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: October 31, 2016
Date of reporting period: April 30, 2016
Table of Contents
| Item 1. | Reports to Stockholders. |
Table of Contents
APRIL 30, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
|
iShares, Inc.
| Ø | iShares Emerging Markets Corporate Bond ETF | CEMB | BATS |
| Ø | iShares Emerging Markets High Yield Bond ETF | EMHY | BATS |
| Ø | iShares Emerging Markets Local Currency Bond ETF | LEMB | NYSE Arca |
| Ø | iShares Global High Yield Corporate Bond ETF | GHYG | BATS |
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Table of Contents
iSHARES® EMERGING MARKETS CORPORATE BOND ETF
Performance as of April 30, 2016
The iShares Emerging Markets Corporate Bond ETF (the “Fund”) seeks to track the investment results of an index composed of U.S. dollar-denominated, emerging market corporate bonds, as represented by the Morningstar® Emerging Markets Corporate Bond IndexSM (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 April 30, 2016, the total return for the Fund was 3.92%, net of fees, while the total return for the Index was 4.34%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
1.79% | 5.91% | 2.28% | 1.79% | 5.91% | 2.28% | ||||||||||||||||||||
| Since Inception |
3.54% | 4.60% | 4.14% | 15.09% | 19.91% | 17.81% | ||||||||||||||||||||
The inception date of the Fund was 4/17/12. The first day of secondary market trading was 4/19/12.
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 (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Beginning Account Value (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,039.20 | $ | 2.54 | $ | 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 9 for more information. |
| 1 | Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| 2 | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
5 |
Table of Contents
Fund Performance Overview
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
Performance as of April 30, 2016
The iShares Emerging Markets High Yield Bond ETF (the “Fund”) seeks to track the investment results of an index composed of U.S. dollar-denominated, emerging market high yield sovereign and corporate bonds, as represented by the Morningstar® Emerging Markets High Yield Bond IndexSM (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 April 30, 2016, the total return for the Fund was 6.03%, net of fees, while the total return for the Index was 5.42%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
4.26% | 5.42% | 3.73% | 4.26% | 5.42% | 3.73% | ||||||||||||||||||||
| Since Inception |
4.93% | 5.04% | 5.19% | 21.67% | 22.18% | 22.92% | ||||||||||||||||||||
The inception date of the Fund was 4/3/12. The first day of secondary market trading was 4/3/12.
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 (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Beginning Account Value (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,060.30 | $ | 2.56 | $ | 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 9 for more information. |
| 1 | Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| 2 | Excludes money market funds. |
| 6 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Fund Performance Overview
iSHARES® EMERGING MARKETS LOCAL CURRENCY BOND ETF
Performance as of April 30, 2016
The iShares Emerging Markets Local Currency Bond ETF (the “Fund”) seeks to track the investment results of an index composed of local currency denominated, emerging market sovereign bonds, as represented by the Barclays Emerging Markets Broad Local Currency Bond 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 April 30, 2016, the total return for the Fund was 6.84%, net of fees, while the total return for the Index was 7.63%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(2.15)% | (2.26)% | (1.23)% | (2.15)% | (2.26)% | (1.23)% | ||||||||||||||||||||
| Since Inception |
(0.31)% | (0.33)% | 0.14% | (1.39)% | (1.48)% | 0.65% | ||||||||||||||||||||
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 9 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Beginning Account Value (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,068.40 | $ | 2.57 | $ | 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 9 for more information. |
| 1 | Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| 2 | Excludes money market funds. |
| FUND PERFORMANCE OVERVIEWS |
7 |
Table of Contents
Fund Performance Overview
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
Performance as of April 30, 2016
The iShares Global High Yield Corporate Bond ETF (the “Fund”) seeks to track the investment results of an index composed of U.S. dollar, euro, British pound sterling and Canadian dollar-denominated, high yield corporate bonds, as represented by the Markit iBoxx Global Developed Markets High Yield 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 April 30, 2016, the total return for the Fund was 2.43%, net of fees, while the total return for the Index was 2.66%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
(1.08)% | (2.58)% | (0.63)% | (1.08)% | (2.58)% | (0.63)% | ||||||||||||||||||||
| Since Inception |
4.07% | 3.98% | 4.25% | 17.64% | 17.23% | 18.47% | ||||||||||||||||||||
The inception date of the Fund was 4/3/12. The first day of secondary market trading was 4/5/12.
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 (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Beginning Account Value (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,024.30 | $ | 2.01 | $ | 1,000.00 | $ | 1,022.90 | $ | 2.01 | 0.40% | ||||||||||||||
| 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. |
| 1 | Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| 2 | 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 November 1, 2015 and held through April 30, 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
Schedule of Investments (Unaudited)
iSHARES® EMERGING MARKETS CORPORATE BOND ETF
April 30, 2016
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
11 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS CORPORATE BOND ETF
April 30, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS CORPORATE BOND ETF
April 30, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
April 30, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
April 30, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
April 30, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
21 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® EMERGING MARKETS LOCAL CURRENCY BOND ETF
April 30, 2016
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS LOCAL CURRENCY BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
23 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS LOCAL CURRENCY BOND ETF
April 30, 2016
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® EMERGING MARKETS LOCAL CURRENCY BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
25 |
Table of Contents
Schedule of Investments (Unaudited)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
27 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
29 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
31 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
33 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
35 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 36 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
37 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 38 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
39 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 40 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
41 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 42 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
43 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 44 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
45 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 46 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
47 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 48 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
49 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| 50 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® GLOBAL HIGH YIELD CORPORATE BOND ETF
April 30, 2016
| SCHEDULES OF INVESTMENTS |
51 |
Table of Contents
Statements of Assets and Liabilities (Unaudited)
iSHARES®, INC.
