SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2 to
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: FT 229
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
E. Title of Securities
Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
FT 229
Cross-Reference Sheet
(Form N-8B-2 Items required by Instructions as
to the Prospectus in Form S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Summary of Essential
Information
2. Name and address of each Information as to
depositor Sponsor, Trustee and
Evaluator
3. Name and address of Information as to
trustee Sponsor, Trustee and
Evaluator
4. Name and address of Underwriting
principal underwriters
5. State of organization The FT Series
of trust
6. Execution and termination The FT Series; Other
of trust agreement Information
7. Changes of name *
8. Fiscal Year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer Rights of Unit Holders
securities
(b) Cumulative or distributive
securities The FT Series
(c) Redemption Rights of Unit Holders
(d) Conversion, transfer, etc. Rights of Unit Holders
(e) Periodic payment plan
certificates *
(f) Voting rights Rights of Unit Holders;
Other Information
(g) Notice of certificate- Rights of Unit Holders;
holders Other Information
(h) Consents required Rights of Unit Holders;
Other Information
(i) Other provisions The FT Series
11. Types of securities comprising The FT Series
12. Certain information
regarding periodic payment
plan certificates *
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public
Offering; The FT Series
(b) Certain information
regarding periodic payment
plan certificates *
(c) Certain percentages Summary of Essential
Information; The FT
Series; Public Offering
(d) Difference in price offered Public Offering
for any class of transactions
to any class or group of
individuals
(e) Certain other load fees, Rights of Unit Holders
expenses, etc. payable by
holders
(f) Certain profits receivable The FT Series
by depositor, principal
underwriters, trustee or
affiliated persons
(g) Ratio of annual charges to
income *
14. Issuance of trust's Rights of Unit Holders
securities
15. Receipt and handling of
payments from purchasers *
16. Acquisition and disposition
of underlying securities The FT Series; Rights of
Unit Holders
17. Withdrawal or redemption The FT Series; Public
Offering; Rights of Unit
Holders
18. (a) Receipt, custody and
disposition of income Rights of Unit Holders
(b) Reinvestment of
distributions Rights of Unit Holders
(c) Reserves or special funds Information as to
Sponsor, Trustee and
Evaluator
(d) Schedule of distributions *
19. Records, accounts and
reports Rights of Unit Holders
20. Certain miscellaneous
provisions of trust
agreement
(a) Amendment Other Information
(b) Termination Other Information
(c) and (d) Trustee, removal and
successor Information as to
Sponsor, Trustee and
Evaluator
(e) and (f) Depositor, removal Information as to
and successor Sponsor, Trustee and
Evaluator
21. Loans to security holders *
22. Limitations on liability The FT Series;
Information as to
Sponsor, Trustee and
Evaluator
23. Bonding arrangements Contents of Registration
Statement
24. Other material provisions
of trust agreement *
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by depositor *
27. Business of depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to *
officials and affiliated
persons of depositor
29. Voting securities of *
depositor
30. Persons controlling *
depositor
31. Payment by depositor for *
certain services rendered
to trust
32. Payment by depositor for *
certain other services
rendered to trust
33. Remuneration of other *
persons for certain
services rendered to trust
34. Remuneration of other *
persons for certain services
rendered to trust
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's
securities by states Public Offering
36. Suspension of sales of
trust's securities *
37. Revocation of authority
to distribute *
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering;
Underwriting
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) N.A.S.D. membership of Information as to
principal underwriters Sponsor, Trustee and
Evaluator
40. Certain fee received by See Items 13(a) and 13(e)
principal underwriters
41. (a) Business of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) Branch offices of
principal underwriters *
(c) Salesmen of principal
underwriters *
42. Ownership of trust's
securities by certain
persons *
43. Certain brokerage
commissions received
by principal underwriters *
44. (a) Method of valuation Summary of Essential
Information; The FT
Series; Public Offering
(b) Schedule as to offering
price *
(c) Variation in offering Public Offering
price to certain persons
45. Suspension of redemption
rights *
46. (a) Redemption Valuation Rights of Unit Holders
(b) Schedule as to redemption
price *
47. Maintenance of position Public Offering; Rights
in underlying securities of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation Information as to
of trustee Sponsor, Trustee and
Evaluator
49. Fees and expenses of trustee The FT Series
50. Trustee's lien The FT Series
VI. INFORMATION CONCERNING THE INSURANCE OF HOLDERS OR
SECURITIES
51. Insurance of holders of *
trust's securities
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The FT Series; Rights
agreement with respect of Unit Holders
to selection or elimination
of underlying securities
(b) Transactions involving
elimination of underlying
securities *
(c) Policy regarding The FT Series; Rights
substitution or elimination of Unit Holders
of underlying securities
(d) Fundamental policy not
otherwise covered *
53. Tax status of Trust The FT Series
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during
last ten years *
55. Certain information regarding
periodic payment plan
certificates
56. Certain information regarding
periodic payment plan
certificates
57. Certain information regarding *
periodic payment plan
certificates
58. Certain information regarding
periodic payment plan
certificates
59. Financial statements Report of Independent
(Instruction 1(b) to Auditors; Statement of
Form S-6) Net Assets
__________________________
* Inapplicable, answer negative or not required.
SUBJECT TO COMPLETION, DATED NOVEMBER 20, 1997
AS AMENDED APRIL 2, 1998
First Trust (registered trademark)
WEBS European Growth Trust, Series 1
FT 229, WEBS European Growth Trust, Series 1 (the "Trust") is a unit
investment trust consisting of a portfolio of World Equity Benchmark
Shares(SM) ("WEBS(SM)") from six European WEBS Index Series (the "Equity
Securities"). Each WEBS Index Series is a separate series of WEBS Index
Fund, Inc., whose common stocks are listed and traded on the American
Stock Exchange, Inc. ("AMEX"). Each WEBS Index Series holds a portfolio
of foreign equity securities that seeks to provide investment results
that correspond generally to the price and yield performance of the
Morgan Stanley Capital International ("MSCI") Index for a specified
European country. Specifically, the Equity Securities will consist of
shares of six of the following European WEBS Index Series: the Austria
WEBS Index Series, the Belgium WEBS Index Series, the France WEBS Index
Series, the Germany WEBS Index Series, the Italy WEBS Index Series, the
Netherlands WEBS Index Series, the Spain WEBS Index Series, the Sweden
WEBS Index Series, the Switzerland WEBS Index Series, and the United
Kingdom WEBS Index Series (collectively, the "WEBS Index Series").
The investment objective of the Trust is to provide the potential for
above average capital appreciation through investment in a portfolio of
European WEBS included in the Trust. See "Schedule of Investments."
Further information regarding the WEBS Index Series is set forth under
"Portfolio." The Trust has a mandatory termination date (the "Mandatory
Termination Date" or "Trust Ending Date") of approximately two years
from the date of this Prospectus as set forth under "Summary of
Essential Information." There is, of course, no guarantee that the
objective of the Trust will be achieved.
Each Unit of the Trust represents an undivided fractional interest in
all the Equity Securities deposited in the Trust. The Equity Securities
deposited in the Trust's portfolio have no fixed maturity date and the
value of these underlying Equity Securities will fluctuate with changes
in the values of stocks in general and of stocks in the relevant market,
but may decline more than or not increase as much as stocks in general
or stocks in the relevant market. See "Portfolio."
Nike Securities L.P. (the "Sponsor") may, from time to time after the
Initial Date of Deposit, deposit additional Equity Securities in the
Trust or cash (including a letter of credit) with instructions to
purchase additional Equity Securities in the Trust. Such deposits of
additional Equity Securities or cash will, therefore, be done in such a
manner that the original proportionate relationship among the number of
shares of the individual issues of the Equity Securities shall be
maintained. Any deposit by the Sponsor of additional
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
Nike Securities, L.P.
Sponsor of First Trust (registered trademark)
1-800-621-9533
FUNDS DISTRIBUTOR, INC.
The date of this Prospectus is ____________, 1998
Page 1
Equity Securities, or the purchase of additional Equity Securities
pursuant to a cash deposit, will duplicate, as nearly as is practicable,
the original proportionate share relationship established on the Initial
Date of Deposit, and not the actual proportionate share relationship on
the subsequent date of deposit, because the two may differ. Any such
difference may be due to the sale, redemption or liquidation of any of
the Equity Securities deposited in the Trust on the Initial Date of
Deposit or any subsequent date of deposit. Moreover, because of
fluctuations in the price of the Equity Securities, the proportionate
value relationship among the Equity Securities on any subsequent date of
deposit will probably be different from that established on the Initial
Date of Deposit. See "What is the FT Series?" and "Rights of Unit
Holders-How May Equity Securities be Removed from the Trust?"
Public Offering Price. The Public Offering Price per Unit of the Trust
is equal to the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of the Equity
Securities) plus or minus a pro rata share of cash, if any, in the
Capital and Income Accounts of the Trust, plus an initial sales charge
equal to the difference between the maximum sales charge (3.95% of the
Public Offering Price) and the maximum remaining deferred sales charge
(initially $.295 per Unit). Commencing ________, 1998, and on the last
business day of each month thereafter, through ________, 1998, a
deferred sales charge of $ will be assessed per Unit. Units
purchased subsequent to the initial deferred sales charge payment will
be subject to the initial sales charge and the remaining deferred sales
charge payments. The deferred sales charge will be paid from funds in
the Capital Account, if sufficient, or from the periodic sale of Equity
Securities. The total maximum sales charge assessed to Unit holders on a
per Unit basis will be 3.95% of the Public Offering Price (equivalent to
3.990% of the net amount invested, exclusive of the deferred sales
charge). A pro rata share of accumulated dividends, if any, in the
Income Account is included in the Public Offering Price. The minimum
amount which an investor may purchase in the Trust is $1,000. The sales
charge for the Trust is reduced on a graduated scale for sales involving
at least $ . See "Public Offering-How is the Public Offering
Price Determined?"
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK
INCLUDING LOSS OF PRINCIPAL.
Dividend and Capital Distributions. Cash dividends received by the Trust
will be paid on each Distribution Date to Unit holders of record on the
respective Record Date as set forth in the "Summary of Essential
Information," and again as part of the final liquidation distribution.
Distributions of funds in the Capital Account, if any, will be made as
part of the final liquidation distribution, and in certain
circumstances, earlier. Any distribution of income and/or capital will
be net of expenses of the Trust. See "What is the Federal Tax Status of
Unit Holders?" Additionally, upon termination of the Trust, the Trustee
will distribute, upon surrender of Units, to each remaining Unit holder
(other than a Rollover Unit holder as defined below) his or her pro rata
share of the Trust's assets, less expenses, in the manner set forth
under "Rights of Unit Holders-How are Income and Capital Distributed?"
For distributions to Rollover Unit holders, see "Special Redemption,
Liquidation and Investment in a New Trust." Any Unit holder may elect to
have each distribution of income or capital on his or her Units, other
than the final liquidating distribution, automatically reinvested in
additional Units of the Trust subject only to remaining deferred sales
charge payments. See "Rights of Unit Holders-How are Income and Capital
Distributed?"
Secondary Market for Units. While under no obligation to do so, the
Sponsor intends to maintain a market for Units of the Trust and offer to
repurchase such Units at prices which are based on the aggregate
underlying value of Equity Securities in the Trust (generally determined
by the closing sale prices of the Equity Securities on the AMEX) plus or
minus cash, if any, in the Capital and Income Accounts of the Trust. If
a secondary market is not maintained, a Unit holder may redeem Units
through redemption at prices based upon the aggregate underlying value
of the Equity Securities in the Trust (generally determined by the
closing sale prices of the Equity Securities on the AMEX) plus or minus
a pro rata share of cash, if any, in the Capital and Income Accounts of
the Trust. Units sold to the Sponsor or tendered for redemption prior to
such time as the entire deferred sales charge on such Units has been
collected will be assessed the amount of the remaining deferred sales
Page 2
charge at the time of sale or redemption. A Unit holder tendering 2,500
Units or more Units of the Trust for redemption may request a
distribution of shares of the underlying WEBS Index Series (reduced by
customary transfer and registration charges) in lieu of payment in cash.
See "Rights of Unit Holders-How May Units be Redeemed?"
Special Redemption, Liquidation and Investment in a New Trust. The
Sponsor intends to create a separate trust (the "2000 Trust") in
conjunction with the termination of this series of the Trust. The
portfolio of the 2000 Trust will contain shares of the six WEBS Index
Series which the Sponsor believes have the potential to provide above-
average capital appreciation over the term of the 2000 Trust. Unit
holders who wish to have the proceeds from their Units invested in the
2000 Trust must specify by ________, 2000 (the "Rollover Notification
Date") their intention to become "Rollover Unit holders." Rollover Unit
holders' Units will be redeemed in-kind on the Rollover Notification
Date and the distributed Equity Securities sold by the Trustee, in its
capacity as Distribution Agent, during the Special Redemption and
Liquidation Period. If the 2000 Trust is offered, the proceeds of the
redemption will then be invested in Units of such Trust at a reduced
sales charge. Units purchased other than with redemption proceeds will
be subject to the full sales charge. The Sponsor may stop creating new
Units of the 2000 Trust at any time in its sole discretion without
regard to whether all the proceeds to be invested have been invested.
Cash that has not been invested on behalf of the Rollover Unit holders
in the 2000 Trust will be distributed at the end of the Special
Redemption and Liquidation Period. The Sponsor, however, anticipates
that sufficient Units can be created, although moneys in the Trust may
not be fully invested on the next business day. Rollover Unit holders
will receive credit for the amount of dividends in the Income Account of
the Trust which will be included in the reinvestment in Units of the
2000 Trust. The exchange option described above is subject to
modification, termination or suspension.
Termination. The Trust will terminate approximately two years after the
Initial Date of Deposit regardless of market conditions at that time.
Commencing no later than the Mandatory Termination Date, Equity
Securities will begin to be sold as prescribed by the Sponsor. The
Trustee shall provide written notice of any termination of the Trust to
all Unit holders that will specify when Unit holders may surrender their
certificates for cancellation and will include with such notice a form
to enable Unit holders to elect a distribution of shares of Equity
Securities (reduced by customary transfer and registration charges) if
such Unit holder owns at least 2,500 Units of the Trust, rather than
receive payment in cash for such Unit holder's pro rata share of the
amounts realized upon the disposition by the Trustee of Equity
Securities. To be effective, the election form, together with
surrendered certificates and other documentation required by the
Trustee, must be returned to the Trustee at least ten business days
prior to the Mandatory Termination Date. Unit holders not electing the
"Rollover Option" or a distribution of shares of the Equity Securities
will receive a cash distribution within a reasonable time after the
Trust is terminated. See "Rights of Unit Holders-How are Income and
Capital Distributed?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
the issuers of the common stocks held by a particular WEBS Index Series,
or the general condition of the respective stock market (although such
markets are currently at or near historically high levels, many have
experienced significant volatility), foreign currency fluctuations,
governmental, political, economic and fiscal policies of the
representative countries, volatile interest rates, economic recession,
the lack of adequate financial information concerning issuers and
exchange control restrictions impacting foreign issuers. The Trust's
portfolio is not managed and Equity Securities will not be sold by the
Trust regardless of market fluctuations, although some Equity Securities
may be sold under certain limited circumstances. Finally, the results of
ownership of Units will differ from the results of ownership of the
underlying Equity Securities of the Trust for various reasons, including
the timing of the purchase and sale (or redemption) of Units of the
Trust, sales charges and expenses of the Trust and taxes. See "What are
Equity Securities?-Risk Factors."
Page 3
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-____________, 1998
Sponsor and Principal Underwriter: Nike Securities L.P.
Principal Underwriter: Funds Distributor, Inc.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units (1)
Fractional Undivided Interest in the Trust per Unit (1) 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Equity Securities in Portfolio (2) $
Aggregate Offering Price Evaluation of Equity Securities per Unit $
Maximum Sales Charge 3.95% of the Public Offering Price per Unit
(3.990% of the net amount invested, exclusive of the deferred sales charge) (3) $
Less Deferred Sales Charge per Unit $( )
Public Offering Price per Unit (3) $
Sponsor's Initial Repurchase Price per Unit $
Redemption Price per Unit (based on aggregate underlying
value of Equity Securities less the deferred sales charge) (4) $
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Cash CUSIP Number
Reinvestment CUSIP Number
First Settlement Date ________, 1998
Rollover Notification Date ________, 2000
Special Redemption and Liquidation Period During the period from _____ to _____.
Mandatory Termination Date ________, 2000
Discretionary Liquidation Amount The Trust may be terminated if the value of the Equity Securities is less than
the lower of $2,000,000 or 20% of the total value of Equity Securities
deposited in the Trust during the initial offering period.
Trustee's Annual Fee and Out-of-Pocket
Expenses per Unit Outstanding $_____ per Unit outstanding.
Evaluator's Annual Fee $.0030 per Unit outstanding. Evaluations for purposes of sale, purchase or
redemption of Units are made as of the close of trading (generally 4:00 p.m.
Eastern time) on the New York Stock Exchange on each day on which it is open.
Supervisory Fee (5) Maximum of $.0035 per Unit outstanding annually payable to an affiliate of the
Sponsor.
Estimated Annual Amortization of $ per Unit.
Organizational and Offering Costs (6)
Income Distribution Record Date As soon as practicable after each WEBS Index Series' ex-dividend date.
Income Distribution Date (7) As soon as practicable after each WEBS Index Series' respective distribution
date.
<FN>
(1) As of the close of business on the Initial Date of Deposit, the
number of Units of the Trust may be adjusted so that the Public Offering
Price per Unit will equal approximately $10.00. Therefore, to the extent
of any such adjustment, the fractional undivided interest per Unit will
increase or decrease accordingly, from the amounts indicated above.
(2) Each Equity Security listed on a national securities exchange is
valued at the last closing sale price on the business day prior to the
Initial Date of Deposit.
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. The initial sales charge applies to all Units and
represents an amount equal to the difference between the maximum sales
charge for the Trust of 3.95% of the Public Offering Price and the
amount of the maximum remaining deferred sales charge (initially $.295
per Unit). Subsequent to the Initial Date of Deposit, the amount of the
initial sales charge will vary with changes in the aggregate underlying
value of the Equity Securities underlying the Trust. In addition to the
initial sales charge, Unit holders of the Trust will pay a deferred
sales charge of $____ per Unit per month commencing ________, 1998 and
on the last business day of each month thereafter through ________,
1998. Units purchased subsequent to the initial deferred sales charge
payment will be subject to the initial sales charge and the remaining
deferred sales charge payments. These deferred sales charge payments
will be paid from funds in the Capital Account, if sufficient, or from
the periodic sale of Equity Securities. See "Fee Table" and "Public
Offering" for additional information. On the Initial Date of Deposit
there will be no accumulated dividends in the Income Account. Anyone
ordering Units after such date will pay a pro rata share of any
accumulated dividends in such Income Account. The Public Offering Price
as shown reflects the value of the Equity Securities at the opening of
business on the Initial Date of Deposit and establishes the original
proportionate share relationship among the individual Equity Securities.
No sales to investors will be executed at this price. Additional Equity
Securities will be deposited during the day of the Initial Date of
Deposit which will be valued as of 4:00 p.m. Eastern time and sold to
investors at a Public Offering Price per Unit based on this valuation.
(4) See "Rights of Unit Holders-How May Units be Redeemed?"
(5) In addition, the Sponsor may be reimbursed for bookkeeping and other
administrative expenses currently at a maximum annual rate of $.0028 per Unit.
(6) The Trust (and therefore Unit holders) will bear all or a portion of
its organizational and offering costs (including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering Units with the Securities and Exchange Commission and
states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee but not including the expenses
incurred in the printing of preliminary and final prospectuses, and
expenses incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses) as is common for
mutual funds. Total organizational and offering expenses will be charged
off over a period not to exceed ___ years from the Initial Date of
Deposit. See "What are the Expenses and Charges?" and "Statement of Net
Assets." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
(7) If the 2000 Trust is offered, at the Rollover Notification Date for
Rollover Unit holders or upon termination of the Trust for other Unit
holders, amounts in the Income Account (which consist of dividends on
the Equity Securities) will be included in amounts distributed to or on
behalf of Unit holders. Distributions from the Capital Account will be
made monthly payable on the last day of the month to Unit holders of
record on the fifteenth day of such month if the amount available for
distribution equals at least $0.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be made as
part of the final liquidation distribution.
</FN>
</TABLE>
Page 4
FEE TABLE
This Fee Table is intended to help you to understand the costs and
expenses that you will bear directly or indirectly. See "Public
Offering" and "What are the Expenses and Charges?" Although the Trust
has a term of only approximately two years and is a unit investment
trust rather than a mutual fund, this information is presented to permit
a comparison of fees.
<TABLE>
<CAPTION>
Amount
per Unit
________
<S> <C> <C>
Unit holder Transaction Expenses
Maximum total sales charge:
Initial sales charge
(as a percentage of the Public Offering Price) 1.00%(a) $.100
Deferred sales charge
(as a percentage of Public Offering Price) 2.95%(b) .295
_______ _______
3.95% $.395
======= =======
Maximum sales charge per year imposed on
reinvested dividends 2.95%(c) .295
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Trustee's fee, portfolio supervision, bookkeeping, administrative, amortization
of organizational and offering expenses and evaluation fees %
Other operating expenses %
_______ _______
Total % $
======= =======
</TABLE>
<TABLE>
<CAPTION>
Example
_______
Cumulative Expenses Paid for Period:
1 Year 3 Years(d) 5 Years(d) 10 Years(d)
______ __________ __________ __________
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming the WEBS European Growth Trust, Series 1
estimated operating expense ratio of ___% and a 5% annual return
on the investment throughout the periods $ $ $ $
______________
<FN>
(a) The Initial Sales Charge is actually the difference between the
maximum total sales charge of 3.95% and the maximum remaining deferred
sales charge (initially $.295 per Unit) and would exceed 1.00% if the
Public Offering Price exceeds $10.00 per Unit.
(b) The actual fee is $____ per Unit per month, irrespective of purchase
or redemption price deducted in each of the ___ months during the period
from ________, 1998 to ________, 1998. If the Unit price exceeds $10.00
per Unit, the deferred sales charge will be less than 2.95%. If the Unit
price is less than $10.00 per Unit, the deferred sales charge will
exceed 2.95%. Units purchased subsequent to the initial deferred sales
charge payment will be subject to only the Initial Sales Charge and the
remaining deferred sales charge payments.
(c) Reinvested Dividends will be subject only to the deferred sales
charge remaining at the time of reinvestment. See "Rights of Unit
Holders-How are Income and Capital Distributed?"
(d) Although the Trust has a term of only approximately two years and is
a unit investment trust rather than a mutual fund, this information is
presented to permit a comparison of fees, assuming the principal amount
and distributions are rolled over every two years into a new Trust
subject only to the deferred sales charge.
</FN>
</TABLE>
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and
Exchange Commission regulations applicable to mutual funds. For purposes
of the example, the deferred sales charge imposed on reinvestment of
dividends is not reflected until the year following payment of the
dividend; the cumulative expenses would be higher if sales charges on
reinvested dividends were reflected in the year of reinvestment. The
example should not be considered a representation of past or future
expenses or annual rate of return; the actual expenses and annual rate
of return may be more or less than those assumed for purposes of the
example. In addition, while the Trust only has a term of approximately
two years, investors may be able to reinvest their proceeds into a
subsequently offered trust, subject to additional sales charges.
In addition to the Trust Operating Expenses noted above, the Trust will
indirectly bear its proportionate share of the operating expenses of
each WEBS Index Series in which the Trust invests. The aggregate
weighted expense ratio for the six WEBS Index Series held by the Trust
is _____.
Page 5
WEBS EUROPEAN GROWTH TRUST, SERIES 1
FT 229
What is the FT Series?
FT 229, WEBS European Growth Trust, Series 1 is one of a series of
investment companies created by the Sponsor under the name of the FT
Series, all of which are generally similar but each of which is separate
and is designated by a different series number (the "Trust"). The FT
Series was previously known as The First Trust Special Situations Trust
Series. The Trust is a unit investment trust created under the laws of
the State of New York pursuant to a Trust Agreement (the "Indenture"),
dated the Initial Date of Deposit, with Nike Securities L.P. as Sponsor,
The Chase Manhattan Bank as Trustee, and First Trust Advisors L.P. as
Portfolio Supervisor and Evaluator. The Sponsor and Funds Distributor,
Inc. have jointly created the Trust and will jointly distribute Units of
the Trust. Both the Sponsor and Funds Distributor, Inc. may each
individually be referred to herein as a "Principal Underwriter," and
collectively as the "Principal Underwriters."
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of WEBS from six European
WEBS Index Series, together with an irrevocable letter or letters of
credit of a financial institution in an amount at least equal to the
purchase price of such Equity Securities. In exchange for the deposit of
securities or contracts to purchase securities in the Trust, the Trustee
delivered to the Sponsor documents evidencing the entire ownership of
the Trust.
The investment objective of the Trust is to provide the potential for
above average capital appreciation through investment in the portfolio
of WEBS included in the Trust. Each WEBS Index Series is a separate
series of WEBS Index Fund Inc., whose common stocks are listed and
traded on the AMEX. Each WEBS Index Series holds a portfolio of foreign
equity securities that seeks to provide investment results that
correspond generally to the price and yield performance of the MSCI
Index for a specified European country. The Trust's portfolio will be
evenly weighted among the WEBS Index Series selected for the Trust.
There is, of course, no guarantee that the objective of the Trust will
be achieved.
The Trust seeks to achieve its objective by investing equally in six of
the ten European WEBS. Modeling and forecasting techniques are utilized
to determine the growth outlook over the next two years for each country.
WEBS of the six European countries that Nike Securities believes are
ideally positioned for growth are then selected for the Trust.
The European economic and monetary union (EMU) has set down strict
economic criteria for its participants. Any country wanting to be a part
of this exciting change must adhere to these guidelines. As a result,
many European economies have been revitalized and many of these markets
are growing at a faster rate than the U.S.
EMU has also helped keep interest rates low, increased merger and
acquisition activity, and produced steady growth. In addition, through
the anticipated introduction of a single Euro currency, many country
specific differences will be transformed into single standards. For
instance, many things once considered barriers to international
investing will become standardized, such as trading rules, accounting
rules, fees, and taxes. The combination of economic growth and the
cohesiveness of a single currency is expected to increase both foreign
and domestic retail investing in Europe.
Since some foreign markets have little correlation to the U.S. market,
adding international assets to a portfolio of U.S. equities generally
decreases its overall risk. Even though the Trust consists of six WEBS,
investors gain efficient access to hundreds of European companies.
With the deposit of the Equity Securities on the Initial Date of
Deposit, the Sponsor established a percentage relationship between the
number of shares of Equity Securities in the Trust's portfolio. See
"Schedule of Investments." From time to time following the Initial Date
of Deposit, the Sponsor, pursuant to the Indenture, may deposit
additional Equity Securities in the Trust or cash (including a letter of
credit) with instructions to purchase additional Equity Securities in
the Trust, and Units may be continuously offered for sale to the public
by means of this Prospectus, resulting in a potential increase in the
outstanding number of Units of the Trust. Any deposit by the Sponsor of
additional Equity Securities or cash will duplicate, as nearly as is
practicable, the original proportionate share relationship and not the
actual proportionate share relationship on the subsequent date of
deposit, since the two may differ. Any such difference may be due to the
sale, redemption or liquidation of any of the Equity Securities
deposited in the Trust on the Initial Date of Deposit or any subsequent
date of deposit. Moreover, because of fluctuations in the price of the
Equity Securities, the proportionate value relationship among the Equity
Securities on any subsequent date of deposit will probably be different
from that established on the Initial Date of Deposit. See "Rights of
Unit Holders-How May Equity Securities be Removed from the Trust?" Since
the prices of the underlying Equity Securities will fluctuate daily, the
ratio, on a market value basis, will also change daily. The portion of
Equity Securities represented by each Unit will not change as a result
of the deposit of additional Equity Securities in the Trust. If the
Sponsor deposits cash, however, existing and new investors may
experience a dilution of their investment and a reduction in their
anticipated income because of fluctuations in the price of the Equity
Securities between the time of the cash deposit and the purchase of the
Equity Securities and because the Trust will pay the associated
brokerage fees. To minimize this effect, the Trust will try to purchase
the Equity Securities as close to the evaluation time or as close to the
evaluation price as possible. The Trustee may from time to time retain
and pay compensation to the Sponsor (or an affiliate of the Sponsor) to
act as agent for the Trust with respect to acquiring Equity Securities
for the Trust. In acting in such capacity, the Sponsor or its affiliate
will be held subject to the restrictions under the Investment Company
Act of 1940, as amended.
On the Initial Date of Deposit, each Unit of the Trust represented the
undivided fractional interest in the Equity Securities deposited in the
Page 6
Trust set forth under "Summary of Essential Information." To the extent
that Units of the Trust are redeemed, the aggregate value of the Equity
Securities in the Trust will be reduced and the undivided fractional
interest represented by each outstanding Unit of the Trust will be
increased proportionately. However, if additional Units are issued by
the Trust in connection with the deposit of additional Equity Securities
or cash by the Sponsor, the aggregate value of the Equity Securities in
the Trust will be increased by amounts allocable to additional Units,
and the undivided fractional interest represented by each outstanding
Unit of the Trust will be decreased proportionately. See "Rights of Unit
Holders-How May Units be Redeemed?" The Trust has a Mandatory
Termination Date as set forth herein under "Summary of Essential
Information."
What are the Expenses and Charges?
With the exception of brokerage fees discussed above and bookkeeping and
other administrative services provided to the Trust, for which the
Sponsor may be reimbursed in amounts as set forth under "Summary of
Essential Information," the Sponsor will not receive any fees in
connection with its activities relating to the Trust.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee, which is not to exceed the amount set forth
under "Summary of Essential Information," for providing portfolio
supervisory services for the Trust. Such fee is based on the number of
Units outstanding in the Trust on January 1 of each year except for the
year or years in which an initial offering period occurs in which case
the fee for a month is based on the number of Units outstanding at the
end of such month. In providing such supervisory services, the Portfolio
Supervisor may purchase research services from a variety of sources
which may include dealers of the Trust.
Subsequent to the initial offering period, First Trust Advisors L.P., in
its capacity as Evaluator for the Trust, will receive a fee as indicated
in the "Summary of Essential Information."
The Trustee pays certain expenses of the Trust for which it is
reimbursed by the Trust. The Trustee will receive for its ordinary
recurring services to the Trust an annual fee as set forth in the
"Summary of Essential Information." Such fee will be based upon the
largest aggregate number of Units of the Trust outstanding at any time
during the year. For a discussion of the services performed by the
Trustee pursuant to its obligations under the Indenture, reference is
made to the material set forth under "Rights of Unit Holders."
The Trustee's and the above described fees are payable from the Income
Account of the Trust to the extent funds are available and then from the
Capital Account of the Trust. Since the Trustee has the use of the funds
being held in the Capital and Income Accounts for payment of expenses
and redemptions and since such Accounts are noninterest-bearing to Unit
holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Trust is expected to result from
the use of these funds.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for the Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
Expenses incurred in establishing the Trust, including costs of
preparing the registration statement, the trust indenture and other
closing documents, registering Units with the Securities and Exchange
Commission and registering or qualifying the Units with the states, the
initial audit of the Trust's portfolio, legal fees, the initial fees and
expenses of the Trustee and any other out-of-pocket expenses, will be
paid by the Trust and charged off over a period not to exceed one year.
The following additional charges are or may be incurred by the Trust:
all legal expenses of the Trustee incurred by or in connection with its
responsibilities under the Indenture; the expenses and costs of any
action undertaken by the Trustee to protect the Trust and the rights and
interests of the Unit holders; fees of the Trustee for any extraordinary
Page 7
services performed under the Indenture; indemnification of the Trustee
for any loss, liability or expense incurred by it without negligence,
bad faith or willful misconduct on its part, arising out of or in
connection with its acceptance or administration of the Trust;
indemnification of the Sponsor for any loss, liability or expense
incurred without gross negligence, bad faith or willful misconduct in
acting as Depositor of the Trust; all taxes and other government charges
imposed upon the Equity Securities or any part of the Trust (no such
taxes or charges are being levied or made or, to the knowledge of the
Sponsor, contemplated). The above expenses and the Trustee's annual fee,
when paid or owing to the Trustee, are secured by a lien on the Trust.
In addition, the Trustee is empowered to sell Equity Securities in the
Trust in order to make funds available to pay all these amounts if funds
are not otherwise available in the Income and Capital Accounts of the
Trust. Since the Equity Securities are all common stocks and the income
stream produced by dividend payments, if any, is unpredictable, the
Sponsor cannot provide any assurance that dividends will be sufficient
to meet any or all expenses of the Trust. As described above, if
dividends are insufficient to cover expenses, it is likely that Equity
Securities will have to be sold to meet Trust expenses. These sales may
result in capital gains or losses to Unit holders and may tend to reduce
gains or increase the losses which are ultimately received by the Unit
holders from investing in the Trust. See "What is the Federal Tax Status
of Unit Holders?"
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal income
tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold the Units as
"capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). Unit holders should consult their tax advisors in
determining the Federal, state, local and any other tax consequences of
the purchase, ownership and disposition of Units in the Trust. For
purposes of the following discussion and opinions, it is assumed that
each Equity Security is equity for Federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of each of the assets of the Trust under the
Code; the income of the Trust will be treated as income of the Unit
holders thereof under the Code; and each Unit holder will be considered
to have received his or her pro rata share of income derived from each
Trust asset when such income is considered received by the Trust.
2. Unit holders will be taxed in this manner regardless of whether
distribution from the Trust are actually received by the Unit holder or
are automatically reinvested.
3. Each Unit holder will have a taxable event when the Trust disposes
of an Equity Security (whether by sale, taxable exchange, liquidation,
redemption, or otherwise) or upon the sale or redemption of Units by
such Unit holder (except to the extent an in-kind distribution of stocks
is received by such Unit holder as described below). The price a Unit
holder pays for his Units is allocated among his pro rata portion of
each Equity Security held by the Trust (in proportion to the fair market
values thereof on the valuation date closest to the date the Unit holder
purchases his Units) in order to determine his tax basis for his pro
rata portion of each Equity Security held by the Trust. It should be
noted that certain legislative proposals have been made which could
affect the calculation of basis for Unit holders holding securities that
are substantially identical to the Equity Securities. Unit holders
should consult their own tax advisors with regard to the calculation of
basis. For Federal income tax purposes, a Unit holder's pro rata portion
of dividends, as defined by Section 316 of the Code, paid by a
corporation with respect to an Equity Security held by the Trust is
taxable as ordinary income to the extent of such corporation's current
and accumulated "earnings and profits." A Unit holder's pro rata portion
of dividends paid on such Equity Security which exceeds such current and
accumulated earnings and profits will first reduce a Unit holder's tax
basis in such Equity Security, and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security shall generally
be treated as capital gain. In general, the holding period for such
capital gains will be determined by the period of time a Unit holder has
held his or her Units.
4. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held by the
Trust will generally be considered a capital gain except in the case of
a dealer or a financial institution and, in general, will be long-term
if the Unit holder has held his Units for more than one year (the date
on which the Units are acquired (i.e., the trade date) is excluded for
Page 8
purposes of determining whether the Units have been held for more than
one year). A Unit holder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held by the
Trust will generally be considered a capital loss (except in the case of
a dealer or a financial institution) and, in general, will be long-term
if the Unit holder has held his Units for more than one year. Unit
holders should consult their tax advisors regarding the recognition of
such capital gains and losses for Federal income tax purposes. In
particular, a Rollover Unit holder should be aware that a Rollover Unit
holder's loss, if any, incurred in connection with the exchange of Units
for units in a new series of the Trust (the "2000 Trust") will generally
be disallowed with respect to the disposition of any Equity Securities
pursuant to such exchange to the extent that such Unit holder is
considered the owner of substantially identical securities under the
wash sale provisions of the Code taking into account such Unit holders
deemed ownership of the securities underlying the Units in the 2000
Trust in the manner described above, if such substantially identical
securities were acquired within a period beginning 30 days before and
ending 30 days after such disposition. However, any gains incurred in
connection with such an exchange by a Rollover Unit holder would be
recognized.
Deferred Sales Charge. Generally, the tax basis of a Unit holder
includes sales charges, and such charges are not deductible. A portion
of the sales charge for the Trust is deferred. It is possible that for
Federal income tax purposes a portion of the deferred sales charge may
be treated as interest which would be deductible by a Unit holder
subject to limitations on the deduction of investment interest. In such
a case, the non-interest portion of the deferred sales charge would be
added to the Unit holder's tax basis in his Units. The deferred sales
charge could cause the Unit holder's Units to be considered to be debt-
financed under Section 246A of the Code which would result in a small
reduction of the dividends-received deduction. In any case, the income
(or proceeds from redemption) a Unit holder must take into account for
Federal income tax purposes is not reduced by amounts deducted to pay
the deferred sales charge. Unit holders should consult their own tax
advisors as to the income tax consequences of the deferred sales charge.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with respect
to such Unit holder's pro rata portion of dividends received by the
Trust (to the extent such dividends are taxable as ordinary income, as
discussed above, and are attributable to domestic corporations) in the
same manner as if such corporation directly owned the Equity Securities
paying such dividends (other than corporate Unit holders, such as "S"
corporations, which are not eligible for the deduction because of their
special characteristics and other than for purposes of special taxes
such as the accumulated earnings tax and the personal holding
corporation tax). However, a corporation owning Units should be aware
that Sections 246 and 246A of the Code impose additional limitations on
the eligibility of dividends for the 70% dividends received deduction.
These limitations include a requirement that stock (and therefore Units)
must generally be held at least 46 days (as determined under Section
246(c) of the Code). Final regulations have been issued which address
special rules that must be considered in determining whether the 46-day
holding period requirement is met. Moreover, the allowable percentage of
the deduction will be reduced from 70% if a corporate Unit holder owns
certain stock (or Units) the financing of which is directly attributable
to indebtedness incurred by such corporation.
It should be noted that various legislative proposals that would affect
the dividends received deduction have been introduced. Unit holders
should consult with their tax advisors with respect to the limitations
on and possible modifications to the dividends received deduction.
Limitations on Deductibility of Trust Expenses by Unit Holders. Each
Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by such Unit holder. It should be noted that as a
result of the Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross income.
Unit holders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by
the Trust or Disposition of Units. As discussed above, a Unit holder may
recognize taxable gain (or loss) when an Equity Security is disposed of
Page 9
by the Trust or if the Unit holder disposes of a Unit (although losses
incurred by Rollover Unit holders may be subject to disallowance, as
discussed above). For taxpayers other than corporations, net capital
gains (which is defined as net long-term capital gain over net short-
term capital loss for a taxable year) are subject to a maximum stated
marginal tax rate of 28% or 20%, depending upon the holding period of
the capital asset. In particular, net capital gain, excluding net gain
from property held more than one year but not more than 18 months and
gain on certain other assets, is subject to a maximum stated rate of 20%
(10% in the case of certain taxpayers in the lowest tax bracket). Net
capital gain that is not taxed at the marginal stated tax rate of 20%
(or 10%) as described in the preceding sentence, is generally subject to
a maximum marginal stated rate of 28%. The date on which a Unit is
acquired (i.e., the "trade date") is excluded for purposes of
determining the holding period of a Unit. Generally, capital gain or
loss is long-term if the holding period for the asset is more than one
year, and is short-term if the holding period for the asset is one year
or less. Net short-term capital gain is taxed at the same rate as
ordinary income. However, Unit holders should consult their own tax
advisors regarding the holding period and the tax rate of capital gains.
It should be noted that legislative proposals are introduced from time
to time that affect tax rates and could affect relative differences at
which ordinary income and capital gains are taxed. The 1997 Act provides
that the application of these rules in the case of pass-through entities
such as the Trust will be prescribed in future U.S. Treasury
Regulations. Accordingly, Unit holders should consult their own tax
advisers as to the tax rate applicable to capital gain dividends.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unit holders and prospective investors should consult
with their tax advisers regarding the potential effect of this provision
on their investment in Units.
If the Unit holder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all assets of the Trust
involved including his pro rata portion of all the Equity Securities
represented by the Unit.
The Taxpayer Relief Act of 1997 (the "1997 Act") includes provisions
that treat certain transactions designed to reduce or eliminate risk of
loss and opportunities for gain (e.g., short sales, offsetting notional
principal contracts, futures or forward contracts or similar
transactions) as constructive sales for purposes of recognition of gain
(but not loss) and for purposes of determining the holding period. Unit
holders should consult their own tax advisors with regard to any such
constructive sales rules.
Special Tax Consequences of In-Kind Distributions Upon Redemption of
Units or Termination of the Trust. As discussed in "Rights of Unit
Holders-How are Income and Capital Distributed?", under certain
circumstances a Unit holder who owns at least 2,500 Units may request an
In-Kind Distribution upon the redemption of Units or the termination of
the Trust. The Unit holder requesting an In-Kind Distribution will be
liable for expenses related thereto (the "Distribution Expenses") and
the amount of such In-Kind Distribution will be reduced by the amount of
the Distribution Expenses. See "Rights of Unit Holders-How are Income
and Capital Distributed?" As previously discussed, prior to the
redemption of Units or the termination of the Trust, a Unit holder is
considered as owning a pro rata portion of each of the Trust's assets
for Federal income tax purposes. The receipt of an In-Kind Distribution
will result in a Unit holder receiving an undivided interest in whole
shares of stock plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind
Distribution will depend on whether or not a Unit holder receives cash
in addition to Equity Securities. An "Equity Security" for this purpose
is a particular class of stock issued by a particular corporation. A
Unit holder will not recognize gain or loss if a Unit holder only
receives Equity Securities in exchange for his or her pro rata portion
in the Equity Securities held by the Trust. However, if a Unit holder
also receives cash in exchange for a fractional share of an Equity
Security held by the Trust, such Unit holder will generally recognize
gain or loss based upon the difference between the amount of cash
received by the Unit holder and his tax basis in such fractional share
of an Equity Security held by the Trust.
Because the Trust will own many Equity Securities, a Unit holder who
requests an In-Kind Distribution will have to analyze the tax
consequences with respect to each of the WEBS of the underlying WEBS
Index Series owned by the Trust. The amount of taxable gain (or loss)
recognized upon such exchange will generally equal the sum of the gain
(or loss) recognized under the rules described above by such Unit holder
Page 10
with respect to each Equity Security owned by the Trust. Unit holders
who request an In-Kind Distribution are advised to consult their tax
advisors in this regard.
As discussed in "Special Redemption, Liquidation and Investment in a New
Trust," a Unit holder may elect to become a Rollover Unit holder. To the
extent a Rollover Unit holder exchanges his Units for Units of the 2000
Trust in a taxable transaction, such Unit holder will recognize gains,
if any, but generally will not be entitled to a deduction for any losses
recognized upon the disposition of any Equity Securities pursuant to
such exchange to the extent that such Unit holder is considered the
owner of substantially identical securities under the wash sale
provisions of the Code taking into account such Unit holder's deemed
ownership of the securities underlying the Units in the 2000 Trust in
the manner described above, if such substantially identical securities
were acquired within a period beginning 30 days before and ending 30
days after such disposition under the wash sale provisions contained in
Section 1091 of the Code. In the event a loss is disallowed under the
wash sale provisions, special rules contained in Section 1091 (d) of the
Code apply to determine the Unit holder's tax basis in the securities
acquired. Rollover Unit holders are advised to consult their tax advisors.
Computation of the Unit holder's Tax Basis. Initially, a Unit holder's
tax basis in his Units will generally equal the price paid by such Unit
holder for his Units. The cost of the Units is allocated among the
Equity Securities held in the Trust in accordance with the proportion of
the fair market values of such Equity Securities on the valuation date
nearest the date the Units are purchased in order to determine such Unit
holder's tax basis for his pro rata portion of each Equity Security.
A Unit holder's tax basis in his Units and his pro rata portion of an
Equity Security held by the Trust will be reduced to the extent
dividends paid with respect to such Equity Security are received by the
Trust which are not taxable as ordinary income as described above.
Distributions on the WEBS Index Series shares which are taxable as
ordinary income to the Unit holders will constitute dividends for
Federal income tax purposes. To the extent dividends received by the
WEBS Index Series are attributable to foreign corporations, a
corporation that owns Units will not be entitled to the dividends
received deduction with respect to the pro rata portion of such
dividends, since the dividends received deduction is generally available
only with respect to dividends paid by domestic corporations. It should
be noted that various legislative proposals that would affect the
dividends received deduction have been introduced. Unit holders should
consult with their tax advisers with respect to the limitation on a
possible modification of the dividends received deduction.
