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iSHARES

Filed: 6 Nov 20, 8:11am

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number  

  811-09102

iShares, Inc.

 

(Exact name of registrant as specified in charter)

c/o: State Street Bank and Trust Company    

100 Summer Street, 4th Floor, Boston, MA  

02110

(Address of principal executive offices)

  

(Zip code)

The Corporation Trust Incorporated

2405 York Road, Suite 201, Lutherville-Timonium, Maryland 21093

 

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:  

    (415) 670-2000                    

 

Date of fiscal year end:

  

  August 31, 2020                

Date of reporting period:

  

  August 31, 2020                


Item 1.

Reports to Stockholders.

Copies of the annual reports transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 are attached.


 

LOGO

 AUGUST 31, 2020

 

 

   

  

2020 Annual Report

 

 

iShares, Inc.

 

· 

iShares MSCI Austria ETF   |   EWO   |   NYSE Arca

 

· 

iShares MSCI Belgium ETF  |  EWK  |  NYSE Arca

 

· 

iShares MSCI France ETF  |  EWQ  |  NYSE Arca

 

· 

iShares MSCI Netherlands ETF  |  EWN  |  NYSE Arca

 

· 

iShares MSCI Sweden ETF  |  EWD  |  NYSE Arca

 

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of each Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect to receive all future reports in paper free of charge. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds held with your financial intermediary.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by contacting your financial intermediary. Please note that not all financial intermediaries may offer this service.


The Markets in Review

Dear Shareholder,

The 12-month reporting period as of August 31, 2020 has been a time of sudden change in global financial markets, as the emergence and spread of the coronavirus led to a vast disruption in the global economy and financial markets. For most of the first half of the reporting period, U.S. equities and bonds both delivered impressive returns, despite fears and doubts about the economy that were ultimately laid to rest with unprecedented monetary stimulus and a sluggish yet resolute performance from the U.S. economy. But as the threat from the coronavirus became more apparent throughout February and March 2020, countries around the world took economically disruptive countermeasures. Stay-at-home orders and closures of non-essential businesses became widespread, many workers were laid off, and unemployment claims spiked, causing a global recession and a sharp fall in equity prices.

After markets hit their lowest point during the reporting period in late March 2020, a steady recovery ensued, as businesses began to re-open and governments learned to adapt to life with the virus. Equity prices continued to rise throughout the summer, fed by strong fiscal and monetary support and improving economic indicators. By the end of the reporting period, all major investment categories posted positive returns, and many equity indices were near all-time highs. In the United States, large-capitalization stocks advanced significantly, outperforming small-capitalization stocks, which also gained for the reporting period. International equities from developed economies also turned in a positive performance while lagging emerging market stocks, which rebounded sharply.

During the market downturn, the performance of different types of fixed-income securities initially diverged due to a reduced investor appetite for risk. U.S. Treasuries benefited from the risk-off environment, and posted solid returns, as the 10-year U.S. Treasury yield (which is inversely related to bond prices) touched an all-time low. In the corporate bond market, support from the U.S. Federal Reserve (the “Fed”) assuaged credit concerns and both investment-grade and high-yield bonds recovered to post positive returns.

The Fed reduced interest rates twice in late 2019 to support slowing economic growth. After the coronavirus outbreak, the Fed instituted two emergency rate cuts, pushing short-term interest rates close to zero. To stabilize credit markets, the Fed also implemented a new bond-buying program, as did several other central banks around the world, including the European Central Bank and the Bank of Japan.

Looking ahead, while coronavirus-related disruptions have clearly hindered worldwide economic growth, we believe that the global expansion is likely to continue as economic activity resumes. Several risks remain, however, including a potential resurgence of the coronavirus amid loosened restrictions, policy fatigue among governments already deep into deficit spending, and structural damage to the financial system from lengthy economic interruptions.

Overall, we favor a moderately positive stance toward risk, and in particular toward credit given the extraordinary central bank measures taken in recent months. This support extends beyond investment-grade corporates and into high-yield, leading to attractive opportunities in that end of the market. We believe that international diversification and sustainable investments can help provide portfolio resilience, and the disruption created by the coronavirus appears to be accelerating the shift toward sustainable investments. We remain neutral on equities overall while favoring European stocks, which are poised for cyclical upside as re-openings continue.

In this environment, our view is that investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit ishares.com for further insight about investing in today’s markets.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock, Inc.

LOGO

Rob Kapito

President, BlackRock, Inc.

 

Total Returns as of August 31, 2020

 

   
     6-Month     12-Month  
  

U.S. large cap equities
(S&P 500® Index)

 19.63% 21.94%
  

U.S. small cap equities
(Russell 2000® Index)

 6.57 6.02
  

International equities
(MSCI Europe, Australasia, Far East Index)

 7.10 6.13
  

Emerging market equities
(MSCI Emerging Markets Index)

 11.23 14.49
  

3-month Treasury bills
(ICE BofA 3-Month U.S. Treasury Bill Index)

 0.34 1.26
  

U.S. Treasury securities
(ICE BofA 10-Year U.S. Treasury Index)

 4.67 8.93
  

U.S. investment grade bonds
(Bloomberg Barclays U.S. Aggregate Bond Index)

 2.98 6.47
  

Tax-exempt municipal bonds
(S&P Municipal Bond Index)

 0.29 3.15
  

U.S. high yield bonds
(Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)

 3.04 4.65

 

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

 

 

 

 

2

 H I S  A G E  I S  N O T  A R T  O F  O U R  U N D  E P O R T


Table of Contents

 

   Page 

 

 

The Markets in Review

   2 

Market Overview

   4 

Fund Summary

   5 

About Fund Performance

   15 

Shareholder Expenses

   15 

Schedules of Investments

   16 

Financial Statements

  

Statements of Assets and Liabilities

   32 

Statements of Operations

   34 

Statements of Changes in Net Assets

   36 

Financial Highlights

   39 

Notes to Financial Statements

   44 

Report of Independent Registered Public Accounting Firm

   53 

Important Tax Information (Unaudited)

   54 

Board Review and Approval of Investment Advisory Contract

   55 

Supplemental Information

   59 

Director and Officer Information

   60 

General Information

   62 

Glossary of Terms Used in this Report

   63 

 

 

 


Market Overview

 

iShares, Inc.

Global Market Overview

Global equity markets advanced strongly during the 12 months ended August 31, 2020 (“reporting period”). The MSCI ACWI, a broad global equity index that includes both developed and emerging markets, returned 16.52% in U.S. dollar terms for the reporting period.

Global stocks gained steadily for much of the first half of the reporting period, supported by slowing but resilient growth and accommodative monetary policy from major central banks. Equity markets ended 2019 on a positive note, as a trade agreement between the U.S. and China helped alleviate one of the world economy’s most significant risks.

However, the spread of the coronavirus upended global equity markets in early 2020. As the extent of the outbreak became apparent in February 2020, restrictions on travel and work disrupted the global economy and precipitated a sharp decline in equity prices. Beginning in late March 2020, equity prices posted a strong recovery, buoyed by massive stimulus from the world’s largest central banks and governments, the phased reopening of countries’ economies, and optimism surrounding prospective vaccines. By the end of the reporting period, equities posted positive returns in all of the world’s major regions despite the onset of a significant global recession.

In the U.S., following the issuance of stay-at-home orders, nonessential business closures, and other coronavirus-related restrictions on public gatherings, whole portions of the economy shut down. Businesses associated with travel and leisure were particularly affected, as air traffic declined, and conferences and events were postponed. The disruption created by these sudden changes led to an annualized economic contraction of 31.7% in the second quarter of 2020.

In response to the pandemic, the federal government enacted over U.S. $2 trillion in stimulus spending. The U.S. Federal Reserve Bank (“Fed”) also acted to stabilize markets by implementing two emergency interest rate reductions and launching a bond-buying program that included U.S. Treasuries, corporate and municipal bonds, and securities backed by mortgages and auto loans. The unprecedented level of Fed intervention and support from government stimulus led to a significant recovery in U.S. stock prices, many of which reached record highs by the end of the reporting period.

Europe was similarly affected by the coronavirus, as many of the area’s largest economies instituted social distancing policies that significantly limited economic activity, leading to a rapid decline in stock prices. To mitigate the economic impact of this disruption, many countries individually implemented fiscal stimulus plans. In July 2020, Eurozone countries reached a historic deal for a collective 750 billion in stimulus spending, in addition to a large European Central Bank (“ECB”) bond-buying plan. European stocks recovered late in the reporting period to post positive returns overall but trailed most other regions of the globe.

Asia-Pacific stocks posted strong returns despite a sharp decline during the first quarter of 2020 as the coronavirus outbreaks worsened. Although widespread business and factory closures led to economic weakness initially, the Chinese economy showed signs of recovery late in the reporting period, leading to a significant rise in Asia-Pacific equity markets, which are highly sensitive to economic conditions in China.

Emerging market stocks outside of Asia declined, driven by sharply weaker currencies and lower commodities prices, which weighed on economies reliant on these exports. Latin America drove emerging markets declines, hindered by mass business closures and bankruptcies, political and social unrest, and among the world’s highest level of coronavirus cases.

 

 

A R K E T  V E R V I E W

 4


Fund Summary as of August 31, 2020  iShares® MSCI Austria ETF

 

Investment Objective

The iShares MSCI Austria ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Austrian equities, as represented by the MSCI Austria IMI 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

Performance

 

  Average Annual Total Returns     Cumulative Total Returns 
   1 Year   5 Years   10 Years      1 Year   5 Years   10 Years 

Fund NAV

  (16.58)%    2.43   1.44   (16.58)%    12.77   15.34

Fund Market

  (16.80   2.35    1.47    (16.80   12.34    15.74 

Index

  (16.96   2.45    1.52       (16.96   12.88    16.26 

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

 

LOGO

Index performance through February 11, 2013 reflects the performance of the MSCI Austria Investable Market Index. Index performance beginning on February 12, 2013 reflects the performance of the MSCI Austria IMI 25/50 Index.

Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 15 for more information.

Expense Example

 

Actual     Hypothetical 5% Return       
 

Beginning
Account Value
(03/01/20)
 
 
 
     

Ending
Account Value
(08/31/20)
 
 
 
     

Expenses
Paid During

the Period

 
 

 (a) 

      


Beginning

Account Value
(03/01/20)

 

 
 

     

Ending
Account Value
(08/31/20
 
 
     

Expenses
Paid During
the Period
 
 
 (a) 
     

Annualized

Expense

Ratio

 

 

 

   $        1,000.00      $      873.50      $       2.45       $      1,000.00      $      1,022.50      $      2.64      0.52

 

 (a) 

Expenses are calculated using the Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days) and divided by the number of days in the year (366 days). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Shareholder Expenses” on page 15 for more information.

 

 

5 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Fund Summary as of August 31, 2020   (continued)  iShares® MSCI Austria ETF

 

Portfolio Management Commentary

Stocks in Austria declined strongly for the reporting period amid a deep global recession driven by the coronavirus pandemic. Growth in Austria’s economy, which is highly dependent on exports, was already stagnant at the end of 2019 due to slowing global trade. Pandemic-related closures led to the steepest economic contraction on record for the second quarter of 2020. With nonessential businesses closed, spending declined while unemployment rose to the highest level since World War II. Following sharp first-quarter declines, Austrian equities rebounded, helped by government stimulus and signs of economic revival. Expansive U.S. monetary policy, ultralow interest rates, and the rapid spread of the coronavirus drove U.S. dollar depreciation relative to the euro, which benefited U.S.-based investors. Nevertheless, Austrian equities remained well below pre-pandemic levels.

The energy sector detracted the most from the Index’s return. Already-low oil prices declined sharply in early 2020 due to increased competition from suppliers in Saudi Arabia and Russia. Meanwhile, the pandemic precipitated a steep drop in demand for energy, leading the integrated oil and gas industry to post starkly lower profits, consider dividend reductions, and decrease capital spending. Reduced demand for drilling equipment and services drove large layoffs and profit losses in the oil and gas equipment and services industry.

The financials sector also weighed on the Index’s performance, driven by the banking industry. Substantially higher loan default provisions weakened the credit outlook for Austrian banks and sharply constrained profits. Lower retail lending, along with persistently low interest rates that curtailed income generated from loans, further pressured banks’ revenues. The real estate sector was also a meaningful detractor. The value of real estate assets declined as temporarily closed businesses, particularly retailers, missed rent payments.

Portfolio Information

 

ALLOCATION BY SECTOR

 

  

Sector

  

Percent of

Total Investments


(a) 

Financials

  31.3

Materials

  13.9 

Industrials

  13.8 

Energy

  12.8 

Utilities

  10.7 

Real Estate

  10.5 

Communication Services

  3.5 

Information Technology

  2.3 

Consumer Staples

  1.2 

 

 (a)

Excludes money market funds.

 

TEN LARGEST HOLDINGS

 

  

Security

  

Percent of

Total Investments

 

(a) 

Erste Group Bank AG

  17.1

OMV AG

  11.6 

Verbund AG

  8.8 

Wienerberger AG

  7.5 

BAWAG Group AG

  4.7 

CA Immobilien Anlagen AG

  4.6 

Raiffeisen Bank International AG

  4.4 

voestalpine AG

  4.4 

ANDRITZ AG

  4.3 

IMMOFINANZ AG

  3.5 
 

 

U N D  U M M A R Y

 6


Fund Summary as of August 31, 2020   iShares® MSCI Belgium ETF

 

Investment Objective

The iShares MSCI Belgium ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Belgian equities, as represented by the MSCI Belgium IMI 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

Performance

 

   Average Annual Total Returns      Cumulative Total Returns 
   1 Year   5 Years  10 Years       1 Year   5 Years   10 Years 

Fund NAV

  (2.02)%    3.22  7.23    (2.02)%    17.16   101.01

Fund Market

  (2.80   3.13   7.22     (2.80   16.63    100.84 

Index

  (1.91   3.23   7.92        (1.91   17.20    114.31 

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

 

LOGO

Index performance through November 8, 2012 reflects the performance of the MSCI Belgium Investable Market Index. Index performance beginning on November 9, 2012 reflects the performance of the MSCI Belgium IMI 25/50 Index.

Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 15 for more information.

Expense Example

 

Actual     Hypothetical 5% Return       
 

Beginning

Account Value

(03/01/20)


 

 

     

Ending

Account Value

(08/31/20)

 

 

 

     

Expenses

Paid During

the Period

 

 

 (a) 

   

Beginning

Account Value

(03/01/20)

 

 

 

     

Ending

Account Value

(08/31/20)

 

 

 

     

Expenses

Paid During

the Period

 

 

 (a) 

     

Annualized

Expense

Ratio

 

 

 

   $      1,000.00      $      1,061.00      $        2.69       $      1,000.00      $      1,022.50      $      2.64      0.52

 

 (a) 

Expenses are calculated using the Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days) and divided by the number of days in the year (366 days). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Shareholder Expenses” on page 15 for more information.

 

 

7 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Fund Summary as of August 31, 2020   (continued)  iShares® MSCI Belgium ETF

 

Portfolio Management Commentary

Stocks in Belgium declined modestly for the reporting period amid a deep global recession driven by the coronavirus pandemic. Economic growth remained slow but steady in 2019, outpacing that of the Eurozone. However, Belgium’s economic activity declined following pandemic-related closures, leading to the steepest contraction on record for the second quarter of 2020. Following sharp first-quarter declines, Belgian equities rebounded amid government stimulus. Expansive U.S. monetary policy, ultralow interest rates, and the rapid spread of the coronavirus drove U.S. dollar depreciation relative to the euro, which benefited U.S.-based investors. Nevertheless, Belgian equities ended the reporting period below pre-pandemic levels.

The consumer staples sector detracted the most from the Index’s return, driven primarily by the beverages industry. Despite relatively resilient sales at retail locations, starkly lower sales volumes due to closed restaurants and bars weighed heavily on the alcoholic beverages industry. Declining global revenues led a multinational beer producer to reduce its dividend payment and increase loss provisions, citing banned alcohol sales in South Africa.

The communication services sector also weighed on performance. The telecommunication services industry weakened amid protests about the environmental and health impacts of next-generation mobile networks, leading to a pause in the rollout of the country’s 5G network.

On the upside, the healthcare sector contributed to the Index’s return. Despite pandemic-related delays in clinical trials, the pharmaceuticals industry advanced amid merger and acquisition activity and solid revenue gains driven by sales of drugs to treat Crohn’s disease and epilepsy. The biotechnology industry benefited from positive late-stage trial results for a neuromuscular disease treatment. Within the materials sector, the chemicals industry was a modest contributor, as recycling activity somewhat offset lower demand for rechargeable batteries and catalytic converters used in automobiles.

Portfolio Information

 

ALLOCATION BY SECTOR

 

  

Sector

  

Percent of

Total Investments

 

(a) 

Consumer Staples

  25.4

Financials

  24.6 

Health Care

  18.5 

Materials

  9.7 

Real Estate

  9.6 

Communication Services

  3.9 

Information Technology

  2.4 

Utilities

  2.0 

Consumer Discretionary

  1.5 

Energy

  1.2 

Industrials

  1.2 

 

 (a)

Excludes money market funds.

 

TEN LARGEST HOLDINGS

 

  

Security

  

Percent of

Total Investments

 

(a) 

Anheuser-Busch InBev SA/NV

  22.6

UCB SA

  8.4 

KBC Group NV

  8.0 

Groupe Bruxelles Lambert SA

  5.8 

Umicore SA

  4.4 

Argenx SE

  4.3 

Ageas SA/NV

  4.3 

Solvay SA

  3.8 

Galapagos NV

  3.4 

Warehouses De Pauw CVA

  2.8 
 

 

U N D  U M M A R Y

 8


Fund Summary as of August 31, 2020   iShares® MSCI France ETF

 

Investment Objective

The iShares MSCI France ETF (the “Fund”) seeks to track the investment results of an index composed of French equities, as represented by the MSCI France Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

Performance

 

    Average Annual Total Returns       Cumulative Total Returns 
   1 Year   5 Years   10 Years      1 Year   5 Years   10 Years 

Fund NAV

  0.50   5.54   6.02   0.50   30.97   79.37

Fund Market

  0.05    5.50    6.08    0.05    30.70    80.52 

Index

  0.70    5.51    6.00       0.70    30.78    79.12 

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

 

LOGO

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 15 for more information.

Expense Example

 

Actual     Hypothetical 5% Return       
 

Beginning

Account Value

(03/01/20)

 

 

 

     

Ending

Account Value

(08/31/20)

 

 

 

     

Expenses

Paid During

the Period

 

 

 (a) 

   

Beginning

Account Value

(03/01/20)

 

 

 

     

Ending

Account Value

(08/31/20)

 

 

 

     

Expenses

Paid During

the Period

 

 

 (a) 

     

Annualized

Expense

Ratio

 

 

 

   $      1,000.00      $    1,029.10      $      2.65       $      1,000.00      $      1,022.50      $      2.64      0.52

 

 (a) 

Expenses are calculated using the Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days) and divided by the number of days in the year (366 days). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Shareholder Expenses” on page 15 for more information.

 

 

9 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Fund Summary as of August 31, 2020  (continued)  iShares® MSCI France ETF

 

Portfolio Management Commentary

French stocks advanced modestly for the reporting period amid a global recession driven by the coronavirus pandemic. Economic activity, already diminished due to labor strikes that tempered manufacturing and slowing global trade, declined sharply following pandemic-related closures, leading to the steepest economic contraction on record for the second quarter of 2020. French equity performance for U.S.-based investors was also helped by U.S. dollar depreciation relative to the euro, driven by the U.S.’s expansive monetary policy, ultralow interest rates, and the rapid spread of the coronavirus.

The healthcare sector contributed the most to the Index’s return. The pharmaceuticals industry gained amid U.S. government-funded programs to develop a coronavirus vaccine. Positive developments in using existing drugs to treat complications from COVID-19 helped power the sector’s growth. The information technology sector also advanced, driven by higher revenues of software and services providers involved in developing France’s coronavirus contact tracing application. The semiconductors industry gained amid expectations of rising sales to automakers as signs of China’s economic recovery emerged. The consumer discretionary and materials sectors also bolstered the Index’s performance, benefiting respectively from improving luxury goods sales in Asia following easing of pandemic restrictions and sharply stronger demand for medical oxygen used to treat ventilated coronavirus patients.

On the downside, the energy sector detracted from the Index’s return. The integrated oil and gas industry, constrained by ultralow oil prices and the steep drop in demand for energy, posted losses amid asset write-downs. The financials sector also constrained the Index’s performance. Banks declined amid pandemic-related revenue losses, particularly from trading. A weakened credit outlook due to expected loan defaults also worked against French banks. Industrials stocks also weighed notably on the Index’s return, as travel restrictions led to sharply reduced demand for new aircraft.

Portfolio Information

 

ALLOCATION BY SECTOR

 

  

Sector

  

Percent of

Total Investments

 

(a) 

Industrials

  20.8

Consumer Discretionary

  20.0 

Consumer Staples

  11.4 

Health Care

  9.9 

Financials

  8.7 

Information Technology

  7.2 

Energy

  6.4 

Materials

  6.2 

Communication Services

  4.7 

Utilities

  3.3 

Real Estate

  1.4 

 

 (a) 

Excludes money market funds.

