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 Australia ETF (the “Fund”) seeks to track the investment results of an index composed of Australian equities, as represented by the MSCI Australia 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

Stocks in Australia advanced during the reporting period amid modest economic growth and moderating inflation. Australia’s economy received a boost in early 2023 when China, its largest trading partner, removed substantial coronavirus restrictions. Services and manufacturing expanded, as exports to China reached a record high. The Reserve Bank of Australia addressed inflation with eight interest rate increases, more than doubling its key borrowing rate to an 11-year high. The central bank paused interest rate increases late in the reporting period as economic growth forecasts decreased, though inflation remained twice as high as the bank’s stated target. Investor concerns about prospects for slowing growth and persistent inflation, particularly as China’s economy weakened, weighed on stocks late in the reporting period.

The materials sector contributed the most to the Index’s return, led by the metals and mining industry. Australian producers of iron ore, aluminum, copper, and precious metals advanced. Amid rising interest rates and inflation, more investors turned to gold, pushing prices higher. Iron ore prices rose toward the end of 2022, reflecting rising demand from China as it reopened. With prices and demand rising, production increased, helping boost cash flow in some segments of the industry. However, higher costs weighed on earnings, and commodities prices retreated as economic growth slowed.

The financials sector also contributed to the Index’s performance. Bank stocks rose as profits grew, benefiting from loan growth and increased deposits. In the insurance industry, rising premiums drove profits significantly higher.

On the downside, the healthcare sector detracted from the Index’s return. The biotechnology industry declined along with profit growth projections, as currency exchange headwinds and labor costs increased.

Portfolio Information

Investment Objective

The iShares MSCI Canada ETF (the “Fund”) seeks to track the investment results of an index composed of Canadian equities, as represented by the MSCI Canada 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 August 31, 2017 reflects the performance of the MSCI Canada Index. Index performance beginning on September 1, 2017 reflects the performance of the MSCI Canada 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

Portfolio Management Commentary

Stocks in Canada advanced for the reporting period, as consumer spending continued to rise despite stalling economic growth and concerns about rebounding inflation. While unemployment remained low by historic standards, it rose near the end of the reporting period, as job creation failed to keep pace with Canada’s significant population growth. To combat inflation, the Bank of Canada raised interest rates six times during the reporting period, and the inflation rate declined substantially. However, prices grew again toward the end of the reporting period, raising concerns among investors that additional monetary tightening would be needed to control inflation.

The information technology sector contributed the most to the Index’s return, led by the information technology services industry. Revenues from e-commerce platforms and point of sale systems grew substantially amid sharply higher gross merchandise volume (the total value of merchandise sold through an e-commerce platform). The industry also benefited from optimism surrounding the impact of new developments in the area of artificial intelligence (“AI”). New AI-powered products generated investor enthusiasm, including a new feature designed to help online vendors manage their virtual storefronts using AI and another aimed at assisting merchants with text used in marketing their businesses.

Stocks in the materials sector also gained, due to strength in the metals and mining industry. Although some metal commodities prices declined during the reporting period, gold prices rose notably. This price increase bolstered the earnings of precious metals streamers (companies that provide capital and financing for mines in exchange for discounted precious metal prices) in the gold industry.

On the downside, utilities companies detracted from the Index’s performance. Financing delays for a new wind farm project amid tighter financial conditions pressured the independent power and renewable electricity producers industry.

Portfolio Information

Investment Objective

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

Japanese stocks advanced for the reporting period, as the economy grew at its fastest pace in three years. The Japanese economy, which has struggled with weak growth and deflation, or falling prices, in recent decades, returned to growth while logging its highest inflation rate in more than 30 years. Foreign demand for automotive products and tourism drove stronger economic growth. The lifting of coronavirus pandemic-related travel restrictions on foreign tourism unleashed pent-up demand, spurring strong growth in tourism. Automotive exports recovered from lingering supply chain disruptions related to prior pandemic-related policies. Domestic consumption trailed, however, as household spending contracted, and the country’s notoriously high savings rate remained elevated for the reporting period, leading to concerns about the sustainability of recent economic growth. Nevertheless, investor optimism that Japan would maintain accommodative monetary policy to stimulate growth and inflation, as well as other policy shifts, such as limiting government intervention in bond markets and corporate governance reforms, ultimately drove strong flows into the Japanese equity market.

