iShares Trust

Table of Contents

Market Overview

iShares Trust

Global Market Overview

Global equity markets declined during the 12 months ended July 31, 2022 (“reporting period”). The MSCI ACWI, a broad global equity index that includes both developed and emerging markets, returned -10.48% in U.S. dollar terms for the reporting period.

For the first five months 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 3.5% in July 2022 — identical to the pre-pandemic rate in February 2020. Although high inflation negatively impacted consumer sentiment, which declined significantly, consumer spending continued to increase.

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.

Stocks declined in Europe and economic growth stalled, with the Eurozone economy slowing substantially beginning in the fourth quarter of 2021. 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. 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.

Investment Objective

The iShares MSCI ACWI ETF (the “Fund”) seeks to track the investment results of an index composed of large- and mid-capitalization developed and emerging market equities, as represented by the MSCI ACWI (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 stocks declined substantially during the reporting period, as global growth cooled in an environment of high inflation, rising interest rates, and volatility in commodities markets. U.S. stocks were the largest detractors from the Index’s return, as the recovery slowed and the economy contracted in the first half of 2022.

Among U.S. stocks, the communication services sector declined the most, driven primarily by weakness in the interactive media and services industry. A change to the data-tracking policies of a popular mobile platform impeded the ability of social media companies to target specific customer demographics, reducing the value of the advertising they sell. Consequently, revenues decreased, weighing heavily on stocks in this growth-oriented industry. The information technology sector also declined, as payment platforms in the IT services industry experienced slowing user growth. Consumers reoriented their spending back toward physical retail, negatively impacting growth in e-commerce transactions. Uncertainty around the sustainability of recent growth also pressured software providers amid a normalization of work and leisure activities.

Chinese stocks also detracted from the Index’s performance, as strict lockdowns to prevent the spread of COVID-19 weighed on economic activity. The consumer discretionary sector led the decline, particularly the internet and direct marketing retail industry. Stiff competition, both domestically and internationally, led to slower revenue growth and declining earnings. Increased regulatory scrutiny from the Chinese government also drove investor uncertainty surrounding the industry. The communication services sector was another source of weakness, constrained by new regulations that dampened revenue growth.

Stocks in Japan, which endured two quarters of economic contraction during the reporting period, also restrained the Index’s performance. The Japanese yen declined significantly relative to the U.S. dollar, reducing the value of Japanese assets denominated in U.S. dollars. The industrials sector declined the most amid a notable slowdown in industrial production.

German stocks further detracted from the Index’s return, as weakness in the automobiles industry weighed on the consumer discretionary sector. Supply chain problems, exacerbated by a global semiconductor shortage and Russia’s invasion of Ukraine, led to production difficulties that pressured the industry.

Portfolio Information

Investment Objective

The iShares MSCI ACWI Low Carbon Target ETF (the “Fund”) seeks to track the investment results of an index composed of large and mid-capitalization developed and emerging market equities with a lower carbon exposure than that of the broad market, as represented by the MSCI ACWI Low Carbon Target 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 December 8, 2014. The first day of secondary market trading was December 9, 2014.

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

As the global economy recovered from the initial disruptions of the COVID-19 pandemic, rising economic activity drove higher energy use and global carbon emissions increased by 6% in 2021. This rise marked the largest single-year emissions increase on record, and more than reversed 2020’s decline. While increased fossil fuel use drove higher emissions, renewable energy generation reached an all-time high in 2021. Investor interest in lower-carbon investments appeared relatively strong as governments budgeted record amounts toward climate goals and Russia’s invasion of Ukraine led some countries to seek alternatives to Russian fossil fuels. However, as interest rates increased later in the reporting period, investors moved away from future-oriented growth stocks.

U.S. stocks were the largest detractors from the Index’s return as the reopening-led recovery cooled and the economy contracted in the first half of 2022. The communication services sector led the decline, driven primarily by weakness in the interactive media and services industry. A change to the tracking data policies of a popular mobile platform impeded the ability of social media companies to target specific customer demographics, reducing the value of the advertising they sell. The information technology sector also declined as payment platforms in the information technology services industry experienced slowing user growth.