 

TEN LARGEST HOLDINGS

 

  

Security

  

Percent of

Total Investments

 

(a) 

LVMH Moet Hennessy Louis Vuitton SE

  8.5

Sanofi

  7.5 

TOTAL SE

  6.4 

L’Oreal SA

  5.4 

Air Liquide SA

  5.1 

Schneider Electric SE

  4.5 

BNP Paribas SA

  3.2 

Airbus SE

  3.2 

Vinci SA

  3.2 

Kering SA

  3.0 
 

 

U N D  U M M A R Y

 10


Fund Summary as of August 31, 2020   

iShares® MSCI Netherlands ETF

 

Investment Objective

The iShares MSCI Netherlands ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Dutch equities, as represented by the MSCI Netherlands IMI 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

Performance

 

    Average Annual Total Returns       Cumulative Total Returns 
   1 Year   5 Years   10 Years      1 Year   5 Years   10 Years 

Fund NAV

  16.88   9.96   9.36   16.88   60.78   144.76

Fund Market

  16.74    9.94    9.43    16.74    60.58    146.23 

Index

  17.48    10.51    9.77       17.48    64.79    153.90 

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

 

LOGO

Index performance through August 31, 2017 reflects the performance of the MSCI Netherlands Investable Market Index. Index performance beginning on September 1, 2017 reflects the performance of the MSCI Netherlands IMI 25/50.

Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 15 for more information.

Expense Example

 

Actual     Hypothetical 5% Return       
 

Beginning
Account Value
(03/01/20)
 
 
 
     

Ending
Account Value
(08/31/20)
 
 
 
     

Expenses
Paid During
the Period 
 
 
(a) 
   

Beginning
Account Value
(03/01/20)
 
 
 
     

Ending
Account Value
(08/31/20)
 
 
 
     

Expenses
Paid During
the Period
 
 
 (a) 
     

Annualized
Expense
Ratio
 
 
 
   $      1,000.00      $      1,180.20      $      2.85       $      1,000.00      $      1,022.50      $      2.64      0.52

 

 (a) 

Expenses are calculated using the Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days) and divided by the number of days in the year (366 days). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Shareholder Expenses” on page 15 for more information.

 

 

11 

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Fund Summary as of August 31, 2020  (continued)  

iShares® MSCI Netherlands ETF

 

Portfolio Management Commentary

Stocks in the Netherlands advanced strongly for the reporting period despite a deep global recession driven by the coronavirus pandemic. Sharply lower household spending during the pandemic led to the largest economic contraction on record for the second quarter of 2020. Meanwhile, exports diminished as global trade slowed due to supply chain disruptions. The first quarter’s steep equity market declines were reversed during the second quarter amid government stimulus and gradual easing of restrictions. U.S.-based investors also benefited from U.S. dollar depreciation relative to the euro, driven by the U.S.’s expansive monetary policy, ultralow interest rates, and the rapid spread of the coronavirus.

The information technology sector contributed the most to the Index’s return, as remote working arrangements drove sharply higher use of technology products and services. The semiconductor equipment industry continued to supply the expansion of 5G networks, data center usage, and cloud computing. Following the pandemic’s restrictions on social interaction, businesses increased investment in remote working and communications infrastructure, while consumers staying at home drove demand for computer equipment and gaming consoles, further supporting the semiconductor equipment industry’s gains. The software and services industry also contributed to the sector’s gains, advancing amid higher e-commerce payment processing revenues due to increased online purchases.

The consumer discretionary sector was also a key source of strength. Internet and direct marketing retailers posted rising revenues as consumers increased purchases of video games and spent more time on social media, which drove higher advertising spending. Increased consumer demand for meal delivery when eat-in dining at restaurants was prohibited drove strong revenue growth for food delivery services, another area of the industry’s strength.

Portfolio Information

 

ALLOCATION BY SECTOR

 

  

Sector

  

Percent of

Total Investments

 

(a) 

Information Technology

  28.8

Consumer Staples

  23.4 

Consumer Discretionary

  10.6 

Industrials

  10.5 

Financials

  9.3 

Materials

  8.8 

Health Care

  4.3 

Communication Services

  2.1 

Energy

  1.4 

Real Estate

  0.8 

 

 (a) 

Excludes money market funds.

 

TEN LARGEST HOLDINGS

 

  

Security

  

Percent of

Total Investments

 

(a) 

ASML Holding NV

  22.5

Unilever NV

  12.9 

Prosus NV

  7.5 

ING Groep NV

  4.5 

Adyen NV

  4.4 

Koninklijke Ahold Delhaize NV

  4.4 

Koninklijke DSM NV

  4.3 

Koninklijke Philips NV

  4.1 

Wolters Kluwer NV

  3.5 

Akzo Nobel NV

  3.4 
 

 

U N D  U M M A R Y

 12


Fund Summary as of August 31, 2020   

iShares® MSCI Sweden ETF

 

Investment Objective

The iShares MSCI Sweden ETF (the “Fund”) seeks to track the investment results of an index composed of Swedish equities, as represented by the MSCI Sweden 25/50 Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

Performance

 

    Average Annual Total Returns       Cumulative Total Returns 
   1 Year   5 Years   10 Years      1 Year   5 Years   10 Years 

Fund NAV

  28.51   6.87   7.52   28.51   39.38   106.47

Fund Market

  28.00    6.80    7.58    28.00    38.96    107.67 

Index

  28.37    6.40    7.10       28.37    36.36    98.65 

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

 

LOGO

Index performance through November 30, 2016 reflects the performance of the MSCI Sweden Index. Index performance beginning on December 1, 2016 reflects the performance of the MSCI Sweden 25/50 Index.

Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” on page 15 for more information.

Expense Example

 

Actual     Hypothetical 5% Return       
 

Beginning
Account Value
(03/01/20)
 
 
 
     

Ending
Account Value
(08/31/20)
 
 
 
     

Expenses
Paid During
the Period 
 
 
(a) 
      

Beginning
Account Value
(03/01/20)
 
 
 
     

Ending
Account Value
(08/31/20)
 
 
 
     

Expenses
Paid During
the Period 
 
 
(a) 
     

Annualized
Expense
Ratio
 
 
 
   $      1,000.00      $      1,194.30      $        3.20       $      1,000.00      $      1,022.20      $        2.95      0.58

 

 (a) 

Expenses are calculated using the Fund’s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (184 days) and divided by the number of days in the year (366 days). Other fees, such as brokerage commissions and other fees to financial intermediaries, may be paid which are not reflected in the tables and examples above. See “Shareholder Expenses” on page 15 for more information.

 

 

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Fund Summary as of August 31, 2020  (continued)  

iShares® MSCI Sweden ETF

 

Portfolio Management Commentary

Stocks in Sweden advanced strongly for the reporting period despite a global recession driven by the coronavirus pandemic. Economic activity in the export-dependent country was already slowing at the end of 2019 due to global trade tensions. Despite relatively few pandemic-related closures in contrast to most of Europe, Sweden experienced the steepest economic contraction on record for the second quarter of 2020. Nevertheless, the first-quarter’s sharp equity market declines were reversed during the second quarter amid massive government stimulus and relatively resilient corporate profits. U.S.-based investors also benefited from U.S. dollar depreciation relative to the euro, driven by the U.S.’s expansive monetary policy, ultralow interest rates, and the rapid spread of the coronavirus.

The industrials sector contributed the most to the Index’s return, driven by the capital goods industry. Despite lower global manufacturing activity, strong sales of industrial machinery, such as gas compressors and equipment used to manufacture semiconductors, drove the industry’s performance. Improving orders for metal cutting equipment used in the automotive, energy, and mining industries, particularly after China lifted harsh lockdowns, bolstered gains. Higher-than-expected profits of machinery and building products makers also served as industry tailwinds.

The financials and information technology sectors also contributed to the Index’s return. Among financials, bank stocks advanced amid unexpectedly strong profits and lower-than-expected loan defaults. Sweden’s lenient pandemic response, which kept businesses open, benefited domestically focused banks. Gains in the portfolio companies of a large investment conglomerate in the diversified financials industry also supported the sector’s performance. Within the information technology sector, the technology hardware and equipment industry drove gains amid higher sales of communications equipment used for expanding 5G networks and anticipated contract gains due to the U.K.’s ban on a Chinese supplier’s equipment.

Portfolio Information

 

ALLOCATION BY SECTOR

 

  

Sector

  
Percent of
Total Investments
 
(a) 

Industrials

  37.7

Financials

  27.1 

Information Technology

  11.9 

Consumer Staples

  8.4 

Consumer Discretionary

  6.8 

Communication Services

  3.8 

Materials

  3.2 

Energy

  1.1 

 

 (a) 

Excludes money market funds.

 

TEN LARGEST HOLDINGS

 

  

Security

  
Percent of
Total Investments
 
(a) 

Telefonaktiebolaget LM Ericsson, Class B

  7.3

Atlas Copco AB, Class A

  6.7 

Investor AB, Class B

  6.3 

Volvo AB, Class B

  6.2 

Nordea Bank Abp

  5.7 

Assa Abloy AB, Class B

  5.0 

Hexagon AB, Class B

  4.6 

Sandvik AB

  4.5 

Essity AB, Class B

  4.4 

Skandinaviska Enskilda Banken AB, Class A

  3.6 
 

 

U N D  U M M A R Y

 14


About Fund Performance

 

Past performance is no guarantee of future results. Financial markets have experienced extreme volatility and trading in many instruments has been disrupted. These circumstances may continue for an extended period of time and may continue to affect adversely the value and liquidity of the fund’s investments. As a result, current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at 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 ask 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. 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.

Shareholder Expenses

As a shareholder of your 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 at the beginning of the period (or from the commencement of operations if less than 6 months) and held through the end of the period, is intended to help you understand your ongoing costs (in dollars and cents) of investing in your 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 the Period.”

Hypothetical Example for Comparison Purposes – The table also provides information about hypothetical account values and hypothetical expenses based on your 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 and other fees 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.

 

 

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Schedule of Investments  

August 31, 2020

  

iShares® MSCI Austria ETF

(Percentages shown are based on Net Assets)

 

Security Shares  Value 

 

 

Common Stocks

  
Aerospace & Defense — 0.7%      

FACC AG(a)(b)

  43,579  $298,117 
  

 

 

 
Air Freight & Logistics — 3.1%      

Oesterreichische Post AG(b)

  39,986   1,338,996 
  

 

 

 
Banks — 25.3%      

BAWAG Group AG(a)(c)

  51,483   1,943,184 

Erste Group Bank AG(a)

  291,782   7,111,740 

Raiffeisen Bank International AG(a)

  102,226   1,833,859 
  

 

 

 
   10,888,783 
Chemicals — 2.0%      

Lenzing AG(a)(b)

  16,513   858,082 
  

 

 

 
Commercial Services & Supplies — 1.1%      

DO & CO AG(a)(b)

  10,313   452,035 
  

 

 

 
Construction & Engineering — 0.8%      

Porr AG(a)(b)

  23,873   343,182 
  

 

 

 
Construction Materials — 7.2%      

Wienerberger AG(a)

  114,830   3,106,427 
  

 

 

 
Diversified Telecommunication Services — 3.3% 

Telekom Austria AG(a)

  193,650   1,431,262 
  

 

 

 
Electric Utilities — 10.4%      

EVN AG

  47,649   804,640 

Verbund AG

  68,024   3,660,900 
  

 

 

 
   4,465,540 
Electrical Equipment — 0.9%      

Zumtobel Group AG

  51,826   396,061 
  

 

 

 
Electronic Equipment, Instruments & Components — 2.2% 

AT&S Austria Technologie & Systemtechnik AG

  36,719   712,287 

Kapsch TrafficCom AG

  14,506   235,939 
  

 

 

 
   948,226 
Energy Equipment & Services — 1.2% 

Schoeller-Bleckmann Oilfield Equipment AG

  16,841   503,525 
  

 

 

 
Food Products — 1.1%      

Agrana Beteiligungs AG

  23,059   490,327 
  

 

 

 
Insurance — 4.9%      

UNIQA Insurance Group AG

  147,707   983,942 

Vienna Insurance Group AG Wiener Versicherung Gruppe(a)

  46,865   1,148,989 
  

 

 

 
   2,132,931 
Security Shares  Value 

 

 
Machinery — 6.8%      

ANDRITZ AG

  53,894  $1,807,306 

Palfinger AG

  21,030   563,379 

Semperit AG Holding(a)

  26,406   553,286 
  

 

 

 
   2,923,971 
Metals & Mining — 4.2%      

voestalpine AG

  73,409   1,826,983 
  

 

 

 
Oil, Gas & Consumable Fuels — 11.2%      

OMV AG(a)

  148,025   4,825,854 
  

 

 

 
Real Estate Management & Development — 10.1% 

CA Immobilien Anlagen AG

  60,780   1,900,840 

IMMOFINANZ AG(a)

  88,598   1,472,828 

S IMMO AG(a)

  54,826   995,340 
  

 

 

 
   4,369,008 
  

 

 

 

Total Common Stocks — 96.5%
(Cost: $63,056,495)

   41,599,310 
  

 

 

 

Short-Term Investments

  
Money Market Funds — 6.8%      

BlackRock Cash Funds: Institutional,
SL Agency Shares,
    0.37%(d)(e)(f)

  2,922,382   2,925,304 

BlackRock Cash Funds: Treasury,
SL Agency Shares,
    0.07%(d)(e)

  10,000   10,000 
  

 

 

 
   2,935,304 
  

 

 

 

Total Short-Term Investments — 6.8%
(Cost: $2,935,367)

   2,935,304 
  

 

 

 

Total Investments in Securities — 103.3%
(Cost: $65,991,862)

   44,534,614 

Other Assets, Less Liabilities — (3.3)%

   (1,430,283
  

 

 

 

Net Assets — 100.0%

  $  43,104,331 
  

 

 

 

 

(a) 

Non-income producing security.

(b) 

All or a portion of this security is on loan.

(c) 

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(d) 

Affiliate of the Fund.

(e) 

Annualized 7-day yield as of period-end.

(f) 

All or a portion of this security was purchased with cash collateral received from loaned securities.

 

 

 

C H E D U L E  O F  N V E S T M E N  T S

 16


Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Austria ETF

 

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended August 31, 2020, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

 

  
  Affiliated Issuer  

Value at

08/31/19

   

Purchases

at Cost

  

Proceeds

from Sales

  

Net Realized

Gain (Loss)

  

Change in

Unrealized

Appreciation

(Depreciation)

  

Value at

08/31/20

   

Shares

Held at

08/31/20

   Income  

Capital Gain

Distributions from

Underlying Funds

    
 

 

  

    

 

BlackRock Cash Funds: Institutional,
SL Agency Shares

  $1,211,805   $1,714,091(a)  $  $(289 $(303 $2,925,304    2,922,382   $96,969(b)  $        
 

BlackRock Cash Funds: Treasury,
SL Agency Shares

   24,000       (14,000)(a)         10,000    10,000    319     
       

 

 

  

 

 

  

 

 

     

 

 

  

 

 

  
       $(289 $(303 $2,935,304     $97,288  $  
       

 

 

  

 

 

  

 

 

     

 

 

  

 

 

  

 

 (a) 

Represents net amount purchased (sold).

 
 (b) 

All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

Futures Contracts

 

 

 
Description  

Number of

Contracts

   

Expiration

Date

   

Notional

Amount

(000)

   

Value/

Unrealized

Appreciation

(Depreciation)

 

 

 

Long Contracts

        

Euro STOXX 50 Index

   38    09/18/20   $1,484   $18,061 
        

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of August 31, 2020, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

 

 
   

Equity

Contracts

 

 

 

Assets — Derivative Financial Instruments

  

Futures contracts

  

Unrealized appreciation on futures contracts(a)

  $18,061 
  

 

 

 

 

 (a) 

Net cumulative appreciation (depreciation) on futures contracts are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).

 

For the year ended August 31, 2020, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

 
   

Equity

Contracts

 

 

 

Net Realized Gain (Loss) from:

  

Futures contracts

  $140,859 
  

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

  

Futures contracts

  $(20,097
  

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

 

 

Futures contracts:

  

Average notional value of contracts — long

  $1,290,555     

 

 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Measurements

Various inputs are used in determining the fair value of financial instruments. For description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

 

 

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Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Austria ETF

 

Fair Value Measurements (continued)

The following table summarizes the value of the Fund’s investments according to the fair value hierarchy as of August 31, 2020. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.

 

                                                                            

 

 
   Level 1   Level 2   Level 3   Total 

 

 

Investments

        

Assets

        

Common Stocks

  $41,599,310   $   $   $41,599,310 

Money Market Funds

   2,935,304            2,935,304 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $44,534,614   $   $   $44,534,614 
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments(a)

        

Assets

        

Futures Contracts

  $18,061   $   $   $18,061 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 (a) 

Shown at the unrealized appreciation (depreciation) on the contracts.

 

See notes to financial statements.

 

 

C H E D U L E  O F  N V E S T M E N  T S

 18


Schedule of Investments

August 31, 2020

  

iShares® MSCI Belgium ETF

(Percentages shown are based on Net Assets)

 

Security Shares  Value 

 

 

Common Stocks

  
Air Freight & Logistics — 0.7%      

bpost SA(a)

  23,235  $    233,002 
  

 

 

 
Banks — 8.0%      

KBC Group NV

  45,163   2,598,011 
  

 

 

 
Beverages — 22.5%      

Anheuser-Busch InBev SA/NV

  125,991   7,353,889 
  

 

 

 
Biotechnology — 7.7%      

Argenx SE(a)

  6,110   1,415,416 

Galapagos NV(a)(b)

  8,184   1,114,814 
  

 

 

 
   2,530,230 
Capital Markets — 0.8%      

Gimv NV

  4,395   250,984 
  

 

 

 
Chemicals — 9.0%      

Recticel SA

  11,596   118,990 

Solvay SA

  14,254   1,238,300 

Tessenderlo Group SA(a)

  4,706   176,442 

Umicore SA

  30,908   1,422,761 
  

 

 

 
   2,956,493 
Construction & Engineering — 0.5%      

Cie. d’Entreprises CFE(a)

  2,137   153,345 
  

 

 

 
Distributors — 1.0%      

D’ieteren SA/NV

  4,949   323,756 
  

 

 

 
Diversified Financial Services — 11.5%      

Ackermans & van Haaren NV(a)

  4,690   668,033 

Groupe Bruxelles Lambert SA

  20,235   1,877,441 

KBC Ancora(a)

  8,548   313,232 

Sofina SA

  3,016   907,157 
  

 

 

 
   3,765,863 
Diversified Telecommunication Services — 1.8% 

Proximus SADP

  30,452   604,193 
  

 

 

 
Electric Utilities — 2.0%      

Elia Group SA/NV

  6,152   662,910 
  

 

 

 
Electronic Equipment, Instruments & Components — 1.0% 

Barco NV

  15,118   322,771 
  

 

 

 
Entertainment — 0.5%      

Kinepolis Group NV(a)(b)

  3,839   150,823 
  

 

 

 
Equity Real Estate Investment Trusts (REITs) — 9.6% 

Aedifica SA

  5,419   639,661 

Befimmo SA

  5,284   254,040 

Cofinimmo SA

  4,880   716,690 

Intervest Offices & Warehouses NV

  5,601   149,042 

Montea CVA

  2,309   274,488 

Retail Estates NV

  2,586   179,997 

Warehouses De Pauw CVA

  25,637   907,553 
  

 

 

 
   3,121,471 
Food & Staples Retailing — 2.1%      

Colruyt SA

  11,003   697,429 
  

 

 

 
Health Care Equipment & Supplies — 0.6%      

Biocartis Group NV(a)(b)(c)

  17,381   98,426 

Ion Beam Applications(b)

  9,046   98,124 
  

 

 

 
   196,550 
Security Shares  Value 

 

 
Health Care Providers & Services — 0.9%      

Fagron

  13,493  $306,602 
  

 

 

 
Health Care Technology — 0.5%      

AGFA-Gevaert NV(a)

  38,078   161,209 
  

 

 

 
Insurance — 4.3%      

Ageas SA/NV

  33,030   1,390,479 
  

 

 

 
IT Services — 0.4%      

Econocom Group SA/NV

  39,585   119,538 
  

 

 

 
Media — 1.1%      

Telenet Group Holding NV

  9,597   373,938 
  

 

 

 
Metals & Mining — 0.6%      

Bekaert SA

  9,055   183,340 
  

 

 

 
Oil, Gas & Consumable Fuels — 1.2%      

Euronav NV

  37,584   343,632 

Exmar NV(a)(b)

  24,205   60,067 
  

 

 

 
   403,699 
Personal Products — 0.6%      

Ontex Group NV(a)

  15,688   210,135 
  

 

 

 
Pharmaceuticals — 8.7%      

Mithra Pharmaceuticals SA(a)

  5,212   106,714 

UCB SA

  22,880   2,723,200 
  

 

 

 
   2,829,914 
Semiconductors & Semiconductor Equipment — 1.1% 

Melexis NV

  4,326   347,413 
  

 

 

 
Textiles, Apparel & Luxury Goods — 0.5%      

Sioen Industries NV(a)

  3,458   80,437 

Van de Velde NV(a)

  2,714   68,000 
  

 

 

 
   148,437 
Wireless Telecommunication Services — 0.4% 

Orange Belgium SA

  8,402   141,883 
  

 

 

 

Total Common Stocks — 99.6%
(Cost: $39,708,815)

   32,538,307 
  

 

 

 

Short-Term Investments

  
Money Market Funds — 4.1%      

BlackRock Cash Funds: Institutional,
SL Agency Shares,
    0.37%(d)(e)(f)

  1,339,983   1,341,323 

BlackRock Cash Funds: Treasury,
SL Agency Shares,
    0.07%(d)(e)

  10,000   10,000 
  

 

 

 
   1,351,323 
  

 

 

 

Total Short-Term Investments — 4.1%
(Cost: $1,351,373)

   1,351,323 
  

 

 

 

Total Investments in Securities — 103.7%
(Cost: $41,060,188)

   33,889,630 

Other Assets, Less Liabilities — (3.7)%

   (1,204,894
  

 

 

 

Net Assets — 100.0%

  $  32,684,736 
  

 

 

 

 

(a) 

Non-income producing security.

