iShares, Inc.

Table of Contents

Market Overview

iShares, Inc.

Global Market Overview

Global equity markets advanced during the 12 months ended August 31, 2023 (“reporting period”), supported by continued economic growth and moderating inflation. The MSCI ACWI, a broad global equity index that includes both developed and emerging markets, returned 13.95% in U.S. dollar terms for the reporting period. Despite concerns about the impact of higher interest rates and rising prices, the global economy continued to grow, albeit at a slower pace than during the initial post-coronavirus pandemic recovery. Inflation began to subside in most regions of the world, and lower energy prices reduced pressure on consumers, leading consumer and business sentiment to improve. While the Russian invasion of Ukraine continued to disrupt trade in Europe and elsewhere, market adaptation lessened the economic impact of the ongoing war. The prices of several key commodities, including oil, natural gas, and wheat, either stabilized or declined during the reporting period, easing pressure on the world’s economies.

The U.S. Federal Reserve (“Fed”) tightened monetary policy rapidly, raising short-term interest rates seven times over the course of the reporting period. The pace of tightening decelerated as the Fed twice lowered the increment of increase before pausing entirely in June 2023, the first time it declined to take action since the tightening cycle began. However, the Fed then raised interest rates again at its July 2023 meeting and stated that it would continue to monitor economic data. The Fed also continued to decrease the size of its balance sheet by reducing the store of U.S. Treasuries it had accumulated to stabilize markets in the early phases of the pandemic.

Despite the tightening financial conditions, the U.S. economy demonstrated continued strength, and U.S. equities advanced. The economy returned to growth in the third quarter of 2022 and showed robust, if slightly slower, growth thereafter. Consumers powered the economy, increasing their spending in both nominal and inflation-adjusted terms. A strong labor market bolstered spending, as unemployment remained low, and the number of employed persons reached an all-time high. Tightness in the labor market drove higher wages, although wage growth slowed as the reporting period continued.

European stocks outpaced their counterparts in most other regions of the globe, advancing strongly for the reporting period despite modest economic growth. European stocks benefited from a solid recovery following the early phases of the war in Ukraine. While the conflict disrupted critical natural gas supplies, new sources were secured and prices declined, while a warm winter helped moderate consumption. The European Central Bank (“ECB”) responded to the highest inflation since the introduction of the euro by raising interest rates eight times and beginning to reduce the size of its debt holdings.

Stocks in the Asia-Pacific region gained, albeit at a slower pace than other regions of the world. Japan returned to growth in the fourth quarter of 2022 and first half of 2023, as strong business investment and exports helped boost the economy and support Japanese equities. However, Chinese stocks were negatively impacted by slowing economic growth. While investors were initially optimistic following China’s lifting of several pandemic-related lockdowns in December 2022, subsequent performance disappointed, and tensions with the U.S. increased. Emerging market stocks advanced modestly, as the resilient global economic environment reassured investors. The declining value of the U.S. dollar relative to many other currencies and the slowing pace of the Fed’s interest rate increases also supported emerging market stocks.

Investment Objective

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

Performance

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Expense Example

Portfolio Management Commentary

Brazilian stocks posted robust gains for the reporting period. After contracting in the fourth quarter of 2022, the country’s economy grew faster than anticipated in the first quarter of 2023, driven by a surge in agricultural output. The Brazilian real strengthened notably against the U.S. dollar, and low unemployment and an easing in the inflation rate paved the way for Brazil’s central bank to lower interest rates for the first time in three years.

The energy sector contributed the most to the Index’s return. The integrated oil and gas industry benefited from positive investor reaction to government policies introducing flexibility in the pricing of gasoline and diesel. Companies in the industry reiterated plans to increase investment in renewable energy initiatives over the next five years while still expanding oil production, assuaging investor concerns. In the second quarter of 2023, a reduction in oil prices curbed profits for oil companies in Brazil, but to a lesser extent than in other countries.

The financials sector also contributed meaningfully to the Index’s performance, led by banks. Growth in deposits and operating revenues supported banks’ balance sheets, as did higher loan volumes. In the financial exchanges and data industry, stock and bond exchanges benefited from notable growth in the volume of both traded equities and fixed-income issuance. Strong revenue growth in investment banking supported companies in the diversified capital markets industry.

On the downside, the consumer discretionary sector detracted, as a revelation of accounting fraud at an e-commerce business dampened investor sentiment for the internet and direct marketing retail industry. Another area of weakness was the consumer staples sector, where high levels of consumer debt and lower global commodities prices pressured profits in the food, beverage, and tobacco industry.

Portfolio Information

Investment Objective

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

Expense Example

Portfolio Management Commentary

Stocks in Chile advanced during the reporting period as economic growth resumed, and the country avoided a recession. The economy contracted in the first three quarters of 2022 as the Central Bank of Chile aggressively increased interest rates to address the highest inflation in almost three decades. It maintained its policy rate near a two-decade high before lowering it late in the reporting period after inflation moderated considerably. Chilean stocks rose steadily after the central bank stopped raising interest rates in late 2022. The Chilean government raised price projections for copper, which accounts for almost half of the country’s exports, twice in four months, further supporting stock prices. In addition, investors reacted favorably as conservatives gained control of a government council in charge of drafting a new constitution.

The utilities sector contributed the most to the Index’s return. Electric utilities companies posted higher revenue and improved profitability. A leading electrical utilities company, benefiting from Chile’s massive expansion of wind and solar power and higher prices, doubled its power generation capacity from renewable sources. Water utilities companies also contributed amid increased earnings, despite various weather challenges, including water shortages and heavy rain that presented service challenges.

The consumer staples sector also contributed to the Index’s performance. Within the consumer staples distribution and retail industry, a large company with operations throughout the Americas exhibited consistent sales growth, partly due to increased market share and business consolidation.

The materials and industrials sectors detracted from the Index’s return. The world’s second-largest producer of lithium for electric batteries straddles both sectors, as it also manufactures batteries and related electrical equipment. Stock in the firm, also a leading producer of industrial chemicals, fell amid declining lithium prices, which pressured earnings.

Portfolio Information

Investment Objective

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

Performance

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Expense Example

Portfolio Management Commentary

Israeli stocks declined substantially for the reporting period amid political turmoil and economic challenges. A November 2022 election brought a change in government, and the new Prime Minister proposed a controversial reform to the powers of Israel’s Supreme Court. This proposal sparked large protests and economic disruption, as some business leaders warned about the impact on Israel’s economy. While the plan was suspended in response to the protests in March 2023, it was later reintroduced and passed in July 2023, driving uncertainty about Israel’s political stability. The declining value of the Israeli shekel relative to the U.S. dollar also weighed on Israeli stocks in U.S. dollar terms, as unrest surrounding the judicial reform negatively impacted Israel’s currency.

Israeli financials stocks were the largest detractors from the Index’s return amid substantial declines in the banking industry. A large Israeli bank’s investment in a U.S. bank declined sharply in the wake of a series of regional bank failures, negatively impacting earnings. While higher interest rates generally benefited Israeli banks, near the end of the reporting period the Bank of Israel declined to raise interest rates for the first time since the tightening cycle began in April 2022.

The real estate sector also detracted from the Index’s performance, particularly the real estate management and development industry. The combination of high real estate prices and rising interest rates led to a softening of real estate activity, and total transactions declined substantially. High interest rates also pressured the construction and engineering industry in the industrials sector, as mortgage lending weakened. Building starts declined notably, and the lower value of the Israeli shekel drove the cost of building materials, which are often imported, significantly higher.

