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 iSharesCore 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 

(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

Emerging market stocks advanced modestly during the reporting period, 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.

Taiwanese information technology stocks contributed notably to the Index’s performance, as companies in the technology hardware, storage, and peripherals industry and the semiconductors industry were buoyed by growing investor interest in technologies related to artificial intelligence (“AI”). In this environment, companies that manufacture AI servers and companies that produce microchips for AI applications posted strong gains.

South Korean stocks contributed the most to the Index’s return, led by the information technology sector. A U.S. law enacted in August 2022 directed incentives toward a leading South Korean microchip producer and electronics conglomerate to expand its manufacturing footprint within the U.S. Investors also responded favorably to early-2023 production cuts by microchip producers.

Mexican stocks also contributed, led by the consumer staples sector. 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. In India, strong industrial production buoyed the capital goods industry, while strong automobile sales drove the automobiles and components industry.

On the downside, Chinese stocks detracted the most from the Index’s performance, reflecting the negative impact of slowing economic growth. While investors were initially optimistic following China’s lifting of several coronavirus pandemic-related lockdowns in December 2022, subsequent economic performance disappointed, while tensions with the U.S. increased. Internet and direct marketing companies, in the consumer discretionary sector, were the largest detractors. The reopening of China’s economy dented the profit margins of food delivery service providers, as the end of pandemic-related lockdowns led to reduced demand. In addition, increased competition in the space, including from one of China’s largest technology firms, weighed on the industry.

Portfolio Information

Investment Objective

The iShares MSCI BIC ETF (the “Fund”) 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”). 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

The Index declined during the reporting period, as slowing economic growth negatively impacted Chinese equities. While investors were initially optimistic following China’s lifting of several coronavirus pandemic-related lockdowns in December 2022, subsequent economic performance disappointed. In contrast, Brazilian stocks posted robust gains. After contracting in the fourth quarter of 2022, the country’s economy grew faster than anticipated in the first quarter of 2023, driven by a surge in agricultural output.

Chinese equities detracted the most from the Index’s return, driven by the internet and direct marketing retail industry in the consumer discretionary sector. The reopening of China’s economy dented the profit margins of food delivery service providers, as the end of pandemic-related lockdowns led to reduced demand. In addition, increased competition in the space, including from one of China’s largest technology firms, weighed on the industry. Some Chinese e-commerce platforms reduced prices during the reporting period with the goal of gaining market share. Investors grew concerned about the impact of lowered prices on profitability, which further weighed on the stocks of internet and direct marketing retail companies.

China’s healthcare sector also detracted from the Index’s return. Life sciences tools and services companies were pressured by a U.S. executive order introducing a national biotechnology and biomanufacturing initiative. Given the program’s stated goal of reducing American reliance on China, stocks of Chinese companies engaged in contract drug research declined. The Chinese consumer staples sector detracted further, as investor concerns over the growth potential of the liquid milk market dampened investor sentiment toward food, beverage, and tobacco companies.

On the upside, Brazilian stocks contributed to the Index’s return, led by the energy sector. The integrated oil and gas industry benefited from positive investor reaction to government policies introducing flexibility in the pricing of gasoline and diesel. In the second quarter of 2023, a reduction in oil prices curbed profits for oil companies in Brazil, but to a lesser extent than in other countries.

Portfolio Information

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

Portfolio Management Commentary

Stocks in Asian emerging markets declined marginally during the reporting period. Chinese equities detracted the most from the Index’s return, reflecting the negative impact of China’s slowing economic growth. While investors were initially optimistic following China’s lifting of several coronavirus pandemic-related lockdowns in December 2022, subsequent economic performance disappointed, while tensions with the U.S. increased.

Within China, the consumer discretionary sector detracted significantly from the Index’s return, led by the internet and direct marketing industry. The reopening of China’s economy dented the profits of food delivery service providers, as the end of pandemic-related lockdowns led to reduced demand. In addition, increased competition in the space, including from one of China’s largest technology firms, weighed on the industry. Some Chinese e-commerce platforms reduced prices during the reporting period with the goal of gaining market share. Investors grew concerned about the impact of lowered prices on profitability, which further pressured the stocks of internet and direct marketing retail companies. Malaysian and Philippine equities also detracted, driven by the financials and real estate sectors, respectively.

On the upside, South Korean stocks were the largest contributor to the Index’s return, led by the information technology sector. The technology hardware, storage, and peripherals industry advanced, as a U.S. law enacted in August 2022 encouraged South Korean companies in the industry to expand manufacturing in the U.S. Investors also responded favorably to early-2023 production cuts by microchip producers, which aimed to lower inventories and help the market for microchips to recover.

Taiwanese stocks also contributed meaningfully to the Index’s performance. A slowdown in the U.S. inflation rate supported the Taiwanese information technology sector, as investors grew optimistic that the monetary tightening cycle was nearing an end. Companies in the technology hardware, storage, and peripherals industry and the semiconductors industry were buoyed by growing investor interest in technologies related to artificial intelligence (“AI”). In this environment, Taiwanese companies involved in AI-related activities, such as manufacturing AI servers and producing microchips for AI applications, posted strong gains.

Portfolio Information

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 

Portfolio Management Commentary

Small-capitalization stocks in emerging markets advanced significantly during the reporting period. The declining value of the U.S. dollar relative to many other currencies and the slowing pace of the Fed’s interest rate increases supported emerging market stocks. In China, however, slowing economic growth and geopolitical tensions led to stock declines.

Indian stocks contributed the most to the Index’s return, led by the industrials sector. India’s economy continued to rapidly expand, as strong domestic demand drove a rise in manufacturing. In the electrical equipment industry, a robust increase in India’s rate of electricity generation benefited distributors of cables and transformers. Higher demand for electricity generated by solar and wind power supported gains for makers of renewable energy infrastructure. The Indian financials sector was another source of strength, led by financial services companies. A state-owned provider of infrastructure financing for power projects posted substantial revenue gains, driven by an increase in net interest income on loan assets.

Taiwanese stocks contributed meaningfully to the Index’s performance, led by the information technology sector. Growing investor interest in technologies related to artificial intelligence (“AI”) buoyed the technology hardware, storage, and peripherals industry. In this environment, companies involved in AI-related activities, such as manufacturing AI servers, posted strong gains. A slowdown in the inflation rate in the U.S. also provided a tailwind to Taiwanese information technology stocks, as investors grew optimistic that the monetary tightening cycle was nearing an end.

South Korean stocks also contributed, led by the materials sector. In an environment of rising global demand for electric vehicles, South Korean companies that manufacture cathodes used in lithium-ion batteries for electric vehicles announced plans to build new production facilities overseas, supporting the commodities chemicals industry.

On the downside, Chinese equities detracted from the Index’s return, driven by the real estate sector. Despite support from the Chinese government through guarantees of repayment for onshore bonds, the real estate management and development industry declined as high debt levels and difficulties in accessing capital pressured several companies.

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.

A B O U T  F U N D  P E R F O R M A N C E / D I S C L O S U R E  O F  E X P E N S E S