(b) 

All or a portion of this security is on loan.

(c) 

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

 

 

19 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Belgium ETF

 

(d)

Affiliate of the Fund.

(e) 

Annualized 7-day yield as of period-end.

(f) 

All or a portion of this security was purchased with cash collateral received from loaned securities.

        

 

 

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended August 31, 2020, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

 

  
  Affiliated Issuer  

Value at

08/31/19

   

Purchases

at Cost

   

Proceeds

from Sales

  

Net Realized

Gain (Loss)

  

Change in

Unrealized

Appreciation

(Depreciation)

  

Value at

08/31/20

   

Shares

Held at

08/31/20

   Income  

Capital Gain

Distributions from

Underlying Funds

    
 

 

  

    

 

BlackRock Cash Funds: Institutional,
SL Agency Shares

  $1,700,630   $   $(355,713)(a)  $(3,128 $(466 $1,341,323    1,339,983   $29,066(b)  $  
 

BlackRock Cash Funds: Treasury,
SL Agency Shares

   19,000        (9,000)(a)         10,000    10,000    210           
        

 

 

  

 

 

  

 

 

     

 

 

  

 

 

  
        $(3,128 $(466 $1,351,323     $29,276  $  
        

 

 

  

 

 

  

 

 

     

 

 

  

 

 

  

 

 (a) 

Represents net amount purchased (sold).

 
 (b) 

All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

Futures Contracts

 

 

 
Description  

Number of

Contracts

   

Expiration

Date

   

Notional

Amount

(000)

   

Value/

Unrealized

Appreciation

(Depreciation)

 

 

 

Long Contracts

        

Euro STOXX 50 Index

   3    09/18/20   $117   $(743
        

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of August 31, 2020, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

 

 
   

Equity

Contracts

 

 

 

Liabilities — Derivative Financial Instruments

  

Futures contracts

  

Unrealized depreciation on futures contracts(a)

  $743 
  

 

 

 

 

 (a) 

Net cumulative appreciation (depreciation) on futures contracts are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).

 

For the year ended August 31, 2020, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

 
   

Equity

Contracts

 

 

 

Net Realized Gain (Loss) from:

  

Futures contracts

  $26,336 
  

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

  

Futures contracts

  $(743
  

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

 

 

Futures contracts:

  

Average notional value of contracts — long

  $95,859     

 

 

 

 

C H E D U L E  O F  N V E S T M E N  T S

 20


Schedule of Investments  (continued)

August 31, 2020

  iShares® MSCI Belgium ETF

 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Measurements

Various inputs are used in determining the fair value of financial instruments. For description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

The following table summarizes the value of the Fund’s investments according to the fair value hierarchy as of August 31, 2020. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.

 

 

 
   Level 1   Level 2   Level 3   Total 

 

 

Investments

        

Assets

        

Common Stocks

  $32,538,307   $   $   $32,538,307 

Money Market Funds

   1,351,323            1,351,323 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $33,889,630   $            —   $            —   $33,889,630 
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments(a)

        

Liabilities

        

Futures Contracts

  $(743  $   $   $(743
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 (a)

Shown at the unrealized appreciation (depreciation) on the contracts.

 

See notes to financial statements.

 

 

21 

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Schedule of Investments  

August 31, 2020

  

iShares® MSCI France ETF

(Percentages shown are based on Net Assets)

 

Security Shares  Value 

Common Stocks

  
Aerospace & Defense — 6.3%      

Airbus SE(a)

  339,023  $    27,911,503 

Dassault Aviation SA(a)

  1,433   1,306,770 

Safran SA(a)

  184,638   21,423,754 

Thales SA

  61,366   4,807,091 
  

 

 

 
   55,449,118 
Auto Components — 1.9%      

Cie. Generale des Etablissements Michelin SCA

  97,773   11,064,074 

Faurecia SE(a)

  44,021   1,922,140 

Valeo SA(b)

  132,055   4,043,040 
  

 

 

 
   17,029,254 
Automobiles — 1.0%      

Peugeot SA(a)

  338,921   5,824,632 

Renault SA(a)

  109,970   3,135,405 
  

 

 

 
   8,960,037 
Banks — 4.8%      

BNP Paribas SA(a)

  648,145   28,343,336 

Credit Agricole SA(a)

  663,796   6,817,731 

Societe Generale SA(a)

  467,435   7,592,734 
  

 

 

 
   42,753,801 
Beverages — 2.6%      

Pernod Ricard SA

  122,350   20,997,572 

Remy Cointreau SA

  13,081   2,157,339 
  

 

 

 
   23,154,911 
Building Products — 1.4%      

Cie. de Saint-Gobain(a)

  297,955   12,108,414 
  

 

 

 
Capital Markets — 0.5%      

Amundi SA(a)(c)

  34,960   2,721,859 

Natixis SA(a)

  551,278   1,519,689 
  

 

 

 
   4,241,548 
Chemicals — 5.6%      

Air Liquide SA

  272,923   45,386,254 

Arkema SA

  39,895   4,432,486 
  

 

 

 
   49,818,740 
Construction & Engineering — 4.3%      

Bouygues SA(a)

  131,658   5,235,427 

Eiffage SA(a)

  48,809   4,507,574 

Vinci SA

  296,915   27,903,416 
  

 

 

 
   37,646,417 
Diversified Financial Services — 0.3%      

Eurazeo SE(a)

  22,696   1,200,277 

Wendel SE

  15,630   1,606,638 
  

 

 

 
   2,806,915 
Diversified Telecommunication Services — 1.7% 

Iliad SA

  8,586   1,838,049 

Orange SA

  1,151,589   12,849,682 
  

 

 

 
   14,687,731 
Electric Utilities — 0.4%      

Electricite de France SA

  357,575   3,764,105 
  

 

 

 
Electrical Equipment — 5.9%      

Legrand SA

  154,179   12,888,893 

Schneider Electric SE

  318,933   39,573,164 
  

 

 

 
   52,462,057 
Electronic Equipment, Instruments & Components — 0.7% 

Ingenico Group SA(a)

  34,881   5,932,008 
  

 

 

 
Security Shares  Value 
Entertainment — 2.2%      

Bollore SA

  511,772  $    1,926,746 

Ubisoft Entertainment SA(a)

  52,130   4,299,304 

Vivendi SA

  478,762   13,627,301 
  

 

 

 
   19,853,351 
Equity Real Estate Investment Trusts (REITs) — 1.4% 

Covivio

  29,961   2,225,159 

Gecina SA

  26,523   3,654,167 

ICADE

  17,385   1,127,944 

Klepierre SA(b)

  113,459   1,871,184 

Unibail-Rodamco-Westfield(b)

  79,904   3,742,178 
  

 

 

 
   12,620,632 
Food & Staples Retailing — 0.7% 

Carrefour SA

  350,055   5,635,008 

Casino Guichard Perrachon SA(a)(b)

  4,428   115,181 
  

 

 

 
   5,750,189 
Food Products — 2.7%      

Danone SA

  355,820   23,447,425 
  

 

 

 
Health Care Equipment & Supplies — 0.4% 

BioMerieux

  23,766   3,609,716 
  

 

 

 
Health Care Providers & Services — 0.4% 

Orpea(a)

  29,801   3,587,218 
  

 

 

 
Hotels, Restaurants & Leisure — 1.0%      

Accor SA(a)

  109,262   3,363,496 

La Francaise des Jeux SAEM(c)

  49,565   1,842,931 

Sodexo SA

  50,915   3,651,073 
  

 

 

 
   8,857,500 
Household Durables — 0.3%      

SEB SA

  13,114   2,307,072 
  

 

 

 
Insurance — 3.0%      

AXA SA

  1,114,503   22,760,437 

CNP Assurances(a)

  99,973   1,341,494 

SCOR SE(a)

  91,434   2,451,639 
  

 

 

 
   26,553,570 
IT Services — 3.7%      

Atos SE(a)

  56,633   4,910,444 

Capgemini SE

  92,627   12,850,168 

Edenred

  140,553   7,273,446 

Worldline SA(a)(c)

  79,041   7,280,633 
  

 

 

 
   32,314,691 
Life Sciences Tools & Services — 1.3% 

Eurofins Scientific SE(a)

  7,597   6,101,913 

Sartorius Stedim Biotech

  15,929   5,711,279 
  

 

 

 
   11,813,192 
Machinery — 0.7%      

Alstom SA(a)

  111,221   6,203,811 
  

 

 

 
Media — 0.8%      

JCDecaux SA(a)

  49,342   943,579 

Publicis Groupe SA(a)

  125,252   4,399,485 

SES SA

  221,153   1,573,704 
  

 

 

 
   6,916,768 
Metals & Mining — 0.6%      

ArcelorMittal SA(a)

  412,724   5,233,121 
  

 

 

 
Multi-Utilities — 2.9%      

Engie SA(a)

  1,054,264   14,695,178 
 

 

 

C H E D U L E  O F  N V E S T M E N  T S

 22


Schedule of Investments   (continued)

August 31, 2020

  

iShares® MSCI France ETF

(Percentages shown are based on Net Assets)

 

Security Shares  Value 
Multi-Utilities (continued)      

Suez SA

  198,209  $    3,438,384 

Veolia Environnement SA

  310,910   7,511,026 
  

 

 

 
     25,644,588 
Oil, Gas & Consumable Fuels — 6.4%      

TOTAL SE

  1,425,417   56,426,503 
  

 

 

 
Personal Products — 5.4%      

L’Oreal SA

  145,096   48,049,802 
  

 

 

 
Pharmaceuticals — 7.7%      

Ipsen SA

  21,854   2,268,631 

Sanofi

  651,753   66,153,138 
  

 

 

 
     68,421,769 
Professional Services — 1.6%      

Bureau Veritas SA(a)

  168,416   3,825,920 

Teleperformance

  33,835   10,456,152 
  

 

 

 
     14,282,072 
Semiconductors & Semiconductor Equipment — 1.3% 

STMicroelectronics NV

  367,511   11,080,424 
  

 

 

 
Software — 1.6%      

Dassault Systemes SE

  76,174   14,380,188 
  

 

 

 
Textiles, Apparel & Luxury Goods — 15.8%      

EssilorLuxottica SA(a)

  163,872   21,969,672 

Hermes International

  18,250   15,701,694 

Kering SA

  43,657   26,868,095 

LVMH Moet Hennessy Louis Vuitton SE

  160,139   75,228,396 
  

 

 

 
     139,767,857 
Transportation Infrastructure — 0.6%      

Aeroports de Paris

  16,869   1,771,320 
Security Shares  Value 
Transportation Infrastructure (continued)      

Getlink SE(a)

  254,567  $3,909,132 
  

 

 

 
     5,680,452 
  

 

 

 

Total Common Stocks — 99.9%
(Cost: $1,002,574,589)

   883,616,967 
  

 

 

 

Short-Term Investments

  
Money Market Funds — 1.0%      

BlackRock Cash Funds: Institutional,
SL Agency Shares,
    0.37%(d)(e)(f)

  8,560,352   8,568,912 

BlackRock Cash Funds: Treasury,
SL Agency Shares,
    0.07%(d)(e)

  529,000   529,000 
  

 

 

 
     9,097,912 
  

 

 

 

Total Short-Term Investments — 1.0%
(Cost: $9,098,682)

   9,097,912 
  

 

 

 

Total Investments in Securities — 100.9%
(Cost: $1,011,673,271)

   892,714,879 
Other Assets, Less Liabilities — (0.9)%    (7,780,359) 
  

 

 

 
Net Assets — 100.0%    $ 884,934,520 
  

 

 

 

 

(a)

Non-income producing security.

(b)

All or a portion of this security is on loan.

(c)

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(d)

Affiliate of the Fund.

(e)

Annualized 7-day yield as of period-end.

(f)

All or a portion of this security was purchased with cash collateral received from loaned securities.

 

 

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended August 31, 2020, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

 
Affiliated Issuer  

Value at

08/31/19

   

Purchases

at Cost

   

Proceeds

from Sales

   

Net Realized

Gain (Loss)

   

Change in

Unrealized

Appreciation

(Depreciation)

   

Value at

08/31/20

   

Shares

Held at

08/31/20

   Income   

Capital Gain

Distributions from

Underlying Funds

 

 

 

BlackRock Cash Funds: Institutional,
SL Agency Shares

  $9,136,341   $   $(559,558)(a)   $(6,730  $(1,141  $8,568,912    8,560,352   $296,487(b)   $ 

BlackRock Cash Funds: Treasury,
SL Agency Shares

   436,000    93,000(a)                529,000    529,000    4,527     
        

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 
        $(6,730  $(1,141  $9,097,912     $301,014   $ 
        

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

 

 (a)

Represents net amount purchased (sold).

 
 (b)

All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

Futures Contracts

 

 

 
Description  

Number of

Contracts

   

Expiration

Date

   

Notional

Amount

(000)

   

Value/

Unrealized

Appreciation

(Depreciation)

 

 

 

Long Contracts

        

CAC 40 Index

   22    09/18/20   $1,300   $(8,542
        

 

 

 

 

 

23 

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Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI France ETF

 

Derivative Financial Instruments Categorized by Risk Exposure

As of August 31, 2020, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

 

 
   Equity
Contracts
 

 

 

Liabilities — Derivative Financial Instruments

  

Futures contracts

  

Unrealized depreciation on futures contracts(a)

  $8,542 
  

 

 

 

 

 (a)

Net cumulative appreciation (depreciation) on futures contracts are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).

 

For the year ended August 31, 2020, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

 
   

Equity

Contracts

 

 

 

Net Realized Gain (Loss) from:

  

Futures contracts

   $(70,310
  

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

  

Futures contracts

   $(62,549
  

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

     

Average notional value of contracts — long

  $1,414,476 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Measurements

Various inputs are used in determining the fair value of financial instruments. For description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

The following table summarizes the value of the Fund’s investments according to the fair value hierarchy as of August 31, 2020. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.

 

                                                                                    

 

 
   Level 1   Level 2   Level 3   Total 

 

 

Investments

        

Assets

        

Common Stocks

  $883,616,967   $   $   $883,616,967 

Money Market Funds

   9,097,912            9,097,912 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $892,714,879   $   $   $892,714,879 
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments(a)

        

Liabilities

        

Futures Contracts

  $(8,542  $   $   $(8,542
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 (a)

Shown at the unrealized appreciation (depreciation) on the contracts.

 

See notes to financial statements.

 

 

C H E D U L E  O F  N V E S T M E N  T S

 24


Schedule of Investments  

August 31, 2020

  

iShares® MSCI Netherlands ETF

(Percentages shown are based on Net Assets)

 

Security Shares  Value 

Common Stocks

  
Air Freight & Logistics — 0.4%      

PostNL NV(a)

  258,623  $    772,323 
  

 

 

 
Banks — 5.4%      

ABN AMRO Bank NV, CVA(b)

  145,885   1,392,978 

ING Groep NV(a)

  1,039,142   8,455,756 

NIBC Holding NV(a)(b)

  34,244   302,651 
  

 

 

 
     10,151,385 
Beverages — 5.9%      

Coca-Cola European Partners PLC

  66,816   2,750,147 

Heineken Holding NV(a)

  25,867   2,123,732 

Heineken NV(a)

  67,303   6,242,886 
  

 

 

 
     11,116,765 
Biotechnology — 0.2%      

Pharming Group NV(a)(c)

  326,400   413,780 
  

 

 

 
Capital Markets — 0.3%      

Flow Traders(b)

  15,265   602,454 
  

 

 

 
Chemicals — 8.6%      

Akzo Nobel NV

  63,595   6,308,124 

Corbion NV

  22,162   1,028,381 

Koninklijke DSM NV

  50,405   8,104,899 

OCI NV(a)(c)

  46,642   634,236 
  

 

 

 
     16,075,640 
Construction & Engineering — 0.9%      

Arcadis NV(a)(c)

  32,428   746,559 

Boskalis Westminster(a)(c)

  33,306   699,456 

Koninklijke BAM Groep NV(a)(c)

  207,885   320,968 
  

 

 

 
     1,766,983 
Distributors — 0.1%      

B&S Group Sarl(a)(b)

  33,497   255,988 
  

 

 

 
Diversified Financial Services — 0.0%      

SNS REAAL NV(a)(c)(d)

  68,952   1 
  

 

 

 
Diversified Telecommunication Services — 2.1% 

Altice Europe NV(a)

  219,435   973,103 

Koninklijke KPN NV

  1,087,650   2,857,804 
  

 

 

 
     3,830,907 
Electrical Equipment — 1.7%      

Alfen Beheer BV(a)(b)

  10,044   730,337 

SIF Holding NV(a)

  14,505   237,658 

Signify NV(a)(b)

  45,433   1,520,854 

TKH Group NV

  16,913   664,663 
  

 

 

 
     3,153,512 
Energy Equipment & Services — 0.7%      

Fugro NV, CVA(a)(c)

  73,035   312,874 

SBM Offshore NV

  58,528   1,013,901 
  

 

 

 
     1,326,775 
Equity Real Estate Investment Trusts (REITs) — 0.8% 

Eurocommercial Properties NV

  29,720   356,858 

NSI NV

  10,950   392,870 

Vastned Retail NV(a)

  13,306   390,672 

Wereldhave NV(a)(c)

  34,140   286,625 
  

 

 

 
     1,427,025 
Food & Staples Retailing — 4.3%      

Koninklijke Ahold Delhaize NV

  269,966   8,142,680 
  

 

 

 
Security Shares  Value 
Food Products — 0.1%      

ForFarmers NV

  40,323  $    260,894 
  

 

 

 
Health Care Equipment & Supplies — 4.1%      

Koninklijke Philips NV(a)

  162,072   7,682,456 
  

 

 

 
Hotels, Restaurants & Leisure — 0.3%      

Basic-Fit NV(a)(b)

  20,285   572,533 
  

 

 

 
Household Durables — 0.2%      

TomTom NV(a)

  42,566   342,348 
  

 

 

 
Insurance — 3.5%      

Aegon NV

  577,267   1,610,663 

ASR Nederland NV

  46,593   1,618,751 

NN Group NV

  88,776   3,349,717 
  

 

 

 
     6,579,131 
Internet & Direct Marketing Retail — 9.7%      

Just Eat Takeaway.com NV(a)(b)

  37,380   4,168,260 

Prosus NV(a)

  139,826   14,020,142 
  

 

 

 
     18,188,402 
IT Services — 4.4%      

Adyen NV(a)(b)

  4,858   8,209,428 
  

 

 

 
Leisure Products — 0.2%      

Accell Group NV(a)

  12,978   388,026 
  

 

 

 
Machinery — 0.7%      

Aalberts NV

  35,440   1,341,045 
  

 

 

 
Metals & Mining — 0.2%      

AMG Advanced Metallurgical Group NV

  20,255   417,137 
  

 

 

 
Oil, Gas & Consumable Fuels — 0.7%      

Koninklijke Vopak NV

  23,329   1,283,973 
  

 

 

 
Personal Products — 12.9%      

Unilever NV

  415,987   24,133,718 
  

 

 

 
Professional Services — 5.0%      

Brunel International NV(a)

  25,876   199,604 

Intertrust NV(a)(b)

  37,288   670,703 

Randstad NV(a)

  38,111   1,990,429 

Wolters Kluwer NV

  79,493   6,540,795 
  

 

 

 
     9,401,531 
Semiconductors & Semiconductor Equipment — 24.3% 

ASM International NV

  15,046   2,269,078 

ASML Holding NV

  111,656   41,970,066 

BE Semiconductor Industries NV

  26,595   1,273,842 
  

 

 

 
     45,512,986 
Trading Companies & Distributors — 1.7% 

AerCap Holdings NV(a)(c)

  43,784   1,294,693 

IMCD NV

  16,865   1,804,785 
  

 

 

 
     3,099,478 
  

 

 

 

Total Common Stocks — 99.4%
(Cost: $186,162,961)

   186,449,304 
  

 

 

 

Short-Term Investments

  
Money Market Funds — 2.1%      
BlackRock Cash Funds: Institutional,
SL Agency Shares,
    0.37%(e)(f)(g)
 3,758,042  3,761,800 
 

 

 

25 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Netherlands ETF

(Percentages shown are based on Net Assets)

 

Security Shares  Value 
Money Market Funds (continued)      

BlackRock Cash Funds: Treasury,
SL Agency Shares,
    0.07%(e)(f)

  90,000  $90,000 
  

 

 

 
   3,851,800 
  

 

 

 

Total Short-Term Investments — 2.1%
(Cost: $3,851,227)

   3,851,800 
  

 

 

 

Total Investments in Securities — 101.5%
(Cost: $190,014,188)

   190,301,104 

Other Assets, Less Liabilities — (1.5)%

   (2,782,382
  

 

 

 

Net Assets — 100.0%

  $187,518,722 
  

 

 

 

 

(a) 

Non-income producing security.