Because more than 50% of the value of the total assets of WEBS Index
Series consist of stock or securities in foreign corporations, WEBS
Index Series may elect to pass through to its shareholders the foreign
income and similar taxes paid by WEBS Index Series in order to enable
such shareholders to take a credit (or deduction) for foreign income
taxes paid by WEBS Index Series. If such an election is made, Unit
holders of the Trust, because they are deemed to own a pro rata portion
of the WEBS Index Series shares held by the Trust, as described above,
must include in their gross income, for Federal income tax purposes,
both their portion of dividends received by the Trust from WEBS Index
Series, and also their portion of the amount which WEBS Index Series
deems to be the Trust's portion of foreign income taxes paid with
respect to, or withheld from, dividends, interest or other income of
WEBS Index Series from its foreign investments. Unit holders may then
subtract from their Federal income tax the amount of such taxes
withheld, or else treat such foreign taxes as deductions from gross
income; however, as in the case of investors receiving income directly
from foreign sources, the above described tax credit or deduction is
subject to certain limitations. Unit holders should consult their tax
advisers regarding this election and its consequences to them.
General. Each Unit holder will be requested to provide the Unit holder's
taxpayer identification number to the Trustee and to certify that the
Unit holder has not been notified that payments to the Unit holder are
subject to back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when requested,
distributions by the Trust to such Unit holder (including amounts
received upon the redemption of Units) will be subject to back-up
withholding. Distributions by the Trust (other than those that are not
treated as United States source income, if any) will generally be
subject to United States income taxation and withholding in the case of
Units held by non-resident alien individuals, foreign corporations or
other non-United States persons. Such persons should consult their tax
Page 11
advisors. At the termination of the Trust, the Trustee will furnish to
each Unit holder a statement containing information relating to the
dividends received by the Trust on the Equity Securities, the gross
proceeds received by the Trust from the disposition of any Equity
Security (resulting from redemption or the sale of any Equity Security)
and the fees and expenses paid by the Trust. The Trustee will also
furnish annual information returns to Unit holders and the Internal
Revenue Service.
Unit holders desiring to purchase Units for tax-deferred plans and IRAs
should consult their broker for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
plans established. See "Are Investments in the Trust Eligible for
Retirement Plans?"
The foregoing discussion relates only to the tax treatment of United
States Unit holders ("U.S. Unit holders") with regard to Federal and
certain aspects of New York State and City income taxes. Unit holders
may be subject to taxation in New York or in other jurisdictions and
should consult their own tax advisors in this regard. As used herein,
the term "U.S. Unit holder" means an owner of a Unit in the Trust that
(a) is (i) for United States Federal income tax purposes a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the
income of which is subject to United States Federal income taxation
regardless of its source or (b) does not qualify as a U.S. Unit holder
in paragraph (a) but whose income from a Unit is effectively connected
with such Unit holder's conduct of a United States trade or business.
The term also includes certain former citizens of the United States
whose income and gain on the Units will be taxable.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trust for New York tax matters, under the existing income tax laws of
the State of New York, the Trust is not an association taxable as a
corporation and the income of the Trust will be treated as the income of
the Unit holders thereof.
Are Investments in the Trust Eligible for Retirement Plans?
Units of the Trust are eligible for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred retirement
plans. Generally, the Federal income tax relating to capital gains and
income received in each of the foregoing plans is deferred until
distributions are received. Distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for
special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisors
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary. Accordingly,
investors considering investing through a retirement plan should
consider doing so with funds already in such plan.
PORTFOLIO
What are the WEBS Index Series?
The Trust will consist of a portfolio of WEBS issued by the six European
WEBS Index Series as described herein.
The WEBS Index Series are each a separate series of the WEBS Index Fund,
Inc. (the "Index Fund"). Each WEBS Index Series invests primarily in
foreign common stocks in an effort to track the performance of a
specified foreign equity market index.
The investment objective of each WEBS Index Series is to seek to provide
investment results that correspond generally to the price and yield
performance of publicly traded securities in the aggregate in particular
markets, as represented by a particular foreign equity securities index
compiled by Morgan Stanley Capital International ("MSCI"). The MSCI
Indices (as defined herein) utilized by the WEBS Index Series in which
the Trust invests reflect the reinvestment of net dividends.
The shares of common stock of each WEBS Index Series are sometimes
referred to as "World Equity Benchmark Shares(SM)" or "WEBS(SM)." The
WEBS are listed for trading on the AMEX. The non-redeemable WEBS trade
on the AMEX during the day at prices that differ to some degree from
their net asset value. There can be no assurance that an active trading
market will be maintained for the WEBS. See "Investment Considerations
and Risks" for a discussion of certain investment considerations and
risks that should be considered by potential investors.
Page 12
The Index Fund issues and redeems WEBS of each WEBS Index Series only in
aggregations of a specified number of shares (each, a "Creation Unit")
at net asset value. Except when aggregated in Creation Units, WEBS are
not redeemable securities of the Index Fund. The Trust has not purchased
Creation Units from the Index Fund; it has acquired WEBS through the
Authorized Participants (as that term is defined in the Index Fund's
Statement of Additional Information), which may be derived from Creation
Units, or in open market transactions on the AMEX.
The Index Fund is managed and advised by Barclays Global Fund Advisors
(the "Adviser"). PFPC Inc. (the "Administrator") provides certain
administrative services to each WEBS Index Series of the Index Fund.
Funds Distributor, Inc. (the "Distributor") serves as the principal
underwriter and distributor of the Index Fund's shares. The Distributor
does not maintain a secondary market in WEBS. Morgan Stanley Trust
Company ("MSTC") serves as Sub-Administrator, as Custodian for the cash
and portfolio securities of each WEBS Index Series and as Lending Agent
for each WEBS Index Series.
The information in this Prospectus regarding the Index Fund and its WEBS
Index Series has been derived from the Index Fund's Prospectus dated
October 29, 1997. Both the Prospectus and the Statement of Additional
Information for the Index Fund, each dated October 29, 1997, provide
further discussion of certain topics referred to in this Prospectus and
other information which may be of interest to investors. Both the Index
Fund's Prospectus and Statement of Additional Information have been
filed with the Securities and Exchange Commission (the "SEC") and are
incorporated herein by reference. Copies of these documents may be
obtained without charge by writing to the Distributor. The Index Fund's
Prospectus, Statement of Additional Information, material incorporated
by reference in the Index Fund's Prospectus and other information
regarding the Index Fund is available at the SEC's Web site
(http://www.sec.gov). The Index Fund's and each WEBS Index Series'
address is WEBS Index Fund, Inc., c/o PFPC Inc., 400 Bellevue Parkway,
Wilmington, Delaware 19809.
"WORLD EQUITY BENCHMARK SHARES" AND "WEBS" ARE SERVICE MARKS OF
MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. AND HAVE BEEN LICENSED OR
SUBLICENSED TO THE INDEX FUND AND THE TRUST. "MSCI" AND "MSCI INDICES"
ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED ("MORGAN
STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF
MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY THE INDEX FUND
("LICENSEE"). THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED
BY CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF
CAPITAL INTERNATIONAL S.A.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES
OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN
SECURITIES GENERALLY, OR IN THE WEBS OF ANY WEBS INDEX SERIES
PARTICULARLY, OR THE ABILITY OF THE INDICES IDENTIFIED HEREIN TO TRACK
GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS THE LICENSOR OF
CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN STANLEY,
INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK ("MSCI")
WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO
MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED,
COMPOSED AND CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX
SERIES OR THE ISSUER THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX
SERIES OR THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES INTO
CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING, IN THE CASE OF
CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN STANLEY, THE RESPECTIVE
MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS RESPONSIBLE FOR, NOR
HAVE THEY PARTICIPATED IN, THE DETERMINATION OF THE TIMING OF, PRICES
OF, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED OR
IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF
ANY WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA
HAS ANY OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX
SERIES IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF
THE WEBS OF ANY WEBS INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS
RELIABLE, NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY
AND/OR THE COMPLETENESS OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED
FROM INDEPENDENT SOURCES. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE,
Page 13
OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE
RIGHTS LICENSED UNDER ANY LICENSE AGREEMENT OR FOR ANY OTHER USE.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED
WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE
MSCI INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR CIPSA HAVE ANY LIABILITY
FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER
DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
The information contained herein regarding MSCI, the MSCI Indices, local
securities markets and Depository Trust Company ("DTC") was obtained
from publicly available sources.
SUMMARY OF INDEX FUND EXPENSES
The purpose of the following tables is to assist investors in
understanding the various costs and expenses an investor will bear
directly and indirectly with respect to each WEBS Index Series of the
Index Fund. The tables show all operating expenses and fees each WEBS
Index Series is expected to incur. The information under "Annual Series
Operating Expenses" is based on actual expenses incurred by each WEBS
Index Series in the fiscal year ended August 31, 1997, adjusted to
reflect changes in the rate of Rule 12b-1 and administration fees that
became effective on October 29, 1997. The examples set forth below are
presented for an investment of $1,000 as required by rules of the SEC.
The examples in the tables should not be considered a representation of
past or future expenses or performance. Actual expenses may be greater
or less than those shown. The notes to the tables and the information
under "Explanation of Tables" should be carefully reviewed when reading
the tables.
<TABLE>
<CAPTION>
Austria Belgium France Germany Italy
WEBS WEBS WEBS WEBS WEBS
Index Index Index Index Index
Series Series Series Series Series
________ ______ ______ _______ ______
<S> <C> <C> <C> <C> <C>
Annual WEBS Index Series Operating Expenses
(as a percentage of average net assets)
Management Fees .27% .27% .27% .27% .27%
12b-1 Fees (a) .20% .20% .20% .20% .20%
Other Expenses* 1.21% .77% 1.05% .90% .86%
_____ _____ _____ _____ _____
Total Operating Expenses* 1.68% 1.24% 1.52% 1.37% 1.33%
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Netherlands Spain Sweden Switzerland United
WEBS WEBS WEBS WEBS Kingdom
Index Index Index Index WEBS Index
Series Series Series Series Series
__________ ______ ______ ___________ __________
<S> <C> <C> <C> <C> <C>
Annual WEBS Index Series Operating Expenses
(as a percentage of average net assets)
Management Fees .27% .27% .27% .27% .27%
12b-1 Fees (a) .20% .20% .20% .20% .20%
Other Expenses* .99% 1.20% 1.17% 1.05% .91%
_____ _____ _____ _____ _____
Total Operating Expenses* 1.46% 1.67% 1.64% 1.52% 1.38%
===== ===== ===== ===== =====
_________________
<FN>
* These expense ratio percentages reflect the average daily net assets
of the ten WEBS Index Series for the fiscal year ended August 31, 1997,
which totaled $127,509,764. The net assets of the ten WEBS Index Series
totaled $177,984,043 as of August 31, 1997.
(a) All payments by the Index Fund to the Distributor will be made
pursuant to the Index Fund's Rule 12b-1 Plan at a rate set from time to
time by the Index Fund's Board of Directors, provided that the annual
Page 14
rate may not exceed .25% of the Index Fund's average daily net assets.
The Index Fund's Board of Directors has determined to limit the annual
fee payable under the Rule 12b-1 Plan with respect to each WEBS Index
Series so as not to exceed .20% of the average daily net assets of each
WEBS Index Series until further notice. See "Management of the Index
Fund-Distributor," below. A long-term shareholder of a WEBS Index Series
may pay more in total sales charges than the economic equivalent of the
maximum front-end sales charges otherwise permitted by the rules of the
National Association of Securities Dealers, Inc.
</FN>
</TABLE>
Explanation of Tables
Annual Series Operating Expenses are based on actual expenses incurred
by the Index Fund for the fiscal year ended August 31, 1997, as adjusted
to reflect changes to the rates of Rule 12b-1 and administration fees
that became effective on October 29, 1997. Actual expenses may vary and
will be affected by, among other things, the levels of average net
assets of a WEBS Index Series and the Index Fund. Management fees are
paid to the Adviser to provide each WEBS Index Series with investment
advisory, management and certain administrative services. "Other
Expenses" include fees paid to the Administrator to provide the Index
Fund with administrative and fund accounting services. From time to
time, the Administrator may waive the administration fees otherwise
payable to it or may reimburse the Index Fund for its operating
expenses. On July 1, 1997, the Administrator waived all deferred fees.
The waived amount totaled $648,802 as of such date. Distribution fees
are paid to the Distributor, to compensate the Distributor and/or
reimburse it for certain expenses and for payments made to dealers and
other persons providing distribution, marketing and shareholder services
to the Index Fund. See "Management of the Index Fund" for additional
information.
Examples of Expenses
(a) WEBS in less than Creation Units are not redeemable. The Index Fund
redeems Creation Units principally on an in-kind basis for Deposit
Securities. If an investor were permitted to purchase and redeem less
than a Creation Unit of WEBS on an in-kind basis, such investor would
pay the following expenses on a $1,000 investment (payment with a
deposit of Deposit Securities), assuming (1) a 5% annual return and (2)
redemption (delivery of Deposit Securities), at the end of each
indicated time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
_______ _______ ________ _______
<S> <C> <C> <C> <C>
Austria WEBS Index Series $20.94 $56.69 $94.79 $201.37
Belgium WEBS Index Series 17.74 44.35 72.96 154.28
France WEBS Index Series 18.39 50.86 85.57 183.24
Germany WEBS Index Series 15.06 44.44 75.94 165.08
Italy WEBS Index Series 15.29 43.82 74.45 161.22
Netherlands WEBS Index Series 18.70 49.91 83.32 177.52
Spain WEBS Index Series 20.81 56.36 94.25 200.27
Sweden WEBS Index Series 20.35 55.28 92.54 196.91
Switzerland WEBS Index Series 17.86 50.33 85.05 182.75
United Kingdom WEBS Index Series 17.66 47.21 78.89 168.49
</TABLE>
(b) Such an investor would pay the following expenses on the same
investment, assuming no redemptions:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
_______ _______ ________ _______
<S> <C> <C> <C> <C>
Austria WEBS Index Series $18.99 $54.74 $92.84 $199.42
Belgium WEBS Index Series 15.17 41.78 70.39 151.71
France WEBS Index Series 16.91 49.38 84.09 181.76
Germany WEBS Index Series 14.50 43.88 75.38 164.52
Italy WEBS Index Series 14.41 42.94 73.57 160.34
Netherlands WEBS Index Series 16.76 47.97 81.38 175.58
Spain WEBS Index Series 18.88 54.42 92.31 198.33
Sweden WEBS Index Series 18.50 53.43 90.68 195.05
Switzerland WEBS Index Series 16.65 49.12 83.85 181.54
United Kingdom WEBS Index Series 15.84 45.39 77.07 166.67
</TABLE>
Page 15
The examples above illustrate the estimated expenses associated with a
$1,000 investment in a Creation Unit of WEBS on an in-kind basis over
periods of 1, 3, 5 and 10 years, based on the expenses in the table and
an assumed annual rate of return of 5%. The presentation of a $1,000
investment in a Creation Unit is for illustration purposes only, as WEBS
may only be purchased from the Index Fund or redeemed by the Index Fund
in Creation Units. Further, the return of 5% and estimated expenses are
for illustration purposes only and should not be considered indications
of expected WEBS Index Series expenses or performance, both of which may
vary. The expenses associated with a $1,000 investment in WEBS include a
pro rata portion of shareholder transaction expenses associated with the
purchase or sale of a Creation Unit, which would have been valued as of
August 31, 1997 at between $616,844 and $7,568,662, depending on the
WEBS Index Series, assuming for this purpose that the net asset value of
a Creation Unit was the same as the value of the Deposit Securities as
of such date.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
The following tables set forth certain information concerning the
investment results of each WEBS Index Series. The financial highlights
for the periods indicated have been audited by independent auditors for
the Index Fund, whose current report on the financial statements and
financial highlights of the Index Fund is incorporated by reference in
the Index Fund's Statement of Additional Information. The tables should
be read in conjunction with the financial statements and related notes
incorporated by reference in the Index Fund's Statement of Additional
Information. The financial data for each WEBS Index Series for the
period ending August 31, 1996 is a part of previous financial statements
audited by the Index Fund's independent auditors. Further information
about the performance of the Index Fund is available in the annual
report to shareholders, which may be obtained free of charge by calling
the Distributor at 1-800-810-WEBS (9327).
