributions from:
Net investment income		(3.70	)		(3.01	)		(1.51	)		(0.88	)		(0.27	)
Total distributions		(3.70	)		(3.01	)		(1.51	)		(0.88	)		(0.27	)
Net asset value, end of period	$	112.03		$	97.57		$	75.73		$	62.03		$	52.51
Total return		19.17	%		33.27	%		24.74	%		20.15	%		5.51	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	2,094,931		$	1,522,107		$	651,250		$	223,298		$	105,029
Ratio of expenses to average net assetse		0.50	%		0.50	%		0.50	%		0.50	%		0.50	%
Ratio of net investment income to average net assetse		3.67	%		4.09	%		3.68	%		3.47	%		2.87	%
Portfolio turnover ratef		8	%		16	%		8	%		8	%		5	%

^a Commencement of operations.

^b Based on average shares outstanding throughout each period.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Not annualized.

^e Annualized for periods of less than one year.

^f Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

108 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Singapore Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	7.77		$	6.52		$	5.38		$	5.01		$	5.34
Income from investment operations:
Net investment incomea		0.40			0.38			0.22			0.12			0.07
Net realized and unrealized gain (loss)b		1.23			1.15			1.04			0.33			(0.36	)
Total from investment operations		1.63			1.53			1.26			0.45			(0.29	)
Less distributions from:
Net investment income		(0.29	)		(0.28	)		(0.12	)		(0.08	)		(0.04	)
Total distributions		(0.29	)		(0.28	)		(0.12	)		(0.08	)		(0.04	)
Net asset value, end of year	$	9.11		$	7.77		$	6.52		$	5.38		$	5.01
Total return		21.61	%		24.06	%		23.47	%		9.30	%		(5.42	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	574,620		$	341,137		$	170,047		$	108,202		$	88,126
Ratio of expenses to average net assets		0.54	%		0.57	%		0.79	%		0.84	%		0.84	%
Ratio of net investment income to average net assets		4.74	%		5.19	%		3.50	%		2.67	%		1.44	%
Portfolio turnover ratec		6	%		8	%		9	%		14	%		9	%

^a Basedon average shares outstanding throughout each period.

^b Theamounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Portfolioturnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 109

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI South Africa Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Period from Feb. 3, 2003a to Aug. 31, 2003
Net asset value, beginning of period	$	82.99		$	59.92		$	46.81		$	38.72
Income from investment operations:
Net investment incomeb		2.87			1.92			1.23			0.89
Net realized and unrealized gainc		13.78			22.36			13.24			7.20
Total from investment operations		16.65			24.28			14.47			8.09
Less distributions from:
Net investment income		(1.97	)		(1.21	)		(1.36	)		—
Total distributions		(1.97	)		(1.21	)		(1.36	)		—
Net asset value, end of period	$	97.67		$	82.99		$	59.92		$	46.81
Total return		20.06	%		40.62	%		31.30	%		20.89	%d
Ratios/Supplemental data:
Net assets, end of period (000s)	$	297,898		$	153,530		$	92,882		$	81,914
Ratio of expenses to average net assetse		0.70	%		0.74	%		0.95	%		0.99	%
Ratio of net investment income to average net assetse		2.79	%		2.62	%		2.23	%		3.86	%
Portfolio turnover ratef		7	%		32	%		13	%		17	%

^a Commencementof operations.

^b Basedon average shares outstanding throughout each period.

^c Theamounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Notannualized.

^e Annualizedfor periods of less than one year.

^f Portfolioturnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

110 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI South Korea Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	34.75		$	24.17		$	23.06		$	21.17		$	13.25
Income from investment operations:
Net investment income (loss)a		0.31			0.46			0.22			0.19			(0.00	)b
Net realized and unrealized gainc		11.20			10.22			1.13			1.70			7.92
Total from investment operations		11.51			10.68			1.35			1.89			7.92
Less distributions from:
Net investment income		(0.26	)		(0.10	)		(0.24	)		—			—
Total distributions		(0.26	)		(0.10	)		(0.24	)		—			—
Net asset value, end of year	$	46.00		$	34.75		$	24.17		$	23.06		$	21.17
Total return		33.16	%		44.29	%		5.83	%		8.93	%		59.77	%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	1,621,334		$	698,455		$	315,464		$	154,486		$	96,336
Ratio of expenses to average net assets		0.70	%		0.74	%		0.94	%		0.99	%		1.00	%
Ratio of expenses to average net assets exclusive of foreign taxes		0.70	%		0.74	%		0.94	%		0.99	%		0.99	%
Ratio of net investment income (loss) to average net assets		0.71	%		1.49	%		0.87	%		0.98	%		(0.01	)%
Portfolio turnover rated		47	%		30	%		29	%		39	%		25	%

^a Basedon average shares outstanding throughout each period.

^b Roundsto less than $0.01.

^c Theamounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Portfolioturnover rates include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units solely for cash in U.S. dollars. Excluding such transactions, the portfolio turnover rate for the years ended August 31, 2006 and August 31, 2005 would have been 14% and 9%, respectively. See Note 4.

See notes to the financial statements.

FINANCIAL HIGHLIGHTS 111

Financial Highlights (Continued)

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Taiwan Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	11.57		$	10.66		$	10.79		$	8.82		$	9.01
Income from investment operations:
Net investment income (loss)a		0.34			0.27			0.14			0.04			(0.03	)
Net realized and unrealized gain (loss)b		0.80			0.72			(0.25	)		1.93			(0.16	)
Total from investment operations		1.14			0.99			(0.11	)		1.97			(0.19	)
Less distributions from:
Net investment income		(0.14	)		(0.08	)		(0.02	)		–			–
Total distributions		(0.14	)		(0.08	)		(0.02	)		–			–
Net asset value, end of year	$	12.57		$	11.57		$	10.66		$	10.79		$	8.82
Total return		9.84	%		9.28	%		(1.10	)%		22.45	%		(2.11	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	1,893,751		$	752,640		$	390,228		$	234,727		$	142,043
Ratio of expenses to average net assets		0.85	%		1.03	%		1.19	%c		1.31	%		1.33	%
Ratio of expenses to average net assets exclusive of foreign taxes		0.70	%		0.74	%		0.92	%		0.99	%		0.99	%
Ratio of net investment income (loss) to average net assets		2.74	%		2.34	%		1.23	%		0.43	%		(0.28	)%
Portfolio turnover rated		29	%		20	%		19	%		15	%		11	%

^a Based on average shares outstanding throughout eachperiod.

^b The amountsreported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^c Ratio ofexpenses to average net assets prior to voluntary reimbursed distribution fees for the year ended August 31, 2004 was 1.22%.

^d Portfolioturnover rates include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units solely for cash in U.S. dollars. Excluding such transactions, the portfolio turnover rate for the years ended August 31, 2006 and August 31, 2005 would have been 10% and 10%, respectively. See Note 4.

See notes to the financial statements.

112 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements

iSHARES^®, INC.

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, 2006, 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 uses 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 securities of 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; less 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.

1. SIGNIFICANT ACCOUNTING POLICIES

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 the 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 the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

SECURITY VALUATION

The securities and other assets of each Fund are generally valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service or a major market maker (or dealer), (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service or a major market maker (or dealer) or (iii) based on amortized cost. In the case of shares of funds that are not traded on an exchange, a market valuation means such fund’s published net asset value per share. The investment adviser may use various pricing services or discontinue the use of any pricing service. A price obtained from a pricing service based on such pricing service’s valuation matrix may be considered a market valuation. In the event that current market valuations are not readily available or such valuations do not reflect current market values, the affected investments will be valued using fair value pricing pursuant to the pricing policy and procedures approved by the Board of Directors of the Company (the “Board”).

NOTES TO THE FINANCIAL STATEMENTS 113

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, net of any foreign taxes withheld at source, 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. Foreign currencies, as well as investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates deemed appropriate by the investment adviser. Any use of a different rate from the rates used by MSCI may adversely affect a Fund’s ability to track its underlying index. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars on the respective dates of such transactions.

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 16.50% and up to 20.00%, 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. Foreign taxes payable as of August 31, 2006, if any, are reflected in their Statements of Assets and Liabilities.

The iShares MSCI Emerging Markets Index Fund may pay foreign taxes on certain taxable corporate events (i.e. tender offers) by Thai companies whose securities are held by the Fund. The foreign taxes paid by the Fund, if any, 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 capital 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.

As of August 31, 2006, the tax year-end of the Funds, the components of net 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			Net Distributable Earnings (Accumulated Losses)
Australia	$	22,888,627	$	70,460,017		$	(7,305,581	)	$	86,043,063
Brazil		35,107,628		470,342,244			(45,167,023	)		460,282,849
Canada		7,180,499		153,797,217			(2,935,472	)		158,042,244
Emerging Markets		167,842,041		1,733,589,217			(94,116,598	)		1,807,314,660
Hong Kong		16,247,956		99,224,411			(18,198,063	)		97,274,304
Malaysia		7,440,216		91,578,282			(46,577,047	)		52,441,451
Mexico		5,968,807		18,692,731			(7,561,482	)		17,100,056
Pacific ex-Japan		69,125,733		409,001,081			(6,640,180	)		471,486,634
Singapore		21,199,384		67,252,881			(14,997,787	)		73,454,478
South Africa		6,238,449		(45,028,414	)		(2,626,547	)		(41,416,512	)
South Korea		10,954,387		493,150,219			(63,650,973	)		440,453,633
Taiwan		44,460,389		144,697,642			(122,422,201	)		66,735,830

114 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

For the years ended August 31, 2006 and August 31, 2005, the tax characterization of distributions paid for each Fund represents ordinary income. 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, 2006.

From November 1, 2005 to August 31, 2006, certain Funds incurred net realized capital losses and net foreign currency losses. As permitted by tax regulations, these Funds have elected to defer these losses and treat them as arising in the year ending August 31, 2007, as follows:

iShares MSCI Index Fund	Deferred Net Realized Capital/Net Foreign Currency Losses
Emerging Markets	$	61,598,277
Hong Kong		3,045,214
Malaysia		16,065,921
Mexico		131,311
Pacific ex-Japan		1,673,327
South Africa		1,847,693
South Korea		43,797,425
Taiwan		65,611,598

The Funds had tax basis net capital loss carryforwards as of August 31, 2006, the tax year-end of the Funds, as follows:

iShares MSCI Index Fund	Expiring 2007		Expiring 2008		Expiring 2009		Expiring 2010		Expiring 2011		Expiring 2012		Expiring 2013		Expiring 2014		Total
Australia	$	—	$	71,019	$	1,971,994	$	3,625,203	$	650,082	$	596,240	$	384,424	$	—	$	7,298,962
Brazil		—		—		—		—		45,165,910		—		—		—		45,165,910
Canada		—		—		—		—		—		—		2,931,648		—		2,931,648
Emerging Markets		—		—		—		—		—		840,778		20,296,564		11,239,258		32,376,600
Hong Kong		4,085,707		—		—		4,971,970		2,870,602		2,330,414		468,716		425,440		15,152,849
Malaysia		8,654,333		—		—		9,819,029		2,898,105		775,477		6,820,474		1,543,708		30,511,126
Mexico		—		—		—		1,319,032		2,329,290		3,136,171		12,912		632,766		7,430,171
Pacific ex-Japan		—		—		—		—		329,461		2,563,114		1,175,692		853,529		4,921,796
Singapore		—		—		—		3,754,702		4,428,316		4,256,421		2,558,348		—		14,997,787
South Africa		—		—		—		—		—		527,613		—		260,738		788,351
South Korea		—		—		556,540		666,642		504,041		3,363,449		11,590,303		3,172,573		19,853,548
Taiwan		—		—		—		12,532,361		8,689,663		9,129,874		12,022,719		14,435,986		56,810,603

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.

NOTES TO THE FINANCIAL STATEMENTS 115

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

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

Each Fund reclassifies at the end of its tax year 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.

As of August 31, 2006, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

iShares MSCI Index Fund	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation (Depreciation)
Australia	$	622,597,160	$	79,197,719	$	(8,763,434	)	$	70,434,285
Brazil		1,993,920,679		491,032,674		(20,703,701	)		470,328,973
Canada		943,614,442		168,296,260		(14,510,085	)		153,786,175
Emerging Markets		10,923,320,778		1,946,687,342		(213,357,811	)		1,733,329,531
Hong Kong		814,620,366		111,476,602		(12,252,343	)		99,224,259
Malaysia		281,237,390		92,941,263		(1,361,502	)		91,579,761
Mexico		823,699,304		30,833,456		(12,140,771	)		18,692,685
Pacific ex-Japan		1,713,049,972		422,794,147		(13,906,522	)		408,887,625
Singapore		508,335,156		77,143,515		(9,912,744	)		67,230,771
South Africa		342,658,248		3,380,744		(48,399,406	)		(45,018,662	)
South Korea		1,235,779,014		503,686,338		(10,536,119	)		493,150,219
Taiwan		1,721,827,363		194,645,856		(49,821,931	)		144,823,925

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 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.

2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

Pursuant to an Investment Advisory Agreement with the Company, Barclays Global Fund Advisors (“BGFA”) manages the investment of each Fund’s assets. BGFA is a California corporation indirectly owned by Barclays Bank PLC. Under the Investment Advisory Agreement, BGFA is responsible for all 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 execution of portfolio transactions, distribution fees and extraordinary expenses.

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 of the average daily net assets of all the funds offered by the Company (except for the iShares MSCI Brazil, iShares

116 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

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 Average Daily Net Assets
0.59%	First $7 billion
0.54	Over $7 billion, up to and including $11 billion
0.49	Over $11 billion

For its investment 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 of the average daily net assets of these four Funds as follows:

Investment Advisory Fee	Aggregate Average Daily Net Assets
0.74%	First $2 billion
0.69	Over $2 billion, up to and including $4 billion
0.64	Over $4 billion

For its investment advisory services to the iShares MSCI Pacific ex-Japan Index Fund, BGFA is entitled to an annual investment advisory fee based on the average daily 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 daily net assets of the Fund excluding any investments in other iShares MSCI Index Funds, of 0.75%. BGFA voluntarily waived its advisory fees for the iShares MSCI Emerging Markets Index Fund in an amount equal to the investment advisory fees payable on the amount of the Fund’s investment in other iShares MSCI Index Funds.

The Board approved a change to the investment advisory fee rates for the iShares MSCI Australia, iShares MSCI Canada, iShares MSCI Hong Kong, iShares MSCI Malaysia, iShares MSCI Mexico and iShares MSCI Singapore Index Funds effective September 1, 2006. For its investment advisory services to each Fund, BGFA will be entitled to be paid annual investment advisory fees based on each Fund’s allocable portion of the aggregate of the average daily 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 Average Daily Net Assets
0.59%	First $7 billion
0.54	Over $7 billion, up to and including $11 billion
0.49	Over $11 billion, up to and including $24 billion
0.44	Over $24 billion

The Board approved a change to the investment advisory fee structure for the iShares MSCI Emerging Markets Index Fund effective September 1, 2006. For its investment advisory services to the Fund, BGFA will be entitled to be paid annual investment advisory fees based on the average daily net assets of the Fund excluding any investments in other iShares MSCI Index Funds, as follows:

Investment Advisory Fee	Average Daily Net Assets
0.75%	First $14 billion
0.68	Over $14 billion, up to and including $28 billion
0.61	Over $28 billion

NOTES TO THE FINANCIAL STATEMENTS 117

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

BGFA intends to continue to voluntarily waive its advisory fees for the iShares MSCI Emerging Markets Index Fund in an amount equal to the investment advisory fees payable on the amount of the Fund’s investment in other iShares MSCI Index Funds.

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 and expenses are Covered Expenses as defined above.

SEI Investments Distribution Co. (“SEI”) serves as each Fund’s underwriter and distributor of the shares of each Fund, pursuant to a Distribution Agreement with the Company. SEI does not currently receive a fee from the Funds for its distribution services.

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission (“SEC”), the Funds are permitted to lend portfolio securities to Barclays Capital, Inc. (“BarCap”). Pursuant to the same exemptive order, Barclays Global Investors, N.A. (“BGI”) serves as securities lending agent for the Company. BarCap and BGI are affiliates 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, 2006, BGI earned securities lending agent fees as follows:

iShares MSCI Index Fund	Securities Lending Agent Fees
Australia	$	42,933
Brazil		1,515
Emerging Markets		6,885,228
Hong Kong		155,076
Mexico		311,946
Pacific ex-Japan		291,724
Singapore		129,743
South Korea		656,131

Cross trades for the year ended August 31, 2006, if any, were executed by the Funds pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment adviser. At its regularly scheduled quarterly meetings, the Board reviews such transactions as of the most recent calendar quarter, for compliance with the requirements and restrictions set forth by Rule 17a-7.

Each Fund may invest in the Institutional Shares of certain money market funds managed by BGFA, the Funds’ investment adviser, including the Government Money Market Fund (“GMMF”), Institutional Money Market Fund (“IMMF”), Prime Money Market Fund (“PMMF”) and Treasury Money Market Fund (“TMMF”) of Barclays Global Investors Funds. The GMMF, IMMF, PMMF and TMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (collectively, the “Master Portfolios”), respectively, which are also managed by BGFA. While the GMMF, IMMF, PMMF and TMMF 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 GMMF, IMMF, PMMF and TMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Funds from temporary cash investments are recorded as interest from affiliated issuers in the accompanying Statements of Operations. Income distributions earned by the Funds from the investment of securities lending collateral are included in securities lending income 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 shares of other iShares MSCI Index Funds that invest in securities in the Fund’s benchmark index. As of August 31, 2006, the iShares MSCI Emerging Markets Index Fund held shares of the iShares MSCI Malaysia, iShares MSCI South Korea and iShares MSCI Taiwan Index Funds.

118 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

The following table provides information about the direct investment by each Fund (exclusive of investments of securities lending collateral) in issuers of which BGFA is an affiliate or issuers of which a Fund owns 5% or more of the outstanding voting securities, for the year ended August 31, 2006.

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
Australia
IMMF	108	33,322	33,398	32	$	31,715	$	5,946	$	—
Brazil
IMMF	1,112	894,918	891,141	4,889		4,889,243		165,134		—
Canada
IMMF	39	110,454	110,092	401		400,763		19,579		—
Emerging Markets
IMMF	4,035	2,992,165	2,990,377	5,823		5,823,368		533,655		—
Siliconware Precision Industries Co. ADR	26,306	23,592	16,096	33,802		198,416,383		6,315,069		19,892,644
iShares MSCI Malaysia Index Fund	1,180	34	175	1,039		8,011,924		350,401		76,325
iShares MSCI South Korea Index Fund	402	316	172	546		25,023,371		133,907		3,621,587
iShares MSCI Taiwan Index Fund	1,516	2,037	741	2,812		35,144,925		211,224		1,536,527
Hong Kong
IMMF	23	119,874	119,199	698		697,658		22,999		—
Malaysia
IMMF	401	54,293	54,694	—		463		8,001		—
Mexico
IMMF	17	95,196	94,620	593		592,868		17,739		—
Pacific ex-Japan
IMMF	816	124,509	125,148	177		177,436		21,949		—
Singapore
IMMF	52	64,886	64,592	346		345,991		11,895		—
South Africa
IMMF	5	35,962	35,851	116		115,792		6,525		—
South Korea
IMMF	1,393	721,596	720,703	2,286		2,285,879		138,813		—
Taiwan
IMMF	70	277,754	277,342	482		482,401		48,544		—

As of August 31, 2006, certain directors and officers of the Company are also officers of BGI and/or BGFA.

NOTES TO THE FINANCIAL STATEMENTS 119

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, 2006, were as follows:

iShares MSCI Index Fund	Purchases		Sales
Australia	$	40,006,500	$	38,140,342
Brazil		1,897,083,809		249,661,100
Canada		166,319,274		163,140,738
Emerging Markets		1,430,092,582		1,315,795,291
Hong Kong		76,173,353		71,232,546
Malaysia		245,520,892		282,687,853
Mexico		55,935,760		52,974,079
Pacific ex-Japan		153,730,864		151,205,267
Singapore		36,451,690		29,412,786
South Africa		24,166,180		19,448,454
South Korea		1,353,003,811		674,512,118
Taiwan		1,534,904,792		462,700,047

In-kind transactions (see Note 4) for the year ended August 31, 2006, were as follows:

iShares MSCI Index Fund	In-kind Purchases		In-kind Sales
Australia	$	334,544,005	$	93,072,824
Canada		723,483,446		180,787,533
Emerging Markets		6,463,573,882		3,610,426,189
Hong Kong		378,266,291		201,804,853
Mexico		937,426,542		545,844,568
Pacific ex-Japan		504,319,584		173,419,251
Singapore		239,978,837		78,865,483
South Africa		392,268,611		257,122,073

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

120 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

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 contribution 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). Investors purchasing and redeeming Creation Units pay a purchase transaction fee and a redemption transaction fee directly to Investors Bank, the administrator, to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units, including Creation Units for cash. Investors transacting in Creation Units for cash pay an additional variable charge to compensate the relevant Fund for brokerage and market impact expenses relating to investing in portfolio securities.

5. LOANS OF PORTFOLIO SECURITIES

Each Fund may lend its investment securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, 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 of at least 102% of the market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other 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, 2006, certain Funds had loaned securities which were collateralized by cash. Pursuant to an exemptive order issued by the SEC, the cash collateral received was invested in a joint account with other investment funds managed by BGFA. The joint account 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 or non-U.S. Government debt securities. The market value of the securities on loan as of August 31, 2006 and the value of the related collateral are disclosed in the Statements of Assets and Liabilities. Securities lending income, as disclosed in the Funds’ Statements of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to BGI as securities lending agent.

6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, (“FIN 48”) “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact of applying the various provisions of FIN 48.

NOTES TO THE FINANCIAL STATEMENTS 121

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 Series (the “Funds”), at August 31, 2006, the results of each of their operations for the year then ended and the changes in each of their net assets and the financial highlights for each of the periods presented, 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

October 23, 2006

122 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Tax Information (Unaudited)

iSHARES^®, INC.

For the fiscal year ended August 31, 2006, certain 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	$	23,991,398	$	976,663
Brazil		59,024,576		4,228,850
Canada		15,846,668		2,164,450
Emerging Markets		294,771,644		27,816,041
Mexico		11,495,278		296
Pacific ex-Japan		80,236,548		3,967,523
South Korea		23,370,932		3,572,900
Taiwan		73,485,251		16,910,239

Under Section 854(b)(2) of the Code, certain Funds hereby designate the following maximum amounts as qualified dividend income for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended August 31, 2006:

iShares MSCI Index Fund	Qualified Dividend Income
Australia	$	18,973,890
Brazil		2,621,285
Canada		11,575,231
Emerging Markets		214,998,474
Malaysia		291,621
Mexico		9,395,798
Pacific ex-Japan		43,813,084
South Africa		8,101,179
South Korea		14,523,199

In January 2007, shareholders will receive Form 1099-DIV which will include their share of qualified dividend income distributed during the calendar year 2006. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their income tax returns.

TAX INFORMATION 123

Board Review and Approval of Investment Advisory Contracts (Unaudited)

iSHARES^®, INC.

Under Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), the Company’s Board of Directors (the “Board”), including a majority of Directors who are not interested persons of the Company (as that term is defined in the 1940 Act) (the “Independent Directors”), is required annually to consider the Investment Advisory Contract between the Company and BGFA (the “Advisory Contract”) on behalf of the Funds. As required by Section 15(c), the Board requested and BGFA provided such information as the Board deemed reasonably necessary to evaluate the terms of the Advisory Contract. At a meeting held on June 14-15, 2006, the Board approved the selection of BGFA and the continuance of the Advisory Contract, based on its review of qualitative and quantitative information provided by BGFA. In selecting BGFA and approving the Advisory Contract for the Funds, the Board, including the Independent Directors, advised by their independent counsel, considered the following factors, none of which was controlling, and made the following conclusions:

NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY BGFA

The Board determined that there would be no diminution in the scope of services required of BGFA under the Advisory Contract for the coming year as compared to the scope of services provided by BGFA over the past year. In reviewing the scope of these services, the Board considered BGFA’s investment philosophy and experience, noting that BGFA and its affiliates have committed significant resources over time, including over the past year, to the support of the Funds. The Board also considered BGFA’s compliance program and its compliance record with respect to the Funds. In that regard, the Board noted that BGFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and has made appropriate officers available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons responsible for the day-to-day management of the Funds. In addition to the above considerations, the Board reviewed and considered BGFA’s investment processes and strategies, and matters related to BGFA’s portfolio transaction policies and procedures. The Board further noted that BGFA does not serve as investment adviser for any other series of registered investment companies with substantially similar investment objectives and strategies as the Funds; therefore, no comparative performance information was available. However, the Board also noted that the Funds had met their investment objectives consistently since their respective inception dates. Based on this review, the Board concluded that the nature, extent and quality of services to be provided by BGFA to the Funds under the Advisory Contract were appropriate and mitigated in favor of the Board’s approval of the Advisory Contract for the coming year.

FUNDS’ EXPENSES AND PERFORMANCE OF THE FUNDS

The Board reviewed statistical information prepared by Lipper Inc. (“Lipper”), an independent provider of investment company data, regarding the expense ratio components, including advisory fees, waivers/reimbursements, and gross and net total expenses of each Fund in comparison with the same information for other registered funds objectively selected solely by Lipper as comprising each Fund’s applicable peer group (the “Lipper Peer Group”). In addition, the Board reviewed statistical information prepared by Lipper regarding the performance of each Fund for the one-, three- and five-year, and “last quarter” periods ended March 31, 2006, as applicable, and a comparison of each Fund’s performance to that of the funds in its Lipper Peer Group for the same periods. Because there are few, if any, exchange traded funds or index funds that track indices similar to those tracked by the Funds, the Lipper Peer Groups included mutual funds, closed-end funds, exchange traded funds, and funds with differing investment objective classifications, investment focuses and other characteristics (e.g., actively managed funds and funds sponsored by “at cost” service providers). In support of its review of the statistical information, the Board was provided with a detailed description of the methodology used by Lipper to determine the applicable Lipper Peer Groups and to prepare this information. The Board further noted that due to the limitations in providing comparable funds in the various Lipper Peer Groups, the statistical information may or may not provide meaningful direct comparisons to the Funds. The Board noted that most of the Funds generally performed in line with the funds in their respective Lipper Peer Groups over relevant periods, however, certain of the Funds may have underperformed or outperformed funds in their respective Lipper Peer Groups over relevant periods, but any such Funds also performed in line with their relevant benchmarks over such periods. The Board also noted that the investment advisory fees and overall expenses for the Funds were generally lower than or in line with the investment advisory fee rates and overall expenses of the funds in their respective Lipper Peer Groups. The Board also reviewed statistical information from Lipper displaying the effects of the proposed extension/addition of breakpoints in the investment advisory fee rates for certain of the Funds (as discussed below)

124 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Board Review and Approval of Investment Advisory Contracts (Unaudited) (Continued)

iSHARES^®, INC.

at various assets levels of such Funds as compared to their respective Lipper Peer Groups. Based on this review, the Board concluded that the investment advisory fees and expense levels and the historical performance of each Fund, as managed by BGFA, as compared to the investment advisory fees and expense levels and performance of the funds in the relevant Lipper Peer Group, were satisfactory for the purposes of approving the Advisory Contract for the coming year.

COSTS OF SERVICES PROVIDED TO FUNDS AND PROFITS REALIZED BY BGFA AND AFFILIATES

The Board reviewed information about the profitability to BGFA of the Funds based on the fees payable to BGFA and its affiliates (including fees under the Advisory Contract), and all other sources of revenue and expense to BGFA and its affiliates for the last calendar year. The Board discussed the sources of direct and ancillary revenue with management, including the revenues to BGI from securities lending by the Company (including any securities lending by the Funds). The Board also discussed BGFA’s profit margin as reflected in the Funds’ profitability analysis and reviewed information regarding economies of scale (as discussed below). Based on this review, the Board concluded that the profits to be realized by BGFA and its affiliates under the Advisory Contract and from other relationships between the Funds and BGFA and/or its affiliates, if any, were within the range the Board considered reasonable and appropriate.

ECONOMIES OF SCALE

In connection with its review of the Funds’ profitability analysis, the Board reviewed information regarding economies of scale or other efficiencies that may result from increases in the Funds’ assets. The Board was also presented with materials regarding the proposed extension of breakpoints in the investment advisory fee rates at certain asset levels of certain Funds on an aggregated basis with certain other iShares funds and the addition of breakpoints in the investment advisory fee rates for the iShares MSCI Emerging Markets Index Fund. The Board noted that the Advisory Contract already provided for breakpoints in the investment advisory fee rates for most of the Funds as the assets of such Funds, on an aggregated basis with the assets of certain other iShares funds, increased, but also noted that the Advisory Contract did not currently provide for any breakpoints in the investment advisory fee rates for the iShares MSCI Pacific Ex-Japan Index Fund and the iShares MSCI Emerging Markets Index Fund. The Board discussed the substantial growth in assets of certain iShares funds, including the iShares Emerging Markets Index Fund and the iShares funds in the group with which most of the other Funds’ assets are aggregated for the purpose of applying breakpoints in the investment advisory fee rates, over the last few years. However, the Board generally noted that possible future economies of scale for the Funds had been taken into consideration by fixing the investment advisory fees at rates at the lower end of the marketplace, effectively giving Fund shareholders, from inception, the benefits of the lower average fee shareholders would have received from a fee structure with declining breakpoints where the initial fee was higher. In addition, the Board noted that as of July 1, 2004, Fund shareholders were no longer paying distribution fees pursuant to the Funds’ distribution plan under 12b-1 of the 1940 Act because such plan had been terminated as of that date, benefiting the Funds’ shareholders by lowering the Funds’ overall expenses. The Board also reviewed BGFA’s historic profitability as investment adviser to the iShares fund complex and noted that BGFA had made a significant investment in the iShares funds and had incurred operating losses during earlier years when the iShares funds, including the Funds, had not yet reached scale. In light of this history, the Board determined that the proposed extension/addition of breakpoints was appropriate and warranted at this juncture for certain of the Funds but that reductions in fee rates or further extensions/additions of breakpoints were not warranted at this juncture for the other Funds. Based on this review, the Board, recognizing its responsibility to consider this issue at least annually, concluded that the structure of the investment advisory fees, with the proposed extension/addition of breakpoints for certain of the Funds, reflects the current sharing and potential further sharing of economies of scale with the Funds’ shareholders.

BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS 125

Board Review and Approval of Investment Advisory Contracts (Unaudited) (Continued)

iSHARES^®, INC.

FEES AND SERVICES PROVIDED FOR OTHER COMPARABLE FUNDS/ACCOUNTS MANAGED BY BGFA AND ITS AFFILIATES

The Board considered the Funds’ annual investment advisory fee rates under the Advisory Contract in comparison to the investment advisory/management fee rates for other funds/accounts for which BGFA (or its affiliate, BGI) provides investment advisory/management services, including other funds registered under the 1940 Act, collective funds and separate accounts (together, the “Other Accounts”). The Board noted that comparative investment advisory/management fee information was not available, as BGFA and its affiliates do not manage any Other Accounts with substantially similar investment objectives and strategies as the Funds. However, the Board noted that BGFA provided the Board with general information regarding how the level of services provided to the Other Accounts differed from the level of services provided to the Funds. Based on this review, the Board determined that the investment advisory fee rates under the Advisory Contracts, with the proposed extension/addition of breakpoints, do not constitute fees that are so disproportionately large as to bear no reasonable relationship to the services rendered and that could not have been the product of arm’s-length bargaining, and concluded that the investment advisory fee rates under the Advisory Contracts, with the proposed extension/addition of breakpoints, are fair and reasonable.

OTHER BENEFITS TO BGFA AND/OR ITS AFFILIATES

The Board reviewed any ancillary revenue received by BGFA and/or its affiliates in connection with the services provided to the Funds by BGFA, such as any payment of revenue to BGI, the Company’s securities lending agent, for loaning any portfolio securities, and payment of advisory fees and/or administration fees to BGFA and BGI in connection with any investments by the Funds in other funds for which BGFA provides investment advisory services and/or BGI provides administration services. The Board noted that BGFA does not use soft dollars or consider the value of research or other services that may be provided to BGFA (including its affiliates) in selecting brokers for portfolio transactions for the Funds. The Board further noted that any portfolio transactions on behalf of the Funds placed through a BGFA affiliate are reported to the Board pursuant to Rule 17e-1 under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Funds’ shareholders.

Based on this analysis, the Board determined that the Advisory Contract, including the investment advisory fee rates, with the proposed extension/addition of breakpoints, are fair and reasonable in light of all relevant circumstances, and concluded that it is in the best interest of the Funds and their shareholders to approve the Advisory Contract, with the fee schedule to the Advisory Contract as proposed to be amended to reflect the extension/addition of breakpoints, for the coming year.