April 30, 2016
| iShares Emerging Markets Corporate Bond ETF |
iShares Emerging Markets High Yield Bond ETF |
iShares Bond ETF |
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| ASSETS |
||||||||||||
| Investments, at cost: |
||||||||||||
| Unaffiliated |
$ | 24,406,050 | $ | 72,163,961 | $ | 369,077,797 | ||||||
| Affiliated (Note 2) |
503,850 | 1,180,569 | 161,834 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total cost of investments |
$ | 24,909,900 | $ | 73,344,530 | $ | 369,239,631 | ||||||
|
|
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|
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| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||||||||||
| Unaffiliated |
$ | 23,722,041 | $ | 69,790,578 | $ | 347,059,458 | ||||||
| Affiliated (Note 2) |
503,850 | 1,180,569 | 161,834 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total fair value of investments |
24,225,891 | 70,971,147 | 347,221,292 | |||||||||
| Foreign currency, at valueb |
— | — | 23,263,988 | |||||||||
| Cash |
112,624 | 5,125 | 198,603 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
115,702 | 1,231,226 | 4,301,733 | |||||||||
| Due from custodian (Note 4) |
988,272 | 472,527 | 194,441 | |||||||||
| Interest |
346,226 | 1,364,529 | 5,904,264 | |||||||||
| Unrealized appreciation on forward currency contracts (Note 1) |
— | — | 69,056 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
25,788,715 | 74,044,554 | 381,153,377 | |||||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
1,056,620 | 2,071,991 | 8,822,289 | |||||||||
| Collateral for securities on loan (Note 1) |
241,750 | — | — | |||||||||
| Capital shares sold |
310 | — | 449 | |||||||||
| Deferred foreign capital gains taxes (Note 1) |
857 | 2,603 | 248,948 | |||||||||
| Unrealized depreciation on forward currency contracts (Note 1) |
— | — | 394,749 | |||||||||
| Investment advisory fees (Note 2) |
8,665 | 26,881 | 146,105 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
1,308,202 | 2,101,475 | 9,612,540 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 24,480,513 | $ | 71,943,079 | $ | 371,540,837 | ||||||
|
|
|
|
|
|
|
|||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$ | 26,180,649 | $ | 98,769,116 | $ | 455,213,126 | ||||||
| Undistributed net investment income |
76,212 | 366,817 | 10,140,039 | |||||||||
| Accumulated net realized loss |
(1,091,482 | ) | (24,816,868 | ) | (71,730,048 | ) | ||||||
| Net unrealized depreciation |
(684,866 | ) | (2,375,986 | ) | (22,082,280 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| NET ASSETS |
$ | 24,480,513 | $ | 71,943,079 | $ | 371,540,837 | ||||||
|
|
|
|
|
|
|
|||||||
| Shares outstandingc |
500,000 | 1,500,000 | 8,400,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value per share |
$ | 48.96 | $ | 47.96 | $ | 44.23 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Securities on loan with values of $234,643, $ — and $ —, respectively. See Note 1. |
| b | Cost of foreign currency: $ —, $ — and $23,005,763, respectively. |
| c | $0.001 par value, number of shares authorized: 500 million, 500 million and 500 million, respectively. |
See notes to financial statements.
| 52 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Assets and Liabilities (Unaudited) (Continued)
iSHARES®, INC.
April 30, 2016
| iShares Global High Yield Corporate Bond ETF |
||||
| ASSETS |
||||
| Investments, at cost: |
||||
| Unaffiliated |
$ | 106,404,022 | ||
| Affiliated (Note 2) |
19,578,364 | |||
|
|
|
|||
| Total cost of investments |
$ | 125,982,386 | ||
|
|
|
|||
| Investments in securities, at fair value (including securities on loana) (Note 1): |
||||
| Unaffiliated |
$ | 102,679,226 | ||
| Affiliated (Note 2) |
19,578,364 | |||
|
|
|
|||
| Total fair value of investments |
122,257,590 | |||
| Foreign currency, at valueb |
906,565 | |||
| Receivables: |
||||
| Investment securities sold |
794,212 | |||
| Interest |
1,682,477 | |||
|
|
|
|||
| Total Assets |
125,640,844 | |||
|
|
|
|||
| LIABILITIES |
||||
| Payables: |
||||
| Investment securities purchased |
1,876,259 | |||
| Collateral for securities on loan (Note 1) |
18,796,424 | |||
| Investment advisory fees (Note 2) |
30,745 | |||
|
|
|
|||
| Total Liabilities |
20,703,428 | |||
|
|
|
|||
| NET ASSETS |
$ | 104,937,416 | ||
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$ | 113,738,791 | ||
| Undistributed net investment income |
760,790 | |||
| Accumulated net realized loss |
(5,865,201 | ) | ||
| Net unrealized depreciation |
(3,696,964 | ) | ||
|
|
|
|||
| NET ASSETS |
$ | 104,937,416 | ||
|
|
|
|||
| Shares outstandingc |
2,200,000 | |||
|
|
|
|||
| Net asset value per share |
$ | 47.70 | ||
|
|
|
|||
| a | Securities on loan with a value of $18,361,674. See Note 1. |
| b | Cost of foreign currency: $889,652. |
| c | $0.001 par value, number of shares authorized: 500 million. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
53 |
Table of Contents
Statements of Operations (Unaudited)
iSHARES®, INC.
Six months ended April 30, 2016
| iShares Emerging Markets Corporate Bond ETF |
iShares Emerging Markets High Yield Bond ETF |
iShares Bond ETF |
||||||||||
| NET INVESTMENT INCOME |
||||||||||||
| Dividends — affiliated (Note 2) |
$ | 169 | $ | 631 | $ | 3,313 | ||||||
| Interest — unaffiliateda |
600,329 | 2,471,837 | 11,235,252 | |||||||||
| Securities lending income — affiliated — net (Note 2) |
1,558 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| 602,056 | 2,472,468 | 11,238,565 | ||||||||||
| Less: Other foreign taxes (Note 1) |
— | — | (233 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Total investment income |
602,056 | 2,472,468 | 11,238,332 | |||||||||
|
|
|
|
|
|
|
|||||||
| EXPENSES |
||||||||||||
| Investment advisory fees (Note 2) |
58,019 | 161,238 | 1,093,094 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
58,019 | 161,238 | 1,093,094 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net investment income |
544,037 | 2,311,230 | 10,145,238 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments — unaffiliatedb |
(147,302 | ) | (954,359 | ) | (48,145,123 | ) | ||||||
| In-kind redemptions — unaffiliated |
(560,416 | ) | (7,995,887 | ) | (9,912,550 | ) | ||||||
| Foreign currency transactions |
— | — | (572,116 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net realized loss |
(707,718 | ) | (8,950,246 | ) | (58,629,789 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation on: |
||||||||||||
| Investmentsc |
830,364 | 10,014,776 | 66,721,081 | |||||||||
| Forward currency contracts |
— | — | (325,693 | ) | ||||||||
| Translation of assets and liabilities in foreign currencies |
— | — | 647,510 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation/depreciation |
830,364 | 10,014,776 | 67,042,898 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized gain |
122,646 | 1,064,530 | 8,413,109 | |||||||||
|
|
|
|
|
|
|
|||||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 666,683 | $ | 3,375,760 | $ | 18,558,347 | ||||||
|
|
|
|
|
|
|
|||||||
| a | Net of foreign withholding tax of $ —, $ — and $486,256, respectively. |
| b | Net of foreign capital gains taxes of $ —, $ — and $208,706, respectively. |
| c | Net of deferred foreign capital gains taxes of $857, $2,603 and $249,580, respectively. |
See notes to financial statements.
| 54 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Operations (Unaudited) (Continued)
iSHARES®, INC.