The industrials sector contributed the most to the Index’s return. The trading companies and distributors industry, which acts as an intermediary for the trading of many Japanese exports, benefited from growth in exports, a recovery in Japanese auto sales, and relatively elevated commodities prices.

The financials sector also contributed to the Index’s return, as Japan’s diversified banks advanced with strong earnings growth, including gains on bond sales, higher fees, lower credit costs, and growth in overseas lending activity. The information technology sector also advanced, led by the semiconductors and semiconductor equipment industry, as Chinese companies brought forward chip orders ahead of the Japanese government’s restrictions on semiconductor trade, while expectations for chip demand from artificial intelligence also rose sharply.

Portfolio Information

Investment Objective

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

Certain sectors and markets performed exceptionally well based on market conditions during the one-year period. Achieving such exceptional returns involves the risk of volatility and investors should not expect that such exceptional returns will be repeated.

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

Mexican equities advanced strongly for the reporting period, despite slow economic growth. To quell rising inflation, the Bank of Mexico aggressively increased interest rates for the first half of the reporting period, then paused at a record high rate of 11.25% in May 2023. Consequently, inflation, which began the reporting period at an annual rate of 8.7%, fell sharply to 4.6% at the end of the reporting period. Sharply declining inflation with relatively high interest rates meant Mexican bonds had relatively high yields after adjusting for inflation, which led to a sharply rising Mexican peso. The stronger Mexican peso relative to the U.S. dollar drove a large portion of the Index’s return. Foreign investment, particularly money from the U.S., also surged due to investments in utilities’ capacity and ongoing U.S. efforts to bring its foreign manufacturing resources closer to home.

The consumer staples sector was the largest contributor to the Index’s return. The beverages industry advanced, as strong sales growth across business segments benefited a leading operator of convenience stores and bottling operations. The company’s strategic investments in digital enterprises further buoyed investor sentiment.

The financials sector also contributed significantly to the Index’s return, as a large Mexican bank posted strong earnings despite higher loan loss provisions. Sales of annuities and insurance, as well as proprietary trading, drove strong earnings. The premiums earned from lending deposits also grew modestly.

The materials sector contributed meaningfully to the Index’s return, as a global Mexican cement producer advanced due to a rebound in demand. The company benefited from increasing prices, the stronger Mexican peso, and solid revenue from the U.S., its largest market.

Portfolio Information

Investment Objective

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

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

Stocks in South Korea advanced for the reporting period, aided by China’s reopening from strict coronavirus limitations and moderating inflation. The latter allowed the Bank of Korea to pause interest rate increases in early 2023. The removal of tight coronavirus restrictions in China, the nation’s largest trading partner, boosted optimism that economic growth would increase. However, China’s economy subsequently weakened, and South Korea’s exports to China declined. Meanwhile, shipments to the U.S. increased in the first half of 2023, easing South Korea’s overall slump in exports, which account for almost half its economic output. The pace of South Korea’s manufacturing contraction slowed, unemployment decreased, and the economy resumed slightly positive growth in early 2023.

The information technology sector contributed the most to the Index’s return. The technology hardware, storage, and peripherals industry benefited from hopes for improved semiconductor chip demand prompted by China’s reopening and burgeoning artificial intelligence applications, as electronics and related components account for almost a third of South Korea’s exports. Investor optimism persisted despite a glut in the global semiconductor industry, due to reduced demand for smartphones and computers following the coronavirus pandemic, and memory chip price declines that weighed on corporate profits.

The materials sector also contributed, as stocks in the steel industry advanced. A leading steelmaker exceeded earnings expectations, with operating profit rising substantially, as it recovered from a lengthy, typhoon-related mill closure early in the reporting period. Battery material sales also increased significantly.

On the downside, the communication services sector detracted from the Index’s performance. The interactive media and services industry declined, as a leading internet provider experienced its worst-ever service disruption and accounting losses tied to a merger and other investments. The healthcare sector also detracted, led by biotechnology firms.

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.