<TABLE>
<CAPTION>
Austria WEBS Belgium WEBS France WEBS Germany WEBS
Index Series Index Series Index Series Index Series
_________________ __________________ __________________ __________________
For the For the For the For the For the For the For the For the
year period year period year period year period
ended 03/12/96* ended 03/12/96* ended 03/12/96* ended 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96 08/31/97 -08/31/96 08/31/97 -08/31/96
_______ _______ _______ _______ _______ _______ _______ _________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $10.40 $10.91(1) $14.99 $14.92(1) $12.73 $12.42(1) $13.64 $13.23(1)
_______ _______ _______ _______ _______ _______ _______ _______
Net Investment Income/(loss) (+) (0.02) 0.04 0.77 0.40 0.17 0.17 0.03 0.06
Net realized and unrealized gain/(loss) on
investments, foreign currency related
transactions, and translation of other
assets and liabilities
denominated in foreign currencies 0.13 (0.41) 0.62 0.36 1.95 0.45 2.77 0.47
_______ _______ _______ _______ _______ _______ _______ _______
Net increase/(decrease) in net assets
resulting from operations 0.11 (0.37) 1.39 0.76 2.12 0.62 2.80 0.53
_______ _______ _______ _______ _______ _______ _______ _______
Less distributions
Dividends from net investment income - (0.02) (0.33) (0.54) (0.15) (0.09) (0.03) (0.03)
Dividends from excess of net investment income - (0.01) (0.28) (0.09) - (0.01) (0.01) (0.01)
Distributions from net realized capital gains - (0.03) (0.12) (0.06) (0.20) 0.00** (0.07) -
Distribution from excess of net realized gains - - - - - - - (0.01)
Return of capital - (0.08) (0.01) - - (0.21) (0.02) (0.07)
_______ _______ _______ _______ _______ _______ _______ _______
Total dividends and distributions - (0.14) (0.74) (0.69) (0.35) (0.31) (0.13) (0.12)
_______ _______ _______ _______ _______ _______ _______ _______
Net asset value, end of period $10.51 $10.40 $15.64 $14.99 $14.50 $12.73 $16.31 $13.64
====== ====== ====== ====== ====== ====== ====== ======
Total Investment Return (2) 1.06% (3.39%)(4) 9.26% (5.01%)(4) 16.60% 4.95%(4) 20.51% 4.00%(4)
Ratios/Supplement Data
Net assets, end of period (in 000's) $4,205 $13,520 $32,528 $1,800 $14,519 $22,930 $25,486 $28,664
Ratios of expenses to average net assets (5) 1.68% 1.56%(3) 1.24% 2.29%(3) 1.52% 1.84%(3) 1.37% 1.68%(3)
Ratios of net investment income/(loss) to (0.22%) 0.87%(3) 4.63% 5.67%(3) 1.17% 2.72%(3) 0.23% 1.00%(3)
average
net assets (5)
Portfolio turnover (6) 28.47% 9.60%(4) 16.83% 6.25%(4) 7.13% 0.00%(4) 9.04% 0.00%(4)
Average commission rate paid $0.1719 $0.2986 $0.3379 $0.4327 $0.0137 $0.3956 $0.0236 -
</TABLE>
Page 16
<TABLE>
<CAPTION>
Italy WEBS Netherlands WEBS Spain WEBS Sweden WEBS
Index Series Index Series Index Series Index Series
_________________ _________________ _________________ __________________
For the For the For the For the For the For the For the For the
year period year period year period year period
ended 03/12/96* ended 03/12/96* ended 03/12/96* ended 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96 08/31/97 -08/31/96 08/31/97 -08/31/96
_______ _______ _______ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $13.79 $13.62(1) $17.36 $15.91(1) $14.09 $13.28(1) $14.67 $13.22(1)
_______ _______ _______ _______ _______ _______ _______ _______
Net Investment Income/(loss) (+) 0.12 0.25 0.11 0.24 0.19 0.14 (0.03) 0.20
Net realized and unrealized gain/(loss) on
investments, foreign currency related
transactions, and translation of other
assets and liabilities
denominated in foreign currencies 3.10 0.31 4.79 1.54 5.33 0.98 4.45 1.67
_______ _______ _______ _______ _______ _______ _______ _______
Net increase/(decrease) in net assets
resulting from operations 3.22 0.56 4.90 1.78 5.52 1.12 4.42 1.87
_______ _______ _______ _______ _______ _______ _______ _______
Less distributions
Dividends from net investment income (0.11) (0.14) (0.10) (0.14) (0.12) (0.18) - (0.23)
Dividends from excess of net investment income (0.24) (0.03) (0.01) (0.01) (0.05) - - (0.07)
Distributions from net realized capital gains - (0.14) (0.71) (0.08) (0.86) (0.13) (0.77) (0.12)
Distribution from excess of net realized gains - - - (0.01) - - - -
Return of capital - (0.08) (0.02) (0.09) (0.09) - - -
_______ _______ _______ _______ _______ _______ _______ _______
Total dividends and distributions (0.35) (0.39) (0.84) (0.33) (1.12) (0.31) (0.77) (0.42)
_______ _______ _______ _______ _______ _______ _______ _______
Net asset value, end of period $ 16.66 $13.79 $21.42 $17.36 $18.49 $14.09 $18.32 $14.67
======= ======= ======= ======= ======= ======= ======= =======
Total Investment Return (2) 23.37% 4.11%(4) 28.04% 11.19%(4) 39.15% 8.45%(4) 30.10% 14.13%(4)
Ratios/Supplement Data
Net assets, end of period (in 000's) $32,495 $35,170 $9,661 $6,962 $ 8,321 $ 4,227 $8,243 $4,400
Ratios of expenses to average net assets (5) 1.33% 1.43%(3) 1.46% 1.63%(3) 1.67% 1.76%(3) 1.64% 1.75%(3)
Ratios of net investment income/(loss) to
average net assets (5) 0.76% 3.69%(3) 0.54% 2.93%(3) 1.04% 2.04%(3) (0.19)% 3.05%(3)
Portfolio turnover (6) 13.70% 19.80%(4) 12.68% 4.32%(4) 19.21% 4.73%(4) 13.71% 5.87%(4)
Average commission rate paid $0.0045 $0.0046 $0.0354 $0.0651 $0.0344 $0.0723 $0.0229 $0.0561
</TABLE>
<TABLE>
<CAPTION>
Switzerland WEBS United Kingdom
Index Series WEBS Index Series
__________________ __________________
For the For the For the For the
year period year period
ended 03/12/96* ended 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96
_______ _________ _______ _________
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $12.29 $12.07(1) $13.15 $12.14(1)
_______ _______ _______ _______
Net Investment Income/(loss) (+) (0.04) 0.08 0.38 0.21
Net realized and unrealized gain/(loss) on
investments, foreign currency related
transactions, and translation of other
assets and liabilities denominated in
foreign currencies 2.11 0.24 3.62 1.06
_______ _______ _______ _______
Net increase/(decrease) in net assets
resulting from operations 2.07 0.32 4.00 1.27
_______ _______ _______ _______
Less distributions
Dividends from net investment income - (0.10) (0.32) (0.20)
Dividends from excess of net investment income - - (0.06) (0.03)
Distributions from net realized capital gains (0.57) - (0.17) 0.00**
Distribution from excess of net realized gains - - - -
Return of capital 0.00** - (0.10) (0.03)
_______ _______ _______ _______
Total dividends and distributions (0.57) (0.10) (0.65) (0.26)
_______ _______ _______ _______
Net asset value, end of period $13.79 $12.29 $16.50 $13.15
======= ======= ======= =======
Total Investment Return (2) 16.69% 2.60%(4) 30.48% 10.41%(4)
Ratios/Supplement Data
Net assets, end of period (in 000's) $13,805 $6,158 $29,721 $15,790
Ratios of expenses to average net assets (5) 1.52% 1.82%(3) 1.38% 1.61%(3)
Ratios of net investment income/(loss) to
average net assets (5) (0.29)% 1.39%(3) 2.47% 3.62%(3)
Portfolio turnover (6) 48.05% 17.06%(4) 1.84% 0.00%(4)
Average commission rate paid $0.8788 $0.7852 $0.0314 -
__________
<FN>
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of
operations).
(2) Total investment return is calculated assuming a purchase of capital
stock at net asset value per share on the first day and a sale at the
net asset value per share on the last day of the period reported.
Dividends and distributions, if any, are assumed, for purposes of this
calculation, to be reinvested at the net asset value per share on the ex-
dividend date.
Page 17
(3) Annualized.
(4) Not Annualized.
(5) Includes voluntary waivers by the AMEX. If such waivers had not been
made the ratios of expenses to average net assets and ratios of net
investment income/(loss) to average net assets would have been as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Austria Belgium France Germany Italy
_______ _______ ______ _______ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratios of expenses to average net 1.69% 1.57%(3) 1.24% 2.30%(3) 1.52% 1.85%(3) 1.37% 1.69%(3) 1.33% 1.44%(3)
assets before waivers
Ratios of net investment income/(loss) (0.22)% 0.86%(3) 4.63% 5.66%(3) 1.17% 2.71%(3) 0.22% 0.99%(3) 0.76% 3.68%(3)
to average net assets before waivers
</TABLE>
<TABLE>
<CAPTION>
Netherlands Spain Sweden Switzerland United Kingdom
___________ _____ ______ ___________ ______________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratios of expenses to average net 1.46% 1.64%(3) 1.67% 1.77%(3) 1.64% 1.76%(3) 1.53% 1.83%(3) 1.38% 1.62%(3)
assets before waivers
Ratios of net investment income/(loss) 0.53% 2.92%(3) 1.04% 2.03%(3) (0.19)% 3.04%(3) (0.29)% 1.38%(3) 2.47% 3.61%(3)
to average net assets before waivers
<FN>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
</FN>
</TABLE>
WEBS Index Fund, Inc. and its Investment Objective
The Index Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
organized as a series fund. There are currently 17 WEBS Index Series
traded on the AMEX. Of the 10 European WEBS Index Series of the Index
Fund which currently issue shares, the following have been included in
the Trust's Portfolio: The United Kingdom WEBS Index
Series is classified as a "diversified" investment company under the
1940 Act. Each of the other WEBS Index Series included in the Trust is
classified as a "non-diversified" investment company under the 1940 Act.
The Board of Directors of the Index Fund may authorize additional WEBS
Index Series in the future.
The investment objective of each WEBS Index Series is to seek to provide
investment results that correspond generally to the price and yield
performance of publicly traded securities in the aggregate in particular
markets, as represented by a particular foreign equity securities index.
Each of the WEBS Index Series included in the Trust utilizes an MSCI
Index that reflects the reinvestment of net dividends as its benchmark
index. See "The Benchmark MSCI Indices Utilized by the WEBS Index
Series" below. Each MSCI Index is a market capital weighted index of
equity securities traded on the principal securities exchange(s) and, in
some cases, the over-the-counter market, of the respective country. The
investment objective of each WEBS Index Series is a fundamental policy
and cannot be changed without the approval of the holders of a majority
of the respective WEBS Index Series' voting securities (as defined in
the 1940 Act).
There can be no assurance that the investment objective of any WEBS
Index Series will be achieved. In this regard, it should be noted that
the benchmark indices are unmanaged and bear no management,
administration, distribution, transaction or other expenses or taxes,
while each WEBS Index Series must bear these expenses and are also
subject to a number of limitations on its investment flexibility. The
WEBS Index Series utilize a portfolio sampling technique and do not
invest in all of the securities in their respective MSCI Indices. As a
result, a WEBS Index Series' performance will differ from that of the
benchmark MSCI Index to a greater extent than if it invested in all of
the securities in the benchmark. In addition, the MSCI Indices assume
that dividends are received throughout a year ("dividend smoothing")
while the WEBS Index Series record them on the ex date and this can
cause the performance of a WEBS Index Series to diverge from that of the
benchmark, particularly over periods of less than a year. See
"Implementation of Policies." In addition, certain WEBS Index Series are
subject to foreign tax withholding at rates different than those assumed
by the relevant benchmark index. See "The Benchmark MSCI Indices
Utilized by the WEBS Index Series." Investing in WEBS of a WEBS Index
Series involves special risks of investing in securities of the relevant
foreign country. For a discussion of certain special considerations and
risk factors relevant to an investment in WEBS, see "Investment
Considerations and Risks."
World Equity Benchmark Shares: "WEBS"
The shares of common stock, par value $.001 per share, of each WEBS
Index Series are referred to herein as "World Equity Benchmark Shares"
or "WEBS." Except when aggregated in Creation Units, WEBS are not
redeemable securities of the Index Fund. The WEBS are listed for trading
on the AMEX. The non-redeemable WEBS trade on the AMEX during the day at
prices that differ to some degree from their net asset value. See
"Determination of Net Asset Value," "Exchange Listing and Trading of
WEBS," and "Investment Consideration and Risks."
Page 18
Who Should Invest?
The WEBS of each WEBS Index Series are designed for investors who seek a
relatively low-cost "passive" approach for investing in a portfolio of
equity securities of companies located in the country of the subject
MSCI Index. Unlike equity mutual funds that seek to "beat" market
averages with unpredictable results, the WEBS Index Series seek to
provide investment results that correspond generally to the price and
yield performance of their respective benchmark indices.
It is generally recognized that international diversification of an
investment portfolio reduces risk. Many of the foreign equity securities
held by the WEBS Index Series are difficult to purchase or hold, or are,
as a practical matter, not available to retail investors. The WEBS Index
Series offer investors a convenient way to obtain indexed exposure to
the equity markets of specific foreign countries. It should be noted,
however, that the prices of WEBS of a particular WEBS Index Series may
be volatile, and investors should be able to tolerate sudden, sometimes
substantial fluctuations in the value of their investment. No assurance
can be given that any WEBS Index Series will achieve its stated
objective and shareholders should understand that they will be exposed
to the risks inherent in international equity investing. Because of the
risks associated with international equity investments, a WEBS Index
Series is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term
market movements. See "Investment Considerations and Risks."
Investment Policies
The Index Fund is not managed according to traditional methods of
"active" investment management, which involve the buying and selling of
securities based upon economic, financial and market analysis and
investment judgment. Instead, each WEBS Index Series utilizing a
"passive" or indexing investment approach, attempts to approximate the
investment performance of its benchmark index by investing in a
portfolio of stocks selected through the use of quantitative analytical
procedures. Stocks are selected for inclusion in a WEBS Index Series in
order to have aggregate investment characteristics (based on market
capitalization and industry weightings), fundamental characteristics
(such as return variability, earnings valuation and yield) and liquidity
measures similar to those of the subject MSCI Index taken in its
entirety. WEBS Index Series generally will not hold all of the stocks in
their respective benchmark indices but will typically hold a
representative subset of such stocks selected through the Adviser's
application of portfolio sampling techniques. However, each WEBS Index
Series reserves the right to invest in all of the stocks in its
benchmark index and, where a WEBS Index Series benchmark index is
comprised of relatively few securities, it may do so on a regular basis.
In addition, a WEBS Index Series may hold stocks that are not in the
relevant MSCI Index if the Adviser determines this to be appropriate in
light of the WEBS Index Series' investment objective and relevant
investment constraints.
Each WEBS Index Series has the policy to remain as fully invested as
practicable in a pool of equity securities the performance of which will
approximate the performance of the subject MSCI Index taken in its
entirety. A WEBS Index Series will normally invest at least 95% of its
total assets in stocks that are represented in the relevant MSCI Index,
and will at all times invest at least 90% of its total assets in such
stocks, except that in order to permit the Adviser additional
flexibility to comply with the requirements of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), and other regulatory
requirements and to manage future corporate actions and index changes in
the smaller markets, each of the Austria, Belgium, Netherlands, Spain,
Sweden and Switzerland WEBS Index Series will at all times invest at
least 80% of its total assets in such stocks and at least 10% of the
remaining 20% of its total assets in such stocks or in stocks included
in the relevant market, but not in the relevant MSCI Index. A WEBS Index
Series may invest its remaining assets in Short-Term Investments
(defined below), in stocks that are in the relevant market but not the
relevant MSCI Index, and/or in combinations of certain stock index
futures contracts, options on such futures contracts, stock index
options, stock index swaps, cash, local currency and forward currency
exchange contracts that are intended to provide the WEBS Index Series
with exposure to such stocks (the WEBS Index Series will not use such
instruments to leverage their investment portfolios). "Short-Term
Investments" are short-term high quality debt securities that include:
obligations of the United States Government and its agencies or
instrumentalities; commercial paper (rated Prime-1 by Moody's Investors
Page 19
Services, Inc. or A-1 by Standard & Poor's Ratings Group), bank
certificates of deposit and bankers' acceptances; repurchase agreements
collateralized by the foregoing securities; participation interests in
such securities; and shares of money market funds (subject to applicable
limits under the 1940 Act).
A WEBS Index Series will not invest in cash reserves or Short-Term
Investments or utilize futures contracts, options or swap agreements as
part of a temporary defensive strategy to protect against potential
stock market declines. A WEBS Index Series may enter into forward
currency exchange contracts in order to facilitate settlements in local
markets, in connection with positions in stock index futures and to
protect against currency exposure in connection with its distributions
to shareholders, but not as part of a defensive strategy to protect
against fluctuations in exchange rates. See "Implementation of Policies"
for a description of these and other investment practices of the Index
Fund.
Each WEBS Index Series has a policy to concentrate its investments in an
industry or industries if, and to the extent that, its benchmark index
concentrates in such industry or industries, except where the
concentration of the relevant index is the result of a single stock. As
a result of this policy, a WEBS Index Series will maintain at least 25%
of the value of its assets in securities of issuers in each industry for
which its benchmark index has a concentration of more than 25% (except
where the concentration of the index is the result of a single stock).
No WEBS Index Series will concentrate its investments otherwise. If the
benchmark index for a WEBS Index Series has a concentration of more than
25% because of a single stock (i.e., if one stock in the benchmark index
accounts for more than 25% of the index and it is the only stock in the
index in its industry), the WEBS Index Series will invest less than 25%
of its assets in such stock and will reallocate the excess to stocks in
other industries. Changes in a WEBS Index Series' concentration (if any)
and non-concentration would be made "passively" that is, any such
changes would be made solely as a result of changes in the
concentrations of the benchmark index's constituents. As of August 31,
1997, as a result of this policy, the Spain WEBS Index Series
concentrates in the Banking and Utilities (Electrical & Gas) industries,
the Sweden WEBS Index Series concentrates in the Electrical &
Electronics industry, and the Switzerland WEBS Index Series concentrates
in the Health & Personal Care industry. Since the concentration of each
WEBS Index Series is based on that of its benchmark index, changes in
the market values of the WEBS Index Series' portfolio securities will
not necessarily trigger changes in the portfolio of such WEBS Index
Series.
The concentration policy of each WEBS Index Series is a fundamental
policy that may be changed only with shareholder approval. Each of the
other investment policies of each WEBS Index Series is a nonfundamental
policy that may be changed by the Board of Directors without shareholder
approval. However, shareholders would be notified prior to any material
change in these policies. See "Investment Limitations" herein and
"Investment Policies and Restrictions" in the Statement of Additional
Information for the Index Fund for a listing of limitations on
investment practices that may only be changed with shareholder approval.
Implementation of Policies
A WEBS Index Series generally will not hold all of the issues that
comprise the subject MSCI Index, due in part to the costs involved and,
in certain instances, the potential illiquidity of certain securities.
Instead, each WEBS Index Series will attempt to hold a representative
sample of the securities in the MSCI Index, which will be selected by
the Adviser utilizing quantitative analytical models in a technique
known as "portfolio sampling." Under this technique, each stock is
considered for inclusion in the WEBS Index Series based on its
contribution to certain capitalization, industry and fundamental
investment characteristics. The Adviser will seek to construct the
portfolio of each WEBS Index Series so that, in the aggregate, its
capitalization, industry and fundamental investment characteristics
perform like those of the subject MSCI Index. Over time, the portfolio
composition of a WEBS Index Series may be altered (or "rebalanced") to
reflect changes in the characteristics of the subject MSCI Index or with
a view to bringing the performance and characteristics of the WEBS Index
Series more in line with that of the relevant MSCI Index. Such
rebalancing will require the WEBS Index Series to incur transaction
costs and other expenses. As noted above, each WEBS Index Series
reserves the right to invest in all of the securities in the benchmark
index, and WEBS Index Series with benchmark indices comprised of
relatively few stocks may do so on a regular basis.
Page 20
DUE TO THE USE OF THIS PORTFOLIO SAMPLING TECHNIQUE AND THE OTHER
FACTORS DISCUSSED HEREIN, A WEBS INDEX SERIES IS NOT EXPECTED TO TRACK
ITS BENCHMARK INDEX WITH THE SAME DEGREE OF ACCURACY AS WOULD AN
INVESTMENT VEHICLE THAT INVESTED IN EVERY COMPONENT SECURITY OF THE
SUBJECT INDEX. The Adviser expects that, over time, the "expected
tracking error" of a WEBS Index Series relative to the performance of
its benchmark index will be less than 5% and that the tracking error
will generally be greater for WEBS Index Series that have benchmark
indices with fewer rather than greater numbers of component stocks. An
expected tracking error of 5% means that there is a 68% probability that
the net asset value of the WEBS Index Series will be within plus or
minus 5% of the subject MSCI Index level after one year, without
rebalancing the portfolio composition. A tracking error of 0% would
indicate perfect tracking, which would be achieved when the net asset
value of the WEBS Index Series increases or decreases in exact
proportion to changes in its benchmark index. Factors such as expenses
of the Index Fund, taxes, the need to comply with the diversification
and other requirements of the Internal Revenue Code, the fact that the
MSCI Indices "smooth" dividend payments evenly over a year while the
Index Fund records dividends on the ex date, and the fact that the MSCI
Indices utilized by certain WEBS Index Series assume a different foreign
tax withholding rate than that applicable to such WEBS Index Series, may
adversely impact the tracking of the performance of a WEBS Index Series
to that of its benchmark index. The Adviser will monitor the tracking
error of each WEBS Index Series on an ongoing basis and will seek to
minimize tracking error to the maximum extent possible. See also the
discussion of portfolio sampling in the preceding paragraph. There can
be no assurance that any WEBS Index Series will achieve any particular
level of tracking error relative to the performance of the relevant
benchmark index. Semiannual and annual reports of the Index Fund
disclose tracking error over the previous six-month periods, and, in the
event that tracking error exceeds 5%, the Board of the Index Fund will
consider what action might be appropriate.
Although the policy of each WEBS Index Series is to remain substantially
fully invested in equity securities, a WEBS Index Series may also invest
in combinations of certain stock index futures contracts, options on
such futures contracts, stock index options, stock index swaps and cash
and Short-Term Investments that are intended to provide the WEBS Index
Series with exposure to such equity securities, and in cash, local
currency, forward currency exchange contracts and certain Short-Term
Investments that are not associated with related positions in stock
index futures contracts, options on such futures contracts, stock index
options or stock index swaps. Such investments may be made to invest
uncommitted cash balances or, in limited circumstances, to assist in
meeting shareholder redemptions of Creation Units of WEBS.
A WEBS Index Series may purchase stock index futures contracts, options
on such futures contracts and stock index options and may enter into
stock index swaps to stimulate full investment in the underlying index
to a limited extent. This may be done to facilitate trading (e.g., to
rapidly gain exposure to a market in anticipation of purchasing the
underlying equities over time), to reduce transaction costs or because
the Adviser has determined that the use of such instruments permits the
WEBS Index Series to gain exposure to the underlying equities at a lower
cost than by making direct investments in the cash market. While each of
these instruments can be used to leverage an investment portfolio, no
WEBS Index Series may use them to leverage its net assets.
A WEBS Index Series may enter into foreign currency forward and foreign
currency futures contracts to facilitate settlements in local markets,
in connection with stock index futures positions, and to protect against
currency exposure in connection with its distributions to shareholders,
but may not enter into such contracts for speculative purposes or as a
way of protecting against anticipated adverse changes in exchange rates
between foreign currencies and the U.S. dollar. A foreign currency
forward contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at
the time of the contract.
The Index Fund may lend securities from the portfolio of a WEBS Index
Series to brokers, dealers and other financial institutions desiring to
borrow securities to complete transactions and for other purposes.
Because the government securities or other assets that are pledged as
collateral to the Index Fund in connection with these loans generate
income, securities lending enables a WEBS Index Series to earn income
that may partially offset the expenses of the WEBS Index Series, and
thereby reduce the effect that expenses have on a WEBS Index Series'
ability to provide investment results that correspond generally to the
price and yield performance of its benchmark index. These loans may not
exceed 33% of a WEBS Index Series' total assets. The documentation for
Page 21
these loans will provide that the WEBS Index Series will receive
collateral equal to at least 100% of the current market value of the
loaned securities, as marked to market each day that the net asset value
of the WEBS Index Series is determined, consisting of government
securities or other assets permitted by applicable regulations and
interpretations. A WEBS Index Series will pay reasonable administrative
and custodial fees in connection with the loan of securities. The WEBS
Index Series will invest collateral in Short-Term Investments, and the
WEBS Index Series will bear the risk of loss of the invested collateral.
In addition, a WEBS Index Series will be exposed to the risk of loss
should a borrower default on its obligation to return the borrowed
securities. Morgan Stanley Trust Company ("MSTC") serves as Lending
Agent of the Index Fund and, in such capacity, shares equally with the
respective WEBS Index Series any net income earned on invested
collateral. A WEBS Index Series' share of income from the loan
collateral will be included in the WEBS Index Series' gross investment
income. The Index Fund will comply with the conditions for securities
lending established by the SEC staff.
Although each WEBS Index Series generally seeks to invest for the long
term, the WEBS Index Series retain the right to sell securities
irrespective of how long they have been held. However, because of the
"passive" investment management approach of the Index Fund, the
portfolio turnover rate for each WEBS Index Series is expected to be
under 50%, a generally lower turnover rate than for many other
investment companies. A portfolio turnover rate of 50% would occur if
one half of a WEBS Index Series' securities were sold within one year.
Ordinarily, securities are sold by a WEBS Index Series only to reflect
certain administrative changes in an Index (including mergers or changes
in the composition of the Index) or to accommodate cash flows out of the
WEBS Index Series while seeking to keep the performance of the WEBS
Index Series in line with that of its benchmark index. In addition,
securities may be sold from a WEBS Index Series in certain circumstances
to ensure the WEBS Index Series' compliance with the diversification and
other requirements of the Internal Revenue Code and with other
requirements, which would tend to raise the portfolio turnover rate of
such WEBS Index Series. Purchases and sales of securities in connection
with such compliance will involve transaction costs which will be borne
by the respective WEBS Index Series.
A WEBS Index Series may borrow money from a bank up to a limit of 33% of
the market value of its assets, but only for temporary or emergency
purposes (e.g., to facilitate distributions to shareholders or to meet
redemption requests (in connection with Creation Units of WEBS that the
Index Fund agrees to redeem for cash) prior to the settlement of
securities already sold or in the process of being sold by the WEBS
Index Series). To the extent that a WEBS Index Series borrows money
prior to receiving distributions on its portfolio securities or prior to
selling securities in connection with a redemption, it may be leveraged;
at such times, the WEBS Index Series may appreciate or depreciate in
value more rapidly than its benchmark index. A WEBS Index Series will
not make cash purchases of securities when the amount of money borrowed
exceeds 5% of the market value of its total assets.
Investment Limitations
Each WEBS Index Series intends to observe certain limitations on its
investment practices. Specifically, a WEBS Index Series may not:
(i) lend any funds or other assets except through the purchase of all
or a portion of an issue of securities or obligations of the type in
which it is permitted to invest (including participation interests in
such securities or obligations) and except that a WEBS Index Series may
lend its portfolio securities in an amount not to exceed 33% of the
value of its total assets;
(ii) issue senior securities or borrow money, except borrowings from
banks for temporary or emergency purposes in an amount up to 33% of the
value of the WEBS Index Series' total assets (including the amount
borrowed), valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing is made,
and the WEBS Index Series will not purchase securities while borrowings
in excess of 5% of the WEBS Index Series' total assets are outstanding,
provided, that for purposes of this restriction, short-term credits
necessary for the clearance of transactions are not considered
borrowings;
(iii)pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings; or
Page 22
(iv) purchase a security (other than obligations of the United States
Government, its agencies or instrumentalities) if as a result 25% or
more of its total assets would be invested in a single issuer.
Except with regard to a WEBS Index Series' borrowing policy and illiquid
securities policy, all percentage limitations apply immediately after a
purchase or initial investment, and any subsequent change in any
applicable percentage resulting from market fluctuations or other
changes in total or net assets does not require elimination of any
security from the WEBS Index Series' portfolio. The investment
limitations described in (i) through (iv) above and the preceding
paragraph, and certain additional limitations described in the Statement
of Additional Information of the Index Fund, may be changed with respect
to a WEBS Index Series only with the approval of the holders of a
majority of the outstanding voting securities (as defined in the 1940
Act) of such WEBS Index Series.
The Benchmark MSCI Indices Utilized by the WEBS Index Series
Each WEBS Index Series included in the Trust uses the corresponding MSCI
Index listed below as its benchmark. MSCI publishes several versions of
each stock index that it compiles. The MSCI Indices used by WEBS Index
Series in the Trust's Portfolio as benchmarks reflect the reinvestment
of net dividends. "Net dividends" means dividends after reduction for
taxes withheld at source at the rate applicable to holders of the
underlying stocks that are resident in Luxembourg.
The stocks included in an MSCI Index are chosen by Morgan Stanley
Capital International on a statistical basis. Each stock in an MSCI
Index is weighted according to its market value as a percentage of the
total market value of all stocks in the MSCI Index. (A stock's market
value equals the number of shares outstanding times the most recent
price of the security.) The inclusion of a stock in an MSCI Index in no
way implies that MSCI believes the stock to be an attractive investment.
In General
The Indices were founded in 1969 by Capital International S.A. as the
first international performance benchmarks constructed to facilitate
accurate comparison of world markets. Morgan Stanley acquired rights to
the Indices in 1986. The MSCI Indices have covered the world's developed
markets since 1969, and in 1988, MSCI commenced coverage of the emerging
markets.
Although local stock exchanges have traditionally calculated their own
indices, these are generally not comparable with one another, due to
differences in the representation of the local market, mathematical
formulas, base dates and methods of adjusting for capital changes. MSCI
applies the same criteria and calculation methodology across all markets
for all indices, developed and emerging.
MSCI Indices are notable for the depth and breadth of their coverage.
MSCI generally seeks to have 60% of the capitalization of a country's
stock market reflected in the MSCI Index for such country. Thus, the
MSCI Indices balance the inclusiveness of an "all share" index against
the replicability of a "blue chip" index.
Weighting
All single-country MSCI Indices are market capitalization weighted,
i.e., companies are included in the indices at their full market value
(total number of shares issued and paid up, multiplied by price). MSCI
believes full market capitalization weighting is preferable to other
weighting schemes for both theoretical and practical reasons.
MSCI calculates two indices in some countries in order to address the
issue of restrictions on foreign ownership in such countries. The
additional indices are called "Free" indices, and they exclude companies
and share classes not purchasable by foreigners.
Market capitalization weighting, combined with a consistent target of
60% of market capitalization, helps ensure that each country's weight in
regional and international indices approximates its weight in the total
universe of developing and emerging markets. Maintaining consistent
policy among MSCI developed and emerging market indices is also critical
to the calculation of certain combined developed and emerging market
indices published by MSCI.
The graphs below present certain historical performance information, as
calculated by MSCI, for the MSCI Indices that are the benchmark indices
for each of the WEBS Index Series included in the Trust. The MSCI
Indices are unmanaged securities indices and do not bear transactional
or operating costs and expenses, whereas the WEBS Index Series bear fees
and expenses as described herein. See "Summary of Index Fund Expenses."
Page 23
Such fees and expenses reduce the return of each WEBS Index Series in
comparison with its benchmark index. In addition, because each WEBS
Index Series does not invest in all the securities in its benchmark
index, the investment results do not necessarily correspond to those of
its benchmark index. Moreover, the WEBS Index Series are subject to
various limitations on their investment flexibility and these limits
adversely affect their ability to meet their investment objective. See
"Investment Policies" and "Implementation of Policies." The graphs
measure total return based on the period's change in price, dividends
paid on stocks in the index, and the effect of reinvesting dividends
with adjustments for dividend withholding by foreign governments. See
the first paragraph of this section. The figures provided below for 1997
are through August 29, 1997.
The MSCI Austria Index ("MSCI Austria"). The MSCI Austria consists
primarily of stocks that are traded on the Vienna Stock Exchange. On
August 31, 1997, the MSCI Austria consisted of 24 stocks. The three
largest constituents of the MSCI Austria and the respective approximate
percentages of the MSCI Austria represented thereby were OMV AG
(15.17%), Bank of Austria (12.17%), and Va Technologic (11.70%) for a
total of approximately 39.04% of the MSCI Austria. As of August 31,
1997, the ten largest constituents comprised approximately 80.01% of the
market capitalization of the MSCI Austria. As of August 31, 1997, the
three most highly represented industry sectors in the MSCI Austria, and
the approximate percentages of the MSCI Austria represented thereby,
were Banking (28.68%), Energy Sources (15.17%) and Machinery/Engineering
(14.15%), for a total of approximately 55.58% of the MSCI Austria. The
MSCI Austria represented approximately 66.0% of the aggregate
capitalization of the Austrian equity markets at August 31, 1997.
The MSCI Belgium Index ("MSCI Belgium"). The MSCI Belgium consists
primarily of stocks that are traded on the Brussels Stock Exchange. On
August 31, 1997, the MSCI Belgium consisted of 17 stocks. As of August
31, 1997, the three largest constituents of the MSCI Belgium and the
respective approximate percentages of the MSCI Belgium represented
thereby were Electrabel (15.14%), Petrofina (11.79%) and Fortis Ag
(11.56%), for a total of approximately 38.49% of the MSCI Belgium. As of
August 31, 1997, the ten largest constituents comprised approximately
83.33% of the market capitalization of the MSCI Belgium. As of August
31, 1997, the three most highly represented industry sectors in the MSCI
Belgium, and the approximate percentages of the MSCI Belgium represented
thereby, were Utilities - Electrical & Gas (22.97%), Insurance (17.78%)
and Banking (16.79%), for a total of approximately 57.54% of the MSCI
Belgium. The MSCI Belgium represented approximately 56.0% of the
aggregate capitalization of the Belgian equity markets at August 31, 1997.
Page 24
The MSCI France Index ("MSCI France"). The MSCI France consists
primarily of stocks that are traded on the Paris Stock Exchange. On
August 31, 1997, the MSCI France consisted of 68 stocks. The three
largest constituents of the MSCI France and the respective approximate
percentages of the MSCI France represented thereby were Elf Aquitaine
(7.46%), L'Oreal (5.94%) and Carrefour (5.70%) for a total of
approximately 19.10% of the MSCI France. As of August 31, 1997, the ten
largest constituents comprised approximately 49.07% of the market
capitalization of the MSCI France. As of August 31, 1997, the three most
highly represented industry sectors in the MSCI France, and the
approximate percentages of the MSCI France represented thereby, were
Energy Sources (13.08%), Health & Personal Care (12.08%) and
Merchandising (11.28%), for a total of approximately 36.39% of the MSCI
France. The MSCI France represented approximately 70.4% of the aggregate
capitalization of the French equity markets at August 31, 1997.
The MSCI Germany Index ("MSCI Germany"). The MSCI Germany consists
primarily of stocks that are traded on the Frankfurt Stock Exchange. On
August 31, 1997, the MSCI Germany consisted of 67 stocks. The three
largest constituents of the MSCI Germany and the respective approximate
percentages of the MSCI Germany represented thereby were Allianz
(9.39%), Deutsche Telekom (8.10%) and Daimler-Benz (7.14%) for a total
of approximately 24.63% of the MSCI Germany. As of August 31, 1997, the
ten largest constituents comprised approximately 58.64% of the market
capitalization of the MSCI Germany. As of August 31, 1997, the three
most highly represented industry sectors in the MSCI Germany, and the
approximate percentages of the MSCI Germany represented thereby, were
Insurance (15.16%), Banking (13.64%) and Automobile (11.69%), for a
total of approximately 40.49% of the MSCI Germany. The MSCI Germany
represented approximately 77.3% of the aggregate capitalization of the
German equity markets at August 31, 1997.
The MSCI Italy Index ("MSCI Italy"). The MSCI Italy consists primarily
of stocks that are traded on the Milan Stock Exchange. On August 31,
1997, the MSCI Italy consisted of 55 stocks. The three largest
constituents of the MSCI Italy and the respective approximate
percentages of the MSCI Italy represented thereby were ENI (22.10%), Tim
Ord (11.19%) and Telecom Italia Ordinary (10.76%), for a total of
approximately 44.05% of the MSCI Italy. As of August 31, 1997, the ten
largest constituents comprised approximately 72.33% of the market
capitalization of the MSCI Italy. As of August 31, 1997, the three most
highly represented industry sectors in the MSCI Italy, and the
approximate percentages of the MSCI Italy represented thereby, were
Telecommunications (24.86%), Energy Services (22.10%) and Insurance
(14.70%), for a total of approximately 61.66% of the MSCI Italy. The
MSCI Italy represented approximately 70.6% of the aggregate
capitalization of the Italian equity markets at August 31, 1997.
Page 25
The MSCI Netherlands Index ("MSCI Netherlands"). The MSCI Netherlands
consists primarily of stocks that are traded on the Amsterdam Stock
Exchange. On August 31, 1997, the MSCI Netherlands consisted of 22
stocks. The three largest constituents of the MSCI Netherlands and the
respective approximate percentages of the MSCI Netherlands represented
thereby were Royal Dutch Petroleum (34.64%), ING Groep N.V. (11.39%) and
Unilever NV Cert (10.30%), for a total of approximately 56.33% of the
MSCI Netherlands. As of August 31, 1997, the ten largest constituents
comprised approximately 91.68% of the market capitalization of the MSCI
Netherlands. As of August 31, 1997, the three most highly represented
industry sectors in the MSCI Netherlands, and the approximate
percentages of the MSCI Netherlands represented thereby, were Energy
Sources (34.64%), Financial Services (11.39%) and Food & Household
Products (10.30%), for a total of approximately 56.33% of the MSCI
Netherlands. The MSCI Netherlands represented approximately 70.10% of
the aggregate capitalization of the Dutch equity markets at August 31, 1997.
The MSCI Spain Index ("MSCI Spain"). The MSCI Spain consists primarily
of stocks that are traded on the Madrid Stock Exchange. On August 31,
1997, the MSCI Spain consisted of 31 stocks. The three largest
constituents of the MSCI Spain and the respective approximate
percentages of the MSCI Spain represented thereby were Telefonica de
Espana (17.22%), Endesa Empresa Nal Elec. (14.81%) and Banco Bilbao
Vizcaya (12.57%), for a total of approximately 44.60% of the MSCI Spain.
As of August 31, 1997, the ten largest constituents comprised
approximately 84.89% of the market capitalization of the MSCI Spain. As
of August 31, 1997, the three most highly represented industry sectors
in the MSCI Spain, and the approximate percentages of the MSCI Spain
represented thereby, were Banking (30.57%), Utilities - Electrical & Gas
(28.38%) and Telecommunications (17.22%), for a total of approximately
76.17% of the MSCI Spain. The MSCI Spain represented approximately 70.1%
of the aggregate capitalization of the Spanish equity markets at August
31, 1997.
Page 26
The MSCI Sweden Index ("MSCI Sweden"). The MSCI Sweden consists
primarily of stocks that are traded on the Stockholm Stock Exchange. On
August 31, 1997, the MSCI Sweden consisted of 29 stocks. As of August
31, 1997, the three largest constituents of the MSCI Sweden and the
respective approximate percentages of the MSCI Sweden represented
thereby were Ericsson (LM) (25.93%), Astra (13.80%) and ABB AB (6.29%),
for a total of approximately 46.02% of the MSCI Sweden. As of August 31,
1997, the ten largest constituents comprised approximately 73.35% of the
market capitalization of the MSCI Sweden. As of August 31, 1997, the
three most highly represented industry sectors in the MSCI Sweden, and
the approximate percentages of the MSCI Sweden represented thereby, were
Electrical & Electronics (34.76%), Health & Personal Care (16.79%) and
Banking (8.37%), for a total of approximately 59.92% of the MSCI Sweden.
The MSCI Sweden represented approximately 59.70% of the aggregate
capitalization of the Swedish equity markets at August 31, 1997.
The MSCI Switzerland Index ("MSCI Switzerland"). The MSCI Switzerland
consists primarily of stocks that are traded on the Zurich Stock
Exchange. On August 31, 1997, the MSCI Switzerland consisted of 36
stocks. The three largest constituents of the MSCI Switzerland and the
respective approximate percentages of the MSCI Switzerland represented
thereby were Novartis Namen (23.16%), Roche Holding Genuss (15.55%) and
Nestle (12.00%), for a total of approximately 50.71% of the MSCI
Switzerland. As of August 31, 1997, the ten largest constituents
comprised approximately 86.30% of the market capitalization of the MSCI
Switzerland. As of August 31, 1997, the three most highly represented
industry sectors in the MSCI Switzerland, and the approximate
percentages of the MSCI Switzerland represented thereby, were Health &
Personal Care (47.48%), Banking (17.72%) and Food & Household Products
(12.00%), for a total of approximately 77.20% of the MSCI Switzerland.
The MSCI Switzerland represented approximately 78.80% of the aggregate
capitalization of the Swiss equity markets at August 31, 1997.
Page 27
The MSCI United Kingdom Index ("MSCI UK"). The MSCI UK consists
primarily of stocks that are traded on the London Stock Exchange. On
August 31, 1997, the MSCI UK consisted of 132 stocks. The three largest
constituents of the MSCI UK and the respective approximate percentages
of the MSCI UK represented thereby were British Petroleum (6.68%), Glaxo
Wellcome (5.94%) and Lloyds TSB Group (5.26%), for a total of
approximately 17.88% of the MSCI UK. As of August 31, 1997, the ten
largest constituents comprised approximately 39.76% of the market
capitalization of the MSCI UK. As of August 31, 1997, the three most
highly represented industry sectors in the MSCI UK, and the approximate
percentages of the MSCI UK represented thereby, were Banking (15.60%),
Health & Personal Care (12.45%) and Merchandising (8.35%), for a total
of approximately 36.40% of the MSCI UK. The MSCI UK represented
approximately 61.90% of the aggregate capitalization of the United
Kingdom equity markets at August 31, 1997.
Please refer to the APPENDIX following the last page of this document
for details on the charts included at this point.
Management of the Index Fund
Board of Directors. The Board has responsibility for the overall
management of the Index Fund, including general supervision of the
duties performed by the Adviser and other service providers. Additional
information about the Board and the officers of the Index Fund appears
in the Statement of Additional Information for the Index Fund under the
heading "Management of the Fund."
Adviser. Barclays Global Fund Advisors is the Adviser to the Index Fund
and, subject to the supervision of the Board of the Index Fund, is
responsible for the investment management of each WEBS Index Series,
which includes application of portfolio optimization techniques. The
Adviser is located at 45 Fremont Street, San Francisco, California
94105. The Adviser is a California Corporation indirectly owned by
Barclays Bank PLC and is registered as an investment adviser under the
Investment Advisers Act of 1940. As of August 31, 1997, the Adviser and
its parent, Barclays Global Investors, N.A., manage, administer or
advise assets aggregating in excess of $483 billion. For its investment
management services to each WEBS Index Series, the Adviser is paid
management fees equal to each WEBS Index Series' allocable portion of:
.27% per annum of the aggregate net assets of the Index Fund less than
or equal to $1.7 billion, plus .15% per annum of the aggregate net
assets of the Index Fund between $1.7 billion and $7 billion, plus .12%
per annum of the aggregate net assets of the Index Fund between $7
billion and $10 billion, plus .08% per annum of the aggregate net assets
of the Index Fund in excess of $10 billion. The management fees are
accrued daily and paid by the Index Fund as soon as practical after the
last day of each calendar quarter. The Adviser may from time to time
reimburse expenses to one or more WEBS Index Series. From time to time,
a WEBS Index Series, to the extent consistent with its investment
objective, policies and restrictions, may invest in the securities of
companies with which the Adviser has a lending relationship.
