JULY 31, 2017 2017 ANNUAL REPORT ishares Trust ishares Currency Hedged MSCI Europe Small-Cap ETF HEUS BATS ishares Edge MSCI Min Vol EAFE Currency Hedged ETF HEFV BATS ishares Edge MSCI Min Vol EAFE ETF EFAV BATS ishares Edge MSCI Min Vol Europe Currency Hedged ETF HEUV BATS ishares Edge MSCI Min Vol Europe ETF EUMV NYSE Arca ishares MSCI Europe Small-Cap ETF IEUS NASDAQ
Table of Contents Management s Discussions of Fund Performance... 5 About Fund Performance... 18 Shareholder Expenses... 18 Schedules of Investments... 19 ishares Currency Hedged MSCI Europe Small-Cap ETF... 19 ishares Edge MSCI Min Vol EAFE Currency Hedged ETF... 22 ishares Edge MSCI Min Vol EAFE ETF... 25 ishares Edge MSCI Min Vol Europe Currency Hedged ETF... 30 ishares Edge MSCI Min Vol Europe ETF... 32 ishares MSCI Europe Small-Cap ETF... 35 Financial Statements... 49 Financial Highlights... 56 Notes to Financial Statements... 62 Report of Independent Registered Public Accounting Firm... 79 Tax Information... 80 Board Review and Approval of Investment Advisory Contract... 82 Supplemental Information... 92 Trustee and Officer Information... 97
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Management s Discussion of Fund Performance ishares TRUST GLOBAL EQUITY MARKET OVERVIEW Global equity markets posted strong returns for the 12 months ended July 31, 2017 (the reporting period ). The MSCI ACWI, a broad global equity index that includes both developed and emerging markets, returned 17.06% in U.S. dollar terms for the reporting period. One contributing factor to the robust performance of global stocks was the continuation of accommodative monetary policies by many of the world s central banks. The European Central Bank ( ECB ), the Bank of Japan ( BOJ ), and several other major central banks maintained policies such as quantitative easing and negative interest rates in an effort to stimulate economic activity. Signs that these efforts were effective reflected in stronger economic growth in Europe and China provided a favorable environment for global equity market performance. Another catalyst for global stock market gains was the outcome of the U.S. presidential election in November 2016. The new presidential administration was expected to enact pro-business fiscal policies including lower taxes, decreased regulation, and increased fiscal spending aimed at strengthening U.S. economic growth. These expectations helped drive global stocks higher in late 2016 and early 2017, though the positive impact faded late in the reporting period as the administration struggled to implement its agenda. Regionally, European equity markets generated the best returns among developed markets, advancing by approximately 20% in U.S. dollar terms for the reporting period. European stocks benefited from improving economic conditions and stronger corporate earnings. In addition, election outcomes in France and the Netherlands eased investor concerns about nationalist presidential candidates and their potential impact on the European Union. Currency fluctuations also provided support for European equity performance in U.S. dollar terms as the euro appreciated by approximately 5% against the U.S. dollar. The best-performing European stock markets included Austria, Spain, and Italy, while Denmark and Belgium trailed. The U.S. stock market returned approximately 16% for the reporting period. Despite signs of mixed U.S. economic growth, stocks rallied due to post-election optimism about the economy s future prospects and a notable improvement in corporate earnings growth. U.S. stocks advanced despite three short-term interest rate increases by the U.S. Federal Reserve Bank (the Fed ) during the reporting period, which raised the federal funds rate target to a range of 1.00%-1.25%, its highest level since October 2008. The Fed also unveiled a plan to start reducing the amount of U.S. Treasury bonds and mortgage-backed securities on its balance sheet before the end of 2017. Equity markets in the Asia-Pacific region gained about 15% in U.S. dollar terms for the reporting period, led by Hong Kong and Singapore. Japanese stocks also produced solid returns, benefiting from that country s ongoing economic recovery. While headline growth remained modest, consumer spending improved, and the job market was the strongest in decades. Nevertheless, equity market returns in this region were hindered by a decline in the Japanese yen, which depreciated by approximately 8% against the U.S. dollar. Emerging markets stocks outperformed those in developed markets, returning approximately 25% in U.S. dollar terms for the reporting period. Emerging markets in Asia were the best performers, led by export-driven China and South Korea, which benefited from better economic growth in many developed countries. Equity markets in the Middle East trailed for the reporting period amid continued geopolitical conflict in the region. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 5
Management s Discussion of Fund Performance ishares CURRENCY HEDGED MSCI EUROPE SMALL-CAP ETF Performance as of July 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 23.55% 23.96% 23.19% 23.55% 23.96% 23.19% Since Inception 15.02% 15.11% 14.97% 27.90% 28.08% 27.75% GROWTH OF $10,000 INVESTMENT (SINCE INCEPTION AT NET ASSET VALUE) $13,000 $12,790 $12,775 $12,000 $11,000 $10,000 $9,000 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Fund Index The inception date of the Fund was 10/29/15. The first day of secondary market trading was 11/2/15. 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 18 for more information. Beginning Account Value (2/1/17) Actual Ending Account Value (7/31/17) Expenses Paid During Period a,b Shareholder Expenses Beginning Account Value (2/1/17) Hypothetical 5% Return Ending Account Value (7/31/17) Expenses Paid During Period a,b Annualized Expense Ratio a $ 1,000.00 $ 1,138.20 $ 0.16 $ 1,000.00 $ 1,024.60 $ 0.15 0.03% a Annualized expense ratio and expenses paid during the period do not include fees and expenses of the underlying fund in which the Fund invests. b 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 (181 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 18 for more information. The ishares Currency Hedged MSCI Europe Small-Cap ETF (the Fund ) seeks to track the investment results of an index composed of small-capitalization European developed market equities while mitigating exposure to fluctuations between the value of the component currencies and the U.S. dollar, as represented by the MSCI Europe Small Cap 100% Hedged to USD Index (the Index ). The Index sells forward the non-u.s. dollar currencies in which the constituent securities are denominated in an amount equal to those securities at a one-month forward rate to effectively create a hedge against fluctuations in the relative value of the component currencies in relation to the U.S. dollar. In order to replicate the hedging component of the Index, the Fund enters into foreign currency forward contracts designed to offset the Fund s exposure to the component currencies. 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 6 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Management s Discussion of Fund Performance (Continued) ishares CURRENCY HEDGED MSCI EUROPE SMALL-CAP ETF Index. The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the ishares MSCI Europe Small-Cap ETF. For the 12-month reporting period ended July 31, 2017, the total return for the Fund was 23.55%, net of fees, while the total return for the Index was 23.19%. Every country within the Index advanced for the reporting period in U.S. dollar terms. Small-capitalization stocks in the U.K., the largest country weight in the Index on average, made the most significant contribution to the Index s performance. U.K. equities advanced as the sharp drop in the British pound immediately prior to the reporting period boosted exports and profits for multinational companies earning revenues outside of the U.K. All else equal, a weaker British pound makes exports less expensive, while British companies receiving payment in the stronger foreign currencies can translate revenues into more British pounds. German small-capitalization stocks contributed meaningfully to the Index s return for the reporting period. The German stock market reached an all-time high as export levels climbed to their highest levels on record, which also bolstered industrial production. Stronger consumer spending also helped to support German stocks. The Italian stock market gained during the reporting period, benefiting from the news that the Italian government would rescue two struggling regional banks. French small-capitalization stocks contributed to the Index s return, partly due to pro-business presidential candidate Emmanuel Macron s victory and his preference for keeping France in the European Union. From a sector standpoint, industrials stocks added meaningfully to the Index s performance in U.S. dollar terms during the reporting period as improving economic conditions led to increased industrial output. Financial stocks also contributed as European banks benefited from the election of Macron in France and improving asset quality in the region. Information technology stocks benefited from strong investor inflows, while the Eurozone s improving economic conditions and highest consumer confidence levels in 16 years boosted consumer discretionary stocks. In terms of currency performance, the euro appreciated by 5% against the U.S. dollar during the reporting period while the British pound was relatively flat. The euro s positive performance meant that hedging activity detracted from the Index s return. A fully hedged investor seeks to bypass the currency fluctuations both on the upside and on the downside related to holding foreign-currency-denominated stocks. The Index s hedging activity offset the impact of currency fluctuations relative to the U.S. dollar, resulting in a return for the Index that was relatively close to the Index s return measured in local currencies. ALLOCATION BY SECTOR 1 As of 7/31/17 Percentage of Sector Total Investments 2 Industrials 22.83% Consumer Discretionary 14.91 Financials 13.65 Information Technology 11.26 Real Estate 9.43 Materials 8.09 Health Care 7.49 Consumer Staples 4.97 Energy 2.99 Utilities 2.64 Telecommunication Services 1.74 TOTAL 100.00% TEN LARGEST COUNTRIES 1 As of 7/31/17 Percentage of Country Total Investments 2 United Kingdom 32.00% Germany 11.85 Sweden 9.24 Switzerland 8.42 France 7.60 Italy 7.09 Spain 4.12 Netherlands 3.83 Belgium 3.22 Denmark 3.06 TOTAL 90.43% 1 Table shown is for the ishares MSCI Europe Small-Cap ETF, the underlying fund in which the Fund invests. 2 Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 7
Management s Discussion of Fund Performance ishares EDGE MSCI MIN VOL EAFE CURRENCY HEDGED ETF Performance as of July 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 10.59% 11.09% 10.45% 10.59% 11.09% 10.45% Since Inception 7.57% 7.76% 8.00% 13.70% 14.06% 14.47% GROWTH OF $10,000 INVESTMENT (SINCE INCEPTION AT NET ASSET VALUE) $12,000 $11,500 $11,447 $11,370 $11,000 $10,500 $10,000 $9,500 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Fund Index The inception date of the Fund was 10/29/15. The first day of secondary market trading was 11/2/15. 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 18 for more information. Beginning Account Value (2/1/17) Actual Ending Account Value (7/31/17) Expenses Paid During Period a,b Shareholder Expenses Beginning Account Value (2/1/17) Hypothetical 5% Return Ending Account Value (7/31/17) Expenses Paid During Period a,b Annualized Expense Ratio a $ 1,000.00 $ 1,097.00 $ 0.16 $ 1,000.00 $ 1,024.60 $ 0.15 0.03% a Annualized expense ratio and expenses paid during the period do not include fees and expenses of the underlying fund in which the Fund invests. b 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 (181 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 18 for more information. The ishares Edge MSCI Min Vol EAFE Currency Hedged ETF (the Fund ) seeks to track the investment results of an index composed of developed market equities that, in the aggregate, have lower volatility characteristics relative to the broader developed equity markets, excluding the U.S. and Canada while mitigating exposure to fluctuations between the value of the component currencies and the U.S. dollar, as represented by the MSCI EAFE Minimum Volatility (USD) 100% Hedged to USD Index (the Index ). The Index sells forward the non-u.s. dollar currencies in which the constituent securities are denominated in an amount equal to those securities at a one-month forward rate to effectively create a hedge against fluctuations in the relative value of the component currencies in relation to the U.S. dollar. In order to replicate the hedging component of the Index, the Fund enters into foreign currency forward contracts designed to offset the Fund s exposure to the component currencies. 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 8 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Management s Discussion of Fund Performance (Continued) ishares EDGE MSCI MIN VOL EAFE CURRENCY HEDGED ETF Index. The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the ishares Edge MSCI Min Vol EAFE ETF. For the 12-month reporting period ended July 31, 2017, the total return for the Fund was 10.59%, net of fees, while the total return for the Index was 10.45%. Swiss equities were the largest contributors to the Index s return for the reporting period in U.S. dollar terms. Investor sentiment benefited from improving economic conditions in the Eurozone, which had its strongest quarterly economic output level in nearly six years, as well as encouraging economic data in the U.S. and China. Large Swiss banking and pharmaceutical companies also received a boost from the presidential election of Donald Trump in the U.S., as investors anticipated more lenient regulatory environments for both industries. Stocks in Japan, the largest country weight in the Index during the reporting period, made a positive contribution to the Index s return in U.S. dollar terms. A weaker yen and increased consumer spending bolstered export growth, helping Japan s economy expand throughout the reporting period. Stocks in France added to the Index s performance in U.S. dollar terms, largely reflecting the election of centrist presidential candidate Emmanuel Macron, whose allegiance to the European Union eased concerns about nationalist sentiment and its effect on the European Union. Other noteworthy countries affecting the Index s performance for the reporting period included Denmark, which contributed meaningfully as economic growth improved, and Australia, which detracted modestly from the Index s return in U.S. dollar terms. From a sector standpoint, financial stocks made the most significant contribution in U.S. dollar terms as European banks benefited from the election of a pro-business president in France and improving asset quality in the region. Industrials stocks contributed meaningfully amid increased industrial output during the reporting period. Consumer staples and information technology stocks also contributed, while the real estate and telecommunications services sectors detracted from the Index s return. In terms of currency performance for the reporting period, the euro appreciated by 5% against the U.S. dollar, while the British pound was relatively flat and the Japanese yen declined by 8%. A fully hedged investor seeks to bypass the currency fluctuations both on the upside and on the downside related to holding foreign-currency-denominated stocks. The Index s hedging activity offset the impact of foreign currency performance relative to the U.S. dollar, resulting in a return for the Index that was relatively close to the Index s return measured in local currencies. ALLOCATION BY SECTOR 1 As of 7/31/17 Percentage of Sector Total Investments 2 Financials 16.90% Consumer Staples 16.25 Health Care 15.66 Industrials 14.88 Telecommunication Services 9.38 Utilities 8.48 Consumer Discretionary 7.81 Information Technology 4.15 Real Estate 3.84 Materials 2.21 Energy 0.44 TOTAL 100.00% TEN LARGEST COUNTRIES 1 As of 7/31/17 Percentage of Country Total Investments 2 Japan 27.77% United Kingdom 15.18 Switzerland 13.54 Hong Kong 8.56 Denmark 5.66 France 5.62 Germany 4.63 Australia 4.35 Singapore 4.00 Finland 2.40 TOTAL 91.71% 1 Table shown is for the ishares Edge MSCI Min Vol EAFE ETF, the underlying fund in which the Fund invests. 2 Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 9
Management s Discussion of Fund Performance ishares EDGE MSCI MIN VOL EAFE ETF Performance as of July 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 8.09% 8.56% 8.14% 8.09% 8.56% 8.14% 5 Years 9.56% 9.55% 9.65% 57.84% 57.76% 58.53% Since Inception 9.30% 9.34% 9.39% 67.35% 67.68% 68.03% GROWTH OF $10,000 INVESTMENT (SINCE INCEPTION AT NET ASSET VALUE) $17,000 $16,000 $16,803 $16,735 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 Jul 12 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Fund Index The inception date of the Fund was 10/18/11. The first day of secondary market trading was 10/20/11. 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 18 for more information. Beginning Account Value (2/1/17) Actual Ending Account Value (7/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (2/1/17) Hypothetical 5% Return Ending Account Value (7/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1,000.00 $ 1,134.20 $ 1.06 $ 1,000.00 $ 1,023.80 $ 1.00 0.20% 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 (181 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 18 for more information. The ishares Edge MSCI Min Vol EAFE ETF (the Fund ) seeks to track the investment results of an index composed of developed market equities that, in the aggregate, have lower volatility characteristics relative to the broader developed equity markets, excluding the U.S. and Canada, as represented by the MSCI EAFE Minimum Volatility (USD) 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 July 31, 2017, the total return for the Fund was 8.09%, net of fees, while the total return for the Index was 8.14%. Swiss equities were the largest contributors to the Index s return for the reporting period. Investor sentiment benefited from improving economic conditions in the Eurozone, which had its strongest quarterly economic output level in nearly six years, as well as encouraging economic data in the U.S. and China. Large Swiss banking and pharmaceutical companies also received a boost from the presidential election of Donald Trump in the U.S., as investors anticipated more lenient regulatory environments for both industries. 10 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Management s Discussion of Fund Performance (Continued) ishares EDGE MSCI MIN VOL EAFE ETF Stocks in Japan, the largest country weight in the Index during the reporting period, made a positive contribution to the Index s return. A weaker yen and increased consumer spending bolstered export growth, helping Japan s economy expand throughout the reporting period. Stocks in France added to the Index s performance, largely reflecting the election of centrist presidential candidate Emmanuel Macron, whose allegiance to the European Union eased concerns about nationalist sentiment and its effect on the European Union. Other noteworthy countries affecting the Index s performance for the reporting period included Denmark, which contributed meaningfully as economic growth improved, and Australia, which detracted modestly from the Index s return in U.S. dollar terms. From a sector standpoint, financial stocks made the most significant contribution as European banks benefited from the election of a pro-business president in France and improving asset quality in the region. Industrials stocks contributed meaningfully amid increased industrial output during the reporting period. Consumer staples and information technology stocks also contributed, while the real estate and telecommunications services sectors detracted from the Index s return. In terms of currency performance for the reporting period, the euro appreciated by 5% against the U.S. dollar, while the British pound was relatively flat and the Japanese yen declined by 8%. The Index seeks lower volatility than the broader market with returns in line with the market over the long-term. For the reporting period, the Index underperformed the broader market, as represented by the MSCI EAFE Index. Minimum volatility strategies focus on providing broad market exposure with less volatility, so they have tended to outperform during periods of elevated volatility but tend to underperform during periods of low volatility and risk-on markets, as seen over the reporting period. Relative to the broader market, an overweight allocation to Hong Kong and an underweight allocation to France detracted from performance in U.S. dollar terms, while overweight allocations to Denmark and Switzerland benefited relative performance. From a sector perspective, overweight allocations to the telecommunication services and utilities sectors relative to the broader market weighed on the Index s performance, while underweight allocations to the automobiles and components industry and the energy sector benefited relative performance. ALLOCATION BY SECTOR As of 7/31/17 Percentage of Sector Total Investments* Financials 16.90% Consumer Staples 16.25 Health Care 15.66 Industrials 14.88 Telecommunication Services 9.38 Utilities 8.48 Consumer Discretionary 7.81 Information Technology 4.15 Real Estate 3.84 Materials 2.21 Energy 0.44 TOTAL 100.00% TEN LARGEST COUNTRIES As of 7/31/17 Percentage of Country Total Investments* Japan 27.77% United Kingdom 15.18 Switzerland 13.54 Hong Kong 8.56 Denmark 5.66 France 5.62 Germany 4.63 Australia 4.35 Singapore 4.00 Finland 2.40 TOTAL 91.71% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 11
Management s Discussion of Fund Performance ishares EDGE MSCI MIN VOL EUROPE CURRENCY HEDGED ETF Performance as of July 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 8.31% 9.78% 9.26% 8.31% 9.78% 9.26% Since Inception 6.62% 7.07% 6.95% 11.93% 12.76% 12.52% GROWTH OF $10,000 INVESTMENT (SINCE INCEPTION AT NET ASSET VALUE) $12,000 $11,500 $11,000 $11,252 $11,193 $10,500 $10,000 $9,500 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Fund Index The inception date of the Fund was 10/29/15. The first day of secondary market trading was 11/2/15. 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 18 for more information. Beginning Account Value (2/1/17) Actual Ending Account Value (7/31/17) Expenses Paid During Period a,b Shareholder Expenses Beginning Account Value (2/1/17) Hypothetical 5% Return Ending Account Value (7/31/17) Expenses Paid During Period a,b Annualized Expense Ratio a $ 1,000.00 $ 1,107.00 $ 0.16 $ 1,000.00 $ 1,024.60 $ 0.15 0.03% a Annualized expense ratio and expenses paid during the period do not include fees and expenses of the underlying fund in which the Fund invests. b 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 (181 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 18 for more information. The ishares Edge MSCI Min Vol Europe Currency Hedged ETF (the Fund ) seeks to track the investment results of an index composed of European developed market equities that, in the aggregate, have lower volatility characteristics relative to the broader European developed equity markets while mitigating exposure to fluctuations between the value of the component currencies and the U.S. dollar, as represented by the MSCI Europe Minimum Volatility (USD) 100% Hedged to USD Index (the Index ). The Index sells forward the non-u.s. dollar currencies in which the constituent securities are denominated in an amount equal to those securities at a one-month forward rate to effectively create a hedge against fluctuations in the relative value of the component currencies in relation to the U.S. dollar. In order to replicate the hedging component of the Index, the Fund enters into foreign currency forward contracts designed to offset the Fund s exposure to the component currencies. 12 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Management s Discussion of Fund Performance (Continued) ishares EDGE MSCI MIN VOL EUROPE CURRENCY HEDGED ETF 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. The Fund currently seeks to achieve its investment objective by investing a substantial portion of its assets in one underlying fund, the ishares Edge MSCI Min Vol Europe ETF. For the 12-month reporting period ended July 31, 2017, the total return for the Fund was 8.31%, net of fees, while the total return for the Index was 9.26%. Every country within the Index advanced for the reporting period, with Swiss stocks making the most significant contribution to the Index s return in U.S. dollars. Improving economic conditions in the Eurozone as well as encouraging economic signs from the U.S. and China supported Swiss investor sentiment. Large Swiss banking and pharmaceutical companies also received a boost from the election of Donald Trump, as investors anticipated more lenient regulatory environments for both industries. Stocks in Denmark also contributed meaningfully as economic growth improved within the country and the region. French stocks contributed to the Index s return for the reporting period. The election of centrist presidential candidate Emmanuel Macron, who reinforced France s allegiance to the European Union, eased concerns about anti-globalist sentiment in the country and its effect on the European Union. Tax cuts and low energy prices helped wages to rise and unemployment levels to drop, in turn bolstering consumer demand and profit margins. From a sector standpoint, financial stocks made the most significant contribution to the Index s return in U.S. dollar terms as European banks benefited from the election of Emmanuel Macron in France and improving asset quality in the region. Industrials stocks, which tend to be economically sensitive, contributed meaningfully as improving economic conditions led to increased industrial output. The consumer staples and healthcare sectors also contributed. In terms of currency performance, the euro appreciated by 5% against the U.S. dollar during the reporting period while the British pound was relatively flat. The euro s positive performance meant hedging activity detracted from the Index s return. A fully hedged investor seeks to bypass the currency fluctuations both on the upside and on the downside related to holding foreigncurrency-denominated stocks. The Index s hedging activity offset the impact of currency fluctuations relative to the U.S. dollar, resulting in an Index return that was relatively close to the Index s return measured in local currencies. Sector ALLOCATION BY SECTOR 1 As of 7/31/17 Percentage of Total Investments 2 Consumer Staples 19.03% Health Care 17.53 Financials 16.70 Industrials 11.44 Telecommunication Services 9.46 Utilities 8.51 Consumer Discretionary 8.46 Energy 2.77 Materials 2.38 Information Technology 2.18 Real Estate 1.54 TOTAL 100.00% Country TEN LARGEST COUNTRIES 1 As of 7/31/17 Percentage of Total Investments 2 United Kingdom 26.93% Switzerland 18.15 France 11.34 Germany 10.56 Denmark 8.35 Belgium 4.86 Finland 4.69 Sweden 4.44 Spain 3.76 Ireland 2.26 TOTAL 95.34% 1 Table shown is for the ishares Edge MSCI Min Vol Europe ETF, the underlying fund in which the Fund invests. 2 Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 13
Management s Discussion of Fund Performance ishares EDGE MSCI MIN VOL EUROPE ETF Performance as of July 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 10.29% 10.43% 10.35% 10.29% 10.43% 10.35% Since Inception 2.58% 2.61% 2.66% 8.40% 8.47% 8.64% GROWTH OF $10,000 INVESTMENT (SINCE INCEPTION AT NET ASSET VALUE) $11,000 $10,500 $10,864 $10,840 $10,000 $9,500 $9,000 $8,500 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Fund Index The inception date of the Fund was 6/3/14. The first day of secondary market trading was 6/5/14. 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 18 for more information. Beginning Account Value (2/1/17) Actual Ending Account Value (7/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (2/1/17) Hypothetical 5% Return Ending Account Value (7/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1,000.00 $ 1,175.00 $ 1.35 $ 1,000.00 $ 1,023.60 $ 1.25 0.25% 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 (181 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 18 for more information. The ishares Edge MSCI Min Vol Europe ETF (the Fund ) seeks to track the investment results of an index composed of European developed market equities that, in the aggregate, have lower volatility characteristics relative to the broader European developed equity markets, as represented by the MSCI Europe Minimum Volatility (USD) 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 July 31, 2017, the total return for the Fund was 10.29%, net of fees, while the total return for the Index was 10.35%. Every country within the Index advanced for the reporting period, with Swiss stocks making the most significant contribution to the Index s return. Improving economic conditions in the Eurozone as well as encouraging economic signs from the U.S. and China supported Swiss investor sentiment. Large Swiss banking and pharmaceutical companies also received a boost from the election 14 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Management s Discussion of Fund Performance (Continued) ishares EDGE MSCI MIN VOL EUROPE ETF of Donald Trump, as investors anticipated more lenient regulatory environments for both industries. Stocks in Denmark also contributed meaningfully as economic growth improved within the country and the region. French stocks contributed to the Index s return for the reporting period. The election of centrist presidential candidate Emmanuel Macron, who reinforced France s allegiance to the European Union, eased concerns about anti-globalist sentiment in the country and its effect on the European Union. Tax cuts and low energy prices helped wages to rise and unemployment levels to drop, in turn bolstering consumer demand and profit margins. From a sector standpoint, financial stocks made the most significant contribution to the Index s return as European banks benefited from the election of Emmanuel Macron in France and improving asset quality in the region. Industrials stocks, which tend to be economically sensitive, contributed meaningfully as improving economic conditions led to increased industrial output. The consumer staples and healthcare sectors also contributed. In terms of currency performance, the euro appreciated by 5% against the U.S. dollar during the reporting period while the British pound was relatively flat. The Index seeks lower volatility than the broader market with returns in line with the market over the long-term. For the reporting period, the Index underperformed the broader market, as represented by the MSCI Europe Index. Minimum volatility strategies focus on providing broad market exposure with