Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: State Street Bank and Trust Company
1 Iron Street, Boston, MA 02210
(Address of principal executive offices) (Zip code)
The Corporation Trust Incorporated
351 West Camden Street, Baltimore, MD 21201
(Name and address of agent for service)
Registrant’s telephone number, including area code: (415) 670-2000
Date of fiscal year end: August 31, 2016
Date of reporting period: February 29, 2016
Table of Contents
Item 1. Reports to Stockholders.
Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
|
iShares, Inc.
| Ø | iShares MSCI Austria Capped ETF | EWO | NYSE Arca |
| Ø | iShares MSCI Belgium Capped ETF | EWK | NYSE Arca |
| Ø | iShares MSCI France ETF | EWQ | NYSE Arca |
| Ø | iShares MSCI Netherlands ETF | EWN | NYSE Arca |
| Ø | iShares MSCI Sweden ETF | EWD | NYSE Arca |
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Table of Contents
iSHARES® MSCI AUSTRIA CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Austria Capped ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Austrian equities, as represented by the MSCI Austria Investable Market Index 25/50 (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -8.65%, net of fees, while the total return for the Index was -8.57%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(11.95)% | (11.94)% | (11.90)% | (11.95)% | (11.94)% | (11.90)% | ||||||||||||||||||||
| 5 Years |
(6.68)% | (6.76)% | (6.56)% | (29.22)% | (29.52)% | (28.77)% | ||||||||||||||||||||
| 10 Years |
(4.66)% | (4.73)% | (5.16)% | (37.97)% | (38.43)% | (41.10)% | ||||||||||||||||||||
Index performance through January 31, 2008 reflects the performance of the MSCI Austria Index. Index performance beginning on February 1, 2008 through February 11, 2013 reflects the performance of the MSCI Austria Investable Market Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Austria Investable Market Index 25/50.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 913.50 | $ | 2.28 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI BELGIUM CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Belgium Capped ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Belgian equities, as represented by the MSCI Belgium Investable Market Index 25/50 (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -2.49%, net of fees, while the total return for the Index was -2.36%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(3.31)% | (3.57)% | (3.16)% | (3.31)% | (3.57)% | (3.16)% | ||||||||||||||||||||
| 5 Years |
7.27% | 7.17% | 8.93% | 42.02% | 41.38% | 53.40% | ||||||||||||||||||||
| 10 Years |
1.05% | 0.97% | 1.33% | 11.06% | 10.18% | 14.13% | ||||||||||||||||||||
Index performance through November 30, 2007 reflects the performance of the MSCI Belgium Index. Index performance beginning on December 1, 2007 through November 8, 2012 reflects the performance of the MSCI Belgium Investable Market Index. Index performance beginning on November 9, 2012 reflects the performance of the MSCI Belgium Investable Market Index 25/50.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 975.10 | $ | 2.36 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI FRANCE ETF
Performance as of February 29, 2016
The iShares MSCI France ETF (the “Fund”) seeks to track the investment results of an index composed of French equities, as represented by the MSCI France Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -8.10%, net of fees, while the total return for the Index was -7.97%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(12.14)% | (12.47)% | (12.11)% | (12.14)% | (12.47)% | (12.11)% | ||||||||||||||||||||
| 5 Years |
(0.42)% | (0.58)% | (0.45)% | (2.11)% | (2.88)% | (2.22)% | ||||||||||||||||||||
| 10 Years |
0.92% | 0.83% | 1.01% | 9.57% | 8.66% | 10.53% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 919.00 | $ | 2.29 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI NETHERLANDS ETF
Performance as of February 29, 2016
The iShares MSCI Netherlands ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Dutch equities, as represented by the MSCI Netherlands Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -5.96%, net of fees, while the total return for the Index was -5.77%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(9.33)% | (9.65)% | (8.97)% | (9.33)% | (9.65)% | (8.97)% | ||||||||||||||||||||
| 5 Years |
2.62% | 2.47% | 2.87% | 13.83% | 12.99% | 15.18% | ||||||||||||||||||||
| 10 Years |
3.16% | 3.09% | 3.54% | 36.48% | 35.62% | 41.58% | ||||||||||||||||||||
Index performance through January 31, 2008 reflects the performance of the MSCI Netherlands Index. Index performance beginning on February 1, 2008 reflects the performance of the MSCI Netherlands Investable Market Index.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 940.40 | $ | 2.32 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI SWEDEN ETF
Performance as of February 29, 2016
The iShares MSCI Sweden ETF (the “Fund”) seeks to track the investment results of an index composed of Swedish equities, as represented by the MSCI Sweden Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -8.87%, net of fees, while the total return for the Index was -8.66%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(17.74)% | (18.01)% | (18.82)% | (17.74)% | (18.01)% | (18.82)% | ||||||||||||||||||||
| 5 Years |
0.58% | 0.57% | 0.24% | 2.96% | 2.86% | 1.23% | ||||||||||||||||||||
| 10 Years |
4.85% | 4.80% | 4.67% | 60.56% | 59.83% | 57.80% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 911.30 | $ | 2.28 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
9 |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI AUSTRIA CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
11 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI AUSTRIA CAPPED ETF
February 29, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI BELGIUM CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI BELGIUM CAPPED ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI FRANCE ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI FRANCE ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI NETHERLANDS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI SWEDEN ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Austria Capped ETF |
iShares MSCI Belgium Capped ETF |
iShares MSCI France ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 83,486,968 | $ | 206,024,604 | $ | 453,930,961 | ||||||
| Affiliated (Note 2) |
67,606 | 5,424,511 | 1,609,641 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 83,554,574 | $ | 211,449,115 | $ | 455,540,602 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 55,824,753 | $ | 184,483,500 | $ | 361,526,610 | ||||||
| Affiliated (Note 2) |
67,606 | 5,424,511 | 1,609,641 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
55,892,359 | 189,908,011 | 363,136,251 | |||||||||
| Foreign currency, at valueb |
42,444 | 1,592,114 | 292,917 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
483,025 | 1,859,306 | 506,313 | |||||||||
| Interest |
99 | 55,517 | 5,429 | |||||||||
| Tax reclaims |
903,355 | 93,360 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
57,321,282 | 193,508,308 | 363,940,910 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
501,378 | 3,221,313 | 504,904 | |||||||||
| Collateral for securities on loan (Note 1) |
30,000 | 5,406,025 | 1,448,859 | |||||||||
| Investment advisory fees (Note 2) |
20,804 | 72,637 | 135,959 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
552,182 | 8,699,975 | 2,089,722 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 56,769,100 | $ | 184,808,333 | $ | 361,851,188 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 163,696,614 | $ | 260,982,943 | $ | 508,685,766 | ||||||
| Undistributed (distributions in excess of) net investment income |
(206,313 | ) | (315,262 | ) | 347,674 | |||||||
| Accumulated net realized loss |
(78,859,754 | ) | (54,307,381 | ) | (54,770,788 | ) | ||||||
| Net unrealized depreciation |
(27,861,447 | ) | (21,551,967 | ) | (92,411,464 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 56,769,100 | $ | 184,808,333 | $ | 361,851,188 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
4,000,000 | 11,200,000 | 15,800,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 14.19 | $ | 16.50 | $ | 22.90 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $28,409, $5,416,399 and $1,366,526, respectively. See Note 1. |
| b | Cost of foreign currency: $44,178, $1,615,615 and $300,030, respectively. |
| c | $0.001 par value, number of shares authorized: 100 million, 136.2 million and 340.2 million, respectively. |
See notes to financial statements.
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Netherlands ETF |
iShares MSCI Sweden ETF |
|||||||
| ASSETS |
||||||||
| Investments, at cost: |
||||||||
| Unaffiliated |
$ | 190,637,468 | $ | 396,889,715 | ||||
| Affiliated (Note 2) |
4,004,265 | 3,345,705 | ||||||
|
|
|
|
|
|||||
| Total cost of investments |
$ | 194,641,733 | $ | 400,235,420 | ||||
|
|
|
|
|
|||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||
| Unaffiliated |
$ | 164,451,058 | $ | 307,158,036 | ||||
| Affiliated (Note 2) |
4,004,265 | 3,345,705 | ||||||
|
|
|
|
|
|||||
| Total fair value of investments |
168,455,323 | 310,503,741 | ||||||
| Foreign currency, at valueb |
120,977 | 131,132 | ||||||
| Receivables: |
||||||||
| Investment securities sold |
363,122 | 1,664,990 | ||||||
| Due from custodian (Note 4) |
14,955 | — | ||||||
| Dividends and interest |
175,666 | 758 | ||||||
| Tax reclaims |
— | 60,357 | ||||||
| Foreign withholding tax claims (Note 7) |
— | 10,558,638 | ||||||
|
|
|
|
|
|||||
| Total Assets |
169,130,043 | 322,919,616 | ||||||
|
|
|
|
|
|||||
| LIABILITIES |
||||||||
| Payables: |
||||||||
| Investment securities purchased |
379,132 | 1,510,105 | ||||||
| Collateral for securities on loan (Note 1) |
3,921,616 | 3,326,363 | ||||||
| IRS compliance fee for foreign withholding tax claims (Note 7) |
— | 8,773,929 | ||||||
| Professional fees (Note 7) |
— | 1,155,865 | ||||||
| Investment advisory fees (Note 2) |
58,440 | 115,389 | ||||||
|
|
|
|
|
|||||
| Total Liabilities |
4,359,188 | 14,881,651 | ||||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 164,770,855 | $ | 308,037,965 | ||||
|
|
|
|
|
|||||
| Net assets consist of: |
||||||||
| Paid-in capital |
$ | 239,526,648 | $ | 447,634,794 | ||||
| Undistributed (distributions in excess of) net investment income |
56,221 | (1,064,550 | ) | |||||
| Accumulated net realized loss |
(48,621,207 | ) | (48,682,136 | ) | ||||
| Net unrealized depreciation |
(26,190,807 | ) | (89,850,143 | ) | ||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 164,770,855 | $ | 308,037,965 | ||||
|
|
|
|
|
|||||
| Shares outstandingc |
7,200,000 | 11,175,000 | ||||||
|
|
|
|
|
|||||
| Net asset value per share |
$ | 22.88 | $ | 27.56 | ||||
|
|
|
|
|
|||||
| a | Securities on loan with values of $3,721,613 and $3,167,596, respectively. See Note 1. |
| b | Cost of foreign currency: $120,476 and $133,143, respectively. |
| c | $0.001 par value, number of shares authorized: 255 million and 63.6 million, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
23 |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Austria Capped ETF |
iShares MSCI Belgium Capped ETF |
iShares MSCI France ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 133,811 | $ | 1,158,634 | $ | 2,289,300 | ||||||
| Interest — affiliated (Note 2) |
17 | 65 | 102 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
2,581 | 69,088 | 160,318 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
136,409 | 1,227,787 | 2,449,720 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
133,671 | 421,083 | 889,571 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
133,671 | 421,083 | 889,571 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
2,738 | 806,704 | 1,560,149 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(1,151,322 | ) | (1,771,012 | ) | (3,757,350 | ) | ||||||
| In-kind redemptions — unaffiliated |
(59,893 | ) | 2,206,896 | 1,632,386 | ||||||||
| Foreign currency transactions |
(7,754 | ) | (3,392 | ) | 22,943 | |||||||
|
|
|
|
|
|
|
|||||||
| Net realized gain (loss) |
(1,218,969 | ) | 432,492 | (2,102,021 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(3,937,067 | ) | (10,144,944 | ) | (31,603,845 | ) | ||||||
| Translation of assets and liabilities in foreign currencies |
(29,749 | ) | (15,113 | ) | (12,449 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(3,966,816 | ) | (10,160,057 | ) | (31,616,294 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(5,185,785 | ) | (9,727,565 | ) | (33,718,315 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (5,183,047 | ) | $ | (8,920,861 | ) | $ | (32,158,166 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $12,320, $206,412 and $365,099, respectively. |
See notes to financial statements.
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Netherlands ETF |
iShares MSCI Sweden ETF |
|||||||
| NET INVESTMENT INCOME |
||||||||
| Dividends — unaffiliateda |
$ | 547,546 | $ | 438,140 | ||||
| Interest — affiliated (Note 2) |
76 | 55 | ||||||
| Securities lending income — affiliated — net (Note 2) |
9,173 | 4,433 | ||||||
|
|
|
|
|
|||||
| Total investment income |
556,795 | 442,628 | ||||||
|
|
|
|
|
|||||
| EXPENSES |
||||||||
| Investment advisory fees (Note 2) |
385,775 | 824,535 | ||||||
|
|
|
|
|
|||||
| Total expenses |
385,775 | 824,535 | ||||||
|
|
|
|
|
|||||
| Net investment income (loss) |
171,020 | (381,907 | ) | |||||
|
|
|
|
|
|||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||
| Net realized gain (loss) from: |
||||||||
| Investments — unaffiliated |
(5,240,920 | ) | (1,566,519 | ) | ||||
| In-kind redemptions — unaffiliated |
530,916 | (1,282,791 | ) | |||||
| Foreign currency transactions |
1,959 | (5,373 | ) | |||||
|
|
|
|
|
|||||
| Net realized loss |
(4,708,045 | ) | (2,854,683 | ) | ||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation on: |
||||||||
| Investments |
(4,758,272 | ) | (30,749,300 | ) | ||||
| Translation of assets and liabilities in foreign currencies |
(10,734 | ) | (118,628 | ) | ||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation |
(4,769,006 | ) | (30,867,928 | ) | ||||
|
|
|
|
|
|||||
| Net realized and unrealized loss |
(9,477,051 | ) | (33,722,611 | ) | ||||
|
|
|
|
|
|||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (9,306,031 | ) | $ | (34,104,518 | ) | ||
|
|
|
|
|
|||||
| a | Net of foreign withholding tax of $96,488 and $4,424, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
25 |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares MSCI Austria Capped ETF |
iShares MSCI Belgium Capped ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 2,738 | $ | 942,322 | $ | 806,704 | $ | 3,303,671 | ||||||||
| Net realized gain (loss) |
(1,218,969 | ) | (5,565,859 | ) | 432,492 | 17,449,249 | ||||||||||
| Net change in unrealized appreciation/depreciation |
(3,966,816 | ) | (2,419,854 | ) | (10,160,057 | ) | (19,225,017 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
(5,183,047 | ) | (7,043,391 | ) | (8,920,861 | ) | 1,527,903 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(200,153 | ) | (1,034,120 | ) | (1,088,212 | ) | (3,622,114 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(200,153 | ) | (1,034,120 | ) | (1,088,212 | ) | (3,622,114 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
18,588,043 | 18,333,036 | 96,731,949 | 165,245,124 | ||||||||||||
| Cost of shares redeemed |
(12,565,742 | ) | (17,295,697 | ) | (55,573,316 | ) | (174,257,196 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
6,022,301 | 1,037,339 | 41,158,633 | (9,012,072 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
639,101 | (7,040,172 | ) | 31,149,560 | (11,106,283 | ) | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
56,129,999 | 63,170,171 | 153,658,773 | 164,765,056 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 56,769,100 | $ | 56,129,999 | $ | 184,808,333 | $ | 153,658,773 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributions in excess of net investment income included in net assets at end of period |
$ | (206,313 | ) | $ | (8,898 | ) | $ | (315,262 | ) | $ | (33,754 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
1,200,000 | 1,100,000 | 5,440,000 | 9,600,000 | ||||||||||||
| Shares redeemed |
(800,000 | ) | (1,100,000 | ) | (3,280,000 | ) | (10,240,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
400,000 | — | 2,160,000 | (640,000 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI France ETF |
iShares MSCI Netherlands ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 1,560,149 | $ | 9,397,015 | $ | 171,020 | $ | 3,321,529 | ||||||||
| Net realized gain (loss) |
(2,102,021 | ) | (9,748,837 | ) | (4,708,045 | ) | 4,194,752 | |||||||||
| Net change in unrealized appreciation/depreciation |
(31,616,294 | ) | (18,678,233 | ) | (4,769,006 | ) | (11,181,656 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(32,158,166 | ) | (19,030,055 | ) | (9,306,031 | ) | (3,665,375 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(1,390,748 | ) | (9,469,883 | ) | (1,046,893 | ) | (2,772,645 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(1,390,748 | ) | (9,469,883 | ) | (1,046,893 | ) | (2,772,645 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
65,496,440 | 212,178,798 | 38,745,844 | 119,225,740 | ||||||||||||
| Cost of shares redeemed |
(20,235,332 | ) | (115,462,686 | ) | (39,904,306 | ) | (101,596,983 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
45,261,108 | 96,716,112 | (1,158,462 | ) | 17,628,757 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
11,712,194 | 68,216,174 | (11,511,386 | ) | 11,190,737 | |||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
350,138,994 | 281,922,820 | 176,282,241 | 165,091,504 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 361,851,188 | $ | 350,138,994 | $ | 164,770,855 | $ | 176,282,241 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income included in net assets at end of period |
$ | 347,674 | $ | 178,273 | $ | 56,221 | $ | 932,094 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
2,600,000 | 8,200,000 | 1,700,000 | 4,600,000 | ||||||||||||
| Shares redeemed |
(800,000 | ) | (4,400,000 | ) | (1,700,000 | ) | (4,100,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
1,800,000 | 3,800,000 | — | 500,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
27 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Sweden ETF |
||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||
| OPERATIONS: |
||||||||
| Net investment income (loss) |
$ | (381,907 | ) | $ | 14,836,137 | |||
| Net realized gain (loss) |
(2,854,683 | ) | 18,941,537 | |||||
| Net change in unrealized appreciation/depreciation |
(30,867,928 | ) | (66,312,736 | ) | ||||
|
|
|
|
|
|||||
| Net decrease in net assets resulting from operations |
(34,104,518 | ) | (32,535,062 | ) | ||||
|
|
|
|
|
|||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||
| From net investment income |
(318,546 | ) | (16,981,496 | ) | ||||
|
|
|
|
|
|||||
| Total distributions to shareholders |
(318,546 | ) | (16,981,496 | ) | ||||
|
|
|
|
|
|||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||
| Proceeds from shares sold |
47,168,604 | 177,749,987 | ||||||
| Cost of shares redeemed |
(36,094,510 | ) | (201,102,502 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets from capital share transactions |
11,074,094 | (23,352,515 | ) | |||||
|
|
|
|
|
|||||
| DECREASE IN NET ASSETS |
(23,348,970 | ) | (72,869,073 | ) | ||||
| NET ASSETS |
||||||||
| Beginning of period |
331,386,935 | 404,256,008 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 308,037,965 | $ | 331,386,935 | ||||
|
|
|
|
|
|||||
| Distributions in excess of net investment income included in net assets at end of period |
$ | (1,064,550 | ) | $ | (364,097 | ) | ||
|
|
|
|
|
|||||
| SHARES ISSUED AND REDEEMED |
||||||||
| Shares sold |
1,575,000 | 5,250,000 | ||||||
| Shares redeemed |
(1,350,000 | ) | (6,150,000 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in shares outstanding |
225,000 | (900,000 | ) | |||||
|
|
|
|
|
|||||
See notes to financial statements.
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Austria Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 15.59 | $ | 17.55 | $ | 17.87 | $ | 14.53 | $ | 18.76 | $ | 17.27 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.00 | b | 0.25 | 0.52 | 0.32 | 0.35 | 0.42 | |||||||||||||||||
| Net realized and unrealized gain (loss)c |
(1.34 | ) | (1.96 | ) | (0.18 | ) | 3.36 | (4.09 | ) | 1.53 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.34 | ) | (1.71 | ) | 0.34 | 3.68 | (3.74 | ) | 1.95 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.06 | ) | (0.25 | ) | (0.66 | ) | (0.34 | ) | (0.49 | ) | (0.46 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.06 | ) | (0.25 | ) | (0.66 | ) | (0.34 | ) | (0.49 | ) | (0.46 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 14.19 | $ | 15.59 | $ | 17.55 | $ | 17.87 | $ | 14.53 | $ | 18.76 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(8.65 | )%d | (9.76 | )% | 1.56 | % | 25.49 | % | (19.81 | )% | 10.92 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 56,769 | $ | 56,130 | $ | 63,170 | $ | 82,223 | $ | 53,757 | $ | 136,974 | ||||||||||||
| Ratio of expenses to average net assetse |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.52 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
0.01 | % | 1.54 | % | 2.64 | % | 1.82 | % | 2.32 | % | 1.95 | % | ||||||||||||
| Portfolio turnover ratef |
5 | % | 18 | % | 30 | % | 26 | % | 13 | % | 12 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | Rounds to less than $0.01. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| 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 financial statements.
| FINANCIAL HIGHLIGHTS |
29 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Belgium Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 17.00 | $ | 17.02 | $ | 14.36 | $ | 11.97 | $ | 12.60 | $ | 11.78 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.08 | 0.34 | 0.32 | 0.42 | 0.38 | 0.35 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(0.50 | ) | (0.00 | )c | 2.95 | 2.36 | (0.33 | ) | 0.80 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(0.42 | ) | (0.34 | ) | 3.27 | 2.78 | 0.05 | 1.15 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.08 | ) | (0.36 | ) | (0.61 | ) | (0.39 | ) | (0.67 | ) | (0.33 | ) | ||||||||||||
| Return of capital |
— | — | — | — | (0.01 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.08 | ) | (0.36 | ) | (0.61 | ) | (0.39 | ) | (0.68 | ) | (0.33 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 16.50 | $ | 17.00 | $ | 17.02 | $ | 14.36 | $ | 11.97 | $ | 12.60 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(2.49 | )%d | 1.95 | % | 23.05 | % | 23.43 | % | 1.11 | % | 9.59 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 184,808 | $ | 153,659 | $ | 164,765 | $ | 71,216 | $ | 25,386 | $ | 31,256 | ||||||||||||
| Ratio of expenses to average net assetse |
0.48 | % | 0.48 | % | 0.48 | % | 0.50 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
0.91 | % | 2.01 | % | 1.90 | % | 3.01 | % | 3.35 | % | 2.56 | % | ||||||||||||
| Portfolio turnover ratef |
9 | % | 7 | % | 13 | % | 24 | % | 19 | % | 12 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Rounds to less than $0.01. |
| 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 financial statements.
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI France ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 25.01 | $ | 27.64 | $ | 24.85 | $ | 20.70 | $ | 22.60 | $ | 21.03 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.10 | 0.74 | 0.66 | 0.69 | 0.59 | 0.86 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(2.12 | ) | (2.69 | ) | 2.86 | 4.14 | (1.80 | ) | 1.38 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(2.02 | ) | (1.95 | ) | 3.52 | 4.83 | (1.21 | ) | 2.24 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.09 | ) | (0.68 | ) | (0.73 | ) | (0.68 | ) | (0.69 | ) | (0.67 | ) | ||||||||||||
| Return of capital |
— | — | — | — | (0.00 | )c | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.09 | ) | (0.68 | ) | (0.73 | ) | (0.68 | ) | (0.69 | ) | (0.67 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 22.90 | $ | 25.01 | $ | 27.64 | $ | 24.85 | $ | 20.70 | $ | 22.60 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(8.10 | )%d | (7.17 | )% | 14.07 | % | 23.56 | % | (5.05 | )% | 10.24 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 361,851 | $ | 350,139 | $ | 281,923 | $ | 526,839 | $ | 401,626 | $ | 357,137 | ||||||||||||
| Ratio of expenses to average net assetse |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
0.83 | % | 2.85 | % | 2.36 | % | 2.94 | % | 2.91 | % | 3.38 | % | ||||||||||||
| Portfolio turnover ratef |
2 | % | 6 | % | 6 | % | 5 | % | 6 | % | 6 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Rounds to less than $0.01. |
| 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 financial statements.
| FINANCIAL HIGHLIGHTS |
31 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Netherlands ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 24.48 | $ | 24.64 | $ | 22.52 | $ | 18.23 | $ | 18.45 | $ | 17.89 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.02 | 0.50 | 0.45 | 0.44 | 0.39 | 0.48 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(1.48 | ) | (0.27 | ) | 2.22 | 4.19 | (0.08 | ) | 0.55 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.46 | ) | 0.23 | 2.67 | 4.63 | 0.31 | 1.03 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.14 | ) | (0.39 | ) | (0.55 | ) | (0.34 | ) | (0.53 | ) | (0.47 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.14 | ) | (0.39 | ) | (0.55 | ) | (0.34 | ) | (0.53 | ) | (0.47 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 22.88 | $ | 24.48 | $ | 24.64 | $ | 22.52 | $ | 18.23 | $ | 18.45 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(5.96 | )%c | 0.87 | % | 11.80 | % | 25.57 | % | 1.96 | % | 5.44 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 164,771 | $ | 176,282 | $ | 165,092 | $ | 253,390 | $ | 78,397 | $ | 121,740 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.50 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
0.21 | % | 2.01 | % | 1.78 | % | 2.09 | % | 2.21 | % | 2.26 | % | ||||||||||||
| Portfolio turnover ratee |
7 | % | 6 | % | 7 | % | 11 | % | 10 | % | 6 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Sweden ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 30.26 | $ | 34.11 | $ | 31.97 | $ | 27.32 | $ | 26.82 | $ | 24.46 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment income (loss)a |
(0.03 | ) | 1.30 | b | 1.04 | 0.97 | 0.83 | 1.18 | ||||||||||||||||
| Net realized and unrealized gain (loss)c |
(2.64 | ) | (3.75 | ) | 2.33 | 4.70 | 0.58 | 2.22 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(2.67 | ) | (2.45 | ) | 3.37 | 5.67 | 1.41 | 3.40 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.03 | ) | (1.40 | ) | (1.23 | ) | (1.02 | ) | (0.86 | ) | (1.04 | ) | ||||||||||||
| Return of capital |
— | — | — | — | (0.05 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.03 | ) | (1.40 | ) | (1.23 | ) | (1.02 | ) | (0.91 | ) | (1.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 27.56 | $ | 30.26 | $ | 34.11 | $ | 31.97 | $ | 27.32 | $ | 26.82 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(8.87 | )%d | (7.46 | )%b | 10.49 | % | 21.02 | % | 5.57 | % | 13.40 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 308,038 | $ | 331,387 | $ | 404,256 | $ | 434,006 | $ | 370,832 | $ | 329,887 | ||||||||||||
| Ratio of expenses to average net assetse |
0.48 | % | 0.92 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.51 | % | ||||||||||||
| Ratio of expenses to average net assets excluding the non-recurring professional fees for foreign withholding tax claims (Note 7) |
n/a | 0.48 | % | n/a | n/a | n/a | n/a | |||||||||||||||||
| Ratio of net investment income (loss) to average net assetse |
(0.22 | )% | 3.97 | %b | 2.97 | % | 3.13 | % | 3.17 | % | 3.80 | % | ||||||||||||
| Portfolio turnover ratef |
2 | % | 4 | % | 7 | % | 7 | % | 7 | % | 9 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | Reflects the one-time, positive effect of foreign withholding tax claims, net of the associated IRS compliance fees and professional fees (See Note 7), which resulted in the following increases: |
| • | Net investment income per share by $0.42 |
| • | Total return by 1.14% |
| • | Ratio of net investment income to average net assets by 1.31% |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| 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 financial statements.
| FINANCIAL HIGHLIGHTS |
33 |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF | Diversification Classification | |
| MSCI Austria Capped |
Non-diversified | |
| MSCI Belgium Capped |
Non-diversified | |
| MSCI France |
Non-diversified | |
| MSCI Netherlands |
Non-diversified | |
| MSCI Sweden |
Non-diversified |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| NOTES TO FINANCIAL STATEMENTS |
35 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Austria Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 55,824,732 | $ | — | $ | 21 | $ | 55,824,753 | ||||||||
| Money Market Funds |
67,606 | — | — | 67,606 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 55,892,338 | $ | — | $ | 21 | $ | 55,892,359 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Belgium Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 184,483,500 | $ | — | $ | — | $ | 184,483,500 | ||||||||
| Money Market Funds |
5,424,511 | — | — | 5,424,511 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 189,908,011 | $ | — | $ | — | $ | 189,908,011 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI France |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 361,526,610 | $ | — | $ | — | $ | 361,526,610 | ||||||||
| Money Market Funds |
1,609,641 | — | — | 1,609,641 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 363,136,251 | $ | — | $ | — | $ | 363,136,251 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Netherlands |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 164,451,057 | $ | — | $ | 1 | $ | 164,451,058 | ||||||||
| Money Market Funds |
4,004,265 | — | — | 4,004,265 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 168,455,322 | $ | — | $ | 1 | $ | 168,455,323 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Sweden |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 307,158,036 | $ | — | $ | — | $ | 307,158,036 | ||||||||
| Money Market Funds |
3,345,705 | — | — | 3,345,705 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 310,503,741 | $ | — | $ | — | $ | 310,503,741 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors
| NOTES TO FINANCIAL STATEMENTS |
37 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
(“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount b |
|||||||||
| MSCI Austria Capped |
||||||||||||
| Scotia Capital (USA) Inc. |
$ | 28,409 | $ | 28,409 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| $ | 28,409 | $ | 28,409 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Belgium Capped |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 103,952 | $ | 103,952 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
2,429,754 | 2,267,287 | (162,467 | ) | ||||||||
| Goldman Sachs & Co. |
1,206,703 | 1,206,703 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
50,539 | 50,539 | — | |||||||||
| Morgan Stanley & Co. LLC |
345,428 | 345,428 | — | |||||||||
| Scotia Capital (USA) Inc. |
56,702 | 56,702 | — | |||||||||
| SG Americas Securities LLC |
16,623 | — | (16,623 | ) | ||||||||
| State Street Bank & Trust Company |
879,944 | 879,944 | — | |||||||||
| UBS Securities LLC |
326,754 | 326,754 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 5,416,399 | $ | 5,237,309 | $ | (179,090 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount b |
|||||||||
| MSCI France |
||||||||||||
| Goldman Sachs & Co. |
$ | 999,523 | $ | 999,523 | $ | — | ||||||
| UBS Securities LLC |
367,003 | 367,003 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 1,366,526 | $ | 1,366,526 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Netherlands |
||||||||||||
| Credit Suisse Securities (USA) LLC |
$ | 56,821 | $ | 56,821 | $ | — | ||||||
| Goldman Sachs & Co. |
699,284 | 699,284 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
7,803 | 7,803 | — | |||||||||
| UBS Securities LLC |
2,957,705 | 2,957,705 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 3,721,613 | $ | 3,721,613 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Sweden |
||||||||||||
| Morgan Stanley & Co. LLC |
$ | 3,167,596 | $ | 3,167,596 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| $ | 3,167,596 | $ | 3,167,596 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received by each Fund is disclosed in the Fund’s statement of assets and liabilities and with the exception of the iShares MSCI Belgium Capped ETF, was in excess of the market value of securities loaned at period end. |
| b | Additional collateral is delivered to the Funds on the next business day in accordance with the MSLA. The net amount would be subject to the borrower default indemnity in the event of default by a counterparty. |
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
For its investment advisory services to each Fund, BFA 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 the Fund and certain other iShares 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, up to and including $48 billion | ||||
| 0.40 | Over $48 billion, up to and including $72 billion | ||||
| 0.36 | Over $72 billion | ||||
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA,
| NOTES TO FINANCIAL STATEMENTS |
39 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| MSCI Austria Capped |
$ | 755 | ||
| MSCI Belgium Capped |
16,327 | |||
| MSCI France |
40,341 | |||
| MSCI Netherlands |
2,850 | |||
| MSCI Sweden |
1,316 | |||
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
For the six months ended February 29, 2016, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Austria Capped |
$ | 117,480 | $ | — | ||||
| MSCI Belgium Capped |
1,386,520 | 1,135,633 | ||||||
| MSCI France |
249,557 | 247,535 | ||||||
| MSCI Netherlands |
15,165 | 636,795 | ||||||
| MSCI Sweden |
243,951 | 1,563,786 | ||||||
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Austria Capped |
$ | 2,968,080 | $ | 3,061,365 | ||||
| MSCI Belgium Capped |
15,627,602 | 15,377,125 | ||||||
| MSCI France |
9,385,454 | 8,524,367 | ||||||
| MSCI Netherlands |
11,848,462 | 12,210,914 | ||||||
| MSCI Sweden |
8,214,135 | 6,010,493 | ||||||
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| MSCI Austria Capped |
$ | 18,239,076 | $ | 12,364,526 | ||||
| MSCI Belgium Capped |
95,629,338 | 55,116,793 | ||||||
| MSCI France |
64,655,919 | 19,983,068 | ||||||
| MSCI Netherlands |
38,163,808 | 39,544,234 | ||||||
| MSCI Sweden |
46,996,251 | 35,982,384 | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
From time to time, settlement of securities related to in-kind contributions or in-kind redemptions may be delayed. In such cases, securities related to in-kind contributions are reflected as “Due from custodian” and securities related to in-kind redemptions are reflected as “Securities related to in-kind transactions” in the statements of assets and liabilities.
| NOTES TO FINANCIAL STATEMENTS |
41 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 5. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its investment in equity instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
Each Fund invests all or substantially all of its assets in issuers located in a single country. When a fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in that country may have a significant impact on its investment performance.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 6. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the following Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
| iShares ETF | Non- Expiring a |
Expiring 2016 |
Expiring 2017 |
Expiring 2018 |
Expiring 2019 |
Total | ||||||||||||||||||
| MSCI Austria Capped |
$ | 30,039,704 | $ | 2,587,916 | $ | 7,102,366 | $ | 16,657,011 | $ | 13,826,937 | $ | 70,213,934 | ||||||||||||
| MSCI Belgium Capped |
12,177,456 | 1,698,444 | 5,953,120 | 10,826,174 | 19,023,517 | 49,678,711 | ||||||||||||||||||
| MSCI France |
23,716,456 | 335,795 | 3,408,374 | 7,008,530 | 2,858,814 | 37,327,969 | ||||||||||||||||||
| MSCI Netherlands |
9,043,327 | 1,195,162 | 5,819,153 | 22,256,170 | 2,329,005 | 40,642,817 | ||||||||||||||||||
| MSCI Sweden |
11,775,552 | 100,015 | 13,686,746 | 8,483,510 | 5,244,977 | 39,290,800 | ||||||||||||||||||
| a | Must be utilized prior to losses subject to expiration. |
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 marked-to-market gains.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| MSCI Austria Capped |
$ | 88,756,220 | $ | 344,596 | $ | (33,208,457 | ) | $ | (32,863,861 | ) | ||||||
| MSCI Belgium Capped |
215,003,150 | 2,692,196 | (27,787,335 | ) | (25,095,139 | ) | ||||||||||
| MSCI France |
467,608,392 | 3,472,372 | (107,944,513 | ) | (104,472,141 | ) | ||||||||||
| MSCI Netherlands |
197,251,386 | 2,657,821 | (31,453,884 | ) | (28,796,063 | ) | ||||||||||
| MSCI Sweden |
405,036,340 | 3,481,215 | (98,013,814 | ) | (94,532,599 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| NOTES TO FINANCIAL STATEMENTS |
43 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 7. | FOREIGN WITHHOLDING TAX CLAIMS |
The iShares MSCI Sweden ETF filed claims to recover taxes withheld by Sweden on dividend income received in 2005 through 2009 on the basis that Sweden had purportedly violated certain provisions in the Treaty on the Functioning of the European Union. The Fund received a favorable ruling from the Swedish Administrative Court that the imposition of a withholding tax on dividends paid to a non-resident company, including the Fund, while exempting domestic funds from such taxes, results in discriminatory tax withholding contrary to the free movement of capital.
Based on the favorable ruling and on the successful recovery from the Sweden Tax Authority of withholding taxes from calendar years 2005 through 2009, the Fund recorded a receivable for all recoverable taxes that have been withheld by Sweden from January 1, 2010 to December 4, 2015. Effective December 7, 2015, the Fund qualified for exemption from withholding on future Swedish dividends. Tax claims not yet recovered continue to be disclosed in the statement of assets and liabilities as “Receivable for foreign withholding tax claims”. Professional fees associated with the filing of tax claims in Sweden resulting in the recovery of foreign withholding taxes were approved by the Board as appropriate expenses of the Fund. Such professional fees are disclosed in the statement of assets and liabilities as “Payable for professional fees”.
The Fund, under the approval of the Board, is seeking a closing agreement with the Internal Revenue Service (“IRS”) to address any prior years’ U.S. income tax liabilities attributable to Fund shareholders resulting from the recovery of foreign taxes. The closing agreement would result in the Fund (on behalf of its shareholders) paying a compliance fee to the IRS representing the estimated tax savings generated from foreign tax credits claimed by Fund shareholders on their tax returns from calendar years 2005 through 2014. The Fund has accrued an estimated liability for this IRS compliance fee, which is disclosed as “Payable for IRS compliance fee for foreign withholding tax claims” in the statement of assets and liabilities. The actual IRS compliance fee may differ from the estimate and that difference may be material.
| 8. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| MSCI Austria Capped |
$ | 0.006444 | $ | — | $ | 0.049154 | $ | 0.055598 | 12 | % | — | % | 88 | % | 100 | % | ||||||||||||||||
| MSCI Belgium Capped |
0.082943 | — | — | 0.082943 | 100 | — | — | 100 | ||||||||||||||||||||||||
| MSCI France |
0.065756 | — | 0.022266 | 0.088022 | 75 | — | 25 | 100 | ||||||||||||||||||||||||
| MSCI Netherlands |
0.144399 | — | — | 0.144399 | 100 | — | — | 100 | ||||||||||||||||||||||||
| SUPPLEMENTAL INFORMATION |
45 |
Table of Contents
Notes:
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-802-0216
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Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
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iShares, Inc.
| Ø | iShares MSCI Eurozone ETF | EZU | BATS |
| Ø | iShares MSCI Germany ETF | EWG | NYSE Arca |
| Ø | iShares MSCI Italy Capped ETF | EWI | NYSE Arca |
| Ø | iShares MSCI Spain Capped ETF | EWP | NYSE Arca |
| Ø | iShares MSCI Switzerland Capped ETF | EWL | NYSE Arca |
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Table of Contents
iSHARES® MSCI EUROZONE ETF
Performance as of February 29, 2016
The iShares MSCI Eurozone ETF (the “Fund”) seeks to track the investment results of an index composed of large- and mid-capitalization equities from developed market countries that use the euro as their official currency, as represented by the MSCI EMU Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -10.71%, net of fees, while the total return for the Index was -10.58%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(16.26)% | (16.43)% | (16.13)% | (16.26)% | (16.43)% | (16.13)% | ||||||||||||||||||||
| 5 Years |
(0.85)% | (0.99)% | (0.77)% | (4.18)% | (4.87)% | (3.80)% | ||||||||||||||||||||
| 10 Years |
0.37% | 0.30% | 0.48% | 3.73% | 3.07% | 4.89% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 892.90 | $ | 2.26 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI GERMANY ETF
Performance as of February 29, 2016
The iShares MSCI Germany ETF (the “Fund”) seeks to track the investment results of an index composed of German equities, as represented by the MSCI Germany Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -10.52%, net of fees, while the total return for the Index was -10.34%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(19.51)% | (19.91)% | (19.35)% | (19.51)% | (19.91)% | (19.35)% | ||||||||||||||||||||
| 5 Years |
0.25% | 0.06% | 0.37% | 1.27% | 0.32% | 1.86% | ||||||||||||||||||||
| 10 Years |
3.01% | 2.90% | 3.14% | 34.56% | 33.14% | 36.23% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 894.80 | $ | 2.26 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI ITALY CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Italy Capped ETF (the “Fund”) seeks to track the investment results of an index composed of Italian equities, as represented by the MSCI Italy 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -22.55%, net of fees, while the total return for the Index was -22.33%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(22.24)% | (22.75)% | (22.04)% | (22.24)% | (22.75)% | (22.04)% | ||||||||||||||||||||
| 5 Years |
(6.87)% | (7.02)% | (6.88)% | (29.95)% | (30.51)% | (30.00)% | ||||||||||||||||||||
| 10 Years |
(5.44)% | (5.55)% | (5.47)% | (42.85)% | (43.52)% | (43.04)% | ||||||||||||||||||||
Index performance through February 11, 2013 reflects the performance of the MSCI Italy Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Italy 25/50 Index.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 774.50 | $ | 2.12 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI SPAIN CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Spain Capped ETF (the “Fund”) seeks to track the investment results of an index composed of Spanish equities, as represented by the MSCI Spain 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -19.52%, net of fees, while the total return for the Index was -19.29%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(25.48)% | (25.91)% | (25.13)% | (25.48)% | (25.91)% | (25.13)% | ||||||||||||||||||||
| 5 Years |
(5.08)% | (5.19)% | (5.31)% | (22.94)% | (23.40)% | (23.88)% | ||||||||||||||||||||
| 10 Years |
(0.11)% | (0.20)% | (0.29)% | (1.07)% | (1.94)% | (2.86)% | ||||||||||||||||||||
Index performance through February 11, 2013 reflects the performance of the MSCI Spain Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Spain 25/50 Index.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 804.80 | $ | 2.15 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI SWITZERLAND CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Switzerland Capped ETF (the “Fund”) seeks to track the investment results of an index composed of Swiss equities, as represented by the MSCI Switzerland 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -10.53%, net of fees, while the total return for the Index was -10.48%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(12.78)% | (13.00)% | (12.89)% | (12.78)% | (13.00)% | (12.89)% | ||||||||||||||||||||
| 5 Years |
4.57% | 4.37% | 4.72% | 25.01% | 23.87% | 25.94% | ||||||||||||||||||||
| 10 Years |
5.43% | 5.35% | 4.96% | 69.73% | 68.39% | 62.27% | ||||||||||||||||||||
Index performance through February 11, 2013 reflects the performance of the MSCI Switzerland Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Switzerland 25/50 Index.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 894.70 | $ | 2.26 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
9 |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| SCHEDULES OF INVESTMENTS |
11 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EUROZONE ETF
February 29, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EUROZONE ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EUROZONE ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GERMANY ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GERMANY ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| DAX Index | 109 | Mar. 2016 | Eurex | $ | 28,021,479 | $ | (1,948,850) | |||||||||||||
See notes to financial statements.
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI ITALY CAPPED ETF
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI ITALY CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI SPAIN CAPPED ETF
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI SPAIN CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI SWITZERLAND CAPPED ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI SWITZERLAND CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Eurozone ETF |
iShares MSCI Germany ETF |
iShares MSCI Italy Capped ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 15,125,849,628 | $ | 6,367,245,309 | $ | 1,098,762,164 | ||||||
| Affiliated (Note 2) |
36,944,336 | 20,560,260 | 7,997,347 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 15,162,793,964 | $ | 6,387,805,569 | $ | 1,106,759,511 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 12,525,826,790 | $ | 4,913,990,685 | $ | 768,363,711 | ||||||
| Affiliated (Note 2) |
36,944,336 | 20,560,260 | 7,997,347 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
12,562,771,126 | 4,934,550,945 | 776,361,058 | |||||||||
| Foreign currency, at valueb |
1,247,522 | 13,519,145 | 112,360 | |||||||||
| Foreign currency pledged to broker, at valueb |
— | 4,802,798 | — | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
28,412,943 | 3,596,244 | 26,039,448 | |||||||||
| Dividends and interest |
2,944,266 | 8,055 | 25,823 | |||||||||
| Tax reclaims |
6,976,970 | 13,962,448 | 317 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
12,602,352,827 | 4,970,439,635 | 802,539,006 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
20,323,037 | 3,608,936 | 27,265,160 | |||||||||
| Collateral for securities on loan (Note 1) |
36,656,775 | 19,986,986 | 7,985,637 | |||||||||
| Capital shares redeemed |
4,853,856 | — | — | |||||||||
| Futures variation margin |
— | 1,948,850 | — | |||||||||
| Securities related to in-kind transactions (Note 4) |
26,473 | — | 50,277 | |||||||||
| Investment advisory fees (Note 2) |
5,003,010 | 1,941,662 | 295,721 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
66,863,151 | 27,486,434 | 35,596,795 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 12,535,489,676 | $ | 4,942,953,201 | $ | 766,942,211 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 15,619,576,248 | $ | 6,674,620,652 | $ | 1,288,452,808 | ||||||
| Undistributed net investment income (accumulated net investment loss) |
25,835,100 | (741,951 | ) | 47,095 | ||||||||
| Accumulated net realized loss |
(509,616,281 | ) | (275,277,344 | ) | (191,155,674 | ) | ||||||
| Net unrealized depreciation |
(2,600,305,391 | ) | (1,455,648,156 | ) | (330,402,018 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 12,535,489,676 | $ | 4,942,953,201 | $ | 766,942,211 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
390,400,000 | 209,700,000 | 67,350,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 32.11 | $ | 23.57 | $ | 11.39 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $34,221,557, $19,029,154 and $7,476,980, respectively. See Note 1. |
| b | Cost of foreign currency including currency pledged to broker: $1,268,197, $18,454,713 and $115,132, respectively. |
| c | $0.001 par value, number of shares authorized: 1 billion, 482.2 million and 295.4 million, respectively. |
See notes to financial statements.
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Spain Capped ETF |
iShares MSCI Switzerland Capped ETF |
|||||||
| ASSETS |
||||||||
| Investments, at cost: |
||||||||
| Unaffiliated |
$ | 1,453,685,761 | $ | 1,311,263,067 | ||||
| Affiliated (Note 2) |
128,224 | 23,474,080 | ||||||
|
|
|
|
|
|||||
| Total cost of investments |
$ | 1,453,813,985 | $ | 1,334,737,147 | ||||
|
|
|
|
|
|||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||
| Unaffiliated |
$ | 929,548,059 | $ | 1,121,725,739 | ||||
| Affiliated (Note 2) |
128,224 | 23,474,080 | ||||||
|
|
|
|
|
|||||
| Total fair value of investments |
929,676,283 | 1,145,199,819 | ||||||
| Foreign currency, at valueb |
624,537 | 4,665,133 | ||||||
| Receivables: |
||||||||
| Investment securities sold |
13,709,434 | 8,626,378 | ||||||
| Interest |
84 | 116,420 | ||||||
| Tax reclaims |
71,018 | 8,279,319 | ||||||
|
|
|
|
|
|||||
| Total Assets |
944,081,356 | 1,166,887,069 | ||||||
|
|
|
|
|
|||||
| LIABILITIES |
||||||||
| Payables: |
||||||||
| Investment securities purchased |
13,450,444 | 8,722,019 | ||||||
| Collateral for securities on loan (Note 1) |
67,397 | 23,436,053 | ||||||
| Capital shares redeemed |
2,421,731 | — | ||||||
| Investment advisory fees (Note 2) |
365,316 | 431,819 | ||||||
|
|
|
|
|
|||||
| Total Liabilities |
16,304,888 | 32,589,891 | ||||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 927,776,468 | $ | 1,134,297,178 | ||||
|
|
|
|
|
|||||
| Net assets consist of: |
||||||||
| Paid-in capital |
$ | 1,685,566,558 | $ | 1,371,750,246 | ||||
| Undistributed net investment income |
6,729,762 | 3,150,180 | ||||||
| Accumulated net realized loss |
(240,382,646 | ) | (50,493,967 | ) | ||||
| Net unrealized depreciation |
(524,137,206 | ) | (190,109,281 | ) | ||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 927,776,468 | $ | 1,134,297,178 | ||||
|
|
|
|
|
|||||
| Shares outstandingc |
36,750,000 | 39,750,000 | ||||||
|
|
|
|
|
|||||
| Net asset value per share |
$ | 25.25 | $ | 28.54 | ||||
|
|
|
|
|
|||||
| a | Securities on loan with values of $58,056 and $22,313,962, respectively. See Note 1. |
| b | Cost of foreign currency: $624,537 and $4,676,121, respectively. |
| c | $0.001 par value, number of shares authorized: 127.8 million and 318.625 million, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
25 |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Eurozone ETF |
iShares MSCI |
iShares MSCI Italy Capped ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 79,285,785 | $ | 17,176,607 | $ | 5,824,091 | ||||||
| Interest — affiliated (Note 2) |
4,692 | 755 | 310 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
2,532,297 | 59,645 | 172,348 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
81,822,774 | 17,237,007 | 5,996,749 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
29,951,279 | 13,888,149 | 2,573,597 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
29,951,279 | 13,888,149 | 2,573,597 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
51,871,495 | 3,348,858 | 3,423,152 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(104,453,470 | ) | (15,656,434 | ) | (34,184,376 | ) | ||||||
| In-kind redemptions — unaffiliated |
31,571,483 | (20,178,548 | ) | (14,313,933 | ) | |||||||
| Futures contracts |
— | (2,424,074 | ) | — | ||||||||
| Foreign currency transactions |
(437,486 | ) | (877,742 | ) | (189,870 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(73,319,473 | ) | (39,136,798 | ) | (48,688,179 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(1,533,309,704 | ) | (633,815,066 | ) | (215,217,690 | ) | ||||||
| Futures contracts |
— | 396,213 | — | |||||||||
| Translation of assets and liabilities in foreign currencies |
(228,462 | ) | 30,339 | (10,729 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(1,533,538,166 | ) | (633,388,514 | ) | (215,228,419 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(1,606,857,639 | ) | (672,525,312 | ) | (263,916,598 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (1,554,986,144 | ) | $ | (669,176,454 | ) | $ | (260,493,446 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $10,151,685, $2,787,183 and $947,644, respectively. |
See notes to financial statements.
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Spain Capped ETF |
iShares MSCI Switzerland Capped ETF |
|||||||
| NET INVESTMENT INCOME |
||||||||
| Dividends — unaffiliateda |
$ | 24,585,984 | $ | 5,952,765 | ||||
| Interest — affiliated (Note 2) |
712 | 269 | ||||||
| Securities lending income — affiliated — net (Note 2) |
88,659 | 181,315 | ||||||
|
|
|
|
|
|||||
| Total investment income |
24,675,355 | 6,134,349 | ||||||
|
|
|
|
|
|||||
| EXPENSES |
||||||||
| Investment advisory fees (Note 2) |
3,262,274 | 2,725,189 | ||||||
|
|
|
|
|
|||||
| Total expenses |
3,262,274 | 2,725,189 | ||||||
|
|
|
|
|
|||||
| Net investment income |
21,413,081 | 3,409,160 | ||||||
|
|
|
|
|
|||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||
| Net realized gain (loss) from: |
||||||||
| Investments — unaffiliated |
(47,305,231 | ) | (7,061,269 | ) | ||||
| In-kind redemptions — unaffiliated |
(73,896,942 | ) | 12,355,533 | |||||
| Foreign currency transactions |
67,153 | 37,366 | ||||||
|
|
|
|
|
|||||
| Net realized gain (loss) |
(121,135,020 | ) | 5,331,630 | |||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation on: |
||||||||
| Investments |
(183,988,959 | ) | (138,756,462 | ) | ||||
| Translation of assets and liabilities in foreign currencies |
(19,611 | ) | (226,858 | ) | ||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation |
(184,008,570 | ) | (138,983,320 | ) | ||||
|
|
|
|
|
|||||
| Net realized and unrealized loss |
(305,143,590 | ) | (133,651,690 | ) | ||||
|
|
|
|
|
|||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (283,730,509 | ) | $ | (130,242,530 | ) | ||
|
|
|
|
|
|||||
| a | Net of foreign withholding tax of $1,582,955 and $1,189,322, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
27 |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares MSCI Eurozone ETF |
iShares MSCI Germany ETF |
|||||||||||||||
| Six months February 29, 2016 |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 51,871,495 | $ | 225,781,969 | $ | 3,348,858 | $ | 121,304,245 | ||||||||
| Net realized gain (loss) |
(73,319,473 | ) | 48,868,113 | (39,136,798 | ) | 126,916,177 | ||||||||||
| Net change in unrealized appreciation/depreciation |
(1,533,538,166 | ) | (1,145,598,692 | ) | (633,388,514 | ) | (857,695,814 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(1,554,986,144 | ) | (870,948,610 | ) | (669,176,454 | ) | (609,475,392 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(31,246,470 | ) | (233,277,080 | ) | — | (127,874,456 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(31,246,470 | ) | (233,277,080 | ) | — | (127,874,456 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
5,139,959,708 | 5,243,729,213 | 414,524,633 | 3,934,318,439 | ||||||||||||
| Cost of shares redeemed |
(1,152,853,246 | ) | (2,707,524,817 | ) | (1,409,451,298 | ) | (1,387,346,200 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
3,987,106,462 | 2,536,204,396 | (994,926,665 | ) | 2,546,972,239 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
2,400,873,848 | 1,431,978,706 | (1,664,103,119 | ) | 1,809,622,391 | |||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
10,134,615,828 | 8,702,637,122 | 6,607,056,320 | 4,797,433,929 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 12,535,489,676 | $ | 10,134,615,828 | $ | 4,942,953,201 | $ | 6,607,056,320 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income or accumulated net loss included in net assets at end of period |
$ | 25,835,100 | $ | 5,210,075 | $ | (741,951 | ) | $ | (4,090,809 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
144,900,000 | 136,000,000 | 16,200,000 | 135,600,000 | ||||||||||||
| Shares redeemed |
(35,700,000 | ) | (72,500,000 | ) | (57,300,000 | ) | (50,400,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
109,200,000 | 63,500,000 | (41,100,000 | ) | 85,200,000 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Italy Capped ETF |
iShares MSCI Spain Capped ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 3,423,152 | $ | 24,227,811 | $ | 21,413,081 | $ | 65,134,793 | ||||||||
| Net realized loss |
(48,688,179 | ) | (44,864,340 | ) | (121,135,020 | ) | (29,776,219 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
(215,228,419 | ) | (76,897,587 | ) | (184,008,570 | ) | (436,158,087 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(260,493,446 | ) | (97,534,116 | ) | (283,730,509 | ) | (400,799,513 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(3,315,230 | ) | (24,941,571 | ) | (24,587,962 | ) | (77,875,309 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(3,315,230 | ) | (24,941,571 | ) | (24,587,962 | ) | (77,875,309 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
265,361,545 | 342,752,870 | 30,930,632 | 635,385,021 | ||||||||||||
| Cost of shares redeemed |
(312,047,902 | ) | (699,700,191 | ) | (460,926,293 | ) | (963,657,247 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets from capital share transactions |
(46,686,357 | ) | (356,947,321 | ) | (429,995,661 | ) | (328,272,226 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DECREASE IN NET ASSETS |
(310,495,033 | ) | (479,423,008 | ) | (738,314,132 | ) | (806,947,048 | ) | ||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
1,077,437,244 | 1,556,860,252 | 1,666,090,600 | 2,473,037,648 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 766,942,211 | $ | 1,077,437,244 | $ | 927,776,468 | $ | 1,666,090,600 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | 47,095 | $ | (60,827 | ) | $ | 6,729,762 | $ | 9,904,643 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
17,850,000 | 23,100,000 | 1,050,000 | 18,075,000 | ||||||||||||
| Shares redeemed |
(23,550,000 | ) | (47,250,000 | ) | (16,425,000 | ) | (26,850,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in shares outstanding |
(5,700,000 | ) | (24,150,000 | ) | (15,375,000 | ) | (8,775,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
29 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Switzerland Capped ETF |
||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||
| OPERATIONS: |
||||||||
| Net investment income |
$ | 3,409,160 | $ | 28,397,908 | ||||
| Net realized gain |
5,331,630 | 173,784,011 | ||||||
| Net change in unrealized appreciation/depreciation |
(138,983,320 | ) | (251,839,482 | ) | ||||
|
|
|
|
|
|||||
| Net decrease in net assets resulting from operations |
(130,242,530 | ) | (49,657,563 | ) | ||||
|
|
|
|
|
|||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||
| From net investment income |
— | (28,746,817 | ) | |||||
|
|
|
|
|
|||||
| Total distributions to shareholders |
— | (28,746,817 | ) | |||||
|
|
|
|
|
|||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||
| Proceeds from shares sold |
161,370,117 | 875,666,580 | ||||||
| Cost of shares redeemed |
(96,994,347 | ) | (669,255,531 | ) | ||||
|
|
|
|
|
|||||
| Net increase in net assets from capital share transactions |
64,375,770 | 206,411,049 | ||||||
|
|
|
|
|
|||||
| INCREASE (DECREASE) IN NET ASSETS |
(65,866,760 | ) | 128,006,669 | |||||
| NET ASSETS |
||||||||
| Beginning of period |
1,200,163,938 | 1,072,157,269 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 1,134,297,178 | $ | 1,200,163,938 | ||||
|
|
|
|
|
|||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | 3,150,180 | $ | (258,980 | ) | |||
|
|
|
|
|
|||||
| SHARES ISSUED AND REDEEMED |
||||||||
| Shares sold |
5,250,000 | 25,875,000 | ||||||
| Shares redeemed |
(3,125,000 | ) | (20,125,000 | ) | ||||
|
|
|
|
|
|||||
| Net increase in shares outstanding |
2,125,000 | 5,750,000 | ||||||
|
|
|
|
|
|||||
See notes to financial statements.
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Eurozone ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 36.04 | $ | 39.98 | $ | 34.64 | $ | 29.09 | $ | 31.55 | $ | 30.75 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.14 | 0.96 | 1.18 | 0.92 | 1.02 | 1.23 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(3.99 | ) | (3.95 | ) | 5.10 | 5.55 | (2.38 | ) | 0.71 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(3.85 | ) | (2.99 | ) | 6.28 | 6.47 | (1.36 | ) | 1.94 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.08 | ) | (0.95 | ) | (0.94 | ) | (0.92 | ) | (1.10 | ) | (1.14 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.08 | ) | (0.95 | ) | (0.94 | ) | (0.92 | ) | (1.10 | ) | (1.14 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 32.11 | $ | 36.04 | $ | 39.98 | $ | 34.64 | $ | 29.09 | $ | 31.55 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(10.71 | )%c | (7.62 | )% | 18.02 | % | 22.43 | % | (3.99 | )% | 5.78 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 12,535,490 | $ | 10,134,616 | $ | 8,702,637 | $ | 3,539,980 | $ | 794,226 | $ | 738,233 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.50 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
0.82 | % | 2.50 | % | 2.89 | % | 2.74 | % | 3.55 | % | 3.38 | % | ||||||||||||
| Portfolio turnover ratee |
2 | % | 5 | % | 7 | % | 5 | % | 7 | % | 8 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
31 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Germany ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 26.34 | $ | 28.97 | $ | 25.61 | $ | 21.34 | $ | 21.02 | $ | 19.45 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.01 | 0.58 | 0.59 | 0.46 | 0.56 | 0.86 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(2.78 | ) | (2.70 | ) | 3.40 | 4.24 | 0.34 | 1.38 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(2.77 | ) | (2.12 | ) | 3.99 | 4.70 | 0.90 | 2.24 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
— | (0.51 | ) | (0.63 | ) | (0.43 | ) | (0.58 | ) | (0.67 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
— | (0.51 | ) | (0.63 | ) | (0.43 | ) | (0.58 | ) | (0.67 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 23.57 | $ | 26.34 | $ | 28.97 | $ | 25.61 | $ | 21.34 | $ | 21.02 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(10.52 | )%c | (7.50 | )% | 15.41 | % | 22.11 | % | 4.55 | % | 10.84 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 4,942,953 | $ | 6,607,056 | $ | 4,797,434 | $ | 4,655,875 | $ | 2,797,029 | $ | 2,768,171 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.51 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
0.11 | % | 2.03 | % | 1.95 | % | 1.88 | % | 2.72 | % | 3.45 | % | ||||||||||||
| Portfolio turnover ratee |
1 | % | 3 | % | 6 | % | 4 | % | 4 | % | 13 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Italy Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 14.75 | $ | 16.02 | $ | 13.06 | $ | 11.78 | $ | 13.58 | $ | 15.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.04 | 0.35 | 0.41 | 0.36 | 0.41 | 0.54 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(3.36 | ) | (1.25 | ) | 2.89 | 1.23 | (1.79 | ) | (1.47 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(3.32 | ) | (0.90 | ) | 3.30 | 1.59 | (1.38 | ) | (0.93 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.04 | ) | (0.37 | ) | (0.34 | ) | (0.30 | ) | (0.42 | ) | (0.49 | ) | ||||||||||||
| Return of capital |
— | — | — | (0.01 | ) | (0.00 | )c | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.04 | ) | (0.37 | ) | (0.34 | ) | (0.31 | ) | (0.42 | ) | (0.49 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 11.39 | $ | 14.75 | $ | 16.02 | $ | 13.06 | $ | 11.78 | $ | 13.58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(22.55 | )%d | (5.66 | )% | 25.20 | % | 13.58 | % | (9.98 | )% | (6.80 | )% | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 766,942 | $ | 1,077,437 | $ | 1,556,860 | $ | 717,122 | $ | 196,212 | $ | 144,612 | ||||||||||||
| Ratio of expenses to average net assetse |
0.48 | % | 0.48 | % | 0.48 | % | 0.50 | % | 0.53 | % | 0.51 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
0.63 | % | 2.34 | % | 2.49 | % | 2.78 | % | 3.41 | % | 3.15 | % | ||||||||||||
| Portfolio turnover ratef |
9 | % | 22 | % | 24 | % | 45 | % | 14 | % | 16 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Rounds to less than $0.01. |
| 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 financial statements.
| FINANCIAL HIGHLIGHTS |
33 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Spain Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 31.96 | $ | 40.61 | $ | 30.44 | $ | 26.28 | $ | 35.89 | $ | 37.02 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.46 | 1.32 | 1.80 | 1.33 | 2.12 | 2.14 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(6.65 | ) | (8.35 | ) | 9.53 | 4.07 | (8.93 | ) | (1.36 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(6.19 | ) | (7.03 | ) | 11.33 | 5.40 | (6.81 | ) | 0.78 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.52 | ) | (1.62 | ) | (1.16 | ) | (1.24 | ) | (2.80 | ) | (1.91 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.52 | ) | (1.62 | ) | (1.16 | ) | (1.24 | ) | (2.80 | ) | (1.91 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 25.25 | $ | 31.96 | $ | 40.61 | $ | 30.44 | $ | 26.28 | $ | 35.89 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(19.52 | )%c | (17.63 | )% | 37.39 | % | 20.88 | % | (19.36 | )% | 1.78 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 927,776 | $ | 1,666,091 | $ | 2,473,038 | $ | 417,778 | $ | 195,093 | $ | 180,360 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
3.12 | % | 3.70 | % | 4.48 | % | 4.45 | % | 7.60 | % | 5.31 | % | ||||||||||||
| Portfolio turnover ratee |
6 | % | 15 | % | 15 | % | 24 | % | 17 | % | 14 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Switzerland Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 31.90 | $ | 33.64 | $ | 29.36 | $ | 23.85 | $ | 24.67 | $ | 21.64 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.09 | 0.83 | 0.80 | 0.67 | 0.63 | 0.59 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(3.45 | ) | (1.77 | ) | 4.27 | 5.44 | (0.80 | ) | 2.97 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(3.36 | ) | (0.94 | ) | 5.07 | 6.11 | (0.17 | ) | 3.56 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
— | (0.80 | ) | (0.79 | ) | (0.60 | ) | (0.65 | ) | (0.53 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
— | (0.80 | ) | (0.79 | ) | (0.60 | ) | (0.65 | ) | (0.53 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 28.54 | $ | 31.90 | $ | 33.64 | $ | 29.36 | $ | 23.85 | $ | 24.67 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(10.53 | )%c | (2.92 | )% | 17.21 | % | 25.71 | % | (0.53 | )% | 16.30 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 1,134,297 | $ | 1,200,164 | $ | 1,072,157 | $ | 902,860 | $ | 554,570 | $ | 524,159 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
0.60 | % | 2.49 | % | 2.41 | % | 2.38 | % | 2.73 | % | 2.35 | % | ||||||||||||
| Portfolio turnover ratee |
3 | % | 7 | % | 5 | % | 13 | % | 8 | % | 7 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
35 |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF | Diversification Classification | |
| MSCI Eurozone |
Diversified | |
| MSCI Germany |
Non-diversified | |
| MSCI Italy Capped |
Non-diversified | |
| MSCI Spain Capped |
Non-diversified | |
| MSCI Switzerland Capped |
Non-diversified |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
| • | Futures contracts are valued at that day’s last reported settlement price on the exchange where the contract is traded. |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| NOTES TO FINANCIAL STATEMENTS |
37 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Eurozone |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 12,304,262,574 | $ | — | $ | 7 | $ | 12,304,262,581 | ||||||||
| Preferred Stocks |
221,412,415 | — | — | 221,412,415 | ||||||||||||
| Rights |
151,463 | 331 | — | 151,794 | ||||||||||||
| Money Market Funds |
36,944,336 | — | — | 36,944,336 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 12,562,770,788 | $ | 331 | $ | 7 | $ | 12,562,771,126 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Germany |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 4,650,777,552 | $ | — | $ | — | $ | 4,650,777,552 | ||||||||
| Preferred Stocks |
263,213,133 | — | — | 263,213,133 | ||||||||||||
| Money Market Funds |
20,560,260 | — | — | 20,560,260 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 4,934,550,945 | $ | — | $ | — | $ | 4,934,550,945 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Liabilities: |
||||||||||||||||
| Futures Contracts |
$ | (1,948,850 | ) | $ | — | $ | — | $ | (1,948,850 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | (1,948,850 | ) | $ | — | $ | — | $ | (1,948,850 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Italy Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 754,369,790 | $ | — | $ | — | $ | 754,369,790 | ||||||||
| Preferred Stocks |
13,993,770 | — | — | 13,993,770 | ||||||||||||
| Rights |
— | 151 | — | 151 | ||||||||||||
| Money Market Funds |
7,997,347 | — | — | 7,997,347 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 776,360,907 | $ | 151 | $ | — | $ | 776,361,058 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Spain Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 929,374,266 | $ | — | $ | — | $ | 929,374,266 | ||||||||
| Rights |
173,793 | — | — | 173,793 | ||||||||||||
| Money Market Funds |
128,224 | — | — | 128,224 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 929,676,283 | $ | — | $ | — | $ | 929,676,283 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Switzerland Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 1,121,725,739 | $ | — | $ | — | $ | 1,121,725,739 | ||||||||
| Money Market Funds |
23,474,080 | — | — | 23,474,080 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,145,199,819 | $ | — | $ | — | $ | 1,145,199,819 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Shown at the unrealized appreciation (depreciation) on the contracts. |
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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 FINANCIAL STATEMENTS |
39 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| Shares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Eurozone |
||||||||||||
| Barclays Capital Inc. |
$ | 482,415 | $ | 482,415 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
7,303,363 | 7,303,363 | — | |||||||||
| Deutsche Bank Securities Inc. |
3,757,468 | 3,757,468 | — | |||||||||
| Goldman Sachs & Co. |
7,475,112 | 7,475,112 | — | |||||||||
| Jefferies LLC |
727 | 727 | — | |||||||||
| JPMorgan Clearing Corp. |
5,969,117 | 5,969,117 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
1,475,637 | 1,475,637 | — | |||||||||
| Morgan Stanley & Co. LLC |
4,317,961 | 4,317,961 | — | |||||||||
| UBS Securities LLC |
3,439,757 | 3,439,757 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 34,221,557 | $ | 34,221,557 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Germany |
||||||||||||
| Goldman Sachs & Co. |
$ | 19,029,154 | $ | 19,029,154 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| MSCI Italy Capped |
||||||||||||
| Jefferies LLC |
$ | 71,536 | $ | 71,536 | $ | — | ||||||
| Morgan Stanley & Co. LLC |
7,405,444 | 7,405,444 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 7,476,980 | $ | 7,476,980 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Spain Capped |
||||||||||||
| UBS Securities LLC |
$ | 58,056 | $ | 58,056 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| MSCI Switzerland Capped |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 1,803,572 | $ | 1,803,572 | $ | — | ||||||
| Goldman Sachs & Co. |
13,267,809 | 13,267,809 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
35,370 | 35,370 | — | |||||||||
| Morgan Stanley & Co. LLC |
5,330,730 | 5,330,730 | — | |||||||||
| State Street Bank & Trust Company |
161,830 | 161,830 | — | |||||||||
| Wells Fargo Securities LLC |
1,714,651 | 1,714,651 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 22,313,962 | $ | 22,313,962 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market value of securities loaned at period end and is disclosed in each Fund’s statement of assets and liabilities. |
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
| NOTES TO FINANCIAL STATEMENTS |
41 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
For its investment advisory services to each Fund, BFA 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 the Fund and certain other iShares 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, up to and including $48 billion | ||||
| 0.40 | Over $48 billion, up to and including $72 billion | ||||
| 0.36 | Over $72 billion | ||||
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| MSCI Eurozone |
$ | 630,283 | ||
| MSCI Germany |
16,948 | |||
| MSCI Italy Capped |
43,851 | |||
| MSCI Spain Capped |
19,803 | |||
| MSCI Switzerland Capped |
43,812 | |||
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
For the six months ended February 29, 2016, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Eurozone |
$ | 12,014,786 | $ | 18,138,319 | ||||
| MSCI Germany |
1,099,279 | 5,068,509 | ||||||
| MSCI Italy Capped |
6,840,182 | 2,943,761 | ||||||
| MSCI Spain Capped |
9,961,798 | 3,267,832 | ||||||
| MSCI Switzerland Capped |
8,423,353 | 6,799,700 | ||||||
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Eurozone |
$ | 344,599,928 | $ | 222,301,808 | ||||
| MSCI Germany |
37,536,432 | 42,058,186 | ||||||
| MSCI Italy Capped |
102,679,220 | 101,465,104 | ||||||
| MSCI Spain Capped |
86,383,746 | 128,840,891 | ||||||
| MSCI Switzerland Capped |
29,807,223 | 29,535,800 | ||||||
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| MSCI Eurozone |
$ | 5,020,994,940 | $ | 1,128,267,123 | ||||
| MSCI Germany |
412,504,931 | 1,401,319,637 | ||||||
| MSCI Italy Capped |
249,483,858 | 295,488,782 | ||||||
| MSCI Spain Capped |
26,598,361 | 411,700,745 | ||||||
| MSCI Switzerland Capped |
157,156,106 | 94,301,254 | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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.
| NOTES TO FINANCIAL STATEMENTS |
43 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The consideration for the purchase of Creation Units of a fund in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
From time to time, settlement of securities related to in-kind contributions or in-kind redemptions may be delayed. In such cases, securities related to in-kind contributions are reflected as “Due from custodian” and securities related to in-kind redemptions are reflected as “Securities related to in-kind transactions” in the statements of assets and liabilities.
| 5. | FUTURES CONTRACTS |
Each Fund may purchase or sell futures contracts in an effort to help such Fund track its underlying index. A futures contract is a standardized, exchange-traded agreement to buy or sell a financial instrument at a set price on a future date. Upon entering into a futures contract, the Fund is required to pledge to the executing broker which holds segregated from its own assets, an amount of cash, U.S. government securities or other high-quality debt and equity securities equal to the minimum initial margin requirements of the exchange on which the contract is traded. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Losses may arise if the value of a futures contract decreases due to an unfavorable change in the market rates or values of the underlying instrument during the term of the contract or if the counterparty does not perform under the contract. The use of futures contracts also involves the risk of an imperfect correlation in the movements in the price of futures contracts and the assets underlying such contracts.
The following table shows the value of futures contracts held by the iShares MSCI Germany ETF as of February 29, 2016 and the related locations in the statements of assets and liabilities, presented by risk exposure category:
| Liabilities | ||||
| Equity contracts: |
||||
| Variation margin / Net assets consist of – net unrealized depreciationa |
$ | 1,948,850 | ||
|
|
|
|||
| a | Represents cumulative depreciation of futures contracts as reported in the schedule of investments. |
The following table shows the realized and unrealized gains (losses) on futures contracts held by the iShares MSCI Germany ETF during the six months ended February 29, 2016 and the related locations in the statements of operations, presented by risk exposure category:
| Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation/Depreciation |
|||||||
| Equity contracts: |
||||||||
| Futures contracts |
$ | (2,424,074 | ) | $ | 396,213 | |||
|
|
|
|
|
|||||
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table shows the average quarter-end balances of open futures contracts for the iShares MSCI Germany ETF for the six months ended February 29, 2016:
| Average value of contracts purchased |
$ | 28,003,971 | ||
| 6. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its investment in equity and financial derivative instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
Each Fund, except for the iShares MSCI Eurozone ETF, invests all or substantially all of its assets in issuers located in a single country. When a fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in that country may have a significant impact on its investment performance.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or
| NOTES TO FINANCIAL STATEMENTS |
45 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 7. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year end, the following Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
| iShares ETF | Non- Expiring a |
Expiring 2016 |
Expiring 2017 |
Expiring 2018 |
Expiring 2019 |
Total | ||||||||||||||||||
| MSCI Eurozone |
$ | 70,176,760 | $ | — | $ | 26,644,200 | $ | 68,035,542 | $ | 30,230,739 | $ | 195,087,241 | ||||||||||||
| MSCI Germany |
29,427,327 | 3,394,735 | 27,790,050 | 28,490,949 | 32,215,954 | 121,319,015 | ||||||||||||||||||
| MSCI Italy Capped |
35,582,636 | 472,268 | 2,743,650 | 18,169,627 | 9,459,662 | 66,427,843 | ||||||||||||||||||
| MSCI Spain Capped |
24,791,486 | — | 5,946,927 | 15,120,672 | 8,619,903 | 54,478,988 | ||||||||||||||||||
| MSCI Switzerland Capped |
12,201,097 | — | 2,837,786 | 22,569,380 | 6,955,758 | 44,564,021 | ||||||||||||||||||
| a | Must be utilized prior to losses subject to expiration. |
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 marked-to-market gains.
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| MSCI Eurozone |
$ | 15,378,978,268 | $ | 131,119,310 | $ | (2,947,326,452 | ) | $ | (2,816,207,142 | ) | ||||||
| MSCI Germany |
6,491,453,500 | 55,857,619 | (1,612,760,174 | ) | (1,556,902,555 | ) | ||||||||||
| MSCI Italy Capped |
1,149,167,939 | 3,387,261 | (376,194,142 | ) | (372,806,881 | ) | ||||||||||
| MSCI Spain Capped |
1,493,642,382 | 9,840,964 | (573,807,063 | ) | (563,966,099 | ) | ||||||||||
| MSCI Switzerland Capped |
1,342,500,068 | 29,804,796 | (227,105,045 | ) | (197,300,249 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| 8. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
| NOTES TO FINANCIAL STATEMENTS |
47 |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total
Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| MSCI Eurozone |
$ | 0.065180 | $ | — | $ | 0.011706 | $ | 0.076886 | 85 | % | — | % | 15 | % | 100 | % | ||||||||||||||||
| MSCI Spain Capped |
0.473255 | — | 0.049615 | 0.522870 | 91 | — | 9 | 100 | ||||||||||||||||||||||||
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes:
| NOTES |
49 |
Table of Contents
Notes:
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-807-0216
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|
Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
|
iShares, Inc.
| Ø | iShares MSCI Hong Kong ETF | EWH | NYSE Arca |
| Ø | iShares MSCI Japan Small-Cap ETF | SCJ | NYSE Arca |
| Ø | iShares MSCI Malaysia ETF | EWM | NYSE Arca |
| Ø | iShares MSCI Pacific ex Japan ETF | EPP | NYSE Arca |
| Ø | iShares MSCI Singapore ETF | EWS | NYSE Arca |
| Ø | iShares MSCI Taiwan ETF | EWT | NYSE Arca |
| Ø | iShares MSCI Thailand Capped ETF | THD | NYSE Arca |
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Table of Contents
Fund Performance Overview
Performance as of February 29, 2016
The iShares MSCI Hong Kong ETF (the “Fund”) seeks to track the investment results of an index composed of Hong Kong equities, as represented by the MSCI Hong Kong Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -6.25%, net of fees, while the total return for the Index was -6.05%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(15.00)% | (14.62)% | (14.23)% | (15.00)% | (14.62)% | (14.23)% | ||||||||||||||||||||
| 5 Years |
2.28% | 2.31% | 2.87% | 11.94% | 12.10% | 15.20% | ||||||||||||||||||||
| 10 Years |
6.04% | 6.11% | 6.63% | 79.75% | 80.93% | 90.07% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 12 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 937.50 | $ | 2.31 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 12 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI JAPAN SMALL-CAP ETF
Performance as of February 29, 2016
The iShares MSCI Japan Small-Cap ETF (the “Fund”) seeks to track the investment results of an index composed of small-capitalization Japanese equities, as represented by the MSCI Japan Small Cap Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -2.70%, net of fees, while the total return for the Index was -2.68%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(0.66)% | (1.04)% | (0.20)% | (0.66)% | (1.04)% | (0.20)% | ||||||||||||||||||||
| 5 Years |
4.55% | 4.22% | 5.00% | 24.90% | 22.96% | 27.62% | ||||||||||||||||||||
| Since Inception |
3.50% | 3.43% | 3.88% | 32.55% | 31.82% | 36.58% | ||||||||||||||||||||
The inception date of the Fund was 12/20/07. The first day of secondary market trading was 12/21/07.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 12 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 973.00 | $ | 2.35 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 12 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI MALAYSIA ETF
Performance as of February 29, 2016
The iShares MSCI Malaysia ETF (the “Fund”) seeks to track the investment results of an index composed of Malaysian equities, as represented by the MSCI Malaysia Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was 4.83%, net of fees, while the total return for the Index was 4.88%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(20.37)% | (20.09)% | (20.28)% | (20.37)% | (20.09)% | (20.28)% | ||||||||||||||||||||
| 5 Years |
(2.59)% | (2.66)% | (2.24)% | (12.31)% | (12.60)% | (10.71)% | ||||||||||||||||||||
| 10 Years |
6.91% | 6.85% | 7.36% | 94.99% | 93.95% | 103.40% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 12 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,048.30 | $ | 2.44 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 12 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI PACIFIC ex JAPAN ETF
Performance as of February 29, 2016
The iShares MSCI Pacific ex Japan ETF (the “Fund”) seeks to track the investment results of an index composed of Pacific region developed market equities, excluding Japan, as represented by the MSCI Pacific ex Japan Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -5.12%, net of fees, while the total return for the Index was -4.98%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(20.53)% | (20.54)% | (20.24)% | (20.53)% | (20.54)% | (20.24)% | ||||||||||||||||||||
| 5 Years |
(1.47)% | (1.57)% | (1.08)% | (7.14)% | (7.61)% | (5.30)% | ||||||||||||||||||||
| 10 Years |
4.29% | 4.32% | 4.51% | 52.26% | 52.63% | 55.47% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 12 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 948.80 | $ | 2.37 | $ | 1,000.00 | $ | 1,022.40 | $ | 2.46 | 0.49% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 12 for more information. |
| * | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI SINGAPORE ETF
Performance as of February 29, 2016
The iShares MSCI Singapore ETF (the “Fund”) seeks to track the investment results of an index composed of Singaporean equities, as represented by the MSCI Singapore Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -6.32%, net of fees, while the total return for the Index was -6.26%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(21.11)% | (21.32)% | (20.92)% | (21.11)% | (21.32)% | (20.92)% | ||||||||||||||||||||
| 5 Years |
(2.01)% | (2.12)% | (1.66)% | (9.66)% | (10.15)% | (8.02)% | ||||||||||||||||||||
| 10 Years |
5.12% | 5.13% | 5.40% | 64.72% | 64.88% | 69.22% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 12 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 936.80 | $ | 2.31 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 12 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
9 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI TAIWAN ETF
Performance as of February 29, 2016
The iShares MSCI Taiwan ETF (the “Fund”) seeks to track the investment results of an index composed of Taiwanese equities, as represented by the MSCI Taiwan Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -2.44%, net of fees, while the total return for the Index was -2.14%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(16.78)% | (17.27)% | (16.28)% | (16.78)% | (17.27)% | (16.28)% | ||||||||||||||||||||
| 5 Years |
0.06% | (0.19)% | 0.50% | 0.28% | (0.97)% | 2.53% | ||||||||||||||||||||
| 10 Years |
3.09% | 3.05% | 3.65% | 35.62% | 35.06% | 43.16% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 12 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 975.60 | $ | 3.14 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 12 for more information. |
| * | Excludes money market funds. |
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI THAILAND CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Thailand Capped ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Thai equities, as represented by the MSCI Thailand Investable Market Index 25/50 (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -2.21%, net of fees, while the total return for the Index was -2.09%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(20.72)% | (20.16)% | (20.68)% | (20.72)% | (20.16)% | (20.68)% | ||||||||||||||||||||
| 5 Years |
3.16% | 3.14% | 3.41% | 16.82% | 16.73% | 18.25% | ||||||||||||||||||||
| Since Inception |
5.73% | 5.80% | 6.03% | 55.62% | 56.44% | 59.15% | ||||||||||||||||||||
The inception date of the Fund was 3/26/08. The first day of secondary market trading was 3/28/08.
Index performance through February 11, 2013 reflects the performance of the MSCI Thailand Investable Market Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Thailand Investable Market Index 25/50.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 12 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 977.90 | $ | 3.15 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 12 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
11 |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI HONG KONG ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| Hang Seng Index | 39 | Mar. 2016 | Hong Kong Futures | $ | 4,778,862 | $ | (44,993) | |||||||||||||
See notes to financial statements.
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN SMALL-CAP ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
25 |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI MALAYSIA ETF
February 29, 2016
| Security | Shares | Value | ||||||
| Westports Holdings Bhd |
1,275,800 | $ | 1,222,705 | |||||
|
|
|
|||||||
| 3,189,446 | ||||||||
| WIRELESS TELECOMMUNICATION SERVICES — 8.44% |
| |||||||
| Axiata Group Bhd |
4,632,500 | 6,521,855 | ||||||
| DiGi.Com Bhda |
6,611,800 | 7,751,765 | ||||||
| Maxis Bhda |
3,434,400 | 4,998,461 | ||||||
|
|
|
|||||||
| 19,272,081 | ||||||||
|
|
|
|||||||
| TOTAL COMMON STOCKS |
|
|||||||
| (Cost: $107,737,937) |
|
226,943,107 | ||||||
| SHORT-TERM INVESTMENTS — 14.65% |
| |||||||
| MONEY MARKET FUNDS — 14.65% |
|
|||||||
| BlackRock Cash Funds: Institutional, |
|
|||||||
| 0.50%c,d,e |
31,175,807 | 31,175,807 | ||||||
| BlackRock Cash Funds: Prime, |
|
|||||||
| 0.49%c,d,e |
1,582,136 | 1,582,136 | ||||||
| BlackRock Cash Funds: Treasury, |
|
|||||||
| 0.27%c,d |
699,510 | 699,510 | ||||||
|
|
|
|||||||
| 33,457,453 | ||||||||
|
|
|
|||||||
| TOTAL SHORT-TERM INVESTMENTS |
|
|||||||
| (Cost: $33,457,453) |
|
33,457,453 | ||||||
|
|
|
|||||||
| TOTAL INVESTMENTS |
|
|||||||
| (Cost: $141,195,390) |
260,400,560 | |||||||
| Other Assets, Less Liabilities — (14.01)% |
|
(31,999,197 | ) | |||||
|
|
|
|||||||
| NET ASSETS — 100.00% |
|
$ | 228,401,363 | |||||
|
|
|
|||||||
| a | All or a portion of this security represents a security on loan. See Note 1. |
| b | Non-income earning security. |
| c | Affiliated issuer. See Note 2. |
| d | The rate quoted is the annualized seven-day yield of the fund at period end. |
| e | All or a portion of this security represents an investment of securities lending collateral. See Note 1. |
See notes to financial statements.
| SCHEDULES OF INVESTMENTS |
27 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI PACIFIC ex JAPAN ETF
February 29, 2016
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI PACIFIC ex JAPAN ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
29 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI PACIFIC ex JAPAN ETF
February 29, 2016
| Security | Shares | Value | ||||||
| SHORT-TERM INVESTMENTS — 2.52% |
| |||||||
| MONEY MARKET FUNDS — 2.52% |
|
|||||||
| BlackRock Cash Funds: Institutional, |
|
|||||||
| 0.50%d,e,f |
41,422,841 | $ | 41,422,841 | |||||
| BlackRock Cash Funds: Prime, |
|
|||||||
| 0.49%d,e,f |
2,102,162 | 2,102,162 | ||||||
| BlackRock Cash Funds: Treasury, |
|
|||||||
| 0.27%d,e |
61,841 | 61,841 | ||||||
|
|
|
|||||||
| 43,586,844 | ||||||||
|
|
|
|||||||
| TOTAL SHORT-TERM INVESTMENTS |
|
|||||||
| (Cost: $43,586,844) |
|
43,586,844 | ||||||
|
|
|
|||||||
| TOTAL INVESTMENTS |
|
|||||||
| (Cost: $2,275,760,938) |
1,764,052,561 | |||||||
| Other Assets, Less Liabilities — (1.88)% |
|
(32,508,603 | ) | |||||
|
|
|
|||||||
| NET ASSETS — 100.00% |
|
$ | 1,731,543,958 | |||||
|
|
|
|||||||
| a | All or a portion of this security represents a security on loan. See Note 1. |
| b | Non-income earning security. |
| c | This security may be resold to qualified institutional buyers under Rule 144A of the Securities Act of 1933. |
| d | Affiliated issuer. See Note 2. |
| e | The rate quoted is the annualized seven-day yield of the fund at period end. |
| f | All or a portion of this security represents an investment of securities lending collateral. See Note 1. |
See notes to financial statements.
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| SCHEDULES OF INVESTMENTS |
31 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI SINGAPORE ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| MSCI Singapore Index | 89 | Mar. 2016 | Singapore | $ | 1,905,222 | $ | (1,333) | |||||||||||||
See notes to financial statements.
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| SCHEDULES OF INVESTMENTS |
33 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI TAIWAN ETF
February 29, 2016
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI TAIWAN ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| MSCI Taiwan Index | 60 | Mar. 2016 | Singapore | $ | 1,842,600 | $ | 9,597 | |||||||||||||
See notes to financial statements.
| SCHEDULES OF INVESTMENTS |
35 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI THAILAND CAPPED ETF
February 29, 2016
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI THAILAND CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
37 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI THAILAND CAPPED ETF
February 29, 2016
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI THAILAND CAPPED ETF
February 29, 2016
| Value | ||||||
| TOTAL INVESTMENTS |
||||||
| (Cost: $359,423,160) |
$ | 252,438,308 | ||||
| Other Assets, Less Liabilities — (6.88)% |
(16,258,566 | ) | ||||
|
|
|
|||||
| NET ASSETS — 100.00% |
$ | 236,179,742 | ||||
|
|
|
|||||
NVDR — Non-Voting Depositary Receipts
| a | All or a portion of this security represents a security on loan. See Note 1. |
| b | Non-income earning security. |
| c | Affiliated issuer. See Note 2. |
| d | The rate quoted is the annualized seven-day yield of the fund at period end. |
| e | All or a portion of this security represents an investment of securities lending collateral. See Note 1. |
See notes to financial statements.
| SCHEDULES OF INVESTMENTS |
39 |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Hong Kong ETF |
iShares MSCI Japan Small-Cap ETF |
iShares MSCI Malaysia ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 2,110,398,930 | $ | 196,966,954 | $ | 107,737,937 | ||||||
| Affiliated (Note 2) |
98,870,927 | 7,194,162 | 33,457,453 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 2,209,269,857 | $ | 204,161,116 | $ | 141,195,390 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 1,695,335,904 | $ | 174,793,080 | $ | 226,943,107 | ||||||
| Affiliated (Note 2) |
98,870,927 | 7,194,162 | 33,457,453 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
1,794,206,831 | 181,987,242 | 260,400,560 | |||||||||
| Foreign currency, at valueb |
2,320,502 | 160,563 | 143,355 | |||||||||
| Foreign currency pledged to broker, at valueb |
401,232 | — | — | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
69,059,969 | 57,501 | 20,322 | |||||||||
| Dividends and interest |
314,772 | 503,345 | 698,062 | |||||||||
| Capital shares sold |
— | — | 6,947,607 | |||||||||
| Tax reclaims |
— | 5,972 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
1,866,303,306 | 182,714,623 | 268,209,906 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
66,964,484 | 95 | 6,967,929 | |||||||||
| Collateral for securities on loan (Note 1) |
98,573,720 | 7,142,221 | 32,757,943 | |||||||||
| Capital shares redeemed |
974,001 | 163,323 | — | |||||||||
| Futures variation margin |
44,993 | — | — | |||||||||
| Investment advisory fees (Note 2) |
683,652 | 70,497 | 82,671 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
167,240,850 | 7,376,136 | 39,808,543 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 1,699,062,456 | $ | 175,338,487 | $ | 228,401,363 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 2,652,184,417 | $ | 202,756,085 | $ | 129,030,353 | ||||||
| Distributions in excess of net investment income |
(793,938 | ) | (472,602 | ) | (1,819,010 | ) | ||||||
| Accumulated net realized loss |
(537,218,589 | ) | (4,793,204 | ) | (18,021,951 | ) | ||||||
| Net unrealized appreciation (depreciation) |
(415,109,434 | ) | (22,151,792 | ) | 119,211,971 | |||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 1,699,062,456 | $ | 175,338,487 | $ | 228,401,363 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
94,350,000 | 3,200,000 | 29,250,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 18.01 | $ | 54.79 | $ | 7.81 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $93,393,102, $6,776,145 and $31,225,676, respectively. See Note 1. |
| b | Cost of foreign currency including currency pledged to broker: $2,721,368, $156,576 and $143,134, respectively. |
| c | $0.001 par value, number of shares authorized: 375 million, 500 million and 300 million, respectively. |
See notes to financial statements.
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Pacific ex Japan ETF |
iShares MSCI Singapore ETF |
iShares MSCI Taiwan ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 2,232,174,094 | $ | 624,534,983 | $ | 1,281,615,137 | ||||||
| Affiliated (Note 2) |
43,586,844 | 32,416,167 | 155,064,433 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 2,275,760,938 | $ | 656,951,150 | $ | 1,436,679,570 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 1,720,465,717 | $ | 462,770,529 | $ | 2,215,918,484 | ||||||
| Affiliated (Note 2) |
43,586,844 | 32,416,167 | 155,064,433 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
1,764,052,561 | 495,186,696 | 2,370,982,917 | |||||||||
| Foreign currency, at valueb |
4,779,177 | 1,163,624 | — | |||||||||
| Cash |
— | — | 102,828 | |||||||||
| Foreign currency pledged to broker, at valueb |
— | 146,021 | 99,000 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
17,423,584 | 1,365,867 | 49,460,376 | |||||||||
| Dividends and interest |
8,775,346 | 614,894 | 216,126 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
1,795,030,668 | 498,477,102 | 2,420,861,247 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
19,098,127 | 948,821 | 48,506,451 | |||||||||
| Collateral for securities on loan (Note 1) |
43,525,003 | 32,407,967 | 153,148,400 | |||||||||
| Capital shares redeemed |
183,624 | 242,409 | — | |||||||||
| Futures variation margin |
— | 1,333 | — | |||||||||
| Foreign taxes (Note 1) |
— | — | 106,812 | |||||||||
| Investment advisory fees (Note 2) |
679,956 | 180,144 | 1,115,740 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
63,486,710 | 33,780,674 | 202,877,403 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 1,731,543,958 | $ | 464,696,428 | $ | 2,217,983,844 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 2,799,279,791 | $ | 888,325,937 | $ | 2,578,465,649 | ||||||
| Distributions in excess of net investment income |
(1,473,742 | ) | (10,246,018 | ) | (12,354,333 | ) | ||||||
| Accumulated net realized loss |
(554,548,280 | ) | (251,614,825 | ) | (1,282,428,229 | ) | ||||||
| Net unrealized appreciation (depreciation) |
(511,713,811 | ) | (161,768,666 | ) | 934,300,757 | |||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 1,731,543,958 | $ | 464,696,428 | $ | 2,217,983,844 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
49,200,000 | 47,800,000 | 172,600,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 35.19 | $ | 9.72 | $ | 12.85 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $41,170,611, $30,688,059 and $144,664,693, respectively. See Note 1. |
| b | Cost of foreign currency including currency at broker, if any: $4,792,112, $1,314,547 and $99,000, respectively. |
| c | $0.001 par value, number of shares authorized: 1 billion, 300 million and 900 million, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
41 |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Thailand Capped ETF |
||||
| ASSETS |
||||
| Investments, at cost: |
||||
| Unaffiliated |
$ | 342,278,431 | ||
| Affiliated (Note 2) |
17,144,729 | |||
|
|
|
|||
| Total cost of investments |
$ | 359,423,160 | ||
|
|
|
|||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||
| Unaffiliated |
$ | 235,293,579 | ||
| Affiliated (Note 2) |
17,144,729 | |||
|
|
|
|||
| Total fair value of investments |
252,438,308 | |||
| Receivables: |
||||
| Investment securities sold |
710,381 | |||
| Dividends and interest |
736,097 | |||
|
|
|
|||
| Total Assets |
253,884,786 | |||
|
|
|
|||
| LIABILITIES |
||||
| Payables: |
||||
| Investment securities purchased |
773,291 | |||
| Collateral for securities on loan (Note 1) |
16,817,386 | |||
| Investment advisory fees (Note 2) |
114,367 | |||
|
|
|
|||
| Total Liabilities |
17,705,044 | |||
|
|
|
|||
| NET ASSETS |
$ | 236,179,742 | ||
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$ | 370,697,023 | ||
| Undistributed of net investment income |
715,771 | |||
| Accumulated net realized loss |
(28,248,000 | ) | ||
| Net unrealized depreciation |
(106,985,052 | ) | ||
|
|
|
|||
| NET ASSETS |
$ | 236,179,742 | ||
|
|
|
|||
| Shares outstandingb |
3,750,000 | |||
|
|
|
|||
| Net asset value per share |
$ | 62.98 | ||
|
|
|
|||
| a | Securities on loan with a value of $15,394,900. See Note 1. |
| b | $0.001 par value, number of shares authorized: 200 million. |
See notes to financial statements.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Hong Kong ETF |
iShares MSCI Japan Small-Cap ETF |
iShares MSCI Malaysia ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 23,831,095 | $ | 1,331,038 | $ | 3,503,713 | ||||||
| Interest — affiliated (Note 2) |
1,079 | 42 | 324 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
243,114 | 139,333 | 398,035 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
24,075,288 | 1,470,413 | 3,902,072 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
5,763,315 | 441,600 | 579,030 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
5,763,315 | 441,600 | 579,030 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
18,311,973 | 1,028,813 | 3,323,042 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(71,029,744 | ) | (702,622 | ) | 9,499,579 | |||||||
| In-kind redemptions — unaffiliated |
(13,815,096 | ) | 484,094 | — | ||||||||
| Futures contracts |
452,071 | — | — | |||||||||
| Foreign currency transactions |
(3,408 | ) | 20,745 | (1,237,682 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net realized gain (loss) |
(84,396,177 | ) | (197,783 | ) | 8,261,897 | |||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(75,378,623 | ) | (6,361,717 | ) | (6,629,806 | ) | ||||||
| Futures contracts |
(286,926 | ) | — | — | ||||||||
| Translation of assets and liabilities in foreign currencies |
(5,006 | ) | 4,483 | 31,304 | ||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(75,670,555 | ) | (6,357,234 | ) | (6,598,502 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized gain (loss) |
(160,066,732 | ) | (6,555,017 | ) | 1,663,395 | |||||||
|
|
|
|
|
|
|
|||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (141,754,759 | ) | $ | (5,526,204 | ) | $ | 4,986,437 | ||||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $ —, $147,399 and $ —, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
43 |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Pacific ex Japan ETF |
iShares MSCI Singapore ETF |
iShares MSCI Taiwan ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 37,779,723 | $ | 5,346,050 | $ | 10,259,134 | ||||||
| Interest — affiliated (Note 2) |
1,401 | 377 | 4,783 | |||||||||
| Securities lending income — affiliated — net (Note 2)b |
307,481 | 364,898 | 1,106,770 | |||||||||
|
|
|
|
|
|
|
|||||||
| 38,088,605 | 5,711,325 | 11,370,687 | ||||||||||
| Less: Other foreign taxes (Note 1) |
— | — | (396,044 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
38,088,605 | 5,711,325 | 10,974,643 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
4,630,065 | 1,310,536 | 8,869,553 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
4,630,065 | 1,310,536 | 8,869,553 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
33,458,540 | 4,400,789 | 2,105,090 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(31,133,337 | ) | (10,957,744 | ) | (139,873,921 | ) | ||||||
| In-kind redemptions — unaffiliated |
2,078,153 | (13,270,774 | ) | — | ||||||||
| Futures contracts |
— | (14,750 | ) | 3,116,386 | ||||||||
| Foreign currency transactions |
(43,871 | ) | (85,675 | ) | (168,346 | ) | ||||||
| Payment from affiliate (Note 2) |
— | — | 69,864 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(29,099,055 | ) | (24,328,943 | ) | (136,856,017 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(102,136,356 | ) | (16,394,891 | ) | 22,562,240 | |||||||
| Futures contracts |
— | (161,032 | ) | (1,451,737 | ) | |||||||
| Translation of assets and liabilities in foreign currencies |
291,339 | 80,099 | 489,265 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(101,845,017 | ) | (16,475,824 | ) | 21,599,768 | |||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(130,944,072 | ) | (40,804,767 | ) | (115,256,249 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (97,485,532 | ) | $ | (36,403,978 | ) | $ | (113,151,159 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $983,114, $149,567 and $2,702,653, respectively. |
| b | Net of securities lending income tax paid $ —, $ — and $264,698, respectively. |
See notes to financial statements.
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Thailand Capped ETF |
||||
| NET INVESTMENT INCOME |
||||
| Dividends — unaffiliateda |
$ | 1,987,776 | ||
| Interest — affiliated (Note 2) |
267 | |||
| Securities lending income — affiliated — net (Note 2) |
393,775 | |||
|
|
|
|||
| Total investment income |
2,381,818 | |||
|
|
|
|||
| EXPENSES |
||||
| Investment advisory fees (Note 2) |
727,176 | |||
|
|
|
|||
| Total expenses |
727,176 | |||
|
|
|
|||
| Net investment income |
1,654,642 | |||
|
|
|
|||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||
| Net realized gain (loss) from: |
||||
| Investments — unaffiliated |
(5,858,971 | ) | ||
| In-kind redemptions — unaffiliated |
8,171 | |||
| Foreign currency transactions |
(16,678 | ) | ||
|
|
|
|||
| Net realized loss |
(5,867,478 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation on: |
||||
| Investments |
(1,384,216 | ) | ||
| Translation of assets and liabilities in foreign currencies |
8,938 | |||
|
|
|
|||
| Net change in unrealized appreciation/depreciation |
(1,375,278 | ) | ||
|
|
|
|||
| Net realized and unrealized loss |
(7,242,756 | ) | ||
|
|
|
|||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (5,588,114 | ) | |
|
|
|
|||
| a | Net of foreign withholding tax of $214,776. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
45 |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares MSCI Hong Kong ETF |
iShares MSCI Japan Small-Cap ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 18,311,973 | $ | 76,462,467 | $ | 1,028,813 | $ | 1,851,342 | ||||||||
| Net realized gain (loss) |
(84,396,177 | ) | 94,497,147 | (197,783 | ) | 18,722,198 | ||||||||||
| Net change in unrealized appreciation/depreciation |
(75,670,555 | ) | (535,725,809 | ) | (6,357,234 | ) | (31,986,475 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(141,754,759 | ) | (364,766,195 | ) | (5,526,204 | ) | (11,412,935 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(26,809,982 | ) | (74,964,011 | ) | (1,718,696 | ) | (2,993,420 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(26,809,982 | ) | (74,964,011 | ) | (1,718,696 | ) | (2,993,420 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
14,471,705 | 1,076,021,470 | 45,471,321 | 249,704,421 | ||||||||||||
| Cost of shares redeemed |
(869,068,370 | ) | (1,135,379,620 | ) | (21,892,081 | ) | (246,130,624 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(854,596,665 | ) | (59,358,150 | ) | 23,579,240 | 3,573,797 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(1,023,161,406 | ) | (499,088,356 | ) | 16,334,340 | (10,832,558 | ) | |||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
2,722,223,862 | 3,221,312,218 | 159,004,147 | 169,836,705 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 1,699,062,456 | $ | 2,722,223,862 | $ | 175,338,487 | $ | 159,004,147 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (793,938 | ) | $ | 7,704,071 | $ | (472,602 | ) | $ | 217,281 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
750,000 | 47,625,000 | 800,000 | 4,300,000 | ||||||||||||
| Shares redeemed |
(46,575,000 | ) | (54,600,000 | ) | (400,000 | ) | (4,500,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(45,825,000 | ) | (6,975,000 | ) | 400,000 | (200,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Malaysia ETF |
iShares MSCI Pacific ex Japan ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 3,323,042 | $ | 13,468,130 | $ | 33,458,540 | $ | 118,017,798 | ||||||||
| Net realized gain (loss) |
8,261,897 | 87,766,817 | (29,099,055 | ) | 67,853,487 | |||||||||||
| Net change in unrealized appreciation/depreciation |
(6,598,502 | ) | (328,400,917 | ) | (101,845,017 | ) | (853,844,715 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
4,986,437 | (227,165,970 | ) | (97,485,532 | ) | (667,973,430 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(8,815,229 | ) | (15,389,546 | ) | (46,456,678 | ) | (121,558,328 | ) | ||||||||
| From net realized gain |
(61,020,000 | ) | (1,987,267 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(69,835,229 | ) | (17,376,813 | ) | (46,456,678 | ) | (121,558,328 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
111,362,576 | 107,286,599 | 56,310,950 | 27,284,262 | ||||||||||||
| Cost of shares redeemed |
(81,691,186 | ) | (385,625,950 | ) | (165,029,396 | ) | (725,596,210 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
29,671,390 | (278,339,351 | ) | (108,718,446 | ) | (698,311,948 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DECREASE IN NET ASSETS |
(35,177,402 | ) | (522,882,134 | ) | (252,660,656 | ) | (1,487,843,706 | ) | ||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
263,578,765 | 786,460,899 | 1,984,204,614 | 3,472,048,320 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 228,401,363 | $ | 263,578,765 | $ | 1,731,543,958 | $ | 1,984,204,614 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (1,819,010 | ) | $ | 3,673,177 | $ | (1,473,742 | ) | $ | 11,524,396 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
11,550,000 | 8,250,000 | 1,500,000 | 600,000 | ||||||||||||
| Shares redeemed |
(8,175,000 | ) | (31,125,000 | ) | (4,500,000 | ) | (16,200,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
3,375,000 | (22,875,000 | ) | (3,000,000 | ) | (15,600,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
47 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Singapore ETF |
iShares MSCI Taiwan ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 4,400,789 | $ | 26,302,403 | $ | 2,105,090 | $ | 85,413,696 | ||||||||
| Net realized loss |
(24,328,943 | ) | (5,218,751 | ) | (136,856,017 | ) | (120,497,220 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
(16,475,824 | ) | (209,292,899 | ) | 21,599,768 | (617,626,511 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(36,403,978 | ) | (188,209,247 | ) | (113,151,159 | ) | (652,710,035 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(13,531,507 | ) | (27,289,993 | ) | (85,498,003 | ) | (61,969,914 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(13,531,507 | ) | (27,289,993 | ) | (85,498,003 | ) | (61,969,914 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
14,329,582 | 32,838,329 | 259,501,761 | 1,059,504,564 | ||||||||||||
| Cost of shares redeemed |
(109,624,593 | ) | (191,867,107 | ) | (1,119,278,562 | ) | (367,078,617 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(95,295,011 | ) | (159,028,778 | ) | (859,776,801 | ) | 692,425,947 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DECREASE IN NET ASSETS |
(145,230,496 | ) | (374,528,018 | ) | (1,058,425,963 | ) | (22,254,002 | ) | ||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
609,926,924 | 984,454,942 | 3,276,409,807 | 3,298,663,809 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 464,696,428 | $ | 609,926,924 | $ | 2,217,983,844 | $ | 3,276,409,807 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (10,246,018 | ) | $ | (1,115,300 | ) | $ | (12,354,333 | ) | $ | 71,038,580 | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
1,300,000 | 2,500,000 | 18,000,000 | 66,600,000 | ||||||||||||
| Shares redeemed |
(10,900,000 | ) | (15,600,000 | ) | (86,600,000 | ) | (26,000,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(9,600,000 | ) | (13,100,000 | ) | (68,600,000 | ) | 40,600,000 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Thailand Capped ETF |
||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||
| OPERATIONS: |
||||||||
| Net investment income |
$ | 1,654,642 | $ | 9,130,803 | ||||
| Net realized loss |
(5,867,478 | ) | (15,288,875 | ) | ||||
| Net change in unrealized appreciation/depreciation |
(1,375,278 | ) | (81,366,379 | ) | ||||
|
|
|
|
|
|||||
| Net decrease in net assets resulting from operations |
(5,588,114 | ) | (87,524,451 | ) | ||||
|
|
|
|
|
|||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||
| From net investment income |
(2,017,199 | ) | (9,842,483 | ) | ||||
|
|
|
|
|
|||||
| Total distributions to shareholders |
(2,017,199 | ) | (9,842,483 | ) | ||||
|
|
|
|
|
|||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||
| Proceeds from shares sold |
37,920,114 | 232,829,500 | ||||||
| Cost of shares redeemed |
(31,438,568 | ) | (469,528,663 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets from capital share transactions |
6,481,546 | (236,699,163 | ) | |||||
|
|
|
|
|
|||||
| DECREASE IN NET ASSETS |
(1,123,767 | ) | (334,066,097 | ) | ||||
| NET ASSETS |
||||||||
| Beginning of period |
237,303,509 | 571,369,606 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 236,179,742 | $ | 237,303,509 | ||||
|
|
|
|
|
|||||
| Undistributed net investment income included in net assets at end of period |
$ | 715,771 | $ | 1,078,328 | ||||
|
|
|
|
|
|||||
| SHARES ISSUED AND REDEEMED |
||||||||
| Shares sold |
600,000 | 2,900,000 | ||||||
| Shares redeemed |
(500,000 | ) | (6,100,000 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in shares outstanding |
100,000 | (3,200,000 | ) | |||||
|
|
|
|
|
|||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
49 |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Hong Kong ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 19.42 | $ | 21.89 | $ | 18.91 | $ | 16.94 | $ | 17.59 | $ | 16.02 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.15 | 0.52 | 0.66 | 0.48 | 0.54 | 0.42 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(1.35 | ) | (2.50 | ) | 3.04 | 2.05 | (0.65 | ) | 1.56 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.20 | ) | (1.98 | ) | 3.70 | 2.53 | (0.11 | ) | 1.98 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.21 | ) | (0.49 | ) | (0.72 | ) | (0.56 | ) | (0.54 | ) | (0.41 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.21 | ) | (0.49 | ) | (0.72 | ) | (0.56 | ) | (0.54 | ) | (0.41 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 18.01 | $ | 19.42 | $ | 21.89 | $ | 18.91 | $ | 16.94 | $ | 17.59 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(6.25 | )%c | (9.29 | )% | 19.87 | % | 15.04 | % | (0.33 | )% | 12.27 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 1,699,062 | $ | 2,722,224 | $ | 3,221,312 | $ | 2,124,856 | $ | 1,865,974 | $ | 1,607,982 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.51 | % | 2.36 | % | 3.24 | % | 2.47 | % | 3.26 | % | 2.25 | % | ||||||||||||
| Portfolio turnover ratee |
6 | % | 7 | % | 6 | % | 12 | % | 11 | % | 15 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Japan Small-Cap ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 56.79 | $ | 56.61 | $ | 49.44 | $ | 42.82 | $ | 46.49 | $ | 40.74 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.31 | 0.70 | 0.70 | 0.65 | 0.82 | 0.78 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(1.82 | ) | 0.71 | 7.61 | 6.97 | (3.25 | ) | 5.87 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.51 | ) | 1.41 | 8.31 | 7.62 | (2.43 | ) | 6.65 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.49 | ) | (1.23 | ) | (1.14 | ) | (1.00 | ) | (1.24 | ) | (0.90 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.49 | ) | (1.23 | ) | (1.14 | ) | (1.00 | ) | (1.24 | ) | (0.90 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 54.79 | $ | 56.79 | $ | 56.61 | $ | 49.44 | $ | 42.82 | $ | 46.49 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(2.70 | )%c | 2.63 | % | 16.94 | % | 18.07 | % | (5.18 | )% | 16.38 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 175,338 | $ | 159,004 | $ | 169,837 | $ | 88,988 | $ | 42,817 | $ | 74,387 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.50 | % | 0.53 | % | 0.51 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.11 | % | 1.26 | % | 1.31 | % | 1.36 | % | 1.84 | % | 1.72 | % | ||||||||||||
| Portfolio turnover ratee |
7 | % | 10 | % | 14 | % | 17 | % | 7 | % | 10 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
51 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Malaysia ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 10.19 | $ | 16.13 | $ | 14.60 | $ | 14.52 | $ | 13.92 | $ | 12.98 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.13 | 0.36 | 0.54 | 0.41 | 0.38 | 0.41 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
0.24 | (5.86 | ) | 1.51 | 0.04 | 0.76 | 0.92 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
0.37 | (5.50 | ) | 2.05 | 0.45 | 1.14 | 1.33 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.35 | ) | (0.39 | ) | (0.52 | ) | (0.37 | ) | (0.52 | ) | (0.39 | ) | ||||||||||||
| Net realized gain |
(2.40 | ) | (0.05 | ) | — | — | — | — | ||||||||||||||||
| Return of capital |
— | — | — | — | (0.02 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(2.75 | ) | (0.44 | ) | (0.52 | ) | (0.37 | ) | (0.54 | ) | (0.39 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 7.81 | $ | 10.19 | $ | 16.13 | $ | 14.60 | $ | 14.52 | $ | 13.92 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
4.83 | %c | (34.62 | )% | 14.17 | % | 3.02 | % | 8.61 | % | 10.19 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 228,401 | $ | 263,579 | $ | 786,461 | $ | 809,138 | $ | 936,692 | $ | 978,402 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
2.73 | % | 2.61 | % | 3.48 | % | 2.71 | % | 2.73 | % | 2.84 | % | ||||||||||||
| Portfolio turnover ratee |
45 | % | 24 | % | 16 | % | 17 | % | 24 | % | 49 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover 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 cash transactions, the portfolio turnover rates for the six months ended February 29, 2016 and the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31, 2012 and August 31, 2011 were 5%, 5%, 10%, 8%, 14% and 14%, respectively. See Note 4. |
See notes to financial statements.
