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iShares Trust

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Table of Contents

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Market Overview

iShares Trust

Global Market Overview

Global equity markets declined in U.S. dollar terms during the 12 months ended August 31, 2022 (“reporting period”). The MSCI ACWI, a broad global equity index that includes both developed and emerging markets, returned -15.88% in U.S. dollar terms for the reporting period.

For the first third of the reporting period, economic recovery supported stocks in most regions of the world. The global economy continued to rebound from the impact of restrictions imposed at the beginning of the coronavirus pandemic, as mitigation and adaptation allowed most economic activity to continue. However, substantial challenges emerged at the beginning of 2022 which negatively affected stock prices. Inflation rose significantly in many countries, reducing consumers’ purchasing power and leading many central banks to tighten monetary policy. Russia’s invasion of Ukraine presented a further challenge to the global economy, disrupting important commodities markets.

The U.S. economy grew briskly over the final half of 2021, powered primarily by consumer spending. Record-high personal savings rates allowed consumers to spend at an elevated level, releasing pent-up demand for goods and services. Growth subsequently stalled in the first half of 2022, and the economy contracted amid lower inventories and faltering business investment. Despite the economic downturn, unemployment declined substantially, falling to 3.7% in August 2022 while the number of long-term unemployed dropped below the pre-pandemic level. Although high inflation negatively impacted consumer sentiment, which declined significantly, consumer spending continued to grow.

Rising inflation led to a shift in policy from the U.S. Federal Reserve (“the Fed”). As the reporting period began, the Fed was using accommodative monetary policy to stimulate the economy. Short-term interest rates were kept at near-zero levels, and the Fed used bond-buying programs to stabilize debt markets. However, rising prices led the Fed to tighten monetary policy during the reporting period in an attempt to prevent runaway inflation. The Fed slowed and then ended its bond-buying activities, finally reversing course as it began to reduce its balance sheet in June 2022. In March 2022, the Fed began to raise short-term interest rates, followed by three more increases for a total increase of 225 basis points, the most rapid rise in decades. Interest rates rose significantly in response, leading to higher borrowing costs for businesses. In that environment, the U.S. dollar significantly appreciated relative to most foreign currencies.

Stocks declined in Europe in U.S. dollar terms as economic growth stalled and the euro declined sharply relative to the U.S. dollar. Significantly higher inflation and Russia’s invasion of Ukraine negatively impacted equities. Russia is an important trading partner with many European countries, and new sanctions imposed limits on certain types of trade with Russia. Investors became concerned that the sharp rise in energy prices during the reporting period would constrain economic growth, as Europe relies on imported energy for much of its industrial and heating needs. The European Central Bank (“ECB”) responded to elevated inflation by raising interest rates in July 2022, the first such increase in over a decade.

Despite relatively low inflation by global standards, Asia-Pacific stocks declined significantly in U.S. dollar terms. Chinese stocks faced significant headwinds amid regulatory interventions by the Chinese government and strict lockdowns following COVID-19 outbreaks. Japanese stocks also declined amid an economic contraction in the first quarter of 2022 and a sharp decline in the Japanese yen relative to the U.S. dollar. Emerging market stocks declined substantially, as higher interest rates and a strengthening U.S. dollar raised the cost of borrowing in many emerging economies.

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Investment Objective

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

Performance

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Small-capitalization Brazilian stocks declined during the reporting period amid high inflation, rising interest rates, and slowing economic growth. Rising commodities prices and a shift toward value stocks bolstered Brazilian stocks in the first quarter of 2022 as prices for Brazil’s primary exports – oil, metals, and agricultural commodities – rose. However, Brazilian markets later declined as slowing global growth and recessionary fears started to weigh on commodities prices. Small-capitalization stocks are generally more sensitive to economic shifts, and inflation tends to pressure their margins more than larger peers.

The consumer discretionary sector was the largest detractor from the Index’s return, pressured by inflation, supply-chain disruptions, and weakening consumer sentiment. Education services stocks declined after a pandemic rally as students returned to in-person learning, enrollment levels weakened, and investor sentiment shifted away from stay-at-home stocks. The consumer durables industry detracted as rising costs and interest rates pressured homebuilder stocks amid slowing home sales and weakening margins. Retailers declined amid rising interest rates and high levels of consumer debt, while inflation pressured margins and lowered expectations for sales growth.

Airlines and aerospace and defense stocks drove substantial detraction from the industrials sector. Air traffic failed to return to pre-pandemic levels, and revenue per passenger miles, a measure of demand, remained well below 2019 figures. High fuel costs weighed on airlines’ profits, while concerns surrounding financing led to analyst downgrades. Within aerospace and defense, aircraft manufacturer stocks declined amid continuing quarterly losses, exacerbated by a failed merger between two major players.

Conversely, the energy sector contributed to the Index’s return. Energy prices rose and remained historically high, which drove strong revenue and earnings growth for oil producers.

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Investment Objective

The iShares MSCI China ETF (the “Fund”) seeks to track the investment results of an index composed of Chinese equities that are available to international investors, as represented by the MSCI China 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

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Chinese equities declined sharply during the reporting period as economic growth slowed amid continuing pandemic-related restrictions, while a wide-ranging regulatory crackdown continued to raise uncertainty that pressured technology stocks and the property market, leading to a homebuyer boycott of mortgage payments. Unemployment rose and consumer spending weakened, while inflationary pressures and supply chain disruptions continued. Concerns about delisting from U.S. exchanges arising from audit requirements also weighed on Chinese stocks.

The consumer discretionary sector drove the majority of detraction from the Index’s return amid concerns surrounding slowing growth, as well as public health and regulatory restrictions, as government efforts to rein in large internet firms, which included billions of dollars in anti-trust fines, weighed on investor sentiment. The internet and direct marketing industry declined as market saturation and slowing consumption pressured earnings. Meanwhile, growth in cloud businesses stagnated amid competition from government-backed rivals. Automobile manufacturers also declined as vehicle sales slowed when pandemic-related lockdowns slowed production and car purchases.

The communication services sector detracted from the Index’s return. Media and entertainment stocks declined amid restrictions limiting video game use and advertising. Revenue growth slowed for media and videogaming firms, constraining earnings and raising concerns about future growth. China also temporarily suspended and subsequently resumed the approval of new video games but excluded titles from two of the country’s largest gaming companies.

In the healthcare sector, stocks in the pharmaceuticals, biotechnology, and life sciences industry declined as acquisition and initial public offering activity slowed. Tighter regulations that included drug price reductions and fears about potential U.S. de-listing created headwinds for the healthcare sector. In addition, pharmaceutical companies with exposure to COVID-19 vaccines also declined, as competitors introduced a COVID-19 pill.

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Investment Objective

The iShares MSCI China Small-Cap ETF (the “Fund”) seeks to track the investment results of an index composed of small-capitalization Chinese equities that are available to international investors, as represented by the MSCI China Small Cap Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

Performance

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Smaller-capitalization Chinese equities declined sharply during the reporting period as economic growth slowed amid ongoing pandemic-related restrictions, while a wide-ranging regulatory crackdown continued to raise uncertainty that pressured technology stocks and the property market, leading to a liquidity crisis. Unemployment rose and consumer spending weakened, while inflationary pressures and supply chain disruptions continued. Concerns about delisting from U.S. exchanges arising from audit requirements also weighed on Chinese stocks. Declining liquidity, COVID-19 lockdowns, and concerns about high valuations were especially challenging for smaller companies.

The real estate sector was the largest detractor from the Index’s return, as real estate development and management stocks declined sharply amid the property market crisis. The government’s crackdown on borrowing drove many developers to default, and home prices declined, leading to widespread mortgage boycotts. Companies tied to the property market, including developers, failed to meet obligations. Defaults (or warnings thereof) and ratings agency downgrades weighed on investor sentiment.