Six months ended April 30, 2016
| iShares Global High Yield Corporate Bond ETF |
||||
| NET INVESTMENT INCOME |
||||
| Dividends — affiliated (Note 2) |
$ | 870 | ||
| Interest — unaffiliateda |
2,788,715 | |||
| Securities lending income — affiliated — net (Note 2) |
42,094 | |||
|
|
|
|||
| Total investment income |
2,831,679 | |||
|
|
|
|||
| EXPENSES |
||||
| Investment advisory fees (Note 2) |
260,690 | |||
|
|
|
|||
| Total expenses |
260,690 | |||
| Less investment advisory fees waived (Note 2) |
(71,099 | ) | ||
|
|
|
|||
| Net expenses |
189,591 | |||
|
|
|
|||
| Net investment income |
2,642,088 | |||
|
|
|
|||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||
| Net realized gain (loss) from: |
||||
| Investments — unaffiliated |
(2,535,417 | ) | ||
| In-kind redemptions — unaffiliated |
(2,140,845 | ) | ||
| Foreign currency transactions |
(48,732 | ) | ||
|
|
|
|||
| Net realized loss |
(4,724,994 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation on: |
||||
| Investments |
3,075,535 | |||
| Translation of assets and liabilities in foreign currencies |
23,881 | |||
|
|
|
|||
| Net change in unrealized appreciation/depreciation |
3,099,416 | |||
|
|
|
|||
| Net realized and unrealized loss |
(1,625,578 | ) | ||
|
|
|
|||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 1,016,510 | ||
|
|
|
|||
| a | Net of foreign withholding tax of $37. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
55 |
Table of Contents
Statements of Changes in Net Assets
iSHARES®, INC.
| iShares Emerging Markets Corporate Bond ETF |
iShares Emerging Markets High Yield Bond ETF |
|||||||||||||||
| Six months ended April 30, 2016 (Unaudited) |
Year ended October 31, 2015 |
Six months April 30, 2016 (Unaudited) |
Year ended October 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 544,037 | $ | 1,278,664 | $ | 2,311,230 | $ | 12,330,137 | ||||||||
| Net realized loss |
(707,718 | ) | (494,307 | ) | (8,950,246 | ) | (13,741,369 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
830,364 | (1,231,916 | ) | 10,014,776 | (6,790,259 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
666,683 | (447,559 | ) | 3,375,760 | (8,201,491 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
(570,484 | ) | (1,251,781 | ) | (2,713,676 | ) | (12,543,243 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
(570,484 | ) | (1,251,781 | ) | (2,713,676 | ) | (12,543,243 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
4,859,835 | 14,833,589 | 18,756,004 | 93,299,391 | ||||||||||||
| Cost of shares redeemed |
(9,404,316 | ) | (9,796,578 | ) | (106,674,486 | ) | (112,360,271 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(4,544,481 | ) | 5,037,011 | (87,918,482 | ) | (19,060,880 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(4,448,282 | ) | 3,337,671 | (87,256,398 | ) | (39,805,614 | ) | |||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
28,928,795 | 25,591,124 | 159,199,477 | 199,005,091 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 24,480,513 | $ | 28,928,795 | $ | 71,943,079 | $ | 159,199,477 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income included in net assets at end of period |
$ | 76,212 | $ | 102,659 | $ | 366,817 | $ | 769,263 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
100,000 | 300,000 | 400,000 | 1,900,000 | ||||||||||||
| Shares redeemed |
(200,000 | ) | (200,000 | ) | (2,300,000 | ) | (2,400,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(100,000 | ) | 100,000 | (1,900,000 | ) | (500,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 56 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets (Continued)
iSHARES®, INC.
| iShares Emerging Markets Local Currency Bond ETF |
iShares Global High Yield Corporate Bond ETF |
|||||||||||||||
| Six months ended April 30, 2016 (Unaudited) |
Year ended October 31, 2015 |
Six months April 30, 2016 (Unaudited) |
Year ended October 31, 2015 |
|||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS: |
||||||||||||||||
| Net investment income |
$ | 10,145,238 | $ | 26,144,835 | $ | 2,642,088 | $ | 4,851,867 | ||||||||
| Net realized loss |
(58,629,789 | ) | (66,208,463 | ) | (4,724,994 | ) | (3,387,672 | ) | ||||||||
| Net change in unrealized appreciation/depreciation |
67,042,898 | (49,320,763 | ) | 3,099,416 | (6,121,635 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
18,558,347 | (89,384,391 | ) | 1,016,510 | (4,657,440 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||||||||||
| From net investment income |
— | — | (2,089,418 | ) | (4,184,901 | ) | ||||||||||
| Return of capital |
— | (7,292,193 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions to shareholders |
— | (7,292,193 | ) | (2,089,418 | ) | (4,184,901 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||||||||||
| Proceeds from shares sold |
33,690,685 | 190,126,828 | 18,646,272 | 53,329,370 | ||||||||||||
| Cost of shares redeemed |
(201,240,327 | ) | (157,774,832 | ) | (31,566,952 | ) | (29,558,374 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets from capital share transactions |
(167,549,642 | ) | 32,351,996 | (12,920,680 | ) | 23,770,996 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCREASE (DECREASE) IN NET ASSETS |
(148,991,295 | ) | (64,324,588 | ) | (13,993,588 | ) | 14,928,655 | |||||||||
| NET ASSETS |
||||||||||||||||
| Beginning of period |
520,532,132 | 584,856,720 | 118,931,004 | 104,002,349 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of period |
$ | 371,540,837 | $ | 520,532,132 | $ | 104,937,416 | $ | 118,931,004 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income/(accumulated net investment loss) included in net assets at end of period |
$ | 10,140,039 | $ | (5,199 | ) | $ | 760,790 | $ | 208,120 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SHARES ISSUED AND REDEEMED |
||||||||||||||||
| Shares sold |
800,000 | 4,200,000 | 400,000 | 1,100,000 | ||||||||||||
| Shares redeemed |
(5,000,000 | ) | (3,600,000 | ) | (700,000 | ) | (600,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in shares outstanding |
(4,200,000 | ) | 600,000 | (300,000 | ) | 500,000 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
57 |
Table of Contents
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares Emerging Markets Corporate Bond ETF | ||||||||||||||||||||
| Six months ended Apr. 30, 2016 (Unaudited) |
Year ended Oct. 31, 2015 |
Year ended Oct. 31, 2014 |
Year ended Oct. 31, 2013 |
Period from to Oct. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 48.21 | $ | 51.18 | $ | 50.48 | $ | 52.93 | $ | 50.00 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
1.10 | 2.19 | 2.01 | 1.92 | 1.07 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
0.75 | (3.02 | ) | 0.75 | (2.49 | ) | 2.76 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
1.85 | (0.83 | ) | 2.76 | (0.57 | ) | 3.83 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(1.10 | ) | (2.14 | ) | (2.06 | ) | (1.88 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(1.10 | ) | (2.14 | ) | (2.06 | ) | (1.88 | ) | (0.90 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 48.96 | $ | 48.21 | $ | 51.18 | $ | 50.48 | $ | 52.93 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
3.92 | %d | (1.62 | )% | 5.61 | % | (1.07 | )% | 7.75 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 24,481 | $ | 28,929 | $ | 25,591 | $ | 35,338 | $ | 21,170 | ||||||||||
| Ratio of expenses to average net assetse |
0.50 | % | 0.53 | % | 0.60 | % | 0.60 | % | 0.60 | % | ||||||||||
| Ratio of net investment income to average net assetse |
4.69 | % | 4.47 | % | 3.99 | % | 3.74 | % | 3.87 | % | ||||||||||
| Portfolio turnover ratef |
8 | % | 11 | % | 20 | % | 33 | % | 29 | % | ||||||||||
| 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.
