MARCH 31, ANNUAL REPORT

Transcription

1 MARCH 31, ANNUAL REPORT ishares Trust ishares Micro-Cap ETF IWC NYSE Arca ishares Russell 3000 ETF IWV NYSE Arca ishares Russell Mid-Cap ETF IWR NYSE Arca ishares Russell Mid-Cap Growth ETF IWP NYSE Arca ishares Russell Mid-Cap Value ETF IWS NYSE Arca

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3 Table of Contents Management s Discussions of Fund Performance... 5 About Fund Performance Shareholder Expenses Summary Schedules of Investments ishares Micro-Cap ETF ishares Russell 3000 ETF ishares Russell Mid-Cap ETF ishares Russell Mid-Cap Growth ETF ishares Russell Mid-Cap Value ETF Financial Statements Financial Highlights Notes to Financial Statements Report of Independent Registered Public Accounting Firm Tax Information Supplemental Information Trustee and Officer Information... 74

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5 Management s Discussion of Fund Performance ishares TRUST U.S. EQUITY MARKET OVERVIEW U.S. stocks generated strong returns for the 12 months ended March 31, 2017 (the reporting period ). The Russell 3000 Index, a broad measure of U.S. equity market performance, returned 18.07% for the reporting period. Stocks were flat to slightly higher for the first seven months of the reporting period as the U.S. economy appeared to lose momentum. The economy was sluggish in the first half of 2016, and although it rebounded in the third quarter of 2016, it slowed again in the final quarter of For all of 2016, the U.S. economy grew by just 2.0%, its slowest calendar-year growth rate since Job growth remained robust as the unemployment rate stayed at or under 5%, and retail sales grew by more than 5% during the reporting period. However, other segments of the economy continued to struggle for example, industrial production remained muted, and business productivity was largely unchanged in Geopolitical conflicts and global unrest contributed to increased stock market volatility during the summer of In particular, equity investors reacted sharply to the affirmative vote on the U.K. Brexit referendum to leave the European Union, terrorist attacks in France, and an attempted coup in Turkey. After a modest overall gain through the first seven months of the reporting period, stocks achieved strong returns following the U.S. presidential election in November The new administration was expected to enact pro-business fiscal policies including lower taxes, decreased regulation, and increased fiscal spending aimed at stimulating economic growth. These expectations drove a strong equity market rally that extended through the end of the reporting period. The market remained on an upward trajectory despite two short-term interest rate increases by the U.S. Federal Reserve Bank (the Fed ) late in the reporting period. Uneven economic data kept the Fed on hold for most of the reporting period, but improving growth in the third quarter of 2016 led the Fed to raise its short-term interest rate target in December The Fed acted again in March 2017, partly in response to the highest year-over-year inflation rate in five years. The two Fed interest rate increases raised the federal funds interest rate target to a range of 0.75%-1.00%. For the reporting period, small-capitalization stocks generated the best returns, outpacing mid- and large-capitalization stocks. Value stocks fared better than growth-oriented stocks across all market capitalizations, although growth stocks outperformed value stocks over the final three months of the reporting period as investors grew more confident about the prospects for a stronger economy. In terms of sector performance, the reporting period had two distinct phases. Initially, defensive sectors of the market such as real estate, utilities, consumer staples, and telecommunication services remained the top performers. These stocks led the market s advance in 2015 and the first half of 2016 as investors flocked to sectors with relatively high dividend yields in a low interest rate environment. However, after the presidential election in November 2016, investors moved into more economically sensitive sectors of the market, including financials, information technology, materials, and industrials. As a result, these sectors were the leading performers for the full reporting period, while the more defensive segments of the market lagged. In particular, real estate was the only sector of the market to decline for the reporting period. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 5

6 Management s Discussion of Fund Performance ishares MICRO-CAP ETF Performance as of March 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 27.60% 27.55% 27.77% 27.60% 27.55% 27.77% 5 Years 12.34% 12.29% 12.43% 78.90% 78.52% 79.64% 10 Years 5.07% 5.09% 5.42% 64.05% 64.26% 69.47% GROWTH OF $10,000 INVESTMENT (AT NET ASSET VALUE) $18,000 $16,947 $16,405 $14,000 $10,000 $6,000 $2,000 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Fund Index Past performance is no guarantee 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 on page 16 for more information. Beginning Account Value (10/1/16) Actual Ending Account Value (3/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (10/1/16) Hypothetical 5% Return Ending Account Value (3/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1, $ 1, $ 3.15 $ 1, $ 1, $ % a Expenses are calculated using the Fund s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (182 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 16 for more information ishares A NNUAL R EPORT TO S HAREHOLDERS

7 Management s Discussion of Fund Performance (Continued) ishares MICRO-CAP ETF The ishares Micro-Cap ETF (the Fund ) seeks to track the investment results of an index composed of micro-capitalization U.S. equities, as represented by the Russell Microcap 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. For the 12-month reporting period ended March 31, 2017, the total return for the Fund was 27.60%, net of fees, while the total return for the Index was 27.77%. As represented by the Index, micro-capitalization U.S. stocks posted a positive return for the reporting period, benefiting from a brighter economic outlook, rising business and consumer confidence, and improving economic growth. Based on the Russell Indexes, micro-capitalization stocks delivered strong returns, outperforming large-, mid-, and small-capitalization stocks for the reporting period. All 11 sectors contributed to the Index s return for the reporting period. The financials sector was the largest contributor to the Index s performance. The election of Donald Trump to the U.S. presidency drove expectations that the new administration s fiscal policies would stimulate economic growth and reduce regulation. Those expectations, coupled with two interest rate hikes by the Fed during the reporting period, led to gains in the banking industry. The information technology sector was also a significant contributor to the Index s performance for the reporting period. Every industry group in the sector semiconductors, software and services, and hardware and equipment stocks posted strong returns despite the slow pace of initial public offerings. The healthcare and industrials sectors were also significant contributors to the Index s performance for the reporting period. The healthcare sector s performance reflected solid earnings and optimism for growth. Economically sensitive industrials stocks benefited from a steady expansion in manufacturing activity, increasing construction spending in response to higher home prices, and investors optimism for a cyclical rebound in the wake of the U.S. presidential election. Consumer discretionary stocks were another source of strength. While no single sector detracted from the Index s performance for the reporting period, the real estate, utilities, consumer staples, and telecommunication services sectors each contributed only fractionally. ALLOCATION BY SECTOR As of 3/31/17 Percentage of Sector Total Investments* Financials 26.94% Health Care Information Technology Consumer Discretionary Industrials Real Estate 4.24 Energy 4.02 Materials 2.71 Consumer Staples 1.96 Utilities 1.58 Telecommunication Services 1.17 TOTAL % TEN LARGEST FUND HOLDINGS As of 3/31/17 Percentage of Security Total Investments* Mercury Systems Inc. 0.51% NutriSystem Inc Aerie Pharmaceuticals Inc CenterState Banks Inc Merit Medical Systems Inc Walker & Dunlop Inc Oclaro Inc Lakeland Financial Corp Pacific Premier Bancorp. Inc CareTrust REIT Inc TOTAL 3.54% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 7

8 Management s Discussion of Fund Performance ishares RUSSELL 3000 ETF Performance as of March 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 17.87% 17.88% 18.07% 17.87% 17.88% 18.07% 5 Years 12.99% 12.99% 13.18% 84.16% 84.18% 85.72% 10 Years 7.39% 7.39% 7.54% % % % GROWTH OF $10,000 INVESTMENT (AT NET ASSET VALUE) $22,000 $19,000 $20,684 $20,403 $16,000 $13,000 $10,000 $7,000 $4,000 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Fund Index Past performance is no guarantee 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 on page 16 for more information. Beginning Account Value (10/1/16) Actual Ending Account Value (3/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (10/1/16) Hypothetical 5% Return Ending Account Value (3/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1, $ 1, $ 1.05 $ 1, $ 1, $ % a Expenses are calculated using the Fund s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (182 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 16 for more information ishares A NNUAL R EPORT TO S HAREHOLDERS

9 Management s Discussion of Fund Performance (Continued) ishares RUSSELL 3000 ETF The ishares Russell 3000 ETF (the Fund ) seeks to track the investment results of a broad-based index composed of U.S. equities, as represented by the Russell 3000 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. For the 12-month reporting period ended March 31, 2017, the total return for the Fund was 17.87%, net of fees, while the total return for the Index was 18.07%. As represented by the Index, the broad U.S. stock market posted a positive return for the reporting period, benefiting from a brighter economic outlook, rising business and consumer confidence, and improving economic growth. Looking at the performance of the broad market, small-capitalization stocks outperformed both large- and mid-capitalization companies, while value stocks outperformed growth stocks in all capitalization ranges, as measured by the Russell Indexes. Ten of the 11 sectors contributed to the Index s return for the reporting period, led by the information technology sector. Every industry group in the sector posted strong returns despite the slow pace of initial public offerings. Higher spending on enterprise software helped drive the solid gains in the software and services industry. The hardware and equipment industry posted solid performance amid rising expectations for stabilization of the personal computer industry and modest revenue growth. The financials sector contributed meaningfully to the Index s performance for the reporting period. The election of Donald Trump to the U.S. presidency drove expectations that the new administration s fiscal policies would stimulate economic growth and reduce regulation. Those expectations, coupled with two interest rate hikes by the Fed during the reporting period, led to gains in the banking and diversified financial services industries. The industrials, healthcare, and consumer discretionary sectors also contributed to the Index s return for the reporting period, led by the aerospace and defense, health care equipment and supplies, and media industries, respectively. On the downside, the real estate sector slightly detracted from the Index s return for the reporting period, as rising interest rates weighed on real estate investment trusts. ALLOCATION BY SECTOR As of 3/31/17 Percentage of Sector Total Investments* Information Technology 21.10% Financials Health Care Consumer Discretionary Industrials Consumer Staples 8.35 Energy 6.09 Real Estate 4.03 Materials 3.38 Utilities 3.16 Telecommunication Services 2.18 TOTAL % TEN LARGEST FUND HOLDINGS As of 3/31/17 Percentage of Security Total Investments* Apple Inc. 3.21% Microsoft Corp Amazon.com Inc Johnson & Johnson 1.40 Exxon Mobil Corp JPMorgan Chase & Co Facebook Inc. Class A 1.30 Berkshire Hathaway Inc. Class B 1.29 General Electric Co AT&T Inc TOTAL 15.45% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 9

