iShares Trust

Table of Contents

Market Overview

iShares Trust

Domestic Market Overview

U.S. stocks declined for the 12 months ended March 31, 2023 (“reporting period”), when the Russell 3000^® Index, a broad measure of U.S. equity market performance, returned -8.58%. Elevated inflation and rapid tightening of monetary policy dampened growth and weighed on equities. Higher interest rates drove bond yields higher and increased borrowing costs for businesses and consumers. Equities began to recover in the second half of the reporting period, as the broader economy remained resilient and the pace of inflation declined. In March 2023, two banks suddenly failed, representing the second and third largest bank failures in U.S. history by asset value. This drove concern among investors about the resiliency of the financial system in the face of rapidly rising interest rates. However, government agencies acted swiftly to organize a sale of the failed banks’ assets and inject liquidity, and equity prices recovered.

Inflation was a significant driver of the economic outlook. As the reporting period began, the consumer price index, a widely followed measure of inflation, stood at multi-decade highs. Strong consumer spending and a tight labor market, along with continued supply chain disruptions in Asia, combined to drive prices higher. But the rate of inflation began to decline as the reporting period wore on, decelerating for nine consecutive months beginning in July 2022. Nonetheless, inflation remained elevated by historic standards, and higher prices negatively impacted both consumers and businesses.

The U.S. economy recovered from a decline in the first half of 2022 to post modest growth in the third and fourth quarters of 2022. Consumers continued to power the economy with growing spending, despite higher prices for many consumer goods and services. The strong labor market supported spending, as unemployment remained very low, at one point dropping to the lowest recorded level since 1969. Furthermore, the labor force participation rate—which measures the total proportion of employed persons of working age—rose, indicating that more people were being drawn into the labor force. Amid tightening labor supply, wages rose significantly, with the largest gains at the lower end of the wage spectrum.

To contain inflation, the U.S. Federal Reserve (“Fed”) tightened monetary policy rapidly, raising short-term interest rates eight times over the course of the reporting period. The pace of tightening accelerated as the Fed twice stepped up the increment of increase before reducing it again as inflation began to subside. The Fed also started to reduce 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 coronavirus pandemic. While the Fed indicated that more tightening could be needed to achieve its long-term inflation goal, it sounded a more cautious note about the potential for further interest rate increases near the end of the reporting period.

Despite economic headwinds, corporate profits remained robust, and many companies were able to sufficiently raise prices to preserve profit margins even in the face of rising labor and input costs. Nonetheless, profits declined overall in the fourth quarter of 2022, and the yield curve (a graphical representation of U.S. Treasury rates at different maturities) inverted, a sign that markets were concerned about the impact of higher borrowing costs on the economy. Furthermore, dwindling personal savings and rising household debt raised questions about the sustainability of consumer spending as an engine of economic growth.

Investment Objective

The iShares RussellTop 200 ETF(the “Fund) seeks to track the investment results of an index composed of large-capitalization U.S. equities, as represented by the Russell Top 200^® 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

Large-capitalization U.S. stocks declined for the reporting period, as high inflation and tighter financial conditions impeded economic growth and weighed on equities. The consumer discretionary sector detracted the most from the Index’s return. While consumer spending continued to grow, rising inflation drove up costs for companies, and consumers increasingly sought bargains as higher prices eroded personal spending power. Within the sector, the internet and direct marketing retail industry detracted significantly. The sharp rise in e-commerce, which boosted the industry early in the pandemic, waned as more workers returned to the office and brick-and-mortar retailers gained market share. Stocks in the automobiles industry also declined amid concerns about the market for electric vehicles in the weakening economy and production volumes that failed to meet analysts’ expectations.

The information technology sector also detracted significantly from the Index’s return, as sharply higher interest rates reduced the current value of future earnings. The software and services industry declined notably amid high inflation and slow growth, as cuts to corporate information technology budgets tempered revenue growth. Slowing sales growth for cloud-based software further constrained earnings. Changing consumer behavior patterns pressured the IT services industry, as a return to in-person spending slowed revenue growth for online payment platform providers.