less volatility, so they have tended to outperform during periods of elevated volatility but tend to underperform during periods of low volatility and risk-on markets, as seen over the reporting period. Relative to the broader market, underweight allocations in the Index to the Netherlands and France detracted from performance in U.S dollar terms, while overweight allocations to Denmark and Switzerland benefited the Index s relative performance for the reporting period. From an industry perspective, an underweight allocation in the Index to the commercial banking industry and an overweight allocation to the telecommunication services sector detracted from performance, while an overweight allocation to the insurance industry and an underweight allocation to the energy sector benefited the Index s relative return. ALLOCATION BY SECTOR As of 7/31/17 Percentage of Sector Total Investments* Consumer Staples 19.03% Health Care 17.53 Financials 16.70 Industrials 11.44 Telecommunication Services 9.46 Utilities 8.51 Consumer Discretionary 8.46 Energy 2.77 Materials 2.38 Information Technology 2.18 Real Estate 1.54 TOTAL 100.00% TEN LARGEST COUNTRIES As of 7/31/17 Percentage of Country Total Investments* United Kingdom 26.93% Switzerland 18.15 France 11.34 Germany 10.56 Denmark 8.35 Belgium 4.86 Finland 4.69 Sweden 4.44 Spain 3.76 Ireland 2.26 TOTAL 95.34% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 15
Management s Discussion of Fund Performance ishares MSCI EUROPE SMALL-CAP ETF Performance as of July 31, 2017 Average Annual Total Returns Cumulative Total Returns NAV MARKET INDEX NAV MARKET INDEX 1 Year 24.74% 25.41% 24.78% 24.74% 25.41% 24.78% 5 Years 14.03% 14.11% 14.02% 92.83% 93.48% 92.69% Since Inception 3.75% 3.80% 4.07% 43.06% 43.73% 47.37% GROWTH OF $10,000 INVESTMENT (SINCE INCEPTION AT NET ASSET VALUE) $16,000 $14,000 $14,737 $14,306 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Fund Index The inception date of the Fund was 11/12/07. The first day of secondary market trading was 11/16/07. Index performance through August 31, 2014 reflects the performance of the FTSE Developed Small Cap ex-north America Index. Index performance beginning on September 1, 2014 reflects the performance of the MSCI Europe Small Cap 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 18 for more information. Beginning Account Value (2/1/17) Actual Ending Account Value (7/31/17) Expenses Paid During Period a Shareholder Expenses Beginning Account Value (2/1/17) Hypothetical 5% Return Ending Account Value (7/31/17) Expenses Paid During Period a Annualized Expense Ratio $ 1,000.00 $ 1,206.60 $ 2.19 $ 1,000.00 $ 1,022.80 $ 2.01 0.40% 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 (181 days) and divided by the number of days in the year (365 days). See Shareholder Expenses on page 18 for more information. The ishares MSCI Europe Small-Cap ETF (the Fund ) seeks to track the investment results of an index composed of smallcapitalization 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. For the 12-month reporting period ended July 31, 2017, the total return for the Fund was 24.74%, net of fees, while the total return for the Index was 24.78%. Every country within the Index advanced for the reporting period. Small-capitalization stocks in the U.K., the largest country weight in the Index, made the most significant contribution to the Index s gains. U.K. equities advanced as the sharp drop in the 16 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Management s Discussion of Fund Performance (Continued) ishares MSCI EUROPE SMALL-CAP ETF British pound immediately prior to the reporting period boosted exports and profits for multinational companies earning revenues outside of the U.K. All else equal, a weaker British pound makes exports less expensive, while British companies receiving payment in the stronger foreign currencies can translate revenues into more British pounds. German small-capitalization stocks contributed meaningfully to the Index s return for the reporting period. The German stock market reached an all-time high as export levels climbed to their highest levels on record, which also bolstered industrial production. Stronger consumer spending also helped to support German stocks. The Italian stock market gained during the reporting period and was helped by the news that the Italian government would rescue two struggling regional banks. French small-capitalization stocks contributed to the Index s return, partly due to pro-business presidential candidate Emmanuel Macron s victory and his preference for keeping France in the European Union. From a sector standpoint, industrials stocks contributed meaningfully to the Index s performance during the reporting period, as improving economic conditions led to increased industrial output. Financial stocks contributed meaningfully as European banks benefited from the election of Macron in France and improving asset quality in the region. Information technology stocks benefited from strong investor inflows, while the Eurozone s improving economic conditions and highest consumer confidence levels in 16 years boosted consumer discretionary stocks. In terms of currency performance, the euro appreciated by 5% against the U.S. dollar during the reporting period while the British pound was relatively flat. ALLOCATION BY SECTOR As of 7/31/17 Percentage of Sector Total Investments* Industrials 22.83% Consumer Discretionary 14.91 Financials 13.65 Information Technology 11.26 Real Estate 9.43 Materials 8.09 Health Care 7.49 Consumer Staples 4.97 Energy 2.99 Utilities 2.64 Telecommunication Services 1.74 TOTAL 100.00% TEN LARGEST COUNTRIES As of 7/31/17 Percentage of Country Total Investments* United Kingdom 32.00% Germany 11.85 Sweden 9.24 Switzerland 8.42 France 7.60 Italy 7.09 Spain 4.12 Netherlands 3.83 Belgium 3.22 Denmark 3.06 TOTAL 90.43% * Excludes money market funds. M ANAGEMENT S D ISCUSSIONS OF F UND P ERFORMANCE 17