10 Management s Discussion of Fund Performance ishares RUSSELL MID-CAP ETF Performance as of March 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 16.79% 16.77% 17.03% 16.79% 16.77% 17.03% 5 Years 12.90% 12.90% 13.09% 83.44% 83.47% 84.96% 10 Years 7.79% 7.78% 7.94% % % % GROWTH OF $10,000 INVESTMENT (AT NET ASSET VALUE) $26,000 $22,000 $18,000 $21,469 $21,169 $14,000 $10,000 $6,000 $2,000 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Fund Index Past performance is no guarantee 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 on page 16 for more information. a Beginning Account Value (10/1/16) Actual Ending Account Value (3/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (10/1/16) Hypothetical 5% Return Ending Account Value (3/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1, $ 1, $ 1.04 $ 1, $ 1, $ % Expenses are calculated using the Fund s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (182 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 16 for more information ishares A NNUAL R EPORT TO S HAREHOLDERS

11 Management s Discussion of Fund Performance (Continued) ishares RUSSELL MID-CAP ETF The ishares Russell Mid-Cap ETF (the Fund ) seeks to track the investment results of an index composed of mid-capitalization U.S. equities, as represented by the Russell Midcap 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. For the 12-month reporting period ended March 31, 2017, the total return for the Fund was 16.79%, net of fees, while the total return for the Index was 17.03%. As represented by the Index, mid-capitalization U.S. stocks posted a positive return for the reporting period. Based on the Russell indexes, mid-capitalization stocks posted strong returns that were in line with the broader market, but trailed both large- and small-capitalization stocks. Ten of 11 sectors contributed to the Index s return for the reporting period, led by the financials sector. The election of Donald Trump to the U.S. presidency drove expectations that the new administration s fiscal policies would stimulate economic growth and reduce regulation. Those expectations, coupled with two interest rate increases by the Fed during the reporting period, led to gains in the banking industry. The information technology sector also contributed meaningfully to the Index s performance, despite the slow pace of initial public offerings. Growth in data centers for cloud computing and technology products with wireless connectivity increased demand for semiconductors, while higher spending on enterprise software helped the software and services industry. The industrials and materials sectors posted strong performance for the reporting period. Expansion in manufacturing, increasing construction spending, and investors optimism contributed to a positive environment for these economically sensitive sectors. The healthcare sector was another source of strength during the reporting period. The biotechnology industry delivered a solid performance, while the healthcare equipment and services industry rallied on strong earnings growth. Other noteworthy contributors to the Index s performance included the consumer discretionary and energy sectors. In contrast, real estate was the only sector to detract from the index s performance for the reporting period, as rising interest rates weighed on real estate investment trusts. ALLOCATION BY SECTOR As of 3/31/17 Percentage of Sector Total Investments* Information Technology 15.21% Consumer Discretionary Industrials Financials Real Estate Health Care 9.28 Utilities 6.19 Energy 5.85 Materials 5.69 Consumer Staples 4.98 Telecommunication Services 0.73 TOTAL % TEN LARGEST FUND HOLDINGS As of 3/31/17 Percentage of Security Total Investments* NVIDIA Corp. 0.87% Johnson Controls International PLC 0.60 Marriott International Inc./MD Class A 0.47 Equinix Inc Micron Technology Inc Analog Devices Inc Intuitive Surgical Inc Synchrony Financial 0.45 SunTrust Banks Inc Sempra Energy 0.43 TOTAL 5.10% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 11

12 Management s Discussion of Fund Performance ishares RUSSELL MID-CAP GROWTH ETF Performance as of March 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 13.85% 13.85% 14.07% 13.85% 13.85% 14.07% 5 Years 11.74% 11.75% 11.95% 74.23% 74.28% 75.88% 10 Years 7.92% 7.92% 8.13% % % % GROWTH OF $10,000 INVESTMENT (AT NET ASSET VALUE) $26,000 $22,000 $18,000 $21,855 $21,439 $14,000 $10,000 $6,000 $2,000 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Fund Index Past performance is no guarantee 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 on page 16 for more information. Beginning Account Value (10/1/16) Actual Ending Account Value (3/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (10/1/16) Hypothetical 5% Return Ending Account Value (3/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1, $ 1, $ 1.24 $ 1, $ 1, $ % a Expenses are calculated using the Fund s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (182 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 16 for more information ishares A NNUAL R EPORT TO S HAREHOLDERS

