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iShares, Inc.

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Market Overview

iShares, Inc.

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 Core MSCI Emerging Markets ETF (the “Fund”) seeks to track the investment results of an index composed of large-, mid- and small-capitalization emerging market equities, as represented by the MSCI Emerging Markets 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

(SINCE INCEPTION AT NET ASSET VALUE)

The inception date of the Fund was October 18, 2012. The first day of secondary market trading was October 22, 2012.

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

Emerging markets stocks declined sharply during the reporting period, as higher interest rates and a strengthening U.S. dollar raised the cost of borrowing in many emerging economies. The strong U.S. dollar made investments denominated in some foreign currencies worth less in U.S. dollar terms, which further detracted from the Index’s performance.

Chinese equities drove the majority of detraction from the Index’s return, as economic growth slowed amid continuing coronavirus-related restrictions and lockdowns. Unemployment ran high and consumer spending weakened, while inflationary pressures mounted and supply chain disruptions persisted. Concerns about delisting from U.S. exchanges arising from U.S. audit requirements also impacted Chinese stocks.

Within China, the consumer discretionary sector detracted significantly from the Index’s return. The government’s campaign to rein in large internet firms, which included billions of dollars in anti-trust fines and restrictions on listings on foreign stock exchanges, weighed on investor sentiment. The internet and direct marketing retail industry declined as competitive advantages weakened, while concerns surrounding customer growth and slowing consumption pressured margins and earnings.

Technology-related equities in China’s communication services sector detracted substantially from the Index’s return, as coronavirus-related restrictions and regulatory issues weighed on earnings and forward guidance. The media and entertainment industry declined amid rules limiting video game use and restrictions on key advertisers. Revenue growth slowed for media and videogaming firms, constraining earnings and raising concerns about future growth.

Chinese healthcare stocks also detracted from the Index’s performance after the U.S. Commerce Department added several pharmaceuticals, biotechnology, and life sciences companies to a list of firms with restricted access to U.S. technology, meaning U.S. companies must conduct stricter due diligence in any dealings with them.

South Korean stocks also weighed on the Index’s return, particularly in the technology hardware, storage, and peripherals industry in the information technology sector. Budgetary reductions from major chip customers amid global economic uncertainty slowed sales growth, lowered profits, and affected capacity expansion plans for producers of semiconductors. Indications of weakening consumer demand for personal computers and cell phones further pressured the near-term outlook for semiconductors stocks.

Portfolio Information

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Investment Objective

The iShares MSCI BIC ETF (the “Fund”) (formerly the iShares MSCI BRIC ETF) seeks to track the investment results of an index composed of Chinese equities that are available to international investors, and Brazilian, and Indian equities, as represented by the MSCI BIC Index (the “Index”) (formerly the MSCI BRIC 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.

In response to recent negative developments that led to a material deterioration in the accessability of the Russian equity market to the international institutional investors, MSCI announced on March 2, 2022 that they would remove all Russian securities from their indexes effective March 9, 2022. On March 8, 2022, the Board approved a proposal to change the name of the Fund from iShares MSCI BRIC ETF to iShares MSCI BIC ETF and to change the Fund’s investment objective. These changes became effective on March 10, 2022.

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

The Index declined sharply during the reporting period, especially in the wake of Russia’s February 2022 invasion of Ukraine. Leading up to the invasion, Russian equities and the Russian ruble lost substantial value as investors fled due to geopolitical concerns and expectations that Western nations would impose sanctions on Russian companies. After the attack, the country’s currency and stock market posted even steeper declines. BlackRock suspended the purchase of Russian securities in its active and index funds on Monday, February 28, 2022, in response to the Russian attack on Ukraine. All major index providers began the removal of Russian securities from their indexes beginning the week of March 7.

Chinese equities declined sharply 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. Unemployment rose and consumer spending weakened as inflationary pressures and supply chain disruptions continued. Concerns about delisting from U.S. exchanges arising from audit requirements also weighed on Chinese stocks.

Indian equities declined during the reporting period as inflation weakened the country’s recovery from the coronavirus pandemic, which slowed economic growth well into 2021. Early in the reporting period, Indian stocks advanced as accommodative monetary policy increased liquidity and, despite a resurgence of COVID-19 cases, India’s economic growth was among the world’s strongest as domestic demand improved and foreign inflows rose. Later in the reporting period, foreign outflows surged as rising commodities prices and India’s heavy reliance on imported oil helped drive inflation and raised concerns about an economic slowdown despite strong growth data.

Brazilian stocks declined overall during the reporting period amid high inflation, rising interest rates, and slowing economic growth. Rising commodities prices and a shift toward value stocks bolstered the market in the first quarter of 2022 as exports rose to multi-decade highs. Prices for oil, metals, and agricultural commodities, which are Brazil’s primary exports, rose, especially after Russia invaded Ukraine. However, Brazilian equities declined late in the reporting period as slowing global growth and recessionary fears started to weigh on commodities prices.

Portfolio Information

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Investment Objective

The iShares MSCI Emerging Markets Asia ETF (the “Fund”) seeks to track the investment results of an index composed of Asian emerging market equities, as represented by the MSCI EM Asia Custom 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)

Index performance through May 31, 2018 reflects the performance of the MSCI Emerging Markets Asia. Index performance beginning on June 1, 2018 reflects the performance of the MSCI EM Asia Custom Capped 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 Asian emerging markets declined sharply during the reporting period, as higher interest rates and a strengthening U.S. dollar raised the cost of borrowing in many emerging economies. The strong U.S. dollar made investments denominated in some foreign currencies worth less in U.S. dollar terms, which further detracted from the Index’s performance.

Chinese equities were the largest detractors from the Index’s return, led by the consumer discretionary sector. The government’s campaign to rein in large internet firms, which included billions of dollars in anti-trust fines and restrictions on listings on foreign stock exchanges, weighed on investor sentiment. The internet and direct marketing retail industry declined as competitive advantages weakened, while concerns surrounding customer growth and slowing consumption pressured margins and earnings. Automobiles stocks, including those of electric carmakers, declined along with vehicle sales as restrictions slowed production and kept customers home.

China’s communication services sector also detracted from the Index’s return, as COVID-19-related restrictions and regulatory issues weighed on earnings and forward guidance. Notably, government-imposed lockdowns in media-rich Shanghai and other cities across China decreased online advertising spending. Against this backdrop, revenue growth slowed for interactive media and services companies, constraining earnings and raising concerns about future growth. Chinese information technology companies also declined, notably in the technology hardware and equipment industry, as domestic demand for consumer electronics shrank due to coronavirus-related lockdowns.

South Korean stocks also weighed on the Index’s return, particularly in the technology hardware, storage, and peripherals industry in the information technology sector. Budgetary reductions from major chip customers amid global economic uncertainty slowed sales growth, lowered profits, and affected capacity expansion plans for producers of semiconductors. Indications of weakening consumer demand for personal computers and cell phones further pressured the near-term outlook for semiconductors stocks.

Taiwan’s semiconductors industry in the information technology sector weighed on the Index’s performance against a backdrop of lower global consumer demand, increased outflows of foreign capital driven by market volatility, and political tensions between the U.S. and China resulting in fears of a potential military conflict over Taiwan.

Portfolio Information

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Investment Objective

The iShares MSCI Emerging Markets Small-Cap ETF (the “Fund”) seeks to track the investment results of an index composed of small-capitalization emerging market equities, as represented by the MSCI Emerging Markets 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 stocks in emerging markets declined during the reporting period, as higher interest rates and a strengthening U.S. dollar raised the cost of borrowing in many emerging economies. The strong U.S. dollar made investments denominated in some foreign currencies worth less in U.S. dollar terms, which further detracted from the Index’s performance.

South Korean equities detracted the most from the Index’s return, as investor concerns over the Fed’s monetary tightening reverberated in Korean markets. Korean healthcare stocks declined significantly, with a combination of domestic factors buffeting companies in the pharmaceuticals and biotechnology industries, including an embezzlement scandal at one company and a U.S. Food and Drug Administration order that a Korean pharmaceutical firm’s proposed treatment for a rare heart condition must undergo a second trial. A potential glut of coronavirus vaccines amid a flood of entrants to the market dimmed investor sentiment toward the healthcare sector across regions. Against this backdrop, a Korean vaccine maker ceased work on a new COVID-19 vaccine candidate after two years of development.

Real estate stocks in China further detracted from the Index’s performance, as a debt crisis, falling home prices, and a homebuyer boycott of mortgage payments drove stress in the property market. International credit rating agencies issued downgrades of many Chinese real estate developers during the reporting period, as the financial collapse of a major real estate company drove fears of a liquidity shortage for builders and weakness in China’s economy. Additionally, stocks of some small-capitalization companies in the real estate development industry declined significantly as investors grew concerned over nonpayment of debt leading to bond defaults.

The Taiwanese information technology sector was another source of weakness for the Index’s return, as stocks of companies in the semiconductors industry declined against a backdrop of lower global consumer demand. Other factors affecting Taiwanese equities during the reporting period included outflows of foreign capital driven by fears of increased market volatility and political tensions between the U.S. and China over Taiwan’s status.

Portfolio Information

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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. Since shares of a fund may not trade in the secondary market until after the fund’s inception, for the period from inception to the first day of secondary market trading in shares of the fund, the NAV of the fund is used as a proxy for the Market Price to calculate market returns. 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.

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