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 www.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. 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 February 1, 2017 and held through July 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. 18 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Schedule of Investments ishares CURRENCY HEDGED MSCI EUROPE SMALL-CAP ETF July 31, 2017 Security Shares Value INVESTMENT COMPANIES 100.84% EXCHANGE-TRADED FUNDS 100.84% ishares MSCI Europe Small-Cap ETF a,b 26,084 $1,415,318 1,415,318 TOTAL INVESTMENT COMPANIES (Cost: $1,183,090) 1,415,318 SHORT-TERM INVESTMENTS 45.49% MONEY MARKET FUNDS 45.49% BlackRock Cash Funds: Institutional, SL Agency Shares 1.32% c,d,e 637,809 638,000 BlackRock Cash Funds: Treasury, SL Agency Shares 0.98% c,d 573 573 638,573 Value TOTAL INVESTMENTS IN SECURITIES 146.33% (Cost: $1,821,663) f $2,053,891 Other Assets, Less Liabilities (46.33)% (650,324) NET ASSETS 100.00% $1,403,567 a Affiliated issuer. See Schedule 1. b All or a portion of this security represents a security on loan. See Note 1. c Affiliated money market fund. d The rate quoted is the annualized seven-day yield of the fund at period end. e All or a portion of this security represents an investment of securities lending collateral. See Note 1. f The cost of investments for federal income tax purposes was $1,827,903. Net unrealized appreciation was $225,988, of which $232,228 represented gross unrealized appreciation on securities and $6,240 represented gross unrealized depreciation on securities. TOTAL SHORT-TERM INVESTMENTS (Cost: $638,573) 638,573 Schedule 1 Affiliates (Note 2) Investments in issuers considered to be affiliates of the Fund (excluding affiliated money market funds) during the year ended July 31, 2017, for purposes of Section 2(a)(3) of the 1940 Act, were as follows: Affiliated issuer Shares held at beginning of year Shares purchased Shares sold Shares held at end of year Value at end of year Dividend income Net realized gain (loss) ishares MSCI Europe Small-Cap ETF 29,042 2,837 (5,795) 26,084 $ 1,415,318 $ 25,439 $ (800) S CHEDULES OF I NVESTMENTS 19
Schedule of Investments (Continued) ishares CURRENCY HEDGED MSCI EUROPE SMALL-CAP ETF July 31, 2017 Schedule 2 Forward Currency Contracts (Note 5) Forward currency contracts outstanding as of July 31, 2017 were as follows: Currency purchased Currency sold Counterparty Settlement date Unrealized appreciation (depreciation) CHF 112,000 USD 115,175 MS 08/03/2017 $ 654 DKK 283,000 USD 44,532 MS 08/03/2017 518 EUR 567,000 USD 663,163 MS 08/03/2017 8,087 GBP 364,000 USD 476,341 MS 08/03/2017 3,936 NOK 327,000 USD 41,021 MS 08/03/2017 569 SEK 1,133,000 USD 139,003 MS 08/03/2017 1,335 USD 245,590 CHF 236,000 MS 08/03/2017 1,521 DKK 3,000 USD 478 MS 09/06/2017 1 EUR 4,000 USD 4,735 MS 09/06/2017 9 GBP 2,000 USD 2,641 MS 09/06/2017 1 SEK 35,000 USD 4,336 MS 09/06/2017 8 USD 2,077 CHF 2,000 MS 09/06/2017 5 16,644 CHF 124,000 USD 128,570 MS 08/03/2017 (333) USD 43,489 DKK 283,000 MS 08/03/2017 (1,561) USD 647,520 EUR 567,000 MS 08/03/2017 (23,730) USD 473,170 GBP 364,000 MS 08/03/2017 (7,107) USD 38,915 NOK 327,000 MS 08/03/2017 (2,674) USD 133,362 SEK 1,133,000 MS 08/03/2017 (6,977) USD 115,412 CHF 112,000 MS 09/06/2017 (662) USD 43,253 DKK 274,000 MS 09/06/2017 (446) USD 625,579 EUR 533,000 MS 09/06/2017 (6,531) USD 448,276 GBP 342,000 MS 09/06/2017 (3,477) USD 40,523 NOK 322,000 MS 09/06/2017 (461) USD 134,031 SEK 1,089,000 MS 09/06/2017 (1,111) (55,070) Net unrealized depreciation $ (38,426) Counterparty: MS Morgan Stanley and Co. International PLC Currency abbreviations: CHF Swiss Franc DKK Danish Krone EUR Euro GBP British Pound NOK Norwegian Krone SEK Swedish Krona USD United States Dollar 20 2017 ishares A NNUAL R EPORT TO S HAREHOLDERS
Schedule of Investments (Continued) ishares CURRENCY HEDGED MSCI EUROPE SMALL-CAP ETF July 31, 2017 Schedule 3 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 July 31, 2017. 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: Investment companies $1,415,318 $ $ $1,415,318 Money market funds 638,573 638,573 Total $2,053,891 $ $ $2,053,891 Derivative financial instruments a : Assets: Forward currency contracts $ $ 16,644 $ $ 16,644 Liabilities: Forward currency contracts (55,070) (55,070) Total $ $(38,426) $ $ (38,426) a Shown at the unrealized appreciation (depreciation) on the contracts. See notes to financial statements. S CHEDULES OF I NVESTMENTS 21