13 Management s Discussion of Fund Performance (Continued) ishares RUSSELL MID-CAP GROWTH ETF The ishares Russell Mid-Cap Growth ETF (the Fund ) seeks to track the investment results of an index composed of midcapitalization U.S. equities that exhibit growth characteristics, as represented by the Russell Midcap Growth Index (the Index ). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the 12-month reporting period ended March 31, 2017, the total return for the Fund was 13.85%, net of fees, while the total return for the Index was 14.07%. As represented by the Index, mid-capitalization U.S. growth stocks posted a positive return for the reporting period. Based on the Russell indexes, mid-capitalization stocks posted strong returns that were in line with the broader market, but trailed both largeand small-capitalization stocks. Within the Russell Midcap Index, growth stocks underperformed value stocks. All 11 sectors contributed to the Index s return for the reporting period. The information technology sector contributed the most to the Index s performance, despite the slow pace of initial public offerings. Growth in data centers for cloud computing and technology products with wireless connectivity increased demand for semiconductors, while higher spending on enterprise software helped the software and services industry. Stabilization in the personal computer industry and modest revenue growth also benefited the hardware and equipment industry. The healthcare sector also contributed significantly to the Index s performance during the reporting period, led by the healthcare equipment and services industry, which benefited from strong earnings growth. The pharmaceuticals, biotechnology, and life sciences industry also made solid contributions to the Index s performance despite increased scrutiny from lawmakers on prescription drug costs. The industrials and financials sectors were material contributors to the Index s performance for the reporting period. Expansion in manufacturing, increased construction spending, and investor optimism helped economically sensitive industrials stocks. In the financials sector, diversified financial services firms and banks benefited from two interest rate increases by the Fed during the reporting period, along with expectations that the new administration s fiscal policies would stimulate economic growth and reduce regulation. ALLOCATION BY SECTOR As of 3/31/17 Percentage of Sector Total Investments* Consumer Discretionary 22.99% Information Technology Health Care Industrials Consumer Staples 7.06 Financials 5.33 Real Estate 5.32 Materials 5.15 Energy 1.30 Telecommunication Services 0.19 TOTAL % TEN LARGEST FUND HOLDINGS As of 3/31/17 Percentage of Security Total Investments* NVIDIA Corp. 1.92% Equinix Inc Intuitive Surgical Inc Electronic Arts Inc Ross Stores Inc Fiserv Inc O Reilly Automotive Inc Illumina Inc Zoetis Inc Marriott International Inc./MD Class A 0.79 TOTAL 10.02% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 13

14 Management s Discussion of Fund Performance ishares RUSSELL MID-CAP VALUE ETF Performance as of March 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 19.51% 19.48% 19.82% 19.51% 19.48% 19.82% 5 Years 13.82% 13.82% 14.07% 91.01% 91.00% 93.13% 10 Years 7.29% 7.29% 7.47% % % % GROWTH OF $10,000 INVESTMENT (AT NET ASSET VALUE) $22,000 $18,000 $20,559 $20,217 $14,000 $10,000 $6,000 $2,000 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Fund Index Past performance is no guarantee 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 on page 16 for more information. Beginning Account Value (10/1/16) Actual Ending Account Value (3/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (10/1/16) Hypothetical 5% Return Ending Account Value (3/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1, $ 1, $ 1.25 $ 1, $ 1, $ % a Expenses are calculated using the Fund s annualized expense ratio (as disclosed in the table), multiplied by the average account value for the period, multiplied by the number of days in the period (182 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 16 for more information ishares A NNUAL R EPORT TO S HAREHOLDERS

15 Management s Discussion of Fund Performance (Continued) ishares RUSSELL MID-CAP VALUE ETF The ishares Russell Mid-Cap Value ETF (the Fund ) seeks to track the investment results of an index composed of midcapitalization U.S. equities that exhibit value characteristics, as represented by the Russell Midcap Value Index (the Index ). The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. For the 12-month reporting period ended March 31, 2017, the total return for the Fund was 19.51%, net of fees, while the total return for the Index was 19.82%. As represented by the Index, mid-capitalization U.S. value stocks posted a positive return for the reporting period. Based on the Russell indexes, mid-capitalization stocks delivered strong returns that were in line with the broader market, but trailed both largeand small-capitalization stocks. Within the Russell Midcap Index, value stocks outperformed growth stocks. Nine of the 11 sectors in the Index contributed to the Index s performance for the reporting period, led by the financials sector. The election of Donald Trump to the U.S. presidency drove expectations that the new administration s fiscal policies would stimulate economic growth and reduce regulation. Those expectations, coupled with two interest rate increases by the Fed during the reporting period, led to gains in banks and diversified financial services stocks. Insurance and select real estate-related stocks were other sources of strength. The industrials sector also posted strong performance for the reporting period. Expansion in manufacturing, increased construction spending, and investor optimism aided these economically sensitive stocks. The information technology sector also contributed to the Index s performance despite the slow pace of initial public offerings. Growth in data centers for cloud computing and technology products with wireless connectivity increased demand for semiconductors, while higher spending on enterprise software helped the software and services industry. Other noteworthy contributors to the Index s performance included the energy, materials, utilities, and consumer discretionary sectors. In contrast, the real estate sector was the largest detractor from the Index s performance, as rising interest rates weighed on the sector for the reporting period. Telecommunication services was the only other sector that detracted from performance. ALLOCATION BY SECTOR As of 3/31/17 Percentage of Sector Total Investments* Financials 19.50% Real Estate Industrials Utilities Energy 9.60 Information Technology 9.43 Consumer Discretionary 8.52 Materials 6.13 Health Care 4.14 Consumer Staples 3.27 Telecommunication Services 1.18 TOTAL % TEN LARGEST FUND HOLDINGS As of 3/31/17 Percentage of Security Total Investments* Johnson Controls International PLC 0.86% Micron Technology Inc Synchrony Financial 0.81 SunTrust Banks Inc Sempra Energy 0.78 Analog Devices Inc Prologis Inc Marathon Petroleum Corp Baker Hughes Inc PPL Corp TOTAL 7.85% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 15