Regulatory issues also impacted the healthcare sector, which detracted substantially from the Index’s return amid drug price reductions, tighter research and development policies in China, drug approval setbacks, and fears about delisting. Acquisition and initial public offering activity slowed as investment in COVID-19 treatments receded, driving biotechnology and pharmaceuticals stocks lower.

Consumer discretionary stocks also declined amid public health and regulatory restrictions, along with weakening growth, high unemployment, slowing consumer spending, and delisting concerns. The internet and direct marketing retail industry declined as market saturation and slowing consumption pressured earnings.

Information technology stocks also detracted from the Index’s return, led by the software industry, amid the regulatory crackdown. Stocks that mine cryptocurrency or serve miners declined due to the sharp decline of cryptocurrency market and China’s ban on cryptocurrency mining in May 2021.

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Investment Objective

The iShares MSCI Indonesia ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Indonesian equities, as represented by the MSCI Indonesia 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

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Index performance through May 28, 2019 reflects the performance of MSCI Indonesia Investable Market Index. Index performance beginning on May 29, 2019 reflects the performance of the MSCI Indonesia IMI 25/50 Index.

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Stocks in Indonesia rose significantly during the reporting period as the Indonesian economy maintained a steady pace of growth. Improving consumer sentiment amid the relaxation of COVID-19 restrictions led to increases in private consumption, which makes up more than half of the country’s domestic output. To help keep energy costs low for consumers, the government doubled its spending on subsidies. Exports reached new all-time highs amid rising demand for commodities. This resulted in larger-than-expected trade surpluses, which helped stabilize the nation’s currency. The country’s central bank chose not to increase interest rates for much of the reporting period, favoring other tools to fight inflation, but it changed course in August 2022, raising its benchmark rate by 25 basis points amid accelerating inflation.

The financials sector contributed the most to the Index’s return, led by the banking industry. Indonesia’s largest banks reported notable increases in net profits in 2021 and the first half of 2022, reversing 2020 declines. Loan activity accelerated amid the country’s coronavirus pandemic recovery, as more corporate borrowers sought funds for working capital and investments, and consumer demand for mortgages and vehicle loans increased. Improving loan repayment rates also supported income growth, while enabling banks to reduce pandemic-era loan loss provisions.

Energy company stocks also contributed notably to the Index’s performance. Coal producers benefited from a surge in commodities prices amid the outbreak of war in Ukraine. Sales of coal gained an additional boost from European buyers seeking new sources of the raw material ahead of E.U. sanctions banning Russian coal imports.

On the downside, the materials sector detracted from the Index’s return, as the construction materials industry struggled with supply shortages and the rising costs of raw materials. Increased competition and production overcapacity also weighed on industry earnings.

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Investment Objective

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

Performance

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Peruvian equities advanced slightly during the reporting period, as political and economic turbulence weighed on investor sentiment. Peru’s monthly economic output surpassed levels prior to the coronavirus pandemic for much of the reporting period. However, the country’s central bank had difficulty taming inflation, which accelerated at its fastest pace in 25 years. Rising food and fuel prices, exacerbated by Russia’s invasion of Ukraine, heightened social tensions across the country, leading to rioting and strikes. The government aimed to alleviate these economic pressures through increased social spending, direct payments to citizens, tax relief, and the provision of fertilizer supplies for farmers. Meanwhile, Peru’s government faced turmoil of its own with multiple cabinet reshuffles and presidential impeachment attempts.

The financials sector contributed the most to the Index’s return, driven by the diversified banks industry. Corporate loan activity at the country’s largest financial services holding company grew through much of the reporting period, overcoming government policies that limited banks’ control over commercial rates, a development that slowed credit demand elsewhere in the industry. Rising interest rates also boosted net income and profitability.

The consumer staples sector also contributed to the Index’s performance, most notably the food products industry. Shipments of sugar and molasses, among Peru’s top agricultural exports, increased, especially to the U.S.

On the downside, materials stocks detracted significantly from the Index’s return amid political and operational turmoil in the metals and mining industry. The potential for closures, costs related to physical site damages, and COVID-19-related employee absences weighed on profits at gold mining companies. Among silver miners, production decreased while costs associated with derivatives contracts and rising interest rates increased. Protests from indigenous communities led to shutdowns at copper mines representing a significant amount of the country’s copper production.

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Investment Objective

The iShares MSCI Philippines ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Philippine equities, as represented by the MSCI Philippines 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

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Index performance through November 30, 2020 reflects the performance of the MSCI Philippines Investible Market Index (IMI). Index performance beginning on December 1, 2020 reflects the performance of the MSCI Philippines IMI 25/50 Index.

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Philippine stocks declined substantially during the reporting period as a rapid rise in inflation and concerns over the Philippine government’s finances weighed on an otherwise robust economy. Amid a relaxation of coronavirus-related restrictions, the economy grew at one of the fastest rates among all Asian countries. Private consumption, a key driver of the economy, expanded sharply, then began to slow as prices rose. Higher global energy prices, stemming from Russia’s invasion of Ukraine, led to a deceleration in agricultural production and manufacturing. The government faced pressure to maintain economic growth amid a sizable budget deficit, which expanded in the wake of coronavirus pandemic support programs. Concerns over an economic slowdown diminished investor enthusiasm for Philippine stocks and the Philippine peso, which declined 12% relative to the U.S. dollar.

The industrials sector detracted the most from the Index’s return. Fortunes were mixed for stocks of industrial conglomerates, as macroeconomic uncertainty and currency depreciation outweighed otherwise solid demand for goods and services. Rising energy costs narrowed margins across conglomerates’ portfolios, especially input costs in the petrochemicals business. In contrast, businesses linked to consumer spending, such as brick-and-mortar retail and food production, strengthened. However, rapidly rising inflation slowed the pace of consumption late in the reporting period, clouding the outlook for continued growth.

Companies in the real estate sector also weighed on the Index’s performance, as revenue growth decelerated, namely in residential development. Leasing revenues from shopping centers, hotels, and resorts supported earnings. However, developers exhibited caution, opting to slow down capital expenditure and land acquisition plans.

On the upside, the energy sector contributed to the Index’s return, led by the coal and consumable fuels industry. Coal production hit record highs, while surging global demand for the raw material boosted prices and revenues.

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Investment Objective

The iShares MSCI Poland ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Polish equities, as represented by the MSCI Poland 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

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

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

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Stocks in Poland declined substantially for the reporting period, as accelerating inflation and the Polish government’s attempts to contain it weighed on the economy. War in neighboring Ukraine, looming energy shortages, and general economic weakness discouraged investors, driving Polish stock valuations down to record lows. Inflation reached a 25-year high, even as the Polish central bank executed 10 consecutive interest rate increases during the reporting period. Demand for goods and services decreased, both from domestic consumers and the country’s primary trading partners, and data signaled a contraction in manufacturing activity. The government sought to help consumers through tax reductions and mortgage relief yet failed to maintain voter confidence. The Polish zloty’s decline relative to the U.S. dollar diminished the value of Polish stocks in U.S. dollar terms.

The financials sector was the largest detractor from the Index’s return, as the diversified banking industry bore the brunt of government policies aimed at easing consumer woes. Higher interest rates made it increasingly difficult for homeowners to pay their mortgages, spurring officials to introduce a moratorium on payments. This measure significantly impacted Poland’s two largest banks, which represent approximately 40% of the domestic mortgage market, and soured investor sentiment amid concerns over revenue losses.

Stocks in the consumer discretionary sector weighed on the Index’s return, as political and macroeconomic headwinds constrained retail activity. Higher costs diminished profits in the internet and direct marketing retail industry, which revised growth expectations downward amid rising inflation. Textiles, apparel, and luxury goods companies faced a significant decline in income following their exit from the Russian market.

The communication services sector also detracted from the Index’s performance. Although revenues increased among video game companies in the interactive home entertainment industry, production delays and declining sales sapped investor sentiment.

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Investment Objective

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

Performance

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was April 29, 2014. The first day of secondary market trading was May 1, 2014.

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Stocks in Qatar advanced considerably for the reporting period, as income from its key export, liquefied natural gas (“LNG”), rose sharply. Qatar is one of the world’s largest LNG exporters, and shipments of the product surged after the onset of the war in Ukraine. Demand for Qatari gas, which was relatively inexpensive compared to benchmark European prices, proved particularly strong. The Middle Eastern nation also increased shipments of crude oil, its second-largest export. Further, investors viewed Qatar’s status as host of soccer’s upcoming 2022 FIFA World Cup as a positive development for the domestic economy. As with other Persian Gulf countries, energy prices were a key catalyst for Qatar’s stock market, and the price of crude oil and natural gas both increased during the reporting period.

The financials sector contributed the most to the Index’s return for the reporting period. Banks, which represented approximately 49% of the Index on average, benefited from the rise in oil and gas prices as many of the businesses they finance are involved in the energy sector. Assets and earnings surged on the strength of increased deposits, financing, and investment activity. Loan-to-deposit ratios shrank, improving banks’ liquidity, and fee and commission revenue increased, reflecting improvement in banking service operations.

The industrials sector also contributed to the Index’s performance. The nation’s leading industrial conglomerate reported substantially higher earnings as it raised prices significantly for the fertilizers, petrochemicals, fuel additives, and steel products it sells. That helped the company overcome notably higher production costs and slightly weakened demand resulting from China’s COVID-19 lockdowns. Sales volumes also rose, aided by improved manufacturing efficiency.

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Investment Objective

The iShares MSCI Saudi Arabia ETF (the “Fund”) seeks to track the investment results of a broad-based index composed of Saudi Arabian equities, as represented by the MSCI Saudi Arabia 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

GROWTH OF $10,000 INVESTMENT

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was September 16, 2015. The first day of secondary market trading was September 17, 2015.

Past performance is not an indication 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” for more information.

Expense Example

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Portfolio Management Commentary

Stocks in Saudi Arabia advanced for the reporting period. Prices for crude oil, which accounts for 70% of the nation’s exports and more than half of its government revenue, fluctuated dramatically during the reporting period, particularly after Russia’s invasion of Ukraine. Following the invasion, many global economies stopped accepting shipments of Russian oil and looked to other sources for supplies. Saudi Arabia’s government surplus rose 50% during the reporting period amid high oil prices and increased production. That helped the nation somewhat offset the impact of rising global inflation, slowing global economic growth, and rising interest rates.

The financials sector contributed the most to the Index’s return, as earnings in the banking industry, fueled by income from high oil prices, rose for the nation’s largest lenders. Increased financing, higher banking service fees, and higher investment income further supported earnings. Banks benefited from a strong domestic economy, which reached the highest growth rate in a decade as it recovered from the height of the coronavirus-driven economic slowdown. With oil prices elevated, bond rating services expected credit ratings to remain strong for Saudi Arabian lenders. In addition, Saudi Arabia’s central bank instituted a financial support package for banks aimed at improving liquidity and boosting lending.

The materials sector also contributed to the Index’s performance, driven by higher earnings and plans to increase capital at a state-owned mining company. Stocks in the energy sector also advanced, as a state-owned oil company posted substantially higher profits.

On the downside, the consumer discretionary sector detracted from the Index’s return, as sales fell for a large retailer amid rising costs. The communication services sector also declined as a state-owned telecommunications provider’s rising expenses weighed on earnings.

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