| 52 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Pacific ex Japan ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 38.01 | $ | 51.21 | $ | 44.56 | $ | 43.21 | $ | 44.47 | $ | 39.25 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.66 | 1.97 | 1.88 | 1.69 | 1.73 | 1.64 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(2.55 | ) | (13.09 | ) | 6.51 | 1.71 | (1.14 | ) | 5.31 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.89 | ) | (11.12 | ) | 8.39 | 3.40 | 0.59 | 6.95 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.93 | ) | (2.08 | ) | (1.74 | ) | (2.05 | ) | (1.85 | ) | (1.73 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.93 | ) | (2.08 | ) | (1.74 | ) | (2.05 | ) | (1.85 | ) | (1.73 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 35.19 | $ | 38.01 | $ | 51.21 | $ | 44.56 | $ | 43.21 | $ | 44.47 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(5.12 | )%c | (22.19 | )% | 19.25 | % | 7.87 | % | 1.82 | % | 17.61 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 1,731,544 | $ | 1,984,205 | $ | 3,472,048 | $ | 3,008,067 | $ | 3,188,582 | $ | 3,548,867 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.49 | % | 0.49 | % | 0.49 | % | 0.50 | % | 0.50 | % | 0.50 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
3.56 | % | 4.31 | % | 3.90 | % | 3.59 | % | 4.16 | % | 3.53 | % | ||||||||||||
| Portfolio turnover ratee |
3 | % | 7 | % | 8 | % | 8 | % | 7 | % | 10 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
53 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Singapore ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 10.63 | $ | 13.96 | $ | 12.49 | $ | 13.10 | $ | 13.05 | $ | 12.17 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.08 | 0.41 | 0.40 | 0.44 | 0.41 | 0.45 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(0.74 | ) | (3.31 | ) | 1.52 | (0.47 | ) | 0.11 | 0.92 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(0.66 | ) | (2.90 | ) | 1.92 | (0.03 | ) | 0.52 | 1.37 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.25 | ) | (0.43 | ) | (0.45 | ) | (0.58 | ) | (0.47 | ) | (0.49 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.25 | ) | (0.43 | ) | (0.45 | ) | (0.58 | ) | (0.47 | ) | (0.49 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 9.72 | $ | 10.63 | $ | 13.96 | $ | 12.49 | $ | 13.10 | $ | 13.05 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(6.32 | )%c | (21.27 | )% | 15.65 | % | (0.38 | )% | 4.67 | % | 11.27 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 464,696 | $ | 609,927 | $ | 984,455 | $ | 1,135,477 | $ | 1,512,687 | $ | 1,713,199 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.60 | % | 3.15 | % | 2.99 | % | 3.23 | % | 3.32 | % | 3.34 | % | ||||||||||||
| Portfolio turnover ratee |
2 | % | 10 | % | 4 | % | 10 | % | 3 | % | 10 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 54 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Taiwan ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 13.58 | $ | 16.44 | $ | 13.60 | $ | 12.58 | $ | 13.78 | $ | 12.19 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.01 | 0.37 | 0.29 | 0.24 | 0.28 | 0.39 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(0.34 | ) | (2.94 | ) | 2.81 | 1.05 | (1.01 | ) | 1.49 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(0.33 | ) | (2.57 | ) | 3.10 | 1.29 | (0.73 | ) | 1.88 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.40 | ) | (0.29 | ) | (0.26 | ) | (0.27 | ) | (0.47 | ) | (0.29 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.40 | ) | (0.29 | ) | (0.26 | ) | (0.27 | ) | (0.47 | ) | (0.29 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 12.85 | $ | 13.58 | $ | 16.44 | $ | 13.60 | $ | 12.58 | $ | 13.78 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(2.44 | )%c | (15.79 | )% | 23.24 | % | 10.30 | % | (4.80 | )% | 15.24 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 2,217,984 | $ | 3,276,410 | $ | 3,298,664 | $ | 2,641,997 | $ | 2,247,128 | $ | 2,857,512 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
0.15 | % | 2.36 | % | 1.98 | % | 1.80 | % | 2.25 | % | 2.64 | % | ||||||||||||
| Portfolio turnover ratee |
14 | % | 14 | % | 11 | % | 21 | % | 22 | % | 23 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover 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 cash transactions, the portfolio turnover rates for the six months ended February 29, 2016 and the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31, 2012 and August 31, 2011 were 5%, 4%, 4%, 6%, 7% and 8%, respectively. See Note 4. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
55 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Thailand Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 65.01 | $ | 83.41 | $ | 67.73 | $ | 70.53 | $ | 66.27 | $ | 55.06 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.45 | 1.66 | 1.67 | 1.84 | 1.76 | 1.65 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(1.93 | ) | (17.98 | ) | 15.84 | (2.75 | ) | 4.37 | 11.10 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.48 | ) | (16.32 | ) | 17.51 | (0.91 | ) | 6.13 | 12.75 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.55 | ) | (2.08 | ) | (1.83 | ) | (1.89 | ) | (1.87 | ) | (1.54 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.55 | ) | (2.08 | ) | (1.83 | ) | (1.89 | ) | (1.87 | ) | (1.54 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 62.98 | $ | 65.01 | $ | 83.41 | $ | 67.73 | $ | 70.53 | $ | 66.27 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(2.21 | )%c | (19.92 | )% | 26.18 | % | (1.65 | )% | 9.57 | % | 23.33 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 236,180 | $ | 237,304 | $ | 571,370 | $ | 541,873 | $ | 595,968 | $ | 632,840 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.46 | % | 2.09 | % | 2.24 | % | 2.22 | % | 2.66 | % | 2.56 | % | ||||||||||||
| Portfolio turnover ratee |
3 | % | 13 | % | 9 | % | 24 | % | 12 | % | 22 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 56 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF | Diversification Classification | |
| MSCI Hong Kong |
Non-diversified | |
| MSCI Japan Small-Cap |
Diversified | |
| MSCI Malaysia |
Non-diversified | |
| MSCI Pacific ex Japan |
Diversified | |
| MSCI Singapore |
Non-diversified | |
| MSCI Taiwan |
Non-diversified | |
| MSCI Thailand Capped |
Non-diversified |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| NOTES TO FINANCIAL STATEMENTS |
57 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
| • | Futures contracts are valued at that day’s last reported settlement price on the exchange where the contract is traded. |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited toi attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available;v quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| 58 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Hong Kong |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 1,695,335,904 | $ | — | $ | — | $ | 1,695,335,904 | ||||||||
| Money Market Funds |
98,870,927 | — | — | 98,870,927 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,794,206,831 | $ | — | $ | — | $ | 1,794,206,831 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Liabilities: |
||||||||||||||||
| Futures Contracts |
$ | (44,993 | ) | $ | — | $ | — | $ | (44,993 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | (44,993 | ) | $ | — | $ | — | $ | (44,993 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Japan Small-Cap |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 174,793,080 | $ | — | $ | — | $ | 174,793,080 | ||||||||
| Money Market Funds |
7,194,162 | — | — | 7,194,162 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 181,987,242 | $ | — | $ | — | $ | 181,987,242 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Malaysia |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 226,943,107 | $ | — | $ | — | $ | 226,943,107 | ||||||||
| Money Market Funds |
33,457,453 | — | — | 33,457,453 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 260,400,560 | $ | — | $ | — | $ | 260,400,560 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Pacific ex Japan |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 1,720,465,717 | $ | — | $ | — | $ | 1,720,465,717 | ||||||||
| Money Market Funds |
43,586,844 | — | — | 43,586,844 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,764,052,561 | $ | — | $ | — | $ | 1,764,052,561 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Singapore |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 462,770,529 | $ | — | $ | — | $ | 462,770,529 | ||||||||
| Money Market Funds |
32,416,167 | — | — | 32,416,167 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 495,186,696 | $ | — | $ | — | $ | 495,186,696 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Liabilities: |
||||||||||||||||
| Futures Contracts |
$ | (1,333 | ) | $ | — | $ | — | $ | (1,333 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | (1,333 | ) | $ | — | $ | — | $ | (1,333 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NOTES TO FINANCIAL STATEMENTS |
59 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Taiwan |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 2,215,918,482 | $ | — | $ | 2 | $ | 2,215,918,484 | ||||||||
| Money Market Funds |
155,064,433 | — | — | 155,064,433 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 2,370,982,915 | $ | — | $ | 2 | $ | 2,370,982,917 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Assets: |
||||||||||||||||
| Futures Contracts |
$ | 9,597 | $ | — | $ | — | $ | 9,597 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 9,597 | $ | — | $ | — | $ | 9,597 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Thailand Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 235,293,579 | $ | — | $ | — | $ | 235,293,579 | ||||||||
| Rights |
— | 0 | b | — | 0 | b | ||||||||||
| Money Market Funds |
17,144,729 | — | — | 17,144,729 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 252,438,308 | $ | 0 | b | $ | — | $ | 252,438,308 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Shown at the unrealized appreciation (depreciation) on the contracts. |
| b | Rounds to less than $1. |
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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.
| 60 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
FOREIGN TAXES
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount
| NOTES TO FINANCIAL STATEMENTS |
61 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Hong Kong |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 9,403,104 | $ | 9,403,104 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
1,238,503 | 1,238,503 | — | |||||||||
| Deutsche Bank Securities Inc. |
9,374,567 | 9,374,567 | — | |||||||||
| Goldman Sachs & Co. |
2,359,114 | 2,359,114 | — | |||||||||
| JPMorgan Clearing Corp. |
1,503,768 | 1,503,768 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
184,241 | 184,241 | — | |||||||||
| Morgan Stanley & Co. LLC |
68,524,176 | 68,524,176 | — | |||||||||
| Scotia Capital (USA) Inc. |
123,246 | 123,246 | — | |||||||||
| State Street Bank & Trust Company |
682,383 | 682,383 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 93,393,102 | $ | 93,393,102 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Japan Small-Cap |
||||||||||||
| Barclays Capital Inc. |
$ | 1,030,385 | $ | 1,030,385 | $ | — | ||||||
| BNP Paribas Prime Brokerage Inc. |
6,683 | 6,683 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
698,904 | 698,904 | — | |||||||||
| Deutsche Bank Securities Inc. |
546,824 | 546,824 | — | |||||||||
| Goldman Sachs & Co. |
652,676 | 652,676 | — | |||||||||
| Jefferies LLC |
4,723 | 4,723 | — | |||||||||
| JPMorgan Clearing Corp. |
222,900 | 222,900 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
347,213 | 347,213 | — | |||||||||
| Mizuho Securities USA Inc. |
31,309 | 31,309 | — | |||||||||
| Morgan Stanley & Co. LLC |
1,151,002 | 1,151,002 | — | |||||||||
| SG Americas Securities LLC |
62,963 | 62,963 | — | |||||||||
| State Street Bank & Trust Company |
500,799 | 500,799 | — | |||||||||
| UBS Securities LLC |
1,519,764 | 1,519,764 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 6,776,145 | $ | 6,776,145 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Malaysia |
||||||||||||
| Morgan Stanley & Co. International PLC |
$ | 31,225,676 | $ | 31,225,676 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| $ | 31,225,676 | $ | 31,225,676 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| 62 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Pacific ex Japan |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 146,989 | $ | 146,989 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
901,566 | 901,566 | — | |||||||||
| Deutsche Bank Securities Inc. |
3,199,734 | 3,199,734 | — | |||||||||
| Goldman Sachs & Co. |
5,386,965 | 5,386,965 | — | |||||||||
| Jefferies LLC |
1,218,432 | 1,218,432 | — | |||||||||
| JPMorgan Clearing Corp. |
3,096,000 | 3,096,000 | — | |||||||||
| Macquarie Capital (USA) Inc. |
11,360 | 11,360 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
9,392,136 | 9,392,136 | — | |||||||||
| Morgan Stanley & Co. LLC |
16,674,616 | 16,674,616 | — | |||||||||
| State Street Bank & Trust Company |
309,451 | 309,451 | — | |||||||||
| UBS Securities LLC |
833,362 | 833,362 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 41,170,611 | $ | 41,170,611 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Singapore |
||||||||||||
| Barclays Capital Inc. |
$ | 51,720 | $ | 51,720 | $ | — | ||||||
| Citigroup Global Markets Inc. |
34,331 | 34,331 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
6,009,997 | 6,009,997 | — | |||||||||
| Goldman Sachs & Co. |
3,626,835 | 3,626,835 | — | |||||||||
| JPMorgan Clearing Corp. |
9,813 | 9,813 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
2,870,624 | 2,870,624 | — | |||||||||
| Morgan Stanley & Co. LLC |
15,793,302 | 15,793,302 | — | |||||||||
| State Street Bank & Trust Company |
1,669,123 | 1,669,123 | — | |||||||||
| UBS Securities LLC |
622,314 | 622,314 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 30,688,059 | $ | 30,688,059 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Taiwan |
||||||||||||
| Credit Suisse Securities (Europe) Ltd. |
$ | 27,174,867 | $ | 27,174,867 | $ | — | ||||||
| Deutsche Bank AG |
18,979,925 | 18,979,925 | — | |||||||||
| Morgan Stanley & Co. International PLC |
76,201,302 | 76,201,302 | — | |||||||||
| UBS Ltd. |
22,308,599 | 22,308,599 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 144,664,693 | $ | 144,664,693 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Thailand Capped |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 243,410 | $ | 243,410 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
3,271,421 | 3,271,421 | — | |||||||||
| Deutsche Bank Securities Inc. |
143,718 | 143,718 | — | |||||||||
| Goldman Sachs & Co. |
1,800,358 | 1,800,358 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
584,163 | 584,163 | — | |||||||||
| Morgan Stanley & Co. LLC |
8,615,475 | 8,615,475 | — | |||||||||
| UBS Securities LLC |
736,355 | 736,355 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 15,394,900 | $ | 15,394,900 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market value of securities loaned at period end and is disclosed in each Fund’s statement of assets and liabilities. |
| NOTES TO FINANCIAL STATEMENTS |
63 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
For its investment advisory services to each of the iShares MSCI Hong Kong, iShares MSCI Japan Small-Cap, iShares MSCI Malaysia and iShares MSCI Singapore ETFs, BFA 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 the Fund and certain other iShares 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, up to and including $48 billion | ||||
| 0.40 |
Over $48 billion, up to and including $72 billion | ||||
| 0.36 | Over $72 billion | ||||
For its investment advisory services to the iShares MSCI Pacific ex Japan ETF, BFA 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 the Fund and certain other iShares funds, as follows:
| Investment Advisory Fee | Aggregate Average Daily Net Assets | ||||
| 0.5000 | % | First $46 billion | |||
| 0.4750 | a |
Over $46 billion, up to and including $81 billion | |||
| 0.4513 | a |
Over $81 billion, up to and including $111 billion | |||
| 0.4287 | a |
Over $111 billion, up to and including $141 billion | |||
| 0.4073 | a | Over $141 billion | |||
| a | Investment advisory fee level reflects a 5% reduction (rounded to the fourth decimal place) from the investment advisory fee at the prior aggregate average daily net asset level. |
For its investment advisory services to each of the iShares MSCI Taiwan and iShares MSCI Thailand Capped ETFs, BFA 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 the Fund and certain other iShares 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, up to and including $8 billion | ||||
| 0.57 | Over $8 billion, up to and including $16 billion | ||||
| 0.51 |
Over $16 billion, up to and including $32 billion | ||||
| 0.45 | Over $32 billion | ||||
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in
| 64 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| MSCI Hong Kong |
$ | 61,687 | ||
| MSCI Japan Small-Cap |
32,498 | |||
| MSCI Malaysia |
93,672 | |||
| MSCI Pacific ex Japan |
75,743 | |||
| MSCI Singapore |
87,608 | |||
| MSCI Taiwan |
333,701 | |||
| MSCI Thailand Capped |
91,594 | |||
For the six months ended February 29, 2016, BTC, the Funds’ securities lending agent, has agreed to voluntarily reimburse the iShares MSCI Taiwan ETF in the amount of $47,976, related to the foreign tax on the securities lending income. Such reimbursement is included in “Securities lending income – affiliated – net” in the Fund’s statement of operations.
The iShares MSCI Taiwan ETF received a payment from BFA to compensate the Fund for losses incurred on trades that were executed due to the incorrect processing of a corporate action. The payment covers the transaction costs (commissions and fees), as well as the change in market value on the security between the date the corporate action was incorrectly processed and the date of the subsequent sale of the security. The payment is reported in the Fund’s statement of operations under “Payment from affiliate”.
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
For the six months ended February 29, 2016, the purchases and sales executed by the MSCI Japan Small-Cap ETF pursuant to Rule 17a-7 under the 1940 Act were $105,131 and $1,025,431, respectively.
| NOTES TO FINANCIAL STATEMENTS |
65 |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Hong Kong |
$ | 137,918,087 | $ | 164,978,769 | ||||
| MSCI Japan Small-Cap |
12,083,555 | 12,045,578 | ||||||
| MSCI Malaysia |
108,887,995 | 146,910,594 | ||||||
| MSCI Pacific ex Japan |
100,602,499 | 64,158,202 | ||||||
| MSCI Singapore |
9,452,700 | 20,008,473 | ||||||
| MSCI Taiwan |
380,568,032 | 1,314,594,227 | ||||||
| MSCI Thailand Capped |
7,827,339 | 7,527,519 | ||||||
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| MSCI Hong Kong |
$ | 14,062,544 | $ | 837,978,516 | ||||
| MSCI Japan Small-Cap |
44,721,141 | 21,599,076 | ||||||
| MSCI Pacific ex Japan |
11,312,151 | 161,934,563 | ||||||
| MSCI Singapore |
13,772,310 | 105,423,894 | ||||||
| MSCI Thailand Capped |
37,727,393 | 31,310,637 | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
| 66 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 5. | FUTURES CONTRACTS |
Each Fund may purchase or sell futures contracts in an effort to help such Fund track its underlying index. A futures contract is a standardized, exchange-traded agreement to buy or sell a financial instrument at a set price on a future date. Upon entering into a futures contract, the Fund is required to pledge to the executing broker which holds segregated from its own assets, an amount of cash, U.S. government securities or other high-quality debt and equity securities equal to the minimum initial margin requirements of the exchange on which the contract is traded. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Losses may arise if the value of a futures contract decreases due to an unfavorable change in the market rates or values of the underlying instrument during the term of the contract or if the counterparty does not perform under the contract. The use of futures contracts also involves the risk of an imperfect correlation in the movements in the price of futures contracts and the assets underlying such contracts.
The following table shows the value of futures contracts held as of February 29, 2016 and the related locations in the statements of assets and liabilities, presented by risk exposure category:
| Assets | ||||
| iShares MSCI Taiwan ETF |
||||
| Equity contracts: |
||||
| Variation margin/Net assets consist of – net unrealized appreciation (depreciation)a |
$ | 9,597 | ||
|
|
|
|||
| a | Represents cumulative appreciation of futures contracts as reported in the schedules of investments. Only current day’s variation margin is reported separately within the statements of assets and liabilities. |
| Liabilities | ||||||||
| iShares MSCI Hong Kong ETF |
iShares MSCI Singapore ETF |
|||||||
| Equity contracts: |
||||||||
| Variation margin/Net assets consist of – net unrealized appreciation (depreciation)b |
$ | 44,993 | $ | 1,333 | ||||
|
|
|
|
|
|||||
| b | Represents cumulative depreciation of futures contracts as reported in the schedules of investments. |
The following table shows the realized and unrealized gains (losses) on futures contracts held during the six months ended February 29, 2016 and the related locations in the statements of operations, presented by risk exposure category:
| Net Realized Gain (Loss) | ||||||||||||
| iShares MSCI Hong Kong ETF |
iShares MSCI Singapore ETF |
iShares MSCI Taiwan ETF |
||||||||||
| Equity contracts: |
||||||||||||
| Futures contracts |
$ | 452,071 | $ | (14,750 | ) | $ | 3,116,386 | |||||
|
|
|
|
|
|
|
|||||||
| NOTES TO FINANCIAL STATEMENTS |
67 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| Net Change in
Unrealized Appreciation/Depreciation |
||||||||||||
| iShares MSCI Hong Kong ETF |
iShares MSCI Singapore ETF |
iShares MSCI Taiwan ETF |
||||||||||
| Equity contracts: |
||||||||||||
| Futures contracts |
$ | (286,926 | ) | $ | (161,032 | ) | $ | (1,451,737 | ) | |||
|
|
|
|
|
|
|
|||||||
The following table shows the average quarter-end balances of open futures contracts for the six months ended February 29, 2016:
| iShares MSCI Hong Kong ETF |
iShares MSCI Singapore ETF |
iShares MSCI Taiwan ETF |
||||||||||
| Average value of contracts purchased |
$ | 10,908,866 | $ | 3,978,522 | $ | 14,866,533 | ||||||
|
|
|
|
|
|
|
|||||||
| 6. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its investment in equity and financial derivative instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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;
| 68 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
higher inflation rates; greater social, economic and political uncertainties; the risk of nationalization or expropriation of assets; and the risk of war. These risks are heightened for investments in issuers from countries with less developed markets.
Each Fund, except for the iShares MSCI Pacific ex Japan ETF invests all or substantially all of its assets in issuers located in a single country. When a fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in that country may have a significant impact on its investment performance.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 7. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the following Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
| iShares ETF | Non- Expiring a |
Expiring 2016 |
Expiring 2017 |
Expiring 2018 |
Expiring 2019 |
Total | ||||||||||||||||||
| MSCI Hong Kong |
$ | 198,801,723 | $ | 3,185,408 | $ | 29,235,556 | $ | 114,836,904 | $ | 34,565,959 | $ | 380,625,550 | ||||||||||||
| MSCI Japan Small-Cap |
2,813,514 | — | 131,718 | 541,322 | 203,697 | 3,690,251 | ||||||||||||||||||
| MSCI Pacific ex Japan |
215,930,010 | — | 66,207,828 | 104,799,503 | 36,600,987 | 423,538,328 | ||||||||||||||||||
| MSCI Singapore |
41,531,912 | 807,115 | 15,680,510 | 132,420,824 | 11,588,528 | 202,028,889 | ||||||||||||||||||
| MSCI Taiwan |
69,147,354 | 16,734,578 | 343,375,145 | 363,052,013 | 19,669,958 | 811,979,048 | ||||||||||||||||||
| MSCI Thailand Capped |
8,642,320 | — | 555,444 | 2,321,428 | 1,304,910 | 12,824,102 | ||||||||||||||||||
| a | Must be utilized prior to losses subject to expiration. |
| NOTES TO FINANCIAL STATEMENTS |
69 |
Table of Contents
Notes to Financial Statements (Unaudited) (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 marked-to-market gains.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| MSCI Hong Kong |
$ | 2,256,655,386 | $ | 15,940,696 | $ | (478,389,251 | ) | $ | (462,448,555 | ) | ||||||
| MSCI Japan Small-Cap |
204,789,158 | 7,424,185 | (30,226,101 | ) | (22,801,916 | ) | ||||||||||
| MSCI Malaysia |
165,193,483 | 121,104,673 | (25,897,596 | ) | 95,207,077 | |||||||||||
| MSCI Pacific ex Japan |
2,332,485,475 | 100,526,592 | (668,959,506 | ) | (568,432,914 | ) | ||||||||||
| MSCI Singapore |
669,798,677 | 4,561,777 | (179,173,758 | ) | (174,611,981 | ) | ||||||||||
| MSCI Taiwan |
1,684,286,446 | 984,677,851 | (297,981,380 | ) | 686,696,471 | |||||||||||
| MSCI Thailand Capped |
364,908,204 | 5,282,079 | (117,751,975 | ) | (112,469,896 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| 8. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
| 70 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| MSCI Hong Kong |
$ | 0.206843 | $ | — | $ | 0.007337 | $ | 0.214180 | 97 | % | — | % | 3 | % | 100 | % | ||||||||||||||||
| MSCI Japan Small-Cap |
0.298738 | — | 0.192318 | 0.491056 | 61 | — | 39 | 100 | ||||||||||||||||||||||||
| MSCI Malaysia |
0.346715 | 2.400000 | — | 2.746715 | 13 | 87 | — | 100 | ||||||||||||||||||||||||
| MSCI Pacific ex Japan |
0.697896 | — | 0.229383 | 0.927279 | 75 | — | 25 | 100 | ||||||||||||||||||||||||
| MSCI Singapore |
0.043249 | — | 0.208266 | 0.251515 | 17 | — | 83 | 100 | ||||||||||||||||||||||||
| MSCI Taiwan |
0.398551 | — | 0.000227 | 0.398778 | 100 | — | 0 | a | 100 | |||||||||||||||||||||||
| MSCI Thailand Capped |
0.545189 | — | — | 0.545189 | 100 | — | — | 100 | ||||||||||||||||||||||||
| a | Rounds to less than 1%. |
| SUPPLEMENTAL INFORMATION |
71 |
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Notes:
| 72 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
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Notes:
| NOTES |
73 |
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Notes:
| 74 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-803-0216
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Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED)
|
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iShares, Inc.
| Ø | iShares MSCI Brazil Capped ETF | EWZ | NYSE Arca |
| Ø | iShares MSCI Chile Capped ETF | ECH | NYSE Arca |
| Ø | iShares MSCI Colombia Capped ETF | ICOL | NYSE Arca |
| Ø | iShares MSCI Israel Capped ETF | EIS | NYSE Arca |
| Ø | iShares MSCI Russia Capped ETF | ERUS | NYSE Arca |
| Ø | iShares MSCI South Africa ETF | EZA | NYSE Arca |
| Ø | iShares MSCI Turkey ETF | TUR | NYSE Arca |
| Ø | iShares MSCI USA Equal Weighted ETF | EUSA | NYSE Arca |
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Table of Contents
iSHARES® MSCI BRAZIL CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Brazil Capped ETF (the “Fund”) seeks to track the investment results of an index composed of Brazilian equities, as represented by the MSCI Brazil 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -15.52%, net of fees, while the total return for the Index was -15.32%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(39.66)% | (40.37)% | (39.35)% | (39.66)% | (40.37)% | (39.35)% | ||||||||||||||||||||
| 5 Years |
(20.21)% | (20.42)% | (19.83)% | (67.66)% | (68.09)% | (66.89)% | ||||||||||||||||||||
| 10 Years |
(3.92)% | (3.81)% | (3.34)% | (32.95)% | (32.20)% | (28.83)% | ||||||||||||||||||||
Index performance through February 11, 2013 reflects the performance of the MSCI Brazil Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Brazil 25/50 Index.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 844.80 | $ | 2.94 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI CHILE CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Chile Capped ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Chilean equities, as represented by the MSCI Chile Investable Market Index 25/50 (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -3.75%, net of fees, while the total return for the Index was -3.48%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(17.48)% | (18.21)% | (17.36)% | (17.48)% | (18.21)% | (17.36)% | ||||||||||||||||||||
| 5 Years |
(12.35)% | (12.45)% | (11.72)% | (48.28)% | (48.56)% | (46.39)% | ||||||||||||||||||||
| Since Inception |
(3.18)% | (3.23)% | (2.61)% | (23.50)% | (23.84)% | (19.71)% | ||||||||||||||||||||
The inception date of the Fund was 11/12/07. The first day of secondary market trading was 11/16/07.
Index performance through February 11, 2013 reflects the performance of the MSCI Chile Investable Market Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Chile Investable Market Index 25/50.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 962.50 | $ | 3.12 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI COLOMBIA CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Colombia Capped ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Colombian equities, as represented by the MSCI All Colombia Capped Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -6.83%, net of fees, while the total return for the Index was -6.60%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(29.54)% | (29.16)% | (29.31)% | (29.54)% | (29.16)% | (29.31)% | ||||||||||||||||||||
| Since Inception |
(24.88)% | (24.46)% | (24.41)% | (53.83)% | (53.13)% | (53.02)% | ||||||||||||||||||||
The inception date of the Fund was 6/18/13. The first day of secondary market trading was 6/20/13.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 931.70 | $ | 2.93 | $ | 1,000.00 | $ | 1,021.80 | $ | 3.07 | 0.61% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI ISRAEL CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Israel Capped ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Israeli equities, as represented by the MSCI Israel Capped Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -7.97%, net of fees, while the total return for the Index was -7.53%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(1.10)% | (1.89)% | (0.34)% | (1.10)% | (1.89)% | (0.34)% | ||||||||||||||||||||
| 5 Years |
(1.79)% | (1.91)% | (1.54)% | (8.65)% | (9.18)% | (7.46)% | ||||||||||||||||||||
| Since Inception |
1.32% | 1.28% | 1.81% | 10.93% | 10.61% | 15.33% | ||||||||||||||||||||
The inception date of the Fund was 3/26/08. The first day of secondary market trading was 3/28/08.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 920.30 | $ | 3.06 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI RUSSIA CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Russia Capped ETF (the “Fund”) seeks to track the investment results of an index composed of Russian equities, as represented by the MSCI Russia 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -7.07%, net of fees, while the total return for the Index was -6.43%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(13.54)% | (14.25)% | (12.73)% | (13.54)% | (14.25)% | (12.73)% | ||||||||||||||||||||
| 5 Years |
(14.57)% | (14.75)% | (14.05)% | (54.49)% | (54.98)% | (53.09)% | ||||||||||||||||||||
| Since Inception |
(11.25)% | (11.31)% | (10.71)% | (46.93)% | (47.11)% | (45.19)% | ||||||||||||||||||||
The inception date of the Fund was 11/9/10. The first day of secondary market trading was 11/10/10.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 929.30 | $ | 3.07 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
9 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI SOUTH AFRICA ETF
Performance as of February 29, 2016
The iShares MSCI South Africa ETF (the “Fund”) seeks to track the investment results of an index composed of South African equities, as represented by the MSCI South Africa Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -19.65%, net of fees, while the total return for the Index was -19.41%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(32.05)% | (32.77)% | (31.61)% | (32.05)% | (32.77)% | (31.61)% | ||||||||||||||||||||
| 5 Years |
(5.61)% | (5.81)% | (5.02)% | (25.09)% | (25.85)% | (22.71)% | ||||||||||||||||||||
| 10 Years |
1.33% | 1.20% | 2.13% | 14.13% | 12.72% | 23.47% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 803.50 | $ | 2.87 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI TURKEY ETF
Performance as of February 29, 2016
The iShares MSCI Turkey ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Turkish equities, as represented by the MSCI Turkey Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -0.60%, net of fees, while the total return for the Index was -0.58%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(21.46)% | (22.52)% | (21.41)% | (21.46)% | (22.52)% | (21.41)% | ||||||||||||||||||||
| 5 Years |
(6.44)% | (6.75)% | (6.05)% | (28.32)% | (29.50)% | (26.81)% | ||||||||||||||||||||
| Since Inception |
(1.53)% | (1.71)% | (1.16)% | (11.55)% | (12.76)% | (8.85)% | ||||||||||||||||||||
The inception date of the Fund was 3/26/08. The first day of secondary market trading was 3/28/08.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 994.00 | $ | 3.17 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
11 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI USA EQUAL WEIGHTED ETF
Performance as of February 29, 2016
The iShares MSCI USA Equal Weighted ETF (the “Fund”) seeks to track the investment results of an index composed of equal weighted U.S. equities, as represented by the MSCI USA Equal Weighted Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -5.23%, net of fees, while the total return for the Index was -5.18%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(10.21)% | (10.25)% | (10.18)% | (10.21)% | (10.25)% | (10.18)% | ||||||||||||||||||||
| 5 Years |
9.08% | 9.06% | 9.22% | 54.41% | 54.27% | 55.45% | ||||||||||||||||||||
| Since Inception |
10.52% | 10.51% | 10.69% | 79.02% | 78.93% | 80.59% | ||||||||||||||||||||
The inception date of the Fund was 5/5/10. The first day of secondary market trading was 5/7/10.
Index performance through August 31, 2015 reflects the performance of the MSCI USA Index. Index performance beginning on September 1, 2015 reflects the performance of the MSCI USA Equal Weighted Index.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 13 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 947.70 | $ | 0.73 | $ | 1,000.00 | $ | 1,024.10 | $ | 0.75 | 0.15% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 13 for more information. |
| * | Excludes money market funds. |
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| ABOUT FUND PERFORMANCE / SHAREHOLDER EXPENSES |
13 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI BRAZIL CAPPED ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI BRAZIL CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI BRAZIL CAPPED ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI CHILE CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI CHILE CAPPED ETF
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI COLOMBIA CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI COLOMBIA CAPPED ETF
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI ISRAEL CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI ISRAEL CAPPED ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI RUSSIA CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI SOUTH AFRICA ETF
February 29, 2016
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI SOUTH AFRICA ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
25 |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI TURKEY ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
27 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI TURKEY ETF
February 29, 2016
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
29 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
31 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
33 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
35 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
37 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI USA EQUAL WEIGHTED ETF
February 29, 2016
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Brazil Capped ETF |
iShares MSCI Chile Capped ETF |
iShares MSCI Colombia Capped ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 1,970,510,477 | $ | 225,916,377 | $ | 23,021,564 | ||||||
| Affiliated (Note 2) |
34,520 | 627,776 | 336,962 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 1,970,544,997 | $ | 226,544,153 | $ | 23,358,526 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 1,807,726,466 | $ | 244,406,199 | $ | 17,183,061 | ||||||
| Affiliated (Note 2) |
34,520 | 627,776 | 336,962 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
1,807,760,986 | 245,033,975 | 17,520,023 | |||||||||
| Foreign currency, at valueb |
11,296,410 | — | 979 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
— | 3,198,525 | 361,943 | |||||||||
| Dividends and interest |
10,274,813 | 110 | 6,094 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
1,829,332,209 | 248,232,610 | 17,889,039 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
— | 3,160,247 | 495,886 | |||||||||
| Collateral for securities on loan (Note 1) |
— | — | 320,977 | |||||||||
| Investment advisory fees (Note 2) |
903,775 | 112,202 | 7,388 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
903,775 | 3,272,449 | 824,251 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 1,828,428,434 | $ | 244,960,161 | $ | 17,064,788 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 4,699,567,311 | $ | 434,315,124 | $ | 31,365,481 | ||||||
| Undistributed (distributions in excess of) net investment income |
8,527,855 | 224,801 | (38,067 | ) | ||||||||
| Accumulated net realized loss |
(2,716,602,751 | ) | (208,069,586 | ) | (8,423,823 | ) | ||||||
| Net unrealized appreciation (depreciation) |
(163,063,981 | ) | 18,489,822 | (5,838,803 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 1,828,428,434 | $ | 244,960,161 | $ | 17,064,788 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
88,600,000 | 7,350,000 | 1,550,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 20.64 | $ | 33.33 | $ | 11.01 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $ —, $ — and $294,176, respectively. See Note 1. |
| b | Cost of foreign currency: $11,284,802, $ — and $990, respectively. |
| c | $0.001 par value, number of shares authorized: 500 million, 200 million and 25 million, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
39 |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Israel Capped ETF |
iShares MSCI Russia Capped ETF |
iShares MSCI South Africa ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 136,776,284 | $ | 340,286,951 | $ | 470,701,525 | ||||||
| Affiliated (Note 2) |
15,987,633 | 215,365 | 2,778,950 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 152,763,917 | $ | 340,502,316 | $ | 473,480,475 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 116,693,607 | $ | 217,375,880 | $ | 294,100,338 | ||||||
| Affiliated (Note 2) |
15,987,633 | 215,365 | 2,778,950 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
132,681,240 | 217,591,245 | 296,879,288 | |||||||||
| Foreign currency, at valueb |
199,838 | — | 258,424 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
2,132,087 | 6,641,249 | 6,272,680 | |||||||||
| Due from custodian (Note 4) |
59,852 | — | — | |||||||||
| Dividends and interest |
169,388 | 23,067 | 143,464 | |||||||||
| Capital shares sold |
— | — | 8,375 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
135,242,405 | 224,255,561 | 303,562,231 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
2,262,895 | 7,020,409 | 5,977,199 | |||||||||
| Collateral for securities on loan (Note 1) |
15,936,468 | — | 2,685,340 | |||||||||
| Investment advisory fees (Note 2) |
56,025 | 105,562 | 143,612 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
18,255,388 | 7,125,971 | 8,806,151 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 116,987,017 | $ | 217,129,590 | $ | 294,756,080 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 191,261,545 | $ | 416,584,319 | $ | 613,261,799 | ||||||
| Distributions in excess of net investment income |
(234,960 | ) | (472,822 | ) | (2,057,367 | ) | ||||||
| Accumulated net realized loss |
(53,957,618 | ) | (76,065,097 | ) | (139,836,943 | ) | ||||||
| Net unrealized depreciation |
(20,081,950 | ) | (122,916,810 | ) | (176,611,409 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 116,987,017 | $ | 217,129,590 | $ | 294,756,080 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
2,550,000 | 19,300,000 | 6,500,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 45.88 | $ | 11.25 | $ | 45.35 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $15,280,746, $ — and $2,488,371, respectively. See Note 1. |
| b | Cost of foreign currency: $199,141, $ — and $268,646, respectively. |
| c | $0.001 par value, number of shares authorized: 500 million, 1 billion and 400 million, respectively. |
See notes to financial statements.
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Turkey ETF |
iShares MSCI USA Equal Weighted ETF |
|||||||
| ASSETS |
||||||||
| Investments, at cost: |
||||||||
| Unaffiliated |
$ | 488,923,556 | $ | 36,293,591 | ||||
| Affiliated (Note 2) |
38,043,173 | 1,984,096 | ||||||
|
|
|
|
|
|||||
| Total cost of investments |
$ | 526,966,729 | $ | 38,277,687 | ||||
|
|
|
|
|
|||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||
| Unaffiliated |
$ | 281,035,544 | $ | 33,668,026 | ||||
| Affiliated (Note 2) |
38,043,173 | 1,982,106 | ||||||
|
|
|
|
|
|||||
| Total fair value of investments |
319,078,717 | 35,650,132 | ||||||
| Foreign currency, at valueb |
151,596 | — | ||||||
| Receivables: |
||||||||
| Investment securities sold |
— | 2,296,720 | ||||||
| Interest |
123,035 | 61,030 | ||||||
| Tax reclaims |
— | 58 | ||||||
|
|
|
|
|
|||||
| Total Assets |
319,353,348 | 38,007,940 | ||||||
|
|
|
|
|
|||||
| LIABILITIES |
||||||||
| Payables: |
||||||||
| Investment securities purchased |
— | 2,339,968 | ||||||
| Collateral for securities on loan (Note 1) |
37,788,807 | 1,841,807 | ||||||
| Capital shares redeemed |
8,014 | — | ||||||
| Investment advisory fees (Note 2) |
144,240 | 4,011 | ||||||
|
|
|
|
|
|||||
| Total Liabilities |
37,941,061 | 4,185,786 | ||||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 281,412,287 | $ | 33,822,154 | ||||
|
|
|
|
|
|||||
| Net assets consist of: |
||||||||
| Paid-in capital |
$ | 598,250,647 | $ | 38,253,901 | ||||
| Undistributed (distributions in excess of) net investment income |
(41,752 | ) | 19,736 | |||||
| Accumulated net realized loss |
(108,912,505 | ) | (1,823,928 | ) | ||||
| Net unrealized depreciation |
(207,884,103 | ) | (2,627,555 | ) | ||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 281,412,287 | $ | 33,822,154 | ||||
|
|
|
|
|
|||||
| Shares outstandingc |
7,400,000 | 850,000 | ||||||
|
|
|
|
|
|||||
| Net asset value per share |
$ | 38.03 | $ | 39.79 | ||||
|
|
|
|
|
|||||
| a | Securities on loan with values of $35,278,147 and $1,796,332, respectively. See Note 1. |
| b | Cost of foreign currency: $147,687 and $ —, respectively. |
| c | $0.001 par value, number of shares authorized: 200 million and 500 million, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
41 |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Brazil Capped ETF |
iShares MSCI Chile Capped ETF |
iShares MSCI Colombia Capped ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 37,943,014 | $ | 1,184,157 | $ | 164,164 | ||||||
| Interest — affiliated (Note 2) |
1,062 | 291 | 16 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
— | — | 8,185 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
37,944,076 | 1,184,448 | 172,365 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
5,911,859 | 697,236 | 43,554 | |||||||||
| Commitment fees (Note 7) |
— | — | 29 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
5,911,859 | 697,236 | 43,583 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
32,032,217 | 487,212 | 128,782 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(190,137,413 | ) | (27,150,782 | ) | (1,284,184 | ) | ||||||
| Foreign currency transactions |
(2,140,588 | ) | (3,907 | ) | (30,418 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(192,278,001 | ) | (27,154,689 | ) | (1,314,602 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(171,304,144 | ) | 12,092,103 | 455,092 | ||||||||
| Translation of assets and liabilities in foreign currencies |
1,151,856 | (104 | ) | 491 | ||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(170,152,288 | ) | 12,091,999 | 455,583 | ||||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(362,430,289 | ) | (15,062,690 | ) | (859,019 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (330,398,072 | ) | $ | (14,575,478 | ) | $ | (730,237 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $3,713,368, $281,139 and $739, respectively. |
See notes to financial statements.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Israel Capped ETF |
iShares MSCI Russia Capped ETF |
iShares MSCI South Africa ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 953,336 | $ | 2,082,879 | $ | 3,823,568 | ||||||
| Interest — affiliated (Note 2) |
111 | 403 | 176 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
125,204 | — | 13,795 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
1,078,651 | 2,083,282 | 3,837,539 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
367,262 | 683,281 | 1,055,741 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
367,262 | 683,281 | 1,055,741 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
711,389 | 1,400,001 | 2,781,798 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(16,025,687 | ) | (20,619,245 | ) | (20,014,032 | ) | ||||||
| In-kind redemptions — unaffiliated |
617,400 | (355,705 | ) | (23,500,996 | ) | |||||||
| Foreign currency transactions |
13,685 | (49,995 | ) | 19,240 | ||||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(15,394,602 | ) | (21,024,945 | ) | (43,495,788 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
6,870,001 | 3,806,539 | (47,407,636 | ) | ||||||||
| Translation of assets and liabilities in foreign currencies |
5,261 | 2,231 | 3,240 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
6,875,262 | 3,808,770 | (47,404,396 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(8,519,340 | ) | (17,216,175 | ) | (90,900,184 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (7,807,951 | ) | $ | (15,816,174 | ) | $ | (88,118,386 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $256,958, $365,462 and $647,990, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
43 |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Turkey ETF |
iShares MSCI USA Equal Weighted ETF |
|||||||
| NET INVESTMENT INCOME |
||||||||
| Dividends — unaffiliateda |
$ | 456,520 | $ | 437,768 | ||||
| Dividends — affiliated (Note 2) |
— | 2,010 | ||||||
| Interest — affiliated (Note 2) |
139 | 28 | ||||||
| Securities lending income — affiliated — net (Note 2) |
859,913 | 12,178 | ||||||
|
|
|
|
|
|||||
| Total investment income |
1,316,572 | 451,984 | ||||||
|
|
|
|
|
|||||
| EXPENSES |
||||||||
| Investment advisory fees (Note 2) |
1,036,836 | 31,814 | ||||||
|
|
|
|
|
|||||
| Total expenses |
1,036,836 | 31,814 | ||||||
|
|
|
|
|
|||||
| Net investment income |
279,736 | 420,170 | ||||||
|
|
|
|
|
|||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||
| Net realized gain (loss) from: |
||||||||
| Investments — unaffiliated |
(5,277,896 | ) | (421,149 | ) | ||||
| Investments — affiliated (Note 2) |
— | 1,152 | ||||||
| In-kind redemptions — unaffiliated |
(35,560,462 | ) | 706,633 | |||||
| In-kind redemptions — affiliated (Note 2) |
— | 2,534 | ||||||
| Foreign currency transactions |
(1,363 | ) | — | |||||
|
|
|
|
|
|||||
| Net realized gain (loss) |
(40,839,721 | ) | 289,170 | |||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation on: |
||||||||
| Investments |
37,489,741 | (2,849,597 | ) | |||||
| Translation of assets and liabilities in foreign currencies |
8,732 | — | ||||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation |
37,498,473 | (2,849,597 | ) | |||||
|
|
|
|
|
|||||
| Net realized and unrealized loss |
(3,341,248 | ) | (2,560,427 | ) | ||||
|
|
|
|
|
|||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (3,061,512 | ) | $ | (2,140,257 | ) | ||
|
|
|
|
|
|||||
| a | Net of foreign withholding tax of $70,154 and $94, respectively. |
See notes to financial statements.
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares MSCI Brazil Capped ETF |
iShares MSCI Chile Capped ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 32,032,217 | $ | 101,434,362 | $ | 487,212 | $ | 4,543,461 | ||||||||
| Net realized loss |
(192,278,001 | ) | (723,367,404 | ) | (27,154,689 | ) | (29,660,599 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
(170,152,288 | ) | (2,274,062,591 | ) | 12,091,999 | (38,551,723 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(330,398,072 | ) | (2,895,995,633 | ) | (14,575,478 | ) | (63,668,861 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(20,462,447 | ) | (96,651,627 | ) | (695,435 | ) | (4,099,138 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(20,462,447 | ) | (96,651,627 | ) | (695,435 | ) | (4,099,138 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
418,447,221 | 2,005,630,203 | 137,550,746 | 172,176,839 | ||||||||||||
| Cost of shares redeemed |
(228,293,317 | ) | (2,473,533,229 | ) | (111,856,047 | ) | (222,371,918 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
190,153,904 | (467,903,026 | ) | 25,694,699 | (50,195,079 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(160,706,615 | ) | (3,460,550,286 | ) | 10,423,786 | (117,963,078 | ) | |||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
1,989,135,049 | 5,449,685,335 | 234,536,375 | 352,499,453 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 1,828,428,434 | $ | 1,989,135,049 | $ | 244,960,161 | $ | 234,536,375 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | 8,527,855 | $ | (3,041,915 | ) | $ | 224,801 | $ | 433,024 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
18,950,000 | 49,050,000 | 4,050,000 | 4,200,000 | ||||||||||||
| Shares redeemed |
(10,850,000 | ) | (70,200,000 | ) | (3,450,000 | ) | (5,550,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
8,100,000 | (21,150,000 | ) | 600,000 | (1,350,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
45 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Colombia Capped ETF |
iShares MSCI Israel Capped ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 128,782 | $ | 444,783 | $ | 711,389 | $ | 3,084,931 | ||||||||
| Net realized gain (loss) |
(1,314,602 | ) | (7,063,182 | ) | (15,394,602 | ) | 3,551,272 | |||||||||
| Net change in unrealized appreciation/depreciation |
455,583 | (8,758,897 | ) | 6,875,262 | (10,073,032 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(730,237 | ) | (15,377,296 | ) | (7,807,951 | ) | (3,436,829 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(81,951 | ) | (438,777 | ) | (1,343,265 | ) | (2,707,351 | ) | ||||||||
| Return of capital |
— | (7,256 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(81,951 | ) | (446,033 | ) | (1,343,265 | ) | (2,707,351 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
3,626,320 | 11,677,734 | 102,960,611 | 155,183,874 | ||||||||||||
| Cost of shares redeemed |
— | (6,999,421 | ) | (103,107,246 | ) | (144,400,134 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
3,626,320 | 4,678,313 | (146,635 | ) | 10,783,740 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
2,814,132 | (11,145,016 | ) | (9,297,851 | ) | 4,639,560 | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
14,250,656 | 25,395,672 | 126,284,868 | 121,645,308 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 17,064,788 | $ | 14,250,656 | $ | 116,987,017 | $ | 126,284,868 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (38,067 | ) | $ | (84,898 | ) | $ | (234,960 | ) | $ | 396,916 | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
350,000 | 750,000 | 2,100,000 | 2,900,000 | ||||||||||||
| Shares redeemed |
— | (450,000 | ) | (2,050,000 | ) | (2,800,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
350,000 | 300,000 | 50,000 | 100,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Russia Capped ETF |
iShares MSCI South Africa ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 1,400,001 | $ | 8,597,464 | $ | 2,781,798 | $ | 8,757,656 | ||||||||
| Net realized loss |
(21,024,945 | ) | (29,489,877 | ) | (43,495,788 | ) | (1,560,353 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
3,808,770 | (57,254,526 | ) | (47,404,396 | ) | (101,934,812 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(15,816,174 | ) | (78,146,939 | ) | (88,118,386 | ) | (94,737,509 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(6,883,243 | ) | (10,822,184 | ) | (5,140,299 | ) | (9,092,367 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(6,883,243 | ) | (10,822,184 | ) | (5,140,299 | ) | (9,092,367 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
31,243,231 | 110,271,226 | 130,193,892 | 193,254,026 | ||||||||||||
| Cost of shares redeemed |
(2,326,529 | ) | (100,165,085 | ) | (115,525,398 | ) | (303,473,517 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
28,916,702 | 10,106,141 | 14,668,494 | (110,219,491 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
6,217,285 | (78,862,982 | ) | (78,590,191 | ) | (214,049,367 | ) | |||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
210,912,305 | 289,775,287 | 373,346,271 | 587,395,638 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 217,129,590 | $ | 210,912,305 | $ | 294,756,080 | $ | 373,346,271 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (472,822 | ) | $ | 5,010,420 | $ | (2,057,367 | ) | $ | 301,134 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
2,700,000 | 8,450,000 | 2,500,000 | 2,900,000 | ||||||||||||
| Shares redeemed |
(250,000 | ) | (7,400,000 | ) | (2,500,000 | ) | (4,700,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
2,450,000 | 1,050,000 | — | (1,800,000 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
47 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Turkey ETF |
iShares MSCI USA Equal Weighted ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 279,736 | $ | 10,937,802 | $ | 420,170 | $ | 960,400 | ||||||||
| Net realized gain (loss) |
(40,839,721 | ) | (25,265,900 | ) | 289,170 | 3,191,069 | ||||||||||
| Net change in unrealized appreciation/depreciation |
37,498,473 | (161,936,105 | ) | (2,849,597 | ) | (3,583,310 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
(3,061,512 | ) | (176,264,203 | ) | (2,140,257 | ) | 568,159 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(91,579 | ) | (10,891,320 | ) | (545,089 | ) | (949,728 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(91,579 | ) | (10,891,320 | ) | (545,089 | ) | (949,728 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
25,331,745 | 224,563,809 | 4,129,796 | 32,136,610 | ||||||||||||
| Cost of shares redeemed |
(111,990,915 | ) | (181,550,574 | ) | (12,254,161 | ) | (34,514,668 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(86,659,170 | ) | 43,013,235 | (8,124,365 | ) | (2,378,058 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DECREASE IN NET ASSETS |
(89,812,261 | ) | (144,142,288 | ) | (10,809,711 | ) | (2,759,627 | ) | ||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
371,224,548 | 515,366,836 | 44,631,865 | 47,391,492 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 281,412,287 | $ | 371,224,548 | $ | 33,822,154 | $ | 44,631,865 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (41,752 | ) | $ | (229,909 | ) | $ | 19,736 | $ | 144,655 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
650,000 | 4,150,000 | 100,000 | 750,000 | ||||||||||||
| Shares redeemed |
(2,950,000 | ) | (3,700,000 | ) | (300,000 | ) | (800,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(2,300,000 | ) | 450,000 | (200,000 | ) | (50,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Brazil Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 24.71 | $ | 53.61 | $ | 42.52 | $ | 52.61 | $ | 65.00 | $ | 68.07 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.38 | 1.00 | 1.56 | 1.59 | 1.73 | 2.24 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(4.22 | ) | (28.87 | ) | 11.08 | (10.32 | ) | (12.64 | ) | (1.69 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(3.84 | ) | (27.87 | ) | 12.64 | (8.73 | ) | (10.91 | ) | 0.55 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.23 | ) | (1.03 | ) | (1.55 | ) | (1.36 | ) | (0.56 | ) | (3.62 | ) | ||||||||||||
| Return of capital |
— | — | — | — | (0.92 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.23 | ) | (1.03 | ) | (1.55 | ) | (1.36 | ) | (1.48 | ) | (3.62 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 20.64 | $ | 24.71 | $ | 53.61 | $ | 42.52 | $ | 52.61 | $ | 65.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(15.52 | )%c | (52.49 | )% | 30.33 | % | (16.85 | )% | (16.79 | )% | 0.36 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 1,828,428 | $ | 1,989,135 | $ | 5,449,685 | $ | 4,983,630 | $ | 7,370,617 | $ | 11,332,121 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
3.48 | % | 2.73 | % | 3.37 | % | 3.02 | % | 2.92 | % | 3.08 | % | ||||||||||||
| Portfolio turnover ratee |
15 | % | 63 | % | 54 | % | 56 | % | 7 | % | 11 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover 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 cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31, 2012 and August 31, 2011 were 3%, 48%, 11%, 20%, 6% and 11%, respectively. See Note 4. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
49 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Chile Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 34.75 | $ | 43.52 | $ | 47.70 | $ | 60.31 | $ | 67.11 | $ | 67.37 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.07 | 0.66 | 0.69 | 0.68 | 0.97 | 0.95 | ||||||||||||||||||
| Net realized and unrealized lossb |
(1.38 | ) | (8.81 | ) | (4.18 | ) | (12.58 | ) | (6.80 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.31 | ) | (8.15 | ) | (3.49 | ) | (11.90 | ) | (5.83 | ) | 0.72 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.11 | ) | (0.62 | ) | (0.69 | ) | (0.68 | ) | (0.92 | ) | (0.98 | ) | ||||||||||||
| Return of capital |
— | — | — | (0.03 | ) | (0.05 | ) | (0.00 | )c | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.11 | ) | (0.62 | ) | (0.69 | ) | (0.71 | ) | (0.97 | ) | (0.98 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 33.33 | $ | 34.75 | $ | 43.52 | $ | 47.70 | $ | 60.31 | $ | 67.11 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(3.75 | )%d | (18.85 | )% | (7.40 | )% | (19.87 | )% | (8.68 | )% | 0.93 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 244,960 | $ | 234,536 | $ | 352,499 | $ | 364,890 | $ | 548,797 | $ | 708,018 | ||||||||||||
| Ratio of expenses to average net assetse |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
0.45 | % | 1.64 | % | 1.49 | % | 1.12 | % | 1.55 | % | 1.30 | % | ||||||||||||
| Portfolio turnover ratef |
56 | % | 71 | % | 91 | % | 34 | % | 48 | % | 38 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Rounds to less than $0.01. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover 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 cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31, 2012 and August 31, 2011 were 2%, 10%, 11%, 16%, 20% and 12%, respectively. See Note 4. |
See notes to financial statements.
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Colombia Capped ETF | ||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Period from to Aug. 31, 2013 |
|||||||||||||
| Net asset value, beginning of period |
$ | 11.88 | $ | 28.22 | $ | 25.98 | $ | 25.28 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income from investment operations: |
||||||||||||||||
| Net investment incomeb |
0.10 | 0.46 | c | 0.67 | 0.03 | |||||||||||
| Net realized and unrealized gain (loss)d |
(0.90 | ) | (16.34 | ) | 2.24 | 0.67 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total from investment operations |
(0.80 | ) | (15.88 | ) | 2.91 | 0.70 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Less distributions from: |
||||||||||||||||
| Net investment income |
(0.07 | ) | (0.45 | ) | (0.63 | ) | — | |||||||||
| Net realized gain |
— | — | (0.03 | ) | — | |||||||||||
| Return of capital |
— | (0.01 | ) | (0.01 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions |
(0.07 | ) | (0.46 | ) | (0.67 | ) | — | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net asset value, end of period |
$ | 11.01 | $ | 11.88 | $ | 28.22 | $ | 25.98 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total return |
(6.83 | )%e | (56.73 | )% | 11.44 | % | 2.77 | %e | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Ratios/Supplemental data: |
||||||||||||||||
| Net assets, end of period (000s) |
$ | 17,065 | $ | 14,251 | $ | 25,396 | $ | 18,188 | ||||||||
| Ratio of expenses to average net assetsf |
0.61 | % | 0.61 | % | 0.61 | % | 0.61 | % | ||||||||
| Ratio of net investment income to average net assetsf |
1.80 | % | 2.60 | % | 2.54 | % | 0.61 | % | ||||||||
| Portfolio turnover rateg |
8 | % | 86 | % | 34 | % | 2 | % | ||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | Includes a distribution from Ecopetrol SA. Excluding such distribution, the net investment income would have been $0.33 per share and 1.87% of average net assets. |
| d | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| e | Not annualized. |
| f | Annualized for periods of less than one year. |
| g | Portfolio turnover 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 cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014 and for the period ended August 31, 2013 were 8%, 49%, 33% and 2%, respectively. See Note 4. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
51 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Israel Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 50.51 | $ | 50.69 | $ | 42.85 | $ | 37.25 | $ | 45.89 | $ | 49.41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.30 | 1.23 | 0.87 | 0.95 | 1.12 | 1.39 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(4.29 | ) | (0.34 | ) | 7.95 | 5.68 | (8.66 | ) | (3.18 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(3.99 | ) | 0.89 | 8.82 | 6.63 | (7.54 | ) | (1.79 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.64 | ) | (1.07 | ) | (0.98 | ) | (1.03 | ) | (1.07 | ) | (1.73 | ) | ||||||||||||
| Return of capital |
— | — | — | — | (0.03 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.64 | ) | (1.07 | ) | (0.98 | ) | (1.03 | ) | (1.10 | ) | (1.73 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 45.88 | $ | 50.51 | $ | 50.69 | $ | 42.85 | $ | 37.25 | $ | 45.89 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(7.97 | )%c | 1.80 | % | 20.67 | % | 17.82 | % | (16.52 | )% | (4.26 | )% | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 116,987 | $ | 126,285 | $ | 121,645 | $ | 70,710 | $ | 68,912 | $ | 78,018 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.24 | % | 2.45 | % | 1.74 | % | 2.20 | % | 2.75 | % | 2.49 | % | ||||||||||||
| Portfolio turnover ratee |
33 | % | 14 | % | 15 | % | 14 | % | 20 | % | 17 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 52 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Russia Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Period from to Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 12.52 | $ | 18.34 | $ | 19.84 | $ | 21.15 | $ | 25.13 | $ | 25.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomeb |
0.08 | 0.47 | 0.63 | 0.62 | 0.50 | 0.45 | ||||||||||||||||||
| Net realized and unrealized gain (loss)c |
(0.97 | ) | (5.63 | ) | (2.00 | ) | (1.35 | ) | (4.00 | ) | 0.03 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(0.89 | ) | (5.16 | ) | (1.37 | ) | (0.73 | ) | (3.50 | ) | 0.48 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.38 | ) | (0.66 | ) | (0.13 | ) | (0.58 | ) | (0.48 | ) | (0.35 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.38 | ) | (0.66 | ) | (0.13 | ) | (0.58 | ) | (0.48 | ) | (0.35 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 11.25 | $ | 12.52 | $ | 18.34 | $ | 19.84 | $ | 21.15 | $ | 25.13 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(7.07 | )%d | (27.57 | )% | (7.00 | )% | (3.40 | )% | (13.75 | )% | 1.76 | %d | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 217,130 | $ | 210,912 | $ | 289,775 | $ | 310,511 | $ | 147,026 | $ | 111,835 | ||||||||||||
| Ratio of expenses to average net assetse |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.58 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
1.32 | % | 3.33 | % | 3.14 | % | 2.87 | % | 2.22 | % | 1.99 | % | ||||||||||||
| Portfolio turnover ratef |
11 | % | 19 | % | 15 | % | 14 | % | 16 | % | 22 | % | ||||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| 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 financial statements.
| FINANCIAL HIGHLIGHTS |
53 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI South Africa ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 57.44 | $ | 70.77 | $ | 58.88 | $ | 64.65 | $ | 69.06 | $ | 58.74 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.43 | 1.28 | 1.57 | 1.32 | 2.10 | 1.65 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(11.68 | ) | (13.24 | ) | 11.86 | (5.31 | ) | (4.41 | ) | 11.08 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(11.25 | ) | (11.96 | ) | 13.43 | (3.99 | ) | (2.31 | ) | 12.73 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.84 | ) | (1.37 | ) | (1.54 | ) | (1.78 | ) | (2.10 | ) | (2.41 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.84 | ) | (1.37 | ) | (1.54 | ) | (1.78 | ) | (2.10 | ) | (2.41 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 45.35 | $ | 57.44 | $ | 70.77 | $ | 58.88 | $ | 64.65 | $ | 69.06 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(19.65 | )%c | (17.07 | )% | 23.13 | % | (6.35 | )% | (3.17 | )% | 21.58 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 294,756 | $ | 373,346 | $ | 587,396 | $ | 547,569 | $ | 471,922 | $ | 504,102 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.69 | % | 1.94 | % | 2.40 | % | 2.08 | % | 3.26 | % | 2.38 | % | ||||||||||||
| Portfolio turnover ratee |
7 | % | 9 | % | 6 | % | 5 | % | 4 | % | 4 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 54 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Turkey ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 38.27 | $ | 55.72 | $ | 49.00 | $ | 56.13 | $ | 47.73 | $ | 60.81 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.03 | 1.13 | b | 0.85 | 1.07 | 0.86 | 0.84 | |||||||||||||||||
| Net realized and unrealized gain (loss)c |
(0.26 | ) | (17.49 | ) | 6.75 | (7.08 | ) | 8.70 | (12.59 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(0.23 | ) | (16.36 | ) | 7.60 | (6.01 | ) | 9.56 | (11.75 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.01 | ) | (1.09 | ) | (0.88 | ) | (1.12 | ) | (1.16 | ) | (1.33 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.01 | ) | (1.09 | ) | (0.88 | ) | (1.12 | ) | (1.16 | ) | (1.33 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 38.03 | $ | 38.27 | $ | 55.72 | $ | 49.00 | $ | 56.13 | $ | 47.73 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(0.60 | )%d | (29.69 | )% | 15.52 | % | (11.05 | )% | 20.37 | % | (19.74 | )% | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 281,412 | $ | 371,225 | $ | 515,367 | $ | 436,076 | $ | 561,284 | $ | 448,677 | ||||||||||||
| Ratio of expenses to average net assetse |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
0.17 | % | 2.31 | %b | 1.64 | % | 1.67 | % | 1.75 | % | 1.30 | % | ||||||||||||
| Portfolio turnover ratef |
2 | % | 6 | % | 8 | % | 9 | % | 9 | % | 12 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | Includes a special distribution from Turkcell Iletisim Hizmetleri AS. Excluding such special distribution, the net investment income would have been $0.76 per share and 1.55% of average net assets. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| 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 financial statements.
| FINANCIAL HIGHLIGHTS |
55 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI USA Equal Weighted ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 42.51 | $ | 43.08 | $ | 35.26 | $ | 30.31 | $ | 26.17 | $ | 22.44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.41 | 0.80 | 0.71 | 0.69 | 0.59 | 0.51 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(2.61 | ) | (0.57 | ) | 8.01 | 4.96 | 3.94 | 3.73 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(2.20 | ) | 0.23 | 8.72 | 5.65 | 4.53 | 4.24 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.52 | ) | (0.80 | ) | (0.90 | ) | (0.70 | ) | (0.39 | ) | (0.51 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.52 | ) | (0.80 | ) | (0.90 | ) | (0.70 | ) | (0.39 | ) | (0.51 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 39.79 | $ | 42.51 | $ | 43.08 | $ | 35.26 | $ | 30.31 | $ | 26.17 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(5.23 | )%c | 0.48 | % | 24.98 | % | 18.85 | % | 17.44 | % | 18.89 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 33,822 | $ | 44,632 | $ | 47,391 | $ | 179,830 | $ | 145,470 | $ | 5,233 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.15 | % | 0.15 | % | 0.15 | % | 0.15 | % | 0.15 | % | 0.15 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.98 | % | 1.82 | % | 1.82 | % | 2.10 | % | 2.04 | % | 1.90 | % | ||||||||||||
| Portfolio turnover ratee |
14 | % | 39 | % | 6 | % | 5 | % | 6 | % | 8 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 56 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and 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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
| NOTES TO FINANCIAL STATEMENTS |
57 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| 58 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Brazil Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 1,209,960,061 | $ | — | $ | — | $ | 1,209,960,061 | ||||||||
| Preferred Stocks |
597,705,977 | — | — | 597,705,977 | ||||||||||||
| Rights |
60,428 | — | — | 60,428 | ||||||||||||
| Money Market Funds |
34,520 | — | — | 34,520 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,807,760,986 | $ | — | $ | — | $ | 1,807,760,986 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Chile Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 228,167,662 | $ | — | $ | — | $ | 228,167,662 | ||||||||
| Preferred Stocks |
16,185,697 | — | — | 16,185,697 | ||||||||||||
| Rights |
52,840 | — | — | 52,840 | ||||||||||||
| Money Market Funds |
627,776 | — | — | 627,776 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 245,033,975 | $ | — | $ | — | $ | 245,033,975 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Colombia Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 12,097,587 | $ | 996,961 | $ | — | $ | 13,094,548 | ||||||||
| Preferred Stocks |
4,088,513 | — | — | 4,088,513 | ||||||||||||
| Money Market Funds |
336,962 | — | — | 336,962 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 16,523,062 | $ | 996,961 | $ | — | $ | 17,520,023 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Israel Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 116,693,607 | $ | — | $ | — | $ | 116,693,607 | ||||||||
| Money Market Funds |
15,987,633 | — | — | 15,987,633 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 132,681,240 | $ | — | $ | — | $ | 132,681,240 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Russia Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 203,572,777 | $ | — | $ | — | $ | 203,572,777 | ||||||||
| Preferred Stocks |
13,803,103 | — | — | 13,803,103 | ||||||||||||
| Money Market Funds |
215,365 | — | — | 215,365 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 217,591,245 | $ | — | $ | — | $ | 217,591,245 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NOTES TO FINANCIAL STATEMENTS |
59 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI South Africa |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 294,098,674 | $ | — | $ | 1,664 | $ | 294,100,338 | ||||||||
| Money Market Funds |
2,778,950 | — | — | 2,778,950 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 296,877,624 | $ | — | $ | 1,664 | $ | 296,879,288 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Turkey |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 281,035,544 | $ | — | $ | — | $ | 281,035,544 | ||||||||
| Money Market Funds |
38,043,173 | — | — | 38,043,173 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 319,078,717 | $ | — | $ | — | $ | 319,078,717 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI USA Equal Weighted |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 33,774,047 | $ | — | $ | — | $ | 33,774,047 | ||||||||
| Money Market Funds |
1,876,085 | — | — | 1,876,085 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 35,650,132 | $ | — | $ | — | $ | 35,650,132 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The iShares MSCI Colombia Capped ETF had transfers from Level 1 to Level 2 during the six months ended February 29, 2016 in the amount of $630,070, due to a suspension of trading.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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.
| 60 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
FOREIGN TAXES
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount
| NOTES TO FINANCIAL STATEMENTS |
61 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Colombia Capped |
||||||||||||
| BMO Capital Markets |
$ | 9,656 | $ | 9,656 | $ | — | ||||||
| BNP Paribas Prime Brokerage Inc. |
78,690 | 78,690 | — | |||||||||
| Citigroup Global Markets Inc. |
167,872 | 167,872 | — | |||||||||
| Morgan Stanley & Co. LLC |
37,958 | 37,958 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 294,176 | $ | 294,176 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Israel Capped |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 3,389,882 | $ | 3,389,882 | $ | — | ||||||
| Deutsche Bank Securities Inc. |
197,915 | 197,915 | — | |||||||||
| Goldman Sachs & Co. |
2,333,326 | 2,333,326 | — | |||||||||
| JPMorgan Clearing Corp. |
70,184 | 70,184 | — | |||||||||
| State Street Bank & Trust Company |
422,199 | 422,199 | — | |||||||||
| UBS Securities LLC |
3,052,356 | 3,052,356 | — | |||||||||
| Wells Fargo Securities LLC |
5,814,884 | 5,814,884 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 15,280,746 | $ | 15,280,746 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI South Africa |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 1,247,416 | $ | 1,247,416 | $ | — | ||||||
| Goldman Sachs & Co. |
1,159,545 | 1,159,545 | — | |||||||||
| JPMorgan Clearing Corp. |
19,594 | 19,594 | — | |||||||||
| Macquarie Capital (USA) Inc. |
61,698 | 61,698 | — | |||||||||
| Morgan Stanley & Co. LLC |
118 | 118 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 2,488,371 | $ | 2,488,371 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Turkey |
||||||||||||
| Barclays Capital Inc. |
$ | 1,319,354 | $ | 1,319,354 | $ | — | ||||||
| Citigroup Global Markets Inc. |
880,667 | 880,667 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
2,108,288 | 2,108,288 | — | |||||||||
| Deutsche Bank Securities Inc. |
5,249,687 | 5,249,687 | — | |||||||||
| Goldman Sachs & Co. |
11,024,134 | 11,024,134 | — | |||||||||
| JPMorgan Clearing Corp. |
259,523 | 259,523 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
976,199 | 976,199 | — | |||||||||
| Morgan Stanley & Co. LLC |
4,787,709 | 4,787,709 | — | |||||||||
| SG Americas Securities LLC |
40,902 | 40,902 | — | |||||||||
| UBS Securities LLC |
8,631,684 | 8,631,684 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 35,278,147 | $ | 35,278,147 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| 62 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI USA Equal Weighted |
||||||||||||
| Barclays Capital Inc. |
$ | 78,441 | $ | 78,441 | $ | — | ||||||
| Citigroup Global Markets Inc. |
209,002 | 209,002 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
51,672 | 51,672 | — | |||||||||
| Deutsche Bank Securities Inc. |
204,593 | 204,593 | — | |||||||||
| Goldman Sachs & Co. |
277,140 | 277,140 | — | |||||||||
| HSBC Bank PLC |
53,735 | 53,735 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
162,303 | 162,303 | — | |||||||||
| Morgan Stanley & Co. LLC (U.S. Equity Securities Lending) |
262,129 | 262,129 | — | |||||||||
| SG Americas Securities LLC |
24,166 | 24,166 | — | |||||||||
| State Street Bank & Trust Company |
183,555 | 183,555 | — | |||||||||
| UBS Securities LLC |
289,596 | 289,596 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 1,796,332 | $ | 1,796,332 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market value of securities loaned at period end and is disclosed in each Fund’s statement of assets and liabilities. |
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
For its investment advisory services to each of the iShares MSCI Brazil Capped, iShares MSCI Chile Capped, iShares MSCI Israel Capped, iShares MSCI Russia Capped, iShares MSCI South Africa and iShares MSCI Turkey ETFs, BFA 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 the Fund and certain other iShares 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, up to and including $8 billion | ||||
| 0.57 | Over $8 billion, up to and including $16 billion | ||||
| 0.51 | Over $16 billion, up to and including $32 billion | ||||
| 0.45 | Over $32 billion | ||||
For its investment advisory services to each Fund, BFA is entitled to an annual investment advisory fee based on the average daily net assets of each Fund as follows:
| iShares ETF | Investment Advisory Fee |
|||
| MSCI Colombia Capped |
0.61 | % | ||
| MSCI USA Equal Weighted |
0.15 | |||
| NOTES TO FINANCIAL STATEMENTS |
63 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, the iShares MSCI USA Equal Weighted ETF (the “Group 1 Fund”), retains 71.5% of securities lending income and the amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees.
Pursuant to a securities lending agreement, the iShares MSCI Brazil Capped, iShares MSCI Chile Capped, iShares MSCI Colombia Capped, iShares MSCI Israel Capped, iShares MSCI Russia Capped, iShares MSCI South Africa and iShares MSCI Turkey ETF’s (the “Group 2 Funds”), retain 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, the Group 1 Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 75% of securities lending income and the amount retained can never be less than 65% of the total of securities lending income plus the collateral investment fees. Each Group 2 Fund will receive for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| MSCI Colombia Capped |
$ | 1,839 | ||
| MSCI Israel Capped |
29,993 | |||
| MSCI South Africa |
3,712 | |||
| MSCI Turkey |
200,878 | |||
| MSCI USA Equal Weighted |
4,904 | |||
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
| 64 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
For the six months ended February 29, 2016, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Israel Capped |
$ | 347,058 | $ | 7,607,612 | ||||
| MSCI Russia Capped |
777,584 | 638,528 | ||||||
| MSCI South Africa |
1,274,230 | 4,528,449 | ||||||
| MSCI USA Equal Weighted |
1,357,935 | 1,146,858 | ||||||
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
Investments in issuers considered to be affiliates of the Funds (excluding money market funds) during the six months ended February 29, 2016, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:
| iShares ETF and Name of Affiliated Issuer |
Shares Held at Beginning of Period |
Shares Purchased |
Shares Sold |
Shares Held at End of Period |
Value at End of Period |
Dividend Income |
Net Realized Gain (Loss) |
|||||||||||||||||||||
| MSCI USA Equal Weighted |
||||||||||||||||||||||||||||
| BlackRock Inc. |
226 | 30 | (84 | ) | 172 | $ | 53,657 | $ | 1,227 | $ | 2,363 | |||||||||||||||||
| PNC Financial Services Group Inc. (The) |
776 | 151 | (283 | ) | 644 | 52,364 | 783 | 1,323 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| $ | 106,021 | $ | 2,010 | $ | 3,686 | |||||||||||||||||||||||
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Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Brazil Capped |
$ | 469,974,438 | $ | 278,730,811 | ||||
| MSCI Chile Capped |
146,129,530 | 120,743,435 | ||||||
| MSCI Colombia Capped |
4,760,672 | 1,164,282 | ||||||
| MSCI Israel Capped |
36,976,945 | 37,298,229 | ||||||
| MSCI Russia Capped |
29,984,528 | 24,011,014 | ||||||
| MSCI South Africa |
24,192,934 | 22,156,856 | ||||||
| MSCI Turkey |
5,562,393 | 5,447,971 | ||||||
| MSCI USA Equal Weighted |
6,224,026 | 5,851,830 | ||||||
| NOTES TO FINANCIAL STATEMENTS |
65 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| MSCI Colombia Capped |
$ | 187,257 | $ | — | ||||
| MSCI Israel Capped |
102,599,215 | 102,783,496 | ||||||
| MSCI Russia Capped |
18,680,540 | 1,710,531 | ||||||
| MSCI South Africa |
125,071,065 | 114,280,313 | ||||||
| MSCI Turkey |
25,295,955 | 111,799,583 | ||||||
| MSCI USA Equal Weighted |
4,110,856 | 12,238,332 | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
From time to time, settlement of securities related to in-kind contributions or in-kind redemptions may be delayed. In such cases, securities related to in-kind contributions are reflected as “Due from custodian” and securities related to in-kind redemptions are reflected as “Securities related to in-kind transactions” in the statements of assets and liabilities.
| 5. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its investment in equity instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the
| 66 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund, except for the iShares MSCI USA Equal Weighted ETF, each invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
Each Fund, except for the iShares MSCI USA Equal Weighted ETF, each invests all or substantially all of its assets in issuers located in a single country. When a fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in that country may have a significant impact on its investment performance.
The United States and the European Union, along with the regulatory bodies of a number of countries including Japan, Australia and Canada (collectively, “Sanctioning Bodies”), have imposed sectorial economic sanctions on certain Russian individuals and Russian corporate entities which include prohibitions on transacting in or dealing in new debt of longer than 30 or 90 days maturity or new equity of such issuers. Securities held by the iShares MSCI Russia Capped ETF issued prior to the date of the sanctions being imposed are not currently subject to any restrictions under the sanctions. However, compliance with each of these sanctions may impair the ability of a Fund to buy, sell, hold, receive or deliver the affected securities or other securities of such issuers. The Sanctioning Bodies could also institute broader sanctions on Russia. These sanctions, or even the threat of further sanctions, may result in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy. Current or future sanctions may result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. These retaliatory measures may include the immediate freeze of Russian assets held by a Fund.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| NOTES TO FINANCIAL STATEMENTS |
67 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 6. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
| iShares ETF | Non- Expiring a |
Expiring 2016 |
Expiring 2017 |
Expiring 2018 |
Expiring 2019 |
Total | ||||||||||||||||||
| MSCI Brazil Capped |
$ | 1,053,102,706 | $ | — | $ | — | $ | 198,226,310 | $ | — | $ | 1,251,329,016 | ||||||||||||
| MSCI Chile Capped |
90,296,781 | — | 1,886,881 | 11,712,090 | 976,991 | 104,872,743 | ||||||||||||||||||
| MSCI Colombia Capped |
67,112 | — | — | — | — | 67,112 | ||||||||||||||||||
| MSCI Israel Capped |
14,619,675 | — | 784,479 | 10,801,191 | 7,130,249 | 33,335,594 | ||||||||||||||||||
| MSCI Russia Capped |
20,431,060 | — | — | — | — | 20,431,060 | ||||||||||||||||||
| MSCI South Africa |
33,347,782 | 972,024 | 15,339,464 | 14,856,365 | 6,137,142 | 70,652,777 | ||||||||||||||||||
| MSCI Turkey |
29,873,468 | — | 720,636 | 5,982,737 | 3,859,184 | 40,436,025 | ||||||||||||||||||
| MSCI USA Equal Weighted |
169,304 | — | — | — | — | 169,304 | ||||||||||||||||||
| a | Must be utilized prior to losses subject to expiration. |
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 marked-to-market gains.
| 68 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| MSCI Brazil Capped |
$ | 2,543,013,494 | $ | 330,643,783 | $ | (1,065,896,291 | ) | $ | (735,252,508 | ) | ||||||
| MSCI Chile Capped |
256,934,066 | 25,058,836 | (36,958,927 | ) | (11,900,091 | ) | ||||||||||
| MSCI Colombia Capped |
27,909,397 | 72,283 | (10,461,657 | ) | (10,389,374 | ) | ||||||||||
| MSCI Israel Capped |
153,608,108 | 1,441,394 | (22,368,262 | ) | (20,926,868 | ) | ||||||||||
| MSCI Russia Capped |
353,808,241 | 1,406,939 | (137,623,935 | ) | (136,216,996 | ) | ||||||||||
| MSCI South Africa |
483,506,138 | 524,280 | (187,151,130 | ) | (186,626,850 | ) | ||||||||||
| MSCI Turkey |
540,894,236 | 276,259 | (222,091,778 | ) | (221,815,519 | ) | ||||||||||
| MSCI USA Equal Weighted |
38,813,266 | 1,523,982 | (4,687,116 | ) | (3,163,134 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| 7. | LINE OF CREDIT |
The iShares MSCI Colombia Capped ETF, along with certain other iShares funds, are parties to a $250 million credit agreement with State Street Bank and Trust Company, which expires on October 28, 2016. The line of credit may be used for temporary or emergency purposes, including redemptions, settlement of trades and rebalancing of portfolio holdings. The credit agreement has the following terms: a commitment fee of 0.20% per annum on the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR (not less than zero) plus 1.00% per annum or (b) the U.S. Federal Funds rate (not less than zero) plus 1.00% per annum on amounts borrowed. The commitment fee is allocated to each fund participating in the credit agreement based on each fund’s pro-rata share of the aggregate average daily value of assets invested in local securities of certain foreign markets.
The terms of the credit agreement, as amended by the Board on September 17, 2015, became effective on October 28, 2015. Prior to this date, the maximum borrowing amount was $150 million and the commitment fee was 0.08% per annum on the unused portion of the credit agreement.
The Fund did not borrow under the credit agreement during the six months ended February 29, 2016.
| 8. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
| NOTES TO FINANCIAL STATEMENTS |
69 |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| MSCI Brazil Capped |
$ | 0.232660 | $ | — | $ | — | $ | 0.232660 | 100 | % | — | % | — | % | 100 | % | ||||||||||||||||
| MSCI Chile Capped |
0.114948 | — | — | 0.114948 | 100 | — | — | 100 | ||||||||||||||||||||||||
| MSCI Israel Capped |
0.488643 | — | 0.151007 | 0.639650 | 76 | — | 24 | 100 | ||||||||||||||||||||||||
| MSCI Russia Capped |
0.288468 | — | 0.088696 | 0.377164 | 76 | — | 24 | 100 | ||||||||||||||||||||||||
| MSCI South Africa |
0.756211 | — | 0.086461 | 0.842672 | 90 | — | 10 | 100 | ||||||||||||||||||||||||
| MSCI USA Equal Weighted |
0.492601 | — | 0.031877 | 0.524478 | 94 | — | 6 | 100 | ||||||||||||||||||||||||
| 70 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-804-0216
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Table of Contents
FEBRUARY 29, 2016
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2016 SEMI-ANNUAL REPORT (UNAUDITED)
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iShares, Inc.
| Ø | iShares MSCI All Country World Minimum Volatility ETF | ACWV | NYSE Arca |
| Ø | iShares MSCI Australia ETF | EWA | NYSE Arca |
| Ø | iShares MSCI Canada ETF | EWC | NYSE Arca |
| Ø | iShares MSCI Japan ETF | EWJ | NYSE Arca |
| Ø | iShares MSCI Mexico Capped ETF | EWW | NYSE Arca |
| Ø | iShares MSCI South Korea Capped ETF | EWY | NYSE Arca |
Table of Contents
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| 64 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI ALL COUNTRY WORLD MINIMUM VOLATILITY ETF
Performance as of February 29, 2016
The iShares MSCI All Country World Minimum Volatility ETF (the “Fund”) seeks to track the investment results of an index composed of developed and emerging market equities that, in the aggregate, have lower volatility characteristics relative to the broader developed and emerging equity markets, as represented by the MSCI ACWI Minimum Volatility (USD) Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was 3.86%, net of fees, while the total return for the Index was 3.72%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(1.05)% | (1.13)% | (1.39)% | (1.05)% | (1.13)% | (1.39)% | ||||||||||||||||||||
| Since Inception |
10.15% | 10.17% | 9.85% | 52.54% | 52.63% | 50.75% | ||||||||||||||||||||
The inception date of the Fund was 10/18/11. The first day of secondary market trading was 10/20/11.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,038.60 | $ | 1.01 | $ | 1,000.00 | $ | 1,023.90 | $ | 1.01 | 0.20% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI AUSTRALIA ETF
Performance as of February 29, 2016
The iShares MSCI Australia ETF (the “Fund”) seeks to track the investment results of an index composed of Australian equities, as represented by the MSCI Australia Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -4.69%, net of fees, while the total return for the Index was -4.55%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(23.08)% | (23.12)% | (22.82)% | (23.08)% | (23.12)% | (22.82)% | ||||||||||||||||||||
| 5 Years |
(3.03)% | (3.17)% | (2.68)% | (14.24)% | (14.87)% | (12.69)% | ||||||||||||||||||||
| 10 Years |
3.44% | 3.43% | 3.54% | 40.22% | 40.10% | 41.64% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 953.10 | $ | 2.33 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI CANADA ETF
Performance as of February 29, 2016
The iShares MSCI Canada ETF (the “Fund”) seeks to track the investment results of an index composed of Canadian equities, as represented by the MSCI Canada Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -8.52%, net of fees, while the total return for the Index was -8.51%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(21.06)% | (21.21)% | (20.97)% | (21.06)% | (21.21)% | (20.97)% | ||||||||||||||||||||
| 5 Years |
(6.33)% | (6.45)% | (6.17)% | (27.91)% | (28.37)% | (27.25)% | ||||||||||||||||||||
| 10 Years |
1.17% | 1.13% | 1.39% | 12.38% | 11.87% | 14.80% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 914.80 | $ | 2.29 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI JAPAN ETF
Performance as of February 29, 2016
The iShares MSCI Japan ETF (the “Fund”) seeks to track the investment results of an index composed of Japanese equities, as represented by the MSCI Japan Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -9.30%, net of fees, while the total return for the Index was -9.04%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(10.18)% | (10.57)% | (9.90)% | (10.18)% | (10.57)% | (9.90)% | ||||||||||||||||||||
| 5 Years |
0.63% | 0.42% | 1.11% | 3.17% | 2.13% | 5.66% | ||||||||||||||||||||
| 10 Years |
(1.10)% | (0.98)% | (0.63)% | (10.50)% | (9.42)% | (6.17)% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 907.00 | $ | 2.28 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI MEXICO CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI Mexico Capped ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Mexican equities, as represented by the MSCI Mexico Investable Market Index 25/50 (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -6.25%, net of fees, while the total return for the Index was -6.17%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(17.34)% | (17.63)% | (17.18)% | (17.34)% | (17.63)% | (17.18)% | ||||||||||||||||||||
| 5 Years |
(2.84)% | (2.97)% | (3.02)% | (13.43)% | (13.99)% | (14.21)% | ||||||||||||||||||||
| 10 Years |
4.03% | 4.01% | 3.55% | 48.44% | 48.12% | 41.71% | ||||||||||||||||||||
Index performance through November 30, 2007 reflects the performance of the MSCI Mexico Index. Index performance beginning on December 1, 2007 through February 11, 2013 reflects the performance of the MSCI Mexico Investable Market Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Mexico Investable Market Index 25/50.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 937.50 | $ | 2.31 | $ | 1,000.00 | $ | 1,022.50 | $ | 2.41 | 0.48% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
9 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI SOUTH KOREA CAPPED ETF
Performance as of February 29, 2016
The iShares MSCI South Korea Capped ETF (the “Fund”) seeks to track the investment results of an index composed of South Korean equities, as represented by the MSCI Korea 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -1.18%, net of fees, while the total return for the Index was -1.35%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(16.38)% | (15.71)% | (16.19)% | (16.38)% | (15.71)% | (16.19)% | ||||||||||||||||||||
| 5 Years |
(2.88)% | (2.99)% | (2.29)% | (13.58)% | (14.10)% | (10.96)% | ||||||||||||||||||||
| 10 Years |
1.11% | 0.97% | 1.58% | 11.67% | 10.09% | 16.92% | ||||||||||||||||||||
Index performance through February 11, 2013 reflects the performance of the MSCI Korea Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Korea 25/50 Index.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 988.20 | $ | 3.16 | $ | 1,000.00 | $ | 1,021.70 | $ | 3.22 | 0.64% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| ABOUT FUND PERFORMANCE / SHAREHOLDER EXPENSES |
11 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI ALL COUNTRY WORLD MINIMUM VOLATILITY ETF
February 29, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI ALL COUNTRY WORLD MINIMUM VOLATILITY ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI ALL COUNTRY WORLD MINIMUM VOLATILITY ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI ALL COUNTRY WORLD MINIMUM VOLATILITY ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI ALL COUNTRY WORLD MINIMUM VOLATILITY ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI ALL COUNTRY WORLD MINIMUM VOLATILITY ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI AUSTRALIA ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI AUSTRALIA ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| ASX SPI 200 Index | 159 | Mar. 2016 | Sydney Futures | $ | 13,837,987 | $ | 5,518 | |||||||||||||
See notes to financial statements.
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI CANADA ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI CANADA ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| S&P/TSX 60 Index | 43 | Mar. 2016 | Montreal | $ | 4,786,313 | $ | 138,518 | |||||||||||||
See notes to financial statements.
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
25 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN ETF
February 29, 2016
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
27 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN ETF
February 29, 2016
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
29 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI JAPAN ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| TOPIX Index | 523 | Mar. 2016 | Osaka Securities | $ | 59,678,760 | $ | (7,608,913) | |||||||||||||
See notes to financial statements.
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI MEXICO CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
31 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI MEXICO CAPPED ETF
February 29, 2016
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI MEXICO CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
33 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI SOUTH KOREA CAPPED ETF
February 29, 2016
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI SOUTH KOREA CAPPED ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
35 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI SOUTH KOREA CAPPED ETF
February 29, 2016
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares MSCI All Country World Minimum Volatility ETF |
iShares MSCI Australia ETF |
iShares MSCI Canada ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 2,287,597,072 | $ | 1,642,633,259 | $ | 2,841,217,138 | ||||||
| Affiliated (Note 2) |
53,590,623 | 6,556,731 | 10,699,652 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 2,341,187,695 | $ | 1,649,189,990 | $ | 2,851,916,790 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 2,431,301,187 | $ | 1,155,746,557 | $ | 1,971,479,681 | ||||||
| Affiliated (Note 2) |
53,590,623 | 6,556,731 | 10,699,652 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
2,484,891,810 | 1,162,303,288 | 1,982,179,333 | |||||||||
| Foreign currency, at valueb |
1,819,747 | 4,685,118 | 4,375,476 | |||||||||
| Cash |
303 | — | — | |||||||||
| Foreign currency pledged to broker, at valueb |
— | 770,209 | 269,069 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
338 | 1,479,319 | 11,447,557 | |||||||||
| Due from custodian (Note 4) |
44,132 | — | — | |||||||||
| Dividends and interest |
5,137,378 | 9,336,640 | 2,455,411 | |||||||||
| Capital shares sold |
1,874,998 | — | 107,129 | |||||||||
| Futures variation margin |
— | 5,518 | 138,518 | |||||||||
| Tax reclaims |
910,492 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
2,494,679,198 | 1,178,580,092 | 2,000,972,493 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
1,391,939 | 2,451,887 | 14,304,485 | |||||||||
| Collateral for securities on loan (Note 1) |
52,071,159 | 6,139,876 | 9,224,725 | |||||||||
| Investment advisory fees (Note 2) |
372,183 | 444,504 | 673,015 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
53,835,281 | 9,036,267 | 24,202,225 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 2,440,843,917 | $ | 1,169,543,825 | $ | 1,976,770,268 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 2,324,390,564 | $ | 1,930,853,862 | $ | 3,364,284,587 | ||||||
| Undistributed (distributions in excess of) net investment income |
6,168,252 | 2,069,707 | (3,364,462 | ) | ||||||||
| Accumulated net realized loss |
(33,393,781 | ) | (276,506,410 | ) | (514,644,071 | ) | ||||||
| Net unrealized appreciation (depreciation) |
143,678,882 | (486,873,334 | ) | (869,505,786 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 2,440,843,917 | $ | 1,169,543,825 | $ | 1,976,770,268 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
35,200,000 | 67,600,000 | 91,200,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 69.34 | $ | 17.30 | $ | 21.68 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $49,461,500, $5,816,290 and $8,766,287, respectively. See Note 1. |
| b | Cost of foreign currency including currency at broker, if any: $1,826,572, $5,452,962 and $4,582,807, respectively. |
| c | $0.001 par value, number of shares authorized: 500 million, 627.8 million and 340.2 million, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
37 |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Japan ETF |
iShares MSCI Mexico Capped ETF |
iShares MSCI South Korea Capped ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 20,460,683,917 | $ | 1,640,299,770 | $ | 1,872,337,810 | ||||||
| Affiliated (Note 2) |
53,049,066 | 50,910,905 | 149,263,491 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 20,513,732,983 | $ | 1,691,210,675 | $ | 2,021,601,301 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 17,444,607,056 | $ | 1,112,307,213 | $ | 2,904,596,942 | ||||||
| Affiliated (Note 2) |
53,049,066 | 50,910,905 | 149,263,491 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
17,497,656,122 | 1,163,218,118 | 3,053,860,433 | |||||||||
| Foreign currency, at valueb |
26,893,382 | 1,721,486 | 2 | |||||||||
| Foreign currency pledged to broker, at valueb |
10,732,455 | — | — | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
11,354,039 | 9,819,574 | 30,015,644 | |||||||||
| Due from custodian (Note 4) |
— | 655,618 | — | |||||||||
| Dividends and interest |
30,436,641 | 647,486 | 44,065,735 | |||||||||
| Tax reclaims |
178,993 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
17,577,251,632 | 1,176,062,282 | 3,127,941,814 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
6,062,203 | 9,668,978 | 27,867,358 | |||||||||
| Collateral for securities on loan (Note 1) |
47,140,232 | 50,688,471 | 146,743,934 | |||||||||
| Capital shares redeemed |
2,298,263 | 141,510 | — | |||||||||
| Futures variation margin |
7,608,913 | — | — | |||||||||
| Foreign taxes (Note 1) |
— | — | 2,244 | |||||||||
| Investment advisory fees (Note 2) |
6,820,075 | 415,342 | 1,522,777 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
69,929,686 | 60,914,301 | 176,136,313 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 17,507,321,946 | $ | 1,115,147,981 | $ | 2,951,805,501 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 21,434,096,990 | $ | 1,912,401,394 | $ | 3,295,747,244 | ||||||
| Undistributed (distributions in excess of) net investment income |
(39,484,432 | ) | 3,590,694 | (114,454,881 | ) | |||||||
| Accumulated net realized loss |
(866,367,352 | ) | (272,730,019 | ) | (1,259,250,466 | ) | ||||||
| Net unrealized appreciation (depreciation) |
(3,020,923,260 | ) | (528,114,088 | ) | 1,029,763,604 | |||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 17,507,321,946 | $ | 1,115,147,981 | $ | 2,951,805,501 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
1,599,600,000 | 22,900,000 | 63,400,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 10.94 | $ | 48.70 | $ | 46.56 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $44,784,459, $47,501,290 and $139,864,837, respectively. See Note 1. |
| b | Cost of foreign currency including currency pledged to broker: $36,347,205, $1,672,665 and $2, respectively. |
| c | $0.001 par value, number of shares authorized: 2.5246 billion, 255 million and 200 million, respectively. |
See notes to financial statements.
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI All Country World Minimum Volatility ETF |
iShares MSCI Australia ETF |
iShares MSCI Canada ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 25,049,265 | $ | 33,933,118 | $ | 24,090,303 | ||||||
| Interest — unaffiliated |
— | 941 | — | |||||||||
| Interest — affiliated (Note 2) |
2,238 | 901 | 1,059 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
198,601 | 119,738 | 27,237 | |||||||||
|
|
|
|
|
|
|
|||||||
| 25,250,104 | 34,054,698 | 24,118,599 | ||||||||||
| Less: Other foreign taxes (Note 1) |
252 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
25,250,356 | 34,054,698 | 24,118,599 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
3,611,763 | 2,981,840 | 4,317,689 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
3,611,763 | 2,981,840 | 4,317,689 | |||||||||
| Less investment advisory fees waived (Note 2) |
(1,400,274 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Net expenses |
2,211,489 | 2,981,840 | 4,317,689 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
23,038,867 | 31,072,858 | 19,800,910 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(28,218,798 | ) | (43,700,249 | ) | (92,859,666 | ) | ||||||
| In-kind redemptions — unaffiliated |
26,892,132 | 10,041,570 | (4,452,190 | ) | ||||||||
| Futures contracts |
— | (590,146 | ) | (758,993 | ) | |||||||
| Foreign currency transactions |
(113,688 | ) | (6,296 | ) | (349,943 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(1,440,354 | ) | (34,255,121 | ) | (98,420,792 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
57,130,373 | (55,602,670 | ) | (91,471,393 | ) | |||||||
| Futures contracts |
— | 312,747 | 278,571 | |||||||||
| Translation of assets and liabilities in foreign currencies |
61,101 | 345,232 | 237,354 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
57,191,474 | (54,944,691 | ) | (90,955,468 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized gain (loss) |
55,751,120 | (89,199,812 | ) | (189,376,260 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 78,789,987 | $ | (58,126,954 | ) | $ | (169,575,350 | ) | ||||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $881,225, $903,841 and $4,251,231, respectively |
See notes to financial statements.
| FINANCIAL STATEMENTS |
39 |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Japan ETF |
iShares MSCI Mexico Capped ETF |
iShares MSCI South Korea Capped ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 170,055,144 | $ | 24,158,387 | $ | 46,049,160 | ||||||
| Interest — unaffiliated |
— | — | 422 | |||||||||
| Interest — affiliated (Note 2) |
3,279 | 482 | 4,306 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
728,401 | 251,934 | 3,329,571 | |||||||||
|
|
|
|
|
|
|
|||||||
| 170,786,824 | 24,410,803 | 49,383,459 | ||||||||||
| Less: Other foreign taxes (Note 1) |
— | — | (2,244 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
170,786,824 | 24,410,803 | 49,381,215 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
45,473,317 | 2,880,898 | 10,018,643 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
45,473,317 | 2,880,898 | 10,018,643 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
125,313,507 | 21,529,905 | 39,362,572 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(142,374,810 | ) | (45,217,011 | ) | (67,047,827 | ) | ||||||
| In-kind redemptions — unaffiliated |
298,870,838 | 3,697,126 | — | |||||||||
| Futures contracts |
5,453,072 | — | — | |||||||||
| Foreign currency transactions |
855,692 | (380,297 | ) | (459,759 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net realized gain (loss) |
162,804,792 | (41,900,182 | ) | (67,507,586 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(2,080,132,931 | ) | (75,740,384 | ) | (5,525,055 | ) | ||||||
| Futures contracts |
(4,751,116 | ) | — | — | ||||||||
| Translation of assets and liabilities in foreign currencies |
1,873,533 | 47,084 | (2,439,649 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(2,083,010,514 | ) | (75,693,300 | ) | (7,964,704 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(1,920,205,722 | ) | (117,593,482 | ) | (75,472,290 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (1,794,892,215 | ) | $ | (96,063,577 | ) | $ | (36,109,718 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $18,825,306, $68,601 and $8,589,579, respectively. |
See notes to financial statements.
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares MSCI All Country World Minimum Volatility ETF |
iShares MSCI Australia ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 23,038,867 | $ | 44,309,164 | $ | 31,072,858 | $ | 89,352,838 | ||||||||
| Net realized gain (loss) |
(1,440,354 | ) | 43,296,827 | (34,255,121 | ) | (42,403,229 | ) | |||||||||
| Net change in unrealized appreciation/depreciation |
57,191,474 | (88,854,431 | ) | (54,944,691 | ) | (586,867,702 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
78,789,987 | (1,248,440 | ) | (58,126,954 | ) | (539,918,093 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(27,515,538 | ) | (39,259,118 | ) | (35,452,361 | ) | (88,722,742 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(27,515,538 | ) | (39,259,118 | ) | (35,452,361 | ) | (88,722,742 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
421,283,479 | 1,101,077,585 | 198,757,400 | 286,641,003 | ||||||||||||
| Cost of shares redeemed |
(147,345,985 | ) | (227,950,517 | ) | (163,697,440 | ) | (477,049,572 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
273,937,494 | 873,127,068 | 35,059,960 | (190,408,569 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
325,211,943 | 832,619,510 | (58,519,355 | ) | (819,049,404 | ) | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
2,115,631,974 | 1,283,012,464 | 1,228,063,180 | 2,047,112,584 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 2,440,843,917 | $ | 2,115,631,974 | $ | 1,169,543,825 | $ | 1,228,063,180 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income included in net assets at end of period |
$ | 6,168,252 | $ | 10,644,923 | $ | 2,069,707 | $ | 6,449,210 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
6,100,000 | 15,700,000 | 10,800,000 | 12,800,000 | ||||||||||||
| Shares redeemed |
(2,200,000 | ) | (3,200,000 | ) | (9,000,000 | ) | (22,400,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
3,900,000 | 12,500,000 | 1,800,000 | (9,600,000 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
41 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Canada ETF |
iShares MSCI Japan ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 19,800,910 | $ | 51,171,586 | $ | 125,313,507 | $ | 198,077,924 | ||||||||
| Net realized gain (loss) |
(98,420,792 | ) | (185,598 | ) | 162,804,792 | 433,991,900 | ||||||||||
| Net change in unrealized appreciation/depreciation |
(90,955,468 | ) | (888,177,701 | ) | (2,083,010,514 | ) | (336,921,644 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
(169,575,350 | ) | (837,191,713 | ) | (1,794,892,215 | ) | 295,148,180 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(23,581,010 | ) | (56,091,045 | ) | (142,902,396 | ) | (187,336,932 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(23,581,010 | ) | (56,091,045 | ) | (142,902,396 | ) | (187,336,932 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
396,836,503 | 422,191,995 | 2,740,286,619 | 8,592,356,336 | ||||||||||||
| Cost of shares redeemed |
(158,363,967 | ) | (1,384,361,375 | ) | (2,442,972,435 | ) | (4,281,553,914 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
238,472,536 | (962,169,380 | ) | 297,314,184 | 4,310,802,422 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
45,316,176 | (1,855,452,138 | ) | (1,640,480,427 | ) | 4,418,613,670 | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
1,931,454,092 | 3,786,906,230 | 19,147,802,373 | 14,729,188,703 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 1,976,770,268 | $ | 1,931,454,092 | $ | 17,507,321,946 | $ | 19,147,802,373 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (3,364,462 | ) | $ | 415,638 | $ | (39,484,432 | ) | $ | (21,895,543 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
18,000,000 | 14,300,000 | 236,400,000 | 697,200,000 | ||||||||||||
| Shares redeemed |
(7,200,000 | ) | (48,900,000 | ) | (212,400,000 | ) | (366,600,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
10,800,000 | (34,600,000 | ) | 24,000,000 | 330,600,000 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Mexico Capped ETF |
iShares MSCI South Korea Capped ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 21,529,905 | $ | 23,159,039 | $ | 39,362,572 | $ | 33,901,757 | ||||||||
| Net realized loss |
(41,900,182 | ) | (218,038,852 | ) | (67,507,586 | ) | (284,471,604 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
(75,693,300 | ) | (502,228,529 | ) | (7,964,704 | ) | (1,094,121,115 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(96,063,577 | ) | (697,108,342 | ) | (36,109,718 | ) | (1,344,690,962 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(18,536,309 | ) | (30,297,965 | ) | (75,311,690 | ) | (50,182,957 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(18,536,309 | ) | (30,297,965 | ) | (75,311,690 | ) | (50,182,957 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
642,236,999 | 862,520,515 | 145,657,006 | 649,650,453 | ||||||||||||
| Cost of shares redeemed |
(619,431,435 | ) | (2,203,323,997 | ) | (243,384,406 | ) | (985,441,132 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
22,805,564 | (1,340,803,482 | ) | (97,727,400 | ) | (335,790,679 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DECREASE IN NET ASSETS |
(91,794,322 | ) | (2,068,209,789 | ) | (209,148,808 | ) | (1,730,664,598 | ) | ||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
1,206,942,303 | 3,275,152,092 | 3,160,954,309 | 4,891,618,907 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 1,115,147,981 | $ | 1,206,942,303 | $ | 2,951,805,501 | $ | 3,160,954,309 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | 3,590,694 | $ | 597,098 | $ | (114,454,881 | ) | $ | (78,505,763 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
12,200,000 | 14,400,000 | 2,850,000 | 10,650,000 | ||||||||||||
| Shares redeemed |
(12,200,000 | ) | (37,300,000 | ) | (5,100,000 | ) | (18,650,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in shares outstanding |
— | (22,900,000 | ) | (2,250,000 | ) | (8,000,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
43 |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI All Country World Minimum Volatility ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 67.59 | $ | 68.25 | $ | 59.99 | $ | 55.65 | $ | 50.02 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.71 | 1.70 | 1.72 | 1.68 | 1.49 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
1.89 | (0.89 | ) | 8.18 | 4.20 | 4.67 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
2.60 | 0.81 | 9.90 | 5.88 | 6.16 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.85 | ) | (1.47 | ) | (1.64 | ) | (1.54 | ) | (0.53 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.85 | ) | (1.47 | ) | (1.64 | ) | (1.54 | ) | (0.53 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 69.34 | $ | 67.59 | $ | 68.25 | $ | 59.99 | $ | 55.65 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
3.86 | %d | 1.15 | % | 16.70 | % | 10.69 | % | 12.41 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 2,440,844 | $ | 2,115,632 | $ | 1,283,012 | $ | 1,007,760 | $ | 578,776 | ||||||||||
| Ratio of expenses to average net assetse |
0.20 | % | 0.20 | % | 0.20 | % | 0.20 | % | 0.23 | % | ||||||||||
| Ratio of expenses to average net assets prior to waived feese |
0.33 | % | 0.33 | % | 0.33 | % | 0.34 | % | 0.34 | % | ||||||||||
| Ratio of net investment income to average net assetse |
2.08 | % | 2.41 | % | 2.67 | % | 2.83 | % | 3.17 | % | ||||||||||
| Portfolio turnover ratef |
12 | % | 22 | % | 24 | % | 13 | % | 22 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013 and the period ended August 31, 2012 were 11%, 22%, 23%, 13%, and 22%, respectively. See Note 4. |
See notes to financial statements.
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Australia ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 18.66 | $ | 27.15 | $ | 23.61 | $ | 23.39 | $ | 24.18 | $ | 20.92 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.45 | 1.23 | 1.10 | 1.02 | 1.04 | 0.99 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(1.30 | ) | (8.49 | ) | 3.43 | 0.64 | (0.72 | ) | 3.33 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(0.85 | ) | (7.26 | ) | 4.53 | 1.66 | 0.32 | 4.32 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.51 | ) | (1.23 | ) | (0.99 | ) | (1.44 | ) | (1.11 | ) | (1.06 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.51 | ) | (1.23 | ) | (0.99 | ) | (1.44 | ) | (1.11 | ) | (1.06 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 17.30 | $ | 18.66 | $ | 27.15 | $ | 23.61 | $ | 23.39 | $ | 24.18 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(4.69 | )%c | (27.31 | )% | 19.76 | % | 7.06 | % | 1.84 | % | 20.54 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 1,169,544 | $ | 1,228,063 | $ | 2,047,113 | $ | 1,916,849 | $ | 2,493,699 | $ | 3,090,425 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
4.96 | % | 5.37 | % | 4.28 | % | 4.05 | % | 4.61 | % | 3.95 | % | ||||||||||||
| Portfolio turnover ratee |
6 | % | 9 | % | 6 | % | 6 | % | 9 | % | 9 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
45 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Canada ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 24.02 | $ | 32.93 | $ | 27.34 | $ | 27.52 | $ | 29.89 | $ | 26.10 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.24 | 0.54 | 0.59 | 0.60 | 0.53 | 0.53 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(2.29 | ) | (8.85 | ) | 5.62 | (0.10 | ) | (2.33 | ) | 3.78 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(2.05 | ) | (8.31 | ) | 6.21 | 0.50 | (1.80 | ) | 4.31 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.29 | ) | (0.60 | ) | (0.62 | ) | (0.68 | ) | (0.57 | ) | (0.52 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.29 | ) | (0.60 | ) | (0.62 | ) | (0.68 | ) | (0.57 | ) | (0.52 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 21.68 | $ | 24.02 | $ | 32.93 | $ | 27.34 | $ | 27.52 | $ | 29.89 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(8.52 | )%c | (25.48 | )% | 23.00 | % | 1.84 | % | (5.87 | )% | 16.50 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 1,976,770 | $ | 1,931,454 | $ | 3,786,906 | $ | 3,428,223 | $ | 4,254,544 | $ | 5,092,547 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.51 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
2.18 | % | 1.92 | % | 1.97 | % | 2.12 | % | 1.94 | % | 1.70 | % | ||||||||||||
| Portfolio turnover ratee |
4 | % | 5 | % | 6 | % | 7 | % | 5 | % | 8 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Japan ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 12.15 | $ | 11.83 | $ | 10.97 | $ | 9.02 | $ | 9.80 | $ | 9.43 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.08 | 0.15 | 0.15 | 0.13 | 0.18 | 0.16 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(1.20 | ) | 0.30 | 0.88 | 1.97 | (0.77 | ) | 0.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.12 | ) | 0.45 | 1.03 | 2.10 | (0.59 | ) | 0.53 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.09 | ) | (0.13 | ) | (0.17 | ) | (0.15 | ) | (0.19 | ) | (0.16 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.09 | ) | (0.13 | ) | (0.17 | ) | (0.15 | ) | (0.19 | ) | (0.16 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 10.94 | $ | 12.15 | $ | 11.83 | $ | 10.97 | $ | 9.02 | $ | 9.80 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(9.30 | )%c | 3.84 | % | 9.39 | % | 23.46 | % | (5.96 | )% | 5.54 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 17,507,322 | $ | 19,147,802 | $ | 14,729,189 | $ | 10,461,942 | $ | 4,629,034 | $ | 7,194,509 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.50 | % | 0.53 | % | 0.51 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.31 | % | 1.20 | % | 1.31 | % | 1.18 | % | 1.95 | % | 1.53 | % | ||||||||||||
| Portfolio turnover ratee |
1 | % | 2 | % | 2 | % | 4 | % | 3 | % | 4 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
47 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Mexico Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 52.70 | $ | 71.51 | $ | 61.93 | $ | 60.96 | $ | 58.39 | $ | 48.17 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.90 | 0.68 | 1.06 | 0.75 | 0.73 | 0.80 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(4.15 | ) | (18.56 | ) | 9.61 | 0.85 | 2.76 | 10.15 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(3.25 | ) | (17.88 | ) | 10.67 | 1.60 | 3.49 | 10.95 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.75 | ) | (0.93 | ) | (1.09 | ) | (0.63 | ) | (0.92 | ) | (0.73 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.75 | ) | (0.93 | ) | (1.09 | ) | (0.63 | ) | (0.92 | ) | (0.73 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 48.70 | $ | 52.70 | $ | 71.51 | $ | 61.93 | $ | 60.96 | $ | 58.39 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(6.25 | )%c | (25.10 | )% | 17.42 | % | 2.53 | % | 6.13 | % | 22.67 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 1,115,148 | $ | 1,206,942 | $ | 3,275,152 | $ | 2,217,052 | $ | 1,182,700 | $ | 1,243,731 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.48 | % | 0.48 | % | 0.48 | % | 0.50 | % | 0.53 | % | 0.52 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
3.56 | % | 1.10 | % | 1.61 | % | 1.09 | % | 1.26 | % | 1.35 | % | ||||||||||||
| Portfolio turnover ratee |
3 | % | 13 | % | 19 | % | 32 | % | 10 | % | 5 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI South Korea Capped ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 48.15 | $ | 66.42 | $ | 57.67 | $ | 55.97 | $ | 56.74 | $ | 47.76 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.63 | 0.46 | 0.25 | 0.23 | 0.23 | 0.29 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(1.02 | ) | (18.07 | ) | 9.40 | 1.83 | (0.63 | ) | 9.19 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(0.39 | ) | (17.61 | ) | 9.65 | 2.06 | (0.40 | ) | 9.48 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(1.20 | ) | (0.66 | ) | (0.90 | ) | (0.36 | ) | (0.37 | ) | (0.43 | ) | ||||||||||||
| Return of capital |
— | — | — | — | — | (0.07 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(1.20 | ) | (0.66 | ) | (0.90 | ) | (0.36 | ) | (0.37 | ) | (0.50 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 46.56 | $ | 48.15 | $ | 66.42 | $ | 57.67 | $ | 55.97 | $ | 56.74 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(1.18 | )%c,d | (26.58 | )% | 16.83 | % | 3.65 | % | (0.62 | )% | 19.76 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 2,951,806 | $ | 3,160,954 | $ | 4,891,619 | $ | 3,376,516 | $ | 2,669,551 | $ | 4,071,225 | ||||||||||||
| Ratio of expenses to average net assetse |
0.64 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.61 | % | 0.59 | % | ||||||||||||
| Ratio of net investment income to average net assetse |
2.52 | % | 0.81 | % | 0.39 | % | 0.40 | % | 0.42 | % | 0.49 | % | ||||||||||||
| Portfolio turnover ratef |
6 | % | 24 | % | 13 | % | 13 | % | 12 | % | 18 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | The total return disclosed is based on the net asset value (“NAV”) calculated daily for the creation and redemption of shares in the Fund, which may differ from the NAV calculated for financial reporting purposes. Based on the NAV calculated for financial reporting purposes, the total return for the Fund was -1.05%. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover 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 cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31, 2012, and August 31, 2011 were 4%, 10%, 10%, 11%, 8%, and 6%, respectively. See Note 4. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
49 |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF | Diversification Classification | |
| MSCI All Country World Minimum Volatility |
Diversified | |
| MSCI Australia |
Non-diversified | |
| MSCI Canada |
Diversified | |
| MSCI Japan |
Diversified | |
| MSCI Mexico Capped |
Non-diversified | |
| MSCI South Korea Capped |
Non-diversified |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
| • | Futures contracts are valued at that day’s last reported settlement price on the exchange where the contract is traded. |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| NOTES TO FINANCIAL STATEMENTS |
51 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI All Country World Minimum Volatility |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 2,428,040,121 | $ | 1,792,558 | $ | 8 | $ | 2,429,832,687 | ||||||||
| Preferred Stocks |
1,468,500 | — | — | 1,468,500 | ||||||||||||
| Money Market Funds |
53,590,623 | — | — | 53,590,623 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 2,483,099,244 | $ | 1,792,558 | $ | 8 | $ | 2,484,891,810 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Australia |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 1,155,746,557 | $ | — | $ | — | $ | 1,155,746,557 | ||||||||
| Money Market Funds |
6,556,731 | — | — | 6,556,731 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,162,303,288 | $ | — | $ | — | $ | 1,162,303,288 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Assets: |
||||||||||||||||
| Futures Contracts |
$ | 5,518 | $ | — | $ | — | $ | 5,518 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 5,518 | $ | — | $ | — | $ | 5,518 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Canada |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 1,971,479,681 | $ | — | $ | — | $ | 1,971,479,681 | ||||||||
| Money Market Funds |
10,699,652 | — | — | 10,699,652 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,982,179,333 | $ | — | $ | — | $ | 1,982,179,333 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Assets: |
||||||||||||||||
| Futures Contracts |
$ | 138,518 | $ | — | $ | — | $ | 138,518 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 138,518 | $ | — | $ | — | $ | 138,518 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Japan |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 17,444,607,056 | $ | — | $ | — | $ | 17,444,607,056 | ||||||||
| Money Market Funds |
53,049,066 | — | — | 53,049,066 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 17,497,656,122 | $ | — | $ | — | $ | 17,497,656,122 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Liabilities: |
||||||||||||||||
| Futures Contracts |
$ | (7,608,913 | ) | $ | — | $ | — | $ | (7,608,913 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | (7,608,913 | ) | $ | — | $ | — | $ | (7,608,913 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 52 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Mexico Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 1,112,307,197 | $ | — | $ | 16 | $ | 1,112,307,213 | ||||||||
| Money Market Funds |
50,910,905 | — | — | 50,910,905 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,163,218,102 | $ | — | $ | 16 | $ | 1,163,218,118 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI South Korea Capped |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 2,788,540,157 | $ | — | $ | — | $ | 2,788,540,157 | ||||||||
| Preferred Stocks |
116,056,785 | — | — | 116,056,785 | ||||||||||||
| Money Market Funds |
149,263,491 | — | — | 149,263,491 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 3,053,860,433 | $ | — | $ | — | $ | 3,053,860,433 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Shown at the unrealized appreciation (depreciation) on the contracts. |
The iShares MSCI South Korea Capped ETF had transfers from Level 2 to Level 1 during the six months ended February 29, 2016 in the amount of $34,531,387, resulting from the resumption of trading after a temporary suspension.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the
| NOTES TO FINANCIAL STATEMENTS |
53 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
| 54 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI All Country World Minimum Volatility |
||||||||||||
| Credit Suisse Securities (USA) LLC |
$ | 896,681 | $ | 896,681 | $ | — | ||||||
| Deutsche Bank AG |
6,890 | 6,890 | — | |||||||||
| Goldman Sachs & Co. |
10,660,122 | 10,660,122 | — | |||||||||
| JPMorgan Clearing Corp. |
5,858,842 | 5,858,842 | — | |||||||||
| JPMorgan Securities PLC |
812,193 | 812,193 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
4,426,879 | 4,426,879 | — | |||||||||
| Morgan Stanley & Co. International PLC |
5,283,424 | 5,283,424 | — | |||||||||
| Morgan Stanley & Co. LLC |
18,722,187 | 18,722,187 | — | |||||||||
| Morgan Stanley & Co. LLC (U.S. Equity Securities Lending) |
1,470,440 | 1,470,440 | — | |||||||||
| State Street Bank & Trust Company |
1,011,495 | 1,011,495 | — | |||||||||
| UBS Securities LLC |
312,347 | 312,347 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 49,461,500 | $ | 49,461,500 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Australia |
||||||||||||
| Credit Suisse Securities (USA) LLC |
$ | 7,554 | $ | 7,554 | $ | — | ||||||
| Goldman Sachs & Co. |
1,129,732 | 1,129,732 | — | |||||||||
| JPMorgan Clearing Corp. |
112,144 | 112,144 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
1,085,918 | 1,085,918 | — | |||||||||
| UBS Securities LLC |
3,480,942 | 3,480,942 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 5,816,290 | $ | 5,816,290 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Canada |
||||||||||||
| Credit Suisse Securities (USA) LLC |
$ | 1,648,694 | $ | 1,648,694 | $ | — | ||||||
| Goldman Sachs & Co. |
3,821,910 | 3,821,910 | — | |||||||||
| JPMorgan Clearing Corp. |
2,360,070 | 2,360,070 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
355,784 | 355,784 | — | |||||||||
| Nomura Securities International Inc. |
579,829 | 579,829 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 8,766,287 | $ | 8,766,287 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Japan |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 3,225,175 | $ | 3,225,175 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
7,338,047 | 7,338,047 | — | |||||||||
| Deutsche Bank Securities Inc. |
3,588,563 | 3,588,563 | — | |||||||||
| Goldman Sachs & Co. |
19,202,043 | 19,202,043 | — | |||||||||
| JPMorgan Clearing Corp. |
228,196 | 228,196 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
453,494 | 453,494 | — | |||||||||
| Mizuho Securities USA Inc. |
1,388,348 | 1,388,348 | — | |||||||||
| Morgan Stanley & Co. LLC |
6,996,461 | 6,996,461 | — | |||||||||
| Nomura Securities International Inc. |
578,201 | 578,201 | — | |||||||||
| UBS Securities LLC |
1,785,931 | 1,785,931 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 44,784,459 | $ | 44,784,459 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| NOTES TO FINANCIAL STATEMENTS |
55 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Mexico Capped |
||||||||||||
| Credit Suisse Securities (USA) LLC |
$ | 5,002,682 | $ | 5,002,682 | $ | — | ||||||
| Deutsche Bank Securities Inc. |
2,517,613 | 2,517,613 | — | |||||||||
| Goldman Sachs & Co. |
9,217,696 | 9,217,696 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
14,211,756 | 14,211,756 | — | |||||||||
| Morgan Stanley & Co. LLC |
16,302,306 | 16,302,306 | — | |||||||||
| UBS Securities LLC |
249,237 | 249,237 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 47,501,290 | $ | 47,501,290 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI South Korea Capped |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 15,944,954 | $ | 15,944,954 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
10,800,442 | 10,800,442 | — | |||||||||
| Deutsche Bank Securities Inc. |
840,529 | 840,529 | — | |||||||||
| Goldman Sachs & Co. |
11,982,232 | 11,982,232 | — | |||||||||
| HSBC Bank PLC |
19,008,086 | 19,008,086 | — | |||||||||
| Jefferies LLC |
967,898 | 967,898 | — | |||||||||
| JPMorgan Clearing Corp. |
5,470,647 | 5,470,647 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
11,120,842 | 11,120,842 | — | |||||||||
| Morgan Stanley & Co. LLC |
55,342,656 | 55,342,656 | — | |||||||||
| UBS Securities LLC |
8,386,551 | 8,386,551 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 139,864,837 | $ | 139,864,837 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market value of securities loaned at period end and is disclosed in each Fund’s statement of assets and liabilities. |
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
For its investment advisory services to the iShares MSCI All Country World Minimum Volatility ETF, BFA 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 the Fund and certain other iShares funds, as follows:
| Investment Advisory Fee | Aggregate Average Daily Net Assets | ||||
| 0.350 | % | First $30 billion | |||
| 0.320 |
Over $30 billion, up to and including $60 billion | ||||
| 0.280 |
Over $60 billion, up to and including $90 billion | ||||
| 0.252 | Over $90 billion | ||||
In addition, the iShares MSCI All Country World Minimum Volatility ETF indirectly pays its pro rata share of fees and expenses attributable to its investments in other investment companies (“acquired fund fees and expenses”). The total of the investment advisory fee and acquired fund fees and expenses is a fund’s total annual operating expense. BFA has contractually agreed to
| 56 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
waive a portion of its investment advisory fees for the Fund through December 31, 2018 in an amount equal to the acquired fund fees and expenses attributable to the Fund’s investments in other iShares funds, if any. BFA has also contractually agreed to waive an additional portion of its investment advisory fees for the Fund through December 31, 2018 in order to limit total annual operating expenses after fee waiver to 0.20% of average daily net assets.
For its investment advisory services to each of the iShares MSCI Australia, iShares MSCI Canada, iShares MSCI Japan and iShares MSCI Mexico Capped ETFs, BFA 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 the Fund and certain other iShares 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, up to and including $48 billion | ||||
| 0.40 |
Over $48 billion, up to and including $72 billion | ||||
| 0.36 | Over $72 billion | ||||
For its investment advisory services to the iShares MSCI South Korea Capped ETF, BFA 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 the Fund and certain other iShares 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, up to and including $8 billion | ||||
| 0.57 | Over $8 billion, up to and including $16 billion | ||||
| 0.51 |
Over $16 billion, up to and including $32 billion | ||||
| 0.45 | Over $32 billion | ||||
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
| NOTES TO FINANCIAL STATEMENTS |
57 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| MSCI All Country World Minimum Volatility |
$ | 53,117 | ||
| MSCI Australia |
27,492 | |||
| MSCI Canada |
8,951 | |||
| MSCI Japan |
174,113 | |||
| MSCI Mexico Capped |
64,367 | |||
| MSCI South Korea Capped |
769,174 | |||
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
For the six months ended February 29, 2016, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI All Country World Minimum Volatility |
$ | 36,871,598 | $ | 9,661,485 | ||||
| MSCI Japan |
12,878,003 | — | ||||||
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
Certain Funds, in order to improve their portfolio liquidity and their ability to track their respective underlying index, may invest in shares of other iShares funds that invest in securities in the Fund’s, respective underlying index.
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 58 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI All Country World Minimum Volatility |
$ | 312,972,746 | $ | 265,339,204 | ||||
| MSCI Australia |
70,649,658 | 73,903,775 | ||||||
| MSCI Canada |
68,024,526 | 66,135,625 | ||||||
| MSCI Japan |
251,662,197 | 267,760,902 | ||||||
| MSCI Mexico Capped |
52,215,192 | 38,096,818 | ||||||
| MSCI South Korea Capped |
186,729,501 | 365,113,130 | ||||||
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| MSCI All Country World Minimum Volatility |
$ | 389,395,943 | $ | 135,910,029 | ||||
| MSCI Australia |
197,012,352 | 161,955,684 | ||||||
| MSCI Canada |
389,503,360 | 156,488,402 | ||||||
| MSCI Japan |
2,669,813,709 | 2,380,370,312 | ||||||
| MSCI Mexico Capped |
629,447,798 | 616,273,347 | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
From time to time, settlement of securities related to in-kind contributions or in-kind redemptions may be delayed. In such cases, securities related to in-kind contributions are reflected as “Due from custodian” and securities related to in-kind redemptions are reflected as “Securities related to in-kind transactions” in the statements of assets and liabilities.
| 5. | FUTURES CONTRACTS |
Each Fund may purchase or sell futures contracts in an effort to help such Fund track its underlying index. A futures contract is a standardized, exchange-traded agreement to buy or sell a financial instrument at a set price on a future date. Upon entering into a
| NOTES TO FINANCIAL STATEMENTS |
59 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
futures contract, the Fund is required to pledge to the executing broker which holds segregated from its own assets, an amount of cash, U.S. government securities or other high-quality debt and equity securities equal to the minimum initial margin requirements of the exchange on which the contract is traded. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Losses may arise if the value of a futures contract decreases due to an unfavorable change in the market rates or values of the underlying instrument during the term of the contract or if the counterparty does not perform under the contract. The use of futures contracts also involves the risk of an imperfect correlation in the movements in the price of futures contracts and the assets underlying such contracts.
The following table shows the value of futures contracts held as of February 29, 2016 and the related locations in the statements of assets and liabilities, presented by risk exposure category:
| Assets | ||||||||
| iShares MSCI Australia ETF |
iShares MSCI Canada ETF |
|||||||
| Equity contracts: |
||||||||
| Variation margin/Net assets consist of – net unrealized appreciation (depreciation)a |
$ | 5,518 | $ | 138,518 | ||||
|
|
|
|
|
|||||
| a | Represents cumulative appreciation of futures contracts as reported in the schedules of investments. |
| Liabilities | ||||
| iShares MSCI Japan ETF |
||||
| Equity contracts: |
||||
| Variation margin/Net assets consist of – net unrealized appreciation (depreciation) b |
$ | 7,608,913 | ||
|
|
|
|||
| b | Represents cumulative depreciation of futures contracts as reported in the schedules of investments. |
The following table shows the realized and unrealized gains (losses) on futures contracts held during the six months ended February 29, 2016 and the related locations in the statements of operations, presented by risk exposure category:
| Net Realized Gain (Loss) | ||||||||||||
| iShares MSCI Australia ETF |
iShares MSCI Canada ETF |
iShares MSCI Japan ETF |
||||||||||
| Equity contracts: |
||||||||||||
| Futures contracts |
$ | (590,146 | ) | $ | (758,993 | ) | $ | 5,453,072 | ||||
|
|
|
|
|
|
|
|||||||
| 60 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| Net Change in Unrealized Appreciation/Depreciation |
||||||||||||
| iShares MSCI Australia ETF |
iShares MSCI Canada ETF |
iShares MSCI Japan ETF |
||||||||||
| Equity contracts: |
||||||||||||
| Futures contracts |
$ | 312,747 | $ | 278,571 | $ | (4,751,116 | ) | |||||
|
|
|
|
|
|
|
|||||||
The following table shows the average quarter-end balances of open futures contracts for the six months ended February 29, 2016:
| iShares MSCI Australia ETF |
iShares MSCI Canada ETF |
iShares MSCI Japan ETF |
||||||||||
| Average value of contracts purchased |
$ | 14,255,914 | $ | 5,052,926 | $ | 92,515,026 | ||||||
| 6. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its investment in equity and financial derivative instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
| NOTES TO FINANCIAL STATEMENTS |
61 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Each Fund, except for the iShares MSCI All Country World Minimum Volatility ETF, invests all or substantially all of its assets in issuers located in a single country. When a fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in that country may have a significant impact on its investment performance.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 7. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the following Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
| iShares ETF | Non- Expiring a |
Expiring 2016 |
Expiring 2017 |
Expiring 2018 |
Expiring 2019 |
Total | ||||||||||||||||||
| MSCI All Country World Minimum Volatility |
$ | 12,815,217 | $ | — | $ | — | $ | — | $ | — | $ | 12,815,217 | ||||||||||||
| MSCI Australia |
112,709,424 | 529,868 | 24,006,125 | 23,348,244 | 12,127,364 | 172,721,025 | ||||||||||||||||||
| MSCI Canada |
173,857,295 | 5,107,471 | 27,886,883 | 68,928,677 | 14,903,919 | 290,684,245 | ||||||||||||||||||
| MSCI Japan |
323,800,260 | 44,443,527 | 116,295,478 | 173,577,101 | 139,228,194 | 797,344,560 | ||||||||||||||||||
| MSCI Mexico Capped |
104,624,381 | 853,150 | 8,973,988 | 2,789,471 | 22,863,665 | 140,104,655 | ||||||||||||||||||
| MSCI South Korea Capped |
31,222,228 | — | 60,990,953 | 226,591,665 | 78,503,704 | 397,308,550 | ||||||||||||||||||
| a | Must be utilized prior to losses subject to expiration. |
| 62 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (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 marked-to-market gains.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| MSCI All Country World Minimum Volatility |
$ | 2,354,644,978 | $ | 245,397,321 | $ | (115,150,489 | ) | $ | 130,246,832 | |||||||
| MSCI Australia |
1,695,432,788 | 40,053,139 | (573,182,639 | ) | (533,129,500 | ) | ||||||||||
| MSCI Canada |
2,880,847,059 | 83,822,285 | (982,490,011 | ) | (898,667,726 | ) | ||||||||||
| MSCI Japan |
20,752,849,762 | 891,624,781 | (4,146,818,421 | ) | (3,255,193,640 | ) | ||||||||||
| MSCI Mexico Capped |
1,755,384,123 | 9,126,040 | (601,292,045 | ) | (592,166,005 | ) | ||||||||||
| MSCI South Korea Capped |
2,630,473,374 | 1,180,285,921 | (756,898,862 | ) | 423,387,059 | |||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| 8. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements .
| NOTES TO FINANCIAL STATEMENTS |
63 |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| MSCI All Country World Minimum Volatility |
$ | 0.740084 | $ | — | $ | 0.109161 | $ | 0.849245 | 87 | % | — | % | 13 | % | 100 | % | ||||||||||||||||
| MSCI Australia |
0.354219 | — | 0.155154 | 0.509373 | 70 | — | 30 | 100 | ||||||||||||||||||||||||
| MSCI Canada |
0.173327 | — | 0.116366 | 0.289693 | 60 | — | 40 | 100 | ||||||||||||||||||||||||
| MSCI Japan |
0.086405 | — | 0.001319 | 0.087724 | 98 | — | 2 | 100 | ||||||||||||||||||||||||
| MSCI Mexico Capped |
0.747835 | — | — | 0.747835 | 100 | — | — | 100 | ||||||||||||||||||||||||
| MSCI South Korea Capped |
0.145909 | — | 1.056193 | 1.202102 | 12 | — | 88 | 100 | ||||||||||||||||||||||||
| 64 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes:
| NOTES |
65 |
Table of Contents
Notes:
| 66 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
Certain financial information required by regulations or listing exchange rules in jurisdictions outside the U.S. in which iShares Funds are cross-listed may be publicly filed in those jurisdictions. This information is available upon request by calling 1-800-474-2737.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-815-0216
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Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
|
iShares, Inc.
| Ø | iShares Core MSCI Emerging Markets ETF | IEMG | NYSE Arca |
| Ø | iShares MSCI BRIC ETF | BKF | NYSE Arca |
| Ø | iShares MSCI Emerging Markets Asia ETF | EEMA | NASDAQ |
| Ø | iShares MSCI Emerging Markets Small-Cap ETF | EEMS | NYSE Arca |
Table of Contents
| 5 | ||||
| 9 | ||||
| 9 | ||||
| 10 | ||||
| 10 | ||||
| 39 | ||||
| 44 | ||||
| 53 | ||||
| 67 | ||||
| 73 | ||||
| 77 | ||||
| 91 |
Table of Contents
iSHARES® CORE MSCI EMERGING MARKETS ETF
Performance as of February 29, 2016
The iShares Core MSCI Emerging Markets ETF (the “Fund”) seeks to track the investment results of an index composed of large-, mid- and small-capitalization emerging market equities, as represented by the MSCI Emerging Markets Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -8.16%, net of fees, while the total return for the Index was -8.36%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(22.66)% | (22.77)% | (22.65)% | (22.66)% | (22.77)% | (22.65)% | ||||||||||||||||||||
| Since Inception |
(6.27)% | (6.22)% | (6.26)% | (19.58)% | (19.46)% | (19.58)% | ||||||||||||||||||||
The inception date of the Fund was 10/18/12. The first day of secondary market trading was 10/22/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 9 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 918.40 | $ | 0.81 | $ | 1,000.00 | $ | 1,024.00 | $ | 0.86 | 0.17% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 9 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI BRIC ETF
Performance as of February 29, 2016
The iShares MSCI BRIC ETF (the “Fund”) seeks to track the investment of an index composed of Chinese equities that are available to international investors, and Brazilian, Russian, and Indian equities, as represented by the MSCI BRIC Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -13.74%, net of fees, while the total return for the Index was -13.57%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(27.88)% | (28.02)% | (27.72)% | (27.88)% | (28.02)% | (27.72)% | ||||||||||||||||||||
| 5 Years |
(9.15)% | (9.33)% | (8.34)% | (38.12)% | (38.70)% | (35.30)% | ||||||||||||||||||||
| Since Inception |
(6.99)% | (6.99)% | (6.60)% | (45.17)% | (45.21)% | (43.24)% | ||||||||||||||||||||
The inception date of the Fund was 11/12/07. The first day of secondary market trading was 11/16/07.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 9 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 862.60 | $ | 3.43 | $ | 1,000.00 | $ | 1,021.20 | $ | 3.72 | 0.74% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 9 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI EMERGING MARKETS ASIA ETF
Performance as of February 29, 2016
The iShares MSCI Emerging Markets Asia ETF (the “Fund”) seeks to track the investment results of an index composed of Asian emerging market equities, as represented by the MSCI Emerging Markets Asia Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -6.88%, net of fees, while the total return for the Index was -6.80%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(21.32)% | (21.87)% | (21.30)% | (21.32)% | (21.87)% | (21.30)% | ||||||||||||||||||||
| Since Inception |
(2.00)% | (1.98)% | (1.75)% | (7.87)% | (7.80)% | (6.91)% | ||||||||||||||||||||
The inception date of the Fund was 2/8/12. The first day of secondary market trading was 2/9/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 9 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 931.20 | $ | 2.35 | $ | 1,000.00 | $ | 1,022.40 | $ | 2.46 | 0.49% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 9 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
Performance as of February 29, 2016
The iShares MSCI Emerging Markets Small-Cap ETF (the “Fund”) seeks to track the investment results of an index composed of small-capitalization emerging market equities, as represented by the MSCI Emerging Markets Small Cap Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -4.75%, net of fees, while the total return for the Index was -5.20%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(18.07)% | (18.68)% | (17.57)% | (18.07)% | (18.68)% | (17.57)% | ||||||||||||||||||||
| Since Inception |
(3.54)% | (3.56)% | (2.90)% | (15.11)% | (15.17)% | (12.49)% | ||||||||||||||||||||
The inception date of the Fund was 8/16/11. The first day of secondary market trading was 8/18/11.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 9 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 952.50 | $ | 3.50 | $ | 1,000.00 | $ | 1,021.30 | $ | 3.62 | 0.72% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 9 for more information. |
| * | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| ABOUT FUND PERFORMANCE / SHAREHOLDER EXPENSES |
9 |
Table of Contents
Consolidated Schedule of Investments (Unaudited)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
11 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
25 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
27 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
29 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
31 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
33 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
35 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
37 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® CORE MSCI EMERGING MARKETS ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| MSCI Emerging Markets Mini | 1,239 | Mar. 2016 | New York Board of Trade | $ | 45,973,095 | $ | (545,669) | |||||||||||||
See notes to consolidated financial statements.
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited)
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
39 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI BRIC ETF
February 29, 2016
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI BRIC ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
41 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI BRIC ETF
February 29, 2016
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI BRIC ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
43 |
Table of Contents
Consolidated Schedule of Investments (Unaudited)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
45 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
47 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
49 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
51 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ASIA ETF
February 29, 2016
| 52 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
53 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| 54 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
55 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| 56 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
57 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| 58 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
59 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| 60 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
61 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| 62 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
63 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| 64 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| CONSOLIDATED SCHEDULES OF INVESTMENTS |
65 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS SMALL-CAP ETF
February 29, 2016
| 66 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares Core MSCI Emerging Markets ETF |
iShares MSCI BRIC ETF |
iShares MSCI Emerging Markets |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 11,039,612,118 | $ | 202,584,259 | $ | 129,689,105 | ||||||
| Affiliated (Note 2) |
660,584,667 | 9,466,526 | 4,492,310 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 11,700,196,785 | $ | 212,050,785 | $ | 134,181,415 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 9,053,375,744 | $ | 150,530,006 | $ | 109,038,270 | ||||||
| Affiliated (Note 2) |
660,584,667 | 9,466,526 | 4,492,310 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
9,713,960,411 | 159,996,532 | 113,530,580 | |||||||||
| Foreign currency, at valueb |
4,808,364 | 154,702 | 71,586 | |||||||||
| Cash |
15,657,797 | 305,022 | 254,938 | |||||||||
| Cash pledged to broker |
2,230,203 | — | — | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
43,574,742 | 422,155 | 359,968 | |||||||||
| Dividends and interest |
26,335,301 | 158,813 | 394,109 | |||||||||
| Futures variation margin |
402,675 | — | — | |||||||||
| Tax reclaims |
56,810 | — | — | |||||||||
| Prepaid expenses |
12,694 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
9,807,038,997 | 161,037,224 | 114,611,181 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
47,386,243 | 376,995 | 365,472 | |||||||||
| Collateral for securities on loan (Note 1) |
655,027,607 | 9,466,526 | 4,492,310 | |||||||||
| Line of credit (Note 8) |
— | 100,004 | 190,008 | |||||||||
| Foreign taxes (Note 1) |
118,820 | — | 161 | |||||||||
| Investment advisory fees (Note 2) |
1,141,995 | 85,867 | 36,358 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
703,674,665 | 10,029,392 | 5,084,309 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 9,103,364,332 | $ | 151,007,832 | $ | 109,526,872 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 11,573,027,966 | $ | 424,897,360 | $ | 153,630,582 | ||||||
| Undistributed (distributions in excess of) net investment income |
3,532,721 | (359,083 | ) | (50,496 | ) | |||||||
| Accumulated net realized loss |
(485,205,921 | ) | (221,472,862 | ) | (23,382,462 | ) | ||||||
| Net unrealized depreciation |
(1,987,990,434 | ) | (52,057,583 | ) | (20,670,752 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 9,103,364,332 | $ | 151,007,832 | $ | 109,526,872 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
246,600,000 | 5,800,000 | 2,350,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 36.92 | $ | 26.04 | $ | 46.61 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $613,434,654, $9,015,200 and $4,231,217, respectively. See Note 1. |
| b | Cost of foreign currency: $4,802,812, $154,355 and $71,307, respectively. |
| c | $0.001 par value, number of shares authorized: 450 million, 500 million and 500 million, respectively. |
See notes to consolidated financial statements.
| CONSOLIDATED FINANCIAL STATEMENTS |
67 |
Table of Contents
Consolidated Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Emerging Markets Small-Cap ETF |
||||
| ASSETS |
||||
| Investments, at cost: |
||||
| Unaffiliated |
$ | 107,222,292 | ||
| Affiliated (Note 2) |
14,931,581 | |||
|
|
|
|||
| Total cost of investments |
$ | 122,153,873 | ||
|
|
|
|||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||
| Unaffiliated |
$ | 88,185,311 | ||
| Affiliated (Note 2) |
14,931,581 | |||
|
|
|
|||
| Total fair value of investments |
103,116,892 | |||
| Foreign currency, at valueb |
98,805 | |||
| Cash |
95,290 | |||
| Receivables: |
||||
| Investment securities sold |
1,140,067 | |||
| Dividends and interest |
201,591 | |||
|
|
|
|||
| Total Assets |
104,652,645 | |||
|
|
|
|||
| LIABILITIES |
||||
| Payables: |
||||
| Investment securities purchased |
1,366,608 | |||
| Collateral for securities on loan (Note 1) |
14,854,742 | |||
| Foreign taxes (Note 1) |
69 | |||
| Investment advisory fees (Note 2) |
50,079 | |||
|
|
|
|||
| Total Liabilities |
16,271,498 | |||
|
|
|
|||
| NET ASSETS |
$ | 88,381,147 | ||
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$ | 116,912,992 | ||
| Distributions in excess of net investment income |
(446,134 | ) | ||
| Accumulated net realized loss |
(9,041,375 | ) | ||
| Net unrealized depreciation |
(19,044,336 | ) | ||
|
|
|
|||
| NET ASSETS |
$ | 88,381,147 | ||
|
|
|
|||
| Shares outstandingc |
2,350,000 | |||
|
|
|
|||
| Net asset value per share |
$ | 37.61 | ||
|
|
|
|||
| a | Securities on loan with a value of $13,390,179. See Note 1. |
| b | Cost of foreign currency: $98,395. |
| c | $0.001 par value, number of shares authorized: 500 million. |
See notes to consolidated financial statements.
| 68 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares Core MSCI Emerging Markets ETF |
iShares MSCI BRIC ETF |
iShares MSCI Emerging Markets |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 77,011,163 | $ | 1,852,495 | $ | 932,632 | ||||||
| Interest — unaffiliated |
50 | — | 2 | |||||||||
| Interest — affiliated (Note 2) |
22,026 | 166 | 103 | |||||||||
| Securities lending income — affiliated — net (Note 2)b |
8,603,209 | 81,733 | 70,814 | |||||||||
|
|
|
|
|
|
|
|||||||
| 85,636,448 | 1,934,394 | 1,003,551 | ||||||||||
| Less: Other foreign taxes (Note 1) |
(122,016 | ) | — | (2,594 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
85,514,432 | 1,934,394 | 1,000,957 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
7,008,408 | 641,646 | 400,950 | |||||||||
| Mauritius income taxes (Note 1) |
228,618 | 17,927 | 5,233 | |||||||||
| Commitment fees (Note 8) |
28,765 | 1,536 | 616 | |||||||||
| Interest expense (Note 8) |
— | 586 | 245 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
7,265,791 | 661,695 | 407,044 | |||||||||
| Less investment advisory fees waived (Note 2) |
— | — | (118,124 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net expenses |
7,265,791 | 661,695 | 288,920 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
78,248,641 | 1,272,699 | 712,037 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(251,763,535 | ) | (12,483,680 | ) | (6,649,100 | ) | ||||||
| In-kind redemptions — unaffiliated |
— | (1,660,798 | ) | 9,985 | ||||||||
| Futures contracts |
(6,660,067 | ) | — | — | ||||||||
| Foreign currency transactions |
(1,231,161 | ) | (48,469 | ) | (8,047 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(259,654,763 | ) | (14,192,947 | ) | (6,647,162 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(679,391,438 | ) | (12,635,238 | ) | (3,210,629 | ) | ||||||
| Futures contracts |
3,976,458 | — | — | |||||||||
| Translation of assets and liabilities in foreign currencies |
(1,057,919 | ) | 22,344 | (13,532 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(676,472,899 | ) | (12,612,894 | ) | (3,224,161 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(936,127,662 | ) | (26,805,841 | ) | (9,871,323 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (857,879,021 | ) | $ | (25,533,142 | ) | $ | (9,159,286 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $8,358,024, $109,159 and $109,073, respectively. |
| b | Net of securities lending income tax paid $316,143, $ — and $ —, respectively. |
See notes to consolidated financial statements.
| CONSOLIDATED FINANCIAL STATEMENTS |
69 |
Table of Contents
Consolidated Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Emerging Markets Small-Cap ETF |
||||
| NET INVESTMENT INCOME |
||||
| Dividends — unaffiliateda |
$ | 616,207 | ||
| Interest — unaffiliated |
9 | |||
| Interest — affiliated (Note 2) |
238 | |||
| Securities lending income — affiliated — net (Note 2) |
270,680 | |||
|
|
|
|||
| 887,134 | ||||
| Less: Other foreign taxes (Note 1) |
(1,548 | ) | ||
|
|
|
|||
| Total investment income |
885,586 | |||
|
|
|
|||
| EXPENSES |
||||
| Investment advisory fees (Note 2) |
299,727 | |||
| Commitment fees (Note 8) |
370 | |||
| Interest expense (Note 8) |
207 | |||
|
|
|
|||
| Total expenses |
300,304 | |||
|
|
|
|||
| Net investment income |
585,282 | |||
|
|
|
|||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||
| Net realized gain (loss) from: |
||||
| Investments — unaffiliated |
(2,798,095 | ) | ||
| Foreign currency transactions |
(19,904 | ) | ||
|
|
|
|||
| Net realized loss |
(2,817,999 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation on: |
||||
| Investments |
(2,610,901 | ) | ||
| Translation of assets and liabilities in foreign currencies |
(2,334 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation |
(2,613,235 | ) | ||
|
|
|
|||
| Net realized and unrealized loss |
(5,431,234 | ) | ||
|
|
|
|||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (4,845,952 | ) | |
|
|
|
|||
| a | Net of foreign withholding tax of $53,633. |
See notes to consolidated financial statements.
| 70 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Statements of Changes in Net Assets
iSHARES®, INC.
| iShares Core MSCI Emerging Markets ETF |
iShares MSCI BRIC ETF |
|||||||||||||||
| Six months ended |
Year ended August 31, 2015 |
Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 78,248,641 | $ | 165,940,771 | $ | 1,272,699 | $ | 6,187,330 | ||||||||
| Net realized loss |
(259,654,763 | ) | (168,209,015 | ) | (14,192,947 | ) | (11,493,846 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
(676,472,899 | ) | (1,745,449,404 | ) | (12,612,894 | ) | (66,292,945 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(857,879,021 | ) | (1,747,717,648 | ) | (25,533,142 | ) | (71,599,461 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(123,896,758 | ) | (149,835,315 | ) | (3,354,204 | ) | (7,526,071 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(123,896,758 | ) | (149,835,315 | ) | (3,354,204 | ) | (7,526,071 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
3,059,809,283 | 3,253,716,865 | — | 124,399 | ||||||||||||
| Cost of shares redeemed |
— | — | (16,862,844 | ) | (135,405,344 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
3,059,809,283 | 3,253,716,865 | (16,862,844 | ) | (135,280,945 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
2,078,033,504 | 1,356,163,902 | (45,750,190 | ) | (214,406,477 | ) | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
7,025,330,828 | 5,669,166,926 | 196,758,022 | 411,164,499 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 9,103,364,332 | $ | 7,025,330,828 | $ | 151,007,832 | $ | 196,758,022 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | 3,532,721 | $ | 49,180,838 | $ | (359,083 | ) | $ | 1,722,422 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
74,200,000 | 67,200,000 | — | — | ||||||||||||
| Shares redeemed |
— | — | (600,000 | ) | (3,600,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
74,200,000 | 67,200,000 | (600,000 | ) | (3,600,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to consolidated financial statements.
| CONSOLIDATED FINANCIAL STATEMENTS |
71 |
Table of Contents
Consolidated Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Emerging Markets Asia ETF |
iShares MSCI Emerging Markets Small-Cap ETF |
|||||||||||||||
| Six months ended |
Year ended August 31, 2015 |
Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 712,037 | $ | 2,741,982 | $ | 585,282 | $ | 1,385,999 | ||||||||
| Net realized gain (loss) |
(6,647,162 | ) | (6,372,970 | ) | (2,817,999 | ) | 2,007,950 | |||||||||
| Net change in unrealized appreciation/depreciation |
(3,224,161 | ) | (23,778,572 | ) | (2,613,235 | ) | (18,774,533 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(9,159,286 | ) | (27,409,560 | ) | (4,845,952 | ) | (15,380,584 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(1,995,009 | ) | (1,886,156 | ) | (1,285,374 | ) | (1,449,168 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(1,995,009 | ) | (1,886,156 | ) | (1,285,374 | ) | (1,449,168 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
11,162,654 | 87,597,450 | 18,392,412 | 49,283,928 | ||||||||||||
| Cost of shares redeemed |
(15,118,523 | ) | (14,370,934 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(3,955,869 | ) | 73,226,516 | 18,392,412 | 49,283,928 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(15,110,164 | ) | 43,930,800 | 12,261,086 | 32,454,176 | |||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
124,637,036 | 80,706,236 | 76,120,061 | 43,665,885 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 109,526,872 | $ | 124,637,036 | $ | 88,381,147 | $ | 76,120,061 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (50,496 | ) | $ | 1,232,476 | $ | (446,134 | ) | $ | 253,958 | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
200,000 | 1,450,000 | 450,000 | 1,050,000 | ||||||||||||
| Shares redeemed |
(300,000 | ) | (300,000 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(100,000 | ) | 1,150,000 | 450,000 | 1,050,000 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to consolidated financial statements.
| 72 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Financial Highlights
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares Core MSCI Emerging Markets ETF | ||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Period from to Aug. 31, 2013 |
|||||||||||||
| Net asset value, beginning of period |
$ | 40.75 | $ | 53.89 | $ | 45.71 | $ | 49.06 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income from investment operations: |
||||||||||||||||
| Net investment incomeb |
0.37 | 1.21 | 1.31 | 1.33 | ||||||||||||
| Net realized and unrealized gain (loss)c |
(3.65 | ) | (13.26 | ) | 7.78 | (4.14 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total from investment operations |
(3.28 | ) | (12.05 | ) | 9.09 | (2.81 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Less distributions from: |
||||||||||||||||
| Net investment income |
(0.55 | ) | (1.09 | ) | (0.91 | ) | (0.54 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions |
(0.55 | ) | (1.09 | ) | (0.91 | ) | (0.54 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net asset value, end of period |
$ | 36.92 | $ | 40.75 | $ | 53.89 | $ | 45.71 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total return |
(8.16 | )%d | (22.61 | )% | 20.05 | % | (5.75 | )%d | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Ratios/Supplemental data: |
||||||||||||||||
| Net assets, end of period (000s) |
$ | 9,103,364 | $ | 7,025,331 | $ | 5,669,167 | $ | 1,864,965 | ||||||||
| Ratio of expenses to average net assetse |
0.17 | % | 0.18 | % | 0.17 | % | 0.05 | % | ||||||||
| Ratio of expenses to average net assets prior to waived feese |
0.17 | % | 0.18 | % | 0.18 | % | 0.18 | % | ||||||||
| Ratio of net investment income to average net assetse |
1.86 | % | 2.49 | % | 2.61 | % | 3.17 | % | ||||||||
| Portfolio turnover ratef |
6 | % | 7 | % | 8 | % | 15 | % | ||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014 and the period ended August 31, 2013 were 6%, 7%, 8% and 15%, respectively. See Note 4. |
See notes to consolidated financial statements.
| CONSOLIDATED FINANCIAL HIGHLIGHTS |
73 |
Table of Contents
Consolidated Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI BRIC ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 30.74 | $ | 41.12 | $ | 34.41 | $ | 35.68 | $ | 42.25 | $ | 42.94 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.21 | 0.77 | 0.89 | 0.84 | 0.98 | 0.89 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(4.36 | ) | (10.20 | ) | 6.53 | (1.25 | ) | (6.62 | ) | (0.58 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(4.15 | ) | (9.43 | ) | 7.42 | (0.41 | ) | (5.64 | ) | 0.31 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.55 | ) | (0.95 | ) | (0.71 | ) | (0.86 | ) | (0.93 | ) | (1.00 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.55 | ) | (0.95 | ) | (0.71 | ) | (0.86 | ) | (0.93 | ) | (1.00 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 26.04 | $ | 30.74 | $ | 41.12 | $ | 34.41 | $ | 35.68 | $ | 42.25 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(13.74 | )%c | (23.19 | )% | 21.73 | % | (1.17 | )% | (13.33 | )% | 0.49 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 151,008 | $ | 196,758 | $ | 411,164 | $ | 474,861 | $ | 685,149 | $ | 866,194 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.74 | % | 0.69 | % | 0.68 | % | 0.67 | % | 0.69 | % | 0.67 | % | ||||||||||||
| Ratio of expenses to average net assets prior to waived fees |
n/a | n/a | n/a | n/a | n/a | 0.67 | % | |||||||||||||||||
| Ratio of net investment income to average net assetsd |
1.42 | % | 2.07 | % | 2.38 | % | 2.18 | % | 2.55 | % | 1.86 | % | ||||||||||||
| Portfolio turnover ratee |
9 | % | 9 | % | 10 | % | 10 | % | 32 | % | 13 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31, 2012 and August 31, 2011 were 9%, 9%, 6%, 9%, 20% and 10%, respectively. See Note 4. |
See notes to consolidated financial statements.
| 74 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Emerging Markets Asia ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 50.87 | $ | 62.08 | $ | 52.23 | $ | 50.18 | $ | 54.71 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.30 | 1.25 | 1.36 | 1.15 | 0.87 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
(3.71 | ) | (11.61 | ) | 9.75 | 1.82 | (4.99 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(3.41 | ) | (10.36 | ) | 11.11 | 2.97 | (4.12 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.85 | ) | (0.85 | ) | (1.26 | ) | (0.92 | ) | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.85 | ) | (0.85 | ) | (1.26 | ) | (0.92 | ) | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 46.61 | $ | 50.87 | $ | 62.08 | $ | 52.23 | $ | 50.18 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
(6.88 | )%d | (16.86 | )% | 21.54 | %e | 5.88 | % | (7.52 | )%d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 109,527 | $ | 124,637 | $ | 80,706 | $ | 31,341 | $ | 20,071 | ||||||||||
| Ratio of expenses to average net assetsf |
0.49 | % | 0.49 | % | 0.49 | % | 0.49 | % | 0.49 | % | ||||||||||
| Ratio of expenses to average net assets prior to waived feesf |
0.69 | % | 0.68 | % | 0.68 | % | 0.68 | % | 0.68 | % | ||||||||||
| Ratio of net investment income to average net assetsf |
1.21 | % | 2.10 | % | 2.36 | % | 2.09 | % | 3.05 | % | ||||||||||
| Portfolio turnover rateg |
16 | % | 16 | % | 33 | % | 174 | % | 3 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Includes payment from an affiliate. Not including these proceeds, the Fund’s total return would have been 21.46%. |
| f | Annualized for periods of less than one year. |
| g | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013, and the period ended August 31, 2012, were 9%, 10%, 33%, 21% and 3%, respectively. See Note 4. |
See notes to consolidated financial statements.
| CONSOLIDATED FINANCIAL HIGHLIGHTS |
75 |
Table of Contents
Consolidated Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Emerging Markets Small-Cap ETF | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Period from to Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 40.06 | $ | 51.37 | $ | 43.78 | $ | 43.44 | $ | 49.60 | $ | 50.54 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomeb |
0.28 | 1.04 | 0.93 | 1.07 | 0.50 | 0.07 | ||||||||||||||||||
| Net realized and unrealized gain (loss)c |
(2.15 | ) | (11.06 | ) | 7.67 | 1.13 | (5.52 | ) | (1.01 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(1.87 | ) | (10.02 | ) | 8.60 | 2.20 | (5.02 | ) | (0.94 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.58 | ) | (1.29 | ) | (1.01 | ) | (1.86 | ) | (1.14 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.58 | ) | (1.29 | ) | (1.01 | ) | (1.86 | ) | (1.14 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 37.61 | $ | 40.06 | $ | 51.37 | $ | 43.78 | $ | 43.44 | $ | 49.60 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(4.75 | )%d | (19.77 | )% | 19.92 | %e | 4.85 | % | (9.98 | )% | (1.86 | )%d | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 88,381 | $ | 76,120 | $ | 43,666 | $ | 30,644 | $ | 8,689 | $ | 69,443 | ||||||||||||
| Ratio of expenses to average net assetsf |
0.72 | % | 0.69 | % | 0.67 | % | 0.67 | % | 0.69 | % | 0.69 | % | ||||||||||||
| Ratio of net investment income to average net assetsf |
1.40 | % | 2.20 | % | 1.93 | % | 2.26 | % | 1.13 | % | 3.33 | % | ||||||||||||
| Portfolio turnover rateg |
13 | % | 23 | % | 20 | % | 21 | % | 32 | % | 2 | % | ||||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Includes payment from an affiliate. Not including these proceeds, the Fund’s total return would have been 19.73%. |
| f | Annualized for periods of less than one year. |
| g | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31,2012 and the period ended August 31, 2011 were 13%, 23%, 20%, 21%, 17% and 2%, respectively. See Note 4. |
See notes to consolidated financial statements.
| 76 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Consolidated Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These consolidated financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF |
Diversification Classification | |
| Core MSCI Emerging Markets |
Diversified | |
| MSCI BRIC |
Diversified | |
| MSCI Emerging Markets Asia |
Diversified | |
| MSCI Emerging Markets Small-Cap |
Diversified |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Each Fund carries out its investment strategies associated with investment in Indian securities by investing in a wholly-owned subsidiary in the Republic of Mauritius (each, a “Subsidiary”), which in turn invests in Indian securities included in the underlying index. The investment adviser of each Fund also serves as the investment adviser to each Subsidiary. Through this investment structure, each Fund expects to obtain certain benefits under a current tax treaty between Mauritius and India. The accompanying consolidated financial statements for each Fund include the accounts of its Subsidiary. Intercompany accounts and transactions, if any, have been eliminated.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
77 |
Table of Contents
Notes to Consolidated Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
| • | Futures contracts are valued at that day’s last reported settlement price on the exchange where the contract is traded. |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
| 78 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Consolidated Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective consolidated schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Core MSCI Emerging Markets |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 8,795,791,507 | $ | 11,068,580 | $ | 2,796,074 | $ | 8,809,656,161 | ||||||||
| Preferred Stocks |
243,671,360 | — | — | 243,671,360 | ||||||||||||
| Rights |
48,223 | — | — | 48,223 | ||||||||||||
| Money Market Funds |
660,584,667 | — | — | 660,584,667 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 9,700,095,757 | $ | 11,068,580 | $ | 2,796,074 | $ | 9,713,960,411 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Liabilities: |
||||||||||||||||
| Futures Contracts |
$ | (545,669 | ) | $ | — | $ | — | $ | (545,669 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | (545,669 | ) | $ | — | $ | — | $ | (545,669 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI BRIC |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 142,386,310 | $ | 164,028 | $ | 1 | $ | 142,550,339 | ||||||||
| Preferred Stocks |
7,978,757 | — | — | 7,978,757 | ||||||||||||
| Rights |
910 | — | — | 910 | ||||||||||||
| Money Market Funds |
9,466,526 | — | — | 9,466,526 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 159,832,503 | $ | 164,028 | $ | 1 | $ | 159,996,532 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Emerging Markets Asia |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 107,722,303 | $ | 145,722 | $ | 1 | $ | 107,868,026 | ||||||||
| Preferred Stocks |
1,170,244 | — | — | 1,170,244 | ||||||||||||
| Money Market Funds |
4,492,310 | — | — | 4,492,310 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 113,384,857 | $ | 145,722 | $ | 1 | $ | 113,530,580 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Emerging Markets Small-Cap |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 87,369,225 | $ | 235,970 | $ | 277,203 | $ | 87,882,398 | ||||||||
| Preferred Stocks |
301,014 | — | — | 301,014 | ||||||||||||
| Rights |
1,899 | — | — | 1,899 | ||||||||||||
| Money Market Funds |
14,931,581 | — | — | 14,931,581 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 102,603,719 | $ | 235,970 | $ | 277,203 | $ | 103,116,892 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Shown at the unrealized appreciation (depreciation) on the contracts. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
79 |
Table of Contents
Notes to Consolidated Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their consolidated statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ consolidated statements of assets and liabilities.
Each Fund conducts its investment activities in India through its Subsidiary and expects to obtain benefits under the Double Tax Avoidance Agreement (“DTAA”) between India and Mauritius. In order to be eligible to claim benefits under the DTAA, each Subsidiary must, on an annual basis, satisfy certain tests and conditions, including the establishment and maintenance of valid tax residence in Mauritius and related requirements. Each Fund has obtained a current tax residence certificate issued by the Mauritian Revenue Authorities.
Based upon current interpretation and practice of the current tax laws in India and Mauritius and the DTAA, each Subsidiary is subject to tax in Mauritius on its net income at the rate of 15%. However, a system of tax credits effectively reduces the Mauritius income tax rate to a maximum of 3%. These income taxes, if any, are paid by the Funds and are disclosed in the consolidated statements of operations. Any dividends paid by a Subsidiary to its Fund are not subject to tax in Mauritius. Further, each Subsidiary is also exempt from tax in Mauritius on any gains from the sale of securities.
However, there can be no assurance that any future changes to the India-Mauritius treaty will not adversely affect the tax position of the Funds’ investments in India. If the DTAA is interpreted, amended, terminated, renegotiated, or possibly overridden by the General Anti-Avoidance Rules provisions (which are due to take effect April 1, 2017, the details of which are pending further authoritative guidance), in a manner that would adversely affect the tax position in India of each Fund, such an interpretation,
| 80 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Consolidated Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
amendment, or override renegotiation may cause the Funds to incur capital gains tax in India. Tax laws in India also include provisions that impose Indian tax on the transfer of shares of an Indian company. However, until more definitive authoritative guidance on the final applicability of this provision to the Funds is available, the impact to the Funds, if any, cannot be determined at this time.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the consolidated schedules of investments. The securities on loan for each Fund are also disclosed in its consolidated schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the consolidated statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the consolidated statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
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The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| Core MSCI Emerging Markets |
||||||||||||
| Barclays Capital Inc. |
$ | 9,822,853 | $ | 9,822,853 | $ | — | ||||||
| BNP Paribas Prime Brokerage Inc. |
1,171,454 | 1,171,454 | — | |||||||||
| Citigroup Global Markets Inc. |
43,264,002 | 43,264,002 | — | |||||||||
| Credit Suisse Securities (Europe) Ltd. |
15,802,885 | 15,802,885 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
92,065,697 | 92,065,697 | — | |||||||||
| Deutsche Bank AG |
25,269,852 | 25,269,852 | — | |||||||||
| Deutsche Bank Securities Inc. |
35,909,773 | 35,909,773 | — | |||||||||
| HSBC Bank PLC |
18,083,459 | 18,083,459 | — | |||||||||
| Jefferies LLC |
486,292 | 486,292 | — | |||||||||
| JPMorgan Clearing Corp. |
32,443,651 | 32,443,651 | — | |||||||||
| JPMorgan Securities PLC |
26,822,535 | 26,822,535 | — | |||||||||
| Macquarie Capital (USA) Inc. |
1,437,672 | 1,437,672 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
36,246,878 | 36,246,878 | — | |||||||||
| Morgan Stanley & Co. International PLC |
97,828,461 | 97,828,461 | — | |||||||||
| Morgan Stanley & Co. LLC |
132,665,392 | 132,665,392 | — | |||||||||
| Morgan Stanley & Co. LLC (U.S. Equity Securities Lending) |
5,241,379 | 5,241,379 | — | |||||||||
| National Financial Services LLC |
285,844 | 285,844 | — | |||||||||
| SG Americas Securities LLC |
232,536 | 232,536 | — | |||||||||
| State Street Bank & Trust Company |
4,648,317 | 4,648,317 | — | |||||||||
| UBS Securities LLC |
29,411,602 | 29,411,602 | — | |||||||||
| Wells Fargo Securities LLC |
4,294,120 | 4,294,120 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 613,434,654 | $ | 613,434,654 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI BRIC |
||||||||||||
| BNP Paribas Prime Brokerage Inc. |
$ | 668,974 | $ | 668,974 | $ | — | ||||||
| Citigroup Global Markets Inc. |
1,757 | 1,757 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
438,936 | 438,936 | — | |||||||||
| Deutsche Bank Securities Inc. |
103,091 | 103,091 | — | |||||||||
| Goldman Sachs & Co. |
933,737 | 933,737 | — | |||||||||
| JPMorgan Clearing Corp. |
99,196 | 99,196 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
87,502 | 87,502 | — | |||||||||
| Morgan Stanley & Co. LLC |
2,365,236 | 2,365,236 | — | |||||||||
| Morgan Stanley & Co. LLC (U.S. Equity Securities Lending) |
4,250,292 | 4,250,292 | — | |||||||||
| State Street Bank & Trust Company |
66,479 | 66,479 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 9,015,200 | $ | 9,015,200 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
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iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Emerging Markets Asia |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 168,911 | $ | 168,911 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
403,350 | 403,350 | — | |||||||||
| Deutsche Bank AG |
253,624 | 253,624 | — | |||||||||
| Deutsche Bank Securities Inc. |
124,263 | 124,263 | — | |||||||||
| HSBC Bank PLC |
96,742 | 96,742 | — | |||||||||
| Jefferies LLC |
50,942 | 50,942 | — | |||||||||
| JPMorgan Clearing Corp. |
15,651 | 15,651 | — | |||||||||
| JPMorgan Securities PLC |
175,801 | 175,801 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
269,303 | 269,303 | — | |||||||||
| Morgan Stanley & Co. International PLC |
1,230,928 | 1,230,928 | — | |||||||||
| Morgan Stanley & Co. LLC |
1,441,702 | 1,441,702 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 4,231,217 | $ | 4,231,217 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Emerging Markets Small-Cap |
||||||||||||
| Barclays Capital Inc. |
$ | 171,028 | $ | 171,028 | $ | — | ||||||
| Citigroup Global Markets Inc. |
209,138 | 209,138 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
2,217,106 | 2,217,106 | — | |||||||||
| Deutsche Bank AG |
278,509 | 278,509 | — | |||||||||
| Deutsche Bank Securities Inc. |
1,463,938 | 1,463,938 | — | |||||||||
| Goldman Sachs & Co. |
2,680,311 | 2,680,311 | — | |||||||||
| JPMorgan Clearing Corp. |
1,652,581 | 1,652,581 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
1,276,689 | 1,276,689 | — | |||||||||
| Morgan Stanley & Co. International PLC |
182,122 | 182,122 | — | |||||||||
| Morgan Stanley & Co. LLC |
2,022,766 | 2,022,766 | — | |||||||||
| UBS Securities LLC |
1,235,991 | 1,235,991 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 13,390,179 | $ | 13,390,179 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market value of securities loaned at period end and is disclosed in each Fund’s consolidated statement of assets and liabilities. |
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
Each Subsidiary has entered into a separate contract with BFA under which BFA provides investment advisory services to the Subsidiary but does not receive separate compensation from the Subsidiary for providing it with such services. Each Subsidiary has also entered into separate arrangements that provide for the provision of other services to the Subsidiary (including administrative, custody, transfer agency and other services), and BFA pays the costs and expenses related to the provision of those services.
For its investment advisory services to the iShares Core MSCI Emerging Markets ETF, BFA is entitled to an annual investment advisory fee of 0.16% based on the average daily net assets of the Fund. Prior to November 11, 2015, for its investment advisory
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iSHARES®, INC.
services to the Fund, BFA was entitled to an annual investment advisory fee of 0.18% based on the average daily net assets of the Fund. In addition, the Fund indirectly pays its pro rata share of fees and expenses attributable to its investments in other investment companies (“acquired fund fees and expenses”). BFA contractually agreed to waive a portion of its investment advisory fees for the Fund through December 31, 2015 in an amount equal to the acquired fund fees and expenses attributable to the Fund’s investments in other iShares funds, if any.
For its investment advisory services to each of the iShares MSCI BRIC and iShares MSCI Emerging Markets Small-Cap ETFs, BFA 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 the Fund and certain other iShares funds, as follows:
| Investment Advisory Fee | Aggregate 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, up to and including $42 billion | ||||
| 0.54 | Over $42 billion, up to and including $56 billion | ||||
| 0.47 | Over $56 billion, up to and including $70 billion | ||||
| 0.41 | Over $70 billion, up to and including $84 billion | ||||
| 0.35 | Over $84 billion | ||||
For its investment advisory services to the iShares MSCI Emerging Markets Asia ETF, BFA is entitled to an annual investment advisory fee of 0.68% based on the average daily net assets of the Fund. BFA has contractually agreed to waive a portion of its investment advisory fees for the Fund through December 31, 2018 in order to limit total annual operating expenses after fee waiver to 0.49% of average daily net assets
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
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iSHARES®, INC.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| Core MSCI Emerging Markets |
$ | 2,095,876 | ||
| MSCI BRIC |
19,750 | |||
| MSCI Emerging Markets Asia |
16,678 | |||
| MSCI Emerging Markets Small-Cap |
63,047 | |||
For the six months ended February 29, 2016, BTC, the Funds’ securities lending agent, has agreed to voluntarily reimburse the iShares Core MSCI Emerging Markets ETF in the amount of $57,693, related to the foreign tax on the securities lending income. Such reimbursement is included in “Securities lending income – affiliated – net” in the Fund’s consolidated statement of operations.
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
For the six months ended February 29, 2016, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| Core MSCI Emerging Markets |
$ | 522,927 | $ | 3,726,943 | ||||
| MSCI BRIC |
— | 13,034 | ||||||
| MSCI Emerging Markets Small-Cap |
— | 457,879 | ||||||
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the consolidated statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
Certain Funds, in order to improve their portfolio liquidity and their ability to track their respective underlying index, may invest in shares of other iShares funds that invest in securities in each Fund’s respective underlying index.
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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iSHARES®, INC.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| Core MSCI Emerging Markets |
$ | 3,031,453,103 | $ | 480,999,859 | ||||
| MSCI BRIC |
16,637,340 | 25,008,646 | ||||||
| MSCI Emerging Markets Asia |
19,529,686 | 18,915,741 | ||||||
| MSCI Emerging Markets Small-Cap |
29,126,717 | 11,225,375 | ||||||
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| Core MSCI Emerging Markets |
$ | 452,167,139 | $ | — | ||||
| MSCI BRIC |
— | 10,431,870 | ||||||
| MSCI Emerging Markets Asia |
— | 5,848,956 | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 consolidated statements of changes in net assets.
The consideration for the purchase of Creation Units of a fund in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the consolidated statements of changes in net assets.
| 5. | FUTURES CONTRACTS |
Each Fund may purchase or sell futures contracts in an effort to help such Fund track its underlying index. A futures contract is a standardized, exchange-traded agreement to buy or sell a financial instrument at a set price on a future date. Upon entering into a futures contract, the Fund is required to pledge to the executing broker which holds segregated from its own assets, an amount of cash, U.S. government securities or other high-quality debt and equity securities equal to the minimum initial margin requirements of the exchange on which the contract is traded. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Losses may arise if the value of a futures contract decreases due to an unfavorable change in the market rates or
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iSHARES®, INC.
values of the underlying instrument during the term of the contract or if the counterparty does not perform under the contract. The use of futures contracts also involves the risk of an imperfect correlation in the movements in the price of futures contracts and the assets underlying such contracts.
The following table shows the value of futures contracts held by the iShares Core MSCI Emerging Markets ETF as of February 29, 2016 and the related locations in the consolidated statements of assets and liabilities, presented by risk exposure category:
| Liabilities | ||||
| Equity contracts: |
||||
| Variation margin / Net assets consist of – net unrealized depreciationa |
$ | 545,669 | ||
|
|
|
|||
| a | Represents cumulative depreciation of futures contracts as reported in the consolidated schedule of investments. Only current day’s variation margin is reported separately within the consolidated statements of assets and liabilities. |
The following table shows the realized and unrealized gains (losses) on futures contracts held by the iShares Core MSCI Emerging Markets ETF during the six months ended February 29, 2016 and the related locations in the consolidated statements of operations, presented by risk exposure category:
| Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation/Depreciation |
|||||||
| Equity contracts: |
||||||||
| Futures contracts |
$ | (6,660,067 | ) | $ | 3,976,458 | |||
|
|
|
|
|
|||||
The following table shows the average quarter-end balances of open futures contracts for the iShares Core MSCI Emerging Markets ETF for the six months ended February 29, 2016:
| Average value of contracts purchased |
$ | 34,786,407 |
| 6. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its investment in equity and financial derivative instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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iSHARES®, INC.
factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s consolidated schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its consolidated schedule of investments.
Each Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
The United States and the European Union, along with the regulatory bodies of a number of countries including Japan, Australia and Canada (collectively, “Sanctioning Bodies”), have imposed sectorial economic sanctions on certain Russian individuals and Russian corporate entities which include prohibitions on transacting in or dealing in new debt of longer than 30 or 90 days maturity or new equity of such issuers. Securities held by the iShares Core MSCI Emerging Markets ETF, iShares MSCI BRIC ETF and iShares MSCI Emerging Markets Small-Cap ETF issued prior to the date of the sanctions being imposed are not currently subject to any restrictions under the sanctions. However, compliance with each of these sanctions may impair the ability of a Fund to buy, sell, hold, receive or deliver the affected securities or other securities of such issuers. The Sanctioning Bodies could also institute broader sanctions on Russia. These sanctions, or even the threat of further sanctions, may result in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy. Current or future sanctions may result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. These retaliatory measures may include the immediate freeze of Russian assets held by a Fund.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its consolidated statement of assets and liabilities.
| 7. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital gains (taking into account any capital loss carryforwards) sufficient to
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iSHARES®, INC.
relieve it from all, or substantially all, federal income and excise taxes. Accordingly, no provision for federal income taxes is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the following Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
| iShares ETF | Non- Expiring a |
Expiring 2017 |
Expiring 2018 |
Expiring 2019 |
Total | |||||||||||||||
| Core MSCI Emerging Markets |
$ | 34,205,998 | $ | — | $ | — | $ | — | $ | 34,205,998 | ||||||||||
| MSCI BRIC |
160,504,168 | 1,540,740 | 11,268,086 | 7,760,558 | 181,073,552 | |||||||||||||||
| MSCI Emerging Markets Asia |
9,350,259 | — | — | — | 9,350,259 | |||||||||||||||
| MSCI Emerging Markets Small-Cap |
5,947,880 | — | — | — | 5,947,880 | |||||||||||||||
| a | Must be utilized prior to losses subject to expiration. |
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 marked-to-market gains.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| Core MSCI Emerging Markets |
$ | 11,801,327,887 | $ | 292,418,871 | $ | (2,379,786,347 | ) | $ | (2,087,367,476 | ) | ||||||
| MSCI BRIC |
221,934,446 | 17,771,833 | (79,709,747 | ) | (61,937,914 | ) | ||||||||||
| MSCI Emerging Markets Asia |
136,454,403 | 4,540,542 | (27,464,365 | ) | (22,923,823 | ) | ||||||||||
| MSCI Emerging Markets Small-Cap |
122,866,033 | 5,280,961 | (25,030,102 | ) | (19,749,141 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ consolidated financial statements.
| 8. | LINE OF CREDIT |
The Funds, along with certain other iShares funds, are parties to a $250 million credit agreement with State Street Bank and Trust Company, which expires on October 28, 2016. The line of credit may be used for temporary or emergency purposes, including redemptions, settlement of trades and rebalancing of portfolio holdings. The credit agreement has the following terms: a commitment fee of 0.20% per annum on the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR (not less than zero) plus 1.00% per annum or (b) the U.S. Federal Funds rate (not less than zero) plus
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
89 |
Table of Contents
Notes to Consolidated Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
1.00% per annum on amounts borrowed. The commitment fee is allocated to each fund participating in the credit agreement based on each fund’s pro-rata share of the aggregate average daily value of assets invested in local securities of certain foreign markets.
The terms of the credit agreement, as amended by the Board on September 17, 2015, became effective on October 28, 2015. Prior to this date, the maximum borrowing amount was $150 million and the commitment fee was 0.08% per annum on the unused portion of the credit agreement.
The iShares Core MSCI Emerging Markets ETF did not borrow under the credit agreement during the six month ended February 29, 2016.
For the six months ended February 29, 2016, the maximum amounts borrowed, the average borrowings and the weighted average interest rates, if any, under the credit agreement were as follows:
| iShares ETF | Maximum Amount Borrowed |
Average Borrowings |
Weighted Average Interest Rates |
|||||||||
| MSCI BRIC |
$ | 1,500,000 | $ | 57,923 | 1.26 | % | ||||||
| MSCI Emerging Markets Asia |
587,000 | 23,492 | 1.27 | |||||||||
| MSCI Emerging Markets Small-Cap |
635,000 | 24,290 | 1.26 | |||||||||
| 9. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the consolidated financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the consolidated financial statements.
| 90 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| Core MSCI Emerging Markets |
$ | 0.427548 | $ | — | $ | 0.118734 | $ | 0.546282 | 78 | % | — | % | 22 | % | 100 | % | ||||||||||||||||
| MSCI BRIC |
0.490553 | — | 0.054846 | 0.545399 | 90 | — | 10 | 100 | ||||||||||||||||||||||||
| MSCI Emerging Markets Asia |
0.696623 | — | 0.152317 | 0.848940 | 82 | — | 18 | 100 | ||||||||||||||||||||||||
| MSCI Emerging Markets Small-Cap |
0.485427 | — | 0.098834 | 0.584261 | 83 | — | 17 | 100 | ||||||||||||||||||||||||
| SUPPLEMENTAL INFORMATION |
91 |
Table of Contents
Notes:
| 92 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes:
| NOTES |
93 |
Table of Contents
Notes:
| 94 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-810-0216
|
|
Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
|
iShares, Inc.
| Ø | iShares MSCI Emerging Markets Horizon ETF | EMHZ | BATS |
| Ø | iShares MSCI Frontier 100 ETF | FM | NYSE Arca |
| Ø | iShares MSCI World ETF | URTH | NYSE Arca |
Table of Contents
| 5 | ||||
| 8 | ||||
| 8 | ||||
| 9 | ||||
| 9 | ||||
| 13 | ||||
| 16 | ||||
| 32 | ||||
| 36 | ||||
| 39 | ||||
| 49 |
Table of Contents
iSHARES® MSCI EMERGING MARKETS HORIZON ETF
Performance as of February 29, 2016
The iShares MSCI Emerging Markets Horizon ETF (the “Fund”) seeks to track the investment results of an index that takes the smallest 25% of countries by market capitalization from the universe of an index of emerging markets countries, and then excludes Brazil, China, India, and Russia, as represented by the MSCI Emerging Markets Horizon Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -4.78%, net of fees, while the total return for the Index was -4.47%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(20.41)% | (20.78)% | (20.29)% | (20.41)% | (20.78)% | (20.29)% | ||||||||||||||||||||
| Since Inception |
(18.39)% | (18.10)% | (18.14)% | (24.43)% | (24.06)% | (24.12)% | ||||||||||||||||||||
The inception date of the Fund was 10/14/14. The first day of secondary market trading was 10/16/14.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 8 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 952.20 | $ | 2.43 | $ | 1,000.00 | $ | 1,022.40 | $ | 2.51 | 0.50% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 8 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI FRONTIER 100 ETF
Performance as of February 29, 2016
The iShares MSCI Frontier 100 ETF (the “Fund”) seeks to track the investment results of an index composed of frontier market equities, as represented by the MSCI Frontier Markets 100 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -7.40%, net of fees, while the total return for the Index was -6.33%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(18.28)% | (20.27)% | (16.89)% | (18.28)% | (20.27)% | (16.89)% | ||||||||||||||||||||
| Since Inception |
3.42% | 3.00% | 4.48% | 12.37% | 10.79% | 16.42% | ||||||||||||||||||||
The inception date of the Fund was 9/12/12. The first day of secondary market trading was 9/13/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 8 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 926.00 | $ | 3.78 | $ | 1,000.00 | $ | 1,020.90 | $ | 3.97 | 0.79% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 8 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI WORLD ETF
Performance as of February 29, 2016
The iShares MSCI World ETF (the “Fund”) seeks to track the investment results of an index composed of developed market equities, as represented by the MSCI World Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -4.96%, net of fees, while the total return for the Index was -5.18%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(10.63)% | (10.91)% | (11.00)% | (10.63)% | (10.91)% | (11.00)% | ||||||||||||||||||||
| Since Inception |
8.53% | 8.52% | 8.36% | 40.31% | 40.27% | 39.44% | ||||||||||||||||||||
The inception date of the Fund was 1/10/12. The first day of secondary market trading was 1/12/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 8 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 950.40 | $ | 1.16 | $ | 1,000.00 | $ | 1,023.70 | $ | 1.21 | 0.24% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 8 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI EMERGING MARKETS HORIZON ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
9 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS HORIZON ETF
February 29, 2016
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS HORIZON ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
11 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS HORIZON ETF
February 29, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI FRONTIER 100 ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI FRONTIER 100 ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI FRONTIER 100 ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited)
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
25 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
27 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
29 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI WORLD ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
31 |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares Horizon ETF |
iShares MSCI Frontier 100 ETF |
iShares MSCI World ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 1,187,245 | $ | 496,507,982 | $ | 218,218,934 | ||||||
| Affiliated (Note 2) |
19,176 | 3,415,307 | 4,847,832 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 1,206,421 | $ | 499,923,289 | $ | 223,066,766 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 887,221 | $ | 406,380,953 | $ | 186,611,471 | ||||||
| Affiliated (Note 2) |
19,176 | 3,415,307 | 4,786,152 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
906,397 | 409,796,260 | 191,397,623 | |||||||||
| Foreign currency, at valueb |
1,497 | 5,566,263 | 307,225 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
— | 663,653 | 955,386 | |||||||||
| Dividends and interest |
729 | 120,135 | 475,493 | |||||||||
| Tax reclaims |
131 | 896 | 85,414 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
908,754 | 416,147,207 | 193,221,141 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
— | 2,255,237 | 971,863 | |||||||||
| Collateral for securities on loan (Note 1) |
17,485 | 133,724 | 4,227,877 | |||||||||
| Deferred foreign capital gains taxes (Note 1) |
— | 4,822,054 | — | |||||||||
| Investment advisory fees (Note 2) |
347 | 258,951 | 37,454 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
17,832 | 7,469,966 | 5,237,194 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 890,922 | $ | 408,677,241 | $ | 187,983,947 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 1,291,183 | $ | 581,914,485 | $ | 219,290,035 | ||||||
| Undistributed (distributions in excess of) net investment income |
3,567 | (284,901 | ) | 685,376 | ||||||||
| Accumulated net realized loss |
(103,812 | ) | (79,774,987 | ) | (318,445 | ) | ||||||
| Net unrealized depreciation |
(300,016 | ) | (93,177,356 | ) | (31,673,019 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 890,922 | $ | 408,677,241 | $ | 187,983,947 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
50,000 | 16,900,000 | 2,900,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 17.82 | $ | 24.18 | $ | 64.82 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $16,638, $130,901 and $4,061,536, respectively. See Note 1. |
| b | Cost of foreign currency: $1,483, $5,571,238 and $307,309, respectively. |
| c | $0.001 par value, number of shares authorized: 25 million, 500 million and 500 million, respectively. |
See notes to financial statements.
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares Horizon ETF |
iShares MSCI Frontier 100 ETF |
iShares ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliateda |
$ | 9,307 | $ | 3,754,031 | $ | 2,359,892 | ||||||
| Dividends — affiliated (Note 2) |
— | — | 5,497 | |||||||||
| Interest — unaffiliated |
— | 14,328 | — | |||||||||
| Interest — affiliated (Note 2) |
1 | 1,519 | 157 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
90 | 90 | 17,361 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
9,398 | 3,769,968 | 2,382,907 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
2,243 | 1,849,603 | 264,463 | |||||||||
| Commitment fees (Note 6) |
— | 1,917 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
2,243 | 1,851,520 | 264,463 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
7,155 | 1,918,448 | 2,118,444 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliatedb |
(8,800 | ) | (34,784,164 | ) | (1,819,688 | ) | ||||||
| In-kind redemptions — unaffiliated |
— | 360,421 | 2,470,561 | |||||||||
| In-kind redemptions — affiliated (Note 2) |
— | — | 5,957 | |||||||||
| Foreign currency transactions |
(186 | ) | (122,701 | ) | (15,049 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized gain (loss) |
(8,986 | ) | (34,546,444 | ) | 641,781 | |||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investmentsc |
(43,225 | ) | (6,898,701 | ) | (16,144,139 | ) | ||||||
| Translation of assets and liabilities in foreign currencies |
17 | (3,013 | ) | 3,181 | ||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(43,208 | ) | (6,901,714 | ) | (16,140,958 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(52,194 | ) | (41,448,158 | ) | (15,499,177 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (45,039 | ) | $ | (39,529,710 | ) | $ | (13,380,733 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $686, $421,670 and $80,860, respectively. |
| b | Net of foreign capital gains taxes of $ —, $138,195 and $ —, respectively. |
| c | Net of deferred foreign capital gains taxes of $ —, $3,045,196 and $ —, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
33 |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares MSCI Emerging Markets Horizon ETF |
iShares MSCI Frontier 100 ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Period from to August 31, 2015 |
Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 7,155 | $ | 37,840 | $ | 1,918,448 | $ | 15,030,715 | ||||||||
| Net realized loss |
(8,986 | ) | (146,858 | ) | (34,546,444 | ) | (5,709,041 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
(43,208 | ) | (256,808 | ) | (6,901,714 | ) | (166,708,688 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(45,039 | ) | (365,826 | ) | (39,529,710 | ) | (157,387,014 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(4,527 | ) | (35,584 | ) | (1,587,488 | ) | (14,489,117 | ) | ||||||||
| From net realized gain |
— | — | — | (47,428,840 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(4,527 | ) | (35,584 | ) | (1,587,488 | ) | (61,917,957 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
— | 2,439,470 | 20,177,755 | 114,382,787 | ||||||||||||
| Cost of shares redeemed |
— | (1,097,572 | ) | (73,375,817 | ) | (191,434,078 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
— | 1,341,898 | (53,198,062 | ) | (77,051,291 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(49,566 | ) | 940,488 | (94,315,260 | ) | (296,356,262 | ) | |||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
940,488 | — | 502,992,501 | 799,348,763 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 890,922 | $ | 940,488 | $ | 408,677,241 | $ | 502,992,501 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | 3,567 | $ | 939 | $ | (284,901 | ) | $ | (615,861 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
— | 100,000 | 750,000 | 3,750,000 | ||||||||||||
| Shares redeemed |
— | (50,000 | ) | (3,050,000 | ) | (5,700,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
— | 50,000 | (2,300,000 | ) | (1,950,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Commencement of operations. |
See notes to financial statements.
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI World ETF |
||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||
| OPERATIONS: |
||||||||
| Net investment income |
$ | 2,118,444 | $ | 4,823,722 | ||||
| Net realized gain |
641,781 | 13,170,641 | ||||||
| Net change in unrealized appreciation/depreciation |
(16,140,958 | ) | (28,759,523 | ) | ||||
|
|
|
|
|
|||||
| Net decrease in net assets resulting from operations |
(13,380,733 | ) | (10,765,160 | ) | ||||
|
|
|
|
|
|||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||
| From net investment income |
(2,545,036 | ) | (4,706,418 | ) | ||||
|
|
|
|
|
|||||
| Total distributions to shareholders |
(2,545,036 | ) | (4,706,418 | ) | ||||
|
|
|
|
|
|||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||
| Proceeds from shares sold |
55,087,147 | 147,539,726 | ||||||
| Cost of shares redeemed |
(58,019,921 | ) | (93,954,071 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets from capital share transactions |
(2,932,774 | ) | 53,585,655 | |||||
|
|
|
|
|
|||||
| INCREASE (DECREASE) IN NET ASSETS |
(18,858,543 | ) | 38,114,077 | |||||
| NET ASSETS |
||||||||
| Beginning of period |
206,842,490 | 168,728,413 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 187,983,947 | $ | 206,842,490 | ||||
|
|
|
|
|
|||||
| Undistributed net investment income included in net assets at end of period |
$ | 685,376 | $ | 1,111,968 | ||||
|
|
|
|
|
|||||
| SHARES ISSUED AND REDEEMED |
||||||||
| Shares sold |
800,000 | 2,000,000 | ||||||
| Shares redeemed |
(900,000 | ) | (1,300,000 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in shares outstanding |
(100,000 | ) | 700,000 | |||||
|
|
|
|
|
|||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
35 |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
|
iShares MSCI Emerging Markets Horizon ETF |
| Six months ended Feb. 29, 2016 (Unaudited) |
Period from Oct. 14, 2014a to |
|||||||
| Net asset value, beginning of period |
$ | 18.81 | $ | 24.39 | ||||
|
|
|
|
|
|||||
| Income from investment operations: |
||||||||
| Net investment incomeb |
0.14 | 0.42 | ||||||
| Net realized and unrealized lossc |
(1.04 | ) | (5.37 | ) | ||||
|
|
|
|
|
|||||
| Total from investment operations |
(0.90 | ) | (4.95 | ) | ||||
|
|
|
|
|
|||||
| Less distributions from: |
||||||||
| Net investment income |
(0.09 | ) | (0.63 | ) | ||||
|
|
|
|
|
|||||
| Total distributions |
(0.09 | ) | (0.63 | ) | ||||
|
|
|
|
|
|||||
| Net asset value, end of period |
$ | 17.82 | $ | 18.81 | ||||
|
|
|
|
|
|||||
| Total return |
(4.78 | )%d | (20.64 | )%d | ||||
|
|
|
|
|
|||||
| Ratios/Supplemental data: |
||||||||
| Net assets, end of period (000s) |
$ | 891 | $ | 940 | ||||
| Ratio of expenses to average net assetse |
0.50 | % | 0.50 | % | ||||
| Ratio of net investment income to average net assetse |
1.59 | % | 2.11 | % | ||||
| Portfolio turnover ratef |
2 | % | 28 | % | ||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016 and the period ended August 31, 2015 was 2% and 9%, respectively. See Note 4. |
See notes to financial statements.
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Frontier 100 ETF | ||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Period from Sep. 12, 2012a to Aug. 31, 2013 |
|||||||||||||
| Net asset value, beginning of period |
$ | 26.20 | $ | 37.79 | $ | 30.12 | $ | 25.25 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income from investment operations: |
||||||||||||||||
| Net investment incomeb |
0.10 | 0.77 | 1.09 | 0.67 | ||||||||||||
| Net realized and unrealized gain (loss)c |
(2.04 | ) | (8.78 | ) | 7.47 | 4.51 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total from investment operations |
(1.94 | ) | (8.01 | ) | 8.56 | 5.18 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Less distributions from: |
||||||||||||||||
| Net investment income |
(0.08 | ) | (0.76 | ) | (0.89 | ) | (0.28 | ) | ||||||||
| Net realized gain |
— | (2.82 | ) | — | — | |||||||||||
| Return of capital |
— | — | — | (0.03 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions |
(0.08 | ) | (3.58 | ) | (0.89 | ) | (0.31 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net asset value, end of period |
$ | 24.18 | $ | 26.20 | $ | 37.79 | $ | 30.12 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total return |
(7.40 | )%d | (21.70 | )% | 28.56 | % | 20.54 | %d | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Ratios/Supplemental data: |
||||||||||||||||
| Net assets, end of period (000s) |
$ | 408,677 | $ | 502,993 | $ | 799,349 | $ | 280,084 | ||||||||
| Ratio of expenses to average net assetse |
0.79 | % | 0.79 | % | 0.79 | % | 0.79 | % | ||||||||
| Ratio of net investment income to average net assetse |
0.82 | % | 2.43 | % | 3.07 | % | 2.32 | % | ||||||||
| Portfolio turnover ratef |
10 | % | 47 | % | 61 | % | 18 | % | ||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014 and the period ended August 31, 2013 were 10%, 45%, 42% and 10%, respectively. See Note 4. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
37 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI World ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from Jan. 10, 2012a to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 68.95 | $ | 73.36 | $ | 61.76 | $ | 53.45 | $ | 50.32 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.65 | 1.64 | 1.81 | 1.40 | 0.98 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
(4.03 | ) | (4.49 | ) | 11.16 | 8.03 | 2.89 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(3.38 | ) | (2.85 | ) | 12.97 | 9.43 | 3.87 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.75 | ) | (1.56 | ) | (1.37 | ) | (1.12 | ) | (0.74 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.75 | ) | (1.56 | ) | (1.37 | ) | (1.12 | ) | (0.74 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 64.82 | $ | 68.95 | $ | 73.36 | $ | 61.76 | $ | 53.45 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
(4.96 | )%d | (3.97 | )% | 21.07 | % | 17.84 | % | 7.76 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 187,984 | $ | 206,842 | $ | 168,728 | $ | 24,704 | $ | 10,689 | ||||||||||
| Ratio of expenses to average net assetse |
0.24 | % | 0.24 | % | 0.24 | % | 0.24 | % | 0.24 | % | ||||||||||
| Ratio of net investment income to average net assetse |
1.92 | % | 2.25 | % | 2.57 | % | 2.34 | % | 2.91 | % | ||||||||||
| Portfolio turnover ratef |
3 | % | 5 | % | 5 | % | 5 | % | 3 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| 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 financial statements.
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF | Diversification Classification | |
| MSCI Emerging Markets Horizon |
Non-diversified | |
| MSCI Frontier 100 |
Diversified | |
| MSCI World |
Diversified |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Fixed income investments are valued using the last available bid price or current market quotations provided by dealers or prices (including evaluated prices) supplied by approved independent third-party pricing services. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction |
| NOTES TO FINANCIAL STATEMENTS |
39 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| data, credit quality information, perceived market movements, news, and other relevant information and by other methods, which may include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; general market conditions; and/or other factors and assumptions. Pricing services generally value fixed income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller odd lot sizes. |
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Emerging Markets Horizon |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 880,078 | $ | — | $ | — | $ | 880,078 | ||||||||
| Preferred Stocks |
7,143 | — | — | 7,143 | ||||||||||||
| Money Market Funds |
19,176 | — | — | 19,176 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 906,397 | $ | — | $ | — | $ | 906,397 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Frontier 100 |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 403,175,791 | $ | 2,950,498 | $ | — | $ | 406,126,289 | ||||||||
| Convertible Bonds |
— | 254,664 | — | 254,664 | ||||||||||||
| Money Market Funds |
3,415,307 | — | — | 3,415,307 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 406,591,098 | $ | 3,205,162 | $ | — | $ | 409,796,260 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI World |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 186,775,840 | $ | — | $ | — | $ | 186,775,840 | ||||||||
| Preferred Stocks |
336,540 | — | — | 336,540 | ||||||||||||
| Rights |
377 | — | — | 377 | ||||||||||||
| Money Market Funds |
4,284,866 | — | — | 4,284,866 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 191,397,623 | $ | — | $ | — | $ | 191,397,623 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars on the respective dates of such transactions.
| NOTES TO FINANCIAL STATEMENTS |
41 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
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
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Emerging Markets Horizon |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 1,844 | $ | 1,844 | $ | — | ||||||
| Deutsche Bank Securities Inc. |
5,283 | 5,283 | — | |||||||||
| JPMorgan Clearing Corp. |
1,842 | 1,842 | — | |||||||||
| Morgan Stanley & Co. LLC |
7,669 | 7,669 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 16,638 | $ | 16,638 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Frontier 100 |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 130,635 | $ | 130,635 | $ | — | ||||||
| JPMorgan Clearing Corp. |
266 | 266 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 130,901 | $ | 130,901 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI World |
||||||||||||
| Barclays Capital Inc. |
$ | 40,292 | $ | 40,292 | $ | — | ||||||
| BNP Paribas Prime Brokerage Inc. |
295,521 | 295,521 | — | |||||||||
| Citigroup Global Markets Inc. |
473,781 | 473,781 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
421,205 | 421,205 | — | |||||||||
| Deutsche Bank Securities Inc. |
58,642 | 58,642 | — | |||||||||
| Goldman Sachs & Co. |
440,563 | 440,563 | — | |||||||||
| JPMorgan Clearing Corp. |
687,904 | 687,904 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
383,582 | 383,582 | — | |||||||||
| Morgan Stanley & Co. LLC |
649,048 | 649,048 | — | |||||||||
| Morgan Stanley & Co. LLC (U.S. Equity Securities Lending) |
117,532 | 117,532 | — | |||||||||
| SG Americas Securities LLC |
109,372 | 109,372 | — | |||||||||
| State Street Bank & Trust Company |
227,938 | 227,938 | — | |||||||||
| UBS Securities LLC |
103,194 | 103,194 | — | |||||||||
| Wells Fargo Securities LLC |
52,962 | 52,962 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 4,061,536 | $ | 4,061,536 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total collateral received was in excess of the market value of securities loaned at period end and is disclosed in each Fund’s statement of assets and liabilities. |
| NOTES TO FINANCIAL STATEMENTS |
43 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
For its investment advisory services to each Fund, BFA is entitled to an annual investment advisory fee based on the average daily net assets of each Fund as follows:
| iShares ETF |
Investment Advisory Fee |
|||
| MSCI Emerging Markets Horizon |
0.50 | % | ||
| MSCI Frontier 100 |
0.79 | |||
| MSCI World |
0.24 | |||
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| MSCI Emerging Markets Horizon |
$ | 23 | ||
| MSCI Frontier 100 |
29 | |||
| MSCI World |
4,845 | |||
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
For the six months ended February 29, 2016, the purchase and sales transactions executed by the iShares MSCI World ETF pursuant to Rule 17a-7 under the 1940 Act were $77,145 and $35,860, respectively.
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
Investments in issuers considered to be affiliates of the Funds (excluding money market funds) during the six months ended February 29, 2016, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:
| iShares ETF and Name of Affiliated Issuer |
Shares Held at Beginning of Period |
Shares Purchased |
Shares Sold |
Shares Held of Period |
Value at End of Period |
Dividend Income |
Net Realized Gain (Loss) |
|||||||||||||||||||||
| MSCI World |
||||||||||||||||||||||||||||
| BlackRock Inc. |
810 | 216 | (243 | ) | 783 | $ | 244,265 | $ | 1,884 | $ | 1,462 | |||||||||||||||||
| PNC Financial Services Group Inc. (The) |
3,270 | 872 | (981 | ) | 3,161 | 257,021 | 3,613 | 4,495 | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| $ | 501,286 | $ | 5,497 | $ | 5,957 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Emerging Markets Horizon |
$ | 17,211 | $ | 15,661 | ||||
| MSCI Frontier 100 |
45,651,956 | 88,627,572 | ||||||
| MSCI World |
5,587,119 | 5,588,495 | ||||||
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| MSCI Frontier 100 |
$ | — | $ | 13,043,075 | ||||
| MSCI World |
54,502,071 | 57,219,043 | ||||||
| NOTES TO FINANCIAL STATEMENTS |
45 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
| 5. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its investment in equity instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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;
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
higher inflation rates; greater social, economic and political uncertainties; the risk of nationalization or expropriation of assets; and the risk of war. These risks are heightened for investments in issuers from countries with less developed markets.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 6. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the following Fund had non-expiring capital loss carryforwards available to offset future realized capital gains as follows:
| iShares ETF |
Non- Expiring |
|||
| MSCI World |
$ | 404,019 | ||
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 marked-to-market gains.
| NOTES TO FINANCIAL STATEMENTS |
47 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| MSCI Emerging Markets Horizon |
$ | 1,209,093 | $ | 17,396 | $ | (320,092 | ) | $ | (302,696 | ) | ||||||
| MSCI Frontier 100 |
526,903,962 | 34,448,223 | (151,555,925 | ) | (117,107,702 | ) | ||||||||||
| MSCI World |
223,540,100 | 4,715,676 | (36,858,153 | ) | (32,142,477 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| 7. | LINE OF CREDIT |
The iShares MSCI Frontier 100 ETF, along with certain other iShares funds, is a party to a $250 million credit agreement with State Street Bank and Trust Company, which expires on October 28, 2016. The line of credit may be used for temporary or emergency purposes, including redemptions, settlement of trades and rebalancing of portfolio holdings. The credit agreement has the following terms: a commitment fee of 0.20% per annum on the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR (not less than zero) plus 1.00% per annum or (b) the U.S. Federal Funds rate (not less than zero) plus 1.00% per annum on amounts borrowed. The commitment fee is allocated to each fund participating in the credit agreement based on each fund’s pro-rata share of the aggregate average daily value of assets invested in local securities of certain foreign markets.
The terms of the credit agreement, as amended by the Board on September 17, 2015, became effective on October 28, 2015. Prior to this date, the maximum borrowing amount was $150 million and the commitment fee was 0.08% per annum on the used portion of the credit agreement.
The Fund did not borrow under the credit agreement during the six months ended February 29, 2016.
| 8. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| MSCI Emerging Markets Horizon |
$ | 0.090540 | $ | — | $ | — | $ | 0.090540 | 100 | % | — | % | — | % | 100 | % | ||||||||||||||||
| MSCI Frontier 100 |
— | — | 0.083552 | 0.083552 | — | — | 100 | 100 | ||||||||||||||||||||||||
| MSCI World |
0.709881 | — | 0.038659 | 0.748540 | 95 | — | 5 | 100 | ||||||||||||||||||||||||
| SUPPLEMENTAL INFORMATION |
49 |
Table of Contents
Notes:
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-811-0216
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|
Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
|
iShares, Inc.
| Ø | iShares MSCI Global Agriculture Producers ETF | VEGI | NYSE Arca |
| Ø | iShares MSCI Global Energy Producers ETF | FILL | NYSE Arca |
| Ø | iShares MSCI Global Gold Miners ETF | RING | NYSE Arca |
| Ø | iShares MSCI Global Metals & Mining Producers ETF | PICK | NYSE Arca |
| Ø | iShares MSCI Global Silver Miners ETF | SLVP | NYSE Arca |
Table of Contents
| 5 | ||||
| 10 | ||||
| 10 | ||||
| 11 | ||||
| 11 | ||||
| 14 | ||||
| 18 | ||||
| 19 | ||||
| 23 | ||||
| 24 | ||||
| 31 | ||||
| 36 | ||||
| 48 |
Table of Contents
iSHARES® MSCI GLOBAL AGRICULTURE PRODUCERS ETF
Performance as of February 29, 2016
The iShares MSCI Global Agriculture Producers ETF (the “Fund”) seeks to track the investment results of an index composed of global equities of companies primarily engaged in the business of agriculture, as represented by the MSCI ACWI Select Agriculture Producers Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -9.47%, net of fees, while the total return for the Index was -9.65%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(19.90)% | (20.11)% | (20.21)% | (19.90)% | (20.11)% | (20.21)% | ||||||||||||||||||||
| Since Inception |
(1.77)% | (1.94)% | (1.74)% | (7.02)% | (7.69)% | (6.92)% | ||||||||||||||||||||
The inception date of the Fund was 1/31/12. The first day of secondary market trading was 2/2/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 905.30 | $ | 1.80 | $ | 1,000.00 | $ | 1,023.00 | $ | 1.91 | 0.38% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI GLOBAL ENERGY PRODUCERS ETF
Performance as of February 29, 2016
The iShares MSCI Global Energy Producers ETF (the “Fund”) seeks to track the investment results of an index composed of global equities of companies primarily engaged in the business of energy exploration and production, as represented by the MSCI ACWI Select Energy Producers Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -9.32%, net of fees, while the total return for the Index was -9.63%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(24.79)% | (25.26)% | (25.17)% | (24.79)% | (25.26)% | (25.17)% | ||||||||||||||||||||
| Since Inception |
(8.21)% | (8.23)% | (8.35)% | (29.50)% | (29.56)% | (29.95)% | ||||||||||||||||||||
The inception date of the Fund was 1/31/12. The first day of secondary market trading was 2/2/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 906.80 | $ | 1.85 | $ | 1,000.00 | $ | 1,022.90 | $ | 1.96 | 0.39% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI GLOBAL GOLD MINERS ETF
Performance as of February 29, 2016
The iShares MSCI Global Gold Miners ETF (the “Fund”) seeks to track the investment results of an index composed of global equities of companies primarily engaged in the business of gold mining, as represented by the MSCI ACWI Select Gold Miners Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was 47.62%, net of fees, while the total return for the Index was 47.97%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(5.52)% | (5.05)% | (5.22)% | (5.52)% | (5.05)% | (5.22)% | ||||||||||||||||||||
| Since Inception |
(23.18)% | (23.05)% | (23.04)% | (65.90)% | (65.66)% | (65.68)% | ||||||||||||||||||||
The inception date of the Fund was 1/31/12. The first day of secondary market trading was 2/2/12.
Certain sectors and markets performed exceptionally well based on market conditions during the six-month period. Achieving such exceptional returns involves the risk of volatility and investors should not expect that such exceptional returns will be repeated.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,476.20 | $ | 2.40 | $ | 1,000.00 | $ | 1,022.90 | $ | 1.96 | 0.39% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI GLOBAL METALS & MINING PRODUCERS ETF
Performance as of February 29, 2016
The iShares MSCI Global Metals & Mining Producers ETF (the “Fund”) seeks to track the investment results of an index composed of global equities of companies primarily engaged in mining, extraction or production of diversified metals, excluding gold and silver, as represented by the MSCI ACWI Select Metals & Mining Producers ex Gold & Silver Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -21.18%, net of fees, while the total return for the Index was -21.16%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(43.18)% | (43.25)% | (43.16)% | (43.18)% | (43.25)% | (43.16)% | ||||||||||||||||||||
| Since Inception |
(20.28)% | (20.20)% | (20.25)% | (60.33)% | (60.17)% | (60.31)% | ||||||||||||||||||||
The inception date of the Fund was 1/31/12. The first day of secondary market trading was 2/2/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 788.20 | $ | 1.73 | $ | 1,000.00 | $ | 1,022.90 | $ | 1.96 | 0.39% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI GLOBAL SILVER MINERS ETF
Performance as of February 29, 2016
The iShares MSCI Global Silver Miners ETF (the “Fund”) seeks to track the investment results of an index composed of global equities of companies primarily engaged in the business of silver mining, as represented by the MSCI ACWI Select Silver Miners Investable Market Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was 18.47%, net of fees, while the total return for the Index was 19.23%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(21.77)% | (21.30)% | (21.70)% | (21.77)% | (21.30)% | (21.70)% | ||||||||||||||||||||
| Since Inception |
(24.92)% | (24.77)% | (24.84)% | (68.94)% | (68.69)% | (68.84)% | ||||||||||||||||||||
The inception date of the Fund was 1/31/12. The first day of secondary market trading was 2/2/12.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 10 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,184.70 | $ | 2.12 | $ | 1,000.00 | $ | 1,022.90 | $ | 1.96 | 0.39% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 10 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
9 |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI GLOBAL AGRICULTURE PRODUCERS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
11 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL AGRICULTURE PRODUCERS ETF
February 29, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL AGRICULTURE PRODUCERS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI GLOBAL ENERGY PRODUCERS ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL ENERGY PRODUCERS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL ENERGY PRODUCERS ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL ENERGY PRODUCERS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI GLOBAL GOLD MINERS ETF
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI GLOBAL METALS & MINING PRODUCERS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL METALS & MINING PRODUCERS ETF
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL METALS & MINING PRODUCERS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI GLOBAL METALS & MINING PRODUCERS ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® MSCI GLOBAL SILVER MINERS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares Producers ETF |
iShares Producers ETF |
iShares MSCI Global Gold Miners ETF |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 29,852,034 | $ | 36,915,235 | $ | 80,515,901 | ||||||
| Affiliated (Note 2) |
1,331,329 | 236,222 | 2,496,001 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 31,183,363 | $ | 37,151,457 | $ | 83,011,902 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 23,263,085 | $ | 27,744,858 | $ | 78,764,212 | ||||||
| Affiliated (Note 2) |
1,275,346 | 236,222 | 2,496,001 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
24,538,431 | 27,981,080 | 81,260,213 | |||||||||
| Foreign currency, at valueb |
21,102 | 338,134 | 27,436 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
246,328 | 154,534 | 4,288,049 | |||||||||
| Dividends and interest |
42,653 | 201,739 | 22,930 | |||||||||
| Tax reclaims |
40,457 | 352 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
24,888,971 | 28,675,839 | 85,598,628 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
233,232 | 98,587 | 4,194,583 | |||||||||
| Collateral for securities on loan (Note 1) |
965,739 | 226,680 | 2,357,153 | |||||||||
| Investment advisory fees (Note 2) |
7,213 | 8,479 | 21,663 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
1,206,184 | 333,746 | 6,573,399 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 23,682,787 | $ | 28,342,093 | $ | 79,025,229 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 32,233,056 | $ | 38,428,513 | $ | 109,340,327 | ||||||
| Undistributed (distributions in excess of) net investment income |
74,100 | 188,554 | (30,574 | ) | ||||||||
| Accumulated net realized loss |
(1,975,644 | ) | (1,104,355 | ) | (28,529,528 | ) | ||||||
| Net unrealized depreciation |
(6,648,725 | ) | (9,170,619 | ) | (1,754,996 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 23,682,787 | $ | 28,342,093 | $ | 79,025,229 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
1,100,000 | 1,800,000 | 9,650,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 21.53 | $ | 15.75 | $ | 8.19 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $894,143, $211,398 and $2,228,312, respectively. See Note 1. |
| b | Cost of foreign currency: $21,494, $338,187 and $27,305, respectively. |
| c | $0.001 par value, number of shares authorized: 500 million, 500 million and 500 million, respectively. |
See notes to financial statements.
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares Producers ETF |
iShares MSCI Global Silver Miners ETF |
|||||||
| ASSETS |
|
|||||||
| Investments, at cost: |
||||||||
| Unaffiliated |
$ | 129,481,103 | $ | 20,876,238 | ||||
| Affiliated (Note 2) |
5,650,776 | 1,843,759 | ||||||
|
|
|
|
|
|||||
| Total cost of investments |
$ | 135,131,879 | $ | 22,719,997 | ||||
|
|
|
|
|
|||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||
| Unaffiliated |
$ | 77,694,887 | $ | 18,987,715 | ||||
| Affiliated (Note 2) |
5,650,776 | 1,843,759 | ||||||
|
|
|
|
|
|||||
| Total fair value of investments |
83,345,663 | 20,831,474 | ||||||
| Foreign currency, at valueb |
128,850 | 10,048 | ||||||
| Receivables: |
||||||||
| Investment securities sold |
216,924 | 427,680 | ||||||
| Dividends and interest |
449,084 | 7,876 | ||||||
| Tax reclaims |
10,838 | — | ||||||
|
|
|
|
|
|||||
| Total Assets |
84,151,359 | 21,277,078 | ||||||
|
|
|
|
|
|||||
| LIABILITIES |
||||||||
| Payables: |
||||||||
| Investment securities purchased |
263,173 | 537,170 | ||||||
| Collateral for securities on loan (Note 1) |
5,599,891 | 1,831,740 | ||||||
| Investment advisory fees (Note 2) |
22,904 | 5,210 | ||||||
|
|
|
|
|
|||||
| Total Liabilities |
5,885,968 | 2,374,120 | ||||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 78,265,391 | $ | 18,902,958 | ||||
|
|
|
|
|
|||||
| Net assets consist of: |
||||||||
| Paid-in capital |
$ | 154,383,765 | $ | 26,803,138 | ||||
| Undistributed (distributions in excess of) net investment income |
79,133 | (42,474 | ) | |||||
| Accumulated net realized loss |
(24,403,554 | ) | (5,969,063 | ) | ||||
| Net unrealized depreciation |
(51,793,953 | ) | (1,888,643 | ) | ||||
|
|
|
|
|
|||||
| NET ASSETS |
$ | 78,265,391 | $ | 18,902,958 | ||||
|
|
|
|
|
|||||
| Shares outstandingc |
9,550,000 | 2,600,000 | ||||||
|
|
|
|
|
|||||
| Net asset value per share |
$ | 8.20 | $ | 7.27 | ||||
|
|
|
|
|
|||||
| a | Securities on loan with values of $5,327,731 and $1,552,537, respectively. See Note 1. |
| b | Cost of foreign currency: $130,721 and $10,174, respectively. |
| c | $0.001 par value, number of shares authorized: 500 million and 500 million, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
25 |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares Producers ETF |
iShares Producers ETF |
iShares MSCI Global Gold Miners ETF |
||||||||||
| NET INVESTMENT INCOME |
| |||||||||||
| Dividends — unaffiliateda |
$ | 264,379 | $ | 528,298 | $ | 136,954 | ||||||
| Dividends — affiliated (Note 2) |
651 | — | — | |||||||||
| Interest — affiliated (Note 2) |
19 | 23 | 27 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
22,828 | 2,760 | 13,647 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
287,877 | 531,081 | 150,628 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
49,660 | 53,900 | 100,247 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
49,660 | 53,900 | 100,247 | |||||||||
| Less investment advisory fees waived (Note 2) |
(1,630 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Net expenses |
48,030 | 53,900 | 100,247 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
239,847 | 477,181 | 50,381 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
(457,802 | ) | (473,340 | ) | (3,830,843 | ) | ||||||
| Investments — affiliated (Note 2) |
(2,734 | ) | — | — | ||||||||
| In-kind redemptions — unaffiliated |
(137,561 | ) | — | — | ||||||||
| In-kind redemptions — affiliated (Note 2) |
(66 | ) | — | — | ||||||||
| Foreign currency transactions |
(85 | ) | (17,234 | ) | (5,969 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(598,248 | ) | (490,574 | ) | (3,836,812 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(2,280,350 | ) | (2,534,195 | ) | 29,051,690 | |||||||
| Translation of assets and liabilities in foreign currencies |
(279 | ) | 435 | (2,900 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(2,280,629 | ) | (2,533,760 | ) | 29,048,790 | |||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized gain (loss) |
(2,878,877 | ) | (3,024,334 | ) | 25,211,978 | |||||||
|
|
|
|
|
|
|
|||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (2,639,030 | ) | $ | (2,547,153 | ) | $ | 25,262,359 | ||||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $16,061, $29,746 and $19,541, respectively. |
See notes to financial statements.
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares Producers ETF |
iShares MSCI Global Silver Miners ETF |
|||||||
| NET INVESTMENT INCOME |
| |||||||
| Dividends — unaffiliateda |
$ | 1,365,280 | $ | 29,655 | ||||
| Interest — affiliated (Note 2) |
64 | 5 | ||||||
| Securities lending income — affiliated — net (Note 2) |
64,207 | 7,907 | ||||||
|
|
|
|
|
|||||
| Total investment income |
1,429,551 | 37,567 | ||||||
|
|
|
|
|
|||||
| EXPENSES |
||||||||
| Investment advisory fees (Note 2) |
144,125 | 26,094 | ||||||
|
|
|
|
|
|||||
| Total expenses |
144,125 | 26,094 | ||||||
|
|
|
|
|
|||||
| Net investment income |
1,285,426 | 11,473 | ||||||
|
|
|
|
|
|||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||
| Net realized gain (loss) from: |
||||||||
| Investments — unaffiliated |
(4,935,663 | ) | (1,421,212 | ) | ||||
| In-kind redemptions — unaffiliated |
(844,044 | ) | — | |||||
| Foreign currency transactions |
(2,527 | ) | (502 | ) | ||||
|
|
|
|
|
|||||
| Net realized loss |
(5,782,234 | ) | (1,421,714 | ) | ||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation on: |
||||||||
| Investments |
(14,230,469 | ) | 4,387,826 | |||||
| Translation of assets and liabilities in foreign currencies |
(805 | ) | 427 | |||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation/depreciation |
(14,231,274 | ) | 4,388,253 | |||||
|
|
|
|
|
|||||
| Net realized and unrealized gain (loss) |
(20,013,508 | ) | 2,966,539 | |||||
|
|
|
|
|
|||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (18,728,082 | ) | $ | 2,978,012 | |||
|
|
|
|
|
|||||
| a | Net of foreign withholding tax of $37,975 and $4,950, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
27 |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares MSCI Global Agriculture Producers ETF |
iShares MSCI Global Energy Producers ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 239,847 | $ | 727,994 | $ | 477,181 | $ | 682,782 | ||||||||
| Net realized gain (loss) |
(598,248 | ) | 226,586 | (490,574 | ) | (283,735 | ) | |||||||||
| Net change in unrealized appreciation/depreciation |
(2,280,629 | ) | (4,642,303 | ) | (2,533,760 | ) | (7,286,015 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(2,639,030 | ) | (3,687,723 | ) | (2,547,153 | ) | (6,886,968 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(262,387 | ) | (764,487 | ) | (471,376 | ) | (528,102 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(262,387 | ) | (764,487 | ) | (471,376 | ) | (528,102 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
57 | 1,262,653 | 6,621,203 | 27,723,504 | ||||||||||||
| Cost of shares redeemed |
(1,055,827 | ) | (15,565,180 | ) | — | (3,987,605 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(1,055,770 | ) | (14,302,527 | ) | 6,621,203 | 23,735,899 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(3,957,187 | ) | (18,754,737 | ) | 3,602,674 | 16,320,829 | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
27,639,974 | 46,394,711 | 24,739,419 | 8,418,590 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 23,682,787 | $ | 27,639,974 | $ | 28,342,093 | $ | 24,739,419 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income included in net assets at end of period |
$ | 74,100 | $ | 96,640 | $ | 188,554 | $ | 182,749 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
— | 50,000 | 400,000 | 1,300,000 | ||||||||||||
| Shares redeemed |
(50,000 | ) | (600,000 | ) | — | (200,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(50,000 | ) | (550,000 | ) | 400,000 | 1,100,000 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Global Gold Miners ETF |
iShares MSCI Global Metals & Mining Producers ETF |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 50,381 | $ | 485,776 | $ | 1,285,426 | $ | 7,527,430 | ||||||||
| Net realized loss |
(3,836,812 | ) | (12,222,666 | ) | (5,782,234 | ) | (18,316,429 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
29,048,790 | (26,922,563 | ) | (14,231,274 | ) | (46,808,920 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
25,262,359 | (38,659,453 | ) | (18,728,082 | ) | (57,597,919 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(195,138 | ) | (425,675 | ) | (1,461,853 | ) | (7,833,689 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(195,138 | ) | (425,675 | ) | (1,461,853 | ) | (7,833,689 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
8,031,857 | 19,671,874 | 39,651,206 | 98,298,863 | ||||||||||||
| Cost of shares redeemed |
— | (5,637,066 | ) | (10,414,482 | ) | (147,347,875 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
8,031,857 | 14,034,808 | 29,236,724 | (49,049,012 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
33,099,078 | (25,050,320 | ) | 9,046,789 | (114,480,620 | ) | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
45,926,151 | 70,976,471 | 69,218,602 | 183,699,222 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 79,025,229 | $ | 45,926,151 | $ | 78,265,391 | $ | 69,218,602 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (30,574 | ) | $ | 114,183 | $ | 79,133 | $ | 255,560 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
1,400,000 | 2,700,000 | 4,250,000 | 6,750,000 | ||||||||||||
| Shares redeemed |
— | (750,000 | ) | (1,200,000 | ) | (9,350,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
1,400,000 | 1,950,000 | 3,050,000 | (2,600,000 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
29 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Global Silver Miners ETF |
||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||
| OPERATIONS: |
||||||||
| Net investment income |
$ | 11,473 | $ | 76,577 | ||||
| Net realized loss |
(1,421,714 | ) | (2,663,929 | ) | ||||
| Net change in unrealized appreciation/depreciation |
4,388,253 | (6,307,162 | ) | |||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets resulting from operations |
2,978,012 | (8,894,514 | ) | |||||
|
|
|
|
|
|||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||
| From net investment income |
(6,985 | ) | (294,253 | ) | ||||
|
|
|
|
|
|||||
| Total distributions to shareholders |
(6,985 | ) | (294,253 | ) | ||||
|
|
|
|
|
|||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||
| Proceeds from shares sold |
3,653,225 | 8,449,898 | ||||||
| Cost of shares redeemed |
— | (957,750 | ) | |||||
|
|
|
|
|
|||||
| Net increase in net assets from capital share transactions |
3,653,225 | 7,492,148 | ||||||
|
|
|
|
|
|||||
| INCREASE (DECREASE) IN NET ASSETS |
6,624,252 | (1,696,619 | ) | |||||
| NET ASSETS |
||||||||
| Beginning of period |
12,278,706 | 13,975,325 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 18,902,958 | $ | 12,278,706 | ||||
|
|
|
|
|
|||||
| Distributions in excess of net investment income included in net assets at end of period |
$ | (42,474 | ) | $ | (46,962 | ) | ||
|
|
|
|
|
|||||
| SHARES ISSUED AND REDEEMED |
||||||||
| Shares sold |
600,000 | 1,000,000 | ||||||
| Shares redeemed |
— | (100,000 | ) | |||||
|
|
|
|
|
|||||
| Net increase in shares outstanding |
600,000 | 900,000 | ||||||
|
|
|
|
|
|||||
See notes to financial statements.
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Global Agriculture Producers ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 24.03 | $ | 27.29 | $ | 24.63 | $ | 24.91 | $ | 24.88 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.21 | 0.50 | 0.58 | 0.50 | 0.28 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
(2.48 | ) | (3.21 | ) | 2.63 | (0.46 | ) | (0.05 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(2.27 | ) | (2.71 | ) | 3.21 | 0.04 | 0.23 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.23 | ) | (0.55 | ) | (0.55 | ) | (0.32 | ) | (0.20 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.23 | ) | (0.55 | ) | (0.55 | ) | (0.32 | ) | (0.20 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 21.53 | $ | 24.03 | $ | 27.29 | $ | 24.63 | $ | 24.91 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
(9.47 | )%d | (10.11 | )% | 13.05 | % | 0.10 | % | 0.97 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 23,683 | $ | 27,640 | $ | 46,395 | $ | 35,716 | $ | 9,965 | ||||||||||
| Ratio of expenses to average net assetse |
0.38 | % | 0.38 | % | 0.38 | % | 0.38 | % | 0.38 | % | ||||||||||
| Ratio of expenses to average net assets prior to waived feese |
0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | ||||||||||
| Ratio of net investment income to average net assetse |
1.88 | % | 1.87 | % | 2.17 | % | 1.87 | % | 1.93 | % | ||||||||||
| Portfolio turnover ratef |
3 | % | 10 | % | 14 | % | 6 | % | 6 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013 and the period ended August 31, 2012 were 3%, 10%, 13%, 6% and 6%, respectively. See Note 4. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
31 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Global Energy Producers ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 17.67 | $ | 28.06 | $ | 24.06 | $ | 23.51 | $ | 24.79 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.29 | 0.68 | 0.68 | 0.63 | 0.43 | |||||||||||||||
| Net realized and unrealized gain |
(1.93 | ) | (10.61 | ) | 3.96 | 0.55 | (1.39 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(1.64 | ) | (9.93 | ) | 4.64 | 1.18 | (0.96 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.28 | ) | (0.46 | ) | (0.64 | ) | (0.63 | ) | (0.32 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.28 | ) | (0.46 | ) | (0.64 | ) | (0.63 | ) | (0.32 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 15.75 | $ | 17.67 | $ | 28.06 | $ | 24.06 | $ | 23.51 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
(9.32 | )%d | (35.63 | )% | 19.44 | % | 5.10 | % | (3.77 | )%d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 28,342 | $ | 24,739 | $ | 8,419 | $ | 4,811 | $ | 4,701 | ||||||||||
| Ratio of expenses to average net assetse |
0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | ||||||||||
| Ratio of net investment income to average net assetse |
3.45 | % | 3.23 | % | 2.57 | % | 2.61 | % | 3.16 | % | ||||||||||
| Portfolio turnover ratef |
3 | % | 4 | % | 8 | % | 6 | % | 5 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but includes portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013 and the period ended August 31, 2012 were 3%, 4%, 8%, 6% and 5%, respectively. See Note 4. |
See notes to financial statements.
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Global Gold Miners ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 5.57 | $ | 11.27 | $ | 11.60 | $ | 20.05 | $ | 25.00 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.01 | 0.07 | 0.08 | 0.21 | 0.15 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
2.63 | (5.71 | ) | (0.33 | ) | (8.47 | ) | (5.02 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
2.64 | (5.64 | ) | (0.25 | ) | (8.26 | ) | (4.87 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.02 | ) | (0.06 | ) | (0.08 | ) | (0.19 | ) | (0.08 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.02 | ) | (0.06 | ) | (0.08 | ) | (0.19 | ) | (0.08 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 8.19 | $ | 5.57 | $ | 11.27 | $ | 11.60 | $ | 20.05 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
47.62 | %d | (50.16 | )% | (2.01 | )% | (41.28 | )% | (19.45 | )%d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 79,025 | $ | 45,926 | $ | 70,976 | $ | 38,285 | $ | 32,084 | ||||||||||
| Ratio of expenses to average net assetse |
0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | ||||||||||
| Ratio of net investment income to average net assetse |
0.20 | % | 0.88 | % | 0.81 | % | 1.37 | % | 1.25 | % | ||||||||||
| Portfolio turnover ratef |
14 | % | 20 | % | 22 | % | 19 | % | 11 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| 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 financial statements.
| FINANCIAL HIGHLIGHTS |
33 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Global Metals & Mining Producers ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 10.65 | $ | 20.19 | $ | 18.11 | $ | 19.00 | $ | 24.76 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.15 | 0.81 | 0.50 | 0.50 | 0.37 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
(2.41 | ) | (8.96 | ) | 2.23 | (1.00 | ) | (6.00 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(2.26 | ) | (8.15 | ) | 2.73 | (0.50 | ) | (5.63 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.19 | ) | (1.39 | ) | (0.65 | ) | (0.39 | ) | (0.13 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.19 | ) | (1.39 | ) | (0.65 | ) | (0.39 | ) | (0.13 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 8.20 | $ | 10.65 | $ | 20.19 | $ | 18.11 | $ | 19.00 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
(21.18 | )%d | (41.94 | )% | 15.32 | % | (2.68 | )% | (22.76 | )%d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 78,265 | $ | 69,219 | $ | 183,699 | $ | 222,808 | $ | 123,524 | ||||||||||
| Ratio of expenses to average net assetse |
0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | ||||||||||
| Ratio of expenses to average net assets prior to waived feese |
0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | ||||||||||
| Ratio of net investment income to average net assetse |
3.48 | % | 5.18 | % | 2.53 | % | 2.51 | % | 2.98 | % | ||||||||||
| Portfolio turnover ratef |
5 | % | 17 | % | 18 | % | 11 | % | 1 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013 and the period ended August 31, 2012 were 4%, 10%, 15%, 7% and 1%, respectively. See Note 4. |
See notes to financial statements.
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Global Silver Miners ETF | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 6.14 | $ | 12.70 | $ | 13.92 | $ | 20.94 | $ | 24.87 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.01 | 0.05 | 0.08 | 0.16 | 0.11 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
1.12 | (6.42 | ) | (1.15 | ) | (6.90 | ) | (3.90 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
1.13 | (6.37 | ) | (1.07 | ) | (6.74 | ) | (3.79 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.00 | )d | (0.19 | ) | (0.15 | ) | (0.28 | ) | (0.14 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.00 | )d | (0.19 | ) | (0.15 | ) | (0.28 | ) | (0.14 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 7.27 | $ | 6.14 | $ | 12.70 | $ | 13.92 | $ | 20.94 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
18.47 | %e | (50.51 | )% | (7.48 | )% | (32.49 | )% | (15.18 | )%e | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 18,903 | $ | 12,279 | $ | 13,975 | $ | 6,959 | $ | 2,094 | ||||||||||
| Ratio of expenses to average net assetsf |
0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | 0.39 | % | ||||||||||
| Ratio of net investment income to average net assetsf |
0.17 | % | 0.57 | % | 0.63 | % | 1.03 | % | 0.86 | % | ||||||||||
| Portfolio turnover rateg |
10 | % | 31 | % | 22 | % | 13 | % | 9 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Rounds to less than $0.01. |
| e | Not annualized. |
| f | Annualized for periods of less than one year. |
| g | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
35 |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF |
Diversification Classification | |
| MSCI Global Agriculture Producers |
Non-diversified | |
| MSCI Global Energy Producers |
Non-diversified | |
| MSCI Global Gold Miners |
Non-diversified | |
|
MSCI Global Metals & Mining Producers |
Non-diversified | |
| MSCI Global Silver Miners |
Non-diversified |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| • | Exchange-traded funds and closed-end funds traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the fund is primarily traded. Funds traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| NOTES TO FINANCIAL STATEMENTS |
37 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Global Agriculture Producers |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 23,115,686 | $ | 13,155 | $ | 0 | a | $ | 23,128,841 | |||||||
| Investment Companies |
302,453 | — | — | 302,453 | ||||||||||||
| Preferred Stocks |
134,244 | — | — | 134,244 | ||||||||||||
| Money Market Funds |
972,893 | — | — | 972,893 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 24,525,276 | $ | 13,155 | $ | 0 | a | $ | 24,538,431 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Global Energy Producers |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 27,588,808 | $ | — | $ | — | $ | 27,588,808 | ||||||||
| Preferred Stocks |
156,050 | — | — | 156,050 | ||||||||||||
| Warrants |
— | 0 | a | — | 0 | a | ||||||||||
| Money Market Funds |
236,222 | — | — | 236,222 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 27,981,080 | $ | 0 | a | $ | — | $ | 27,981,080 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Global Gold Miners |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 78,764,212 | $ | — | $ | — | $ | 78,764,212 | ||||||||
| Money Market Funds |
2,496,001 | — | — | 2,496,001 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 81,260,213 | $ | — | $ | — | $ | 81,260,213 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Global Metals & Mining Producers |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 76,640,705 | $ | 11,442 | $ | 1 | $ | 76,652,148 | ||||||||
| Preferred Stocks |
1,041,949 | — | — | 1,041,949 | ||||||||||||
| Rights |
— | 790 | — | 790 | ||||||||||||
| Money Market Funds |
5,650,776 | — | — | 5,650,776 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 83,333,430 | $ | 12,232 | $ | 1 | $ | 83,345,663 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Global Silver Miners |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 18,987,715 | $ | — | $ | — | $ | 18,987,715 | ||||||||
| Money Market Funds |
1,843,759 | — | — | 1,843,759 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 20,831,474 | $ | — | $ | — | $ | 20,831,474 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Rounds to less than $1. |
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of
| NOTES TO FINANCIAL STATEMENTS |
39 |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Global Agriculture Producers |
||||||||||||
| Barclays Capital Inc. |
$ | 15,503 | $ | 15,503 | $ | — | ||||||
| Citigroup Global Markets Inc. |
160,170 | 160,170 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
45,568 | 45,568 | — | |||||||||
| Deutsche Bank Securities Inc. |
16,095 | 16,095 | — | |||||||||
| Goldman Sachs & Co. |
303,890 | 303,890 | — | |||||||||
| Morgan Stanley & Co. International PLC |
18,011 | 18,011 | — | |||||||||
| Morgan Stanley & Co. LLC |
296,829 | 296,829 | — | |||||||||
| UBS Securities LLC |
38,077 | 38,077 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 894,143 | $ | 894,143 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Global Energy Producers |
||||||||||||
| BNP Paribas Prime Brokerage Inc. |
$ | 143 | $ | 143 | $ | — | ||||||
| Citigroup Global Markets Inc. |
3,481 | 3,481 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
36,745 | 36,745 | — | |||||||||
| Deutsche Bank Securities Inc. |
916 | 916 | — | |||||||||
| Goldman Sachs & Co. |
19,178 | 19,178 | — | |||||||||
| JPMorgan Clearing Corp. |
9,586 | 9,586 | — | |||||||||
| Macquarie Capital (USA) Inc. |
267 | 267 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
31,943 | 31,943 | — | |||||||||
| Morgan Stanley & Co. LLC |
37,689 | 37,689 | — | |||||||||
| Nomura Securities International Inc. |
5,702 | 5,702 | — | |||||||||
| Scotia Capital (USA) Inc. |
6,007 | 6,007 | — | |||||||||
| SG Americas Securities LLC |
2,184 | 2,184 | — | |||||||||
| State Street Bank & Trust Company |
9,478 | 9,478 | — | |||||||||
| UBS Securities LLC |
48,079 | 48,079 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 211,398 | $ | 211,398 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Global Gold Miners |
||||||||||||
| BNP Paribas Prime Brokerage Inc. |
$ | 19,105 | $ | 19,105 | $ | — | ||||||
| Citigroup Global Markets Inc. |
181,669 | 181,669 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
490,939 | 490,939 | — | |||||||||
| Goldman Sachs & Co. |
693,623 | 693,623 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
776,537 | 776,537 | — | |||||||||
| State Street Bank & Trust Company |
66,439 | 66,439 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 2,228,312 | $ | 2,228,312 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Global Metals & Mining Producers |
||||||||||||
| BNP Paribas Prime Brokerage Inc. |
$ | 1,504 | $ | 1,504 | $ | — | ||||||
| Citigroup Global Markets Inc. |
789,127 | 789,127 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
471,645 | 471,645 | — | |||||||||
| Deutsche Bank Securities Inc. |
483,320 | 483,320 | — | |||||||||
| HSBC Bank PLC |
46,080 | 46,080 | — | |||||||||
| JPMorgan Clearing Corp. |
823,573 | 823,573 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
770,113 | 770,113 | — | |||||||||
| Morgan Stanley & Co. LLC |
1,011,172 | 1,011,172 | — | |||||||||
| Scotia Capital (USA) Inc. |
68,393 | 68,393 | — | |||||||||
| SG Americas Securities LLC |
126,930 | 126,930 | — | |||||||||
| State Street Bank & Trust Company |
126,935 | 126,935 | — | |||||||||
| UBS Securities LLC |
608,939 | 608,939 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 5,327,731 | $ | 5,327,731 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| NOTES TO FINANCIAL STATEMENTS |
41 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Global Silver Miners |
||||||||||||
| Credit Suisse Securities (USA) LLC |
$ | 482,132 | $ | 482,132 | $ | — | ||||||
| Goldman Sachs & Co. |
243,916 | 243,916 | — | |||||||||
| JPMorgan Clearing Corp. |
496,142 | 496,142 | — | |||||||||
| Morgan Stanley & Co. LLC |
74,506 | 74,506 | — | |||||||||
| Nomura Securities International Inc. |
23,069 | 23,069 | — | |||||||||
| Scotia Capital (USA) Inc. |
172,469 | 172,469 | — | |||||||||
| State Street Bank & Trust Company |
60,303 | 60,303 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 1,552,537 | $ | 1,552,537 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market values of securities loaned at period end and is disclosed in each Fund’s statement of assets and liabilities. |
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
For its investment advisory services to each Fund, BFA is entitled to an annual investment advisory fee of 0.39% based on the average daily net assets of each Fund.
In addition, each of the iShares MSCI Global Agriculture Producers and iShares MSCI Global Metals & Mining Producers ETFs indirectly pays its pro rata share of fees and expenses attributable to its investments in other investment companies (“acquired fund fees and expenses”). BFA has contractually agreed to waive a portion of its investment advisory fees for each Fund through December 31, 2018 in an amount equal to the acquired fund fees and expenses attributable to each Fund’s investments in other iShares funds, if any.
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| MSCI Global Agriculture Producers |
$ | 5,201 | ||
| MSCI Global Energy Producers |
646 | |||
| MSCI Global Gold Miners |
3,144 | |||
| MSCI Global Metals & Mining Producers |
15,116 | |||
| MSCI Global Silver Miners |
1,968 | |||
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
For the six months ended February 29, 2016 transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Global Agriculture Producers |
$ | 15,361 | $ | 25,667 | ||||
| MSCI Global Energy Producers |
— | 165,208 | ||||||
| MSCI Global Gold Miners |
473,267 | 1,222,715 | ||||||
| MSCI Global Silver Miners |
22,086 | 13,577 | ||||||
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
iShares MSCI Global Agriculture Producers and iShares MSCI Global Metals & Mining Producers ETFs, in order to improve their portfolio liquidity and their ability to track their respective underlying index, may invest in shares of other iShares funds that invest in securities in each Fund’s respective underlying index.
Investments in issuers considered to be affiliates of the Funds (excluding money market funds) during the six months ended February 29, 2016, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:
| iShares ETF and Name of Affiliated Issuer |
Shares Held at Beginning of Period |
Shares Purchased |
Shares Sold |
Shares Held at End of Period |
Value at End of Period |
Dividend Income |
Net Realized Gain (Loss) |
|||||||||||||||||||||
| MSCI Global Agriculture Producers |
||||||||||||||||||||||||||||
| iShares India 50 ETF |
13,844 | — | (1,001 | ) | 12,843 | $ | 302,453 | $ | 651 | $ | (2,800 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| NOTES TO FINANCIAL STATEMENTS |
43 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Global Agriculture Producers |
$ | 866,801 | $ | 944,511 | ||||
| MSCI Global Energy Producers |
796,356 | 738,544 | ||||||
| MSCI Global Gold Miners |
7,237,623 | 7,439,968 | ||||||
| MSCI Global Metals & Mining Producers |
8,033,150 | 4,076,899 | ||||||
| MSCI Global Silver Miners |
1,823,542 | 1,428,685 | ||||||
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| MSCI Global Agriculture Producers |
$ | — | $ | 989,452 | ||||
| MSCI Global Energy Producers |
6,472,074 | — | ||||||
| MSCI Global Gold Miners |
7,849,123 | — | ||||||
| MSCI Global Metals & Mining Producers |
33,712,699 | 8,892,195 | ||||||
| MSCI Global Silver Miners |
3,640,693 | — | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
| 5. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its direct or indirect investment in equity instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
Each Fund invests all or substantially all of its assets in securities within a single or limited number of market sectors. When a fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions affecting those market sectors may have a significant impact on its investment performance.
The United States and the European Union, along with the regulatory bodies of a number of countries including Japan, Australia and Canada (collectively, “Sanctioning Bodies”), have imposed sectorial economic sanctions on certain Russian individuals and Russian corporate entities which include prohibitions on transacting in or dealing in new debt of longer than 30 or 90 days maturity or new equity of such issuers. Securities held by the iShares MSCI Global Agriculture Producers ETF, iShares MSCI Global Energy Producers ETF and iShares MSCI Global Metals & Mining Producers ETF issued prior to the date of the sanctions being imposed are not currently subject to any restrictions under the sanctions. However, compliance with each of these sanctions may impair the ability of a Fund to buy, sell, hold, receive or deliver the affected securities or other securities of such issuers. The Sanctioning Bodies could also institute broader sanctions on Russia. These sanctions, or even the threat of further sanctions, may result in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy. Current or future sanctions may result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. These retaliatory measures may include the immediate freeze of Russian assets held by a Fund.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty
| NOTES TO FINANCIAL STATEMENTS |
45 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 6. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the following Funds had non-expiring capital loss carryforwards available to offset future realized capital gains as follows:
| iShares ETF | Non- Expiring |
|||
| MSCI Global Agriculture Producers |
$ | 558,434 | ||
| MSCI Global Energy Producers |
127,882 | |||
| MSCI Global Gold Miners |
4,476,366 | |||
| MSCI Global Metals & Mining Producers |
4,586,250 | |||
| MSCI Global Silver Miners |
613,283 | |||
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 marked-to-market gains.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| MSCI Global Agriculture Producers |
$ | 31,318,234 | $ | 771,467 | $ | (7,551,270 | ) | $ | (6,779,803 | ) | ||||||
| MSCI Global Energy Producers |
37,294,588 | 132,303 | (9,445,811 | ) | (9,313,508 | ) | ||||||||||
| MSCI Global Gold Miners |
93,243,441 | 11,231,892 | (23,215,120 | ) | (11,983,228 | ) | ||||||||||
| MSCI Global Metals & Mining Producers |
141,201,213 | 250,828 | (58,106,378 | ) | (57,855,550 | ) | ||||||||||
| MSCI Global Silver Miners |
24,468,869 | 879,054 | (4,516,449 | ) | (3,637,395 | ) | ||||||||||
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| 7. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
| NOTES TO FINANCIAL STATEMENTS |
47 |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| MSCI Global Agriculture Producers |
$ | 0.195075 | $ | — | $ | 0.033088 | $ | 0.228163 | 85 | % | — | % | 15 | % | 100 | % | ||||||||||||||||
| MSCI Global Energy Producers |
0.254400 | — | 0.022880 | 0.277280 | 92 | — | 8 | 100 | ||||||||||||||||||||||||
| MSCI Global Gold Miners |
0.017932 | — | 0.003750 | 0.021682 | 83 | — | 17 | 100 | ||||||||||||||||||||||||
| MSCI Global Metals & Mining Producers |
0.138644 | — | 0.051207 | 0.189851 | 73 | — | 27 | 100 | ||||||||||||||||||||||||
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes:
| NOTES |
49 |
Table of Contents
Notes:
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-812-0216
|
|
Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
|
iShares, Inc.
| Ø | iShares Currency Hedged MSCI EM Minimum Volatility ETF | HEMV | BATS |
| Ø | iShares Currency Hedged MSCI Emerging Markets ETF | HEEM | NYSE Arca |
| Ø | iShares MSCI Emerging Markets ETF | EEM | NYSE Arca |
| Ø | iShares MSCI Emerging Markets Minimum Volatility ETF | EEMV | NYSE Arca |
Table of Contents
| 5 | ||||
| 11 | ||||
| 11 | ||||
| 12 | ||||
| 12 | ||||
| 14 | ||||
| 16 | ||||
| iShares MSCI Emerging Markets Minimum Volatility ETF (Consolidated) |
30 | |||
| 35 | ||||
| 41 | ||||
| 45 | ||||
| 62 | ||||
| 65 |
Table of Contents
iSHARES® CURRENCY HEDGED MSCI EM MINIMUM VOLATILITY ETF
Performance as of February 29, 2016
The iShares Currency Hedged MSCI EM Minimum Volatility ETF (the “Fund”) seeks to track the investment results of an index composed of emerging market equities that, in the aggregate, have lower volatility characteristics relative to the broader emerging equity markets while mitigating exposure to fluctuations between the value of the component currencies and the U.S. dollar, as represented by the MSCI Emerging Markets Minimum Volatility (USD) 100% Hedged to USD Index (the “Index”).
The Index sells forward the non-U.S. dollar currencies in which the constituent securities are denominated in an amount equal to those securities at a one-month forward rate to effectively create a “hedge” against fluctuations in the relative value of the component currencies in relation to the U.S. dollar. In order to replicate the “hedging” component of the Index, the Fund enters into foreign currency forward contracts designed to offset the Fund’s exposure to the component currencies.
The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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. The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares MSCI Emerging Markets Minimum Volatility ETF. For the period from October 29, 2015 (inception date of the Fund) through February 29, 2016, the total return for the Fund was -5.60%, net of fees, while the total return for the Index was -7.65%.
| Cumulative Total Returns | ||||||
| NAV | MARKET | INDEX | ||||
| Since Inception |
(5.60)% | (5.06)% | (7.65)% | |||
The inception date of the Fund was 10/29/15. The first day of secondary market trading was 11/2/15.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (10/29/15) a |
Ending Account Value (2/29/16) |
Expenses Paid During Period b,c |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period b,c |
Annualized Expense Ratio b |
||||||||||||||||||||
| $ | 1,000.00 | $ | 944.00 | $ | 0.10 | $ | 1,000.00 | $ | 1,024.70 | $ | 0.15 | 0.03% | ||||||||||||||
| a | The beginning of the period (commencement of operations) is October 29, 2015. |
| b | Annualized expense ratio and expenses paid during the period do not include fees and expenses of the underlying fund in which the Fund invests. |
| c | 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 (123 days for actual and 182 days for hypothetical expenses) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview (Continued)
iSHARES® CURRENCY HEDGED MSCI EM MINIMUM VOLATILITY ETF
| 1 | Reflects the portfolio allocation and ten largest countries of the iShares MSCI Emerging Markets Minimum Volatility ETF, the underlying fund in which the Fund invests. |
| 2 | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® CURRENCY HEDGED MSCI EMERGING MARKETS ETF
Performance as of February 29, 2016
The iShares Currency Hedged MSCI Emerging Markets ETF (the “Fund”) seeks to track the investment results of an index composed of large- and mid-capitalization emerging market equities while mitigating exposure to fluctuations between the value of the component currencies and the U.S. dollar, as represented by the MSCI Emerging Markets 100% Hedged to USD Index (the “Index”).
The Index sells forward the non-U.S. dollar currencies in which the constituent securities are denominated in an amount equal to those securities at a one-month forward rate to effectively create a “hedge” against fluctuations in the relative value of the component currencies in relation to the U.S. dollar. In order to replicate the “hedging” component of the Index, the Fund enters into foreign currency forward contracts designed to offset the Fund’s exposure to the component currencies.
The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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. The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the iShares MSCI Emerging Markets ETF. For the six-month reporting period ended February 29, 2016, the total return for the Fund was -5.81%, net of fees, while the total return for the Index was -6.51%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(16.96)% | (17.07)% | (16.72)% | (16.96)% | (17.07)% | (16.72)% | ||||||||||||||||||||
| Since Inception |
(10.88)% | (10.89)% | (10.92)% | (15.24)% | (15.25)% | (15.31)% | ||||||||||||||||||||
The inception date of the Fund was 9/23/14. The first day of secondary market trading was 9/25/14.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a,b |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a,b |
Annualized Expense Ratio a |
||||||||||||||||||||
| $ | 1,000.00 | $ | 941.90 | $ | 0.05 | $ | 1,000.00 | $ | 1,024.80 | $ | 0.05 | 0.01% | ||||||||||||||
| a | Annualized expense ratio and expenses paid during the period do not include fees and expenses of the underlying fund in which the Fund invests. |
| b | 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview (Continued)
iSHARES® CURRENCY HEDGED MSCI EMERGING MARKETS ETF
| 1 | Reflects the portfolio allocation and ten largest countries of the iShares MSCI Emerging Markets ETF, the underlying fund in which the Fund invests. |
| 2 | Excludes money market funds. |
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® MSCI EMERGING MARKETS ETF
Performance as of February 29, 2016
The iShares MSCI Emerging Markets ETF (the “Fund”) seeks to track the investment results of an index composed of large- and mid-capitalization emerging market equities, as represented by the MSCI Emerging Markets Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -9.03%, net of fees, while the total return for the Index was -8.85%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(23.82)% | (23.87)% | (23.41)% | (23.82)% | (23.87)% | (23.41)% | ||||||||||||||||||||
| 5 Years |
(6.01)% | (5.99)% | (5.41)% | (26.63)% | (26.56)% | (24.28)% | ||||||||||||||||||||
| 10 Years |
1.16% | 1.24% | 1.83% | 12.22% | 13.14% | 19.91% | ||||||||||||||||||||
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 909.70 | $ | 3.47 | $ | 1,000.00 | $ | 1,021.20 | $ | 3.67 | 0.73% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
9 |
Table of Contents
Fund Performance Overview
iSHARES® MSCI EMERGING MARKETS MINIMUM VOLATILITY ETF
Performance as of February 29, 2016
The iShares MSCI Emerging Markets Minimum Volatility ETF (the “Fund”) seeks to track the investment results of an index composed of emerging market equities that, in the aggregate, have lower volatility characteristics relative to the broader emerging equity markets, as represented by the MSCI Emerging Markets Minimum Volatility (USD) Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 six-month reporting period ended February 29, 2016, the total return for the Fund was -7.00%, net of fees, while the total return for the Index was -6.92%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(18.11)% | (18.03)% | (18.11)% | (18.11)% | (18.03)% | (18.11)% | ||||||||||||||||||||
| Since Inception |
1.29% | 1.40% | 1.47% | 5.76% | 6.24% | 6.56% | ||||||||||||||||||||
The inception date of the Fund was 10/18/11. The first day of secondary market trading was 10/20/11.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 11 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 930.00 | $ | 1.20 | $ | 1,000.00 | $ | 1,023.60 | $ | 1.26 | 0.25% | ||||||||||||||
| 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 (182 days) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 11 for more information. |
| * | Excludes money market funds. |
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
As a shareholder of a 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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 (or commencement of operations, as applicable) and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 corresponding to your Fund under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| ABOUT FUND PERFORMANCE / SHAREHOLDER EXPENSES |
11 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® CURRENCY HEDGED MSCI EM MINIMUM VOLATILITY ETF
February 29, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® CURRENCY HEDGED MSCI EM MINIMUM VOLATILITY ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® CURRENCY HEDGED MSCI EMERGING MARKETS ETF
February 29, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® CURRENCY HEDGED MSCI EMERGING MARKETS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Consolidated Schedule of Investments (Unaudited)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
25 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
27 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS ETF
February 29, 2016
Open futures contracts as of February 29, 2016 were as follows:
| Issue | Number of Contracts Purchased (Sold) |
Expiration | Exchange | Notional Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| MSCI Emerging Markets Mini Index | 2,645 | Mar. 2016 | New York Board of Trade | $ | 98,142,725 | $ | (455,882) | |||||||||||||
See notes to financial statements.
| SCHEDULES OF INVESTMENTS |
29 |
Table of Contents
Consolidated Schedule of Investments (Unaudited)
iSHARES® MSCI EMERGING MARKETS MINIMUM VOLATILITY ETF
February 29, 2016
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS MINIMUM VOLATILITY ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
31 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS MINIMUM VOLATILITY ETF
February 29, 2016
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS MINIMUM VOLATILITY ETF
February 29, 2016
| SCHEDULES OF INVESTMENTS |
33 |
Table of Contents
Consolidated Schedule of Investments (Unaudited) (Continued)
iSHARES® MSCI EMERGING MARKETS MINIMUM VOLATILITY ETF
February 29, 2016
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
February 29, 2016
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
iShares Currency Hedged MSCI Emerging Markets ETF |
iShares (Consolidated) |
||||||||||
| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | — | $ | — | $ | 23,029,720,660 | ||||||
| Affiliated (Note 2) |
2,531,148 | 241,051,885 | 1,099,130,164 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 2,531,148 | $ | 241,051,885 | $ | 24,128,850,824 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | — | $ | — | $ | 18,197,381,152 | ||||||
| Affiliated (Note 2) |
2,285,955 | 188,753,158 | 1,099,130,164 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
2,285,955 | 188,753,158 | 19,296,511,316 | |||||||||
| Foreign currency, at valueb |
— | — | 14,244,824 | |||||||||
| Cash |
— | — | 19,496,409 | |||||||||
| Cash pledged to broker |
— | — | 4,761,010 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
4,985 | 499,248 | 61,326,290 | |||||||||
| Dividends and interest |
— | 40,935 | 59,026,013 | |||||||||
| Unrealized appreciation on forward currency contracts (Note 1) |
20,420 | 2,002,343 | — | |||||||||
| Futures variation margin |
— | — | 864,666 | |||||||||
| Tax reclaims |
— | — | 103,748 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
2,311,360 | 191,295,684 | 19,456,334,276 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
— | — | 62,247,372 | |||||||||
| Collateral for securities on loan (Note 1) |
— | — | 1,073,592,226 | |||||||||
| Foreign taxes (Note 1) |
— | — | 105,789 | |||||||||
| Unrealized depreciation on forward currency contracts (Note 1) |
28,383 | 2,758,496 | — | |||||||||
| Investment advisory fees (Note 2) |
52 | — | 10,375,272 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
28,435 | 2,758,496 | 1,146,320,659 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 2,282,925 | $ | 188,537,188 | $ | 18,310,013,617 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 2,451,534 | $ | 238,802,436 | $ | 34,304,850,326 | ||||||
| Undistributed (distributions in excess of) net investment income |
(450 | ) | 110,432 | (96,644,766 | ) | |||||||
| Undistributed net realized gain (accumulated net realized loss) |
84,997 | 2,679,200 | (11,062,505,331 | ) | ||||||||
| Net unrealized depreciation |
(253,156 | ) | (53,054,880 | ) | (4,835,686,612 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 2,282,925 | $ | 188,537,188 | $ | 18,310,013,617 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
100,000 | 9,850,000 | 604,800,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 22.83 | $ | 19.14 | $ | 30.27 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $ —, $ — and $1,018,118,873, respectively. See Note 1. |
| b | Cost of foreign currency: $ —, $ — and $14,220,215, respectively. |
| c | $0.001 par value, number of shares authorized: 25 million, 250 million and 2 billion, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
35 |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
February 29, 2016
| iShares MSCI Emerging Markets Minimum Volatility ETF (Consolidated) |
||||
| ASSETS |
||||
| Investments, at cost: |
||||
| Unaffiliated |
$ | 3,006,239,664 | ||
| Affiliated (Note 2) |
101,642,547 | |||
|
|
|
|||
| Total cost of investments |
$ | 3,107,882,211 | ||
|
|
|
|||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||
| Unaffiliated |
$ | 2,645,703,096 | ||
| Affiliated (Note 2) |
101,642,547 | |||
|
|
|
|||
| Total fair value of investments |
2,747,345,643 | |||
| Foreign currency, at valueb |
5,201,671 | |||
| Cash |
62,456 | |||
| Receivables: |
||||
| Investment securities sold |
17,320,766 | |||
| Due from custodian (Note 4) |
184,938 | |||
| Dividends and interest |
6,158,253 | |||
| Capital shares sold |
14,977,613 | |||
|
|
|
|||
| Total Assets |
2,791,251,340 | |||
|
|
|
|||
| LIABILITIES |
||||
| Payables: |
||||
| Investment securities purchased |
33,814,078 | |||
| Deposit for capital contribution |
1,385,100 | |||
| Collateral for securities on loan (Note 1) |
97,466,967 | |||
| Investment advisory fees (Note 2) |
520,498 | |||
|
|
|
|||
| Total Liabilities |
133,186,643 | |||
|
|
|
|||
| NET ASSETS |
$ | 2,658,064,697 | ||
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$ | 3,372,699,792 | ||
| Undistributed net investment income |
6,513,073 | |||
| Accumulated net realized loss |
(360,252,591 | ) | ||
| Net unrealized depreciation |
(360,895,577 | ) | ||
|
|
|
|||
| NET ASSETS |
$ | 2,658,064,697 | ||
|
|
|
|||
| Shares outstandingc |
56,800,000 | |||
|
|
|
|||
| Net asset value per share |
$ | 46.80 | ||
|
|
|
|||
| a | Securities on loan with a value of $91,914,325. See Note 1. |
| b | Cost of foreign currency: $5,270,443. |
| c | $0.001 par value, number of shares authorized: 500 million. |
See notes to financial statements.
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI EM Minimum Volatility ETF |
iShares MSCI Emerging Markets ETF |
iShares (Consolidated) |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — unaffiliatedb |
$ | — | $ | — | $ | 202,487,214 | ||||||
| Dividends — affiliated (Note 2) |
30,126 | 3,173,153 | — | |||||||||
| Interest — affiliated (Note 2) |
1 | 75 | 26,829 | |||||||||
| Securities lending income — affiliated — net (Note 2)c |
— | 125,551 | 10,935,257 | |||||||||
|
|
|
|
|
|
|
|||||||
| 30,127 | 3,298,779 | 213,449,300 | ||||||||||
| Less: Other foreign taxes (Note 1) |
— | — | (319,290 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
30,127 | 3,298,779 | 213,130,010 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
6,062 | 792,226 | 74,750,709 | |||||||||
| Mauritius income taxes (Note 1) |
— | — | 894,693 | |||||||||
| Commitment fees (Note 9) |
— | — | 76,053 | |||||||||
| Interest expense (Note 9) |
— | — | 17,713 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
6,062 | 792,226 | 75,739,168 | |||||||||
| Less investment advisory fees waived (Note 2) |
(5,798 | ) | (786,614 | ) | — | |||||||
|
|
|
|
|
|
|
|||||||
| Net expenses |
264 | 5,612 | 75,739,168 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
29,863 | 3,293,167 | 137,390,842 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliated |
— | — | (1,070,467,660 | ) | ||||||||
| Investments — affiliated (Note 2) |
(2,798 | ) | (4,517,364 | ) | — | |||||||
| In-kind redemptions — unaffiliated |
— | — | (133,183,882 | ) | ||||||||
| In-kind redemptions — affiliated (Note 2) |
— | (526,046 | ) | — | ||||||||
| Futures contracts |
— | — | (13,019,242 | ) | ||||||||
| Foreign currency transactions |
87,795 | 10,766,838 | (3,847,135 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net realized gain (loss) |
84,997 | 5,723,428 | (1,220,517,919 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investments |
(245,193 | ) | (18,347,469 | ) | (1,056,198,480 | ) | ||||||
| Forward currency contracts |
(7,963 | ) | (3,841,091 | ) | — | |||||||
| Futures contracts |
— | — | 9,122,039 | |||||||||
| Translation of assets and liabilities in foreign currencies |
— | — | (972,651 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
(253,156 | ) | (22,188,560 | ) | (1,048,049,092 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized loss |
(168,159 | ) | (16,465,132 | ) | (2,268,567,011 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (138,296 | ) | $ | (13,171,965 | ) | $ | (2,131,176,169 | ) | |||
|
|
|
|
|
|
|
|||||||
| a | For the period from October 29, 2015 (commencement of operations) to February 29, 2016. |
| b | Net of foreign withholding tax of $ —, $ — and $21,492,979, respectively. |
| c | Net of securities lending income tax paid $ —, $ — and $334,502, respectively. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
37 |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended February 29, 2016
| iShares MSCI Emerging Markets Minimum Volatility ETF (Consolidated) |
||||
| NET INVESTMENT INCOME |
||||
| Dividends — unaffiliateda |
$ | 25,593,427 | ||
| Interest — unaffiliated |
36 | |||
| Interest — affiliated (Note 2) |
2,367 | |||
| Securities lending income — affiliated — net (Note 2) |
758,605 | |||
|
|
|
|||
| 26,354,435 | ||||
| Less: Other foreign taxes (Note 1) |
(12,255 | ) | ||
|
|
|
|||
| Total investment income |
26,342,180 | |||
|
|
|
|||
| EXPENSES |
||||
| Investment advisory fees (Note 2) |
9,405,190 | |||
| Mauritius income taxes (Note 1) |
17,544 | |||
| Commitment fees (Note 9) |
3,694 | |||
| Interest expense (Note 9) |
12,096 | |||
|
|
|
|||
| Total expenses |
9,438,524 | |||
| Less investment advisory fees waived (Note 2) |
(6,124,235 | ) | ||
|
|
|
|||
| Net expenses |
3,314,289 | |||
|
|
|
|||
| Net investment income |
23,027,891 | |||
|
|
|
|||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||
| Net realized gain (loss) from: |
||||
| Investments — unaffiliated |
(149,095,599 | ) | ||
| Foreign currency transactions |
(1,064,370 | ) | ||
|
|
|
|||
| Net realized loss |
(150,159,969 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation on: |
||||
| Investments |
(67,543,958 | ) | ||
| Translation of assets and liabilities in foreign currencies |
(223,947 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation |
(67,767,905 | ) | ||
|
|
|
|||
| Net realized and unrealized loss |
(217,927,874 | ) | ||
|
|
|
|||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (194,899,983 | ) | |
|
|
|
|||
| a | Net of foreign withholding tax of $2,408,667. |
See notes to financial statements.
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
iShares Currency Hedged MSCI Emerging Markets ETF |
|||||||||||
| Period from to (Unaudited) |
Six months ended February 29, 2016 (Unaudited) |
Period from to August 31, 2015 |
||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||
| OPERATIONS: |
||||||||||||
| Net investment income |
$ | 29,863 | $ | 3,293,167 | $ | 1,465,817 | ||||||
| Net realized gain |
84,997 | 5,723,428 | 3,865,112 | |||||||||
| Net change in unrealized appreciation/depreciation |
(253,156 | ) | (22,188,560 | ) | (30,866,320 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net decrease in net assets resulting from operations |
(138,296 | ) | (13,171,965 | ) | (25,535,391 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||
| From net investment income |
(30,313 | ) | (3,182,735 | ) | (1,468,085 | ) | ||||||
| From net realized gain |
— | (7,816,500 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Total distributions to shareholders |
(30,313 | ) | (10,999,235 | ) | (1,468,085 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||
| Proceeds from shares sold |
2,451,534 | 37,141,003 | 260,396,098 | |||||||||
| Cost of shares redeemed |
— | (36,297,520 | ) | (21,527,717 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net increase in net assets from capital share transactions |
2,451,534 | 843,483 | 238,868,381 | |||||||||
|
|
|
|
|
|
|
|||||||
| INCREASE (DECREASE) IN NET ASSETS |
2,282,925 | (23,327,717 | ) | 211,864,905 | ||||||||
| NET ASSETS |
||||||||||||
| Beginning of period |
— | 211,864,905 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| End of period |
$ | 2,282,925 | $ | 188,537,188 | $ | 211,864,905 | ||||||
|
|
|
|
|
|
|
|||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (450 | ) | $ | 110,432 | $ | — | |||||
|
|
|
|
|
|
|
|||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||
| Shares sold |
100,000 | 1,750,000 | 10,850,000 | |||||||||
| Shares redeemed |
— | (1,800,000 | ) | (950,000 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net increase (decrease) in shares outstanding |
100,000 | (50,000 | ) | 9,900,000 | ||||||||
|
|
|
|
|
|
|
|||||||
| a | Commencement of operations. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
39 |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares MSCI Emerging Markets ETF (Consolidated) |
iShares MSCI Emerging Markets Minimum Volatility ETF (Consolidated) |
|||||||||||||||
| Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
Six months ended February 29, 2016 (Unaudited) |
Year ended August 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 137,390,842 | $ | 579,976,167 | $ | 23,027,891 | $ | 61,402,206 | ||||||||
| Net realized loss |
(1,220,517,919 | ) | (1,550,037,406 | ) | (150,159,969 | ) | (65,601,019 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
(1,048,049,092 | ) | (7,707,709,659 | ) | (67,767,905 | ) | (459,223,410 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net decrease in net assets resulting from operations |
(2,131,176,169 | ) | (8,677,770,898 | ) | (194,899,983 | ) | (463,422,223 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(326,346,692 | ) | (661,275,094 | ) | (35,202,978 | ) | (56,113,327 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(326,346,692 | ) | (661,275,094 | ) | (35,202,978 | ) | (56,113,327 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
2,173,712,042 | 1,756,006,247 | 425,810,670 | 1,088,475,713 | ||||||||||||
| Cost of shares redeemed |
(2,407,040,562 | ) | (15,752,495,900 | ) | — | (186,946,485 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(233,328,520 | ) | (13,996,489,653 | ) | 425,810,670 | 901,529,228 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(2,690,851,381 | ) | (23,335,535,645 | ) | 195,707,709 | 381,993,678 | ||||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
21,000,864,998 | 44,336,400,643 | 2,462,356,988 | 2,080,363,310 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 18,310,013,617 | $ | 21,000,864,998 | $ | 2,658,064,697 | $ | 2,462,356,988 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed (distributions in excess of) net investment income included in net assets at end of period |
$ | (96,644,766 | ) | $ | 92,311,084 | $ | 6,513,073 | $ | 18,688,160 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
63,000,000 | 40,950,000 | 8,500,000 | 18,300,000 | ||||||||||||
| Shares redeemed |
(79,650,000 | ) | (402,300,000 | ) | — | (3,300,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(16,650,000 | ) | (361,350,000 | ) | 8,500,000 | 15,000,000 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout the period)
|
iShares Currency Hedged MSCI EM Minimum Volatility ETF | ||
| Period from Oct. 29, 2015a to Feb. 29, 2016 (Unaudited) |
||||
| Net asset value, beginning of period |
$ | 24.50 | ||
|
|
|
|||
| Income from investment operations: |
||||
| Net investment incomeb |
0.30 | |||
| Net realized and unrealized lossc |
(1.67 | ) | ||
|
|
|
|||
| Total from investment operations |
(1.37 | ) | ||
|
|
|
|||
| Less distributions from: |
||||
| Net investment income |
(0.30 | ) | ||
|
|
|
|||
| Total distributions |
(0.30 | ) | ||
|
|
|
|||
| Net asset value, end of period |
$ | 22.83 | ||
|
|
|
|||
| Total return |
(5.60 | )%d | ||
|
|
|
|||
| Ratios/Supplemental data: |
||||
| Net assets, end of period (000s) |
$ | 2,283 | ||
| Ratio of expenses to average net assetse,f |
0.03 | % | ||
| Ratio of expenses to average net assets prior to waived feese,f |
0.78 | % | ||
| Ratio of net investment income to average net assetse |
3.84 | % | ||
| Portfolio turnover rateg,h |
2 | % | ||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout the period. |
| c | The amount reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund is invested. This ratio does not include these indirect fees and expenses. |
| g | Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
| h | Portfolio turnover rate excludes the portfolio activity of the underlying fund in which the Fund is invested. See page 44 for the portfolio turnover rates of the underlying fund. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
41 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
|
iShares Currency Hedged MSCI Emerging Markets ETF | ||
| Six months ended Feb. 29, 2016 (Unaudited) |
Period from Sept. 23, 2014a to Aug. 31, 2015 |
|||||||
| Net asset value, beginning of period |
$ | 21.40 | $ | 24.44 | ||||
|
|
|
|
|
|||||
| Income from investment operations: |
||||||||
| Net investment incomeb |
0.33 | 0.41 | ||||||
| Net realized and unrealized gain (loss)c |
(1.51 | ) | (2.80 | ) | ||||
|
|
|
|
|
|||||
| Total from investment operations |
(1.18 | ) | (2.39 | ) | ||||
|
|
|
|
|
|||||
| Less distributions from: |
||||||||
| Net investment income |
(0.30 | ) | (0.65 | ) | ||||
| Net realized gain |
(0.78 | ) | — | |||||
|
|
|
|
|
|||||
| Total distributions |
(1.08 | ) | (0.65 | ) | ||||
|
|
|
|
|
|||||
| Net asset value, end of period |
$ | 19.14 | $ | 21.40 | ||||
|
|
|
|
|
|||||
| Total return |
(5.81 | )%d | (10.01 | )%d | ||||
|
|
|
|
|
|||||
| Ratios/Supplemental data: |
||||||||
| Net assets, end of period (000s) |
$ | 188,537 | $ | 211,865 | ||||
| Ratio of expenses to average net assetse,f |
0.01 | % | 0.02 | % | ||||
| Ratio of expenses to average net assets prior to waived feese,f |
0.78 | % | 0.78 | % | ||||
| Ratio of net investment income to average net assetse |
3.24 | % | 1.82 | % | ||||
| Portfolio turnover rateg,h |
8 | % | 7 | % | ||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund is invested. This ratio does not include these indirect fees and expenses. |
| g | Portfolio turnover rates exclude portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
| h | Portfolio turnover rates exclude the portfolio activity of the underlying fund in which the Fund is invested. See page 43 for the portfolio turnover rates of the underlying fund. |
See notes to financial statements.
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Emerging Markets ETF (Consolidated) | ||||||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Year ended Aug. 31, 2012 |
Year ended Aug. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 33.79 | $ | 45.11 | $ | 38.44 | $ | 39.22 | $ | 42.71 | $ | 40.19 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomea |
0.21 | 0.73 | 0.83 | 0.75 | 0.86 | 0.81 | ||||||||||||||||||
| Net realized and unrealized gain (loss)b |
(3.23 | ) | (11.21 | ) | 6.55 | (0.76 | ) | (3.53 | ) | 2.56 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
(3.02 | ) | (10.48 | ) | 7.38 | (0.01 | ) | (2.67 | ) | 3.37 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
(0.50 | ) | (0.84 | ) | (0.71 | ) | (0.77 | ) | (0.82 | ) | (0.85 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.50 | ) | (0.84 | ) | (0.71 | ) | (0.77 | ) | (0.82 | ) | (0.85 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 30.27 | $ | 33.79 | $ | 45.11 | $ | 38.44 | $ | 39.22 | $ | 42.71 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
(9.03 | )%c | (23.46 | )% | 19.34 | % | (0.08 | )% | (6.18 | )% | 8.23 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 18,310,014 | $ | 21,000,865 | $ | 44,336,401 | $ | 34,804,192 | $ | 34,256,628 | $ | 33,496,549 | ||||||||||||
| Ratio of expenses to average net assetsd |
0.73 | % | 0.69 | % | 0.67 | % | 0.67 | % | 0.68 | % | 0.67 | % | ||||||||||||
| Ratio of expenses to average net assets prior to waived feesd |
0.73 | % | 0.69 | % | 0.68 | % | 0.67 | % | 0.69 | % | 0.67 | % | ||||||||||||
| Ratio of net investment income to average net assetsd |
1.32 | % | 1.79 | % | 1.98 | % | 1.78 | % | 2.13 | % | 1.76 | % | ||||||||||||
| Portfolio turnover ratee |
11 | % | 10 | % | 22 | % | 24 | % | 15 | % | 17 | % | ||||||||||||
| a | Based on average shares outstanding throughout each period. |
| b | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| c | Not annualized. |
| d | Annualized for periods of less than one year. |
| e | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013, August 31, 2012 and August 31, 2011 were 6%, 7%, 7%, 9%, 10% and 15%, respectively. See Note 4. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
43 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares MSCI Emerging Markets Minimum Volatility ETF (Consolidated) | ||||||||||||||||||||
| Six months ended Feb. 29, 2016 (Unaudited) |
Year ended Aug. 31, 2015 |
Year ended Aug. 31, 2014 |
Year ended Aug. 31, 2013 |
Period from Oct. 18, 2011a to Aug. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 50.98 | $ | 62.47 | $ | 55.56 | $ | 55.32 | $ | 49.30 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.43 | 1.58 | 1.51 | 1.85 | 1.93 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
(3.97 | ) | (11.65 | ) | 6.94 | (0.60 | ) | 5.41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
(3.54 | ) | (10.07 | ) | 8.45 | 1.25 | 7.34 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.64 | ) | (1.42 | ) | (1.54 | ) | (1.01 | ) | (1.32 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.64 | ) | (1.42 | ) | (1.54 | ) | (1.01 | ) | (1.32 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 46.80 | $ | 50.98 | $ | 62.47 | $ | 55.56 | $ | 55.32 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
(7.00 | )%d | (16.32 | )% | 15.44 | % | 2.22 | % | 15.16 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 2,658,065 | $ | 2,462,357 | $ | 2,080,363 | $ | 2,455,727 | $ | 387,227 | ||||||||||
| Ratio of expenses to average net assetse |
0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | ||||||||||
| Ratio of expenses to average net assets prior to waived feese |
0.72 | % | 0.69 | % | 0.67 | % | 0.67 | % | 0.69 | % | ||||||||||
| Ratio of net investment income to average net assetse |
1.75 | % | 2.71 | % | 2.58 | % | 3.13 | % | 4.08 | % | ||||||||||
| Portfolio turnover ratef |
12 | % | 28 | % | 34 | % | 23 | % | 31 | % | ||||||||||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout each period. |
| c | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rates exclude portfolio securities received or delivered in Creation Units but include portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rates for the six months ended February 29, 2016, the years ended August 31, 2015, August 31, 2014, August 31, 2013 and the period ended August 31, 2012 were 12%, 24%, 26%, 23% and 16%, respectively. See Note 4. |
See notes to financial statements.
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited)
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):
| iShares ETF | Diversification Classification | |
| Currency Hedged MSCI EM Minimum Volatilitya |
Non-diversified | |
| Currency Hedged MSCI Emerging Markets |
Non-diversified | |
| MSCI Emerging Markets |
Diversified | |
| MSCI Emerging Markets Minimum Volatility |
Diversified |
| a | The Fund commenced operations on October 29, 2015. |
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 its underlying index. The investment adviser uses a “passive” or index approach to try to achieve each Fund’s investment objective. Currently each currency hedged fund seeks to achieve its investment objective by investing a substantial portion of its assets in an iShares fund (an “underlying fund”). The financial statements and schedules of investments for the underlying funds are included in this report and should be read in conjunction with the financial statements of the currency hedged funds.
Each of the iShares MSCI Emerging Markets ETF and iShares MSCI Emerging Markets Minimum Volatility ETF carries out its investment strategies associated with investment in Indian securities by investing in a wholly-owned subsidiary in the Republic of Mauritius (each, a “Subsidiary”), which in turn invests in Indian securities included in the underlying index. The investment adviser of each Fund also serves as the investment adviser to each Subsidiary. Through this investment structure, each Fund expects to obtain certain benefits under a current tax treaty between Mauritius and India. The accompanying consolidated financial statements for the Funds’ include the accounts of its Subsidiary. Intercompany accounts and transactions, if any, have been eliminated.
Pursuant to 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 Funds in the preparation of their financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
Each Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP
| NOTES TO FINANCIAL STATEMENTS |
45 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Funds. The investments of each Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Exchange-traded funds and closed-end funds traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the fund is primarily traded. Funds traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
| • | Futures contracts are valued at that day’s last reported settlement price on the exchange where the contract is traded. |
| • | Forward currency contracts are valued based on that day’s prevailing forward exchange rate for the underlying currencies. |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
The following table summarizes the value of each of the Funds’ investments according to the fair value hierarchy as of February 29, 2016. The breakdown of each Fund’s investments into major categories is disclosed in its respective schedule of investments.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Currency Hedged MSCI EM Minimum Volatility |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Exchange-Traded Funds |
$ | 2,284,906 | $ | — | $ | — | $ | 2,284,906 | ||||||||
| Money Market Funds |
1,049 | — | — | 1,049 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 2,285,955 | $ | — | $ | — | $ | 2,285,955 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Assets: |
||||||||||||||||
| Forward Currency Contracts |
$ | — | $ | 20,420 | — | $ | 20,420 | |||||||||
| Liabilities: |
||||||||||||||||
| Forward Currency Contracts |
$ | — | $ | (28,383 | ) | $ | — | $ | (28,383 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | — | $ | (7,963 | ) | $ | — | $ | (7,963 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Currency Hedged MSCI Emerging Markets |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Exchange-Traded Funds |
$ | 188,657,533 | $ | — | $ | — | $ | 188,657,533 | ||||||||
| Money Market Funds |
95,625 | — | — | 95,625 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 188,753,158 | $ | — | $ | — | $ | 188,753,158 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Assets: |
||||||||||||||||
| Forward Currency Contracts |
$ | — | $ | 2,002,343 | $ | — | $ | 2,002,343 | ||||||||
| Liabilities: |
||||||||||||||||
| Forward Currency Contracts |
$ | — | $ | (2,758,496 | ) | $ | — | $ | (2,758,496 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | — | $ | (756,153 | ) | $ | — | $ | (756,153 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NOTES TO FINANCIAL STATEMENTS |
47 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| MSCI Emerging Markets |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 17,603,350,832 | $ | 16,870,916 | $ | 9,361 | $ | 17,620,231,109 | ||||||||
| Preferred Stocks |
577,103,270 | — | — | 577,103,270 | ||||||||||||
| Rights |
46,773 | — | — | 46,773 | ||||||||||||
| Money Market Funds |
1,099,130,164 | — | — | 1,099,130,164 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 19,279,631,039 | $ | 16,870,916 | $ | 9,361 | $ | 19,296,511,316 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments: a |
||||||||||||||||
| Liabilities: |
||||||||||||||||
| Futures Contracts |
$ | (455,882 | ) | $ | — | $ | — | $ | (455,882 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | (455,882 | ) | $ | — | $ | — | $ | (455,882 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| MSCI Emerging Markets Minimum Volatility |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 2,611,742,000 | $ | 8,677,610 | $ | 29 | $ | 2,620,419,639 | ||||||||
| Preferred Stocks |
25,283,457 | — | — | 25,283,457 | ||||||||||||
| Money Market Funds |
101,642,547 | — | — | 101,642,547 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 2,738,668,004 | $ | 8,677,610 | $ | 29 | $ | 2,747,345,643 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Shown at the unrealized appreciation (depreciation) on the contracts. |
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. 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. Each Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes. The iShares Currency Hedged MSCI EM Minimum Volatility ETF and
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
iShares Currency Hedged MSCI Emerging Markets ETF has elected to treat realized gains (losses) from certain foreign currency contracts as capital gain (loss) for federal income tax purposes.
FOREIGN TAXES
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their statements of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Funds’ statements of assets and liabilities.
Each of the iShares MSCI Emerging Markets ETF and iShares MSCI Emerging Markets Minimum Volatility ETF conducts its investment activities in India through its Subsidiary and expects to obtain benefits under the Double Tax Avoidance Agreement (“DTAA”) between India and Mauritius. In order to be eligible to claim benefits under the DTAA, each Subsidiary must, on an annual basis, satisfy certain tests and conditions, including the establishment and maintenance of valid tax residence in Mauritius and related requirements. Each Fund has obtained a current tax residence certificate issued by the Mauritian Revenue Authorities.
Based upon current interpretation and practice of the current tax laws in India and Mauritius and the DTAA, each Subsidiary is subject to tax in Mauritius on its net income at the rate of 15%. However, a system of tax credits effectively reduces the Mauritius income tax rate to a maximum of 3%. These income taxes, if any, are paid by the Funds and are disclosed in the consolidated statements of operations. Any dividends paid by a Subsidiary to its Fund are not subject to tax in Mauritius. Further, each Subsidiary is also exempt from tax in Mauritius on any gains from the sale of securities.
However, there can be no assurance that any future changes to the India-Mauritius treaty will not adversely affect the tax position of the Funds’ investments in India. If the DTAA is interpreted, amended, terminated, renegotiated, or possibly overridden by the General Anti-Avoidance Rules provisions (which are due to take effect April 1, 2017, the details of which are pending further authoritative guidance), in a manner that would adversely affect the tax position in India of each Fund, such an interpretation, amendment, or override renegotiation may cause the Funds to incur capital gains tax in India. Tax laws in India also include provisions that impose Indian tax on the transfer of shares of an Indian company. However, until more definitive authoritative guidance on the final applicability of this provision to the Funds is available, the impact to the Funds, if any, cannot be determined at this time.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by each Fund are recorded on the ex-dividend dates. 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.
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
| NOTES TO FINANCIAL STATEMENTS |
49 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
of at least 102% of the current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Funds. Any additional required collateral is delivered to the Funds and any excess collateral is returned by the Funds on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedules of investments. The securities on loan for each Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statements of assets and liabilities. Income earned by the Funds from securities lending is disclosed in the statements of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. Each Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, a Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| MSCI Emerging Markets |
||||||||||||
| Barclays Capital Inc. |
$ | 16,580,371 | $ | 16,580,371 | $ | — | ||||||
| BNP Paribas Prime Brokerage Inc. |
17,203,104 | 17,203,104 | — | |||||||||
| Citigroup Global Markets Inc. |
45,966,895 | 45,966,895 | — | |||||||||
| Credit Suisse Securities (Europe) Ltd. |
13,161,191 | 13,161,191 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
135,968,213 | 135,968,213 | — | |||||||||
| Deutsche Bank AG |
24,692,696 | 24,692,696 | — | |||||||||
| Deutsche Bank Securities Inc. |
58,121,809 | 58,121,809 | — | |||||||||
| Goldman Sachs & Co. |
94,464,747 | 94,464,747 | — | |||||||||
| Goldman Sachs International |
81,189,354 | 81,189,354 | — | |||||||||
| HSBC Bank PLC |
16,456,224 | 16,456,224 | — | |||||||||
| Jefferies LLC |
789,601 | 789,601 | — | |||||||||
| JPMorgan Clearing Corp. |
54,584,235 | 54,584,235 | — | |||||||||
| JPMorgan Securities PLC |
16,374,440 | 16,374,440 | — | |||||||||
| Macquarie Capital (USA) Inc. |
2,840,062 | 2,840,062 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
22,538,038 | 22,538,038 | — | |||||||||
| Morgan Stanley & Co. International PLC |
139,672,144 | 139,672,144 | — | |||||||||
| Morgan Stanley & Co. LLC |
173,502,764 | 173,502,764 | — | |||||||||
| Morgan Stanley & Co. LLC (U.S. Equity Securities Lending) |
68,580,199 | 68,580,199 | — | |||||||||
| SG Americas Securities LLC |
353,375 | 353,375 | — | |||||||||
| State Street Bank & Trust Company |
644,943 | 644,943 | — | |||||||||
| UBS Ltd. |
19,241,308 | 19,241,308 | — | |||||||||
| UBS Securities LLC |
14,846,392 | 14,846,392 | — | |||||||||
| Wells Fargo Securities LLC |
346,768 | 346,768 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 1,018,118,873 | $ | 1,018,118,873 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| MSCI Emerging Markets Minimum Volatility |
||||||||||||
| Citigroup Global Markets Inc. |
$ | 690,270 | $ | 690,270 | $ | — | ||||||
| Credit Suisse Securities (USA) LLC |
3,346,687 | 3,346,687 | — | |||||||||
| Deutsche Bank AG |
400,595 | 400,595 | — | |||||||||
| Deutsche Bank Securities Inc. |
1,015,357 | 1,015,357 | — | |||||||||
| Goldman Sachs & Co. |
10,692,402 | 10,692,402 | — | |||||||||
| HSBC Bank PLC |
18 | 18 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
826,878 | 826,878 | — | |||||||||
| Morgan Stanley & Co. International PLC |
54,543,895 | 54,543,895 | — | |||||||||
| Morgan Stanley & Co. LLC |
18,435,072 | 18,435,072 | — | |||||||||
| SG Americas Securities LLC |
954,270 | 954,270 | — | |||||||||
| State Street Bank & Trust Company |
84,091 | 84,091 | — | |||||||||
| UBS Securities LLC |
924,790 | 924,790 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 91,914,325 | $ | 91,914,325 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market value of securities loaned at period end and is disclosed in each Fund’s consolidated statement of assets and liabilities. |
| NOTES TO FINANCIAL STATEMENTS |
51 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of each Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Funds, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
Each Subsidiary has entered into a separate contract with BFA under which BFA provides investment advisory services to the Subsidiary but does not receive separate compensation from the Subsidiary for providing it with such services. Each Subsidiary has also entered into separate arrangements that provide for the provision of other services to the Subsidiary (including administrative, custody, transfer agency and other services), and BFA pays the costs and expenses related to the provision of those services.
For its investment advisory services to the iShares Currency Hedged MSCI EM Minimum Volatility ETF, BFA is entitled to an annual investment advisory fee of 0.78% based on the average daily net assets of the Fund. In addition, the Fund indirectly pays its pro rata share of fees and expenses attributable to its investments in other investment companies (“acquired fund fees and expenses”). BFA has contractually agreed to waive a portion of its investment advisory fees for the Fund through December 31, 2020 on assets attributable to the Fund’s investments in the iShares MSCI Emerging Markets Minimum Volatility ETF (“EEMV”). BFA has also contractually agreed to a reduction of investment advisory fees for the Fund through December 31, 2017 on assets attributable to the Fund’s investment in EEMV (and those assets used by the Fund to hedge the currencies in which the securities in EEMV are denominated against the U.S. dollar) such that the Fund’s total annual investment advisory fee is equal to EEMV’s net total expense ratio after fee waiver plus 0.03%.
For its investment advisory services to the iShares Currency Hedged MSCI Emerging Markets ETF, BFA is entitled to an annual investment advisory fee of 0.78% based on the average daily net assets of the Fund. In addition, the Fund indirectly pays acquired fund fees and expenses. BFA has contractually agreed to waive a portion of its investment advisory fees for the Fund through December 31, 2020 on assets attributable to the Fund’s investments in the iShares MSCI Emerging Markets ETF (“EEM”) (and those assets used by the Fund to hedge the currencies in which the securities in EEM are denominated against the U.S. dollar) such that the Fund’s total annual investment advisory fee is equal to EEM’s net total expense ratio after fee waiver.
For its investment advisory services to each of the iShares MSCI Emerging Markets and iShares MSCI Emerging Markets Minimum Volatility ETFs, BFA 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 the Fund and certain other iShares funds, as follows:
| Investment Advisory Fee | Aggregate 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, up to and including $42 billion | ||||
| 0.54 | Over $42 billion, up to and including $56 billion | ||||
| 0.47 | Over $56 billion, up to and including $70 billion | ||||
| 0.41 | Over $70 billion, up to and including $84 billion | ||||
| 0.35 | Over $84 billion | ||||
BFA contractually agreed to waive a portion of its investment advisory fees for the iShares MSCI Emerging Markets ETF through December 31, 2015 in an amount equal to the acquired fund fees and expenses attributable to the Fund’s investments in other iShares funds, if any.
| 52 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The total of the investment advisory fee and any other fund expenses is a fund’s total annual operating expense. For the iShares MSCI Emerging Markets Minimum Volatility ETF, BFA has contractually agreed to waive a portion of its investment advisory fees for the Fund through December 31, 2018 in order to limit total annual operating expenses after fee waiver to 0.25% of average daily net assets.
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. Each Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees each Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Funds retain a portion of securities lending income and remit the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, each Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, each Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
For the six months ended February 29, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF | Fees Paid to BTC |
|||
| Currency Hedged MSCI Emerging Markets |
$ | 34,138 | ||
| MSCI Emerging Markets |
2,683,268 | |||
| MSCI Emerging Markets Minimum Volatility |
186,086 | |||
For the six months ended February 29, 2016, BTC, the Funds’ securities lending agent, has agreed to voluntarily reimburse the iShares MSCI Emerging Markets ETF in the amount of $60,471, related to the foreign tax on the securities lending income. Such reimbursement is included in “Securities lending income – affiliated – net” in the Fund’s consolidated statement of operations.
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for each Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Funds.
Cross trading is the buying or selling of portfolio securities between funds to which BFA (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.
| NOTES TO FINANCIAL STATEMENTS |
53 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
For the six months ended February 29, 2016, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| MSCI Emerging Markets |
$ | 707,020 | $ | 7,925,563 | ||||
| MSCI Emerging Markets Minimum Volatility |
5,790,146 | 1,407,498 | ||||||
Each Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest – affiliated” in the statements of operations.
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Funds for 1940 Act purposes.
Certain Funds, in order to improve their portfolio liquidity and their ability to track their respective underlying index, may invest in shares of other iShares funds that invest in securities in each Fund’s respective underlying index.
Investments in issuers considered to be affiliates of the Funds (excluding money market funds) during the six months ended February 29, 2016, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:
| iShares ETF and Name of Affiliated Issuer |
Shares Held at Beginning of Period |
Shares Purchased |
Shares Sold |
Shares Held at End of Period |
Value at End of Period |
Dividend Income |
Net Realized Gain (Loss) |
|||||||||||||||||||||
| Currency Hedged MSCI EM Minimum Volatility |
||||||||||||||||||||||||||||
| iShares MSCI Emerging Markets Minimum Volatility ETF |
— | 49,350 | (766 | ) | 48,584 | $ | 2,284,906 | $ | 30,126 | $ | (2,798 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Currency Hedged MSCI Emerging Markets |
||||||||||||||||||||||||||||
| iShares MSCI Emerging Markets ETF |
6,243,211 | 1,588,697 | (1,607,641 | ) | 6,224,267 | $ | 188,657,533 | $ | 3,173,153 | $ | (5,043,410 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the six months ended February 29, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| Currency Hedged MSCI EM Minimum Volatility |
$ | 121,596 | $ | 37,280 | ||||
| Currency Hedged MSCI Emerging Markets |
15,962,404 | 16,111,194 | ||||||
| MSCI Emerging Markets |
1,335,676,079 | 1,186,478,303 | ||||||
| MSCI Emerging Markets Minimum Volatility |
318,305,639 | 321,202,862 | ||||||
| 54 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
In-kind transactions (see Note 4) for the six months ended February 29, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| Currency Hedged MSCI EM Minimum Volatility |
$ | 2,448,581 | $ | — | ||||
| Currency Hedged MSCI Emerging Markets |
36,871,940 | 35,944,998 | ||||||
| MSCI Emerging Markets |
847,790,269 | 1,145,440,105 | ||||||
| MSCI Emerging Markets Minimum Volatility |
189,501,082 | — | ||||||
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by each Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statements of changes in net assets.
From time to time, settlement of securities related to in-kind contributions or in-kind redemptions may be delayed. In such cases, securities related to in-kind contributions are reflected as “Due from custodian” and securities related to in-kind redemptions are reflected as “Securities related to in-kind transactions” in the statements of assets and liabilities.
| 5. | FUTURES CONTRACTS |
Each Fund may purchase or sell futures contracts in an effort to help such Fund track its underlying index. A futures contract is a standardized, exchange-traded agreement to buy or sell a financial instrument at a set price on a future date. Upon entering into a futures contract, the Fund is required to pledge to the executing broker which holds segregated from its own assets, an amount of cash, U.S. government securities or other high-quality debt and equity securities equal to the minimum initial margin requirements of the exchange on which the contract is traded. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Losses may arise if the value of a futures contract decreases due to an unfavorable change in the market rates or values of the underlying instrument during the term of the contract or if the counterparty does not perform under the contract. The use of futures contracts also involves the risk of an imperfect correlation in the movements in the price of futures contracts and the assets underlying such contracts.
| NOTES TO FINANCIAL STATEMENTS |
55 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table shows the value of futures contracts held by the iShares MSCI Emerging Markets ETF as of February 29, 2016 and the related locations in the consolidated statements of assets and liabilities, presented by risk exposure category:
| Liabilities | ||||
| Equity contracts: |
||||
| Variation margin / Net assets consist of – net unrealized depreciationa |
$ | 455,882 | ||
|
|
|
|||
| a | Represents cumulative depreciation of futures contracts as reported in the consolidated schedule of investments. Only current day’s variation margin is reported separately within the consolidated statement of assets and liabilities. |
The following table shows the realized and unrealized gains (losses) on futures contracts held by the iShares MSCI Emerging Markets ETF during the six months ended February 29, 2016 and the related locations in the consolidated statements of operations, presented by risk exposure category:
| Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation/Depreciation |
|||||||
| Equity contracts: |
||||||||
| Futures contracts |
$ | (13,019,242 | ) | $ | 9,122,039 | |||
|
|
|
|
|
|||||
The following table shows the average quarter-end balances of open futures contracts for the the iShares MSCI Emerging Markets ETF for the six months ended February 29, 2016:
| Average value of contracts purchased |
$ | 72,056,742 |
| 6. | FORWARD CURRENCY CONTRACTS |
Each Fund may enter into forward currency contracts for the purpose of hedging against the effects of foreign currencies on the value of such Fund’s assets that are denominated in a non-U.S. currency. A forward currency contract is an obligation to purchase or sell a currency against another currency at a specified future date at an agreed upon price and quantity. Forward currency contracts are traded over-the-counter (“OTC”) and not on an organized exchange. The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation or depreciation. When the contract is closed, a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed is recorded. Losses may arise if there are unfavorable movements in the value of a foreign currency relative to the U.S. dollar or if the counterparties do not meet the terms of the agreement. The Fund’s use of forward currency contracts also involves the risks of imperfect correlation between the value of its currency positions and its other investments or the Fund failing to close out its position due to an illiquid market.
| 56 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table shows the value of forward currency contracts held as of February 29, 2016 and the related locations in the statements of assets and liabilities, presented by risk exposure category:
| Assets | ||||||||
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
iShares Currency Hedged MSCI Emerging Markets ETF |
|||||||
| Forward currency contracts: |
||||||||
| Unrealized appreciation on forward currency contracts / Net assets consist of – net unrealized depreciation |
$ | 20,420 | $ | 2,002,343 | ||||
|
|
|
|
|
|||||
| Liabilities | ||||||||
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
iShares Currency Hedged MSCI Emerging Markets ETF |
|||||||
| Forward currency contracts: |
||||||||
| Unrealized depreciation on forward currency contracts / Net assets consist of – net unrealized depreciation |
$ | 28,383 | $ | 2,758,496 | ||||
|
|
|
|
|
|||||
The following table shows the realized and unrealized gains (losses) on forward currency contracts held during the six months ended February 29, 2016 and the related locations in the statements of operations, presented by risk exposure category:
| Net Realized Gain (Loss) | ||||||||
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
iShares Currency Hedged MSCI Emerging Markets ETF |
|||||||
| Forward currency contracts: |
||||||||
| Foreign currency transactions |
$ | 87,795 | $ | 10,766,838 | ||||
|
|
|
|
|
|||||
| Net Change in
Unrealized Appreciation/Depreciation |
||||||||
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
iShares Currency Hedged MSCI Emerging Markets ETF |
|||||||
| Forward currency contracts: |
||||||||
| Forward currency contracts |
$ | (7,963 | ) | $ | (3,841,091 | ) | ||
|
|
|
|
|
|||||
| NOTES TO FINANCIAL STATEMENTS |
57 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table shows the average quarter-end balances of outstanding forward currency contracts for the six months ended February 29, 2016:
|
iShares Currency Hedged MSCI EM Minimum Volatility ETF |
iShares Currency Hedged MSCI Emerging Markets ETF |
|||||||
| Average amounts purchased in U.S. dollars |
$ | 2,599,781 | $ | 252,837,518 | ||||
| Average amounts sold in U.S. dollars |
$ | 4,748,065 | $ | 449,846,809 | ||||
The Funds’ risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Funds. In order to better define their contractual rights and to secure rights that will help the Funds to mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Funds and a counterparty that governs OTC derivatives and foreign exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy or insolvency.
The collateral requirements under an ISDA Master Agreement are typically calculated by netting the mark-to-market amount for each transaction under such agreement, and comparing that amount to the value of any collateral currently pledged by the parties. Forward currency contracts held by the Funds generally do not require collateral. To the extent amounts due to the Funds from the counterparty are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to netting arrangements in the statements of assets and liabilities.
The following table presents the exposure of the open forward currency contracts that are subject to potential offset on the statements of assets and liabilities as of February 29, 2016:
|
Derivative Assets Subject to Offsetting |
Derivatives Available for Offset |
Net Amount of Derivative Assets |
||||||||||
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
||||||||||||
| Forward currency contracts |
$ | 20,420 | $ | (17,637 | ) | $ | 2,783 | |||||
|
|
|
|
|
|
|
|||||||
| iShares Currency Hedged MSCI Emerging Markets ETF |
||||||||||||
| Forward currency contracts |
$ | 2,002,343 | $ | (1,926,593 | ) | $ | 75,750 | |||||
|
|
|
|
|
|
|
|||||||
| 58 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
|
Derivative Liabilities Subject to Offsetting |
Derivatives Available for Offset |
Net Amount of Derivative Liabilities |
||||||||||
| iShares Currency Hedged MSCI EM Minimum Volatility ETF |
||||||||||||
| Forward currency contracts |
$ | 28,383 | $ | (17,637 | ) | $ | 10,746 | |||||
|
|
|
|
|
|
|
|||||||
| iShares Currency Hedged MSCI Emerging Markets ETF |
||||||||||||
| Forward currency contracts |
$ | 2,758,496 | $ | (1,926,593 | ) | $ | 831,903 | |||||
|
|
|
|
|
|
|
|||||||
| 7. | PRINCIPAL RISKS |
In the normal course of business, each Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks each Fund is exposed to include market risk and credit risk. Each Fund’s prospectus provides details of these and other types of risk.
BFA uses a “passive” or index approach to try to achieve each Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss each Fund may suffer through holding market positions in the face of market movements. Each Fund is exposed to market risk by virtue of its direct or indirect investment in equity and financial derivative instruments. The fair value of securities held by the Funds may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of each Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s portfolio are disclosed in its schedule of investments.
Each Fund invests a substantial amount of its assets, with the iShares Currency Hedged MSCI EM Minimum Volatility ETF and iShares Currency Hedged MSCI Emerging Markets ETF investing indirectly, in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
| NOTES TO FINANCIAL STATEMENTS |
59 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The United States and the European Union, along with the regulatory bodies of a number of countries including Japan, Australia and Canada (collectively, “Sanctioning Bodies”), have imposed sectorial economic sanctions on certain Russian individuals and Russian corporate entities which include prohibitions on transacting in or dealing in new debt of longer than 30 or 90 days maturity or new equity of such issuers. Securities held by the iShares MSCI Emerging Markets ETF and iShares MSCI Emerging Markets Minimum Volatility ETF issued prior to the date of the sanctions being imposed are not currently subject to any restrictions under the sanctions. However, compliance with each of these sanctions may impair the ability of a Fund to buy, sell, hold, receive or deliver the affected securities or other securities of such issuers. The Sanctioning Bodies could also institute broader sanctions on Russia. These sanctions, or even the threat of further sanctions, may result in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy. Current or future sanctions may result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. These retaliatory measures may include the immediate freeze of Russian assets held by a Fund.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of each Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 8. | INCOME TAX INFORMATION |
Each Fund is treated as an entity separate from the Company’s other funds 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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Funds. Because such gains or losses are not taxable to the Funds and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Funds’ tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
As of August 31, 2015, the Funds’ fiscal year-end, the following Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
| iShares ETF |
Non- Expiring a |
Expiring 2016 |
Expiring 2017 |
Expiring 2018 |
Expiring 2019 |
Total | ||||||||||||||||||
| MSCI Emerging Markets |
$ | 4,817,904,318 | $ | 13,844,901 | $ | 228,196,854 | $ | 1,201,366,175 | $ | 873,167,649 | $ | 7,134,479,897 | ||||||||||||
| MSCI Emerging Markets Minimum Volatility |
112,910,321 | — | — | — | — | 112,910,321 | ||||||||||||||||||
| a | Must be utilized prior to losses subject to expiration. |
| 60 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (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 marked-to-market gains.
As of February 29, 2016, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| iShares ETF | Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Appreciation (Depreciation) |
||||||||||||
| Currency Hedged MSCI EM Minimum Volatility |
$ | 2,531,148 | $ | — | $ | (245,193 | ) | $ | (245,193 | ) | ||||||
| Currency Hedged MSCI Emerging Markets |
241,311,696 | — | (52,558,538 | ) | (52,558,538 | ) | ||||||||||
| MSCI Emerging Markets |
25,278,954,993 | 2,199,651,171 | (8,182,094,848 | ) | (5,982,443,677 | ) | ||||||||||
| MSCI Emerging Markets Minimum Volatility |
3,153,796,593 | 113,784,761 | (520,235,711 | ) | (406,450,950 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of February 29, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
| 9. | LINE OF CREDIT |
The iShares MSCI Emerging Markets ETF and iShares MSCI Emerging Markets Minimum Volatility ETF, along with certain other iShares funds, are parties to a $250 million credit agreement with State Street Bank and Trust Company, which expires on October 28, 2016. The line of credit may be used for temporary or emergency purposes, including redemptions, settlement of trades and rebalancing of portfolio holdings. The credit agreement has the following terms: a commitment fee of 0.20% per annum on the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR (not less than zero) plus 1.00% per annum or (b) the U.S. Federal Funds rate (not less than zero) plus 1.00% per annum on amounts borrowed. The commitment fee is allocated to each fund participating in the credit agreement based on each fund’s pro-rata share of the aggregate average daily value of assets invested in local securities of certain foreign markets.
The terms of the credit agreement, as amended by the Board on September 17, 2015, became effective on October 28, 2015. Prior to this date, the maximum borrowing amount was $150 million and the commitment fee was 0.08% per annum on the unused portion of the credit agreement.
For the six months ended February 29, 2016, the maximum amounts borrowed, the average borrowings and the weighted average interest rates, if any, under the credit agreement were as follows:
| iShares ETF | Maximum Amount Borrowed |
Average Borrowings |
Weighted Average |
|||||||||
| MSCI Emerging Markets |
$ | 45,000,000 | $ | 1,721,311 | 1.26 | % | ||||||
| MSCI Emerging Markets Minimum Volatility |
49,300,000 | 1,885,792 | 1.26 | |||||||||
| 10. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
| NOTES TO FINANCIAL STATEMENTS |
61 |
Table of Contents
Board Review and Approval of Investment Advisory
Contract
iSHARES®, INC.
iShares Currency Hedged MSCI EM Minimum Volatility ETF
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 to consider and approve the proposed Investment Advisory Contract between the Company and BFA (the “Advisory Contract”) on behalf of the Fund. The Independent Directors requested, and BFA provided, such information as the Independent Directors, with advice from independent counsel, deemed reasonably necessary to evaluate the terms of the proposed Advisory Contract.
At a meeting held on September 16-17, 2015, the Board, including all of the Independent Directors, approved the selection of BFA as investment adviser and approved the proposed Advisory Contract for the Fund, based on its review of qualitative and quantitative information provided by BFA. The Board also considered information previously provided by BFA, BlackRock Institutional Trust Company, N.A. (“BTC”), and BlackRock, Inc. (“BlackRock”), as applicable, at prior Board meetings. The Independent Directors were advised by their independent counsel throughout the process, including about the legal standards applicable to their review.
In selecting BFA and approving the Advisory Contract for the Fund, the Board, including the Independent Directors, considered the following factors, no one of which was controlling, and made the following conclusions:
Expenses 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 actual advisory fees, waivers/reimbursements, and gross and net total expenses of the Fund in comparison with the same information for other exchange traded funds (including, where applicable, funds sponsored by an “at cost” service provider) and, in the limited instances where no comparable ETFs existed and the comparison group would not otherwise be reasonable in Lipper’s judgment, pure index institutional mutual funds, objectively selected by Lipper as comprising the Fund’s applicable peer group pursuant to Lipper’s proprietary ETF methodology (the “Lipper Group”). The Board was provided with a detailed description of Lipper’s proprietary ETF methodology used by Lipper to determine the Fund’s Lipper Group. The Board further noted that due to the limitations in providing comparable funds in the Lipper Group, the statistical information provided in Lipper’s report may or may not provide meaningful direct comparisons to the Fund in all instances.
The Board also noted that the investment advisory fee rate and overall expenses (net of waivers and reimbursements) for the Fund were lower than the median of the investment advisory fee rates and overall expenses (net of waivers and reimbursements) of the funds in its Lipper Group.
Based on this review, the other factors considered at the meeting, and their general knowledge of ETF pricing, the Board concluded that the proposed investment advisory fee and expense level of the Fund supported the Board’s approval of the Advisory Contract.
Nature, Extent and Quality of Services to be Provided by BFA — The Board reviewed the scope of services to be provided by BFA under the Advisory Contract. In reviewing the scope of these services, the Board considered BFA’s investment philosophy and experience, noting that BFA and its affiliates have committed significant resources over time, including during the past year, to supporting iShares funds and their shareholders. The Board acknowledged that resources to support the iShares funds and their shareholders have been added or enhanced in recent years. The Board considered representations by BFA, BTC, and BlackRock that the scope and quality of services to be provided to the Fund would be similar to the scope and quality of services provided to other iShares funds. The Board also considered BFA’s compliance program and its compliance record with respect to other iShares funds. In that regard, the Board noted that BFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and on other occasions as necessary
| 62 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Board Review and Approval of Investment Advisory
Contract (Continued)
iSHARES®, INC.
and appropriate, and has provided information and made appropriate officers available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons who will be responsible for the day-to-day management of the Fund, as well as the resources that will be available to them in managing the Fund. In addition to the above considerations, the Board reviewed and considered detailed presentations regarding BFA’s investment performance, investment and risk management processes and strategies provided throughout the previous year, and matters related to BFA’s portfolio compliance policies and procedures.
Based on the review of this information, the Board concluded that the nature, extent and quality of services to be provided by BFA to the Fund under the Advisory Contract supported the Board’s approval of the Advisory Contract.
Costs of Services to be Provided to the Fund and Profits to be Realized by BFA and its Affiliates — The Board did not consider the profitability of the Fund to BFA based on the fees payable under the Advisory Contract or revenue to be received by BFA or its affiliates in connection with services to be provided to the Fund since the proposed relationship had not yet commenced. The Board noted that it expects to receive profitability information from BFA periodically following the Fund’s launch and will thus be in a position to evaluate whether, in the future, any adjustments in the Fund’s fees would be appropriate.
Economies of Scale — The Board reviewed information regarding potential economies of scale or other efficiencies that may result from increases in the Fund’s assets. The Board noted that it had previously received and considered information regarding scale benefits shared with the iShares funds through relatively low fee rates established at inception, breakpoints, waivers, or other fee reductions, as well as through additional investment in the iShares business and the provision of improved or additional infrastructure and services to the iShares funds and their shareholders. The Board noted that the Advisory Contract for the Fund did not provide for any breakpoints in the Fund’s investment advisory fee rate as the assets of the Fund increase. However, the Board noted that to the extent that the Fund invests in the unhedged iShares MSCI Emerging Markets Minimum Volatility ETF (“EEMV”), Fund shareholders would benefit from breakpoints in EEMV’s investment advisory fee rate as the assets of EEMV, on an aggregated basis with the assets of other iShares funds, increase. The Board further noted that should material economies of scale exist in the future, a breakpoint structure for the Fund may be appropriate, and that it would continue to monitor the sharing of economies of scale to determine the appropriateness of adding breakpoints in the future.
Based on this review, as well as the other factors considered at the meeting, the Board, recognizing its responsibility to consider this issue periodically, determined to approve the Advisory Contract.
Fees and Services Provided for Other Comparable Funds/Accounts Managed by BFA and its Affiliates — The Board received and considered information regarding the investment advisory/management fee rates for other funds/accounts in the U.S. for which BFA (or its affiliates) provides investment advisory/management services, including open-end and closed-end funds registered under the 1940 Act (including sub-advised funds), collective trust funds, separately managed accounts, and institutional separate accounts (together, the “Other Accounts”), and acknowledged BFA’s assertion that the iShares funds are fundamentally different investment vehicles from the Other Accounts. The Board noted that BFA and its affiliates do not manage Other Accounts that track the same index as the Fund. The Board further noted that BFA previously provided the Board with detailed information regarding how the Other Accounts (particularly institutional clients) generally differ from the iShares funds, including in terms of the different, generally more extensive services provided to the iShares funds, as well as other significant differences in the approach of BFA and its affiliates to the iShares funds, on one hand, and the Other Accounts, on the other. In that regard, the Board considered that the pricing of services to institutional clients is typically based on a number of factors beyond the nature and extent of the specific services to be provided and often depends on the overall relationship between the client and its affiliates and the adviser and its affiliates. In addition, the Board considered the relative complexity and inherent risks and challenges of managing and providing other services to the Fund, as a publicly traded exchange traded fund, as compared to the Other Accounts that are institutional clients in light of differing regulatory requirements and client-imposed mandates. The
| BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACT |
63 |
Table of Contents
Board Review and Approval of Investment Advisory
Contract (Continued)
iSHARES®, INC.
Board also considered the “all-inclusive” nature of the Fund’s advisory fee structure and the Fund expenses to be borne by BFA under this arrangement. The Board noted that the investment advisory fee rate under the Advisory Contract for the Fund was generally higher than the investment advisory/management fee rates for the Other Accounts that are institutional clients of BFA (or its affiliates) and concluded that the differences appeared to be consistent with the factors discussed.
Other Benefits to BFA and/or its Affiliates — Except as noted below, the Board did not consider the “fallout” benefits or ancillary revenue to be received by BFA and/or its affiliates in connection with the services to be provided to the Fund by BFA since the proposed relationship had not yet commenced. However, the Board noted that BFA generally does not use soft dollars or consider the value of research or other services that may be provided to BFA (including its affiliates) in selecting brokers for portfolio transactions for the Fund. The Board considered the potential payment of advisory fees and/or administration fees to BFA and BTC (or their affiliates) in connection with any investments by the Fund in other funds for which BFA (or its affiliates) provides investment advisory services and/or administration services. The Board also considered the potential for revenue to BTC, the Fund’s securities lending agent, and its affiliates in the event of any loaning of portfolio securities of the Fund. The Board further noted that any portfolio transactions on behalf of the Fund placed through a BFA affiliate or purchased from an underwriting syndicate in which a BFA affiliate participates will be reported to the Board pursuant to Rule 17e-1 or Rule 10f-3, as applicable, under the 1940 Act. The Board concluded that the existence of any such ancillary benefits would not alter the Board’s conclusion with respect to the appropriateness of approving the Advisory Contract.
Based on the considerations described above, the Board determined that the investment advisory fee rate under the Advisory Contract does not constitute a fee that is so disproportionately large as to bear no reasonable relationship to the services to be rendered and that could not have been the product of arm’s-length bargaining and concluded that it is in the best interest of the Fund and its shareholders to approve the Advisory Contract.
| 64 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Supplemental Information (Unaudited)
iSHARES®, INC.
Section 19(a) Notices
The amounts and sources of distributions reported are estimates and are provided pursuant to regulatory requirements and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Shareholders will receive a Form 1099-DIV each calendar year that will inform them how to report these distributions for federal income tax purposes.
| Total Cumulative Distributions for the Fiscal Year-to-Date |
% Breakdown of the Total
Cumulative Distributions for the Fiscal Year-to-Date |
|||||||||||||||||||||||||||||||
| iShares ETF | Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
Net Investment Income |
Net Realized Capital Gains |
Return of Capital |
Total Per Share |
||||||||||||||||||||||||
| Currency Hedged MSCI EM Minimum Volatility |
$ | 0.299951 | $ | — | $ | 0.003179 | $ | 0.303130 | 99 | % | — | % | 1 | % | 100 | % | ||||||||||||||||
| Currency Hedged MSCI Emerging Markets |
0.300258 | 0.781650 | — | 1.081908 | 28 | 72 | — | 100 | ||||||||||||||||||||||||
| MSCI Emerging Markets |
0.334713 | — | 0.166126 | 0.500839 | 67 | — | 33 | 100 | ||||||||||||||||||||||||
| MSCI Emerging Markets Minimum Volatility |
0.528458 | — | 0.112762 | 0.641220 | 82 | — | 18 | 100 | ||||||||||||||||||||||||
| SUPPLEMENTAL INFORMATION |
65 |
Table of Contents
Notes:
| 66 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Funds use to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Funds’ website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Funds also disclose their complete schedules of portfolio holdings on a daily basis on the Funds’ website.
Certain financial information required by regulations or listing exchange rules in jurisdictions outside the U.S. in which iShares Funds are cross-listed may be publicly filed in those jurisdictions. This information is available upon request by calling 1-800-474-2737.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-805-0216
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Table of Contents
FEBRUARY 29, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
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iShares, Inc.
| Ø | iShares FactorSelect™ MSCI Emerging ETF | EMGF | BATS |
Table of Contents
| 5 | ||||
| 6 | ||||
| 6 | ||||
| 7 | ||||
| 10 | ||||
| 13 | ||||
| 14 | ||||
| 23 |
Table of Contents
iSHARES® FACTORSELECTTM MSCI EMERGING ETF
Performance as of February 29, 2016
The iShares FactorSelect MSCI Emerging ETF (the “Fund”) seeks to track the investment results of an index composed of stocks of large- and mid-capitalization companies in emerging markets that have favorable exposure to target style factors subject to constraints, as represented by the MSCI Emerging Markets Diversified Multiple-Factor Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to 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 period from December 8, 2015 (inception date of the Fund) through February 29, 2016, the total return for the Fund was -8.28%, net of fees, while the total return for the Index was -8.58%.
| Cumulative Total Returns | ||||||||||||
| NAV | MARKET | INDEX | ||||||||||
| Since Inception |
(8.28)% | (8.04)% | (8.58)% | |||||||||
The inception date of the Fund was 12/8/15. The first day of secondary market trading was 12/10/15.
Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 6 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (12/8/15) a |
Ending Account Value (2/29/16) |
Expenses Paid During Period b |
Beginning Account Value (9/1/15) |
Ending Account Value (2/29/16) |
Expenses Paid During Period b |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 917.20 | $ | 1.30 | $ | 1,000.00 | $ | 1,021.90 | $ | 3.02 | 0.60% | ||||||||||||||
| a | The beginning of the period (commencement of operations) is December 8, 2015. |
| b | 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 (83 days for actual and 182 days for hypothetical expenses) and divided by the number of days in the year (366 days). See “Shareholder Expenses” on page 6 for more information. |
| * | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEW |
5 |
Table of Contents
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at www.ishares.com. Performance results 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 on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.
Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of a fund are listed for trading, as of the time that such fund’s NAV is calculated. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are 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 at Market Price and NAV, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. 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.
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 expense example, which is based on an investment of $1,000 invested on September 1, 2015 (or commencement of operations, as applicable) and held through February 29, 2016, 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.
Actual Expenses — The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account 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 under the heading entitled “Expenses Paid During Period.”
Hypothetical Example for Comparison Purposes — The table also 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. 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 hypothetical examples are 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.
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
February 29, 2016
| SCHEDULE OF INVESTMENTS |
7 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
February 29, 2016
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
February 29, 2016
| SCHEDULE OF INVESTMENTS |
9 |
Table of Contents
Statement of Assets and Liabilities (Unaudited)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
February 29, 2016
| ASSETS |
||||
| Investments, at cost: |
||||
| Unaffiliated |
$ | 3,145,544 | ||
| Affiliated (Note 2) |
262,947 | |||
|
|
|
|||
| Total cost of investments |
$ | 3,408,491 | ||
|
|
|
|||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||
| Unaffiliated |
$ | 2,872,902 | ||
| Affiliated (Note 2) |
241,717 | |||
|
|
|
|||
| Total fair value of investments |
3,114,619 | |||
| Foreign currency, at valueb |
4,725 | |||
| Receivables: |
||||
| Dividends and interest |
9,513 | |||
|
|
|
|||
| Total Assets |
3,128,857 | |||
|
|
|
|||
| LIABILITIES |
||||
| Payables: |
||||
| Collateral for securities on loan (Note 1) |
25,460 | |||
| Investment advisory fees (Note 2) |
1,481 | |||
|
|
|
|||
| Total Liabilities |
26,941 | |||
|
|
|
|||
| NET ASSETS |
$ | 3,101,916 | ||
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$ | 3,384,592 | ||
| Undistributed net investment income |
12,319 | |||
| Accumulated net realized loss |
(754 | ) | ||
| Net unrealized depreciation |
(294,241 | ) | ||
|
|
|
|||
| NET ASSETS |
$ | 3,101,916 | ||
|
|
|
|||
| Shares outstandingc |
100,000 | |||
|
|
|
|||
| Net asset value per share |
$ | 31.02 | ||
|
|
|
|||
| a | Securities on loan with a value of $23,908. See Note 1. |
| b | Cost of foreign currency: $4,698. |
| c | $0.001 par value, number of shares authorized: 25 million. |
See notes to financial statements.
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statement of Operations (Unaudited)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
Period from December 8, 2015 (commencement of operations) to February 29, 2016
| NET INVESTMENT INCOME |
||||
| Dividends — unaffiliateda |
$ | 14,213 | ||
| Dividends — affiliated (Note 2) |
1,779 | |||
| Interest — affiliated (Note 2) |
1 | |||
| Securities lending income — affiliated — net (Note 2) |
651 | |||
|
|
|
|||
| Total investment income |
16,644 | |||
|
|
|
|||
| EXPENSES |
||||
| Investment advisory fees (Note 2) |
4,658 | |||
|
|
|
|||
| Total expenses |
4,658 | |||
| Less investment advisory fees waived (Note 2) |
(333 | ) | ||
|
|
|
|||
| Net expenses |
4,325 | |||
|
|
|
|||
| Net investment income |
12,319 | |||
|
|
|
|||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||
| Net realized gain (loss) from: |
||||
| Foreign currency transactions |
(754 | ) | ||
|
|
|
|||
| Net realized loss |
(754 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation on: |
||||
| Investments |
(293,872 | ) | ||
| Translation of assets and liabilities in foreign currencies |
(369 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation |
(294,241 | ) | ||
|
|
|
|||
| Net realized and unrealized loss |
(294,995 | ) | ||
|
|
|
|||
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (282,676 | ) | |
|
|
|
|||
| a | Net of foreign withholding tax of $2,631. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
11 |
Table of Contents
Statement of Changes in Net Assets
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
| Period from to February 29, 2016 |
||||
| INCREASE (DECREASE) IN NET ASSETS |
||||
| OPERATIONS: |
||||
| Net investment income |
$ | 12,319 | ||
| Net realized loss |
(754 | ) | ||
| Net change in unrealized appreciation/depreciation |
(294,241 | ) | ||
|
|
|
|||
| Net decrease in net assets resulting from operations |
(282,676 | ) | ||
|
|
|
|||
| CAPITAL SHARE TRANSACTIONS: |
||||
| Proceeds from shares sold |
3,384,592 | |||
|
|
|
|||
| Net increase in net assets from capital share transactions |
3,384,592 | |||
|
|
|
|||
| INCREASE IN NET ASSETS |
3,101,916 | |||
| NET ASSETS |
||||
| Beginning of period |
— | |||
|
|
|
|||
| End of period |
$ | 3,101,916 | ||
|
|
|
|||
| Undistributed net investment income included in net assets at end of period |
$ | 12,319 | ||
|
|
|
|||
| SHARES ISSUED |
||||
| Shares sold |
100,000 | |||
|
|
|
|||
| Net increase in shares outstanding |
100,000 | |||
|
|
|
|||
| a | Commencement of operations. |
See notes to financial statements.
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
(For a share outstanding throughout the period)
| Period from to Feb. 29, 2016 (Unaudited) |
||||
| Net asset value, beginning of period |
$ | 33.82 | ||
|
|
|
|||
| Income from investment operations: |
||||
| Net investment incomeb |
0.12 | |||
| Net realized and unrealized lossc |
(2.92 | ) | ||
|
|
|
|||
| Total from investment operations |
(2.80 | ) | ||
|
|
|
|||
| Net asset value, end of period |
$ | 31.02 | ||
|
|
|
|||
| Total return |
(8.28 | )%d | ||
|
|
|
|||
| Ratios/Supplemental data: |
||||
| Net assets, end of period (000s) |
$ | 3,102 | ||
| Ratio of expenses to average net assetse |
0.60 | % | ||
| Ratio of expenses to average net assets prior to waived feese |
0.65 | % | ||
| Ratio of net investment income to average net assetse |
1.72 | % | ||
| Portfolio turnover ratef |
0 | % | ||
| a | Commencement of operations. |
| b | Based on average shares outstanding throughout the period. |
| c | The amount reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| d | Not annualized. |
| e | Annualized for periods of less than one year. |
| f | Portfolio turnover rate excludes portfolio securities received or delivered in Creation Units but includes portfolio transactions that are executed as a result of the Fund processing capital share transactions in Creation Units partially for cash in U.S. dollars. Excluding such cash transactions, the portfolio turnover rate for the period ended February 29, 2016 was 0%. See Note 4. There were purchases activities only and none for Sales. Therefore the PTO ratio is a true zero %. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS |
13 |
Table of Contents
Notes to Financial Statements (Unaudited)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
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 Articles of Incorporation as subsequently amended and restated.
These financial statements relate only to the following fund (the “Fund”):
| iShares ETF |
Diversification Classification | |
| FactorSelect MSCI Emerginga |
Non-diversified |
| a | The Fund commenced operations on December 8, 2015. |
The investment objective of the Fund is to seek investment results that correspond generally to the price and yield performance, before fees and expenses, of its underlying index. The investment adviser uses a “passive” or index approach to try to achieve the Fund’s investment objective.
Pursuant to 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 Fund in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
SECURITY VALUATION
The Fund’s investments are valued at fair value each day that the Fund’s listing exchange is open and, for financial reporting purposes, as of the report date should the reporting period end on a day that the Fund’s listing exchange is not open. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) provides oversight of the valuation of investments for the Fund. The investments of the Fund are valued pursuant to policies and procedures developed by the Global Valuation Committee and approved by the Board of Directors of the Company (the “Board”).
| • | Equity investments traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| • | Exchange-traded funds and closed-end funds traded on a recognized securities exchange are valued at that day’s last reported trade price or the official closing price, as applicable, on the exchange where the fund is primarily traded. Funds traded on a recognized exchange for which there were no sales on that day are valued at the last traded price. |
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
| • | Open-end U.S. mutual funds are valued at that day’s published net asset value (“NAV”). |
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the fair value of such investment or if a price is not available, the investment will be valued based upon other available factors deemed relevant by the Global Valuation Committee, in accordance with policies approved by the Board. These factors include but are not limited to (i) attributes specific to the investment; (ii) the principal market for the investment; (iii) the customary participants in the principal market for the investment; (iv) data assumptions by market participants for the investment, if reasonably available; (v) quoted prices for similar investments in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. Valuations based on such factors are reported to the Board on a quarterly basis.
The Global Valuation Committee employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Company’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices, reviews of large movements in market values, and reviews of market related activity.
Fair value pricing could result in a difference between the prices used to calculate the Fund’s NAV and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
Various inputs are used in determining the fair value of financial instruments. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for a financial instrument within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The categorization of a value determined for a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and is not necessarily an indication of the risk associated with investing in the instrument. The three levels of the fair value hierarchy are as follows:
| • | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| • | Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability (such as exchange rates, financing terms, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs; and |
| • | Level 3 — Unobservable inputs for the asset or liability, including the Global Valuation Committee’s assumptions used in determining the fair value of investments. |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. In accordance with the Company’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period.
| NOTES TO FINANCIAL STATEMENTS |
15 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
The following table summarizes the value of each of the Fund’s investments according to the fair value hierarchy as of February 29, 2016. The breakdown of the Fund’s investments into major categories is disclosed in its schedule of investments.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Common Stocks |
$ | 2,682,378 | $ | 16,551 | $ | — | $ | 2,698,929 | ||||||||
| Preferred Stocks |
173,973 | — | — | 173,973 | ||||||||||||
| Investment Companies |
213,370 | — | — | 213,370 | ||||||||||||
| Money Market Funds |
28,347 | — | — | 28,347 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 3,098,068 | $ | 16,551 | $ | — | $ | 3,114,619 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities as of February 29, 2016 are reflected in tax reclaims receivable. Non-cash dividends received in the form of stock in an elective dividend, if any, are recorded as dividend income at fair value. Distributions received by the Fund may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. 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. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars on the respective dates 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.
FOREIGN TAXES
The Fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Fund invests. These foreign taxes, if any, are paid by the Fund and are reflected in its statement of operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “other foreign taxes”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of February 29, 2016, if any, are disclosed in the Fund’s statement of assets and liabilities.
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. 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.
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 current 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 value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund. Any additional required collateral is delivered to the Fund and any excess collateral is returned by the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
Any cash received as collateral for securities on loan may be reinvested in certain short-term instruments either directly on behalf of a fund or through one or more joint accounts or money market funds, including those managed by BlackRock Fund Advisors (“BFA”), the Fund’s investment adviser, or its affiliates. As of February 29, 2016, any securities on loan were collateralized by cash. The cash collateral received was invested in money market funds managed by BFA and is disclosed in the schedule of investments. The securities on loan for the Fund are also disclosed in its schedule of investments. The total value of any securities on loan as of February 29, 2016 and the total value of the related collateral are disclosed in the statement of assets and liabilities. Income earned by the Fund from securities lending is disclosed in the statement of operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of securities lent. The Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (“MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
| NOTES TO FINANCIAL STATEMENTS |
17 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
The following table is a summary of securities lending agreements which are subject to offset under an MSLA as of February 29, 2016:
| Counterparty | Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| Credit Suisse Securities (USA) LLC |
$ | 23,908 | $ | 23,908 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| a | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received was in excess of the market value of securities loaned at period end and is disclosed in the Fund’s statement of assets and liabilities. |
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BFA manages the investment of the Fund’s assets. BFA is a California corporation indirectly owned by BlackRock. Under the Investment Advisory Agreement, BFA is responsible for substantially all expenses of the Fund, except interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution fees, litigation expenses and any extraordinary expenses.
For its investment advisory services to the Fund, BFA is entitled to an annual investment advisory fee of 0.65% based on the average daily net assets of the Fund. In addition, the Fund indirectly pays its pro rata share of fees and expenses attributable to its investments in other investment companies. BFA has contractually agreed to waive a portion of its investment advisory fees for the Fund through December 31, 2016 on those assets attributable to the Fund’s investments in other iShares funds, if any.
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BlackRock Institutional Trust Company, N.A. (“BTC”), an affiliate of BFA, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Fund is responsible for fees in connection with the investment of cash collateral received for securities on loan in a money market fund managed by BFA, however, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Fund bears to an annual rate of 0.04% (the “collateral investment fees”). Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Fund retains a portion of securities lending income and remits the remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to a securities lending agreement, the Fund retains 80% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees. In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in a given calendar year exceeds the aggregate securities lending income generated across the iShares ETF Complex in the calendar year 2013, the Fund, pursuant to a securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
For the period ended February 29, 2016, the Fund paid to BTC securities lending agent services and collateral investment fees in the amount of $163.
BlackRock Investments, LLC, an affiliate of BFA, is the distributor for the Fund. Pursuant to the distribution agreement, BFA is responsible for any fees or expenses for distribution services provided to the Fund.
The Fund may invest its positive cash balances in certain money market funds managed by BFA or an affiliate. The income earned on these temporary cash investments is included in “Interest—affiliated” in the statement of operations.
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
The PNC Financial Services Group, Inc. is the largest stockholder of BlackRock and is considered to be an affiliate of the Fund for 1940 Act purposes.
The Fund, in order to improve its portfolio liquidity and its ability to track its underlying index, may invest in shares of other iShares funds that invest in securities in the Fund’s underlying index.
Investments in issuers considered to be affiliates of the Fund (excluding money market funds) during the period ended February 29, 2016, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:
| Name of Affiliated Issuer | Shares Held at Beginning of Period |
Shares Purchased |
Shares Sold |
Shares Held of Period |
Value at of Period |
Dividend Income |
||||||||||||||||||
| iShares MSCI India ETF |
— | 8,883 | — | 8,883 | $ | 213,370 | $ | 1,779 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
Certain directors and officers of the Company are also officers of BTC and/or BFA.
| 3. | INVESTMENT PORTFOLIO TRANSACTIONS |
Purchases and sales of investments (excluding in-kind transactions and short-term investments) for the period ended February 29, 2016, were $2,180,357 and $—, respectively.
In-kind purchases and sales (see Note 4) for the period ended February 29, 2016, were $1,199,787 and $—, respectively.
| 4. | CAPITAL SHARE TRANSACTIONS |
Capital shares are issued and redeemed by the Fund only in aggregations of a specified number of shares or multiples thereof (“Creation Units”) at NAV. 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 a fund in the Company generally consists of the in-kind deposit of a designated portfolio of securities and a specified amount of cash. Certain funds in the Company may be offered in Creation Units solely or partially for cash in U.S. dollars. Investors purchasing and redeeming Creation Units may pay a purchase transaction fee and a redemption transaction fee directly to State Street Bank and Trust Company, the Company’s 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 may also pay an additional variable charge to compensate the relevant fund for certain transaction costs (i.e., stamp taxes, taxes on currency or other financial transactions, and brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” in the statement of changes in net assets.
| 5. | PRINCIPAL RISKS |
In the normal course of business, the Fund’s investment activities expose it to various types of risk associated with the financial instruments and markets in which it invests. The significant types of financial risks the Fund is exposed to include market risk and credit risk. The Fund’s prospectus provides details of these and other types of risk.
| NOTES TO FINANCIAL STATEMENTS |
19 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
BFA uses a “passive” or index approach to try to achieve the Fund’s investment objective following the securities included in its underlying index during upturns as well as downturns. BFA does not take steps to reduce market exposure or to lessen the effects of a declining market. Divergence from the underlying index and the composition of the portfolio is monitored by BFA.
MARKET RISK
Market risk arises mainly from uncertainty about future values of financial instruments influenced by price, currency and interest rate movements. It represents the potential loss the Fund may suffer through holding market positions in the face of market movements. The Fund is exposed to market risk by virtue of its direct or indirect investment in equity instruments. The fair value of securities held by the Fund may decline due to general market conditions, economic trends or events that are not specifically related to the issuers of the securities including local, regional or global political, social or economic instability or to factors that affect a particular industry or group of industries. The extent of the Fund’s exposure to market risk is the market value of the investments held as shown in the Fund’s schedule of investments.
A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within the Fund’s portfolio are disclosed in its schedule of investments.
The Fund invests a substantial amount of its assets in securities of non-U.S. issuers that trade in non-U.S. markets. This involves 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. These risks are heightened for investments in issuers from countries with less developed markets.
The United States and the European Union, along with the regulatory bodies of a number of countries including Japan, Australia and Canada (collectively, “Sanctioning Bodies”), have imposed sectorial economic sanctions on certain Russian individuals and Russian corporate entities which include prohibitions on transacting in or dealing in new debt of longer than 30 or 90 days maturity or new equity of such issuers. Securities held by the Fund issued prior to the date of the sanctions being imposed are not currently subject to any restrictions under the sanctions. However, compliance with each of these sanctions may impair the ability of a Fund to buy, sell, hold, receive or deliver the affected securities or other securities of such issuers. The Sanctioning Bodies could also institute broader sanctions on Russia. These sanctions, or even the threat of further sanctions, may result in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy. Current or future sanctions may result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. These retaliatory measures may include the immediate freeze of Russian assets held by a Fund.
CREDIT RISK
Credit risk is the risk that an issuer or guarantor of debt instruments or the counterparty to a financial transaction, including derivatives contracts, repurchase agreements or loans of portfolio securities, is unable or unwilling to make timely interest and/or principal payments or to otherwise honor its obligations. BFA and its affiliates manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to issuer and counterparty credit
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to credit and counterparty risks with respect to those financial assets is approximated by their value recorded in its statement of assets and liabilities.
| 6. | INCOME TAX INFORMATION |
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 ordinary income and any net capital 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 is required.
For purposes of U.S. GAAP, in-kind redemptions are treated as sales of securities resulting in realized capital gains or losses to the Fund. Because such gains or losses are not taxable to the Fund and are not distributed to existing Fund shareholders, the gains or losses are reclassified from accumulated net realized gain (loss) to paid-in capital at the end of the Fund’s tax year. These reclassifications have no effect on net assets or NAV per share.
The tax character of current year distributions will be determined at the end of the current fiscal year.
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 marked-to-market gains.
As of February 29, 2016, the cost of investments for federal income tax purposes was $3,408,491. Net unrealized depreciation was $293,872, of which $54,163 represented gross unrealized appreciation on securities and $348,035 represented gross unrealized depreciation on securities.
Management has analyzed tax laws and regulations and their application to the Fund as of February 29, 2016, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.
| 7. | LINE OF CREDIT |
The Fund, along with certain other iShares funds, is a party to a $250 million credit agreement with State Street Bank and Trust Company, which expires on October 28, 2016. The line of credit may be used for temporary or emergency purposes, including redemptions, settlement of trades and rebalancing of portfolio holdings. The credit agreement has the following terms: a commitment fee of 0.20% per annum on the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR (not less than zero) plus 1.00% per annum or (b) the U.S. Federal Funds rate (not less than zero) plus 1.00% per annum on amounts borrowed. The commitment fee is allocated to each fund participating in the credit agreement based on each fund’s pro-rata share of the aggregate average daily value of assets invested in local securities of certain foreign markets.
The Fund did not borrow under the credit agreement during the period ended February 29, 2016.
| NOTES TO FINANCIAL STATEMENTS |
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iSHARES® FACTORSELECT™ MSCI EMERGING ETF
| 8. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were available to be issued and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.
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Board Review and Approval of Investment Advisory
Contract
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
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 to consider and approve the proposed Investment Advisory Contract between the Company and BFA (the “Advisory Contract”) on behalf of the Fund. The Independent Directors requested, and BFA provided, such information as the Independent Directors, with advice from independent counsel, deemed reasonably necessary to evaluate the terms of the proposed Advisory Contract.
At a meeting held on March 24-25, 2015, the Board, including all of the Independent Directors, approved the selection of BFA as investment adviser and approved the proposed Advisory Contract for the Fund, based on its review of qualitative and quantitative information provided by BFA. The Board also considered information previously provided by BFA, BlackRock Institutional Trust Company, N.A. (“BTC”), and BlackRock, Inc. (“BlackRock”), as applicable, at prior Board meetings. The Independent Directors were advised by their independent counsel throughout the process, including about the legal standards applicable to their review.
In selecting BFA and approving the Advisory Contract for the Fund, the Board, including the Independent Directors, considered the following factors, no one of which was controlling, and made the following conclusions:
Expenses 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 actual advisory fees, waivers/reimbursements, and gross and net total expenses of the Fund in comparison with the same information for other exchange traded funds (including a fund sponsored by an “at cost” service provider) (the “Lipper Group”). The Board was provided with a detailed description of Lipper’s proprietary ETF methodology used by Lipper to determine the applicable Lipper Group and to prepare this information. The Board further noted that due to the limitations in providing comparable funds in the Lipper Group, the statistical information provided in Lipper’s report may or may not provide meaningful direct comparisons to the Fund in all instances.
The Board also noted that the proposed investment advisory fee rate and overall expenses for the Fund were higher than the median of the investment advisory fee rates and overall expenses of the funds in the Lipper Group. The Board noted management’s assertion that many of the funds in the Lipper Group are single-factor funds, while the Fund is a multi-factor fund. The Board further noted that management further discussed, and the Board considered, the differing characteristics and likely client uses for funds that are multi-factor versus single-factor.
Based on this review, the other factors considered at the meeting, and their general knowledge of fund pricing, the Board concluded that the proposed investment advisory fee and expense levels of the Fund supported the Board’s approval of the Advisory Contract.
Nature, Extent and Quality of Services to be Provided by BFA — The Board reviewed the scope of services to be provided by BFA under the Advisory Contract. In reviewing the scope of these services, the Board considered BFA’s investment philosophy and experience, noting that BFA and its affiliates have committed significant resources over time, including during the past year, to supporting iShares funds and their shareholders. The Board acknowledged that resources to support the iShares funds and their shareholders have been added or enhanced in recent years. The Board considered representations by BFA, BTC, and BlackRock that the scope and quality of services to be provided to the Fund would be similar to the scope and quality of services provided to other iShares funds. The Board also considered BFA’s compliance program and its compliance record with respect to other iShares funds. In that regard, the Board noted that BFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and on other occasions as necessary and appropriate, and has provided information and made appropriate officers available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons who will be responsible for the day-to-day management of the Fund, as well as the resources that will be available to them in managing the Fund. In addition to the
| BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACT |
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Board Review and Approval of Investment Advisory
Contract (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
above considerations, the Board reviewed and considered detailed presentations regarding BFA’s investment performance, investment and risk management processes and strategies provided throughout the previous year, and matters related to BFA’s portfolio compliance policies and procedures.
Based on the review of this information, the Board concluded that the nature, extent and quality of services to be provided by BFA to the Fund under the Advisory Contract supported the Board’s approval of the Advisory Contract.
Costs of Services to be Provided to the Fund and Profits to be Realized by BFA and its Affiliates — The Board did not consider the profitability of the Fund to BFA based on the fees payable under the Advisory Contract or revenue to be received by BFA or its affiliates in connection with services to be provided to the Fund since the proposed relationship had not yet commenced. The Board noted that it expects to receive profitability information from BFA periodically following the Fund’s launch and will thus be in a position to evaluate whether, in the future, any adjustments in the Fund’s fees would be appropriate.
Economies of Scale — The Board reviewed information regarding economies of scale or other efficiencies that may result from increases in the Fund’s assets. The Board noted that the Advisory Contract for the Fund did not provide for any breakpoints in the Fund’s investment advisory fee rate as the assets of the Fund increase. However, the Board noted that should material economies of scale exist in the future, a breakpoint structure for the Fund may be appropriate, and that it would continue to monitor the sharing of economies of scale to determine the appropriateness of adding breakpoints in the future. The Board noted that there are various ways to share potential economies of scale with iShares fund shareholders, including through fee reductions (that may take the form of breakpoints, price cuts, and/or waivers), continued investment in services to iShares fund shareholders, and fee levels that anticipate scale.
Based on this review, as well as the other factors considered at the meeting, the Board, recognizing its responsibility to consider this issue periodically, determined to approve the Advisory Contract.
Fees and Services Provided for Other Comparable Funds/Accounts Managed by BFA and its Affiliates — The Board received and considered information regarding the investment advisory/management fee rates for other funds/accounts in the U.S. for which BFA (or its affiliates) provides investment advisory/management services, including open-end and closed-end funds registered under the 1940 Act (including sub-advised funds), collective trust funds, separately managed accounts, and institutional separate accounts (together, the “Other Accounts”), and acknowledged BFA’s assertion that the iShares funds are fundamentally different investment vehicles from the Other Accounts. The Board noted that BFA and its affiliates do not manage Other Accounts that track the same underlying index that serves as the underlying index for the Fund. The Board further noted that BFA previously provided the Board with detailed information regarding how the Other Accounts (particularly institutional clients) generally differ from the iShares funds, including in terms of the different, generally more extensive services to be provided to the iShares funds, as well as other significant differences in the approach of BFA and its affiliates to the iShares funds, on one hand, and the Other Accounts, on the other. In that regard, the Board considered that the pricing of services to institutional clients is typically based on a number of factors beyond the nature and extent of the specific services to be provided and often depends on the overall relationship between the client and its affiliates and the adviser and its affiliates. In addition, the Board considered the relative complexity and inherent risks and challenges of managing and providing other services to the Fund, as a publicly traded exchange traded fund, as compared to the Other Accounts that are institutional clients in light of differing regulatory requirements and client-imposed mandates. The Board also considered the “all-inclusive” nature of the Fund’s advisory fee structure and the Fund expenses to be borne by BFA under this arrangement. The Board noted that the investment advisory fee rate under the Advisory Contract for the Fund was generally higher than the investment advisory/management fee rates for the Other Accounts that are institutional clients of BFA (or its affiliates) and concluded that the differences appeared to be consistent with the factors discussed.
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Board Review and Approval of Investment Advisory
Contract (Unaudited) (Continued)
iSHARES® FACTORSELECT™ MSCI EMERGING ETF
Other Benefits to BFA and/or its Affiliates — Except as noted below, the Board did not consider the “fallout” benefits or ancillary revenue to be received by BFA and/or its affiliates in connection with the services to be provided to the Fund by BFA since the proposed relationship had not yet commenced. However, the Board noted that BFA generally does not use soft dollars or consider the value of research or other services that may be provided to BFA (including its affiliates) in selecting brokers for portfolio transactions for the Fund. The Board considered the potential payment of advisory fees and/or administration fees to BFA and BTC (or their affiliates) in connection with any investments by the Fund in other funds for which BFA (or its affiliates) provides investment advisory services and/or administration services. The Board also considered the potential for revenue to BTC, the Fund’s securities lending agent, and its affiliates in the event of any loaning of portfolio securities of the Fund. The Board further noted that any portfolio transactions on behalf of the Fund placed through a BFA affiliate or purchased from an underwriting syndicate in which a BFA affiliate participates will be reported to the Board pursuant to Rule 17e-1 or Rule 10f-3, as applicable, under the 1940 Act. The Board concluded that the existence of any such ancillary benefits would not alter the Board’s conclusion with respect to the appropriateness of approving the Advisory Contract.
Based on the considerations described above, the Board determined that the investment advisory fee rate under the Advisory Contract does not constitute a fee that is so disproportionately large as to bear no reasonable relationship to the services to be rendered and that could not have been the product of arm’s-length bargaining and concluded that it is in the best interest of the Fund and its shareholders to approve the Advisory Contract.
| BOARD REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACT |
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Notes:
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
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For more information visit www.iShares.com or call 1-800-474-2737
This report is intended for the Fund’s shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.
Investing involves risk, including possible loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.
A description of the policies that the Fund uses to determine how to vote proxies relating to portfolio securities and information about how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request, by calling toll-free 1-800-474-2737; on the Fund’s website at www.iShares.com; and on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website or may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also discloses its complete schedule of portfolio holdings on a daily basis on the Fund’s website.
©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc. or its subsidiaries. All other marks are the property of their respective owners.
iS-SAR-816-0216
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Item 2. Code of Ethics.
Not applicable to this semi-annual filing.
Item 3. Audit Committee Financial Expert.
Not applicable to this semi-annual filing.
Item 4. Principal Accountant Fees and Services.
Not applicable to this semi-annual filing.
Item 5. Audit Committee of Listed Registrants.
Not applicable to this semi-annual filing.
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Item 6. Investments.
(a) Schedules of investments are included as part of the reports to shareholders filed under Item 1 of this Form.
(b) Not applicable.
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 President (the Registrant’s Principal Executive Officer) and Chief Financial Officer (the Registrant’s 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 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) Not applicable to this semi-annual filing.
(a) (2) Section 302 Certifications are attached.
(a) (3) Not applicable to the Registrant.
(b) Section 906 Certifications are attached.
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SIGNATURES
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/ Manish Mehta |
| Manish Mehta, President (Principal Executive Officer) |
| Date: April 29, 2016 |
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/ Manish Mehta |
| Manish Mehta, President (Principal Executive Officer) |
| Date: April 29, 2016 |
| By: /s/ Jack Gee |
| Jack Gee, Treasurer and Chief Financial Officer (Principal Financial Officer) |
| Date: April 29, 2016 |