Chinese stocks further detracted from the Index’s performance as strict lockdowns to prevent the spread of COVID-19 weighed on economic activity. The U.S. consumer discretionary sector stocks detracted, as the lockdowns significantly dampened consumer sentiment. Japanese industrials stocks also declined amid a notable slowdown in industrial production.

In terms of relative performance, the Index slightly underperformed the broader market, as represented by the MSCI ACWI Index, while tracking it fairly closely. The low-carbon investment process leads to underweight and overweight positions in industries with higher or lower carbon emissions, respectively. For the reporting period, the Index had underweight positions in the energy and materials sectors and overweight positions in the financials and industrials sectors. Stock selection and the underweight position in the energy sector, which performed well due to rising oil and gas prices, detracted from relative performance. However, stock selection in the information technology and financials sectors benefited the Index’s relative return.

Portfolio Information

Investment Objective

The iShares MSCI All Country Asia ex Japan ETF (the “Fund”) seeks to track the investment results of an index composed of Asian equities, excluding Japan, as represented by the MSCI AC Asia ex 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

Stocks in Asia excluding Japan declined sharply for the reporting period as economic growth slowed and inflationary pressures rose. Chinese equities drove the majority of detraction from the Index’s return amid pandemic-related restrictions, a far-reaching regulatory crackdown, mounting stress in the property market, rising unemployment, weakness in consumer spending, and supply chain disruptions. Concerns about delisting from U.S. exchanges arising from audit requirements also weighed on Chinese stocks.

Within China, technology-related stocks drove the majority of detraction from the Index’s return, due to concerns surrounding slowing sales, lockdowns, and regulatory restrictions. The government’s campaign to rein in large internet firms by lessening their market advantages included billions of dollars in antitrust fines and restrictions on stock listings. While investor sentiment periodically shifted toward signs of an easing crackdown, further government statements repeatedly reignited uncertainty. In the information technology sector, stocks in the internet and direct marketing industry detracted the most from the Index’s return as regulations weakened companies’ competitive advantages, while concerns surrounding new customer growth and slowing consumption pressured profit margins and earnings. Growth in cloud businesses stagnated amid competition from government-backed rivals.

In the communication services sector, COVID-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 video gaming firms, constraining earnings and raising concerns about future growth. While China resumed the approval of video games in April 2022 after a months-long suspension, titles from two of the country’s largest gaming companies were not included.

South Korean stocks also detracted significantly from the Index’s performance, led by the technology hardware and equipment industry in the information technology sector. Budgetary reductions from major chip customers amid global economic uncertainty slowed sales growth, reduced profits, and affected capacity expansion plans for chip producers. Memory prices weakened along with demand for personal computers and smartphones.

Portfolio Information

Investment Objective

The iShares MSCI Europe Financials ETF (the “Fund”) seeks to track the investment results of an index composed of developed market European equities in the financials sector, as represented by the MSCI Europe Financials 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

European financials equities declined for the reporting period, as soaring inflation and rising interest rates squeezed borrowers, the euro fell sharply against the U.S. dollar, and Eurozone business growth slowed. While higher interest rates often benefit banks, which constituted approximately 46% of the Index on average during the reporting period, sharply rising prices limit customers’ ability to repay higher-interest loans. To combat inflation, the ECB raised its benchmark interest rate by 0.50% in July 2022, its first increase in 11 years, leading to concerns that European banks could face rising short-term financing costs and declining demand for loans.

Financials stocks in Sweden detracted the most from the Index’s return, namely venture capital firms in the diversified financial services industry, as the substantial decline in global markets lowered the valuations of many of their portfolio companies. In this difficult environment for capital, Swedish entrepreneurial investors sold some underlying assets to shore up finances, leading to stock price declines for the parent companies. The sharp sell-off in information technology and growth-oriented companies during the reporting period led to a slowdown in new investment deals undertaken by leading private investor conglomerates.

German financials stocks detracted notably from the Index’s performance, as rising interest rates and recession fears drove stocks of insurers lower. In addition, a leading German insurer settled lawsuits from investors for nearly $4 billion in the wake of a hedge fund collapse, with potential regulatory fines expected to increase those costs.