126 2006  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 (the “Exchange”), 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 Exchange, the Market Price is determined using the midpoint of the bid/ask spread as of the opening of regular trading on the Exchange. 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. The information shown for each Fund is for five calendar years (or for each full calendar quarter completed after the inception date of such Fund if less than five years) through the date of the most recent calendar quarter-end. 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 Australia Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5%	2	0.14	%
Greater than 3.0% and Less than 3.5%	2	0.14
Greater than 2.5% and Less than 3.0%	2	0.14
Greater than 2.0% and Less than 2.5%	7	0.51
Greater than 1.5% and Less than 2.0%	36	2.61
Greater than 1.0% and Less than 1.5%	124	8.98
Greater than 0.5% and Less than 1.0%	334	24.19
Between 0.5% and – 0.5%	695	50.33
Less than –0.5% and Greater than –1.0%	104	7.53
Less than –1.0% and Greater than –1.5%	40	2.90
Less than –1.5% and Greater than –2.0%	21	1.52
Less than –2.0% and Greater than –2.5%	7	0.51
Less than –2.5% and Greater than –3.0%	4	0.29
Less than –3.0% and Greater than –3.5%	3	0.21
	1,381	100.00	%

SUPPLEMENTAL INFORMATION 127

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Brazil Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5%	2	0.14	%
Greater than 3.0% and Less than 3.5%	4	0.29
Greater than 2.5% and Less than 3.0%	13	0.94
Greater than 2.0% and Less than 2.5%	22	1.59
Greater than 1.5% and Less than 2.0%	38	2.75
Greater than 1.0% and Less than 1.5%	91	6.59
Greater than 0.5% and Less than 1.0%	189	13.69
Between 0.5% and –0.5%	732	53.02
Less than –0.5% and Greater than –1.0%	144	10.43
Less than –1.0% and Greater than –1.5%	41	2.97
Less than –1.5% and Greater than –2.0%	38	2.75
Less than –2.0% and Greater than –2.5%	25	1.81
Less than –2.5% and Greater than –3.0%	12	0.87
Less than –3.0% and Greater than –3.5%	8	0.58
Less than –3.5% and Greater than –4.0%	7	0.51
Less than –4.0% and Greater than –4.5%	6	0.43
Less than –4.5% and Greater than –5.0%	6	0.43
Less than –5.0%	3	0.21
	1,381	100.00	%

iShares MSCI Canada Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5%	1	0.07	%
Greater than 3.0% and Less than 3.5%	4	0.29
Greater than 2.5% and Less than 3.0%	9	0.65
Greater than 2.0% and Less than 2.5%	15	1.09
Greater than 1.5% and Less than 2.0%	30	2.17
Greater than 1.0% and Less than 1.5%	89	6.44
Greater than 0.5% and Less than 1.0%	239	17.31
Between 0.5% and –0.5%	884	64.03
Less than –0.5% and Greater than –1.0%	78	5.65
Less than –1.0% and Greater than –1.5%	20	1.45
Less than –1.5% and Greater than –2.0%	6	0.43
Less than –2.0% and Greater than –2.5%	5	0.35
Less than –2.5% and Greater than –3.0%	1	0.07
	1,381	100.00	%

128 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Emerging Markets Index Fund

Period Covered: July 1, 2003 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 2.0% and Less than 2.5%	1	0.13	%
Greater than 1.5% and Less than 2.0%	17	2.25
Greater than 1.0% and Less than 1.5%	47	6.22
Greater than 0.5% and Less than 1.0%	209	27.65
Between 0.5% and –0.5%	379	50.13
Less than –0.5% and Greater than –1.0%	67	8.86
Less than –1.0% and Greater than –1.5%	19	2.51
Less than –1.5% and Greater than –2.0%	13	1.72
Less than –2.0% and Greater than –2.5%	4	0.53
	756	100.00	%

iShares MSCI Hong Kong Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 4.0%	3	0.21	%
Greater than 3.5% and Less than 4.0%	2	0.14
Greater than 3.0% and Less than 3.5%	4	0.29
Greater than 2.5% and Less than 3.0%	4	0.29
Greater than 2.0% and Less than 2.5%	21	1.52
Greater than 1.5% and Less than 2.0%	54	3.91
Greater than 1.0% and Less than 1.5%	118	8.54
Greater than 0.5% and Less than 1.0%	248	17.97
Between 0.5% and –0.5%	589	42.66
Less than –0.5% and Greater than –1.0%	157	11.37
Less than –1.0% and Greater than –1.5%	74	5.36
Less than –1.5% and Greater than –2.0%	62	4.49
Less than –2.0% and Greater than –2.5%	17	1.23
Less than –2.5% and Greater than –3.0%	12	0.87
Less than –3.0% and Greater than –3.5%	6	0.43
Less than –3.5% and Greater than –4.0%	6	0.43
Less than –4.0%	4	0.29
	1,381	100.00	%

SUPPLEMENTAL INFORMATION 129

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC .

iShares MSCI Malaysia Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5%	1	0.07	%
Greater than 3.0% and Less than 3.5%	2	0.14
Greater than 2.5% and Less than 3.0%	9	0.65
Greater than 2.0% and Less than 2.5%	34	2.46
Greater than 1.5% and Less than 2.0%	65	4.71
Greater than 1.0% and Less than 1.5%	125	9.05
Greater than 0.5% and Less than 1.0%	183	13.26
Between 0.5% and –0.5%	368	26.66
Less than –0.5% and Greater than –1.0%	143	10.35
Less than –1.0% and Greater than –1.5%	128	9.27
Less than –1.5% and Greater than –2.0%	85	6.15
Less than –2.0% and Greater than –2.5%	75	5.43
Less than –2.5% and Greater than –3.0%	55	3.98
Less than –3.0% and Greater than –3.5%	40	2.90
Less than –3.5% and Greater than –4.0%	24	1.74
Less than –4.0% and Greater than –4.5%	24	1.74
Less than –4.5% and Greater than –5.0%	9	0.65
Less than –5.0% and Greater than –5.5%	1	0.07
Less than –5.5% and Greater than –6.0%	4	0.29
Less than –6.0%	6	0.43
	1,381	100.00	%

iShares MSCI Mexico Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 2.5% and Less than 3.0%	1	0.07	%
Greater than 2.0% and Less than 2.5%	6	0.43
Greater than 1.5% and Less than 2.0%	25	1.81
Greater than 1.0% and Less than 1.5%	69	5.00
Greater than 0.5% and Less than 1.0%	194	14.05
Between 0.5% and –0.5%	794	57.51
Less than –0.5% and Greater than –1.0%	182	13.18
Less than –1.0% and Greater than –1.5%	78	5.65
Less than –1.5% and Greater than –2.0%	23	1.67
Less than –2.0% and Greater than –2.5%	5	0.35
Less than –2.5% and Greater than –3.0%	3	0.21
Less than –3.0%	1	0.07
	1,381	100.00	%

130 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Pacific ex-Japan Index Fund

Period Covered: January 1, 2002 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5% and Less than 4.0%	2	0.18	%
Greater than 3.0% and Less than 3.5%	2	0.18
Greater than 2.5% and Less than 3.0%	7	0.62
Greater than 2.0% and Less than 2.5%	10	0.88
Greater than 1.5% and Less than 2.0%	61	5.39
Greater than 1.0% and Less than 1.5%	198	17.49
Greater than 0.5% and Less than 1.0%	285	25.18
Between 0.5% and –0.5%	495	43.72
Less than –0.5% and Greater than –1.0%	48	4.24
Less than –1.0% and Greater than –1.5%	16	1.41
Less than –1.5% and Greater than –2.0%	7	0.62
Less than –2.0%	1	0.09
	1,132	100.00	%

iShares MSCI Singapore Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 4.0% and Less than 4.5%	1	0.07	%
Greater than 3.5% and Less than 4.0%	2	0.14
Greater than 3.0% and Less than 3.5%	2	0.14
Greater than 2.5% and Less than 3.0%	8	0.58
Greater than 2.0% and Less than 2.5%	24	1.74
Greater than 1.5% and Less than 2.0%	67	4.85
Greater than 1.0% and Less than 1.5%	174	12.60
Greater than 0.5% and Less than 1.0%	223	16.15
Between 0.5% and –0.5%	479	34.70
Less than –0.5% and Greater than –1.0%	148	10.72
Less than –1.0% and Greater than –1.5%	119	8.62
Less than –1.5% and Greater than –2.0%	50	3.62
Less than –2.0% and Greater than –2.5%	33	2.39
Less than –2.5% and Greater than –3.0%	20	1.45
Less than –3.0% and Greater than –3.5%	10	0.72
Less than –3.5% and Greater than –4.0%	10	0.72
Less than –4.0% and Greater than –4.5%	4	0.29
Less than –4.5% and Greater than –5.0%	4	0.29
Less than –5.0% and Greater than –5.5%	1	0.07
Less than –5.5%	2	0.14
	1,381	100.00	%

SUPPLEMENTAL INFORMATION 131

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI South Africa Index Fund

Period Covered: April 1, 2003 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.0%	2	0.24	%
Greater than 2.5% and Less than 3.0%	3	0.37
Greater than 2.0% and Less than 2.5%	7	0.85
Greater than 1.5% and Less than 2.0%	18	2.20
Greater than 1.0% and Less than 1.5%	64	7.81
Greater than 0.5% and Less than 1.0%	157	19.17
Between 0.5% and –0.5%	472	57.64
Less than –0.5% and Greater than –1.0%	52	6.35
Less than –1.0% and Greater than –1.5%	25	3.05
Less than –1.5% and Greater than –2.0%	9	1.10
Less than –2.0% and Greater than –2.5%	2	0.24
Less than –2.5% and Greater than –3.0%	3	0.37
Less than –3.0% and Greater than –3.5%	3	0.37
Less than –3.5%	2	0.24
	819	100.00	%

iShares MSCI South Korea Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 5.5%	2	0.14	%
Greater than 5.0% and Less than 5.5%	2	0.14
Greater than 4.5% and Less than 5.0%	3	0.21
Greater than 4.0% and Less than 4.5%	2	0.14
Greater than 3.5% and Less than 4.0%	7	0.51
Greater than 3.0% and Less than 3.5%	5	0.35
Greater than 2.5% and Less than 3.0%	16	1.16
Greater than 2.0% and Less than 2.5%	45	3.26
Greater than 1.5% and Less than 2.0%	92	6.66
Greater than 1.0% and Less than 1.5%	158	11.44
Greater than 0.5% and Less than 1.0%	250	18.12
Between 0.5% and –0.5%	468	33.93
Less than –0.5% and Greater than –1.0%	137	9.92
Less than –1.0% and Greater than –1.5%	82	5.94
Less than –1.5% and Greater than –2.0%	49	3.55
Less than –2.0% and Greater than –2.5%	26	1.88
Less than –2.5% and Greater than –3.0%	18	1.30
Less than –3.0% and Greater than –3.5%	8	0.58
Less than –3.5% and Greater than –4.0%	5	0.35
Less than –4.0% and Greater than –4.5%	3	0.21
Less than –4.5%	3	0.21
	1,381	100.00	%

132 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Supplemental Information (Unaudited) (Continued)

iSHARES^®, INC.

iShares MSCI Taiwan Index Fund

Period Covered: January 1, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 6.0%	9	0.65	%
Greater than 5.5% and Less than 6.0%	3	0.21
Greater than 5.0% and Less than 5.5%	1	0.07
Greater than 4.5% and Less than 5.0%	12	0.87
Greater than 4.0% and Less than 4.5%	3	0.21
Greater than 3.5% and Less than 4.0%	19	1.38
Greater than 3.0% and Less than 3.5%	23	1.67
Greater than 2.5% and Less than 3.0%	37	2.68
Greater than 2.0% and Less than 2.5%	55	3.98
Greater than 1.5% and Less than 2.0%	124	8.98
Greater than 1.0% and Less than 1.5%	150	10.87
Greater than 0.5% and Less than 1.0%	215	15.58
Between 0.5% and –0.5%	367	26.59
Less than –0.5% and Greater than –1.0%	139	10.07
Less than –1.0% and Greater than –1.5%	93	6.73
Less than –1.5% and Greater than –2.0%	60	4.34
Less than –2.0% and Greater than –2.5%	18	1.30
Less than –2.5% and Greater than –3.0%	28	2.03
Less than –3.0% and Greater than –3.5%	13	0.94
Less than –3.5% and Greater than –4.0%	4	0.29
Less than –4.0% and Greater than –4.5%	1	0.07
Less than –4.5% and Greater than –5.0%	3	0.21
Less than –5.0% and Greater than –5.5%	1	0.07
Less than –5.5%	3	0.21
	1,381	100.00	%

SUPPLEMENTAL INFORMATION 133

Director and Officer 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 111 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 an additional 25 portfolios within the fund complex.

Unless otherwise noted in the tables below, the address for each Director and Officer is c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, California 94105. The Board has designated George G.C. Parker as its Lead Director. Additional information about the Funds’ Directors and Officers may be found in the Funds’ combined Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-474-2737.

Interested Directors and Officers

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
*Lee T. Kranefuss, 1961	Director, Chairman and President (since 2003).	Chief Executive Officer, Global Index and Markets Group of BGI (since 2005); Chief Executive Officer of Intermediary Investor and Exchange Traded Products Business of BGI (since 2003); Chief Executive Officer of the Individual Investor Business of BGI (1999-2003).	Trustee (since 2003) of iShares Trust; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.
*John E. Martinez, 1962	Director (since 2003).	Co-Chief Executive Officer of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); Chief Executive Officer of Capital Markets Group of BGI (1996-2001).	Trustee (since 2003) of iShares Trust; Director (since 2005) of Real Estate Equity Exchange; Director (since 2003) of Larkin Street Youth Services.

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

134 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Director and Officer Information (Unaudited) (Continued)

iSHARES^®, INC.

Independent Directors

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Richard K. Lyons, 1961	Director (since 2002).	Executive Associate Dean (since 2005); Sylvan Coleman Chair in Finance (since 2004); Acting Dean (2004-2005) and Professor (since 1993), University of California, Berkeley: Haas School of Business; Consultant for IMF World Bank, Federal Reserve Bank and Citibank N.A. (since 2000).	Trustee (since 2000) of iShares Trust; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.; Trustee (since 1995) and Chairman of Matthews Asian Funds (oversees 8 portfolios).
George G. C. Parker, 1939	Director (since 2002).	Dean Witter Distinguished Professor of Finance (since 1994); Formerly Senior Associate Dean for Academic Affairs, Director of MBA Program, Stanford University: Graduate School of Business (1993-2001).	Trustee (since 2000) of iShares Trust; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (since 1999) of Tejon Ranch Company; Director (since 2003) of First Republic Bank; Director (since 2004) of Threshold Pharmaceuticals.
Cecilia H. Herbert, 1949	Director (since 2005).	Member of Finance Council, Archdiocese of San Francisco (since 1991); Chair of Investment Committee, Archdiocese of San Francisco (1994-2005).	Trustee (since 2005) of iShares Trust; Trustee (2004-2005) of Pacific Select Funds; Trustee (1992-2003) of the Montgomery Funds; Trustee (since 2005) of the Thacher School; Director (since 1998) of Catholic Charities CYO; Director (since 2005) of Women’s Forum West (professional association).
Charles A. Hurty, 1943	Director (since 2005).	Partner, KPMG LLP (1968-2001).	Trustee (since 2005) of iShares Trust; Director (since 2002) of GMAM Absolute Return Strategy Fund (1 portfolio); Director (since 2002) of Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC (2 portfolios); Director (since 2005) of CSFB Alternative Investments Fund (15 portfolios).

DIRECTOR AND OFFICER INFORMATION 135

Director and Officer Information (Unaudited) (Continued)

iSHARES^®, INC.

Independent Directors (Continued)

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
John E. Kerrigan, 1955	Director (since 2005)	Chief Investment Officer, Santa Clara University (since 2002); Managing Director, Merrill Lynch (1994-2002).	Trustee (since 2005) of iShares Trust; Member (since 2004) of Advisory Council for Commonfund Distressed Debt Partners II.

Officer

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Michael A. Latham, 1965	Secretary, Treasurer and Principal Financial Officer (since 2002).	Chief Operating Officer of the Intermediary Investor 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).	None.