The communication services sector also detracted, particularly high-valuation stocks with growth prospects in the interactive media and services industry. Demand for online advertisements slowed during the reporting period, as businesses cut back marketing expenditures in a more challenging economic environment. Stiff competition among companies producing disruptive new artificial intelligence products also pressured the industry.

On the upside, energy sector stocks contributed to the Index’s return. Relatively high average prices of energy commodities following Russia’s invasion of Ukraine supported profitability in the oil, gas, and consumable fuels industry.

Portfolio Information

Investment Objective

The iShares Russell Top 200 Growth ETF (the “Fund”) seeks to track the investment results of an index composed of large-capitalization U.S. equities that exhibit growth characteristics, as represented by the Russell Top 200^® Growth 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 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

Growth-oriented large-capitalization U.S. stocks declined for the reporting period, as high inflation and tighter financial conditions impeded economic growth and weighed on equities. Large-capitalization growth stocks, which derive a significant portion of their price from investors’ expectations of future growth, faced significant headwinds relative to other equities. Growth stocks are particularly sensitive to interest rates, which rose notably as the Fed sharply tightened monetary policy.

The consumer discretionary sector detracted the most from the Index’s return. Rising inflation drove up costs for companies, and consumers increasingly sought bargains as higher prices eroded personal spending power. Within the sector, the internet and direct marketing retail industry detracted significantly from the Index’s performance. The sharp rise in e-commerce, which boosted the industry early in the pandemic, waned as more workers returned to the office and brick-and-mortar retailers gained market share. Excess warehouse capacity also weighed on industry cash flow. Slowing revenue growth from data cloud services further pressured the industry’s profitability, as business customers tried to reduce expenditures amid economic uncertainty. The automobiles industry also declined amid concerns about the market for electric vehicles (“EVs”) in the weakening economy. While EV sales continued to grow, production did not meet analysts’ expectations, and price discounts on some new models negatively impacted revenues.

The communication services sector also detracted significantly from the Index’s return, as the rising interest rate environment negatively impacted the interactive media and services industry, particularly high-valuation stocks with growth prospects. Demand for online advertisements slowed during the reporting period, as businesses cut back on marketing expenditures in a more challenging economic environment. Stiff competition among companies producing disruptive new artificial intelligence products also pressured the industry, as analysts attempted to chart the potential impact of the new technologies.

Portfolio Information

Investment Objective

The iShares Russell Top 200 Value ETF (the “Fund”) seeks to track the investment results of an index composed of large-capitalization U.S. equities that exhibit value characteristics, as represented by the Russell Top 200^® Value 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

Value-oriented large-capitalization U.S. stocks declined for the reporting period, as high inflation and tighter financial conditions impeded economic growth and weighed on equities. The financials sector detracted the most from the Index’s performance amid tightening financial conditions. The banking industry faced significant challenges as the potential impact of a slowing economy outweighed the benefits of being able to charge more for loans. While bank profitability is typically supported by higher interest rates, persistently high inflation led to significant tightening from the Fed, and investors became concerned about the long-term effect of this tightening on loan growth and credit losses. Bank stocks were further pressured late in the reporting period after the sudden failure of two regional banks. Despite government actions to contain the impact, these bank failures weighed heavily on the industry. The financial services industry also faced headwinds due to weak economic growth, declining prices for stocks and bonds, and concerns about the balance sheet liquidity of a large discount broker following the bank failures.

The information technology sector also detracted significantly from the Index’s return, as sharply higher interest rates reduced the current value of future earnings. High inflation and slow growth weighed on the sector, as consumers and businesses often seek to reduce spending on technology products and services during a downturn.

On the upside, stocks in the energy sector contributed to the Index’s return despite lower oil prices and a sharp decline in the price of natural gas. The price of oil and natural gas surged in the aftermath of Russia’s invasion of Ukraine. While prices subsequently fell as markets stabilized, the relatively high average prices of energy commodities supported profitability in the oil, gas, and consumable fuels industry.

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 March 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: