iShares, Inc.

Table of Contents

Market Overview

iShares, Inc.

Global Bond Market Overview

Global investment-grade bonds experienced a sizable decline the 12 months ended October 31, 2022 (the “reporting period”). The Bloomberg Global Aggregate Index, a broad measure of global bond market performance, returned -20.79% in U.S. dollar terms for the reporting period.

The poor returns for fixed income reflected the backdrop of sharply rising inflation worldwide. Annualized consumer price inflation in the United States came in above 7.5% in each month of 2022, with a peak of 9.1% in June. Inflation was even more pronounced overseas, particularly in Europe. Inflation rose more than 10% year-over-year in September across the region as a whole, with many Eastern European nations posting increases north of 20%. The trend of rising inflation, which had already begun in 2021, was exacerbated by Russia’s invasion of Ukraine in February 2022. The conflict, together with the sanctions that followed, further snarled global supply chains and contributed to a spike in food and energy prices across the globe.

Developed-market central banks responded by tightening monetary policy in dramatic fashion. In the United States, for example, the U.S. Federal Reserve wound down its stimulative quantitative easing program and raised interest rates from a range of 0%-0.25% to 3.0% - 3.25%. Other central banks followed suit, but the Bank of Japan—which continued to provide stimulus to the nation’s economy—was a notable outlier.

These events fueled a spike in bond yields across the globe. In the United States, the yield on the two-year note rose from 0.50% at the beginning of the period to 4.48% by the end of October 2022, while the 10-year issue climbed from 1.55% to 4.05%. The overseas markets experienced a similar trend directionally, with the weakest performance occurring in the United Kingdom and Continental Europe. Japan held up better in relative terms due to the more accommodative policy of its central bank. Emerging-market bonds, which are highly sensitive to global growth trends, were particularly weak in the annual period.

Corporate bonds generally underperformed government debt. In addition to being hurt by rising prevailing yields, the category was pressured by rising yield spreads over government issues – a trend caused by concerns about economic growth as well as the broader “risk-off” environment.

Unfavorable currency translation weighed on the returns of foreign debt for U.S-based investors. The U.S. dollar surged against most major currencies due in part to expectations that the nation’s stronger relative growth would cause the Fed to raise interest rates more aggressively than its global peers. As a result, the value of non-U.S. investments suffered larger losses in U.S. dollar terms than they did in their local markets. The effect was especially pronounced with respect to emerging-market bonds.

One notable outcome of the downturn in bond prices is that negative-yielding debt—which had risen to be a fairly sizable portion of the overall fixed-income market by late 2021—largely disappeared as yields climbed into positive territory in most countries. However, the real (after-inflation) yields on a large swath of the market remained negative at the close of the period.

Investment Objective

The iShares International High Yield Bond ETF (the “Fund”) seeks to track the investment results of an index composed of euro, British pound sterling and Canadian dollar-denominated, high yield corporate bonds, as represented by the Markit iBoxx^® Global Developed Markets ex-US High Yield Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

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

Portfolio Management Commentary

International high yield bonds fell sharply in the annual period. The shift toward tighter monetary policy by the world’s central banks led to a sharp increase in prevailing yields across the global bond markets. High yield issues faced additional pressure from a widening of spreads over government debt. This trend reflected the combination of the broader “risk-off” market tone and concerns that rising interest rates would lead to a slowdown in global economic growth (and thus a deterioration of credit conditions). Bonds in Europe were further hurt by the negative sentiment associated with Russia’s invasion of Ukraine. In addition to fueling uncertainty, the conflict and resulting sanctions contributed to supply-chain disruptions, slower economic growth, and rising energy prices across the region. The significant decline in the value of non-U.S. currencies relative to the U.S. Dollar was a further headwind for non-U.S. securities.

In this environment, most countries in the Index posed losses in a range from 20% to 26%. Norway and Canada, while losing ground in absolute terms, nonetheless outpaced the Index thanks in part to the tailwind rising oil prices provided for energy-exporting nations. Consistent with the backdrop of heightened investor risk aversion, lower-quality bonds (those rated Caa and below or unrated) lagged the broader market.

Portfolio Information

Investment Objective

The iShares J.P. Morgan EM Corporate Bond ETF (the “Fund”) seeks to track the investment results of an index composed of U.S. dollar-denominated, emerging market corporate bonds, as represented by the J.P. Morgan CEMBI Broad Diversified Core 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 31, 2017 reflects the performance of the Morningstar^® Emerging Markets Corporate Bond Index^SM. Index performance beginning on June 1, 2017 reflects the performance of the J.P. Morgan CEMBI Broad Diversified Core 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

Portfolio Management Commentary

Emerging market corporate bonds suffered losses in the 12-month period, with the adverse effect of falling prices more than offsetting the contribution from the category’s above-average income. However, the asset class finished ahead of emerging market government issues.

As was the case across the rest of the bond market, the Index was hurt by the environment of sharply rising inflation and the aggressive interest rate hikes by the world’s major central banks. In addition, credit spreads widened amid the pronounced deterioration in investor sentiment and concerns about the trajectory of global growth.

Emerging markets were hurt by events specific occurring within the region. First, Russia’s invasion of Ukraine together with the sanctions that followed caused significant losses in Russian bonds contributing to underperformance across Eastern Europe. Second, China was a persistent source of concern. The government’s increased regulation of technology companies and continued lockdowns associated with its zero-COVID policy weighed on the nation’s financial assets, as did instability in the property market.

These factors caused emerging market bond funds to experience record outflows, which exacerbated the effect of falling prices. On the positive side, supply also fell considerably as higher yields dissuaded corporations from issuing new debt.

All countries represented in the Index finished with a negative total return. However, Latin America outperformed in relative terms due in part to its higher sensitivity to the rally in commodities. Similarly, markets in the Middle East generally posted narrower losses than the Index thanks to the strength in crude oil prices.

Portfolio Information

Investment Objective

The iShares J.P. Morgan EM High Yield Bond ETF (the “Fund”) seeks to track the investment results of an index composed of U.S. dollar-denominated, emerging market high yield sovereign and corporate bonds, as represented by the J.P. Morgan USD Emerging Markets High Yield Bond Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

Performance

GROWTH OF $10,000 INVESTMENT

(AT NET ASSET VALUE)

Index performance through March 01, 2020 reflects the performance of the Morningstar Emerging Markets High Yield Bond Index^SM which terminated on April 01, 2020. Index performance beginning on March 02, 2020 reflects the performance of the J.P. Morgan USD Emerging Markets High Yield Bond 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

Portfolio Management Commentary

Emerging market high yield bonds suffered losses in the 12-month period, but the category finished ahead of emerging market sovereign bonds. A higher contribution from yield, together with relative strength for corporate bonds (particularly energy-related issues) versus government securities helped fuel the outperformance.

As was the case across the rest of the global fixed-income market, the Index was hurt by the environment of sharply rising inflation and the aggressive interest rate hikes by the world’s major central banks. In addition, credit spreads widened amid a pronounced deterioration in investor sentiment and concerns about the trajectory of global growth.

Emerging markets were hurt by events specific occurring within the region. First, Russia’s invasion of Ukraine together with the sanctions that followed caused significant losses in Russian bonds contributing to underperformance across Eastern Europe. Second, China was a persistent source of concern. The government’s increased regulation of technology companies and continued lockdowns associated with its zero-COVID policy weighed on the nation’s financial assets, as did instability in the property market.

All countries represented in the Index finished with a negative total return. However, Latin America outperformed in relative terms due in part to its higher sensitivity to the rally in commodities. Similarly, markets in the Middle East generally posted narrower losses than the Index thanks to the strength in crude oil prices.

Portfolio Information

Investment Objective

The iShares J.P. Morgan EM Local Currency Bond ETF (the “Fund”) seeks to track the investment results of an index composed of local currency denominated, emerging market sovereign bonds, as represented by the J.P. Morgan GBI-EM Global Diversified 15% Cap 4.5% Floor 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 31, 2017 reflects the performance of the Bloomberg Emerging Markets Broad Local Currency Bond Index. Index performance beginning on June 1, 2017 reflects the performance of the J.P. Morgan GBI-EM Global Diversified 15% Cap 4.5% Floor 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

Portfolio Management Commentary

Emerging market bonds suffered losses in the 12-month period, with the adverse effect of falling prices more than offsetting the contribution from the category’s above-average income. As was the case across the rest of the bond market, the Index was hurt by the environment of sharply rising inflation and the aggressive interest rate hikes by the world’s major central banks. In addition, credit spreads widened amid the pronounced deterioration in investor sentiment. These trends also led to losses for emerging market currencies relative to the U.S. Dollar, causing local-currency bonds to lag U.S. Dollar-denominated issues.

Russia was a key detractor from Index performance, as the sanctions that followed the country’s invasion of Ukraine caused challenging financial markets and resulted in a meaningful decline in asset prices. Other Eastern European nations, including Poland, Hungary, Romania, Serbia, and the Czech Republic, also lagged the Index. The region had above-average vulnerability to the economic impact of the war in Ukraine, particularly the reduction in energy supplies.

Asian local currency bonds outperformed. The region was less affected by the conflict, and it continued to source energy supplies from Russia. China was a source of relative strength, which was notable given the country’s challenges. Indonesia, while losing ground in absolute terms, outpaced the broader market on optimism about the country’s fiscal picture. Latin American bonds strongly outperformed the larger category. Brazil was the top performer in the region and the Index as a whole, and both Mexico and Uruguay posted positive returns despite the weakness in the global fixed-income markets more broadly.

Portfolio Information

Investment Objective

The iShares US & Intl HighYield Corp Bond ETF (the “Fund”) seeks to track the investment results of an index composed of U.S. dollar, euro, British pound sterling and Canadian dollar-denominated, high yield corporate bonds, as represented by the Markit iBoxx^® Global Developed Markets High Yield Index (the “Index”). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index.

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

Portfolio Management Commentary

Global high yield bonds fell sharply in the annual period. The shift toward tighter monetary policy by the U.S. Federal Reserve and other central banks led to a sharp increase in prevailing yields across the global bond markets. High yield issues faced additional pressure from a widening of spreads over government debt. This trend reflected the combination of the broader “risk-off” market tone and concerns that rising interest rates would lead to a slowdown in global economic growth (and thus a deterioration of credit conditions). Bonds in Europe were further hurt by the negative sentiment associated with Russia’s invasion of Ukraine. In addition to fueling uncertainty, the conflict and resulting sanctions contributed to supply-chain disruptions, slower economic growth, and rising energy prices across the region. The significant decline in the value of non-U.S. currencies relative to the U.S. Dollar was a further headwind for non-U.S. securities.

In this environment, all countries represented in the Index lost ground. The United States, which makes up more than 60% or the Index, outperformed the international markets. The relative strength reflected the country’s more robust economic outlook and larger weighting in the energy sector, which benefited from the rally in the prices of crude oil and other related commodities. The European markets were among the worst performers in the Index, with the United Kingdom, Italy, France and Germany all posting losses in a range of 20% to 25%. Bonds rated B and Ba by Moody’s, which comprise the majority of the Index, outperformed. In contrast, the lowest rated credit tiers (those rated Caa and below or unrated) lagged.

Portfolio Information

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.