Banking stocks in Italy, Spain, and France also detracted from the Index’s return. As nations worldwide tightened sanctions against Russia for its war in Ukraine, uncertainty arose about the exposures of European lenders to Russian assets, including major financial institutions in all three countries. Among Eurozone nations, Italy and France had the highest exposure to Russian assets, according to data published in September 2021. Amid investor concerns about credit contagion, Italy’s two largest banks sought to reassure investors that they maintained sufficient capital to weather even a worst-case scenario of pulling entirely out of Russia.

Portfolio Information

Investment Objective

The iShares MSCI Europe Small-Cap ETF (the “Fund”) seeks to track the investment results of an index composed of small-capitalization developed market equities in Europe, as represented by the MSCI Europe 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

Portfolio Management Commentary

Small-capitalization European equities declined sharply during the reporting period, as higher inflation, rising interest rates, and weakening global economies sent markets lower. Russia’s invasion of Ukraine also increased investor uncertainty, as international sanctions on Russia disrupted global economic activity, unsettled commodities markets, and constrained companies that had connections to Russia. The combination of resilient consumer demand and persistent supply chain disruptions contributed to higher inflation in many countries. This inflationary pressure led some of the world’s central banks to raise interest rates.

Stocks in the U.K., particularly in the consumer discretionary sector, detracted the most from the Index’s performance. Stocks of several consumer discretionary companies dropped on diminished sales outlooks due to falling levels of consumer confidence, inflation rates at 40-year highs, and the slowing growth in the economy. In particular, internet and direct marketing retail companies experienced declining sales due to a reduction in online spending by consumers. British industrials stocks also weighed on the Index’s performance, particularly sellers of building supplies in the trading companies and distributors industry, as the costs of materials rose and the U.K. housing market cooled after the Bank of England raised interest rates to the highest levels in 13 years.

Stocks in Sweden further detracted from the Index’s return amid slowing economic growth and the depreciation of Swedish krona against the U.S. dollar. Swedish industrials stocks declined as war-related supply-chain constraints and higher costs for materials and energy dampened the revenues of industrial machinery manufacturers. Consumer discretionary stocks in Sweden also declined, led by the leisure products industry, as steep inflation and weak consumer confidence across regions pressured the stocks of outdoor gear brands.

Stocks in Germany weighed on the Index’s performance amid recession fears as the country’s economy stalled in the second quarter of 2022. German healthcare stocks detracted, largely due to the decision of a major pharmaceutical conglomerate to discontinue the development of a potential treatment for chronic cough and endometriosis, which pressured the stock of its project partner, a life sciences tools and services company.

Portfolio Information

Investment Objective

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

Developed market stocks outside of Japan declined during the reporting period, as higher inflation, rising interest rates, and weakening global economies sent markets lower. Russia’s invasion of Ukraine increased investor uncertainty, as international sanctions on Russia disrupted global economic activity, unsettled commodities markets, and constrained companies with connections to Russia. The combination of resilient consumer demand and persistent supply chain disruptions contributed to higher inflation in many countries. This inflationary pressure led some of the world’s central banks to adopt less accommodative stances regarding monetary policy.

U.S. stocks detracted the most from the Index’s return, driven by companies in the communication services sector, which reported slowing revenue growth as advertisers reduced spending, citing inflationary pressures and slowing cooling U.S. economic growth. The U.S economy contracted slightly in the first two quarters of 2022 as business inventories and private investment declined. In addition, a change to the data tracking policies of a major technology platform reduced the effectiveness of targeted advertising. Some communications services companies declined due to falling subscriptions, as the deteriorating economic outlook led consumers to curb discretionary spending. Competition from newer entrants to the sector also drove the stocks of communication services companies lower, leading firms to suspend hiring and downgrade predictions for future growth. Despite high spending levels, robust job growth, and low unemployment, rising inflation rates precipitated a notable decrease in consumer confidence. In this environment, information technology stocks declined sharply during the first half of 2022. As pandemic-related restrictions continued to ease and consumers returned to shopping in stores, online shopping declined, further weakening the growth outlook for some information technology companies. Additionally, several companies suspended business in Russia following the invasion of Ukraine.

German stocks, particularly automobile manufacturers, also detracted from the Index’s performance as the economy slowed, prices climbed, and consumer confidence waned. The war in Ukraine disrupted supply chains and contributed to record-high inflation across the Eurozone as commodities and oil prices soared.

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. 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 a 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.