16 About Fund Performance Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at 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. The price used to calculate market return ( Market Price ) is determined by using the midpoint between the highest bid and the lowest offer 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. Certain funds may have a NAV which is determined prior to the opening of regular trading on its listed exchange and their market returns are calculated using the midpoint of the bid/ask spread as of the opening of regular trading on the exchange. 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. Shareholder Expenses As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of fund shares and (2) ongoing costs, including management fees and other fund expenses. The expense example, which is based on an investment of $1,000 invested on October 1, 2016 and held through March 31, 2017, is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of investing in other funds. Actual Expenses The table provides information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. To estimate the expenses that you paid on your account over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number corresponding to your Fund under the heading entitled Expenses Paid During Period. Hypothetical Example for Comparison Purposes The table also provides information about hypothetical account values and hypothetical expenses based on each Fund s actual expense ratio and an assumed rate of return of 5% per year before expenses. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of fund shares. Therefore, the hypothetical examples are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher ishares A NNUAL R EPORT TO S HAREHOLDERS

17 Summary Schedule of Investments ishares MICRO-CAP ETF March 31, 2017 Security Shares Value COMMON STOCKS % of Net Assets AEROSPACE & DEFENSE Mercury Systems Inc. a,b 111,130 $ 4,339, % Other securities c 7,226, ,565, AIR FREIGHT & LOGISTICS Other securities c 4,454, ,454, AUTO COMPONENTS Other securities c 10,337, ,337, AUTOMOBILES Other securities c 1,860, ,860, BANKS Cardinal Financial Corp. 75,544 2,261, CenterState Banks Inc. 118,028 3,056, Customers Bancorp. Inc. a 66,375 2,092, Enterprise Financial Services Corp. 47,158 1,999, First Busey Corp. 75,954 2,233, Hanmi Financial Corp. 75,821 2,331, Lakeland Bancorp. Inc. 99,008 1,940, Lakeland Financial Corp. 59,079 2,547, MainSource Financial Group Inc. 57,429 1,891, Pacific Premier Bancorp. Inc. a,b 64,422 2,483, Sandy Spring Bancorp. Inc. 58,005 2,377, Southside Bancshares Inc. 63,882 2,144, State Bank Financial Corp. 86,986 2,272, Stock Yards Bancorp. Inc. 52,165 2,120, Other securities c 115,522, ,275, BEVERAGES Other securities c 2,967, ,967, BIOTECHNOLOGY Blueprint Medicines Corp. a,b 58,013 2,319, Security Shares Value % of Net Assets Synergy Pharmaceuticals Inc. a,b 482,139 $ 2,246, % Xencor Inc. a,b 86,001 2,057, Other securities c 66,513, ,136, BUILDING PRODUCTS Patrick Industries Inc. a,b 34,462 2,443, Other securities c 6,886, ,329, CAPITAL MARKETS Other securities c 12,061, ,061, CHEMICALS Koppers Holdings Inc. a 48,171 2,040, Other securities c 10,963, ,003, COMMERCIAL SERVICES & SUPPLIES Viad Corp. 47,666 2,154, Other securities c 12,704, ,859, COMMUNICATIONS EQUIPMENT Applied Optoelectronics Inc. a,b 38,867 2,182, Oclaro Inc. a,b 264,559 2,597, Other securities c 13,487, ,267, CONSTRUCTION & ENGINEERING Argan Inc. 31,720 2,098, Other securities c 6,102, ,200, CONSTRUCTION MATERIALS Other securities c 427, , CONSUMER FINANCE Other securities c 3,745, ,745, CONTAINERS & PACKAGING Other securities c 1,277, ,277, DISTRIBUTORS Other securities c 529, , S UMMARY S CHEDULES OF I NVESTMENTS 17

18 Summary Schedule of Investments (Continued) ishares MICRO-CAP ETF March 31, 2017 Security Shares Value % of Net Assets Security Shares Value % of Net Assets DIVERSIFIED CONSUMER SERVICES Strayer Education Inc. 25,183 $ 2,026, % Other securities c 8,442, ,469, DIVERSIFIED FINANCIAL SERVICES Other securities c 3,186, ,186, DIVERSIFIED TELECOMMUNICATION SERVICES Other securities c 7,748, ,748, ELECTRIC UTILITIES Other securities c 670, , ELECTRICAL EQUIPMENT Other securities c 5,456, ,456, ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS eplus Inc. a 15,054 2,033, Novanta Inc. a 74,182 1,969, Other securities c 15,255, ,257, ENERGY EQUIPMENT & SERVICES Exterran Corp. a 77,939 2,451, Other securities c 14,002, ,453, EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS) CareTrust REIT Inc. b 147,175 2,475, Monmouth Real Estate Investment Corp. 155,023 2,212, Other securities c 27,311, ,999, FOOD & STAPLES RETAILING Other securities c 1,345, ,345, FOOD PRODUCTS Other securities c 7,195, ,195, GAS UTILITIES Other securities c 1,082, ,082, HEALTH CARE EQUIPMENT & SUPPLIES Cardiovascular Systems Inc. a 75,374 $ 2,131, % Merit Medical Systems Inc. a 101,365 2,929, Other securities c 27,853, ,913, HEALTH CARE PROVIDERS & SERVICES BioTelemetry Inc. a 65,250 1,888, LHC Group Inc. a,b 35,816 1,930, Tivity Health Inc. a,b 75,507 2,197, U.S. Physical Therapy Inc. 28,941 1,889, Other securities c 15,089, ,995, HEALTH CARE TECHNOLOGY Other securities c 4,849, ,849, HOTELS, RESTAURANTS & LEISURE Denny s Corp. a,b 179,249 2,217, Other securities c 21,188, ,405, HOUSEHOLD DURABLES Other securities c 12,707, ,707, HOUSEHOLD PRODUCTS Other securities c 990, , INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS Other securities c 1,937, ,937, INSURANCE Stewart Information Services Corp. 52,179 2,305, Universal Insurance Holdings Inc. 76,717 1,879, Other securities c 11,857, ,041, INTERNET & DIRECT MARKETING RETAIL NutriSystem Inc. 69,043 3,831, Other securities c 4,269, ,101, ishares A NNUAL R EPORT TO S HAREHOLDERS

19 Summary Schedule of Investments (Continued) ishares MICRO-CAP ETF March 31, 2017 Security Shares Value % of Net Assets Security Shares Value % of Net Assets INTERNET SOFTWARE & SERVICES Other securities c $ 22,538, % 22,538, IT SERVICES Other securities c 12,022, ,022, LEISURE PRODUCTS Other securities c 4,336, ,336, LIFE SCIENCES TOOLS & SERVICES Other securities c 5,314, ,314, MACHINERY Federal Signal Corp. 138,974 1,919, Lydall Inc. a,b 39,289 2,105, Other securities c 17,758, ,784, MARINE Other securities c 1,812, ,812, MEDIA Other securities c 8,221, ,221, METALS & MINING Other securities c 8,349, ,349, MORTGAGE REAL ESTATE INVESTMENT Hannon Armstrong Sustainable Infrastructure Capital Inc. 114,293 2,308, Other securities c 9,977, ,286, MULTI-UTILITIES Other securities c 1,488, ,488, MULTILINE RETAIL Other securities c 1,495, ,495, OIL, GAS & CONSUMABLE FUELS Other securities c 17,768, ,768, PAPER & FOREST PRODUCTS Other securities c $ 27, % 27, PERSONAL PRODUCTS Other securities c 3,613, ,613, PHARMACEUTICALS Aerie Pharmaceuticals Inc. a,b 69,102 3,133, Corcept Therapeutics Inc. a 179,843 1,971, Other securities c 23,532, ,637, PROFESSIONAL SERVICES Other securities c 11,929, ,929, REAL ESTATE MANAGEMENT & DEVELOPMENT Other securities c 4,561, ,561, ROAD & RAIL Other securities c 4,484, ,484, SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT FormFactor Inc. a 161,701 1,916, Other securities c 24,592, ,508, SOFTWARE Other securities c 16,330, ,330, SPECIALTY RETAIL Other securities c 15,393, ,393, TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS Other securities c 2,809, ,809, TEXTILES, APPAREL & LUXURY GOODS Other securities c 6,771, ,771, THRIFTS & MORTGAGE FINANCE Meridian Bancorp. Inc. 123,160 2,253, S UMMARY S CHEDULES OF I NVESTMENTS 19