 

(b) 

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(c) 

All or a portion of this security is on loan.

(d)

Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy.

(e)

Affiliate of the Fund.

(f)

Annualized 7-day yield as of period-end.

(g)

All or a portion of this security was purchased with cash collateral received from loaned securities.

 

 

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended August 31, 2020, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

 
Affiliated Issuer  

Value at

08/31/19

   

Purchases

at Cost

   Proceeds
from Sales
   Net Realized
Gain (Loss)
   Change in
Unrealized
Appreciation
(Depreciation)
   Value at
08/31/20
   Shares
Held at
08/31/20
   Income   Capital Gain
Distributions from
Underlying Funds
 

 

 

BlackRock Cash Funds: Institutional,
SL Agency Shares

  $2,183,511   $1,581,494(a)   $   $(3,557  $352   $3,761,800    3,758,042   $49,581(b)   $ 

BlackRock Cash Funds: Treasury,
SL Agency Shares

   102,000        (12,000)(a)            90,000    90,000    877     
        

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 
        $(3,557  $352   $3,851,800     $50,458   $ 
        

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

 

 (a) 

Represents net amount purchased (sold).

 
 (b)

All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

Futures Contracts

 

 

 
Description  Number of
Contracts
   Expiration
Date
   

Notional

Amount

(000)

   Value/
Unrealized
Appreciation
(Depreciation)
 

 

 

Long Contracts

        

Euro STOXX 50 Index

   26    09/18/20   $1,015   $5,482 
        

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of August 31, 2020, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

 

 
   Equity
Contracts
 

 

 

Assets — Derivative Financial Instruments

  

Futures contracts

  

Unrealized appreciation on futures contracts(a)

  $5,482 
  

 

 

 

 

 (a) 

Net cumulative appreciation (depreciation) on futures contracts are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).

 

 

 

C H E D U L E  O F  N V E S T M E N  T S

 26


Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Netherlands ETF

 

For the year ended August 31, 2020, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

 
   Equity
Contracts
 

 

 

Net Realized Gain (Loss) from:

  

Futures contracts

  $19,138 
  

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

  

Futures contracts

  $(10,586
  

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

 

 

Futures contracts:

  

Average notional value of contracts — long

  $471,074     

 

 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Fair Value Measurements

Various inputs are used in determining the fair value of financial instruments. For description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

The following table summarizes the value of the Fund’s investments according to the fair value hierarchy as of August 31, 2020. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.

 

 

 
   Level 1   Level 2   Level 3   Total 

 

 

Investments

        

Assets

        

Common Stocks

  $186,449,303   $                —   $                1   $186,449,304 

Money Market Funds

   3,851,800            3,851,800 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $190,301,103   $   $1   $190,301,104 
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments(a)

        

Assets

        

Futures Contracts

  $5,482   $   $   $5,482 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 (a) 

Shown at the unrealized appreciation (depreciation) on the contracts.

 

See notes to financial statements.

 

 

27 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Schedule of Investments  

August 31, 2020

  

iShares® MSCI Sweden ETF

(Percentages shown are based on Net Assets)

 

Security Shares  Value 

Common Stocks

  
Banks — 15.8%      

Nordea Bank Abp(a)

  1,678,701  $  13,552,305 

Skandinaviska Enskilda Banken AB,
Class A(a)

  878,440   8,732,508 

Svenska Handelsbanken AB, Class A(a)

  833,746   8,411,942 

Swedbank AB, Class A(a)

  489,893   8,327,945 
  

 

 

 
     39,024,700 
Building Products — 6.3% 

Assa Abloy AB, Class B

  518,793   12,030,052 

Nibe Industrier AB, Class B(a)

  121,423   3,420,981 
  

 

 

 
     15,451,033 
Capital Markets — 0.6%      

EQT AB

  83,274   1,539,974 
  

 

 

 
Commercial Services & Supplies — 1.1% 

Securitas AB, Class B(a)

  184,476   2,632,942 
  

 

 

 
Communications Equipment — 7.1% 

Telefonaktiebolaget LM Ericsson, Class B

  1,513,221   17,588,555 
  

 

 

 
Construction & Engineering — 1.6% 

Skanska AB, Class B(a)

  190,975   3,901,448 
  

 

 

 
Diversified Financial Services — 9.9% 

Industrivarden AB, Class C(a)

  94,715   2,502,687 

Investor AB, Class B

  236,079   15,092,721 

Kinnevik AB, Class B(a)

  125,632   4,865,810 

L E Lundbergforetagen AB, Class B(a)

  42,377   1,940,755 
  

 

 

 
     24,401,973 
Diversified Telecommunication Services — 2.2% 

Telia Co. AB

  1,379,485   5,327,642 
  

 

 

 
Electronic Equipment, Instruments & Components — 4.5% 

Hexagon AB, Class B(a)

  151,452   10,999,430 
  

 

 

 
Food & Staples Retailing — 1.1%      

ICA Gruppen AB

  55,438   2,726,601 
  

 

 

 
Hotels, Restaurants & Leisure — 1.5%      

Evolution Gaming Group AB(b)

  49,323   3,704,536 
  

 

 

 
Household Durables — 2.3%      

Electrolux AB, Series B

  134,893   2,930,909 

Husqvarna AB, Class B

  256,931   2,799,596 
  

 

 

 
     5,730,505 
Household Products — 4.3% 

Essity AB, Class B(a)

  306,802   10,586,064 
  

 

 

 
Industrial Conglomerates — 0.7% 

Investment AB Latour, Class B(c)

  76,581   1,712,761 
  

 

 

 
Machinery — 27.1%      

Alfa Laval AB(a)

  176,998   4,338,272 

Atlas Copco AB, Class A

  348,126   16,141,031 
Security Shares  Value 
Machinery (continued)      

Atlas Copco AB, Class B

  201,682  $8,121,109 

Epiroc AB, Class A

  363,669   5,428,714 

Epiroc AB, Class B

  210,000   3,027,670 

Sandvik AB(a)

  546,787   10,764,634 

SKF AB, Class B

  213,615   4,274,801 

Volvo AB, Class B(a)

  770,308   14,763,206 
  

 

 

 
     66,859,437 
Metals & Mining — 1.9%      

Boliden AB

  154,146   4,609,216 
  

 

 

 
Oil, Gas & Consumable Fuels — 1.1%      

Lundin Energy AB

  107,429   2,633,116 
  

 

 

 
Paper & Forest Products — 1.2%      

Svenska Cellulosa AB SCA, Class B(a)

  227,656   2,941,728 
  

 

 

 
Specialty Retail — 2.8%      

Hennes & Mauritz AB, Class B(c)

  436,307   6,975,894 
  

 

 

 
Tobacco — 2.8%      

Swedish Match AB

  89,372   6,803,710 
  

 

 

 
Wireless Telecommunication Services — 1.5% 

Tele2 AB, Class B

  265,138   3,767,287 
  

 

 

 

Total Common Stocks — 97.4%
(Cost: $252,499,619)

   239,918,552 
  

 

 

 

Short-Term Investments

  
Money Market Funds — 1.5%      

BlackRock Cash Funds: Institutional,
SL Agency Shares,
    0.37%(d)(e)(f)

  3,682,704   3,686,386 

BlackRock Cash Funds: Treasury,
SL Agency Shares,
    0.07%(d)(e)

  80,000   80,000 
  

 

 

 
     3,766,386 
  

 

 

 

Total Short-Term Investments — 1.5%
(Cost: $3,767,187)

   3,766,386 
  

 

 

 

Total Investments in Securities — 98.9% (Cost: $256,266,806)

   243,684,938 

Other Assets, Less Liabilities — 1.1%

   2,818,019 
  

 

 

 

Net Assets — 100.0%

  $246,502,957 
  

 

 

 

 

(a) 

Non-income producing security.

(b)

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(c) 

All or a portion of this security is on loan.

(d)

Affiliate of the Fund.

(e)

Annualized 7-day yield as of period-end.

(f)

All or a portion of this security was purchased with cash collateral received from loaned securities.

 

 

 

C H E D U L E  O F  N V E S T M E N  T S

 28


Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Sweden ETF

 

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended August 31, 2020, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

 
Affiliated Issuer Value at
08/31/19
   Purchases
at Cost
  Proceeds
from Sales
   Net Realized
Gain (Loss)
  Change in
Unrealized
Appreciation
(Depreciation)
  Value at
08/31/20
   Shares
Held at
08/31/20
   Income  Capital Gain
Distributions from
Underlying Funds
 

 

 

BlackRock Cash Funds: Institutional, SL Agency Shares

 $   $3,688,589(a)  $   $(1,402 $(801 $3,686,386    3,682,704   $5,334(b)  $ 

BlackRock Cash Funds: Treasury,
SL Agency Shares

  78,000    2,000(a)             80,000    80,000    1,476    
      

 

 

  

 

 

  

 

 

     

 

 

  

 

 

 
      $(1,402 $(801 $3,766,386     $6,810  $ 
      

 

 

  

 

 

  

 

 

     

 

 

  

 

 

 

 

 (a) 

Represents net amount purchased (sold).

 
 (b)

All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

 

Futures Contracts

 

 

 
Description  Number of
Contracts
   Expiration
Date
   Notional
Amount
(000)
   Value/
Unrealized
Appreciation
(Depreciation)
 

 

 

Long Contracts

        

OMXS 30 Index

   318    09/18/20   $6,508   $22,835 
        

 

 

 

Forward Foreign Currency Exchange Contracts

 

 

 
Currency Purchased     Currency Sold     Counterparty    Settlement Date         Unrealized
Appreciation
(Depreciation)
 

 

 

SEK

  4,539,483     USD  484,643     SCB    09/18/20        $41,775 
                      

 

 

 

USD

  1,028,517     EUR  904,037     SCB    09/18/20         (53,042

USD

  8,350,700     SEK  77,139,463     SCB    09/18/20         (594,735
                      

 

 

 
                       (647,777
                      

 

 

 
  Net unrealized depreciation            $(606,002
                      

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of August 31, 2020, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

    
    

Equity

Contracts

   Foreign
Currency
Exchange
Contracts
   Total 

Assets — Derivative Financial Instruments

      

Futures contracts

      

Unrealized appreciation on futures contracts(a)

  $22,835   $   $22,835 

Forward foreign currency exchange contracts
Unrealized appreciation on forward foreign currency exchange contracts

  $   $41,775   $41,775 
  

 

 

   

 

 

   

 

 

 
  $22,835   $41,775   $64,610 
  

 

 

   

 

 

   

 

 

 

Liabilities — Derivative Financial Instruments

      

Forward foreign currency exchange contracts
Unrealized depreciation on forward foreign currency exchange contracts

  $   $647,777   $647,777 
  

 

 

   

 

 

   

 

 

 

 

 (a) 

Net cumulative appreciation (depreciation) on futures contracts are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).

 

 

 

29 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Sweden ETF

 

For the year ended August 31, 2020, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

 
   Equity
Contracts
   Foreign
Currency
Exchange
Contracts
   Total 

 

 

Net Realized Gain (Loss) from:

      

Futures contracts

  $1,064,000   $   $1,064,000 

Forward foreign currency exchange contracts

       107,393    107,393 
  

 

 

   

 

 

   

 

 

 
  $1,064,000   $107,393   $1,171,393 
  

 

 

   

 

 

   

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

      

Futures contracts

  $(144,826  $   $(144,826

Forward foreign currency exchange contracts

       (1,118,246   (1,118,246
  

 

 

   

 

 

   

 

 

 
  $(144,826  $(1,118,246  $(1,263,072
  

 

 

   

 

 

   

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

 

 

Futures contracts:

  

Average notional value of contracts — long

  $5,325,986     

Forward foreign currency exchange contracts:

  

Average amounts purchased — in USD

   135,087     

Average amounts sold — in USD

  $9,061,755     

 

 

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments - Offsetting as of Year End

The Fund’s derivative assets and liabilities (by type) were as follows:

 

 

 
   Assets   Liabilities 

 

 

Derivative Financial Instruments:

    

Futures contracts

  $22,835   $ 

Forward foreign currency exchange contracts

   41,775    647,777 
  

 

 

   

 

 

 

Total derivative assets and liabilities in the Statement of Assets and Liabilities

  $64,610   $647,777 

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)

   (22,835    
  

 

 

   

 

 

 

Total derivative assets and liabilities subject to an MNA

  $41,775   $647,777 
  

 

 

   

 

 

 

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:

 

 

 

Counterparty

   


Derivative
Assets
Subject to
an MNA by



 
   

Derivatives

Available

 

 

   
Net Amount
of Derivative

   Counterparty      for Offset(a)      Assets 

 

 

Standard Chartered Bank

             $41,775     $(41,775    $ 
   

 

 

     

 

 

     

 

 

 
           

 

 

Counterparty

   



Derivative
Liabilities
Subject to
an MNA by




 

   

Derivatives

Available

 

 

   

Net Amount

of Derivative

 

 

   Counterparty      for Offset(a)      Liabilities(b) 

 

 

Standard Chartered Bank

   $647,777     $(41,775            $606,002 
   

 

 

     

 

 

     

 

 

 

 

 (a) 

The amount of derivatives available for offset is limited to the amount of derivatives assets and/or liabilities that are subject to an MNA.

 
 (b) 

Net amount represents the net amount payable due to the counterparty in the event of default.

 

Fair Value Measurements

Various inputs are used in determining the fair value of financial instruments. For description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

 

 

C H E D U L E  O F  N V E S T M E N  T S

 30


Schedule of Investments  (continued)

August 31, 2020

  

iShares® MSCI Sweden ETF

 

Fair Value Measurements (continued)

The following table summarizes the value of the Fund’s investments according to the fair value hierarchy as of August 31, 2020. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.

 

                                                                                    

 

 
   Level 1   Level 2   Level 3   Total 

 

 

Investments

        

Assets

        

Common Stocks

  $239,918,552   $   $   $239,918,552 

Money Market Funds

   3,766,386            3,766,386 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $243,684,938   $   $   $243,684,938 
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments(a)

        

Assets

        

Futures Contracts

  $22,835   $   $   $22,835 

Forward Foreign Currency Exchange Contracts

       41,775        41,775 

Liabilities

        

Forward Foreign Currency Exchange Contracts

       (647,777       (647,777
  

 

 

   

 

 

   

 

 

   

 

 

 
  $22,835   $(606,002  $   $(583,167
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 (a) 

Shown at the unrealized appreciation (depreciation) on the contracts.

 

See notes to financial statements.

 

 

31 

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Statements of Assets and Liabilities  

August 31, 2020

 

  

iShares

MSCI Austria

ETF

  

iShares

MSCI

Belgium ETF

     

iShares

MSCI France ETF

  

iShares

MSCI

Netherlands

ETF

 

 

 

ASSETS

       

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

       

Unaffiliated(b)

 $41,599,310  $32,538,307     $883,616,967  $186,449,304 

Affiliated(c)

  2,935,304   1,351,323      9,097,912   3,851,800 

Cash

  8,194   4,440      5,251   8,282 

Foreign currency, at value(d)

  90,598   56,525      1,591,811   443,082 

Foreign currency collateral pledged:

       

Futures contracts(e)

  216,467   17,939      212,879   148,297 

Receivables:

       

Investments sold

  1,254,656   997,685      534,857   1,660,126 

Securities lending income — Affiliated

  12,492   1,471      12,259   4,260 

Dividends

     17,093      17,307   551,582 

Tax reclaims

  1,205,593   53,722          
 

 

 

  

 

 

     

 

 

  

 

 

 

Total assets

  47,322,614   35,038,505      895,089,243   193,116,733 
 

 

 

  

 

 

     

 

 

  

 

 

 

LIABILITIES

       

Collateral on securities loaned, at value

  2,926,197   1,342,697      8,574,710   3,762,198 

Payables:

       

Investments purchased

  1,250,832   995,318      1,197,356   1,736,715 

Variation margin on futures contracts

  21,703   1,723      21,094   14,876 

Investment advisory fees

  19,551   14,031      361,563   84,222 
 

 

 

  

 

 

     

 

 

  

 

 

 

Total liabilities

  4,218,283   2,353,769      10,154,723   5,598,011 
 

 

 

  

 

 

     

 

 

  

 

 

 

NET ASSETS

 $43,104,331  $32,684,736     $884,934,520  $187,518,722 
 

 

 

  

 

 

     

 

 

  

 

 

 

NET ASSETS CONSIST OF:

       

Paid-in capital

 $106,767,687  $58,900,447     $1,057,536,930  $210,368,411 

Accumulated loss

  (63,663,356  (26,215,711     (172,602,410  (22,849,689
 

 

 

  

 

 

     

 

 

  

 

 

 

NET ASSETS

 $43,104,331  $32,684,736     $884,934,520  $187,518,722 
 

 

 

  

 

 

     

 

 

  

 

 

 

Shares outstanding

  2,750,000   1,840,000      30,200,000   5,300,000 
 

 

 

  

 

 

     

 

 

  

 

 

 

Net asset value

 $15.67  $17.76     $29.30  $35.38 
 

 

 

  

 

 

     

 

 

  

 

 

 

Shares authorized

  100 million   136.2 million      340.2 million   255 million 
 

 

 

  

 

 

     

 

 

  

 

 

 

Par value

 $0.001  $0.001     $0.001  $0.001 
 

 

 

  

 

 

     

 

 

  

 

 

 

(a) Securities loaned, at value

 $2,777,853  $1,311,865     $8,025,156  $3,534,096 

(b) Investments, at cost — Unaffiliated

 $63,056,495  $39,708,815     $1,002,574,589  $186,162,961 

(c)  Investments, at cost — Affiliated

 $2,935,367  $1,351,373     $9,098,682  $3,851,227 

(d) Foreign currency, at cost

 $76,361  $55,664     $1,557,587  $435,879 

(e) Foreign currency collateral pledged, at cost

 $215,996  $17,900     $212,416  $147,975 

See notes to financial statements.

 

 

I N A N C I A L  T A T E M E N T  S

 32


 

Statements of Assets and Liabilities  (continued)

August 31, 2020

 

  

iShares

MSCI

Sweden ETF

 

 

 

ASSETS

 

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

 

Unaffiliated(b)

 $239,918,552 

Affiliated(c)

  3,766,386 

Cash

  3,745 

Foreign currency, at value(d)

  568,334 

Foreign currency collateral pledged:

 

Futures contracts(e)

  993,142 

Receivables:

 

Investments sold

  361,258 

Securities lending income — Affiliated

  1,172 

Dividends

  8 

Tax reclaims

  445,929 

Foreign withholding tax claims

  15,859,894 

Unrealized appreciation on:

 

Forward foreign currency exchange contracts

  41,775 
 

 

 

 

Total assets

  261,960,195 
 

 

 

 

LIABILITIES

 

Collateral on securities loaned, at value

  3,688,589 

Payables:

 

Investments purchased

  424,680 

Variation margin on futures contracts

  107,911 

Investment advisory fees

  92,274 

Professional fees

  1,625,989 

IRS compliance fee for foreign withholding tax claims

  8,870,018 

Unrealized depreciation on:

 

Forward foreign currency exchange contracts

  647,777 
 

 

 

 

Total liabilities

  15,457,238 
 

 

 

 

NET ASSETS

 $246,502,957 
 

 

 

 

NET ASSETS CONSIST OF:

 

Paid-in capital

 $296,893,115 

Accumulated loss

  (50,390,158
 

 

 

 

NET ASSETS

 $246,502,957 
 

 

 

 

Shares outstanding

  6,900,000 
 

 

 

 

Net asset value

 $35.73 
 

 

 

 

Shares authorized

  63.6 million 
 

 

 

 

Par value

 $0.001 
 

 

 

 

(a) Securities loaned, at value

 $3,489,442 

(b) Investments, at cost — Unaffiliated

 $252,499,619 

(c)  Investments, at cost — Affiliated

 $3,767,187 

(d) Foreign currency, at cost

 $472,889 

(e) Foreign currency collateral pledged, at cost

 $990,289 

See notes to financial statements.

 

 

33 

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Statements of Operations

Year Ended August 31, 2020

 

  

iShares

MSCI Austria

ETF

      

iShares

MSCI

Belgium ETF

      

iShares

MSCI France

ETF

      

iShares

MSCI

Netherlands

ETF

 

 

 

INVESTMENT INCOME

          

Dividends — Unaffiliated

 $424,401    $839,961    $15,205,732    $3,218,045 

Dividends — Affiliated

  319     210     4,527     877 

Securities lending income — Affiliated — net

  96,969     29,066     296,487     49,581 

Foreign taxes withheld

  (50,537    (126,089    (2,024,572    (475,918
 

 

 

    

 

 

    

 

 

    

 

 

 

Total investment income

  471,152     743,148     13,482,174     2,792,585 
 

 

 

    

 

 

    

 

 

    

 

 

 

EXPENSES

          

Investment advisory fees

  287,457     203,365     4,284,049     923,604 

Miscellaneous

  264     264     264     264 
 

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

  287,721     203,629     4,284,313     923,868 
 

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income

  183,431     539,519     9,197,861     1,868,717 
 

 

 

    

 

 

    

 

 

    

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS)

          

Net realized gain (loss) from:

          

Investments — Unaffiliated

  (5,032,776    (2,949,110    (10,699,149    (5,155,977

Investments — Affiliated

  (289    (3,128    (6,730    (3,557

In-kind redemptions — Unaffiliated

  (3,195,101    1,576,251     39,510,106     14,185,893 

Futures contracts

  140,859     26,336     (70,310    19,138 

Foreign currency transactions

  12,521     7,663     139,532     17,879 
 

 

 

    

 

 

    

 

 

    

 

 

 

Net realized gain (loss)

  (8,074,786    (1,341,988    28,873,449     9,063,376 
 

 

 

    

 

 

    

 

 

    

 

 

 

Net change in unrealized appreciation (depreciation) on:

          

Investments — Unaffiliated

  (5,847,490    462,191     (43,241,158    7,082,322 

Investments — Affiliated

  (303    (466    (1,141    352 

Futures contracts

  (20,097    (743    (62,549    (10,586

Foreign currency translations

  110,603     7,014     54,208     19,549 
 

 

 

    

 

 

    

 

 

    

 

 

 

Net change in unrealized appreciation (depreciation)

  (5,757,287    467,996     (43,250,640    7,091,637 
 

 

 

    

 

 

    

 

 

    

 

 

 

Net realized and unrealized gain (loss)

  (13,832,073    (873,992    (14,377,191    16,155,013 
 

 

 

    

 

 

    

 

 

    

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

 $(13,648,642   $(334,473   $(5,179,330   $18,023,730 
 

 

 

    

 

 

    

 

 

    

 

 

 

See notes to financial statements.

 

 

I N A N C I A L  T A T E M E N T  S

 34


 

Statements of Operations  (continued)

Year Ended August 31, 2020

 

  

iShares

MSCI

Sweden ETF

 

 

 

INVESTMENT INCOME

 

Dividends — Unaffiliated

 $2,357,580 

Dividends — Affiliated

  1,476 

Non-cash dividends — Unaffiliated

  797,785 

Securities lending income — Affiliated — net

  5,334 

Foreign taxes withheld

  (198,284

Foreign withholding tax claims

  407,350 

IRS Compliance fee for foreign withholding tax claims

  (96,089
 

 

 

 

Total investment income

  3,275,152 
 

 

 

 

EXPENSES

 

Investment advisory fees

  1,016,772 

Professional fees

  75,068 

Miscellaneous

  264 
 

 

 

 

Total expenses

  1,092,104 
 

 

 

 

Net investment income

  2,183,048 
 

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS)

 

Net realized gain (loss) from:

 

Investments — Unaffiliated

  (9,044,532

Investments — Affiliated

  (1,402

In-kind redemptions — Unaffiliated

  (12,382,047

Futures contracts

  1,064,000 

Forward foreign currency exchange contracts

  107,393 

Foreign currency transactions

  117,384 
 

 

 

 

Net realized loss

  (20,139,204
 

 

 

 

Net change in unrealized appreciation (depreciation) on:

 

Investments — Unaffiliated

  57,181,196 

Investments — Affiliated

  (801

Futures contracts

  (144,826

Forward foreign currency exchange contracts

  (1,118,246

Foreign currency translations

  1,795,122 
 

 

 

 

Net change in unrealized appreciation (depreciation)

  57,712,445 
 

 

 

 

Net realized and unrealized gain

  37,573,241 
 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 $39,756,289 
 

 

 

 

See notes to financial statements.

 

 

35 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


 

Statements of Changes in Net Assets

 

  iShares
MSCI Austria ETF
  iShares
MSCI Belgium ETF
 
  

 

Year Ended
08/31/20

  Year Ended
08/31/19
  Year Ended
08/31/20
  Year Ended
08/31/19
 

 

 

INCREASE (DECREASE) IN NET ASSETS

    

OPERATIONS

    

Net investment income

 $183,431  $1,991,632  $539,519  $1,205,284 

Net realized loss

  (8,074,786  (14,361,944  (1,341,988  (1,884,910

Net change in unrealized appreciation (depreciation)

  (5,757,287  (6,282,218  467,996   (1,629,193
 

 

 

  

 

 

  

 

 

  

 

 

 

Net decrease in net assets resulting from operations

  (13,648,642  (18,652,530  (334,473  (2,308,819
 

 

 

  

 

 

  

 

 

  

 

 

 

DISTRIBUTIONS TO SHAREHOLDERS(a)

    

Decrease in net assets resulting from distributions to shareholders

  (418,122  (2,792,866  (830,721  (1,172,255
 

 

 

  

 

 

  

 

 

  

 

 

 

CAPITAL SHARE TRANSACTIONS

    

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

  2,404,148   (70,251,096  (13,455,384  (9,116,599
 

 

 

  

 

 

  

 

 

  

 

 

 

NET ASSETS

    

Total decrease in net assets

  (11,662,616  (91,696,492  (14,620,578  (12,597,673

Beginning of year

  54,766,947   146,463,439   47,305,314   59,902,987 
 

 

 

  

 

 

  

 

 

  

 

 

 

End of year

 $43,104,331  $54,766,947  $32,684,736  $47,305,314 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

I N A N C I A L  T A T E M E N T  S

 36


 

Statements of Changes in Net Assets (continued)

 

  iShares
MSCI France ETF
  iShares
MSCI Netherlands ETF
 
  

 

Year Ended

08/31/20

  

Year Ended

08/31/19

  

Year Ended

08/31/20

  

Year Ended

08/31/19

 

 

 

INCREASE (DECREASE) IN NET ASSETS

    

OPERATIONS

    

Net investment income

 $9,197,861  $23,186,901  $1,868,717  $4,692,606 

Net realized gain

  28,873,449   19,210,568   9,063,376   12,102,764 

Net change in unrealized appreciation (depreciation)

  (43,250,640  (81,679,760  7,091,637   (9,530,024
 

 

 

  

 

 

  

 

 

  

 

 

 

Net increase (decrease) in net assets resulting from operations

  (5,179,330  (39,282,291  18,023,730   7,265,346 
 

 

 

  

 

 

  

 

 

  

 

 

 

DISTRIBUTIONS TO SHAREHOLDERS(a)

    

Decrease in net assets resulting from distributions to shareholders

  (6,248,852  (22,272,214  (1,766,500  (4,709,077
 

 

 

  

 

 

  

 

 

  

 

 

 

CAPITAL SHARE TRANSACTIONS

    

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

  (232,837,366  251,536,596   38,219,101   1,318,549 
 

 

 

  

 

 

  

 

 

  

 

 

 

NET ASSETS

    

Total increase (decrease) in net assets

  (244,265,548  189,982,091   54,476,331   3,874,818 

Beginning of year

  1,129,200,068   939,217,977   133,042,391   129,167,573 
 

 

 

  

 

 

  

 

 

  

 

 

 

End of year

 $884,934,520  $1,129,200,068  $187,518,722  $133,042,391 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

37 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


 

Statements of Changes in Net Assets (continued)

 

  iShares
MSCI Sweden ETF
 
  

 

Year Ended

08/31/20

  

Year Ended

08/31/19

 

 

 

INCREASE (DECREASE) IN NET ASSETS

  

OPERATIONS

  

Net investment income

 $2,183,048  $7,235,753 

Net realized loss

  (20,139,204  (6,956,310

Net change in unrealized appreciation (depreciation)

  57,712,445   (21,010,780
 

 

 

  

 

 

 

Net increase (decrease) in net assets resulting from operations

  39,756,289   (20,731,337
 

 

 

  

 

 

 

DISTRIBUTIONS TO SHAREHOLDERS(a)

  

Decrease in net assets resulting from distributions to shareholders

  (3,366,893  (7,255,549
 

 

 

  

 

 

 

CAPITAL SHARE TRANSACTIONS

  

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

  4,597,755   (14,965,695
 

 

 

  

 

 

 

NET ASSETS

  

Total increase (decrease) in net assets

  40,987,151   (42,952,581

Beginning of year

  205,515,806   248,468,387 
 

 

 

  

 

 

 

End of year

 $246,502,957  $205,515,806 
 

 

 

  

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

I N A N C I A L  T A T E M E N T  S

 38


Financial Highlights

(For a share outstanding throughout each period)

 

  iShares MSCI Austria ETF 
 

 

 
  

 

Year Ended
08/31/20

  Year Ended
08/31/19
  Year Ended
08/31/18
  Year Ended
08/31/17
  Year Ended
08/31/16
 

 

 

Net asset value, beginning of year

      $18.89         $22.88         $22.87         $15.58         $15.59 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income(a)

   0.06    0.48    0.58    0.53    0.38 

Net realized and unrealized gain (loss)(b)

   (3.16   (3.69   0.11    7.13    (0.06
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from investment operations

   (3.10   (3.21   0.69    7.66    0.32 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions(c)

          

From net investment income

   (0.12   (0.78   (0.68   (0.37   (0.33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

   (0.12   (0.78   (0.68   (0.37   (0.33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of year

  $15.67   $18.89   $22.88   $22.87   $15.58 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Return

          

Based on net asset value

   (16.58)%    (14.07)%    3.03   49.52   2.11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios to Average Net Assets

          

Total expenses

   0.51   0.49   0.47   0.49   0.48
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

   0.32   2.34   2.37   2.75   2.47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Data

          

Net assets, end of year (000)

  $43,104   $54,767   $146,463   $233,322   $60,780 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio turnover rate(d)

   16   17   19   18   15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Portfolio turnover rate excludes in-kind transactions.

See notes to financial statements.

 

 

39 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Financial Highlights (continued)

(For a share outstanding throughout each period)

 

  iShares MSCI Belguim ETF 
 

 

 

 
  

 

Year Ended
08/31/20

  Year Ended
08/31/19
  Year Ended
08/31/18
  Year Ended
08/31/17
  Year Ended
08/31/16
 

 

 

Net asset value, beginning of year

      $18.48     $19.70       $20.59       $18.16       $17.00 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income(a)

   0.24    0.44    0.50    0.43    0.34 

Net realized and unrealized gain (loss)(b)

   (0.60   (1.22   (0.77   2.51    1.05 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from investment operations

   (0.36   (0.78   (0.27   2.94    1.39 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions(c)

          

From net investment income

   (0.36   (0.44   (0.62   (0.51   (0.23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

   (0.36   (0.44   (0.62   (0.51   (0.23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of year

  $17.76   $18.48   $19.70   $20.59   $18.16 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Return

          

Based on net asset value

   (2.02)%    (3.80)%    (1.34)%    16.44   8.20
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios to Average Net Assets

          

Total expenses

   0.51   0.49   0.47   0.49   0.48
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

   1.34   2.43   2.40   2.31   1.92
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Data

          

Net assets, end of year (000)

  $32,685   $47,305   $59,903   $74,128   $132,203 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio turnover rate(d)

   18   11   13   8   19
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Portfolio turnover rate excludes in-kind transactions.

See notes to financial statements.

 

 

I N A N C I A L  I G H L I G H T  S

 40


Financial Highlights (continued)

(For a share outstanding throughout each period)

 

  iShares MSCI France ETF 
 

 

 

 
  

 

Year Ended

08/31/20

  

Year Ended

08/31/19

  

Year Ended

08/31/18

  

Year Ended

08/31/17

  

Year Ended

08/31/16

 

 

 

Net asset value, beginning of year

  $29.41       $31.10       $29.64       $23.84       $25.01 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income(a)

   0.32    0.83    0.80    0.69    0.67 

Net realized and unrealized gain (loss)(b)

   (0.18   (1.67   1.40    5.69    (1.14
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from investment operations

   0.14    (0.84   2.20    6.38    (0.47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions(c)

          

From net investment income

   (0.25   (0.85   (0.74   (0.58   (0.70
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

   (0.25   (0.85   (0.74   (0.58   (0.70
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of year

  $29.30   $29.41   $31.10   $29.64   $23.84 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Return

          

Based on net asset value

   0.50   (2.64)%    7.46   26.93   (1.87)% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios to Average Net Assets

          

Total expenses

   0.51   0.50   0.47   0.49   0.48
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

   1.09   2.84   2.53   2.57   2.77
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Data

          

Net assets, end of year (000)

  $884,935   $1,129,200   $939,218   $640,201   $329,054 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio turnover rate(d)

   2   2   4   6   6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Portfolio turnover rate excludes in-kind transactions.

See notes to financial statements.

 

 

41 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Financial Highlights (continued)

(For a share outstanding throughout each period)

 

  iShares MSCI Netherlands ETF 
 

 

 
  

 

Year Ended

08/31/20

  

Year Ended

08/31/19

  

Year Ended

08/31/18

  

Year Ended

08/31/17

  

Year Ended

08/31/16

 

 

 

Net asset value, beginning of year

      $30.58       $31.12       $30.56       $24.78       $24.48 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income(a)

   0.33    0.88    0.62    0.46    0.71 

Net realized and unrealized gain (loss)(b)

   4.80    (0.56   0.62    5.98    0.08 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase from investment operations

   5.13    0.32    1.24    6.44    0.79 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions(c)

          

From net investment income

   (0.33   (0.86   (0.68   (0.66   (0.49
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

   (0.33   (0.86   (0.68   (0.66   (0.49
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of year

  $35.38   $30.58   $31.12   $30.56   $24.78 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Return

          

Based on net asset value

   16.88   1.16   4.08   26.44   3.32
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios to Average Net Assets

          

Total expenses

   0.51   0.50   0.47   0.49   0.48
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

   1.03   2.97   1.95   1.74   2.97
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Data

          

Net assets, end of year (000)

  $187,519   $133,042   $129,168   $192,540   $184,587 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio turnover rate(d)

   19   13   7   14   24
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Portfolio turnover rate excludes in-kind transactions.

See notes to financial statements.

 

 

I N A N C I A L  I G H L I G H T  S

 42


Financial Highlights (continued)

(For a share outstanding throughout each period)

 

  iShares MSCI Sweden ETF 
 

 

 
  

 

Year Ended

08/31/20

  

Year Ended

08/31/19

  

Year Ended

08/31/18

  

Year Ended

08/31/17

  

Year Ended

08/31/16

 

 

 

Net asset value, beginning of year

      $28.25        $31.85        $34.68        $28.54        $30.26 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

   0.34     0.95     1.14     0.86     1.05 

Net realized and unrealized gain (loss)(b)

   7.65     (3.58    (2.19    6.04     (1.63
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

   7.99     (2.63    (1.05    6.90     (0.58
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Distributions(c)

              

From net investment income

   (0.51    (0.97    (1.78    (0.76    (1.14
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions

   (0.51    (0.97    (1.78    (0.76    (1.14
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $35.73    $28.25    $31.85    $34.68    $28.54 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return

              

Based on net asset value

   28.51    (8.41)%     (2.88)%     24.30    (1.91)% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets

              

Total expenses

   0.55    0.55    0.53    0.53    0.48
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses excluding professional fees for foreign withholding tax claims

   0.51    0.49    0.47    0.49    0.48
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income

   1.09    3.16    3.34    2.74    3.65
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

              

Net assets, end of year (000)

  $246,503    $205,516    $248,468    $460,315    $284,709 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate(d)

   8    4    5    9    7
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average shares outstanding.

(b) 

The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Portfolio turnover rate excludes in-kind transactions.

See notes to financial statements.

 

 

43 

2 0 2 0  H A R E S  N N U A L  E P O R T  T O  H A R E H O L D E R  S


Notes to Financial Statements

 

1.

ORGANIZATION

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 is organized as a Maryland corporation and is authorized to have multiple series or portfolios.

These financial statements relate only to the following funds (each, a “Fund,” and collectively, the “Funds”):

 

iShares ETF 

Diversification   

Classification   

MSCI Austria

 Non-diversified   

MSCI Belgium

 Non-diversified   

MSCI France

 Non-diversified   

MSCI Netherlands

 Non-diversified   

MSCI Sweden

 Non-diversified   

 

2.

SIGNIFICANT ACCOUNTING POLICIES

The following significant accounting policies are consistently followed by each 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 increases and decreases in net assets from operations 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.

Investment Transactions and Income Recognition: Investment transactions are accounted for on trade date. Realized gains and losses on investment transactions are determined using the specific identification method. Dividend income and capital gain distributions, if any, are recognized on the ex-dividend date, net of any foreign taxes withheld at source. Any taxes withheld that are reclaimable from foreign tax authorities are reflected in tax reclaims receivable. Distributions received by the Funds may include a return of capital that is estimated by management. Such amounts are recorded as a reduction of the cost of investments or reclassified to capital gains. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be re-designated as a return of capital or capital gain. Non-cash dividends, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is accrued daily.

Foreign CurrencyTranslation: 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 non-U.S. currencies are translated to U.S. dollars using prevailing market rates as quoted by one or more data service providers. Purchases and sales of investments, 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 investments. Such fluctuations are reflected by the Funds as a component of net realized and unrealized gain (loss) from investments for financial reporting purposes. Each Fund reports realized currency gain (loss) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Foreign Taxes: The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which each Fund invests. These foreign taxes, if any, are paid by each 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 August 31, 2020, if any, are disclosed in the statement of assets and liabilities.

In-kind Redemptions: For financial reporting purposes, 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 net asset value (“NAV”) per share.

Distributions: 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.

Indemnifications: In the normal course of business, each Fund enters into contracts that contain a variety of representations that provide general indemnification. The Funds’ maximum exposure under these arrangements is unknown because it involves future potential claims against the Funds, which cannot be predicted with any certainty.

 

 

O T E S  T O  I N A N C I A L  T A T E M E N T S

 44


Notes to Financial Statements  (continued)

 

3.

INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: Each Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) 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. A fund determines the fair value of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Directors of the Company (the “Board”). If a security’s market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with a policy approved by the Board as reflecting fair value. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:

  

Equity investments traded on a recognized securities exchange are valued at that day’s 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.

  

Investments in open-end U.S. mutual funds (including money market funds) are valued at that day’s published NAV.

  

Futures contracts are valued based on that day’s last reported settlement price on the exchange where the contract is traded.

  

Forward foreign currency exchange contracts are valued based on that day’s prevailing forward exchange rate for the underlying currencies.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investment, or in the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee include market approach, income approach and the cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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.

Fair Value Hierarchy: Various inputs are used in determining the fair value of financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial reporting purposes as follows:

  

Level 1 – Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access;

  

Level 2 – Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs); and

  

Level 3 – Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, (including the Global Valuation Committee’s assumptions used in determining the fair value of financial instruments).

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgement exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for financial instruments is based on the pricing transparency of the financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

 

4.

SECURITIES AND OTHER INVESTMENTS

Securities Lending: Each Fund may lend its 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 an approved 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 market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund or excess collateral is returned by the Fund, 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

 

 

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Notes to Financial Statements  (continued)

 

securities but does not receive interest income on securities received as collateral. 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.

As of August 31, 2020, any securities on loan were collateralized by cash and/or U.S. government obligations. Cash collateral received was invested in money market funds managed by BlackRock Fund Advisors (“BFA”), the Funds’ investment adviser, or its affiliates and is disclosed in the schedules of investments. Any non-cash collateral received cannot be sold, re-invested or pledged by the Fund, except in the event of borrower default. The securities on loan for each Fund, if any, are also disclosed in its schedule of investments. The market value of any securities on loan as of August 31, 2020 and the value of the related cash collateral are disclosed in the statements of assets and liabilities.

Securities lending transactions are entered into by a fund under Master Securities Lending Agreements (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency) for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than 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, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the fund can reinvest cash collateral received in connection with loaned securities.

The following table is a summary of the securities lending agreements by counterparty which are subject to offset under an MSLA as of August 31, 2020:

 

 

 

iShares ETF and Counterparty

 

 

 

 

Market Value of
Securities on Loan

 

 
 

   
Cash Collateral
Received
 
(a) 
  
Non-Cash Collateral
Received
 
 
   Net Amount 

 

 

 

MSCI Austria

      

Credit Suisse Securities (USA) LLC

 $173,151   $173,151  $   $ 

Deutsche Bank Securities Inc.

  370,815    370,815        

Goldman Sachs & Co.

  166,596    166,596        

Morgan Stanley & Co. LLC

  2,067,291    2,067,291        
 

 

 

   

 

 

  

 

 

   

 

 

 
 $2,777,853   $2,777,853  $   $ 
 

 

 

   

 

 

  

 

 

   

 

 

 

MSCI Belgium

      

Credit Suisse AG

 $1,158,341   $1,158,341  $   $ 

Deutsche Bank Securities Inc.

  24,816    24,816        

Goldman Sachs & Co.