136 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes:

NOTES 137

Notes:

138 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes:

NOTES 139

The iShares^® Family of Funds

The following is a list of iShares Funds being offered, along with their respective exchange trading symbols. Please call 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 100 (OEF) iShares S&P 500 (IVV) iShares S&P 500 Growth (IVW) iShares S&P 500 Value (IVE) iShares S&P MidCap 400 (IJH) iShares S&P MidCap 400 Growth (IJK) iShares S&P MidCap 400 Value (IJJ) iShares S&P SmallCap 600 (IJR) iShares S&P SmallCap 600 Growth (IJT) iShares S&P SmallCap 600 Value (IJS)   iShares Domestic Sector Index Funds iShares Cohen & Steers Realty Majors (ICF) iShares Dow Jones U.S. Basic Materials Sector (IYM) iShares Dow Jones U.S. Consumer Services Sector (IYC) iShares Dow Jones U.S. Consumer Goods 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 U.S. Technology Sector (IYW) iShares Dow Jones U.S. Telecommunications Sector (IYZ) iShares Dow Jones Transportation Average (IYT) iShares Dow Jones U.S. Utilities Sector (IDU) iShares Dow Jones U.S. Total Market (IYY) 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 Domestic Subsector Index Funds iShares Dow Jones U.S. Aerospace & Defense (ITA) iShares Dow Jones U.S. Broker-Dealers (IAI) iShares Dow Jones U.S. Health Care Providers (IHF) iShares Dow Jones U.S. Home Construction (ITB) iShares Dow Jones U.S. Insurance (IAK) iShares Dow Jones U.S. Medical Devices (IHI) iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO) iShares Dow Jones U.S. Oil Equipment & Services (IEZ) iShares Dow Jones U.S. Pharmaceuticals (IHE) iShares Dow Jones U.S. Regional Banks (IAT) iShares Global Index Funds iShares S&P Global 100 (IOO) iShares S&P Global Consumer Discretionary Sector (RXI) iShares S&P Global Consumer Staples Sector (KXI) 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 Industrials Sector (EXI) iShares S&P Global Materials Sector (JXI) iShares S&P Global Technology Sector (IXN) iShares S&P Global Telecommunications Sector (IXP) iShares S&P Global Utilities Sector (MXI)   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 Russell Microcap™ (IWC)   iShares International Country 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 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 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/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 Specialty Index Funds iShares KLD Select Social^SM (KLD) iShares Dow Jones Select Dividend (DVY) iShares International Index Funds iShares MSCI EAFE (EFA) iShares MSCI EAFE Growth (EFG) iShares MSCI EAFE Value (EFV) iShares MSCI Emerging Markets (EEM) iShares MSCI EMU (EZU) iShares MSCI Pacific ex-Japan (EPP) iShares S&P Europe 350 (IEV) iShares S&P Latin America 40 (ILF)   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 NYSE Index Funds iShares NYSE Composite (NYC) iShares NYSE 100 (NY)

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, KLD Research & Analytics, Inc., 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 a deposit of a bank and it 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 2006 Annual Report.

3467-iS-0906

140 2006  iSHARES ANNUAL REPORT TO SHAREHOLDERS

Table of Contents

Management’s Discussion of Fund Performance	1
Shareholder Expenses (Unaudited)	3
Schedule of Investments	4
Financial Statements	15
Financial Highlights	18
Notes to the Financial Statements	19
Report of Independent Registered Public Accounting Firm	25
Tax Information (Unaudited)	26
Board Review and Approval of Investment Advisory Contracts (Unaudited)	27
Supplemental Information (Unaudited)	30
Director and Officer Information (Unaudited)	31
iShares Family of Funds	36

Management’s Discussion of Fund Performance

iSHARES^® MSCI JAPAN INDEX FUND

Performance as of August 31, 2006

Average Annual Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
26.10	%	23.64	%	26.94	%	8.94	%	8.73	%	9.59	%	0.16	%	0.14	%	0.92	%
Cumulative Total Returns
Year Ended 8/31/06						Five Years Ended 8/31/06						Ten Years Ended 8/31/06
NAV		MARKET		INDEX		NAV		MARKET		INDEX		NAV		MARKET		INDEX
26.10	%	23.64	%	26.94	%	53.45	%	51.94	%	58.06	%	1.57	%	1.46	%	9.54	%

“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.

The Fund’s per share net asset value or “NAV” is the value of one share of the 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. 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, an 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 tables 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.

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, an 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.

MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE 1

Management’s Discussion of Fund Performance (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

PORTFOLIO ALLOCATION

As of 8/31/06

Sector	Percentage of Net Assets
Consumer Cyclical	24.78	%
Financial	22.51
Industrial	20.01
Consumer Non-Cyclical	10.07
Basic Materials	7.99
Technology	4.96
Communications	4.35
Utilities	4.26
Energy	1.00
Short-Term and Other Net Assets	0.07
TOTAL	100.00	%

TOP TEN FUND HOLDINGS

As of 8/31/06

Security	Percentage of Net Assets
Toyota Motor Corp.	5.57	%
Mitsubishi UFJ Financial Group	4.24
Mizuho Financial Group Inc.	2.78
Sumitomo Mitsui Financial Group Inc.	2.44
Takeda Pharmaceutical Co. Ltd.	2.08
Canon Inc.	1.89
Honda Motor Co. Ltd.	1.89
Sony Corp.	1.57
Matsushita Electric Industrial Co. Ltd.	1.55
Nomura Holdings Inc.	1.24
TOTAL	25.25	%

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 securities in the aggregate in the Japanese market, as measured by the MSCI Japan Index (the “Index”). The Fund invests in a representative sample of securities in the Index, which has a similar investment profile as the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the twelve-month period ended August 31, 2006 (the “reporting period”), the Fund returned 26.10%, while the Index returned 26.94%.

The Japanese stock market rallied sharply for the reporting period, overcoming a series of challenges that included computer glitches at the Tokyo Stock Exchange, financial fraud and insider trading scandals, and North Korean missile testing in the Sea of Japan. The strong stock market performance was due to the Japanese economy, which appeared to turn the corner after a decade-long downturn. Economic growth repeatedly surpassed expectations as industrial production increased, spare manufacturing capacity shrunk to its lowest levels since 1991, consumer confidence hit a 15-year high, and retail sales surged to their highest level in more than a decade. In local employment markets, the job vacancies per applicant ratio climbed to its highest level in the past 14 years, indicating that there are more jobs available than there are applicants.

All of this economic activity produced an end to Japan’s decade-long battle against deflation, as consumer prices rose for nine consecutive months. As a result, the Bank of Japan raised interest rates for the first time in six years and only the second time since 1990, boosting rates from 0% to 0.25% in July 2006. Nonetheless, Japanese interest rates remained well below those of other developed nations, and that continued to weigh on the Japanese currency. For the reporting period, the U.S. dollar strengthened by 5.9% against the Japanese yen, hurting returns for U.S. investors. In local-currency terms, the Index returned 33.97%.

As of August 31, 2006, the ten largest Fund holdings accounted for approximately 25% of Fund net assets. Each of the Fund’s ten largest holdings as of August 31, 2006, produced double-digit returns for the reporting period. The top performer was Canon Inc., which makes cameras, printers, and copiers. Canon enjoyed robust sales and increasing profit margins, especially in its camera division, and boosted capital spending to automate all of its manufacturing processes. The financial stocks amongst the Fund’s ten largest holdings also performed well, led by Mizuho Financial Group Inc. and Nomura Holdings Inc. Both companies reported strong profit growth; in particular, Nomura reported the highest profits in the 81-year history of the company, tripling its earnings from the previous year. The lowest returns came from electronics manufacturer Matsushita Electric Industrial Co. Ltd. and drug maker Takeda Pharmaceutical Co. Ltd., though both produced strong gains for the reporting period.

2 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Shareholder Expenses (Unaudited)

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, 2006 to August 31, 2006.

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 (3/1/06)		Ending Account Value (8/31/06)		Annualized Expense Ratio		Expenses Paid During Period a (3/1/06 to 8/31/06)
Actual	$	1,000.00	$	985.00	0.52	%	$	2.60
Hypothetical (5% return before expenses)		1,000.00		1,022.58	0.52			2.65

^a 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 (365 days).

SHAREHOLDER EXPENSES 3

Schedule of Investments

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Shares	Value
COMMON STOCKS – 99.93%
ADVERTISING – 0.30%
Asatsu-DK Inc.	165,500	$	5,348,040
Dentsu Inc.	8,285		24,088,204
Hakuhodo DY Holdings Inc.	165,500		11,091,188
			40,527,432
AGRICULTURE – 0.64%
Japan Tobacco Inc.	23,170		88,306,178
			88,306,178
AIRLINES – 0.14%
All Nippon Airways Co. Ltd.1	3,310,000		12,953,831
Japan Airlines System Corp.1,2	3,314,000		6,301,079
			19,254,910
APPAREL – 0.23%
Asics Corp.	461,000		5,766,185
Gunze Ltd.	1,655,000		9,736,540
Onward Kashiyama Co. Ltd.	1,105,000		15,460,673
			30,963,398
AUTO MANUFACTURERS – 8.45%
Hino Motors Ltd.	1,655,000		8,918,105
Honda Motor Co. Ltd.	7,622,200		259,304,924
Nissan Motor Co. Ltd.	11,088,500		126,120,637
Toyota Motor Corp.	14,084,500		764,959,404
			1,159,303,070
AUTO PARTS & EQUIPMENT – 1.79%
Aisin Seiki Co. Ltd.	993,000		30,140,939
Bridgestone Corp.	3,144,500		67,026,901
Denso Corp.	2,648,000		92,341,903
JTEKT Corp.	497,100		9,917,841
NGK Spark Plug Co. Ltd.	629,000		12,817,581
NHK Spring Co. Ltd.	406,000		4,520,919
NOK Corp.	497,100		13,054,253
Sumitomo Rubber Industries Inc.	497,100		5,297,992
Tokai Rika Co. Ltd.	165,700		3,242,371
Toyoda Gosei Co. Ltd.	331,000		7,055,464
			245,416,164
BANKS – 13.06%
Bank of Fukuoka Ltd.	3,310,000		25,484,333
Bank of Kyoto Ltd. (The)	433,000		4,507,763
Bank of Yokohama Ltd. (The)	6,620,000		52,379,759
Chiba Bank Ltd. (The)	3,314,000		30,883,762
Gunma Bank Ltd.	1,657,000		12,743,437
Hokuhoku Financial Group Inc.	4,971,000		19,581,379
Joyo Bank Ltd.	3,314,000		20,061,730
Mitsubishi UFJ Financial Group	42,678		582,212,559
Mitsubishi UFJ Securities Co. Ltd.	1,655,000		22,224,709
Mitsui Trust Holdings Inc.	2,774,000		32,497,557
Mizuho Financial Group Inc.	47,072		380,878,441
Nishi-Nippon City Bank Ltd. (The)	3,310,000		16,086,456
Resona Holdings Inc.	23,170		73,094,598
Sapporo Hokuyo Holdings Inc.	1,128		12,406,702
77 Bank Ltd. (The)	1,655,000		12,135,397
Shinsei Bank Ltd.	6,628,000		40,858,115
Shizuoka Bank Ltd. (The)	3,310,000		37,930,170
Sumitomo Mitsui Financial Group Inc.	29,790		335,275,611
Sumitomo Trust & Banking Co. Ltd. (The)	6,620,000		70,611,075
Suruga Bank Ltd. (The)	776,000		9,845,146
			1,791,698,699
BEVERAGES – 0.80%
Asahi Breweries Ltd.	1,657,000		24,328,379
Coca-Cola West Japan Co. Ltd.	331,000		6,448,693
Ito En Ltd.	331,000		11,034,745
Kirin Brewery Co. Ltd.	4,296,000		59,741,450
Sapporo Holdings Ltd.1	1,655,000		8,283,114
			109,836,381
BUILDING MATERIALS – 1.32%
Asahi Glass Co. Ltd.	4,965,000		65,192,480
Daikin Industries Ltd.	1,159,900		35,503,611
JS Group Corp.	1,489,500		31,305,090
Matsushita Electric Works Ltd.	1,657,000		17,688,229
Nippon Sheet Glass Co. Ltd.1	1,657,000		8,010,564
Sumitomo Osaka Cement Co. Ltd.	1,657,000		4,704,617
Taiheiyo Cement Corp.	4,965,000		18,711,088
			181,115,679
CHEMICALS – 3.93%
Asahi Kasei Corp.	6,620,000		43,800,316
Daicel Chemical Industries Ltd.	1,655,000		12,558,724
Dainippon Ink & Chemical Inc.	3,310,000		12,332,950

4 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Shares	Value
Denki Kagaku Kogyo Kabushiki Kaisha	3,310,000	$	12,699,834
Hitachi Chemical Co. Ltd.	331,400		8,024,692
JSR Corp.	993,000		23,664,024
Kaneka Corp.	1,655,000		15,070,469
Mitsubishi Chemical Holdings Corp.	5,370,000		35,255,148
Mitsubishi Gas Chemical Co. Inc.	1,657,000		18,097,941
Mitsui Chemicals Inc.	3,310,000		23,283,029
Nippon Kayaku Co. Ltd.1	1,655,000		14,336,702
Nissan Chemical Industries Ltd.	1,103,000		14,322,965
Nitto Denko Corp.	827,500		59,477,555
Shin-Etsu Chemical Co. Ltd.	1,986,000		113,282,517
Showa Denko K.K.	4,971,000		21,361,504
Sumitomo Chemical Co. Ltd.	6,628,000		52,217,010
Taiyo Nippon Sanso Corp.	1,655,000		14,435,478
Tokuyama Corp.	908,000		12,595,950
Tosoh Corp.	3,310,000		12,643,390
Ube Industries Ltd.	4,965,000		13,588,822
Zeon Corp.	566,000		6,519,726
			539,568,746
COMMERCIAL SERVICES – 0.97%
Benesse Corp.	331,000		12,332,950
Dai Nippon Printing Co. Ltd.	3,310,000		49,331,799
Goodwill Group Inc. (The)1	6,620		4,696,116
Kamigumi Co. Ltd.	1,655,000		13,264,272
KK DaVinci Advisors2	4,971		4,492,697
Park 24 Co. Ltd.1	165,700		5,086,072
TIS Inc.	331,000		6,984,909
Toppan Printing Co. Ltd.	3,310,000		37,478,620
			133,667,435
COMPUTERS – 1.26%
CSK Corp.	331,000		14,223,814
Fujitsu Ltd.	9,930,000		79,670,291
Itochu Techno-Science Corp.	165,500		8,000,895
Meitec Corp.1	165,700		5,354,503
Net One Systems Co. Ltd.1	3,310		4,995,268
Obic Co. Ltd.	16,570		3,332,790
Otsuka Corp.	62,000		6,063,350
TDK Corp.	662,000		51,307,328
			172,948,239
COSMETICS & PERSONAL CARE – 0.81%
Aderans Co. Ltd.	165,700		4,294,906
Kao Corp.	2,587,000		69,039,605
Shiseido Co. Ltd.	1,657,000		32,918,191
Uni-Charm Corp.	88,300		4,946,336
			111,199,038
DISTRIBUTION & WHOLESALE – 3.35%
Canon Marketing Japan Inc.	165,700		3,934,642
Hitachi High-Technologies Corp.	165,700		4,379,673
Itochu Corp.	8,275,000		69,496,313
Marubeni Corp.	6,632,000		35,454,355
Mitsubishi Corp.	6,620,000		134,900,456
Mitsui & Co. Ltd.	7,947,000		115,120,885
Sojitz Corp.2	1,986,000		7,010,308
Sumitomo Corp.	4,971,000		67,263,307
Toyota Tsusho Corp.	828,500		21,827,727
			459,387,666
DIVERSIFIED FINANCIAL SERVICES – 4.00%
ACOM Co. Ltd.	380,650		17,038,943
Aeon Credit Service Co. Ltd.	496,570		11,897,188
AIFUL Corp.	331,400		13,280,300
Credit Saison Co. Ltd.	827,500		37,323,400
Daiwa Securities Group Inc.	6,620,000		78,964,744
Nikko Cordial Corp.	4,137,500		52,563,201
Nomura Holdings Inc.	8,771,500		169,768,555
ORIX Corp.	414,250		110,021,635
Promise Co. Ltd.	413,750		18,520,591
SFCG Co. Ltd.	16,570		3,283,342
Shinko Securities Co. Ltd.	1,657,000		6,710,790
Takefuji Corp.	546,150		29,476,314
			548,849,003
ELECTRIC – 3.54%
Chubu Electric Power Co. Inc.	3,310,000		89,745,492
Electric Power Development Co. Ltd.	827,500		30,902,929
Hokkaido Electric Power Co. Inc.	497,100		12,291,342
Kansai Electric Power Co. Inc. (The)	3,806,500		91,361,193
Kyushu Electric Power Co. Inc.	1,986,000		47,412,713
Tohoku Electric Power Co. Inc.	2,151,500		48,795,584
Tokyo Electric Power Co. Inc. (The)	5,799,500		165,650,552
			486,159,805