Portfolio Information

Investment Objective

The iShares MSCI South Africa ETF (the “Fund”) seeks to track the investment results of an index composed of South African equities, as represented by the MSCI South Africa 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)

Expense Example

Portfolio Management Commentary

Stocks in South Africa advanced marginally for the reporting period as the nation’s economy expanded despite high inflation and rising interest rates. Stocks rallied in late 2022 to an all-time high amid optimism regarding China’s reopening from coronavirus restrictions. Meanwhile, the South African Reserve Bank raised interest rates five times, reaching a 14-year high. Late in the reporting period, inflation moderated to within the central bank’s target range of 3 – 6%, and the central bank paused interest rate increases. That helped stocks rebound from early 2023, when they fell amid global banking turmoil and recession concerns tied to widespread power outages. The declining value of the South African rand relative to the U.S. dollar also weighed on South African stocks in U.S. dollar terms.

The consumer discretionary sector contributed the most to the Index’s return. The internet and direct marketing retail industry advanced, as a large online retailer and technology investment company benefited from its investment in a major Chinese technology and gaming company, which gained amid China’s post-pandemic reopening.

The financials sector also contributed to the Index’s return. Rising net interest income — the difference between what banks receive from loans and what they pay on deposits — supported the diversified financial services industry. The life and health insurance industry also advanced, reflecting higher cash flow, rising sales, and strong new business volumes.

On the downside, the materials sector detracted the most from the Index’s return. The diversified chemicals industry declined amid higher input costs from supply chain disruptions, while weaker global growth reduced chemical prices. The metals and mining industry declined amid rapidly falling prices for rare earth metals used in catalytic converters to reduce pollution. The communication services sector also detracted, as profit growth slowed in the wireless telecommunications industry.

Portfolio Information

Investment Objective

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

Expense Example

Portfolio Management Commentary

Turkish stocks advanced sharply for the reporting period, as investors were encouraged by signs of improvement in Turkish monetary and fiscal policy. Long beset by an inflation rate significantly higher than most other countries, the Central Bank of the Republic of Turkey took the unorthodox approach of lowering interest rates early in the reporting period, even as inflation exceeded 50%. However, following elections in May 2023, President Erdogan installed new officials in key finance posts in a signal that Turkey was committed to a more traditional approach to economic policy. Turkish stocks surged in response, and inflows from international investors reached the highest level in nearly three years. The Turkish central bank reversed its policy of interest rate decreases and began raising interest rates again in June 2023, followed by two additional increases. Turkey also relaxed its policy to support the value of the Turkish lira, which declined substantially relative to the U.S. dollar for the reporting period. While the currency’s weakness reduced the value of Turkish equities in U.S. dollar terms, it also made Turkish stocks more attractive to foreign investors.

The Turkish industrials sector contributed the most to the Index’s return, led by the industrial conglomerates industry. Strong automotive demand domestically combined with rising exports benefited auto manufacturing operations in the industry. Lending activities also bolstered the industry’s revenues, as rising loans, deposits, and substantial fee growth drove significantly higher income.

The financials sector was a source of strength, particularly the banking industry. Turkish banks benefited from the return to more conventional fiscal and monetary policies and the end of rules related to special foreign exchange-protected bank accounts. The consumer staples sector also contributed, as food retailers gained amid solid consumer spending.

Portfolio Information

About Fund Performance

Past performance is not an indication 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 each 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. Beginning August 10, 2020, the price used to calculate market return (“Market Price”) is the closing price. Prior to August 10, 2020, Market Price was determined 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.

Disclosure of Expenses

Shareholders of each Fund may incur the following charges: (1) transactional expenses, including brokerage commissions on purchases and sales of fund shares and (2) ongoing expenses, including management fees and other fund expenses. The expense examples shown (which are based on a hypothetical investment of $1,000 invested at the beginning of the period and held through the end of the period) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other funds.

The expense examples provide information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number under the heading entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as brokerage commissions and other fees paid on purchases and sales of fund shares. Therefore, the hypothetical examples are useful in comparing ongoing expenses only and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended August 31, 2023 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

For the period ended August 31, 2023, the effect of derivative financial instruments in the Statements of Operations was as follows:

Average Quarterly Balances of Outstanding Derivative Financial Instruments

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

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of financial instruments. For a 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 Fund’s financial instruments categorized in the fair value hierarchy. The breakdown of the Fund’s financial instruments into major categories is disclosed in the Schedule of Investments above.