20 Summary Schedule of Investments (Continued) ishares MICRO-CAP ETF March 31, 2017 Security Shares Value % of Net Assets Meta Financial Group Inc. 21,343 $ 1,888, % United Financial Bancorp. Inc. 123,999 2,109, Walker & Dunlop Inc. a 65,229 2,719, Other securities c 25,253, ,224, TOBACCO Other securities c 524, , TRADING COMPANIES & DISTRIBUTORS Other securities c 5,193, ,193, WATER UTILITIES Other securities c 8,229, ,229, WIRELESS TELECOMMUNICATION SERVICES Other securities c 2,225, ,225, TOTAL COMMON STOCKS (Cost: $810,073,046) 850,993, WARRANTS ENERGY EQUIPMENT & SERVICES Other securities c TOTAL WARRANTS (Cost: $0) Security Shares Value SHORT-TERM INVESTMENTS % of Net Assets MONEY MARKET FUNDS BlackRock Cash Funds: Institutional, SL Agency Shares 1.13% d,e,f 157,190,698 $ 157,253, % BlackRock Cash Funds: Treasury, SL Agency Shares 0.66% d,e 1,077,429 1,077, ,331, TOTAL SHORT-TERM INVESTMENTS (Cost: $ 158,281,497) 158,331, TOTAL INVESTMENTS IN SECURITIES (Cost: $968,354,543) g 1,009,324, Other Assets, Less Liabilities (156,789,285) (18.39) NET ASSETS $ 852,534, % a Non-income earning security. b All or a portion of this security represents a security on loan. See Note 1. c Other securities are those securities, which individually, are not one of the 50 largest unaffiliated issuers and which represent less than one percent of the net assets of the Fund as of March 31, Other securities may include securities on loan and non-income earning securities. d Affiliated money market fund. e The rate quoted is the annualized seven-day yield of the fund at period end. f All or a portion of this security represents an investment of securities lending collateral. See Note 1. g The cost of investments for federal income tax purposes was $986,120,019. Net unrealized appreciation was $23,204,083, of which $196,119,304 represented gross unrealized appreciation on securities and $172,915,221 represented gross unrealized depreciation on securities. Schedule 1 Futures Contracts (Note 5) Futures contracts outstanding as of March 31, 2017 were as follows: Issue Number of long (short) contracts Expiration date Exchange Initial notional value Current notional value Unrealized appreciation (depreciation) Russell 2000 Mini 18 Jun ICE Markets Equity $ 1,228,625 $ 1,245,960 $ 17, ishares A NNUAL R EPORT TO S HAREHOLDERS

21 Summary Schedule of Investments (Continued) ishares MICRO-CAP ETF March 31, 2017 Schedule 2 Fair Value Measurements Various inputs are used in determining the fair value of financial instruments. For description of the input levels and information about the Fund s policy regarding valuation of financial instruments, see Note 1. The following table summarizes the value of the Fund s investments according to the fair value hierarchy as of March 31, The breakdown of the Fund s investments into major categories is disclosed in the schedule of investments above. Level 1 Level 2 Level 3 Total Investments: Assets: Common stocks $ 850,990,607 $ 2,046 $ 445 $ 850,993,098 Warrants 0 a 0 a Money market funds 158,331, ,331,004 Total $1,009,321,611 $ 2,046 $ 445 $1,009,324,102 Derivative financial instruments b : Assets: Futures contracts $ 17,335 $ $ $ 17,335 Total $ 17,335 $ $ $ 17,335 a b Rounds to less than $1. Shown at the unrealized appreciation (depreciation) on the contracts. See notes to financial statements. S UMMARY S CHEDULES OF I NVESTMENTS 21

22 Summary Schedule of Investments ishares RUSSELL 3000 ETF March 31, 2017 Security Shares Value COMMON STOCKS % of Net Assets AEROSPACE & DEFENSE Boeing Co. (The) 179,399 $ 31,728, % United Technologies Corp. 233,569 26,208, Other securities a 99,845, ,783, AIR FREIGHT & LOGISTICS Other securities a 46,615, ,615, AIRLINES Other securities a 43,338, ,338, AUTO COMPONENTS Other securities a 26,747, ,747, AUTOMOBILES Other securities a 43,699, ,699, BANKS Bank of America Corp. 3,090,344 72,901, Citigroup Inc. 833,849 49,880, JPMorgan Chase & Co. 1,094,574 96,147, PNC Financial Services Group Inc. (The) b 149,731 18,003, Wells Fargo & Co. 1,373,948 76,473, Other securities a 180,546, ,953, BEVERAGES Coca-Cola Co. (The) 1,171,295 49,709, PepsiCo Inc. 434,229 48,572, Other securities a 28,861, ,143, BIOTECHNOLOGY AbbVie Inc. 486,671 31,711, Amgen Inc. 225,886 37,061, Celgene Corp. c 231,100 28,755, Gilead Sciences Inc. 398,660 27,076, Other securities a 97,112, ,717, Security Shares Value % of Net Assets BUILDING PRODUCTS Other securities a $ 34,875, % 34,875, CAPITAL MARKETS BlackRock Inc. b 37,422 14,351, Goldman Sachs Group Inc. (The) 116,044 26,657, Other securities a 164,228, ,237, CHEMICALS Other securities a 165,079, ,079, COMMERCIAL SERVICES & SUPPLIES Other securities a 39,850, ,850, COMMUNICATIONS EQUIPMENT Cisco Systems Inc. 1,513,388 51,152, Other securities a 35,274, ,427, CONSTRUCTION & ENGINEERING Other securities a 15,514, ,514, CONSTRUCTION MATERIALS Other securities a 11,940, ,940, CONSUMER FINANCE Other securities a 56,874, ,874, CONTAINERS & PACKAGING Other securities a 33,236, ,236, DISTRIBUTORS Other securities a 8,602, ,602, DIVERSIFIED CONSUMER SERVICES Other securities a 11,054, ,054, DIVERSIFIED FINANCIAL SERVICES Berkshire Hathaway Inc. Class B c 568,606 94,775, Other securities a 5,366, ,141, ishares A NNUAL R EPORT TO S HAREHOLDERS