SCHEDULE OF INVESTMENTS 5

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Shares	Value
ELECTRICAL COMPONENTS & EQUIPMENT – 3.88%
Casio Computer Co. Ltd.	1,324,000	$	25,456,111
Fujikura Ltd.	1,657,000		19,595,506
Furukawa Electric Co. Ltd.	3,310,000		22,944,367
Hitachi Cable Ltd.	1,655,000		7,944,451
Hitachi Ltd.	16,550,000		105,126,401
Mitsubishi Electric Corp.	9,930,000		81,956,261
SANYO Electric Co. Ltd.1	6,628,000		13,901,931
Sharp Corp.	4,965,000		88,898,837
Stanley Electric Co. Ltd.	664,000		14,521,550
Sumitomo Electric Industries Ltd.	3,314,000		42,807,776
Toshiba Corp.	14,895,000		106,170,610
Ushio Inc.	165,700		3,729,786
			533,053,587
ELECTRONICS – 4.28%
Advantest Corp.	331,400		31,561,905
Alps Electric Co. Ltd.	828,500		9,303,274
Dainippon Screen Manufacturing Co. Ltd.	815,000		6,858,550
Fanuc Ltd.	828,500		65,765,741
Hirose Electric Co. Ltd.	165,500		21,476,830
IBIDEN Co. Ltd.	662,000		33,922,667
Keyence Corp.	182,192		42,081,948
Kyocera Corp.	827,500		71,542,396
Mabuchi Motor Co. Ltd.	165,500		10,540,862
Minebea Co. Ltd.	1,657,000		9,366,850
Murata Manufacturing Co. Ltd.	993,000		68,409,771
NEC Corp.	9,942,000		57,896,458
NGK Insulators Ltd.	1,655,000		22,605,705
Nippon Electric Glass Co. Ltd.	1,259,000		30,593,426
Omron Corp.	1,158,500		26,965,980
Secom Co. Ltd.	830,500		41,282,475
Tokyo Seimitsu Co. Ltd.1	165,700		8,010,564
Yaskawa Electric Corp.	1,142,000		13,174,114
Yokogawa Electric Corp.	1,158,500		16,495,673
			587,855,189
ENGINEERING & CONSTRUCTION – 1.03%
Chiyoda Corp.	609,000		13,370,636
JGC Corp.	1,202,000		21,624,419
Kajima Corp.	4,965,000		23,029,032
Nishimatsu Construction Co. Ltd.1	1,655,000		6,180,586
Obayashi Corp.	3,310,000		22,944,367
Okumura Corp.	1,655,000		9,073,325
Shimizu Corp.	3,310,000		19,642,410
Taisei Corp.	4,965,000		17,864,433
Toda Corp.	1,655,000		7,958,563
			141,687,771
ENTERTAINMENT – 0.24%
Oriental Land Co. Ltd.	331,000		18,965,085
Toho Co. Ltd.	664,000		13,389,266
			32,354,351
ENVIRONMENTAL CONTROL – 0.04%
Kurita Water Industries Ltd.	331,400		5,891,367
			5,891,367
FOOD – 0.99%
Ajinomoto Co. Inc.	3,310,000		35,926,419
Katokichi Co. Ltd.	993,000		8,542,755
Kikkoman Corp.	1,655,000		20,178,624
Meiji Dairies Corp.	1,655,000		10,399,753
Meiji Seika Kaisha Ltd.	1,655,000		8,339,558
Nichirei Corp.	1,655,000		9,284,990
Nippon Meat Packers Inc.	1,118,000		12,515,957
Nisshin Seifun Group Inc.	830,500		8,879,626
Nissin Food Products Co. Ltd.	496,500		16,763,781
Yakult Honsha Co. Ltd.	165,700		4,520,953
			135,352,416
FOREST PRODUCTS & PAPER – 0.27%
Nippon Paper Group Inc.	4,965		18,457,092
OJI Paper Co. Ltd.	3,314,000		18,818,468
			37,275,560
GAS – 0.72%
Osaka Gas Co. Ltd.	9,930,000		36,575,521
Tokyo Gas Co. Ltd.	11,585,000		61,735,303
			98,310,824
HAND & MACHINE TOOLS – 0.96%
Fuji Electric Holdings Co. Ltd.	3,310,000		16,820,224
Makita Corp.	331,400		9,748,305
Nidec Corp.	545,900		39,609,575
OSG Corp.	331,400		5,340,376
SMC Corp.	331,000		44,280,087
THK Co. Ltd.	662,000		16,086,456
			131,885,023

6 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Shares	Value
HEALTH CARE – PRODUCTS – 0.80%
Hoya Corp.	2,151,500	$	78,329,752
Terumo Corp.	827,500		31,044,038
			109,373,790
HOME BUILDERS – 0.88%
Daiwa House Industry Co. Ltd.	2,643,000		43,086,635
Haseko Corp.1,2	3,314,000		11,867,502
Sekisui Chemical Co. Ltd.	2,633,000		23,123,076
Sekisui House Ltd.	2,915,000		43,295,648
			121,372,861
HOME FURNISHINGS – 3.38%
Matsushita Electric Industrial Co. Ltd.	9,930,015		212,510,872
Pioneer Corp.1	827,500		15,839,515
Sony Corp.	4,965,000		215,050,518
Yamaha Corp.	993,000		20,616,064
			464,016,969
HOUSEWARES – 0.12%
Toto Ltd.	1,655,000		16,862,557
			16,862,557
INSURANCE – 2.56%
Millea Holdings Inc.	7,267		133,833,994
Mitsui Sumitomo Insurance Co. Ltd.	6,117,000		74,685,970
Sompo Japan Insurance Inc.	4,303,000		56,903,721
T&D Holdings Inc.	1,158,500		86,034,318
			351,458,003
INTERNET – 1.21%
Access Co. Ltd.1,2	995		6,676,600
E*Trade Securities Co. Ltd.	6,628		8,081,204
eAccess Ltd.1	4,971		2,971,114
Index Corp.1	5,773		4,503,811
Matsui Securities Co. Ltd.1	497,100		4,420,645
Rakuten Inc.	31,483		13,663,168
SBI Holdings Inc.	49,650		18,943,919
SoftBank Corp.1	3,641,000		63,329,838
Trend Micro Inc.	533,500		15,374,770
Yahoo! Japan Corp.	76,130		28,592,970
			166,558,039
IRON & STEEL – 2.93%
Daido Steel Co. Ltd.	1,657,000		12,743,437
JFE Holdings Inc.	2,813,550		114,667,425
Kobe Steel Ltd.	13,256,000		42,383,937
Nippon Steel Corp.	29,826,000		124,608,774
Nisshin Steel Co. Ltd.	4,965,000		14,901,138
Sumitomo Metal Industries Ltd.	19,884,000		81,885,766
Tokyo Steel Manufacturing Co. Ltd.	662,000		10,769,459
			401,959,936
LEISURE TIME – 0.81%
Namco Bandai Holdings Inc.	1,158,598		18,265,317
Round One Corp.	1,657		6,640,150
Sankyo Co. Ltd.	331,000		17,920,876
Sega Sammy Holdings Inc.	828,500		28,326,598
Shimano Inc.	496,500		13,969,817
Yamaha Motor Co. Ltd.	993,000		26,500,320
			111,623,078
MACHINERY – 0.17%
Hitachi Construction Machinery Co. Ltd.	331,400		7,318,293
Japan Steel Works Ltd. (The)	1,655,000		11,754,402
Okuma Corp.	493,000		4,880,189
			23,952,884
MACHINERY – CONSTRUCTION & MINING – 0.61%
Komatsu Ltd.	4,589,100		83,929,057
			83,929,057
MACHINERY – DIVERSIFIED – 0.98%
Amada Co. Ltd.	1,657,000		17,320,902
Ebara Corp.1	1,657,000		6,654,278
Kubota Corp.	4,971,000		40,942,882
Sumitomo Heavy Industries Ltd.	3,310,000		28,616,958
Toyota Industries Corp.	993,000		41,401,458
			134,936,478
MANUFACTURING – 2.29%
ARRK Corp.	165,700		1,999,109
Fuji Photo Film Co. Ltd.	2,482,500		91,015,475
Glory Ltd.	165,700		3,079,899
Ishikawajima-Harima Heavy Industries Co. Ltd.	6,620,000		19,303,748
Kawasaki Heavy Industries Ltd.	8,275,000		26,175,768
Konica Minolta Holdings Inc.2	2,467,500		32,294,091
Mitsubishi Heavy Industries Ltd.	16,550,000		69,425,758

SCHEDULE OF INVESTMENTS 7

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Shares	Value
Nikon Corp.	1,655,000	$	29,985,719
Olympus Corp.	1,368,000		40,590,357
			313,869,924
MEDIA – 0.05%
Fuji Television Network Inc.	1,655		3,711,173
Tokyo Broadcasting System Inc.	165,700		3,722,722
			7,433,895
METAL FABRICATE & HARDWARE – 0.29%
NSK Ltd.	3,310,000		26,500,320
NTN Corp.	1,657,000		12,701,053
			39,201,373
MINING – 0.86%
Dowa Mining Co. Ltd.	1,655,000		15,098,692
Mitsubishi Materials Corp.	4,965,000		21,632,051
Mitsui Mining & Smelting Co. Ltd.	3,310,000		18,626,423
Nippon Light Metal Co. Ltd.	1,657,000		4,266,650
Sumitomo Metal Mining Co. Ltd.	2,864,000		40,413,693
Sumitomo Titanium Corp.	39,200		8,004,775
Toho Titanium Co. Ltd.1	165,500		10,272,754
			118,315,038
OFFICE & BUSINESS EQUIPMENT – 2.50%
Canon Inc.	5,219,950		259,918,216
Ricoh Co. Ltd.	3,310,000		65,051,370
Seiko Epson Corp.	662,800		18,253,349
			343,222,935
OIL & GAS – 1.00%
INPEX Holdings Inc.2	4,012		35,575,564
Nippon Mining Holdings Inc.	4,142,500		30,375,154
Nippon Oil Corp.	6,620,500		50,351,588
Showa Shell Sekiyu K.K.	497,100		5,556,534
TonenGeneral Sekiyu K.K.1	1,655,000		14,957,582
			136,816,422
PACKAGING & CONTAINERS – 0.15%
Toyo Seikan Kaisha Ltd.	993,000		20,235,068
			20,235,068
PHARMACEUTICALS – 5.06%
Astellas Pharma Inc.	2,648,030		107,470,033
Chugai Pharmaceutical Co. Ltd.	1,489,500		33,019,568
Daiichi Sankyo Co. Ltd.	3,314,069		91,551,209
Eisai Co. Ltd.	1,324,000		63,104,063
Kyowa Hakko Kogyo Co. Ltd.	1,655,000		12,135,397
Mediceo Paltac Holdings Co. Ltd.	662,800		12,347,854
Santen Pharmaceutical Co. Ltd.	165,700		4,090,050
Shionogi & Co. Ltd.	1,655,000		29,774,055
Suzuken Co. Ltd.	331,400		12,376,110
Taisho Pharmaceutical Co. Ltd.	1,098,000		21,485,356
Takeda Pharmaceutical Co. Ltd.	4,308,200		285,413,429
Tanabe Seiyaku Co. Ltd.	1,655,000		21,109,946
			693,877,070
REAL ESTATE – 2.52%
Daito Trust Construction Co. Ltd.	496,500		25,822,995
Leopalace21 Corp.	662,000		23,480,582
Mitsubishi Estate Co. Ltd.	5,270,000		113,681,204
Mitsui Fudosan Co. Ltd.	4,418,000		99,069,276
NTT Urban Development Corp.	819		6,389,436
Sumitomo Realty & Development Co. Ltd.	1,657,000		48,882,807
Tokyo Tatemono Co. Ltd.	1,257,000		13,611,204
Tokyu Land Corp.	1,657,000		14,467,050
			345,404,554
REAL ESTATE INVESTMENT TRUSTS – 0.31%
Japan Real Estate Investment Corp.	1,655		14,252,036
Nippon Building Fund Inc.	2,435		23,875,602
Nomura Real Estate Office Fund Inc.	520		4,056,785
			42,184,423
RETAIL – 3.53%
Aeon Co. Ltd.	2,979,000		75,056,018
Aoyama Trading Co. Ltd.	331,000		10,780,748
Autobacs Seven Co. Ltd.	165,500		6,843,800
Citizen Watch Co. Ltd.	1,986,000		16,425,118
Daimaru Inc. (The)	1,365,000		16,863,921
EDION Corp.	331,400		5,905,495
FamilyMart Co. Ltd.	331,000		9,369,655
Fast Retailing Co. Ltd.	274,900		25,665,302
Isetan Co. Ltd.	1,158,500		19,557,744
Lawson Inc.	331,000		11,570,960
Marui Co. Ltd.	1,655,000		24,665,900
Mitsukoshi Ltd.1	1,657,000		7,812,772
Nitori Co. Ltd.	165,700		7,728,004
Ryohin Keikaku Co. Ltd.	91,300		6,655,710
Seven & I Holdings Co. Ltd.	3,976,880		140,717,500

8 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Shares		Value
Shimachu Co. Ltd.		331,000	$	9,341,433
Shimamura Co. Ltd.		47,700		4,709,605
Takashimaya Co. Ltd.		1,655,000		20,884,171
UNY Co. Ltd.		1,245,000		17,716,715
USS Co. Ltd.		148,950		10,109,068
Yamada Denki Co. Ltd.		331,400		35,602,507
				483,982,146
SEMICONDUCTORS – 1.03%
Elpida Memory Inc.2		331,400		14,664,842
NEC Electronics Corp.1,2		165,700		5,594,680
Rohm Co. Ltd.		497,500		46,193,247
Sanken Electric Co. Ltd.		332,000		4,387,603
Shinko Electric Industries Co. Ltd.		165,700		4,817,641
Sumco Corp.1		165,700		11,019,824
Tokyo Electron Ltd.		827,552		54,471,598
				141,149,435
SHIPBUILDING – 0.11%
Mitsui Engineering & Shipbuilding Co. Ltd.		4,965,000		15,197,468
				15,197,468
SOFTWARE – 0.17%
Fuji Soft ABC Inc.		165,500		4,882,381
Konami Corp.		496,500		12,657,501
Nomura Research Institute Ltd.		42,000		5,597,135
				23,137,017
STORAGE & WAREHOUSING – 0.04%
Mitsubishi Logistics Corp.		319,000		5,140,555
				5,140,555
TELECOMMUNICATIONS – 2.79%
Hikari Tsushin Inc.		165,500		9,143,880
KDDI Corp.		11,599		76,644,285
Nippon Telegraph & Telephone Corp.		24,855		125,668,372
NTT Data Corp.		6,620		30,592,489
NTT DoCoMo Inc.		86,167		133,711,847
Oki Electric Industry Co. Ltd.1		3,310,000		7,309,460
				383,070,333
TEXTILES – 1.08%
Kuraray Co. Ltd.		1,657,000		18,988,004
Mitsubishi Rayon Co. Ltd.		3,310,000		22,859,701
Nisshinbo Industries Inc.		1,655,000		18,061,986
Teijin Ltd.		4,965,000		26,669,651
Toray Industries Inc.		6,620,000		52,831,308
Toyobo Co. Ltd.		3,310,000		8,805,218
				148,215,868
TOYS, GAMES & HOBBIES – 0.74%
Nintendo Co. Ltd.		496,500		101,937,332
				101,937,332
TRANSPORTATION – 3.90%
Central Japan Railway Co.		8,275		89,604,382
East Japan Railway Co.		16,570		122,489,577
Hanshin Electric Railway Co. Ltd.1		677,000		5,258,533
Kawasaki Kisen Kaisha Ltd.1		3,310,000		21,533,273
Keihin Electric Express Railway Co. Ltd.1		1,661,000		11,442,964
Keio Corp.		3,310,000		21,561,495
Kintetsu Corp.		8,275,000		26,740,205
Mitsui O.S.K. Lines Ltd.		4,971,000		37,933,623
Nippon Express Co. Ltd.		4,965,000		26,965,980
Nippon Yusen Kabushiki Kaisha		4,971,000		30,813,122
Seino Holdings Co. Ltd.		1,243,000		14,254,465
Tobu Railway Co. Ltd.		4,965,000		25,568,999
Tokyu Corp.		4,971,000		33,101,855
West Japan Railway Co.		9,930		42,417,445
Yamato Holdings Co. Ltd.		1,657,000		25,825,946
				535,511,864
VENTURE CAPITAL – 0.06%
JAFCO Co. Ltd.		165,700		8,561,555
				8,561,555
TOTAL COMMON STOCKS (Cost: $10,988,084,861)				13,714,375,858
SHORT-TERM INVESTMENTS – 1.52%
CERTIFICATES OF DEPOSIT3 – 0.06%
Credit Suisse First Boston NY
5.28% - 5.43%, 04/23/07 - 08/21/07	$	1,218,425		1,218,425
Societe Generale
5.33%, 12/08/06		1,740,607		1,740,607
Washington Mutual Bank
5.36%, 11/13/06		4,351,517		4,351,517

SCHEDULE OF INVESTMENTS 9

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Wells Fargo Bank N.A.
4.78%, 12/05/06	$	1,392,485	$	1,392,485
				8,703,034
COMMERCIAL PAPER3 – 0.25%
Amstel Funding Corp.
5.20%, 11/21/06 - 11/22/064		507,874		501,906
Amsterdam Funding Corp.
5.27%, 09/15/064		1,740,607		1,737,039
Atlantis One Funding
5.30%, 11/14/064		2,388,252		2,362,233
Barton Capital Corp.
5.27%, 09/06/064		877,266		876,624
Cancara Asset Securitisation Ltd.
5.30%, 11/14/064		882,348		872,736
CC USA Inc.
5.03%, 10/24/064		348,121		345,543
Charta LLC
5.30%, 11/06/064		1,740,607		1,723,694
Concord Minutemen Capital Co. LLC
5.27% - 5.29%, 09/13/06 - 11/16/064		3,057,045		3,043,484
Curzon Funding LLC
5.29%, 11/17/064		1,740,607		1,720,912
Edison Asset Securitization LLC
5.22%, 12/11/064		1,284,080		1,265,275
Falcon Asset Securitization Corp.
5.30%, 11/06/064		1,740,607		1,723,694
Five Finance Inc.
5.19%, 12/01/064		783,273		772,997
General Electric Capital Services Inc.
5.22%, 12/11/06		174,061		171,512
Giro Funding Corp.
5.28% - 5.34%, 09/11/06 - 10/10/064		1,740,607		1,734,300
Grampian Funding LLC
5.03% - 5.30%, 10/17/06 - 11/16/064		835,491		828,598
KKR Pacific Funding Trust
5.29%, 09/14/064		1,740,607		1,737,282
Landale Funding LLC
5.31%, 11/15/064		1,357,673		1,342,668
Lexington Parker Capital Co. LLC
5.19% - 5.27%, 09/15/06 - 11/15/064		2,256,209		2,243,264
Liberty Street Funding Corp.
5.27%, 09/08/06 - 09/11/064		1,549,140		1,547,255
Mont Blanc Capital Corp.
5.29%, 11/15/064		1,122,691		1,110,318
Monument Gardens Funding LLC
5.28%, 09/21/064		874,707		872,141
Nestle Capital Corp.
5.19%, 08/09/07		1,044,364		992,872
Park Granada LLC
5.30%, 09/01/064		397,763		397,763
Regency Markets LLC
5.28%, 09/15/06		870,303		868,518
Solitaire Funding Ltd.
5.27%, 09/05/064		1,305,455		1,304,691
Sydney Capital Corp.
5.27%, 09/12/064		398,251		397,610
Tulip Funding Corp.
5.29%, 11/15/064		918,031		907,913
White Pine Finance LLC
5.12%, 10/27/064		328,975		326,355
				33,729,197
MEDIUM-TERM NOTES3 – 0.05%
Bank of America N.A.
5.28%, 04/20/07		435,152		435,152
Cullinan Finance Corp.
5.71%, 06/28/074		1,305,455		1,305,455
K2 USA LLC
5.39%, 06/04/074		1,305,455		1,305,455
Marshall & Ilsley Bank
5.18%, 12/15/06		1,740,607		1,742,330
Sigma Finance Inc.
5.13% - 5.51%, 03/30/07 - 06/18/074		2,036,510		2,036,509
US Bank N.A.
2.85%, 11/15/06		348,121		346,805
				7,171,706

10 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Shares or Principal		Value
MONEY MARKET FUNDS – 0.01%
Barclays Global Investors Funds Institutional Money Market Fund, Institutional Shares 5.30%5,6		1,368,550	$	1,368,550
				1,368,550
REPURCHASE AGREEMENTS3 – 0.31%
Banc of America Securities LLC Repurchase Agreement, 5.30%, due 9/1/06, maturity value $2,176,078 (collateralized by U.S. Government obligations, value $2,221,380, 5.50% to 6.50%, 1/1/33 to 7/1/36).	$	2,175,758		2,175,758
Banc of America Securities LLC Repurchase Agreement, 5.36%, due 9/1/06, maturity value $3,481,731 (collateralized by non-U.S. Government debt securities, value $3,589,054, 3.80% to 9.13%, 11/1/06 to 6/15/26).		3,481,213		3,481,213
Bear Stearns Companies Inc. (The) Repurchase Agreement, 5.37%, due 9/1/06, maturity value $2,611,299 (collateralized by non-U.S. Government debt securities, value $2,874,774, 0.08% to 6.43%, 9/25/20 to 7/25/36).		2,610,910		2,610,910
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $5,222,597 (collateralized by non-U.S. Government debt securities, value $5,456,435, 4.35% to 7.50%, 9/15/08 to 8/25/35).		5,221,820		5,221,820
Security	Principal		Value
Citigroup Global Markets Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $1,044,522 (collateralized by non-U.S. Government debt securities, value $1,274,888, 0.00% to 10.00%, 6/1/28 to 8/24/36).	$	1,044,364	$	1,044,364
Goldman Sachs & Co. Repurchase Agreement, 5.35%, due 9/1/06, maturity value $3,481,730 (collateralized by non-U.S. Government debt securities, value $3,554,209, 0.00% to 8.57%, 11/15/06 to 2/15/38).		3,481,213		3,481,213
Goldman Sachs Group Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,740,866 (collateralized by non-U.S. Government debt securities, value $1,829,372, 5.36% to 9.01%, 10/27/10 to 2/18/20).		1,740,607		1,740,607
JP Morgan Securities Inc. Repurchase Agreement, 5.41%, due 9/1/06, maturity value $435,217 (collateralized by non-U.S. Government debt securities, value $457,358, 6.63% to 10.50%, 1/15/07 to 4/15/16).		435,152		435,152
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $3,481,731 (collateralized by non-U.S. Government debt securities, value $3,658,758, 0.51% to 8.89%, 8/5/18 to 9/25/46).		3,481,213		3,481,213

SCHEDULE OF INVESTMENTS 11

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.38%, due 9/1/06, maturity value $1,740,867 (collateralized by non-U.S. Government debt securities, value $1,829,424, 4.11% to 9.79%, 4/28/31 to 9/25/46).	$	1,740,607	$	1,740,607
Lehman Brothers Holdings Inc. Repurchase Agreement, 5.46%, due 9/1/06, maturity value $1,914,957 (collateralized by non-U.S. Government debt securities, value $2,012,309, 3.44% to 15.15%, 12/1/08 to 3/1/36).		1,914,667		1,914,667
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.33%, due 9/1/06, maturity value $3,481,728 (collateralized by non-U.S. Government debt securities, value $3,658,810, 6.38% to 10.25%, 5/1/07 to 10/15/16).		3,481,213		3,481,213
Merrill Lynch & Co. Inc. Repurchase Agreement, 5.36%, due 9/1/06, maturity value $3,481,731 (collateralized by non-U.S. Government debt securities, value $3,589,703, 0.00% to 10.13%, 10/15/06 to 7/1/26).		3,481,213		3,481,213
Morgan Stanley Repurchase Agreement, 5.36%, due 9/1/06, maturity value $1,740,866 (collateralized by non-U.S. Government debt securities, value $1,830,216, 4.05% to 7.24%, 6/20/29 to 1/14/41).		1,740,607		1,740,607
Morgan Stanley Repurchase Agreement, 5.46%, due 9/1/06, maturity value $609,304 (collateralized by non-U.S. Government debt securities, value $934,286, 0.00% to 10.00%, 9/1/06 to 8/31/36).		609,212		609,212
Morgan Stanley Repurchase Agreement, 5.51%, due 6/4/07, maturity value $1,270,082 (collateralized by non-U.S. Government debt securities, value $1,896,885, 0.00% to 10.00%, 9/1/06 to 8/31/36).7		1,218,425		1,218,425
Wachovia Capital Repurchase Agreement, 5.38%, due 9/1/06, maturity value $4,526,253 (collateralized by non-U.S. Government debt securities, value $4,756,367, 0.06% to 7.68%, 10/15/11 to 3/15/45).		4,525,577		4,525,577
				42,383,771
TIME DEPOSITS3 – 0.00%
KBC Bank
5.31%, 09/01/06		367,285		367,285
				367,285
VARIABLE & FLOATING RATE NOTES3 – 0.84%
Allstate Life Global Funding II
5.34% - 5.47%, 09/04/07 - 09/27/074		4,455,953		4,456,529
American Express Bank
5.30%, 02/28/07		1,740,607		1,740,600
American Express Centurion Bank
5.42%, 07/19/07		1,914,667		1,916,607
American Express Credit Corp.
5.51%, 07/05/07		522,182		522,473
ASIF Global Financing
5.51%, 05/03/074		174,061		174,126

12 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Australia & New Zealand Banking Group Ltd.
5.32%, 09/21/074	$	1,131,394	$	1,131,394
Bank of Ireland
5.30% - 5.31%, 08/14/07 - 08/20/074		2,523,880		2,523,984
Beta Finance Inc.
5.29% - 5.48%, 04/25/07 - 07/25/074		4,438,547		4,438,774
BMW US Capital LLC
5.33%, 09/14/074		1,740,607		1,740,607
BNP Paribas
5.36%, 05/18/074		3,220,122		3,220,122
Carlyle Loan Investment Ltd.
5.38%, 04/13/07 - 07/15/074		1,270,643		1,270,644
CC USA Inc.
5.48%, 07/30/074		870,303		870,417
Commodore CDO Ltd.
5.38%, 06/12/074		435,152		435,152
Credit Agricole SA
5.48%, 07/23/07		1,740,607		1,740,607
Credit Suisse First Boston NY
5.51%, 04/24/07		870,303		870,342
Cullinan Finance Corp.
5.36%, 04/25/074		435,152		435,152
DEPFA Bank PLC
5.37%, 06/15/07		1,740,607		1,740,607
Dorada Finance Inc.
5.41% - 5.47%, 06/27/07 - 07/17/074		2,001,698		2,001,825
Eli Lilly Services Inc.
5.37%, 08/31/074		1,740,607		1,740,607
Fifth Third Bancorp
5.30%, 09/21/074		3,481,213		3,481,213
Five Finance Inc.
5.37% - 5.45%, 12/01/06 - 07/13/074		1,740,607		1,740,475
General Electric Capital Corp.
5.29% - 5.49%, 07/09/07 - 09/24/07		1,827,637		1,828,066
Granite Master Issuer PLC
5.30%, 09/20/06		6,092,123		6,092,123
Harrier Finance Funding LLC
5.33%, 07/25/074		522,182		522,278
Hartford Life Global Funding Trusts
5.35% - 5.55%, 07/13/07 - 09/17/07		2,610,910		2,611,318
HBOS Treasury Services PLC
5.53%, 07/24/074		1,740,607		1,740,607
Holmes Financing PLC
5.40%, 07/16/074		3,046,062		3,046,062
JP Morgan Chase & Co.
5.36%, 08/02/07		1,305,455		1,305,455
K2 USA LLC
5.20% - 5.46%, 04/02/07 - 06/28/074		1,305,455		1,305,397
Kestrel Funding LLC
5.31%, 07/11/074		696,243		696,179
Kommunalkredit Austria AG
5.33%, 09/09/074		1,044,364		1,044,364
Leafs LLC
5.33%, 01/22/07 - 02/20/074		1,816,103		1,816,103
Lexington Parker Capital Co. LLC
5.46%, 01/10/074		2,175,758		2,175,273
Links Finance LLC
5.33% - 5.35%, 05/10/07 - 05/16/074		1,914,667		1,914,533
Lothian Mortgages Master Issuer PLC
5.30%, 04/24/074		766,960		766,960
Marshall & Ilsley Bank
5.31%, 09/14/07		957,334		957,334
Metropolitan Life Global Funding I
5.42%, 08/06/074		2,610,910		2,610,910
Metropolitan Life Insurance Funding Agreement
5.57%, 08/01/074,7		174,061		174,061
Monumental Global Funding II
5.49%, 12/27/064		348,121		348,158
Mound Financing PLC
5.39%, 05/08/074		1,636,170		1,636,170

SCHEDULE OF INVESTMENTS 13

Schedule of Investments (Continued)

iSHARES^® MSCI JAPAN INDEX FUND

August 31, 2006

Security	Principal		Value
Natexis Banques Populaires
5.31% - 5.40%, 02/05/07 - 09/14/074	$	5,221,820	$	5,221,736
National City Bank of Indiana
5.37%, 05/21/07		870,303		870,356
Nationwide Building Society
5.44% - 5.62%, 07/06/07 - 07/27/074		5,744,002		5,745,341
Newcastle Ltd.
5.35%, 04/24/074		613,564		613,447
Northern Rock PLC
5.43%, 08/03/074		2,088,728		2,088,777
Principal Life Global Funding I
5.80%, 02/08/07		783,273		784,878
Sedna Finance Inc.
5.30% - 5.37%, 09/20/06 - 08/21/074		3,046,062		3,046,005
Skandinaviska Enskilda Bank NY
5.33%, 09/18/074		1,740,607		1,740,607
Strips III LLC
5.38%, 07/24/074		423,243		423,243
SunTrust Bank
5.37%, 05/01/07		1,740,607		1,740,678
Tango Finance Corp.
5.22% - 5.48%, 04/25/07 - 07/16/074		4,247,080		4,246,703
Union Hamilton Special Funding LLC
5.42% - 5.49%, 09/28/06 - 12/21/064		2,436,849		2,436,850
US Bank N.A.
5.26%, 09/29/06		783,273		783,257
Wachovia Asset Securitization Inc.
5.31%, 09/25/064		2,597,354		2,597,355
Wachovia Bank N.A.
5.36%, 05/22/07		3,481,213		3,481,213
Wells Fargo & Co.
5.34%, 09/14/074		870,303		870,357
WhistleJacket Capital Ltd.
5.29% - 5.35%, 04/18/07 - 06/13/074		1,305,455		1,305,447
White Pine Finance LLC
5.29% - 5.35%, 05/22/07 - 08/20/074		5,221,820		5,220,748
Wind Master Trust
5.31% - 5.32%, 09/25/06 - 07/25/074		1,103,910		1,103,910
				115,104,516
TOTAL SHORT-TERM INVESTMENTS (Cost: $208,828,059)				208,828,059
TOTAL INVESTMENTS IN SECURITIES – 101.45% (Cost: $11,196,912,920)				13,923,203,917
Other Assets, Less Liabilities – (1.45)%				(198,613,508	)
NET ASSETS – 100.00%			$	13,724,590,409

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 (these securities) represent(s) an investment of securities lending collateral. See Note 5.

⁴ This security or a portion of these securities may be resold to qualified institutional buyers under Rule 144A or pursuant to Section 4(2) of the Securities Act of 1933.

⁵ Affiliated issuer. See Note 2.

⁶ The rate quoted is the annualized seven-day yield of the fund at period end.

⁷ The investment adviser has determined that this security or a portion of these securities is illiquid.

See notes to the financial statements.

14 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statement of Assets and Liabilities

iSHARES^®, INC.

August 31, 2006

	iShares MSCI Japan Index Fund
ASSETS
Investments, at cost:
Unaffiliated issuers	$	11,195,544,370
Affiliated issuersa	$	1,368,550
Foreign currency, at cost	$	9,748,028
Investments in securities, at value (including securities on loanb) (Note 1):
Unaffiliated issuers	$	13,921,835,367
Affiliated issuersa		1,368,550
Foreign currency, at value		9,540,626
Receivables:
Investment securities sold		9,237,605
Dividends and interest		4,668,793
Total Assets		13,946,650,941
LIABILITIES
Payables:
Investment securities purchased		8,486,916
Collateral for securities on loan (Note 5)		207,459,509
Investment advisory fees (Note 2)		6,114,107
Total Liabilities		222,060,532
NET ASSETS	$	13,724,590,409
Net assets consist of:
Paid-in capital	$	11,196,635,749
Undistributed net investment income		29,465,062
Accumulated net realized loss		(227,565,085	)
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies		2,726,054,683
NET ASSETS	$	13,724,590,409
Shares outstanding		994,200,000
Net asset value per share	$	13.80

^a See Note 2.

^b Securities on loan with market value of $196,512,225. See Note 5.

See notes to the financial statements.

FINANCIAL STATEMENTS 15

Statement of Operations

iSHARES^®, INC.

Year ended August 31, 2006

	iShares MSCI Japan Index Fund
NET INVESTMENT INCOME
Dividends from unaffiliated issuersa	$	125,980,438
Interest from affiliated issuersb		309,395
Securities lending incomec		1,897,151
Total investment income		128,186,984
EXPENSES
Investment advisory fees (Note 2)		67,470,595
Proxy fees		267,453
Total expenses		67,738,048
Net investment income		60,448,936
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments in unaffiliated issuers		(33,121,854	)
In-kind redemptions		482,452,139
Foreign currency transactions		(487,960	)
Net realized gain		448,842,325
Net change in unrealized appreciation (depreciation) on:
Investments		1,877,509,737
Translation of assets and liabilities in foreign currencies		(202,136	)
Net change in unrealized appreciation (depreciation)		1,877,307,601
Net realized and unrealized gain		2,326,149,926
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	2,386,598,862

^a Net of foreign withholding tax of $8,233,961.

^b See Note 2.

^c Includes income earned from affiliated issuers. See Note 2.

See notes to the financial statements.

16 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Statements of Changes in Net Assets

iSHARES^®, INC.

	iShares MSCI Japan Index Fund
	Year ended August 31, 2006			Year ended August 31, 2005
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income	$	60,448,936		$	37,668,587
Net realized gain		448,842,325			63,663,962
Net change in unrealized appreciation (depreciation)		1,877,307,601			584,158,197
Net increase in net assets resulting from operations		2,386,598,862			685,490,746
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		(55,636,178	)		(26,096,423	)
Total distributions to shareholders		(55,636,178	)		(26,096,423	)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold		5,381,707,859			1,159,930,120
Cost of shares redeemed		(1,236,187,530	)		(434,548,691	)
Net increase in net assets from capital share transactions		4,145,520,329			725,381,429
INCREASE IN NET ASSETS		6,476,483,013			1,384,775,752
NET ASSETS
Beginning of year		7,248,107,396			5,863,331,644
End of year	$	13,724,590,409		$	7,248,107,396
Undistributed net investment income included in net assets at end of year	$	29,465,062		$	21,558,909
SHARES ISSUED AND REDEEMED
Shares sold		426,600,000			109,200,000
Shares redeemed		(91,800,000	)		(42,600,000	)
Net increase in shares outstanding		334,800,000			66,600,000

See notes to the financial statements.

FINANCIAL STATEMENTS 17

Financial Highlights

iSHARES^®, INC.

(For a share outstanding throughout each period)

	iShares MSCI Japan Index Fund
	Year ended Aug. 31, 2006			Year ended Aug. 31, 2005			Year ended Aug. 31, 2004			Year ended Aug. 31, 2003			Year ended Aug. 31, 2002
Net asset value, beginning of year	$	10.99		$	9.89		$	8.29		$	7.77		$	9.07
Income from investment operations:
Net investment income (loss)a		0.06			0.06			0.03			0.00b			(0.01	)
Net realized and unrealized gain (loss)c		2.81			1.08			1.57			0.52			(1.29	)
Total from investment operations		2.87			1.14			1.60			0.52			(1.30	)
Less distributions from:
Net investment income		(0.06	)		(0.04	)		(0.00	)b		—			—
Total distributions		(0.06	)		(0.04	)		(0.00	)b		—			—
Net asset value, end of year	$	13.80		$	10.99		$	9.89		$	8.29		$	7.77
Total return		26.10	%		11.58	%		19.32	%		6.69	%		(14.33	)%
Ratios/Supplemental data:
Net assets, end of year (000s)	$	13,724,590		$	7,248,107		$	5,863,332		$	1,726,855		$	666,376
Ratio of expenses to average net assets		0.54	%		0.57	%		0.64	%d		0.84	%		0.84	%
Ratio of net investment income (loss) to average net assets		0.48	%		0.59	%		0.28	%		0.03	%		(0.12	)%
Portfolio turnover ratee		8	%		6	%		5	%		2	%		2	%

^a Based on average shares outstanding throughout each period.

^b Rounds to less than $0.01.

^c The amounts reported may not accord with the change in aggregate gains and losses in securities due to the timing of capital share transactions.

^d Ratio of expenses to average net assets prior to voluntarily reimbursed distribution fees for the year ended August 31, 2004 was 0.78%.

^e Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units.

See notes to the financial statements.

18 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements

iSHARES^®, INC.

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, 2006, 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 uses 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 securities of 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; less 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.

1. SIGNIFICANT ACCOUNTING POLICIES

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 the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

SECURITY VALUATION

The securities and other assets of the Fund are generally valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service or a major market maker (or dealer), (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service or a major market maker (or dealer) or (iii) based on amortized cost. In the case of shares of funds that are not traded on an exchange, a market valuation means such fund’s published net asset value per share. The investment adviser may use various pricing services or discontinue the use of any pricing service. A price obtained from a pricing service based on such pricing service’s valuation matrix may be considered a market valuation. In the event that current market valuations are not readily available or such valuations do not reflect current market values, the affected investments will be valued using fair value pricing pursuant to the pricing policy and procedures approved by the Board of Directors of the Company (the “Board”).

NOTES TO THE FINANCIAL STATEMENTS 19

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, net of any foreign taxes withheld at source, 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 Fund are maintained in U.S. dollars. Foreign currencies, as well as investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates deemed appropriate by the investment adviser. Any use of a different rate from the rates used by MSCI may adversely affect the Fund’s ability to track its underlying index. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars on the respective date of such transactions.

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 by the Fund. Distributions of net realized capital 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.

As of August 31, 2006, the tax year-end of the Fund, the components of net distributable earnings on a tax basis consisted of undistributed ordinary income of $49,104,975, unrealized appreciation of $2,651,432,248, and capital and other losses of $172,582,563, for net distributable earnings of $2,527,954,660.

For the years ended August 31, 2006 and August 31, 2005, the tax characterization of distributions paid for the Fund represents ordinary income. 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, 2006.

From November 1, 2005 to August 31, 2006, the Fund incurred net realized capital losses and net foreign currency losses of $21,186,379. As permitted by tax regulations, the Fund has elected to defer those losses and treat them as arising in the year ending August 31, 2007.

As of August 31, 2006, 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, $5,594,562, $8,733,802 and $68,122,871 expiring in 2009, 2010, 2011, 2012, 2013 and 2014, respectively. Such losses may be applied against any net realized taxable gains in each succeeding year or until their respective expiration dates, whichever occurs first.

20 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

The Fund may own 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 each passive foreign investment company and would be required to distribute to shareholders any such mark-to-market gains.

The Fund reclassifies at the end of its tax year 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 value per share.

As of August 31, 2006, the cost of investments for federal income tax purposes was $11,271,535,355. Net unrealized appreciation was $2,651,668,562, of which $2,873,877,135 represented gross unrealized appreciation on securities and $222,208,573 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.

2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES

Pursuant to an Investment Advisory Agreement with the Company, Barclays Global Fund Advisors (“BGFA”) manages the investment of 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 expenses (“Covered Expenses”) of the Company, 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 execution 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 of the average daily 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 Average Daily Net Assets
0.59%	First $7 billion
0.54	Over $7 billion, up to and including $11 billion
0.49	Over $11 billion

NOTES TO THE FINANCIAL STATEMENTS 21

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

The Board approved a change to the investment advisory fee rates for the Fund effective September 1, 2006. For its investment advisory services to the Fund, BGFA will be entitled to be paid annual investment advisory fees based on the Fund’s allocable portion of the aggregate of the average daily 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 Average Daily Net Assets
0.59%	First $7 billion
0.54	Over $7 billion, up to and including $11 billion
0.49	Over $11 billion, up to and including $24 billion
0.44	Over $24 billion

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 and expenses are Covered Expenses as defined above.

SEI Investments Distribution Co. (“SEI”) serves as the Fund’s underwriter and distributor of the shares of the Fund, pursuant to a Distribution Agreement with the Company. SEI does not receive a fee from the Fund for its distribution services.

Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission (“SEC”), the Fund is permitted to lend portfolio securities to Barclays Capital, Inc. (“BarCap”). Pursuant to the same exemptive order, Barclays Global Investors, N.A. (“BGI”) serves as securities lending agent for the Company. BarCap and BGI are affiliates 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, 2006, BGI earned securities lending agent fees of $1,897,151.

Cross trades for the year ended August 31, 2006 were executed by the Fund pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which BGFA (or an affiliate) serves as investment adviser. At its regularly scheduled quarterly meetings, the Board reviews such transactions as of the most recent calendar quarter, for compliance with the requirements and restrictions set forth by Rule 17a-7.

The Fund may invest in the Institutional Shares of certain money market funds managed by BGFA, the Fund’s investment adviser, including the Government Money Market Fund (“GMMF”), Institutional Money Market Fund (“IMMF”), Prime Money Market Fund (“PMMF”) and Treasury Money Market Fund (“TMMF”) of Barclays Global Investors Funds. The GMMF, IMMF, PMMF and TMMF are feeder funds in a master/feeder fund structure that invest substantially all of their assets in the Government Money Market Master Portfolio, Money Market Master Portfolio, Prime Money Market Master Portfolio and Treasury Money Market Master Portfolio (collectively, the “Master Portfolios”), respectively, which are also managed by BGFA. While the GMMF, IMMF, PMMF and TMMF 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 GMMF, IMMF, PMMF and TMMF are declared daily and paid monthly from net investment income. Income distributions earned by the Fund from temporary cash investments are recorded as interest from affiliated issuers in the accompanying Statement of Operations. Income distributions earned by the Fund from the investment of securities lending collateral are included in securities lending income in the accompanying Statement of Operations.

22 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

The following table provides information about the direct investment by the Fund (exclusive of investments of securities lending collateral) in issuers of which BGFA is an affiliate, for the year ended August 31, 2006.

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	694	1,756,261	1,755,586	1,369	$	1,368,550	$	309,395

As of August 31, 2006, certain directors and officers of the Company are also officers of BGI and/or BGFA.

3. INVESTMENT PORTFOLIO TRANSACTIONS

Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the year ended August 31, 2006, aggregated $1,011,331,752 and $963,888,644, respectively.

In-kind purchases and sales (see Note 4) for the year ended August 31, 2006, aggregated $5,304,346,344 and $1,209,690,820, respectively.

4. CAPITAL SHARE TRANSACTIONS

The Company has authorized 10.9 billion shares of $.001 par value capital stock. As of August 31, 2006, 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 of the Fund 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 contribution of a designated portfolio of equity securities constituting a portfolio sampling representation of the securities involved in the MSCI Japan Index and an amount of cash. Investors purchasing and redeeming Creation Units pay a purchase transaction fee and a redemption transaction fee directly to Investors Bank, the administrator, 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 by the Fund is required to have a value of at least 102% of the market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other 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 Fund of securities lending are that the borrower may not provide additional collateral when required or may not return the securities when due.

NOTES TO THE FINANCIAL STATEMENTS 23

Notes to the Financial Statements (Continued)

iSHARES^®, INC.

As of August 31, 2006, the Fund had loaned securities which were collateralized by cash. Pursuant to an exemptive order issued by the SEC, the cash collateral received was invested in a joint account with other investment funds managed by BGFA. The joint account 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 or non-U.S. Government debt securities. The market value of the securities on loan as of August 31, 2006 and the value of the related collateral are disclosed in the Statement of Assets and Liabilities. Securities lending income, as disclosed in the Fund’s Statement of Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to BGI as securities lending agent.

6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, (“FIN 48”) “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact of applying the various provisions of FIN 48.

24 2006 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 statement of assets and liabilities, including the schedule 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 Japan Index Fund, a portfolio of the iShares MSCI Series (the “Fund”) at August 31, 2006, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the periods presented, 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

October 23, 2006

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 25

Tax Information (Unaudited)

iSHARES^®, INC.

For the fiscal year ended August 31, 2006, the Fund earned foreign source income of $134,214,398 and paid foreign taxes of $8,201,533 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 the maximum amount of $83,820,853 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended August 31, 2006.

In January 2007, shareholders will receive Form 1099-DIV which will include their share of qualified dividend income distributed during the calendar year 2006. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their income tax returns.

26 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Board Review and Approval of Investment Advisory Contracts (Unaudited)

iSHARES^®, INC.

Under Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), the Company’s Board of Directors (the “Board”), including a majority of Directors who are not interested persons of the Company (as that term is defined in the 1940 Act) (the “Independent Directors”), is required annually to consider the Investment Advisory Contract between the Company and BGFA (the “Advisory Contract”) on behalf of the Fund. As required by Section 15(c), the Board requested and BGFA provided such information as the Board deemed reasonably necessary to evaluate the terms of the Advisory Contract. At a meeting held on June 14-15, 2006, the Board approved the selection of BGFA and the continuance of the Advisory Contract, based on its review of qualitative and quantitative information provided by BGFA. In selecting BGFA and approving the Advisory Contract for the Fund, the Board, including the Independent Directors, advised by their independent counsel, considered the following factors, none of which was controlling, and made the following conclusions:

NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY BGFA

The Board determined that there would be no diminution in the scope of services required of BGFA under the Advisory Contract for the coming year as compared to the scope of services provided by BGFA over the past year. In reviewing the scope of these services, the Board considered BGFA’s investment philosophy and experience, noting that BGFA and its affiliates have committed significant resources over time, including over the past year, to the support of the Fund. The Board also considered BGFA’s compliance program and its compliance record with respect to the Fund. In that regard, the Board noted that BGFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and has made appropriate officers available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons responsible for the day-to-day management of the Fund. In addition to the above considerations, the Board reviewed and considered BGFA’s investment processes and strategies, and matters related to BGFA’s portfolio transaction policies and procedures. The Board further noted that BGFA does not serve as investment adviser for any other series of registered investment companies with substantially similar investment objectives and strategies as the Fund; therefore, no comparative performance information was available. However, the Board also noted that the Fund had met its investment objective consistently since its inception date. Based on this review, the Board concluded that the nature, extent and quality of services to be provided by BGFA to the Fund under the Advisory Contract were appropriate and mitigated in favor of the Board’s approval of the Advisory Contract for the coming year.

FUNDS’ EXPENSES AND PERFORMANCE OF THE FUND

The Board reviewed statistical information prepared by Lipper Inc. (“Lipper”), an independent provider of investment company data, regarding the expense ratio components, including advisory fees, waivers/reimbursements, and gross and net total expenses of the Fund in comparison with the same information for other registered funds objectively selected solely by Lipper as comprising the Fund’s peer group (the “Lipper Peer Group”). In addition, the Board reviewed statistical information prepared by Lipper regarding the performance of the Fund for the one-, three- and five-year, and “last quarter” periods ended March 31, 2006 and a comparison of the Fund’s performance to that of the funds in its Lipper Peer Group for the same periods. Because there are few, if any, exchange traded funds or index funds that track indices similar to those tracked by the Fund, the Lipper Peer Group included mutual funds, closed-end funds, exchange traded funds, and funds with differing investment objective classifications, investment focuses and other characteristics (e.g., actively managed funds and funds sponsored by “at cost” service providers). In support of its review of the statistical information, the Board was provided with a detailed description of the methodology used by Lipper to determine the Lipper Peer Group and to prepare this information. The Board further noted that due to the limitations in providing comparable funds in the Lipper Peer Group, the statistical information may or may not provide meaningful direct comparisons to the Fund. The Board noted that the Fund generally performed in line with the funds in its Lipper Peer Group over relevant periods. The Board also noted that the investment advisory fees and overall expenses for the Fund were generally lower than or in line with the investment advisory fee rates and overall expenses of the funds in its respective Lipper Peer Group. The Board also reviewed statistical information from Lipper displaying the effects of the proposed extension of breakpoints in the investment advisory fee rates for the Fund (as discussed below) at various assets levels of the Funds as compared to its Lipper Peer Group. Based on this review, the Board concluded that the investment advisory fees and expense levels and the historical performance of the Fund, as managed by BGFA, as compared to the investment advisory fees and expense levels and performance of the funds in its Lipper Peer Group, were satisfactory for the purposes of approving the Advisory Contract for the coming year.

BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS 27

Board Review and Approval of Investment Advisory Contracts (Unaudited) (Continued)

iSHARES^®, INC.

COSTS OF SERVICES PROVIDED TO THE FUND AND PROFITS REALIZED BY BGFA AND AFFILIATES

The Board reviewed information about the profitability to BGFA of the Fund based on the fees payable to BGFA and its affiliates (including fees under the Advisory Contract), and all other sources of revenue and expense to BGFA and its affiliates for the last calendar year. The Board discussed the sources of direct and ancillary revenue with management, including the revenues to BGI from securities lending by the Company (including any securities lending by the Fund). The Board also discussed BGFA’s profit margin as reflected in the Fund’s profitability analysis and reviewed information regarding economies of scale (as discussed below). Based on this review, the Board concluded that the profits to be realized by BGFA and its affiliates under the Advisory Contract and from other relationships between the Fund and BGFA and/or its affiliates, if any, were within the range the Board considered reasonable and appropriate.

ECONOMIES OF SCALE

In connection with its review of the Fund’s profitability analysis, the Board reviewed information regarding economies of scale or other efficiencies that may result from increases in the Fund’s assets. The Board was also presented with materials regarding the proposed extension of breakpoints in the investment advisory fee rates at certain asset levels of the Fund on an aggregated basis with certain other iShares funds. The Board noted that the Advisory Contract already provided for breakpoints in the Fund’s investment advisory fee rates as the assets of the Fund, on an aggregated basis with the assets of certain other iShares funds, increase. The Board also discussed the substantial growth in assets of certain iShares funds, including the Fund, over the last few years. The Board further noted that as of July 1, 2004, Fund shareholders were no longer paying distribution fees pursuant to the Fund’s distribution plan under 12b-1 of the 1940 Act because such plan had been terminated as of that date, benefiting the Fund’s shareholders by lowering the Fund’s overall expenses. The Board also reviewed BGFA’s historic profitability as investment adviser to the iShares fund complex and noted that BGFA had made a significant investment in the iShares funds and had incurred operating losses during earlier years when the iShares funds, including the Fund, had not yet reached scale. In light of this history, the Board determined that the proposed extension of breakpoints was appropriate and warranted at this juncture for the Fund. Based on this review, the Board, recognizing its responsibility to consider this issue at least annually, concluded that the structure of the investment advisory fees, with the proposed extension of breakpoints for the Fund, reflects the current sharing and potential further sharing of economies of scale with the Fund’s shareholders.

FEES AND SERVICES PROVIDED FOR OTHER COMPARABLE FUNDS/ACCOUNTS MANAGED BY BGFA AND ITS AFFILIATES

The Board considered the Fund’s annual investment advisory fee rates under the Advisory Contract in comparison to the investment advisory/management fee rates for other funds/accounts for which BGFA (or its affiliate, BGI) provides investment advisory/management services, including other funds registered under the 1940 Act, collective funds and separate accounts (together, the “Other Accounts”). The Board noted that comparative investment advisory/management fee information was not available, as BGFA and its affiliates do not manage any Other Accounts with substantially similar investment objectives and strategies as the Funds. However, the Board noted that BGFA provided the Board with general information regarding how the level of services provided to the Other Accounts differed from the level of services provided to the Funds. Based on this review, the Board determined that the investment advisory fee rates under the Advisory Contract, with the proposed extension of breakpoints, do not constitute fees that are so disproportionately large as to bear no reasonable relationship to the services rendered and that could not have been the product of arm’s-length bargaining, and concluded that the investment advisory fee rates under the Advisory Contract, with the proposed extension of breakpoints, are fair and reasonable.

28 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Board Review and Approval of Investment Advisory Contracts (Unaudited) (Continued)

iSHARES^®, INC.

OTHER BENEFITS TO BGFA AND/OR ITS AFFILIATES

The Board reviewed any ancillary revenue received by BGFA and/or its affiliates in connection with the services provided to the Fund by BGFA, such as any payment of revenue to BGI, the Company’s securities lending agent, for loaning any portfolio securities, and payment of advisory fees and/or administration fees to BGFA and BGI in connection with any investments by the Fund in other funds for which BGFA provides investment advisory services and/or BGI provides administration services. The Board noted that BGFA does not use soft dollars or consider the value of research or other services that may be provided to BGFA (including its affiliates) in selecting brokers for portfolio transactions for the Fund. The Board further noted that any portfolio transactions on behalf of the Fund placed through a BGFA affiliate are reported to the Board pursuant to Rule 17e-1 under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Fund’s shareholders.

Based on this analysis, the Board determined that the Advisory Contract, including the investment advisory fee rates, with the proposed extension of breakpoints, are fair and reasonable in light of all relevant circumstances, and concluded that it is in the best interest of the Fund and its shareholders to approve the Advisory Contract, with the fee schedule to the Advisory Contract as proposed to be amended to reflect the extension of breakpoints, for the coming year.

BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS 29

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 generally 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. The information shown for the Fund is for five calendar years through 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, 2001 through June 30, 2006

Premium/Discount Range	Number of Days	Percentage of Total Days
Greater than 3.5% and Less than 4.0%	2	0.14	%
Greater than 3.0% and Less than 3.5%	4	0.29
Greater than 2.5% and Less than 3.0%	8	0.58
Greater than 2.0% and Less than 2.5%	19	1.38
Greater than 1.5% and Less than 2.0%	47	3.40
Greater than 1.0% and Less than 1.5%	142	10.28
Greater than 0.5% and Less than 1.0%	256	18.54
Between 0.5% and –0.5%	628	45.48
Less than –0.5% and Greater than –1.0%	160	11.59
Less than –1.0% and Greater than –1.5%	64	4.63
Less than –1.5% and Greater than –2.0%	36	2.61
Less than –2.0% and Greater than –2.5%	6	0.43
Less than –2.5% and Greater than –3.0%	4	0.29
Less than –3.0%	5	0.36
	1,381	100.00	%

30 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Director and Officer 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 111 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 an additional 25 portfolios within the fund complex.

Unless otherwise noted in the tables below, the address for each Director and Officer is c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, California 94105. The Board has designated George G.C. Parker as its Lead Director. Additional information about the Funds’ Directors and Officers may be found in the Funds’ combined Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-474-2737.

Interested Directors and Officers

Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
*Lee T. Kranefuss, 1961	Director, Chairman and President (since 2003).	Chief Executive Officer, Global Index and Markets Group of BGI (since 2005); Chief Executive Officer of Intermediary Investor and Exchange Traded Products Business of BGI (since 2003); Chief Executive Officer of the Individual Investor Business of BGI (1999-2003).	Trustee (since 2003) of iShares Trust; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.
*John E. Martinez, 1962	Director (since 2003).	Co-Chief Executive Officer of Global Index and Markets Group of BGI (2001-2003); Chairman of Barclays Global Investors Services (2000-2003); Chief Executive Officer of Capital Markets Group of BGI (1996-2001).	Trustee (since 2003) of iShares Trust; Director (since 2005) of Real Estate Equity Exchange; Director (since 2003) of Larkin Street Youth Services.

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

DIRECTOR AND OFFICER INFORMATION 31

Director and Officer Information (Unaudited) (Continued)

iSHARES^®, INC.

Independent Directors
Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Richard K. Lyons, 1961	Director (since 2002).	Executive Associate Dean (since 2005); Sylvan Coleman Chair in Finance (since 2004); Acting Dean (2004-2005) and Professor (since 1993), University of California, Berkeley: Haas School of Business; Consultant for IMF World Bank, Federal Reserve Bank and Citibank N.A. (since 2000).	Trustee (since 2000) of iShares Trust; Trustee (since 2001) of Barclays Global Investors Funds and Master Investment Portfolio; Director (since 2003) of BGI Cayman Prime Money Market Fund, Ltd.; Trustee (since 1995) and Chairman of Matthews Asian Funds (oversees 8 portfolios).
George G. C. Parker, 1939	Director (since 2002).	Dean Witter Distinguished Professor of Finance (since 1994); Formerly Senior Associate Dean for Academic Affairs, Director of MBA Program, Stanford University: Graduate School of Business (1993-2001).	Trustee (since 2000) of iShares Trust; Director (since 1996) of Continental Airlines, Inc.; Director (since 1995) of Community First Financial Group; Director (since 1999) of Tejon Ranch Company; Director (since 2003) of First Republic Bank; Director (since 2004) of Threshold Pharmaceuticals.
Cecilia H. Herbert, 1949	Director (since 2005).	Member of Finance Council, Archdiocese of San Francisco (since 1991); Chair of Investment Committee, Archdiocese of San Francisco (1994-2005).	Trustee (since 2005) of iShares Trust; Trustee (2004-2005) of Pacific Select Funds; Trustee (1992-2003) of the Montgomery Funds; Trustee (since 2005) of the Thacher School; Director (since 1998) of Catholic Charities CYO; Director (since 2005) of Women’s Forum West (professional association).
Charles A. Hurty, 1943	Director (since 2005).	Partner, KPMG LLP (1968-2001).	Trustee (since 2005) of iShares Trust; Director (since 2002) of GMAM Absolute Return Strategy Fund (1 portfolio); Director (since 2002) of Citigroup Alternative Investments Multi-Adviser Hedge Fund Portfolios LLC (2 portfolios); Director (since 2005) of CSFB Alternative Investments Fund (15 portfolios).
John E. Kerrigan, 1955	Director (since 2005).	Chief Investment Officer, Santa Clara University (since 2002); Managing Director, Merrill Lynch (1994-2002).	Trustee (since 2005) of iShares Trust; Member (since 2004) of Advisory Council for Commonfund Distressed Debt Partners II.

32 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Director and Officer Information (Unaudited) (Continued)

iSHARES^®, INC.

Officer
Name, Year of Birth	Position(s), Length of Service	Principal Occupation(s) During Past 5 Years	Other Directorships Held
Michael A. Latham, 1965	Secretary, Treasurer and Principal Financial Officer (since 2002).	Chief Operating Officer of the Intermediary Investor 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).	None.

DIRECTOR AND OFFICER INFORMATION 33

Notes:

34 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Notes:

NOTES 35

The iShares^® Family of Funds

The following is a list of iShares Funds being offered, along with their respective exchange trading symbols. Please call 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 Global Index Funds	iShares Bond Funds
iShares S&P 1500 (ISI) iShares S&P 100 (OEF) iShares S&P 500 (IVV) iShares S&P 500 Growth (IVW) iShares S&P 500 Value (IVE) iShares S&P MidCap 400 (IJH) iShares S&P MidCap 400 Growth (IJK) iShares S&P MidCap 400 Value (IJJ) iShares S&P SmallCap 600 (IJR) iShares S&P SmallCap 600 Growth (IJT) iShares S&P SmallCap 600 Value (IJS) iShares Domestic Sector Index Funds iShares Cohen & Steers Realty Majors (ICF) iShares Dow Jones U.S. Basic Materials Sector (IYM) iShares Dow Jones U.S. Consumer Services Sector (IYC) iShares Dow Jones U.S. Consumer Goods 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 U.S. Technology Sector (IYW) iShares Dow Jones U.S. Telecommunications Sector (IYZ) iShares Dow Jones Transportation Average (IYT) iShares Dow Jones U.S. Utilities Sector (IDU) iShares Dow Jones U.S. Total Market (IYY) 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 Domestic Subsector Index Funds iShares Dow Jones U.S. Aerospace & Defense (ITA) iShares Dow Jones U.S. Broker-Dealers (IAI) iShares Dow Jones U.S. Health Care Providers (IHF) iShares Dow Jones U.S. Home Construction (ITB) iShares Dow Jones U.S. Insurance (IAK) iShares Dow Jones U.S. Medical Devices (IHI) iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO) iShares Dow Jones U.S. Oil Equipment & Services (IEZ) iShares Dow Jones U.S. Pharmaceuticals (IHE) iShares Dow Jones U.S. Regional Banks (IAT)	iShares S&P Global 100 (IOO) iShares S&P Global Consumer Discretionary Sector (RXI) iShares S&P Global Consumer Staples Sector (KXI) 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 Industrials Sector (EXI) iShares S&P Global Materials Sector (JXI) iShares S&P Global Technology Sector (IXN) iShares S&P Global Telecommunications Sector (IXP) iShares S&P Global Utilities Sector (MXI) 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 Russell Microcap™ (IWC) iShares International Country 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 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 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/TOPIX 150 (ITF)	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 Specialty Index Funds iShares KLD Select SocialSM (KLD) iShares Dow Jones Select Dividend (DVY) iShares International Index Funds iShares MSCI EAFE (EFA) iShares MSCI EAFE Growth (EFG) iShares MSCI EAFE Value (EFV) iShares MSCI Emerging Markets (EEM) iShares MSCI EMU (EZU) iShares MSCI Pacific ex-Japan (EPP) iShares S&P Europe 350 (IEV) iShares S&P Latin America 40 (ILF) 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 NYSE Index Funds iShares NYSE Composite (NYC) iShares NYSE 100 (NY)

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, KLD Research & Analytics, Inc., 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 a deposit of a bank and it 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 2006 Annual Report.

3467-iS-0906

36 2006 iSHARES ANNUAL REPORT TO SHAREHOLDERS

Item 2. Code of Ethics.

As of August 31, 2006, iShares, Inc. (the “Registrant”) had adopted a code of ethics that applies to persons appointed by the Registrant’s Board of Directors as the President and Chief Executive Officer, Chief Financial Officer, Treasurer and/or Chief Accounting Officer, and any persons performing similar functions. For the fiscal year ended August 31, 2006, 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 12(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 Richard K. Lyons, George G.C. Parker, Cecilia H. Herbert, Charles A. Hurty and John E. Kerrigan, 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 audit committee member of various mutual fund boards.

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 Funds’ 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 $348,000 for the fiscal year ended August 31, 2005 and $374,100 for the fiscal year ended August 31, 2006.

(b) Audit-Related Fees – There were no fees billed for the fiscal years ended August 31, 2005 and August 31, 2006 for assurance and related services by the principal accountant that were reasonably related to the performance of the audit of the Funds’ 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 Funds’ tax returns and excise tax calculations, were $166,800 for the fiscal year ended August 31, 2005 and $179,310 for the fiscal year ended August 31, 2006.

(d) All Other Fees – There were no other fees billed for the fiscal years ended August 31, 2005 and August 31, 2006 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 amended in June 2005, 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 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 Funds’ financial statements for the fiscal year ended August 31, 2006 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 Funds, and rendered to the Registrant’s investment adviser, and any Adviser Affiliate that provides ongoing services to the Registrant for the last two fiscal years, were $705,969 for the year ended August 31, 2005 and $1,866,533 for the year ended August 31, 2006.

(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 Richard K. Lyons, George G.C. Parker, Cecilia H. Herbert, Charles A. Hurty and John E. Kerrigan.

Item 6. Schedule of Investments.

The Funds’ full schedules of investments are included as part of the reports 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. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable to the Registrant.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to the Registrant.

Item 10. 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 11. Controls and Procedures.

(a) The Principal Executive Officer 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 Section 4(a) of the attached certification.

(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 quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12. 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.

(a) (3) Not applicable to the Registrant.

(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 and Principal Executive Officer
Date:	November 9, 2006

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 and Principal Executive Officer
Date:	November 9, 2006
By:	/s/ Michael A. Latham
Michael A. Latham, Principal Financial Officer
Date:	November 9, 2006

EX-99.CODE ETHICS

N-CSR Exhibit for Item 12(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 Officers” covered by this Code of Ethics for Senior Officers:

1. Lee T. Kranefuss, President and Principal Executive Officer

2. Michael A. Latham, Principal Financial Officer

Current as of: October 30, 2006

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

N-CSR Exhibit for Item 12(a)(2): SECTION 302 CERTIFICATIONS EX-99. CERT

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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s second fiscal quarter of the period covered by this report 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 9, 2006	/s/ Lee T. Kranefuss	President and Principal Executive Officer
		Lee T. Kranefuss	[Title]
		[Signature]

N-CSR Exhibit for Item 12(a)(2): SECTION 302 CERTIFICATIONS EX-99. CERT

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) and internal control over financial reporting (as defined in Rule 30a-3(d) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s second fiscal quarter of the period covered by this report 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 9, 2006	/s/ Michael A. Latham	Principal Financial Officer
		Michael A. Latham	[Title]
		[Signature]

EX-99.906CERT

Ex.99.906 CERT

N-CSR Exhibit for Item 12(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 Principal Executive Officer, 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, 2006 (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 9, 2006	/s/ Lee T. Kranefuss	President and Principal Executive Officer
		Lee T. Kranefuss	[Title]
		[Signature]
Date:	November 9, 2006	/s/ Michael A. Latham	Principal Financial Officer
		Michael A. Latham	[Title]
		[Signature]