  77,710    77,710        

HSBC Bank PLC

  868    868        

Morgan Stanley & Co. LLC

  50,130    50,130        
 

 

 

   

 

 

  

 

 

   

 

 

 
 $1,311,865   $1,311,865  $   $ 
 

 

 

   

 

 

  

 

 

   

 

 

 

MSCI France

      

Barclays Capital Inc.

 $1,965,084   $1,965,084  $   $ 

BNP Paribas Securities Corp.

  596,870    596,870        

Goldman Sachs & Co.

  5,138,344    5,138,344        

Morgan Stanley & Co. LLC

  324,858    324,858        
 

 

 

   

 

 

  

 

 

   

 

 

 
 $8,025,156   $8,025,156  $   $ 
 

 

 

   

 

 

  

 

 

   

 

 

 

MSCI Netherlands

      

BofA Securities, Inc.

 $598,919   $598,919  $   $ 

Citigroup Global Markets Inc.

  14,813    14,813        

Credit Suisse AG

  365,214    365,214        

Morgan Stanley & Co. LLC

  1,790,782    1,790,782        

National Financial Services LLC

  1,462    1,462        

UBS AG

  762,906    762,906        
 

 

 

   

 

 

  

 

 

   

 

 

 
 $3,534,096   $3,534,096  $   $ 
 

 

 

   

 

 

  

 

 

   

 

 

 

MSCI Sweden

      

BofA Securities, Inc.

 $2,167,449   $2,167,449  $   $ 

Morgan Stanley & Co. LLC

  1,321,993    1,321,993        
 

 

 

   

 

 

  

 

 

   

 

 

 
 $3,489,442   $3,489,442  $   $ 
 

 

 

   

 

 

  

 

 

   

 

 

 

 

 (a) 

Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received by each Fund is disclosed in the Fund’s statement of assets and liabilities.

 

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, each Fund benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned to the extent the collateral received does not cover the value of the securities loaned in the event of borrower default. Each Fund could incur a loss if the

 

 

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Notes to Financial Statements  (continued)

 

value of an investment purchased with cash collateral falls below the market value of the loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. Such losses are borne entirely by each Fund.

 

5.

DERIVATIVE FINANCIAL INSTRUMENTS

Futures Contracts: Each Fund’s use of futures contracts is generally limited to cash equitization. This involves the use of available cash to invest in index futures contracts in order to gain exposure to the equity markets represented in or by the Fund’s underlying index and is intended to allow the Fund to better track its underlying index. Futures contracts are standardized, exchange-traded agreements to buy or sell a specific quantity of an underlying instrument at a set price on a future date. Depending on the terms of a contract, a futures contract is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date.

Upon entering into a futures contract, a fund is required to pledge to the executing broker which holds segregated from its own assets, an amount of cash, U.S. government securities or other high-quality debt and equity securities equal to the minimum initial margin requirements of the exchange on which the contract is traded. Securities deposited as initial margin, if any, are designated in the schedule of investments and cash deposited, if any, is shown as cash pledged for futures contracts in the statement of assets and liabilities.

Pursuant to the contract, a fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation or depreciation and, if any, shown as variation margin receivable or payable on futures contracts in the statement of assets and liabilities. When the contract is closed, a realized gain or loss is recorded in the statement of operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. Losses may arise if the notional value of a futures contract decreases due to an unfavorable change in the market rates or values of the underlying instrument during the term of the contract or if the counterparty does not perform under the contract. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and the assets underlying such contracts.

Forward Foreign Currency Exchange Contracts: The iShares MSCI Sweden ETF uses forward foreign currency exchange contracts to better match benchmark currency exposures in order to facilitate tracking of the investment results of its Index. A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency against another currency at an agreed upon price and quantity. The 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 in the statement of assets and liabilities. When the contract is closed, a realized gain or loss is recorded in the statement of operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts (“NDFs”) are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a contract changes unfavorably due to movements in the value of the referenced foreign currencies. A fund’s 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 fund.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help mitigate its counterparty risk, a fund may enter into an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs certain OTC derivatives 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, insolvency, or other events.

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 a fund and the counterparty. Except for NDFs, the forward foreign currency exchange contracts held by the Funds generally do not require collateral. Cash collateral pledged to the counterparty, if any, is presented as cash pledged as collateral for OTC derivatives on the statement of assets and liabilities. Cash received as collateral from the counterparty may be reinvested in money market funds, including those managed by the Funds’ investment adviser, or its affiliates. Such collateral, if any, is presented in the statement of assets and liabilities as affiliated investments at value and as a liability for cash received as collateral on OTC derivatives. To the extent amounts due to the Funds from the counterparty are not fully collateralized, contractually or otherwise, each Fund bears the risk of loss from counterparty non-performance. Each Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

For financial reporting purposes, each Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the statement of assets and liabilities.

 

6.

INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Advisory Fees: 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 (i) interest and taxes; (ii) brokerage commissions and other expenses connected with the execution of portfolio transactions; (iii) distribution fees; (iv) the advisory fee payable to BFA; and (v) litigation expenses and any extraordinary expenses (in each case as determined by a majority of the independent directors).

For its investment advisory services to each Fund, BFA is entitled to an annual investment advisory fee, accrued daily and paid monthly by the Funds, based on each Fund’s allocable portion of the aggregate of the average daily net assets of the Fund and certain other iShares funds, as follows:

 

 

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Notes to Financial Statements  (continued)

 

Aggregate Average Daily Net Assets Investment Advisory Fee 

First $7 billion

  0.59

Over $7 billion, up to and including $11 billion

  0.54 

Over $11 billion, up to and including $24 billion

  0.49 

Over $24 billion, up to and including $48 billion

  0.44 

Over $48 billion, up to and including $72 billion

  0.40 

Over $72 billion, up to and including $96 billion

  0.36 

Over $96 billion

  0.32 

Distributor: 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.

Securities Lending: The U.S. Securities and Exchange Commission (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 (the “collateral investment fees”). The cash collateral is invested in a money market fund, BlackRock Cash Funds: Institutional or BlackRock Cash Funds: Treasury, managed by BFA, or its affiliates. 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 SL Agency Shares of such money market fund will not be subject to a sales load, distribution fee or service fee. The money market fund in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value redeemed or temporarily restrict redemptions for up to 10 business days during a 90 day period, in the event that the money market fund’s weekly liquid assets fall below certain thresholds.

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. Each Fund retains a portion of securities lending income and remits the remaining portion to BTC as compensation for its services as securities lending agent.

Pursuant to the current securities lending agreement, each Fund retains 82% of securities lending income (which excludes collateral investment fees) and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.

In addition, commencing the business day following the date that the aggregate securities lending income plus the collateral investment fees generated across all 1940 Act iShares exchange-traded funds (the “iShares ETF Complex”) in that calendar year exceeds a specified threshold, each Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year 85% of securities lending income (which excludes collateral investment fees), and the amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.

The share of securities lending income earned by each Fund is shown as securities lending income – affiliated – net in its statement of operations. For the year ended August 31, 2020, the Funds paid BTC the following amounts for securities lending agent services:

 

  
iShares ETF 

Fees Paid   

to BTC   

 

MSCI Austria

 $21,843 

MSCI Belgium

  6,876 

MSCI France

  67,252 

MSCI Netherlands

  11,832 

MSCI Sweden

  1,561   

Officers and Directors: Certain officers and/or directors of the Company are officers and/or directors of BlackRock or its affiliates.

Other Transactions: 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 year ended August 31, 2020, transactions executed by the Funds pursuant to Rule 17a-7 under the 1940 Act were as follows:

 

    
iShares ETF Purchases   Sales   Net Realized
Gain (Loss)
 

 

MSCI Austria

 $671,705   $786,796   $(665,243

MSCI Belgium

  4,615,066    513,463    (93,337

MSCI France

  2,591,467    3,116,549    (2,865,025

MSCI Netherlands

  5,798,744    5,406,322    (597,579

MSCI Sweden

  4,107,737    6,154,535    (3,066,697

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 shown as dividends – affiliated in the statement of operations.

 

 

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 48


Notes to Financial Statements  (continued)

 

A fund, in order to improve its portfolio liquidity and its ability to track its underlying index, may invest in shares of other iShares funds that invest in securities in the fund’s underlying index.

 

7.

PURCHASES AND SALES

For the year ended August 31, 2020, purchases and sales of investments, excluding short-term investments and in-kind transactions, were as follows:

 

   
iShares ETF Purchases   Sales   

MSCI Austria

 $8,966,065   $9,244,234 

MSCI Belgium

  7,263,056    7,661,470 

MSCI France

      21,364,714        18,236,034 

MSCI Netherlands

  34,102,858    34,093,126 

MSCI Sweden

  18,413,861    16,527,199   

For the year ended August 31, 2020, purchases and sales related to in-kind transactions were as follows:

 

iShares ETF 

 

In-kind
Purchases

   

In-kind   

Sales   

MSCI Austria

 $35,266,978   $32,852,075 

MSCI Belgium

  4,098,060    17,430,820 

MSCI France

      403,206,511        635,798,126 

MSCI Netherlands

  149,965,595    112,070,997 

MSCI Sweden

  100,228,620    98,330,334   

 

8.

INCOME TAX INFORMATION

Each Fund is treated as an entity separate from the Company’s other funds for federal income tax purposes. It is the policy of each Fund to qualify as a regulated investment company by complying with the provisions applicable to regulated investment companies, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, and to annually distribute substantially all of its ordinary income and any net capital gains (taking into account any capital loss carryforwards) sufficient to relieve it from all, or substantially all, federal income and excise taxes. Accordingly, no provision for federal income taxes is required.

Management has analyzed tax laws and regulations and their application to the Funds as of August 31, 2020, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or NAV per share. As of August 31, 2020, the following permanent differences attributable to realized gains (losses) from in-kind redemptions, were reclassified to the following accounts:

 

   
iShares ETF Paid-in Capital  Accumulated
Loss
 

MSCI Austria

 $(4,332,145 $4,332,145 

MSCI Belgium

  1,173,235   (1,173,235

MSCI France

  38,637,427   (38,637,427

MSCI Netherlands

  13,360,900   (13,360,900

MSCI Sweden

  (14,080,287  14,080,287 

The tax character of distributions paid was as follows:

 

 

 
iShares ETF 

Year Ended

08/31/20

   

Year Ended

08/31/19

 

 

 

MSCI Austria

   

Ordinary income

 $418,122   $2,792,866 
 

 

 

   

 

 

 

MSCI Belgium

   

Ordinary income

 $830,721   $1,172,255 
 

 

 

   

 

 

 

MSCI France

   

Ordinary income

 $6,248,852   $22,272,214 
 

 

 

   

 

 

 

MSCI Netherlands

   

Ordinary income

 $1,766,500   $4,709,077 
 

 

 

   

 

 

 

MSCI Sweden

   

Ordinary income

 $3,366,893   $7,255,549 
 

 

 

   

 

 

 

 

 

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Notes to Financial Statements  (continued)

 

As of August 31, 2020, the tax components of accumulated net earnings (losses) were as follows:

 

 

 

iShares ETF

  
Undistributed
Ordinary Income
 
 
   

Non-expiring
Capital Loss
Carryforwards
 
 
(a) 
  
Net Unrealized
Gains (Losses)
 
(b) 
  Total 

 

 

MSCI Austria

 $140,614   $(41,739,653 $(22,064,317 $(63,663,356

MSCI Belgium

  294,046    (18,501,985  (8,007,772  (26,215,711

MSCI France

  3,624,604    (50,747,309  (125,479,705  (172,602,410

MSCI Netherlands

  777,386    (23,177,633  (449,442  (22,849,689

MSCI Sweden

  1,385,802    (36,604,434  (15,171,526  (50,390,158)   

 

 (a) 

Amounts available to offset future realized capital gains.

 
 (b) 

The difference between book-basis and tax-basis unrealized gains (losses) was attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains (losses) on certain futures contracts and foreign currency contracts, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies and foreign withholding tax reclaims.

 

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

As of August 31, 2020, gross unrealized appreciation and depreciation based on cost of investments (including short positions and derivatives, if any) for U.S. federal income tax purposes were as follows:

 

     
iShares ETF Tax Cost   Gross Unrealized
Appreciation
   Gross Unrealized
Depreciation
  

Net Unrealized   

Appreciation   

(Depreciation)   

MSCI Austria

 $66,656,665   $401,815   $(22,523,866 $(22,122,051

MSCI Belgium

  41,903,855    3,518,107    (11,532,332  (8,014,225

MSCI France

  1,018,221,201    57,376,638    (182,891,502  (125,514,864

MSCI Netherlands

  190,764,191    21,088,084    (21,551,171  (463,087

MSCI Sweden

  259,698,734    19,564,079    (35,555,040  (15,990,961)   

 

9.

PRINCIPAL RISKS

In the normal course of business, each Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including, among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate or price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Funds and their investments. Each Fund’s prospectus provides details of the risks to which the Fund is subject.

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: An outbreak of respiratory disease caused by a novel coronavirus has developed into a global pandemic and has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the future, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact the prices and liquidity of a fund’s investments. The duration of this pandemic and its effects cannot be determined with certainty.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A fund may invest in illiquid investments. An illiquid investment is any investment that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. A fund may experience difficulty in selling illiquid investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause a fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a fund may lose value, regardless of the individual results of the securities and other instruments in which a fund invests.

The price each Fund could receive upon the sale of any particular portfolio investment may differ from each Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs.

 

 

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Notes to Financial Statements  (continued)

 

Counterparty Credit Risk: The Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions, including making timely interest and/or principal payments or otherwise honor its obligations. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes 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 market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the statement of assets and liabilities, less any collateral held by the Funds.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

Concentration Risk: 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.

Certain Funds invest a significant portion of their assets in issuers located in a single country or a limited number of countries. When a Fund concentrates its investments in this manner, it assumes the risk that economic, regulatory, political and social conditions in that country or those countries may have a significant impact on the fund and could affect the income from, or the value or liquidity of, the fund’s portfolio. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be more volatile and less liquid than U.S. securities and may be less subject to governmental supervision not typically associated with investing in U.S. securities.

Certain Funds invest a significant portion of their assets in securities within a single or limited number of market sectors. When a Fund concentrates its investments in this manner, it assumes the risk that economic, regulatory, political and social conditions affecting such sectors may have a significant impact on the fund and could affect the income from, or the value or liquidity of, the fund’s portfolio. Investment percentages in specific sectors are presented in the schedule of investments.

LIBOR Transition Risk: The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”) by the end of 2021, and it is expected that LIBOR will cease to be published after that time. The Funds may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Funds is uncertain.

 

10.

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 were as follows:

 

 

 
  

 

Year Ended

08/31/20

  

Year Ended

08/31/19

 
 

 

 

  

 

 

 
iShares ETF Shares  Amount  Shares  Amount 

 

 

 

MSCI Austria

    

Shares sold

  2,000,000  $36,144,704   1,000,000  $21,691,523 

Shares redeemed

  (2,150,000  (33,740,556  (4,500,000  (91,942,619
 

 

 

  

 

 

  

 

 

  

 

 

 

Net increase (decrease)

  (150,000 $2,404,148   (3,500,000 $(70,251,096
 

 

 

  

 

 

  

 

 

  

 

 

 

MSCI Belgium

    

Shares sold

  240,000  $4,113,227   560,000  $9,945,400��

Shares redeemed

  (960,000  (17,568,611  (1,040,000  (19,061,999
 

 

 

  

 

 

  

 

 

  

 

 

 

Net decrease

  (720,000 $(13,455,384  (480,000 $(9,116,599
 

 

 

  

 

 

  

 

 

  

 

 

 

MSCI France

    

Shares sold

  13,600,000  $404,731,082   19,200,000  $569,122,479 

Shares redeemed

  (21,800,000  (637,568,448  (11,000,000  (317,585,883
 

 

 

  

 

 

  

 

 

  

 

 

 

Net increase (decrease)

  (8,200,000 $(232,837,366  8,200,000  $251,536,596 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

 

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Notes to Financial Statements  (continued)

 

 

 
  

 

Year Ended

08/31/20

  

Year Ended

08/31/19

 
 

 

 

  

 

 

 
iShares ETF Shares  Amount  Shares  Amount 

 

 

 

MSCI Netherlands

    

Shares sold

  4,600,000  $150,728,480   4,050,000  $117,319,587 

Shares redeemed

  (3,650,000  (112,509,379  (3,850,000  (116,001,038
 

 

 

  

 

 

  

 

 

  

 

 

 

Net increase

  950,000  $38,219,101   200,000  $1,318,549 
 

 

 

  

 

 

  

 

 

  

 

 

 

MSCI Sweden

    

Shares sold

  3,225,000  $105,874,093   2,400,000  $71,346,070 

Shares redeemed

  (3,600,000  (101,276,338  (2,925,000  (86,311,765
 

 

 

  

 

 

  

 

 

  

 

 

 

Net increase (decrease)

  (375,000 $4,597,755   (525,000 $(14,965,695
 

 

 

  

 

 

  

 

 

  

 

 

 

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 shares sold in the table above.

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 transactions are reflected as a receivable or a payable in the statement of assets and liabilities.

 

11.

FOREIGN WITHHOLDING TAX CLAIMS

The iShares MSCI Sweden ETF has filed claims to recover taxes withheld by Sweden on dividend income based upon certain provisions in the Treaty on the Functioning of the European Union. The Fund has recorded receivables for all recoverable taxes withheld by Sweden based upon previous determinations made by the Swedish tax authorities. Professional and other fees associated with the filing of these claims for foreign withholding taxes have been approved by the Board as appropriate expenses of the Fund. Swedish tax claim receivables and related liabilities are disclosed in the statement of assets and liabilities. Collection of these receivables, and any payment of associated liabilities, depends upon future determinations made by the Swedish tax authorities, the outcome of which is uncertain. If such future determinations are unfavorable, the potential negative impact to the Fund, as of August 31, 2020, is $8,160,576 or $1.18 per share.

The Fund, under the approval of the Board, is seeking a closing agreement with the Internal Revenue Service (“IRS”) to address any prior years’ U.S. income tax liabilities attributable to Fund shareholders resulting from the recovery of foreign taxes. The closing agreement would result in the Fund paying a compliance fee to the IRS, on behalf of its shareholders, representing the estimated tax savings generated from foreign tax credits claimed by Fund shareholders on their tax returns in prior years. The Fund has accrued a liability for the estimated IRS compliance fee related to foreign withholding tax claims, which is disclosed in the statement of assets and liabilities. The actual IRS compliance fee may differ from the estimate and that difference may be material.

 

12.

LEGAL PROCEEDINGS

On June 16, 2016, investors in certain iShares funds (iShares Core S&P Small-Cap ETF, iShares Russell 1000 Growth ETF, iShares Core S&P 500 ETF, iShares Russell Mid-Cap Growth ETF, iShares Russell Mid-Cap ETF, iShares Russell Mid-Cap Value ETF, iShares Select Dividend ETF, iShares Morningstar Mid-Cap ETF, iShares Morningstar Large-Cap ETF, iShares U.S. Aerospace & Defense ETF and iShares Preferred and Income Securities ETF) filed a class action lawsuit against iShares Trust, BlackRock, Inc. and certain of its advisory affiliates, and certain directors/trustees and officers of the Funds (collectively, “Defendants”) in California State Court. The lawsuit alleges the Defendants violated federal securities laws by failing to adequately disclose in the prospectuses issued by the funds noted above the risks of using stop-loss orders in the event of a ‘flash crash’, such as the one that occurred on May 6, 2010. On September 18, 2017, the court issued a Statement of Decision holding that the Plaintiffs lack standing to assert their claims. On October 11, 2017, the court entered final judgment dismissing all of the Plaintiffs’ claims with prejudice. In an opinion dated January 23, 2020, the California Court of Appeal affirmed the dismissal of Plaintiffs’ claims. On March 3, 2020, plaintiffs filed a petition for review by the California Supreme Court. On May 27, 2020, the California Supreme Court denied Plaintiff’s petition for review. The case is now closed.

 

13.

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 additional disclosure in the financial statements.

 

 

O T E S  T O  I N A N C I A L  T A T E M E N T S

 52


Report of Independent Registered Public Accounting Firm

 

To the Board of Directors of iShares, Inc. and

Shareholders of iShares MSCI Austria ETF, iShares MSCI Belgium ETF,

iShares MSCI France ETF, iShares MSCI Netherlands ETF and iShares MSCI Sweden ETF

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of iShares MSCI Austria ETF, iShares MSCI Belgium ETF, iShares MSCI France ETF, iShares MSCI Netherlands ETF and iShares MSCI Sweden ETF (five of the funds constituting iShares, Inc., hereafter collectively referred to as the “Funds”) as of August 31, 2020, the related statements of operations for the year ended August 31, 2020, the statements of changes in net assets for each of the two years in the period ended August 31, 2020, including the related notes, and the financial highlights for each of the five years in the period ended August 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of August 31, 2020, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended August 31, 2020 and each of the financial highlights for each of the five years in the period ended August 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of August 31, 2020 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

/s/PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

October 21, 2020

We have served as the auditor of one or more BlackRock investment companies since 2000.

 

 

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Important Tax Information (unaudited)

 

The following maximum amounts are hereby designated as qualified dividend income for individuals for the fiscal year ended August 31, 2020:

 

iShares ETF 

 

Qualified Dividend    
Income    

 

 

MSCI Austria

 $328,903     

MSCI Belgium

  762,251     

MSCI France

  15,093,771     

MSCI Netherlands

  3,070,356     

MSCI Sweden

  2,843,326     

For the fiscal year ended August 31, 2020, the Funds earned foreign source income and paid foreign taxes which they intend to pass through to their shareholders:

 

iShares ETF 

 

Foreign Source
Income Earned

   Foreign    
Taxes Paid    
 

 

MSCI Austria

 $426,835   $36,336     

MSCI Belgium

  840,461    126,088     

MSCI France

  15,216,502     2,021,665     

MSCI Netherlands

  3,219,721    441,793     

MSCI Sweden

  3,160,838    6,177     

 

 

M P O R T A N T  A X  N F O R  M A T I O N

 54


Board Review and Approval of Investment Advisory Contract

 

iShares MSCI Austria ETF, iShares MSCI Belgium ETF, iShares MSCI Netherlands ETF, iShares MSCI Sweden ETF (each the “Fund”)

Under Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), the Company’s Board of Directors (the “Board”), including a majority of Board Members who are not “interested persons” of the Company (as that term is defined in the 1940 Act) (the “Independent Board Members), is required annually to consider and approve the Investment Advisory Contract between the Company and BFA (the “Advisory Contract”) whereby the Board and its committees (composed solely of Independent Board Members) assess BlackRock’s services to the Fund, including investment management; fund accounting; administrative and shareholder services; oversight of the Fund’s service providers; risk management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements. The Independent Board Members requested, and BFA provided, such information as the Independent Board Members, with advice from independent counsel, deemed reasonably necessary to evaluate the Advisory Contract. At meetings on April 17, 2020 and May 19, 2020, a committee composed of all of the Independent Board Members (the “15(c) Committee”), with independent counsel, met with management and reviewed and discussed information provided in response to initial requests of the 15(c) Committee and/or its independent counsel, and requested certain additional information, which management agreed to provide. At a meeting held on June 8-10, 2020, the Board, including the Independent Board Members, reviewed the additional information provided by management in response to these requests.

After extensive discussions and deliberations, the Board, including all of the Independent Board Members, approved the continuance of the Advisory Contract for the Fund, based on a review of qualitative and quantitative information provided by BFA and their cumulative experience as Board Members. The Board noted its satisfaction with the extent and quality of information provided and its frequent interactions with management, as well as the detailed responses and other information provided by BFA. The Independent Board Members were advised by their independent counsel throughout the process, including about the legal standards applicable to their review. In approving the continuance of the Advisory Contract for the Fund, the Board, including the Independent Board Members, considered various factors, including: (i) the expenses and performance of the Fund; (ii) the nature, extent and quality of the services provided by BFA; (iii) the costs of services provided to the Fund and profits realized by BFA and its affiliates; (iv) potential economies of scale and the sharing of related benefits; (v) the fees and services provided for other comparable funds/accounts managed by BFA and its affiliates; and (vi) other benefits to BFA and/or its affiliates. The material factors, none of which was controlling, and conclusions that formed the basis for the Board, including the Independent Board Members, to approve the continuance of the Advisory Contract are discussed below.

Expenses and Performance of the Fund: The Board reviewed statistical information prepared by Broadridge Financial Solutions Inc. (“Broadridge”), an independent provider of investment company data, regarding the expense ratio components, including gross and net total expenses, fees and expenses of another fund in which the Fund invests (if applicable), and waivers/reimbursements (if applicable) of the Fund in comparison with the same information for other ETFs (including, where applicable, funds sponsored by an “at cost” service provider), objectively selected by Broadridge as comprising the Fund’s applicable peer group pursuant to Broadridge’s proprietary ETF methodology (the “Peer Group”). The Board was provided with a detailed description of the proprietary ETF methodology used by Broadridge to determine the Fund’s Peer Group. The Board noted that, due to the limitations in providing comparable funds in the Peer Group, the statistical information provided in Broadridge’s report may or may not provide meaningful direct comparisons to the Fund in all instances. The Board also noted that the overall fund expenses (net of waivers and reimbursements) for the Fund were higher than the median of overall fund expenses (net of waivers and reimbursements ) of the funds in its Peer Group, excluding iShares funds.

In addition, to the extent that any of the comparison funds included in the Peer Group, excluding iShares funds, track the same index as the Fund, Broadridge also provided, and the Board reviewed, a comparison of the Fund’s performance for the one-year, three-year, five-year, ten-year, and since inception periods, as applicable, and for the quarter ended December 31, 2019, to that of relevant comparison fund(s) for the same periods.

The Board noted that the Fund seeks to track its specified underlying index and that, during the year, the Board received periodic reports on the Fund’s short- and longer-term performance in comparison with its underlying index. Such periodic comparative performance information, including additional detailed information as requested by the Board, was also considered. The Board noted that the Fund generally performed in line with its underlying index over the relevant periods.

Based on this review, the other factors considered at the meeting, and their general knowledge of ETF pricing, the Board concluded that the investment advisory fee rate and expense level and the historical performance of the Fund supported the Board’s approval of the continuance of the Advisory Contract for the coming year.

Nature, Extent and Quality of Services Provided: Based on management’s representations, including information about recent and proposed enhancements to the iShares business, including with respect to capital markets support and analysis, technology, portfolio management, product design and quality, compliance and risk management, global public policy and other services, the Board expected that there would be no diminution in the scope of services required of or provided by BFA under the Advisory Contract for the coming year as compared with the scope of services provided by BFA during prior years. In reviewing the scope of these services, the Board considered BFA’s investment philosophy and experience, noting that BFA and its affiliates have committed significant resources over time, including during the past year, to support the iShares funds and their shareholders and have made significant investments into the iShares business. The Board also considered BFA’s compliance program and its compliance record with respect to the Fund. In that regard, the Board noted that BFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and on other occasions as necessary and appropriate, and has provided information and made relevant officers and other employees of BFA (and its affiliates) available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons responsible for the day-to-day management of the Fund, as well as the resources available to them in managing the Fund. In addition to the above considerations, the Board reviewed and considered detailed presentations regarding BFA’s investment performance, investment and risk management processes and strategies, which were provided at the June 8-10, 2020 meeting and throughout the year.

Based on review of this information, and the performance information discussed above, the Board concluded that the nature, extent and quality of services provided to the Fund under the Advisory Contract supported the Board’s approval of the continuance of the Advisory Contract for the coming year.

Costs of Services Provided to the Fund and Profits Realized by BFA and its Affiliates: The Board reviewed information about the estimated profitability to BlackRock in managing the Fund, based on the fees payable to BFA and its affiliates (including fees under the Advisory Contract), and other sources of revenue and expense to BFA and its affiliates from the Fund’s operations for the last calendar year. The Board reviewed BlackRock’s methodology for calculating estimated profitability of the iShares

 

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Board Review and Approval of Investment Advisory Contract  (continued)

 

funds, noting that the 15(c) Committee and the Board had focused on the methodology and profitability presentation. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers by BFA, the types of funds managed, expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at individual fund levels is challenging. The Board discussed with management the sources of direct and ancillary revenue, including the revenues to BTC, a BlackRock affiliate, from securities lending by the Fund. The Board also discussed BFA’s estimated profit margin as reflected in the Fund’s profitability analysis and reviewed information regarding potential economies of scale (as discussed below).

Based on this review, the Board concluded that the profits realized by BFA and its affiliates under the Advisory Contract and from other relationships between the Fund and BFA and/or its affiliates, if any, were within a reasonable range in light of the factors and other information considered.

Economies of Scale: The Board reviewed information and considered the extent to which economies of scale might be realized as the assets of the Fund increase, noting that the issue of potential economies of scale had been focused on by the 15(c) Committee and the Board during their meetings and addressed by management. The 15(c) Committee and the Board received information regarding BlackRock’s historical estimated profitability, including BFA’s and its affiliates’ estimated costs in providing services. The estimated cost information distinguished, among other things, between fixed and variable costs, and showed how the level and nature of fixed and variable costs may impact the existence or size of scale benefits, with the Board recognizing that potential economies of scale are difficult to measure. The 15(c) Committee and the Board reviewed information provided by BFA regarding the sharing of scale benefits with the iShares funds through various means, including, as applicable, through relatively low fee rates established at inception, breakpoints, waivers, or other fee reductions, as well as through additional investment in the iShares business and the provision of improved or additional infrastructure and services to the iShares funds and their shareholders. The Board noted that the Advisory Contract for the Fund already provided for breakpoints in the Fund’s investment advisory fee rate as the assets of the Fund, on an aggregated basis with the assets of certain other iShares funds, increase. The Board noted that it would continue to assess the appropriateness of adding new or revised breakpoints in the future.

The Board concluded that this review of potential economies of scale and the sharing of related benefits, as well as the other factors considered at the meeting, supported the Board’s approval of the continuance of the Advisory Contract for the coming year.

Fees and Services Provided for Other Comparable Funds/Accounts Managed by BFA and its Affiliates: The Board considered information regarding the investment advisory/management fee rates for other funds/accounts in the U.S. for which BFA (or its affiliates) provides investment advisory/management services, including open-end funds registered under the 1940 Act (including sub-advised funds), collective trust funds, and institutional separate accounts (collectively, the “Other Accounts”). The Board acknowledged BFA’s representation that the iShares funds are fundamentally different investment vehicles from the Other Accounts. The Board noted that BFA and its affiliates do not manage Other Accounts with substantially the same investment objective and strategy as the Fund and that track the same index as the Fund. The Board further noted that BFA provided the Board with detailed information regarding how the Other Accounts generally differ from the Fund, including in terms of the types of services and generally more extensive services provided to the Fund, as well as other significant differences. In that regard, the Board considered that the pricing of services to institutional clients is typically based on a number of factors beyond the nature and extent of the specific services to be provided and often depends on the overall relationship between the client and its affiliates and the adviser and its affiliates. In addition, the Board considered the relative complexity and inherent risks and challenges of managing and providing other services to the Fund, as a publicly traded investment vehicle, as compared to the Other Accounts, particularly those that are institutional clients, in light of differing regulatory requirements and client-imposed mandates. The Board also acknowledged management’s assertion that, for certain iShares funds, and for client segmentation purposes, BlackRock has launched an iShares fund that may provide a similar investment exposure at a lower investment advisory fee rate. The Board also considered the “all-inclusive” nature of the Fund’s advisory fee structure, and the Fund’s expenses borne by BFA under this arrangement. The Board noted that the investment advisory fee rate under the Advisory Contract for the Fund was generally higher than the investment advisory/management fee rates for certain of the Other Accounts (particularly institutional clients) and concluded that the differences appeared to be consistent with the factors discussed.

Other Benefits to BFA and/or its Affiliates: The Board reviewed other benefits or ancillary revenue received by BFA and/or its affiliates in connection with the services provided to the Fund by BFA, both direct and indirect, such as payment of revenue to BTC, the Fund’s securities lending agent, for loaning portfolio securities (which was included in the profit margins reviewed by the Board pursuant to BFA’s estimated profitability methodology), payment of advisory fees or other fees to BFA (or its affiliates) in connection with any investments by the Fund in other funds for which BFA (or its affiliates) provides investment advisory services or other services and BlackRock’s profile in the investment community. The Board also noted the revenue received by BFA and/or its affiliates pursuant to an agreement that permits a service provider to use certain portions of BlackRock’s technology platform to service accounts managed by BFA and/or its affiliates, including the iShares funds. The Board noted that BFA generally does not use soft dollars or consider the value of research or other services that may be provided to BFA (including its affiliates) in selecting brokers for portfolio transactions for the Fund. The Board further noted that any portfolio transactions on behalf of the Fund placed through a BFA affiliate or purchased from an underwriting syndicate in which a BFA affiliate participates (including associated commissions) are reported to the Board pursuant to Rule 17e-1 or Rule 10f-3, as applicable, under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Fund and thus would not alter the Board’s conclusion with respect to the appropriateness of approving the continuance of the Advisory Contract for the coming year.

Conclusion: Based on a review of the factors described above, as well as such other factors as deemed appropriate by the Board, the Board, including all of the Independent Board Members, determined that the Fund’s investment advisory fee rate under the Advisory Contract does not constitute a fee that is so disproportionately large as to bear no reasonable relationship to the services rendered and that could not have been the product of arm’s-length bargaining, and concluded to approve the continuance of the Advisory Contract for the coming year.

iShares MSCI France ETF (the “Fund”)

Under Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), the Company’s Board of Directors (the “Board”), including a majority of Board Members who are not “interested persons” of the Company (as that term is defined in the 1940 Act) (the “Independent Board Members), is required annually to consider and approve the Investment Advisory Contract between the Company and BFA (the “Advisory Contract”) whereby the Board and its committees (composed solely of Independent Board Members) assess BlackRock’s services to the Fund, including investment management; fund accounting; administrative and shareholder services; oversight of the Fund’s

 

O A R D  E V I E W  A N D  P  P R O V A L  O F  N V E S T M E N T  D V I S O R Y  O N T R A C T

 56


Board Review and Approval of Investment Advisory Contract  (continued)

 

service providers; risk management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements. The Independent Board Members requested, and BFA provided, such information as the Independent Board Members, with advice from independent counsel, deemed reasonably necessary to evaluate the Advisory Contract. At meetings on April 17, 2020 and May 19, 2020, a committee composed of all of the Independent Board Members (the “15(c) Committee”), with independent counsel, met with management and reviewed and discussed information provided in response to initial requests of the 15(c) Committee and/or its independent counsel, and requested certain additional information, which management agreed to provide. At a meeting held on June 8-10, 2020, the Board, including the Independent Board Members, reviewed the additional information provided by management in response to these requests.

After extensive discussions and deliberations, the Board, including all of the Independent Board Members, approved the continuance of the Advisory Contract for the Fund, based on a review of qualitative and quantitative information provided by BFA and their cumulative experience as Board Members. The Board noted its satisfaction with the extent and quality of information provided and its frequent interactions with management, as well as the detailed responses and other information provided by BFA. The Independent Board Members were advised by their independent counsel throughout the process, including about the legal standards applicable to their review. In approving the continuance of the Advisory Contract for the Fund, the Board, including the Independent Board Members, considered various factors, including: (i) the expenses and performance of the Fund; (ii) the nature, extent and quality of the services provided by BFA; (iii) the costs of services provided to the Fund and profits realized by BFA and its affiliates; (iv) potential economies of scale and the sharing of related benefits; (v) the fees and services provided for other comparable funds/accounts managed by BFA and its affiliates; and (vi) other benefits to BFA and/or its affiliates. The material factors, none of which was controlling, and conclusions that formed the basis for the Board, including the Independent Board Members, to approve the continuance of the Advisory Contract are discussed below.

Expenses and Performance of the Fund: The Board reviewed statistical information prepared by Broadridge Financial Solutions Inc. (“Broadridge”), an independent provider of investment company data, regarding the expense ratio components, including gross and net total expenses, fees and expenses of another fund in which the Fund invests (if applicable), and waivers/reimbursements (if applicable) of the Fund in comparison with the same information for other ETFs (including, where applicable, funds sponsored by an “at cost” service provider), objectively selected by Broadridge as comprising the Fund’s applicable peer group pursuant to Broadridge’s proprietary ETF methodology (the “Peer Group”). The Board was provided with a detailed description of the proprietary ETF methodology used by Broadridge to determine the Fund’s Peer Group. The Board noted that, due to the limitations in providing comparable funds in the Peer Group, the statistical information provided in Broadridge’s report may or may not provide meaningful direct comparisons to the Fund in all instances. The Board also noted that the overall fund expenses (net of waivers and reimbursements) for the Fund were higher than the median of overall fund expenses (net of waivers and reimbursements ) of the funds in its Peer Group, excluding iShares funds.

In addition, to the extent that any of the comparison funds included in the Peer Group, excluding iShares funds, track the same index as the Fund, Broadridge also provided, and the Board reviewed, a comparison of the Fund’s performance for the one-year, three-year, five-year, ten-year, and since inception periods, as applicable, and for the quarter ended December 31, 2019, to that of relevant comparison fund(s) for the same periods.

The Board noted that the Fund seeks to track its specified underlying index and that, during the year, the Board received periodic reports on the Fund’s short- and longer-term performance in comparison with its underlying index. Such periodic comparative performance information, including additional detailed information as requested by the Board, was also considered. The Board noted that the Fund generally performed in line with its underlying index over the relevant periods.

Based on this review, the other factors considered at the meeting, and their general knowledge of ETF pricing, the Board concluded that the investment advisory fee rate and expense level and the historical performance of the Fund supported the Board’s approval of the continuance of the Advisory Contract for the coming year.

Nature, Extent and Quality of Services Provided: Based on management’s representations, including information about recent and proposed enhancements to the iShares business, including with respect to capital markets support and analysis, technology, portfolio management, product design and quality, compliance and risk management, global public policy and other services, the Board expected that there would be no diminution in the scope of services required of or provided by BFA under the Advisory Contract for the coming year as compared with the scope of services provided by BFA during prior years. In reviewing the scope of these services, the Board considered BFA’s investment philosophy and experience, noting that BFA and its affiliates have committed significant resources over time, including during the past year, to support the iShares funds and their shareholders and have made significant investments into the iShares business. The Board also considered BFA’s compliance program and its compliance record with respect to the Fund. In that regard, the Board noted that BFA reports to the Board about portfolio management and compliance matters on a periodic basis in connection with regularly scheduled meetings of the Board, and on other occasions as necessary and appropriate, and has provided information and made relevant officers and other employees of BFA (and its affiliates) available as needed to provide further assistance with these matters. The Board also reviewed the background and experience of the persons responsible for the day-to-day management of the Fund, as well as the resources available to them in managing the Fund. In addition to the above considerations, the Board reviewed and considered detailed presentations regarding BFA’s investment performance, investment and risk management processes and strategies, which were provided at the June 8-10, 2020 meeting and throughout the year.

Based on review of this information, and the performance information discussed above, the Board concluded that the nature, extent and quality of services provided to the Fund under the Advisory Contract supported the Board’s approval of the continuance of the Advisory Contract for the coming year.

Costs of Services Provided to the Fund and Profits Realized by BFA and its Affiliates: The Board reviewed information about the estimated profitability to BlackRock in managing the Fund, based on the fees payable to BFA and its affiliates (including fees under the Advisory Contract), and other sources of revenue and expense to BFA and its affiliates from the Fund’s operations for the last calendar year. The Board reviewed BlackRock’s methodology for calculating estimated profitability of the iShares funds, noting that the 15(c) Committee and the Board had focused on the methodology and profitability presentation. The Board recognized that profitability may be affected by numerous factors, including, among other things, fee waivers by BFA, the types of funds managed, expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at individual fund levels is challenging. The Board discussed with management the sources of direct and ancillary revenue,

 

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Board Review and Approval of Investment Advisory Contract  (continued)

 

including the revenues to BTC, a BlackRock affiliate, from securities lending by the Fund. The Board also discussed BFA’s estimated profit margin as reflected in the Fund’s profitability analysis and reviewed information regarding potential economies of scale (as discussed below).

Based on this review, the Board concluded that the profits realized by BFA and its affiliates under the Advisory Contract and from other relationships between the Fund and BFA and/or its affiliates, if any, were within a reasonable range in light of the factors and other information considered.

Economies of Scale: The Board reviewed information and considered the extent to which economies of scale might be realized as the assets of the Fund increase, noting that the issue of potential economies of scale had been focused on by the 15(c) Committee and the Board during their meetings and addressed by management. The 15(c) Committee and the Board received information regarding BlackRock’s historical estimated profitability, including BFA’s and its affiliates’ estimated costs in providing services. The estimated cost information distinguished, among other things, between fixed and variable costs, and showed how the level and nature of fixed and variable costs may impact the existence or size of scale benefits, with the Board recognizing that potential economies of scale are difficult to measure. The 15(c) Committee and the Board reviewed information provided by BFA regarding the sharing of scale benefits with the iShares funds through various means, including, as applicable, through relatively low fee rates established at inception, breakpoints, waivers, or other fee reductions, as well as through additional investment in the iShares business and the provision of improved or additional infrastructure and services to the iShares funds and their shareholders. The Board noted that the Advisory Contract for the Fund already provided for breakpoints in the Fund’s investment advisory fee rate as the assets of the Fund, on an aggregated basis with the assets of certain other iShares funds, increase. The Board further noted that it would continue to assess the appropriateness of adding new or revised breakpoints in the future.

The Board concluded that this review of potential economies of scale and the sharing of related benefits, as well as the other factors considered at the meeting, supported the Board’s approval of the continuance of the Advisory Contract for the coming year.