| 58 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares Emerging Markets High Yield Bond ETF | ||||||||||||||||||||
| Six months ended Apr. 30, 2016 (Unaudited) |
Year ended Oct. 31, 2015 |
Year ended Oct. 31, 2014 |
Year ended Oct. 31, 2013 |
Period from to Oct. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 46.82 | $ | 51.03 | $ | 50.90 | $ | 53.62 | $ | 50.02 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
1.64 | 2.99 | 2.93 | 2.97 | 1.60 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
1.09 | (4.11 | ) | 0.15 | (2.91 | ) | 3.40 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
2.73 | (1.12 | ) | 3.08 | 0.06 | 5.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(1.59 | ) | (3.09 | ) | (2.95 | ) | (2.78 | ) | (1.40 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(1.59 | ) | (3.09 | ) | (2.95 | ) | (2.78 | ) | (1.40 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 47.96 | $ | 46.82 | $ | 51.03 | $ | 50.90 | $ | 53.62 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
6.03 | %d | (2.13 | )% | 6.24 | % | 0.14 | % | 10.21 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 71,943 | $ | 159,199 | $ | 199,005 | $ | 203,604 | $ | 166,231 | ||||||||||
| Ratio of expenses to average net assetse |
0.50 | % | 0.55 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
| Ratio of net investment income to average net assetse |
7.17 | % | 6.29 | % | 5.78 | % | 5.64 | % | 5.34 | % | ||||||||||
| Portfolio turnover ratef |
10 | % | 39 | % | 24 | % | 57 | % | 40 | % | ||||||||||
| 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 |
59 |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares Emerging Markets Local Currency Bond ETF | ||||||||||||||||||||||||
| Six months ended Apr. 30, 2016 (Unaudited) |
Year ended Oct. 31, 2015 |
Year ended Oct. 31, 2014 |
Year ended Oct. 31, 2013 |
Year ended Oct. 31, 2012 |
Period from to Oct. 31, 2011 |
|||||||||||||||||||
| Net asset value, beginning of period |
$ | 41.31 | $ | 48.74 | $ | 50.66 | $ | 51.94 | $ | 51.13 | $ | 49.85 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment incomeb |
0.94 | 2.03 | 2.26 | 2.07 | 2.31 | 0.02 | ||||||||||||||||||
| Net realized and unrealized gain (loss)c |
1.98 | (8.87 | ) | (2.84 | ) | (1.92 | ) | 0.41 | 1.26 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total from investment operations |
2.92 | (6.84 | ) | (0.58 | ) | 0.15 | 2.72 | 1.28 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions from: |
||||||||||||||||||||||||
| Net investment income |
— | — | (1.31 | ) | (1.39 | ) | (0.81 | ) | — | |||||||||||||||
| Return of capital |
— | (0.59 | ) | (0.03 | ) | (0.04 | ) | (1.10 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
— | (0.59 | ) | (1.34 | ) | (1.43 | ) | (1.91 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 44.23 | $ | 41.31 | $ | 48.74 | $ | 50.66 | $ | 51.94 | $ | 51.13 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return |
6.84 | %d,e | (13.99) | %e | (1.14 | )% | 0.28 | % | 5.48 | % | 2.57 | %d | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 371,541 | $ | 520,532 | $ | 584,857 | $ | 638,342 | $ | 207,753 | $ | 30,681 | ||||||||||||
| Ratio of expenses to average net assetsf |
0.50 | % | 0.50 | % | 0.59 | % | 0.60 | % | 0.60 | % | 0.60 | % | ||||||||||||
| Ratio of expenses to average net assets prior to waived feesf |
n/a | 0.53 | % | 0.60 | % | n/a | n/a | n/a | ||||||||||||||||
| Ratio of net investment income to average net assetsf |
4.64 | % | 4.63 | % | 4.56 | % | 4.04 | % | 4.57 | % | 1.21 | % | ||||||||||||
| Portfolio turnover rateg |
26 | % | 46 | % | 43 | % | 41 | % | 61 | % | 0 | % | ||||||||||||
| 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 | The total return disclosed is based on the 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 returns for the six months ended April 30, 2016 and the year ended October 31, 2015 were 7.07% and -14.16%, respecitvely. |
| 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 April 30, 2016, the years ended October 31, 2015, October 31, 2014, October 31, 2013 and October 30, 2012 were 26%, 32%, 36%, 39% and 61%, respectively. See Note 4. |
See notes to financial statements.
| 60 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Financial Highlights (Continued)
iSHARES®, INC.
(For a share outstanding throughout each period)
| iShares Global High Yield Corporate Bond ETF | ||||||||||||||||||||
| Six months ended Apr. 30, 2016 (Unaudited) |
Year ended Oct. 31, 2015 |
Year ended Oct. 31, 2014 |
Year ended Oct. 31, 2013 |
Period from to Oct. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 47.57 | $ | 52.00 | $ | 53.50 | $ | 51.67 | $ | 50.00 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
1.26 | 2.56 | 2.84 | 3.05 | 1.82 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
(0.15 | ) | (4.76 | ) | (1.28 | ) | 1.70 | 1.35 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
1.11 | (2.20 | ) | 1.56 | 4.75 | 3.17 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.98 | ) | (2.23 | ) | (3.06 | ) | (2.92 | ) | (1.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.98 | ) | (2.23 | ) | (3.06 | ) | (2.92 | ) | (1.50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 47.70 | $ | 47.57 | $ | 52.00 | $ | 53.50 | $ | 51.67 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
2.43 | %d | (4.32 | )% | 2.91 | % | 9.50 | % | 6.53 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 104,937 | $ | 118,931 | $ | 104,002 | $ | 74,893 | $ | 36,169 | ||||||||||
| Ratio of expenses to average net assetse |
0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | ||||||||||
| Ratio of expenses to average net assets prior to waived feese |
0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
| Ratio of net investment income to average net assetse |
5.57 | % | 5.18 | % | 5.31 | % | 5.82 | % | 6.28 | % | ||||||||||
| Portfolio turnover ratef |
9 | % | 21 | % | 21 | % | 20 | % | 10 | % | ||||||||||
| 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 |
61 |
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 | |
| Emerging Markets Corporate Bond |
Diversified | |
| Emerging Markets High Yield Bond |
Non-diversified | |
| Emerging Markets Local Currency Bond |
Non-diversified | |
| Global High Yield Corporate Bond |
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”).
| • | 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 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; |
| 62 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 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 (including money market funds) are valued at that day’s published net asset value (“NAV”). |
| • | 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; |
| • | 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 |
63 |
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 April 30, 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 | ||||||||||||
| Emerging Markets Corporate Bond |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Corporate Bonds & Notes |
$ | — | $ | 22,817,371 | $ | — | $ | 22,817,371 | ||||||||
| Foreign Government Obligations |
— | 904,670 | — | 904,670 | ||||||||||||
| Money Market Funds |
503,850 | — | — | 503,850 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 503,850 | $ | 23,722,041 | $ | — | $ | 24,225,891 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Emerging Markets High Yield Bond |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Corporate Bonds & Notes |
$ | — | $ | 29,746,259 | $ | — | $ | 29,746,259 | ||||||||
| Foreign Government Obligations |
— | 40,044,319 | — | 40,044,319 | ||||||||||||
| Money Market Funds |
1,180,569 | — | — | 1,180,569 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 1,180,569 | $ | 69,790,578 | $ | — | $ | 70,971,147 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Emerging Markets Local Currency Bond |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Foreign Government Obligations |
$ | — | $ | 347,059,458 | $ | — | $ | 347,059,458 | ||||||||
| Money Market Funds |
161,834 | — | — | 161,834 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 161,834 | $ | 347,059,458 | $ | — | $ | 347,221,292 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments:a |
||||||||||||||||
| Assets: |
||||||||||||||||
| Forward Currency Contracts |
$ | — | $ | 69,056 | $ | — | $ | 69,056 | ||||||||
| Liabilities: |
||||||||||||||||
| Forward Currency Contracts |
— | (394,749 | ) | — | (394,749 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | — | $ | (325,693 | ) | $ | — | $ | (325,693 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Global High Yield Corporate Bond |
||||||||||||||||
| Investments: |
||||||||||||||||
| Assets: |
||||||||||||||||
| Corporate Bonds & Notes |
$ | — | $ | 102,679,226 | $ | — | $ | 102,679,226 | ||||||||
| Money Market Funds |
19,578,364 | — | — | 19,578,364 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 19,578,364 | $ | 102,679,226 | $ | — | $ | 122,257,590 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Shown at the unrealized appreciation (depreciation) on the contracts. |
| 64 | 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. Realized gains and losses on investment transactions are determined using the specific identification method. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized daily on the accrual basis.
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 April 30, 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 plus the interest accrued on such securities, if any, 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 plus accrued interest, if any. 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.
| NOTES TO FINANCIAL STATEMENTS |
65 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
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 April 30, 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 April 30, 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.
On July 23, 2014, the U.S. Securities and Exchange Commission (the “SEC”) adopted amendments to Rule 2a-7 under the 1940 Act, which governs the operations of U.S. money market funds. When implemented in October 2016, the change may affect the Funds with regard to the reinvestment of cash collateral received for securities on loan. Each Fund continues to evaluate its reinvestment strategy in light of the new regulations.
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 April 30, 2016:
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| Emerging Markets Corporate Bond |
||||||||||||
| JPMorgan Clearing Corp. |
$ | 134,152 | $ | 134,152 | $ | — | ||||||
| Wells Fargo Securities LLC |
100,491 | 100,491 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 234,643 | $ | 234,643 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| Global High Yield Corporate Bond |
||||||||||||
| Barclays Capital Inc. |
$ | 1,330,679 | $ | 1,330,679 | $ | — | ||||||
| BNP Paribas Prime Brokerage Inc. |
208,299 | 208,299 | — | |||||||||
| Citigroup Global Markets Inc. |
1,649,438 | 1,649,438 | — | |||||||||
| Credit Suisse Securities (USA) LLC |
2,117,479 | 2,117,479 | — | |||||||||
| Deutsche Bank Securities Inc. |
2,271,499 | 2,271,499 | — | |||||||||
| Goldman Sachs & Co. |
836,865 | 836,865 | — | |||||||||
| HSBC Securities (USA) Inc. |
51,072 | 51,072 | — | |||||||||
| Jefferies LLC |
312,200 | 312,200 | — | |||||||||
| JPMorgan Clearing Corp. |
4,450,468 | 4,450,468 | — | |||||||||
| JPMorgan Securities LLC |
1,542,405 | 1,542,405 | — | |||||||||
| Merrill Lynch, Pierce, Fenner & Smith |
1,633,936 | 1,633,936 | — | |||||||||
| 66 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| iShares ETF and Counterparty |
Market Value of Securities on Loan |
Cash Collateral Received a |
Net Amount |
|||||||||
| Morgan Stanley & Co. LLC |
$ | 1,006,768 | $ | 1,006,768 | $ | — | ||||||
| SG Americas Securities LLC |
316,671 | 316,671 | — | |||||||||
| UBS Securities LLC |
633,895 | 633,895 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 18,361,674 | $ | 18,361,674 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
| 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 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.
BFA has entered into a sub-advisory agreement with BlackRock International Limited (the “Sub-Adviser”), an affiliate of BFA, under which BFA pays the Sub-Adviser for services it provides to the iShares Emerging Markets Local Currency Bond ETF and iShares Global High Yield Corporate Bond ETF.
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 |
|||
| Emerging Markets Corporate Bond |
0.50 | % | ||
| Emerging Markets High Yield Bond |
0.50 | |||
| Emerging Markets Local Currency Bond |
0.50 | |||
| Global High Yield Corporate Bond |
0.55 | |||
The total of the investment advisory fee and any other fund expenses are a fund’s total annual operating expenses. BFA has contractually agreed to waive a portion of its investment advisory fees for the iShares Global High Yield Corporate Bond ETF through February 28, 2017 in order to limit total annual operating expense after fee waiver to 0.40% of average daily net assets.
The SEC 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
| NOTES TO FINANCIAL STATEMENTS |
67 |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
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 April 30, 2016, the total of securities lending agent services and collateral investment fees paid were as follows:
| iShares ETF |
Fees Paid to BTC |
|||
| Emerging Markets Corporate Bond |
$ | 389 | ||
| Global High Yield Corporate Bond |
13,003 | |||
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 April 30, 2016, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:
| iShares ETF | Purchases | Sales | ||||||
| Emerging Markets Corporate Bond |
$ | 8,705 | $ | 11,750 | ||||
| Emerging Markets High Yield Bond |
345,074 | 294,457 | ||||||
| Global High Yield Corporate Bond |
— | 121,600 | ||||||
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 “Dividends – 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 April 30, 2016 were as follows:
| iShares ETF | Purchases | Sales | ||||||
| Emerging Markets Corporate Bond |
$ | 1,838,707 | $ | 1,827,200 | ||||
| Emerging Markets High Yield Bond |
7,655,891 | 8,817,293 | ||||||
| Emerging Markets Local Currency Bond |
111,793,282 | 183,002,116 | ||||||
| Global High Yield Corporate Bond |
22,957,794 | 8,733,272 | ||||||
| 68 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
In-kind transactions (see Note 4) for the six months ended April 30, 2016 were as follows:
| iShares ETF | In-kind Purchases |
In-kind Sales |
||||||
| Emerging Markets Corporate Bond |
$ | 4,601,198 | $ | 9,312,268 | ||||
| Emerging Markets High Yield Bond |
17,334,739 | 102,292,344 | ||||||
| Emerging Markets Local Currency Bond |
3,703,851 | 183,002,116 | ||||||
| Global High Yield Corporate Bond |
4,247,820 | 29,311,358 | ||||||
| 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. | 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.
| NOTES TO FINANCIAL STATEMENTS |
69 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
The following table shows the value of forward currency contracts held by the iShares Emerging Markets Local Currency Bond ETF as of April 30, 2016 and the related locations in the statement of assets and liabilities, presented by risk exposure category:
| Assets | ||||
| Forward currency contracts: |
||||
| Unrealized appreciation on forward currency contracts/Net assets consist of – net unrealized depreciation |
$ | 69,056 | ||
|
|
|
|||
| Liabilities | ||||
| Forward currency contracts: |
||||
| Unrealized depreciation on forward currency contracts/Net assets consist of – net unrealized depreciation |
$ | 394,749 | ||
|
|
|
|||
The following table shows the realized and unrealized gains (losses) on forward currency contracts held by the iShares Emerging Markets Local Currency Bond ETF during the six months ended April 30, 2016 and the related locations in the statement of operations, presented by risk exposure category:
| Net Realized Gain (Loss) |
Net Change in Unrealized Appreciation/Depreciation |
|||||||
| Forward currency contracts: |
||||||||
| Foreign currency transactions/Forward currency contracts |
$ | (572,116 | ) | $ | (325,693 | ) | ||
|
|
|
|
|
|||||
The following table shows the average quarter-end balances of outstanding forward currency contracts for the iShares Emerging Markets Local Currency Bond ETF for the six months ended April 30, 2016:
| Average amounts purchased in U.S. dollars |
$ | 7,899,171 | ||
| Average amounts sold in U.S. dollars |
$ | 7,113,605 |
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.
| 70 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
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Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
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 held by the iShares Emerging Markets Local Currency Bond ETF that are subject to potential offset on the statement of assets and liabilities as of April 30, 2016:
| Derivative Assets Subject to Offsetting |
Derivatives Available for Offset |
Net Amount of |
||||||||||
| Forward currency contracts |
$ | 69,056 | $ | — | $ | 69,056 | ||||||
|
|
|
|
|
|
|
|||||||
| Derivative Liabilities Subject to Offsetting |
Derivatives for Offset |
Net Amount of |
||||||||||
| Forward currency contracts |
$ | 394,749 | $ | — | $ | 394,749 | ||||||
|
|
|
|
|
|
|
|||||||
| 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 fixed income 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
| NOTES TO FINANCIAL STATEMENTS |
71 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
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 Emerging Markets Corporate Bond ETF, iShares Emerging Markets High Yield Bond ETF and iShares Emerging Markets Local Currency Bond 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.
Each Fund invests a substantial amount of its assets in fixed-income securities. Changes in market interest rates or economic conditions, may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will decrease as interest rates rise and increase as interest rates fall. Securities with longer durations tend to be more sensitive to interest rate changes, usually making them more volatile than securities with shorter durations. Given the environment of historically low interest rates, each Fund may be subject to a greater risk of price losses if interest rates rise.
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.
The iShares Emerging Markets Corporate Bond ETF, iShares Emerging Markets High Yield Bond ETF and iShares Global High Yield Corporate Bond ETF each invests a substantial portion of its assets in high yield securities that are rated below investment-grade (including those bonds rated lower than “BBB- ” by Standard & Poor’s Ratings Services and Fitch or “Baa3” by Moody’s), or are unrated which may be more volatile than higher-rated securities of similar maturity. High yield securities may also be subject to greater levels of credit or default risk than higher-rated securities and high yield securities may be less liquid and more difficult to sell at an advantageous time or price or to value than higher-rated securities. In particular, high yield securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) companies, which are generally less able than more financially stable companies to make scheduled payments of interest and principal.
| 72 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES®, INC.
| 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 October 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 |
|||
| Emerging Markets Corporate Bond |
$ | 383,519 | ||
| Emerging Markets High Yield Bond |
15,560,285 | |||
| Emerging Markets Local Currency Bond |
8,453,438 | |||
| Global High Yield Corporate Bond |
1,103,598 | |||
As of April 30, 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) |
||||||||||||
| Emerging Markets Corporate Bond |
$ | 24,910,145 | $ | 410,488 | $ | (1,094,742 | ) | $ | (684,254 | ) | ||||||
| Emerging Markets High Yield Bond |
73,650,867 | 1,708,148 | (4,387,868 | ) | (2,679,720 | ) | ||||||||||
| Emerging Markets Local Currency Bond |
373,886,451 | 9,567,900 | (36,233,059 | ) | (26,665,159 | ) | ||||||||||
| Global High Yield Corporate Bond |
126,018,995 | 1,594,867 | (5,356,272 | ) | (3,761,405 | ) | ||||||||||
Management has analyzed tax laws and regulations and their application to the Funds as of April 30, 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 |
73 |
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 |
||||||||||||||||||||||||
| Emerging Markets Corporate Bond |
$ | 1.104844 | $ | — | $ | — | $ | 1.104844 | 100 | % | — | % | — | % | 100 | % | ||||||||||||||||
| Emerging Markets High Yield Bond |
1.587909 | — | 0.002434 | 1.590343 | 100 | — | 0 | a | 100 | |||||||||||||||||||||||
| Global High Yield Corporate Bond |
0.981333 | — | — | 0.981333 | 100 | — | — | 100 | ||||||||||||||||||||||||
| a | Rounds to less than 1%. |
| 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 Markit Indices Limited or Morningstar, Inc., nor are they sponsored, endorsed or issued by Barclays Capital Inc. None of these companies make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the companies 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-1002-0416
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Table of Contents
APRIL 30, 2016
| 2016 SEMI-ANNUAL REPORT (UNAUDITED) |
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iShares, Inc.
| Ø | iShares International High Yield Bond ETF | HYXU | BATS |
Table of Contents
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Table of Contents
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
Performance as of April 30, 2016
The iShares International High Yield Bond ETF (the “Fund”) seeks to track the investment results of an index composed of euro, British pound sterling and Canadian dollar-denominated, high yield corporate bonds, as represented by the Markit iBoxx Global Developed Markets ex-US High Yield 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 April 30, 2016, the total return for the Fund was 4.73%, net of fees, while the total return for the Index was 5.02%.
| Average Annual Total Returns | Cumulative Total Returns | |||||||||||||||||||||||||
| NAV | MARKET | INDEX | NAV | MARKET | INDEX | |||||||||||||||||||||
| 1 Year |
2.46% | 3.03% | 2.88% | 2.46% | 3.03% | 2.88% | ||||||||||||||||||||
| Since Inception |
3.34% | 3.47% | 3.38% | 14.31% | 14.92% | 14.53% | ||||||||||||||||||||
The inception date of the Fund was 4/3/12. The first day of secondary market trading was 4/3/12.
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 6 for more information.
| Shareholder Expenses | ||||||||||||||||||||||||||
| Actual | Hypothetical 5% Return | |||||||||||||||||||||||||
| Beginning Account Value (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Beginning Account Value (11/1/15) |
Ending Account Value (4/30/16) |
Expenses Paid During Period a |
Annualized Expense Ratio |
||||||||||||||||||||
| $ | 1,000.00 | $ | 1,047.30 | $ | 2.04 | $ | 1,000.00 | $ | 1,022.90 | $ | 2.01 | 0.40% | ||||||||||||||
| 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 6 for more information. |
| 1 | Credit quality ratings shown reflect the ratings assigned by Moody’s Investors Service (“Moody’s”), a widely used independent, nationally recognized statistical rating organization. Moody’s credit ratings are opinions of the credit quality of individual obligations or of an issuer’s general creditworthiness. Investment grade ratings are credit ratings of Baa or higher. Below investment grade ratings are credit ratings of Ba or lower. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| 2 | 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 November 1, 2015 and held through April 30, 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® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULE OF INVESTMENTS |
7 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| 8 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULE OF INVESTMENTS |
9 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| 10 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULE OF INVESTMENTS |
11 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| 12 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULE OF INVESTMENTS |
13 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| 14 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULE OF INVESTMENTS |
15 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| 16 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULE OF INVESTMENTS |
17 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| 18 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| SCHEDULE OF INVESTMENTS |
19 |
Table of Contents
Schedule of Investments (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| 20 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statement of Assets and Liabilities (Unaudited)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
April 30, 2016
| ASSETS |
| |||
| Investments, at cost: |
||||
| Unaffiliated |
$ | 179,121,967 | ||
| Affiliated (Note 2) |
5,947 | |||
|
|
|
|||
| Total cost of investments |
$ | 179,127,914 | ||
|
|
|
|||
| Investments in securities, at fair value (Note 1): |
||||
| Unaffiliated |
$ | 168,104,402 | ||
| Affiliated (Note 2) |
5,947 | |||
|
|
|
|||
| Total fair value of investments |
168,110,349 | |||
| Foreign currency, at valuea |
3,832,758 | |||
| Receivables: |
||||
| Investment securities sold |
730,013 | |||
| Interest |
2,788,931 | |||
|
|
|
|||
| Total Assets |
175,462,051 | |||
|
|
|
|||
| LIABILITIES |
||||
| Payables: |
||||
| Investment securities purchased |
2,286,914 | |||
| Investment advisory fees (Note 2) |
54,710 | |||
|
|
|
|||
| Total Liabilities |
2,341,624 | |||
|
|
|
|||
| NET ASSETS |
$ | 173,120,427 | ||
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$ | 193,777,717 | ||
| Undistributed net investment income |
1,271,286 | |||
| Accumulated net realized loss |
(11,056,407 | ) | ||
| Net unrealized depreciation |
(10,872,169 | ) | ||
|
|
|
|||
| NET ASSETS |
$ | 173,120,427 | ||
|
|
|
|||
| Shares outstandingb |
3,600,000 | |||
|
|
|
|||
| Net asset value per share |
$ | 48.09 | ||
|
|
|
|||
| a | Cost of foreign currency: $3,766,623. |
| b | $0.001 par value, number of shares authorized: 500 million. |
See notes to financial statements.
| FINANCIAL STATEMENTS |
21 |
Table of Contents
Statement of Operations (Unaudited)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
Six months ended April 30, 2016
| NET INVESTMENT INCOME |
| |||
| Dividends — affiliated (Note 2) |
$ | 154 | ||
| Interest — unaffiliated |
3,310,100 | |||
|
|
|
|||
| Total investment income |
3,310,254 | |||
|
|
|
|||
| EXPENSES |
||||
| Investment advisory fees (Note 2) |
413,761 | |||
|
|
|
|||
| Total expenses |
413,761 | |||
| Less investment advisory fees waived (Note 2) |
(112,844 | ) | ||
|
|
|
|||
| Net expenses |
300,917 | |||
|
|
|
|||
| Net investment income |
3,009,337 | |||
|
|
|
|||
| NET REALIZED AND UNREALIZED GAIN (LOSS) |
||||
| Net realized gain (loss) from: |
| |||
| Investments — unaffiliated |
(5,451,728 | ) | ||
| In-kind redemptions — unaffiliated |
(3,868,276 | ) | ||
| Foreign currency transactions |
(93,891 | ) | ||
|
|
|
|||
| Net realized loss |
(9,413,895 | ) | ||
|
|
|
|||
| Net change in unrealized appreciation/depreciation on: |
| |||
| Investments |
13,290,483 | |||
| Translation of assets and liabilities in foreign currencies |
195,369 | |||
|
|
|
|||
| Net change in unrealized appreciation/depreciation |
13,485,852 | |||
|
|
|
|||
| Net realized and unrealized gain |
4,071,957 | |||
|
|
|
|||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 7,081,294 | ||
|
|
|
|||
See notes to financial statements.
| 22 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Statements of Changes in Net Assets
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
| Six months April 30, 2016 (Unaudited) |
Year ended October 31, 2015 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||
| OPERATIONS: |
||||||||
| Net investment income |
$ | 3,009,337 | $ | 8,521,186 | ||||
| Net realized loss |
(9,413,895 | ) | (13,975,677 | ) | ||||
| Net change in unrealized appreciation/depreciation |
13,485,852 | (13,685,054 | ) | |||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets resulting from operations |
7,081,294 | (19,139,545 | ) | |||||
|
|
|
|
|
|||||
| DISTRIBUTIONS TO SHAREHOLDERS: |
||||||||
| From net investment income |
(1,738,061 | ) | (228,686 | ) | ||||
| From net realized gain |
— | (91,363 | ) | |||||
| Return of capital |
— | (7,481,077 | ) | |||||
|
|
|
|
|
|||||
| Total distributions to shareholders |
(1,738,061 | ) | (7,801,126 | ) | ||||
|
|
|
|
|
|||||
| CAPITAL SHARE TRANSACTIONS: |
||||||||
| Proceeds from shares sold |
18,163,971 | 155,929,021 | ||||||
| Cost of shares redeemed |
(36,142,520 | ) | (86,059,601 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets from capital share transactions |
(17,978,549 | ) | 69,869,420 | |||||
|
|
|
|
|
|||||
| INCREASE (DECREASE) IN NET ASSETS |
(12,635,316 | ) | 42,928,749 | |||||
| NET ASSETS |
||||||||
| Beginning of period |
185,755,743 | 142,826,994 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 173,120,427 | $ | 185,755,743 | ||||
|
|
|
|
|
|||||
| Undistributed net investment income included in net assets at end of period |
$ | 1,271,286 | $ | 10 | ||||
|
|
|
|
|
|||||
| SHARES ISSUED AND REDEEMED |
||||||||
| Shares sold |
400,000 | 3,100,000 | ||||||
| Shares redeemed |
(800,000 | ) | (1,800,000 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in shares outstanding |
(400,000 | ) | 1,300,000 | |||||
|
|
|
|
|
|||||
See notes to financial statements.