23 Summary Schedule of Investments (Continued) ishares RUSSELL 3000 ETF March 31, 2017 Security Shares Value % of Net Assets Security Shares Value % of Net Assets DIVERSIFIED TELECOMMUNICATION SERVICES AT&T Inc. 1,852,481 $ 76,970, % Verizon Communications Inc. 1,226,967 59,814, Other securities a 14,439, ,224, ELECTRIC UTILITIES Other securities a 134,239, ,239, ELECTRICAL EQUIPMENT Other securities a 41,054, ,054, ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS Other securities a 52,799, ,799, ENERGY EQUIPMENT & SERVICES Schlumberger Ltd. 418,602 32,692, Other securities a 43,505, ,198, EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS) Other securities a 286,746, ,746, FOOD & STAPLES RETAILING CVS Health Corp. 322,950 25,351, Wal-Mart Stores Inc. 455,025 32,798, Other securities a 69,840, ,989, FOOD PRODUCTS Other securities a 120,200, ,200, GAS UTILITIES Other securities a 13,341, ,341, HEALTH CARE EQUIPMENT & SUPPLIES Medtronic PLC 421,760 33,976, Other securities a 159,878, ,855, HEALTH CARE PROVIDERS & SERVICES UnitedHealth Group Inc. 283,993 46,577, Other securities a 133,684, ,262, HEALTH CARE TECHNOLOGY Other securities a $ 11,753, % 11,753, HOTELS, RESTAURANTS & LEISURE McDonald s Corp. 250,039 32,407, Other securities a 116,924, ,332, HOUSEHOLD DURABLES Other securities a 40,587, ,587, HOUSEHOLD PRODUCTS Procter & Gamble Co. (The) 769,564 69,145, Other securities a 46,218, ,363, INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS Other securities a 7,898, ,898, INDUSTRIAL CONGLOMERATES 3M Co. 176,928 33,851, General Electric Co. 2,621,143 78,110, Honeywell International Inc. 228,916 28,584, Other securities a 8,487, ,033, INSURANCE Other securities a 212,897, ,897, INTERNET & DIRECT MARKETING RETAIL Amazon.com Inc. c 116, ,676, Priceline Group Inc. (The) c 14,885 26,494, Other securities a 31,609, ,780, INTERNET SOFTWARE & SERVICES Alphabet Inc. Class A c 88,276 74,840, Alphabet Inc. Class C c 89,218 74,011, Facebook Inc. Class A c 674,702 95,841, Other securities a 50,563, ,257, S UMMARY S CHEDULES OF I NVESTMENTS 23

24 Summary Schedule of Investments (Continued) ishares RUSSELL 3000 ETF March 31, 2017 Security Shares Value % of Net Assets Security Shares Value % of Net Assets IT SERVICES International Business Machines Corp. 264,337 $ 46,031, % MasterCard Inc. Class A 289,834 32,597, Visa Inc. Class A 572,926 50,915, Other securities a 143,500, ,045, LEISURE PRODUCTS Other securities a 10,958, ,958, LIFE SCIENCES TOOLS & SERVICES Other securities a 54,360, ,360, MACHINERY Other securities a 138,613, ,613, MARINE Other securities a 1,781, ,781, MEDIA Comcast Corp. Class A 1,449,035 54,469, Walt Disney Co. (The) 487,846 55,316, Other securities a 120,056, ,842, METALS & MINING Other securities a 34,417, ,417, MORTGAGE REAL ESTATE INVESTMENT PennyMac Mortgage Investment Trust b 18, , Other securities a 15,830, ,167, MULTI-UTILITIES Other securities a 69,628, ,628, MULTILINE RETAIL Other securities a 28,925, ,925, OIL, GAS & CONSUMABLE FUELS Chevron Corp. 565,250 60,690, Exxon Mobil Corp. 1,253, ,829, Other securities a 208,677, ,196, PAPER & FOREST PRODUCTS Other securities a $ 4,197, % 4,197, PERSONAL PRODUCTS Other securities a 13,032, ,032, PHARMACEUTICALS Bristol-Myers Squibb Co. 502,396 27,320, Johnson & Johnson 826, ,903, Merck & Co. Inc. 832,978 52,927, Pfizer Inc. 1,806,740 61,808, Other securities a 77,512, ,471, PROFESSIONAL SERVICES Other securities a 26,672, ,672, REAL ESTATE MANAGEMENT & DEVELOPMENT Other securities a 10,041, ,041, ROAD & RAIL Union Pacific Corp. 253,768 26,879, Other securities a 38,267, ,146, SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Intel Corp. 1,420,993 51,255, Other securities a 185,606, ,861, SOFTWARE Microsoft Corp. 2,277, ,991, Oracle Corp. 889,200 39,667, Other securities a 144,438, ,097, SPECIALTY RETAIL Home Depot Inc. (The) 374,123 54,932, Other securities a 118,582, ,514, TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS Apple Inc. 1,648, ,753, Other securities a 39,156, ,909, ishares A NNUAL R EPORT TO S HAREHOLDERS