Fees and Services Provided for Other Comparable Funds/Accounts Managed by BFA and its Affiliates: The Board considered information regarding the investment advisory/management fee rates for other funds/accounts in the U.S. for which BFA (or its affiliates) provides investment advisory/management services, including open-end funds registered under the 1940 Act (including sub-advised funds), collective trust funds, and institutional separate accounts (collectively, the “Other Accounts”). The Board acknowledged BFA’s representation that the iShares funds are fundamentally different investment vehicles from the Other Accounts. The Board noted that BFA and its affiliates manage Other Accounts with substantially the same investment objective and strategy as the Fund and that track the same index as the Fund. The Board further noted that BFA provided the Board with detailed information regarding how the Other Accounts generally differ from the Fund, including in terms of the types of services and generally more extensive services provided to the Fund, as well as other significant differences. In that regard, the Board considered that the pricing of services to institutional clients is typically based on a number of factors beyond the nature and extent of the specific services to be provided and often depends on the overall relationship between the client and its affiliates and the adviser and its affiliates. In addition, the Board considered the relative complexity and inherent risks and challenges of managing and providing other services to the Fund, as a publicly traded investment vehicle, as compared to the Other Accounts, particularly those that are institutional clients, in light of differing regulatory requirements and client-imposed mandates. The Board also acknowledged management’s assertion that, for certain iShares funds, and for client segmentation purposes, BlackRock has launched an iShares fund that may provide a similar investment exposure at a lower investment advisory fee rate. The Board also considered the “all-inclusive” nature of the Fund’s advisory fee structure, and the Fund’s expenses borne by BFA under this arrangement. The Board noted that the investment advisory fee rate under the Advisory Contract for the Fund was generally higher than the investment advisory/management fee rates for certain of the Other Accounts (particularly institutional clients) and concluded that the differences appeared to be consistent with the factors discussed.

Other Benefits to BFA and/or its Affiliates: The Board reviewed other benefits or ancillary revenue received by BFA and/or its affiliates in connection with the services provided to the Fund by BFA, both direct and indirect, such as payment of revenue to BTC, the Fund’s securities lending agent, for loaning portfolio securities (which was included in the profit margins reviewed by the Board pursuant to BFA’s estimated profitability methodology), payment of advisory fees or other fees to BFA (or its affiliates) in connection with any investments by the Fund in other funds for which BFA (or its affiliates) provides investment advisory services or other services and BlackRock’s profile in the investment community. The Board also noted the revenue received by BFA and/or its affiliates pursuant to an agreement that permits a service provider to use certain portions of BlackRock’s technology platform to service accounts managed by BFA and/or its affiliates, including the iShares funds. The Board noted that BFA generally does not use soft dollars or consider the value of research or other services that may be provided to BFA (including its affiliates) in selecting brokers for portfolio transactions for the Fund. The Board further noted that any portfolio transactions on behalf of the Fund placed through a BFA affiliate or purchased from an underwriting syndicate in which a BFA affiliate participates (including associated commissions) are reported to the Board pursuant to Rule 17e-1 or Rule 10f-3, as applicable, under the 1940 Act. The Board concluded that any such ancillary benefits would not be disadvantageous to the Fund and thus would not alter the Board’s conclusion with respect to the appropriateness of approving the continuance of the Advisory Contract for the coming year.

Conclusion: Based on a review of the factors described above, as well as such other factors as deemed appropriate by the Board, the Board, including all of the Independent Board Members, determined that the Fund’s investment advisory fee rate under the Advisory Contract does not constitute a fee that is so disproportionately large as to bear no reasonable relationship to the services rendered and that could not have been the product of arm’s-length bargaining, and concluded to approve the continuance of the Advisory Contract for the coming year.

 

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Supplemental Information (unaudited)

 

Section 19(a) Notices

The amounts and sources of distributions reported are estimates and are being 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 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.

August 31, 2020

 

    

 

Total Cumulative Distributions

for the Fiscal Year

 

            

 

% Breakdown of the Total Cumulative

Distributions for the Fiscal Year

 

 
iShares ETF  

 

Net

Investment

Income

     

Net Realized

Capital Gains

     

Return of

Capital

     

Total Per

Share

            

 

Net

Investment

Income

   

Net Realized

Capital Gains

   

Return of

Capital

   

Total Per

Share

 

MSCI Austria(a)

  $ 0.085837     $     $ 0.030308     $ 0.116145          74      26   100

MSCI Belgium(a)

   0.283588            0.071921      0.355509          80        20    100 

MSCI Sweden(a)

   0.373126            0.138030      0.511156             73        27    100 

 

 (a) 

The Fund estimates that it has distributed more than its net investment income and net realized capital gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in the Fund is returned to the shareholder. A return of capital does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income”. When distributions exceed total return performance, the difference will incrementally reduce the Fund’s net asset value per share.

 

Premium/Discount Information

Information on the Fund’s net asset value, market price, premiums and discounts, and bid-ask spreads can be found at iShares.com.

 

 

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Director and Officer Information

 

The Board of Directors has responsibility for the overall management and operations of the Funds, including general supervision of the duties performed by BFA and other service providers. Each Director serves until he or she resigns, is removed, dies, retires or becomes incapacitated. Each officer shall hold office until his or her successor is elected and qualifies or until his or her death, resignation or removal. Directors who are not “interested persons” (as defined in the 1940 Act) of the Company are referred to as independent directors (“Independent Directors”).

The registered investment companies advised by BFAor its affiliates (the “BlackRock-advised Funds”) are organized into one complex of open-end equity, multi-asset, index and money market funds (the “BlackRock Multi-Asset Complex”), one complex of closed-end funds and open-end non-index fixed-income funds (the “BlackRock Fixed-Income Complex”) and one complex of ETFs (“Exchange-Traded Fund Complex”) (each, a “BlackRock Fund Complex”). Each Fund is included in the BlackRock Fund Complex referred to as the Exchange-Traded Fund Complex. Each Director also serves as a Trustee of iShares Trust and a Trustee of iShares U.S. ETF Trust and, as a result, oversees all of the funds within the Exchange-Traded Fund Complex, which consists of 368 funds as of August 31, 2020. With the exception of Robert S. Kapito, Salim Ramji and Charles Park, the address of each Director and officer is c/o BlackRock, Inc., 400 Howard Street, San Francisco, CA 94105. The address of Mr. Kapito, Mr. Ramji and Mr. Park is c/o BlackRock, Inc., ParkAvenue Plaza, 55 East 52nd Street, New York, NY 10055. The Board has designated Cecilia H. Herbert as its Independent Board Chair. Additional information about the Funds’ Directors and officers may be found in the Funds’ combined Statement of Additional Information, which is available without charge, upon request, by calling toll-free 1-800-iShares (1-800-474-2737).

 

Interested Directors
    
  Name (Age)      Position(s)  

Principal Occupation(s)

During the Past 5 Years

        Other Directorships Held by Director        
Robert S.
Kapito(a) (63)
  Director (since 2009).  President, BlackRock, Inc. (since 2006); Vice Chairman of BlackRock, Inc. and Head of BlackRock’s Portfolio Management Group (since its formation in 1998) and BlackRock, Inc.’s predecessor entities (since 1988); Trustee, University of Pennsylvania (since 2009); President of Board of Directors, Hope & Heroes Children’s Cancer Fund (since 2002).    Director of BlackRock, Inc. (since 2006); Trustee of iShares Trust (since 2009); Trustee of iShares U.S. ETF Trust (since 2011).
Salim Ramji(b)
(50)
  Director (since 2019).  Senior Managing Director, BlackRock, Inc. (since 2014); Global Head of BlackRock’s ETF and Index Investments Business (since 2019); Head of BlackRock’s U.S. Wealth Advisory Business (2015-2019); Global Head of Corporate Strategy, BlackRock, Inc. (2014-2015); Senior Partner, McKinsey & Company (2010-2014).    Trustee of iShares Trust (since 2019); Trustee of iShares U.S. ETF Trust (since 2019).

 

(a) 

Robert S. Kapito is deemed to be an “interested person” (as defined in the 1940 Act) of the Company due to his affiliations with BlackRock, Inc. and its affiliates.

(b) 

Salim Ramji is deemed to be an “interested person” (as defined in the 1940 Act) of the Company due to his affiliations with BlackRock, Inc. and its affiliates.

 

Independent Directors
    
  Name (Age)      Position(s)  

Principal Occupation(s)

During the Past 5 Years

        Other Directorships Held by Director        
Cecilia H.
Herbert (71)
  Director (since 2005); Independent Board Chair (since 2016).  Chair of the Finance Committee (since 2019) and Trustee and Member of the Finance, Audit and Quality Committees of Stanford Health Care (since 2016); Trustee of WNET, New York’s public media company (since 2011) and Member of the Audit Committee (since 2018) and Investment Committee (since 2011); Chair (1994-2005) and Member (since 1992) of the Investment Committee, Archdiocese of San Francisco; Trustee of Forward Funds (14 portfolios) (2009-2018); Trustee of Salient MF Trust (4 portfolios) (2015-2018); Director (1998-2013) and President (2007-2011) of the Board of Directors, Catholic Charities CYO; Trustee (2002-2011) and Chair of the Finance and Investment Committee (2006-2010) of the Thacher School.    Trustee of iShares Trust (since 2005); Trustee of iShares U.S. ETF Trust (since 2011); Independent Board Chair of iShares Trust and iShares U.S. ETF Trust (since 2016); Trustee of Thrivent Church Loan and Income Fund (since 2019).
Jane D.
Carlin (64)
  Director (since 2015); Risk Committee Chair (since 2016).  Consultant (since 2012); Member of the Audit Committee (2012-2018), Chair of the Nominating and Governance Committee (2017-2018) and Director of PHH Corporation (mortgage solutions) (2012-2018); Managing Director and Global Head of Financial Holding Company Governance & Assurance and the Global Head of Operational Risk Management of Morgan Stanley (2006-2012).    Trustee of iShares Trust (since 2015); Trustee of iShares U.S. ETF Trust (since 2015); Member of the Audit Committee (since 2016) and Director of The Hanover Insurance Group, Inc. (since 2016).
Richard L.
Fagnani (65)
  Director (since 2017); Audit Committee Chair (since 2019).  Partner, KPMG LLP (2002-2016).    Trustee of iShares Trust (since 2017); Trustee of iShares U.S. ETF Trust (since 2017).

 

 

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 60


Director and Officer Information  (continued)

 

Independent Directors (continued)
    
 Name (Age)  Position(s)  

Principal Occupation(s)

During the Past 5 Years

  Other Directorships Held by Director

John E.

Kerrigan (65)

  

Director (since 2005); Nominating and Governance and Equity Plus Committee Chairs

(since 2019).

  Chief Investment Officer, Santa Clara University (since 2002).  Trustee of iShares Trust (since 2005); Trustee of iShares U.S. ETF Trust (since 2011).

Drew E.

Lawton (61)

  

Director (since 2017); 15(c) Committee Chair

(since 2017).

  Senior Managing Director of New York Life Insurance Company (2010-2015).  Trustee of iShares Trust (since 2017); Trustee of iShares U.S. ETF Trust (since 2017).

John E.

Martinez (59)

  

Director (since 2003); Securities Lending Committee Chair

(since 2019).

  Director of Real Estate Equity Exchange, Inc. (since 2005); Director of Cloudera Foundation (since 2017); and Director of Reading Partners (2012-2016).  Trustee of iShares Trust (since 2003); Trustee of iShares U.S. ETF Trust (since 2011); Director of Cloudera Foundation (since 2017); and Director of Reading Partners (2012-2016).

Madhav V.

Rajan (56)

  

Director (since 2011); Fixed Income Plus Committee Chair

(since 2019).

  Dean, and George Pratt Shultz Professor of Accounting, University of Chicago Booth School of Business (since 2017); Chair of the Board for the Center for Research in Security Prices, LLC (since 2020); Robert K. Jaedicke Professor of Accounting, Stanford University Graduate School of Business (2001-2017); Professor of Law (by courtesy), Stanford Law School (2005-2017); Senior Associate Dean for Academic Affairs and Head of MBA Program, Stanford University Graduate School of Business (2010-2016).  Trustee of iShares Trust (since 2011); Trustee of iShares U.S. ETF Trust (since 2011).
Officers
   
 Name (Age)  Position(s)  

Principal Occupation(s)

During the Past 5 Years

Armando

Senra (49)

  

President

(since 2019).

  Managing Director, BlackRock, Inc. (since 2007); Head of U.S., Canada and Latam iShares, BlackRock, Inc. (since 2019); Head of Latin America Region, BlackRock, Inc. (2006-2019); Managing Director, Bank of America Merrill Lynch (1994-2006).

Trent

Walker (46)

  

Treasurer and Chief Financial Officer

(since 2020).

  Managing Director, BlackRock, Inc. (since September 2019); Executive Vice President of PIMCO (2016-2019); Senior Vice President of PIMCO (2008-2015); Treasurer (2013-2019) and Assistant Treasurer (2007-2017) of PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series, PIMCO Equity Series VIT, PIMCO Managed Accounts Trust, 2 PIMCO-sponsored interval funds and 21 PIMCO-sponsored closed-end funds.

Charles

Park (53)

  

Chief Compliance Officer

(since 2006).

  Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the BlackRock Multi-Asset Complex and the BlackRock Fixed-Income Complex (since 2014); Chief Compliance Officer of BFA (since 2006).

Deepa

Damre (45)

  

Secretary

(since 2019).

  Managing Director, BlackRock, Inc. (since 2014); Director, BlackRock, Inc. (2009-2013).

Scott

Radell (51)

  

Executive Vice President

(since 2012).

  Managing Director, BlackRock, Inc. (since 2009); Head of Portfolio Solutions, BlackRock, Inc. (since 2009).

Alan

Mason (59)

  

Executive Vice President

(since 2016).

  Managing Director, BlackRock, Inc. (since 2009).

Marybeth

Leithead (57)

  

Executive Vice President

(since 2019).

  Managing Director, BlackRock, Inc. (since 2017); Chief Operating Officer of Americas iShares (since 2017); Portfolio Manager, Municipal Institutional & Wealth Management (2009-2016).

 

 

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General Information

 

Electronic Delivery

Shareholders can sign up for email notifications announcing that the shareholder report or prospectus has been posted on the iShares website at iShares.com. Once you have enrolled, you will no longer receive prospectuses and shareholder reports in the mail.

To enroll in electronic delivery:

 

  

Go to icsdelivery.com.

  

If your brokerage firm is not listed, electronic delivery may not be available. Please contact your broker-dealer or financial advisor.

Householding

Householding is an option available to certain fund investors. Householding is a method of delivery, based on the preference of the individual investor, in which a single copy of certain shareholder documents can be delivered to investors who share the same address, even if their accounts are registered under different names. Please contact your broker-dealer if you are interested in enrolling in householding and receiving a single copy of prospectuses and other shareholder documents, or if you are currently enrolled in householding and wish to change your householding status.

Availability of Quarterly Schedule of Investments

The iShares Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The iShares Funds’ Forms N-Q are available on the SEC’s website at sec.gov. The iShares Funds also disclose their complete schedule of portfolio holdings on a daily basis on the iShares website at iShares.com.

Availability of Proxy Voting Policies and Proxy Voting Records

A description of the policies and procedures that the iShares Funds use to determine how to vote proxies relating to portfolio securities and information about how the iShares Funds voted proxies relating to portfolio securities during the most recent twelve-month period ending June 30 is available without charge, upon request (1) by calling toll-free 1-800-474-2737; (2) on the iShares website at iShares.com; and (3) on the SEC website at sec.gov.

A description of the Company’s policies and procedures with respect to the disclosure of the Fund’s portfolio securities is available in the Fund Prospectus. The Fund discloses its portfolio holdings daily and provides information regarding its top holdings in Fund fact sheets at iShares.com.

 

 

E N E R A L  N F O R M A T I O N

 62


Glossary of Terms Used in this Report

 

Counterparty Abbreviations
SCB  Standard Chartered Bank
Currency Abbreviations
EUR  Euro
SEK  Swedish Krona
USD  United States Dollar

 

 

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Want to know more?

iShares.com    |    1-800-474-2737

This report is intended for the Funds’ shareholders. It may not be distributed to prospective investors unless it is preceded or accompanied by the current prospectus.

Investing involves risk, including possible loss of principal.

The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI Inc., nor does this company make any representation regarding the advisability of investing in the iShares Funds. BlackRock is not affiliated with the company listed above.

©2020 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-AR-802-0820

 

LOGO

  LOGO             


 

LOGO AUGUST 31, 2020

 

  2020 Annual Report

 

iShares, Inc.

 

· 

iShares MSCI Eurozone ETF  |  EZU  |  Cboe BZX

· 

iShares MSCI Germany ETF  |  EWG  |  NYSE Arca

· 

iShares MSCI Italy ETF  |  EWI  |  NYSE Arca

· 

iShares MSCI Spain ETF  |  EWP  |  NYSE Arca

· 

iShares MSCI Switzerland ETF  |  EWL  |  NYSE Arca

 

 

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of each Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect to receive all future reports in paper free of charge. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds held with your financial intermediary.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by contacting your financial intermediary. Please note that not all financial intermediaries may offer this service.


The Markets in Review

Dear Shareholder,

The 12-month reporting period as of August 31, 2020 has been a time of sudden change in global financial markets, as the emergence and spread of the coronavirus led to a vast disruption in the global economy and financial markets. For most of the first half of the reporting period, U.S. equities and bonds both delivered impressive returns, despite fears and doubts about the economy that were ultimately laid to rest with unprecedented monetary stimulus and a sluggish yet resolute performance from the U.S. economy. But as the threat from the coronavirus became more apparent throughout February and March 2020, countries around the world took economically disruptive countermeasures. Stay-at-home orders and closures of non-essential businesses became widespread, many workers were laid off, and unemployment claims spiked, causing a global recession and a sharp fall in equity prices.

After markets hit their lowest point during the reporting period in late March 2020, a steady recovery ensued, as businesses began to re-open and governments learned to adapt to life with the virus. Equity prices continued to rise throughout the summer, fed by strong fiscal and monetary support and improving economic indicators. By the end of the reporting period, all major investment categories posted positive returns, and many equity indices were near all-time highs. In the United States, large-capitalization stocks advanced significantly, outperforming small-capitalization stocks, which also gained for the reporting period. International equities from developed economies also turned in a positive performance while lagging emerging market stocks, which rebounded sharply.

During the market downturn, the performance of different types of fixed-income securities initially diverged due to a reduced investor appetite for risk. U.S. Treasuries benefited from the risk-off environment, and posted solid returns, as the 10-year U.S. Treasury yield (which is inversely related to bond prices) touched an all-time low. In the corporate bond market, support from the U.S. Federal Reserve (the “Fed”) assuaged credit concerns and both investment-grade and high-yield bonds recovered to post positive returns.

The Fed reduced interest rates twice in late 2019 to support slowing economic growth. After the coronavirus outbreak, the Fed instituted two emergency rate cuts, pushing short-term interest rates close to zero. To stabilize credit markets, the Fed also implemented a new bond-buying program, as did several other central banks around the world, including the European Central Bank and the Bank of Japan.

Looking ahead, while coronavirus-related disruptions have clearly hindered worldwide economic growth, we believe that the global expansion is likely to continue as economic activity resumes. Several risks remain, however, including a potential resurgence of the coronavirus amid loosened restrictions, policy fatigue among governments already deep into deficit spending, and structural damage to the financial system from lengthy economic interruptions.

Overall, we favor a moderately positive stance toward risk, and in particular toward credit given the extraordinary central bank measures taken in recent months. This support extends beyond investment-grade corporates and into high-yield, leading to attractive opportunities in that end of the market. We believe that international diversification and sustainable investments can help provide portfolio resilience, and the disruption created by the coronavirus appears to be accelerating the shift toward sustainable investments. We remain neutral on equities overall while favoring European stocks, which are poised for cyclical upside as re-openings continue.

In this environment, our view is that investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit ishares.com for further insight about investing in today’s markets.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock, Inc.

LOGO

Rob Kapito

President, BlackRock, Inc.

 

Total Returns as of August 31, 2020
   6-Month  12-Month 

U.S. large cap equities
(S&P 500® Index)

 19.63%   21.94%  

U.S. small cap equities
(Russell 2000® Index)

 6.57      6.02     

International equities
(MSCI Europe, Australasia, Far East Index)

 7.10      6.13     

Emerging market equities
(MSCI Emerging Markets Index)

 11.23      14.49     

3-month Treasury bills
(ICE BofA 3-Month U.S. Treasury Bill Index)

 0.34      1.26     

U.S. Treasury securities
(ICE BofA 10-Year U.S. Treasury Index)

 4.67      8.93     

U.S. investment grade bonds
(Bloomberg Barclays U.S. Aggregate Bond Index)

 2.98      6.47     

Tax-exempt municipal bonds
(S&P Municipal Bond Index)

 0.29      3.15     

U.S. high yield bonds
(Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)

 3.04      4.65     

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

 

 

 

2 

H I S A G E I S N O T A R T  O F  Y O U R U N D  R E P O R T


Table of Contents

 

   Page 

 

 

The Markets in Review

   2 

Market Overview

   4 

Fund Summary

   5 

About Fund Performance

   15 

Shareholder Expenses

   15 

Schedules of Investments

   16 

Financial Statements

  

Statements of Assets and Liabilities

   32 

Statements of Operations

   34 

Statements of Changes in Net Assets

   36 

Financial Highlights

   39 

Notes to Financial Statements

   44 

Report of Independent Registered Public Accounting Firm

   53 

Important Tax Information (Unaudited)

   54 

Board Review and Approval of Investment Advisory Contract

   55 

Supplemental Information

   61 

Director and Officer Information

   63 

General Information

   65 

Glossary of Terms Used in this Report

   66 

 

 

 


Market Overview