| FINANCIAL STATEMENTS |
23 |
Table of Contents
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
(For a share outstanding throughout each period)
| Six months ended Apr. 30, 2016 |
Year ended Oct. 31, 2015 |
Year ended Oct. 31, 2014 |
Year ended Oct. 31, 2013 |
Period from Apr. 3, 2012a to Oct. 31, 2012 |
||||||||||||||||
| Net asset value, beginning of period |
$ | 46.44 | $ | 52.90 | $ | 56.84 | $ | 52.01 | $ | 50.14 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment incomeb |
0.90 | 1.84 | 2.43 | 3.15 | 1.94 | |||||||||||||||
| Net realized and unrealized gain (loss)c |
1.26 | (6.57 | ) | (3.55 | ) | 4.51 | 1.18 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total from investment operations |
2.16 | (4.73 | ) | (1.12 | ) | 7.66 | 3.12 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.51 | ) | (0.05 | ) | (2.82 | ) | (2.83 | ) | (1.25 | ) | ||||||||||
| Net realized gain |
— | (0.02 | ) | — | — | — | ||||||||||||||
| Return of capital |
— | (1.66 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.51 | ) | (1.73 | ) | (2.82 | ) | (2.83 | ) | (1.25 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 48.09 | $ | 46.44 | $ | 52.90 | $ | 56.84 | $ | 52.01 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return |
4.73 | %d | (9.02 | )% | (2.20 | )% | 15.20 | % | 6.49 | %d | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios/Supplemental data: |
||||||||||||||||||||
| Net assets, end of period (000s) |
$ | 173,120 | $ | 185,756 | $ | 142,827 | $ | 51,153 | $ | 26,004 | ||||||||||
| Ratio of expenses to average net assetse |
0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | ||||||||||
| Ratio of expenses to average net assets prior to waived feese |
0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
| Ratio of net investment income to average net assetse |
4.00 | % | 3.85 | % | 4.25 | % | 5.85 | % | 6.92 | % | ||||||||||
| Portfolio turnover ratef |
11 | % | 28 | % | 25 | % | 33 | % | 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 as a result of processing capital share transactions in Creation Units. |
See notes to financial statements.
| 24 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited)
iSHARES® INTERNATIONAL HIGH YIELD BOND 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 | |
| International High Yield Bond |
Diversified |
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. |
| • | 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 data, credit quality information, perceived market movements, news, and other relevant information and by other methods, |
| NOTES TO FINANCIAL STATEMENTS |
25 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
| 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 (including money market 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.
| 26 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
The following table summarizes the value of each of the Fund’s investments according to the fair value hierarchy as of April 30, 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 |
$ | — | $ | — | $ | 0 | a | $ | 0 | a | ||||||
| Corporate Bonds & Notes |
— | 168,104,302 | 100 | 168,104,402 | ||||||||||||
| Money Market Funds |
5,947 | — | — | 5,947 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 5,947 | $ | 168,104,302 | $ | 100 | $ | 168,110,349 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| a | Rounds to less than $1. |
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Realized gains and losses on investment transactions are determined using the specific identification method. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized daily on the accrual basis.
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 April 30, 2016, if any, are disclosed in the Fund’s statement of assets and liabilities.
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.
| NOTES TO FINANCIAL STATEMENTS |
27 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
| 2. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Pursuant to an Investment Advisory Agreement with the Company, BlackRock Fund Advisors (“BFA”) manages the investment of the Fund’s assets. BFA is a California corporation indirectly owned by BlackRock, Inc. (“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.
BFA has entered into a sub-advisory agreement with BlackRock International Limited, (the “Sub-Adviser”), an affiliate of BFA, under which BFA pays the Sub-Adviser for services it provides to the Fund.
For its investment advisory services to the Fund, BFA is entitled to an annual investment advisory fee of 0.55% based on the average daily net assets of the Fund. The total of the investment advisory fee and any other fund expenses are a fund’s total annual operating expenses. BFA has contractually agreed to waive a portion of its investment advisory fees for the Fund through February 28, 2017 in order to limit total annual operating expense after fee waiver to 0.40% of average daily net assets.
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.
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 April 30, 2016, the purchases and sales transactions executed by the Fund pursuant to Rule 17a-7 under the 1940 Act were $ — and $729,723, respectively.
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 “Dividends – affiliated” in the statement of operations.
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.
Certain directors and officers of the Company are also officers of BlackRock Institutional Trust Company, N.A. 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 April 30, 2016, were $30,559,132 and $16,874,348, respectively.
In-kind purchases and sales (see Note 4) for the six months ended April 30, 2016, were $4,001,514 and $34,424,025, 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.
| 28 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
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.
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 investment in equity and fixed income 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 Fund invests a substantial amount of its assets in fixed-income securities. Changes in market interest rates or economic conditions, may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will decrease as interest rates rise and increase as interest rates fall. Securities with longer durations tend
| NOTES TO FINANCIAL STATEMENTS |
29 |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
to be more sensitive to interest rate changes, usually making them more volatile than securities with shorter durations. Given the environment of historically low interest rates, the Fund may be subject to a greater risk of price losses if interest rates rise.
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 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.
The Fund invests a substantial portion of its assets in high yield securities that are rated below investment-grade (including those bonds rated lower than “BBB-” by Standard & Poor’s Ratings Services and Fitch or “Baa3” by Moody’s), or are unrated which may be more volatile than higher-rated securities of similar maturity. High yield securities may also be subject to greater levels of credit or default risk than higher-rated securities and high yield securities may be less liquid and more difficult to sell at an advantageous time or price or to value than higher-rated securities. In particular, high yield securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) companies, which are generally less able than more financially stable companies to make scheduled payments of interest and principal.
| 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.
As of October 31, 2015, the Fund’s fiscal year-end, the Fund had non-expiring capital loss carryforwards in the amount of $1,529,732 available to offset future realized capital gains.
As of April 30, 2016, the cost of investments for federal income tax purposes was $179,240,694. Net unrealized depreciation was $11,130,345, of which $2,912,019 represented gross unrealized appreciation on securities and $14,042,364 represented gross unrealized depreciation on securities.
Management has analyzed tax laws and regulations and their application to the Fund as of April 30, 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 Fund’s financial statements.
| 30 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes to Financial Statements (Unaudited) (Continued)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
| 7. | 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.
| NOTES TO FINANCIAL STATEMENTS |
31 |
Table of Contents
Supplemental Information (Unaudited)
iSHARES® INTERNATIONAL HIGH YIELD BOND ETF
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 the 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 |
|||||||||||||||||||||||||||||
| 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 |
|||||||||||||||||||||||
| $ | 0.032857 | $ | — | $ | 0.475348 | $ | 0.508205 | 6 | % | — | % | 94 | % | 100 | % | |||||||||||||||
| 32 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
Notes:
| NOTES |
33 |
Table of Contents
Notes:
| 34 | 2016 iSHARES SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Table of Contents
For more information visit www.iShares.com or call 1-800-iShares (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 Markit Indices Limited, 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-1017-0416
|
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Table of Contents
| 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.
| 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.
Table of Contents
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: June 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: June 29, 2016
| By: | /s/ Jack Gee | |
| Jack Gee, Treasurer and Chief Financial Officer (Principal Financial Officer) |
Date: June 29, 2016