Administrator. PFPC Inc., an indirect wholly-owned subsidiary of PNC
Bank Corp., is the Administrator of the Index Fund, and is responsible
for certain clerical, recordkeeping and bookkeeping services, except
those performed by the Adviser, by MSTC in its capacity as Custodian, or
by PNC Bank N.A. in its capacity as Transfer Agent. The Administrator
has no role in determining the investment policies of the Index Fund or
which securities are to be purchased or sold by the Index Fund. For the
administrative and fund accounting services the Administrator provides
to the Index Fund, the Administrator is paid aggregate fees equal to
each WEBS Index Series' allocable portion of: .22% per annum of the
aggregate average daily net assets of the Index Fund up to $1.5 billion;
plus .15% per annum of the aggregate average daily net assets of the
Index Fund between $1.5 billion and $3 billion, plus .14% per annum of
the aggregate average daily net assets of the Index Fund between $3
Page 28
billion and $5 billion, plus .13% per annum of the aggregate average
daily net assets of the Index Fund between $5 billion and $7.5 billion,
plus .115% per annum of the aggregate average daily net assets of the
Index Fund between $7.5 billion and $10 billion, plus .10% per annum of
the aggregate average daily net assets of the Index Fund in excess of
$10 billion (the "Standard Fee Schedule"). The Administrator pays Morgan
Stanley Trust Company a fee of .05% of the average daily net assets of
the Index Fund for sub-administration services as described under
"Custodian, Lending Agent and Sub-Administrator" below. From time to
time the Administrator may waive all or a portion of its fees or may
reimburse expenses to one or more WEBS Index Series. See "Investment
Advisory, Management, Administrative and Distribution Services-The
Administrator" in the Index Fund's Statement of Additional Information.
If the Administrator is terminated within the first three years of the
Index Fund's operations, except if removed (i) for failing to
substantially perform to the satisfaction of the Index Fund's Board its
material obligations under the Agreement or (ii) in order to comply with
federal or state law, the Index Fund shall pay any reasonable costs of
time and material associated with the deconversion.
Distributor. Funds Distributor, Inc. is the Distributor of WEBS. Its
address is 60 State Street, Suite 1300, Boston, MA 02109. Investor
information can be obtained by calling 1-800-810-WEBS (9327). WEBS are
sold by the Index Fund and distributed only in Creation Units. WEBS in
less than Creation Units will not be distributed by the Distributor. The
Distributor is a registered broker-dealer under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"). The Index Fund has
a distribution plan pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-
I Plan"). Each WEBS Index Series operates the Rule 12b-1 Plan in
accordance with its terms and the NASD Rules concerning maximum sales
charges. Under the Rule 12b-1 Plan, the Distributor is paid an annual
fee as compensation in connection with the offering and sale of shares
of each WEBS Index Series. The fees to be paid to the Distributor under
the Rule 12b-1 Plan are calculated and paid monthly with respect to each
WEBS Index Series at a rate set from time to time by the Index Fund's
Board of Directors, provided that the annual rate may not exceed .25% of
the average daily net assets of such WEBS Index Series. The Index Fund's
Board of Directors has determined to limit the annual fee payable under
the 12b-1 Plan with respect to each WEBS Index Series so as not to
exceed .20% of the average daily net assets of each WEBS Index Series
until further notice. From time to time the Distributor may waive all or
a portion of the fees. These fees may be used to cover the expenses of
the Distributor primarily intended to result in the sale of shares of
each WEBS Index Series including payments for any activities or expenses
primarily intended to result in or required for the sale of the WEBS
Index Series' shares, including promotional and marketing activities
related to the sale of shares of the WEBS Index Series, expenses related
to the preparation, printing and distribution of prospectuses and sales
literature, certain communications to and with shareholders,
advertisements, and payments made to representatives or others for
selling shares of the WEBS Index Series or for providing ongoing
distribution assistance, shareholder services and/or maintenance of
shareholder accounts. The amount of such fee is not dependent upon the
distribution expenses actually incurred by the Distributor. The
Distributor has no role in determining the investment policies of the
Index Fund or which securities are to be purchased or sold by the Index
Fund. See "Investment Advisory, Management, Administrative and
Distribution Services" in the Index Fund's Statement of Additional
Information.
Custodian, Lending Agent and Sub-Administrator. Morgan Stanley Trust
Company ("MSTC") serves as the Custodian for the cash and portfolio
securities of each WEBS Index Series of the Index Fund, as Lending Agent
for each WEBS Index Series and as Sub-Administrator. As Lending Agent,
MSTC causes the delivery of loaned securities from the Index Fund to
borrowers, arranges for the return of loaned securities to the Index
Fund at the termination of the loans, requests deposit of collateral,
monitors daily the value of the loaned securities and collateral,
requests that borrowers add to the collateral when required by the loan
agreements, and provides recordkeeping and accounting services necessary
for the operation of the program. For its services as Lending Agent, the
Index Fund will pay MSTC, in respect of each WEBS Index Series, 50% of
the net investment income earned on the collateral for securities
loaned. MSTC also provides certain sub-administrative services relating
to the Index Fund pursuant to a Sub-Administration Agreement and
receives a fee from the Administrator equal to .05% of the Index Fund's
average daily net assets for providing such services. MSTC may from time
to time reimburse expenses to one or more WEBS Index Series. MSTC, as
Page 29
Custodian, Lending Agent and Sub-Administrator has no role in
determining the investment policies of the Index Fund or which
securities are to be purchased or sold by the Index Fund. The principal
business address of MSTC is One Pierrepont Plaza, Brooklyn, New York
11201.
Transfer Agent. PNC Bank, N.A. ("PNC"), an indirect wholly-owned
subsidiary of PNC Bank Corp., provides transfer agency services to the
Index Fund. PNC, as transfer agent (the "Transfer Agent"), has no role
in determining the investment policies of the Index Fund or which
securities are to be purchased or sold by the Index Fund. The principal
business address of PNC is Broad and Chestnut Streets, Philadelphia, PA
19110.
The Glass-Steagall Act and other applicable laws may limit the ability
of a bank or other depositary institution to become an underwriter or
distributor of securities. However, in the opinion of the Index Fund,
these laws do not prohibit such depository institutions from providing
services for investment companies such as the administrative, accounting
and other services. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other services
arrangements would be made and that shareholders would not be adversely
affected.
In addition to the fees described above, the Index Fund is responsible
for the payment of expenses that include, among other things,
organizational expenses, compensation of the Directors of the Index
Fund, reimbursement of out-of-pocket expenses incurred by the
Administrator, exchange listing fees, brokerage and other costs
(including costs incurred by a WEBS Index Series in connection with any
rebalancing of its portfolio), legal and audit fees, and litigation and
extraordinary expenses.
Exchange Listing and Trading of WEBS
The WEBS of each WEBS Index Series have been listed for trading on the
AMEX. WEBS trade on the AMEX at prices that differ to some degree from
their net asset value. See "Investment Considerations and Risks" and
"Determination of Net Asset Value." However, given that WEBS can be
created or redeemed in Creation Unit aggregations, the Index Fund
believes that large discounts or premiums to the net asset value of WEBS
should not be sustainable. There can be no assurance that the
requirements of the AMEX necessary to maintain the listing of WEBS will
continue to be met or will remain unchanged or that an active trading
market will be maintained for the WEBS of any particular WEBS Index
Series. The AMEX may remove the WEBS of a WEBS Index Series from listing
if (1) following the initial twelve-month period beginning upon the
commencement of trading of a WEBS Index Series, there are fewer than 50
beneficial holders of the WEBS of such WEBS Index Series for 30 or more
consecutive trading days, (2) the value of the underlying index or
portfolio of securities on which such WEBS Index Series is based is no
longer calculated or available or (3) such other event occurs or
condition exists that, in the opinion of the AMEX, makes further
dealings on the AMEX inadvisable. In addition, the AMEX will remove the
WEBS from listing and trading upon termination of the Index Fund.
During the trading day, an indicative optimized portfolio value ("IOPV")
is disseminated on Bloomberg for each WEBS Index Series. The IOPV on a
per WEBS basis should not be viewed as a real time update of the net
asset value per WEBS share of the Fund, which is calculated only once a
day. See "Exchange Listing and Trading" in the Index Fund's Statement of
Additional Information for additional details.
Investment Considerations and Risks
An investment in the WEBS of a WEBS Index Series involves risks similar
to those of investing in a broadly-based portfolio of equity securities
traded on exchanges in the relevant foreign securities market, such as
market fluctuations caused by such factors as economic and political
developments, changes in interest rates and perceived trends in stock
prices. Investing in WEBS generally involves certain risks and
considerations not typically associated with investing in a fund that
invests in the securities of U.S. issuers. These risks could include
generally less liquid and less efficient securities markets; generally
greater price volatility; exchange rate fluctuations and exchange
controls; less publicly available information about issuers; the
Page 30
imposition of withholding or other taxes; restrictions on the
expatriation of funds or other assets of a WEBS Index Series; higher
transaction and custody costs; delays attendant in settlement
procedures; difficulties in enforcing contractual obligations; lesser
liquidity and the significantly smaller market capitalization of most
non-U.S. securities markets; lesser levels of regulation of the
securities markets; different accounting, disclosure and reporting
requirements; more substantial government involvement in the economy;
higher rates of inflation; greater social, economic, and political
uncertainty and the risk of nationalization or expropriation of assets
and risk of war. Certain WEBS Index Series' specific considerations are
set forth in the Index Fund's Statement of Additional Information.
Volatility of Foreign Equity Markets. The U.S. dollar performance of
foreign equity markets, particularly emerging markets, has generally
been substantially more volatile than that of U.S. markets. For example,
from October 8, 1992 to October 8, 1997, the average price volatility of
the Standard and Poor's 500 Index, a broad measure of the U.S. equity
market, was 9.82%. In contrast, during the same period, the average
price volatility of the respective MSCI Indices was as follows: the MSCI
Austria (14.21%), the MSCI Belgium (11.11%), the MSCI France (13.59%),
the MSCI Germany (12.47%), the MSCI Italy (24.63%), the MSCI Netherlands
(11.71%), the MSCI Spain (17.52%), the MSCI Sweden (17.89%), the MSCI
Switzerland (14.13%), and the MSCI United Kingdom (11.18%). Short-term
volatility in these markets can be significantly greater.
Foreign Currency Fluctuations. Because each WEBS Index Series' assets
are generally invested in non-U.S. securities, and because a substantial
portion of the revenues and income of each WEBS Index Series are
received in a foreign currency, while WEBS Index Series dividends and
other distributions are paid in U.S. dollars, the dollar value of a WEBS
Index Series' net assets are adversely affected by reductions in the
value of subject foreign currency relative to the dollar and are
positively affected by increases in the value of such currency relative
to the dollar. Also, government or monetary authorities have imposed and
may in the future impose exchange controls that could adversely affect
exchange rates. Any such currency fluctuations will affect the net asset
value of a WEBS Index Series irrespective of the performance of its
underlying portfolio. Other than to facilitate settlements in local
markets or to protect against currency exposure in connection with its
distributions to shareholders or borrowings, the Index Fund does not
expect to engage in currency transactions for the purpose of hedging
against the decline in value of any foreign currencies.
Concentration and Lack of Diversification of Certain WEBS Index Series.
Each WEBS Index Series included in the Trust (except for the United
Kingdom WEBS Index Series) is classified as "non-diversified" for
purposes of the 1940 Act, which means each of those WEBS Index Series is
not limited by the 1940 Act with regard to the portion of its assets
that may be invested in the securities of a single issuer. In addition,
a number of WEBS Index Series concentrate their investments in
particular industries. See "Investment Policies" herein. However, each
WEBS Index Series, regardless of whether classified as non-diversified,
intends to maintain the required level of diversification and otherwise
conduct its operations so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code, in order to relieve
the WEBS Index Series of any liability for Federal income tax to the
extent that its earnings are distributed to shareholders. See "Dividends
and Capital Gains Distributions" and "Tax Matters." Compliance with the
diversification requirements of the Internal Revenue Code severely
limits the investment flexibility of certain WEBS Index Series and makes
it less likely that such WEBS Index Series will meet their investment
objectives.
The stocks of particular issuers, or of issuers in particular
industries, may dominate the benchmark indices of certain WEBS Index
Series and, consequently, the investment portfolios of such WEBS Index
Series, which may adversely affect the performance of such WEBS Index
Series or subject such WEBS Index Series to greater price volatility
than that experienced by more diversified investment companies. The WEBS
of a WEBS Index Series may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of an
investment company that is more broadly invested than the subject WEBS
Index Series in the equity securities of the relevant market.
Information concerning the companies and industry sectors that represent
the largest components of the various benchmark indices is set forth
above under "The Benchmark MSCI Indices Utilized by the WEBS Index
Series."
As indicated above, the WEBS have been listed for trading on the AMEX.
There can be no assurance that active trading markets for the WEBS will
be maintained. The Distributor does not maintain a secondary market in
WEBS. Trading in WEBS on the AMEX may be halted due to market conditions
or for reasons that, in the view of the AMEX, make trading in WEBS
inadvisable. In addition, trading in WEBS on the AMEX is subject to
trading halts caused by extraordinary market volatility pursuant to AMEX
Page 31
"circuit breaker" rules that require trading in securities on the AMEX
to be halted in the event of specified market moves. There can be no
assurance that the requirements of the AMEX necessary to maintain the
listing of any WEBS Index Series will continue to be met or will remain
unchanged. See "Exchange Listing and Trading of WEBS."
The net asset value of the WEBS of a WEBS Index Series fluctuate with
changes in the market value of the portfolio securities of the WEBS
Index Series and changes in the market rate of exchange between the U.S.
dollar and the subject foreign currency. On January 1, 1999 the euro is
expected to become the official currency of the member states of the
European Union participating in the Economic and Monetary Union ("EMU").
From the start of EMU, the national currencies of the participating
countries will cease to be independent currencies in their own right.
The conversion rates between the member states' national currencies and
the euro is anticipated to be irrevocably fixed on January 1, 1999.
Although the euro is expected to be the legal currency in the
participating member states, existing national currency bank deposits
will remain available during the 1999-2001 transition period, and
existing notes and coins are anticipated to be legal tender for cash
transactions until mid-2002. The conversion of the national currencies
of the participating countries for the euro could negatively impact the
market rate of exchange between such currencies (or the newly created
euro) and the U.S. dollar. The market prices of WEBS fluctuate in
accordance with changes in net asset value and supply and demand on the
AMEX. The Index Fund cannot predict whether WEBS will trade below, at or
above their net asset value. Price differences may be due, in large
part, to the fact that supply and demand forces at work in the secondary
trading market for WEBS will be closely related to, but not identical
to, the same forces influencing the prices of the stocks of the subject
MSCI Index trading individually or in the aggregate at any point in
time. However, given that WEBS can be created and redeemed in Creation
Unit aggregations (unlike shares of many closed-end funds, which
frequently trade at appreciable discounts from, and sometimes at
premiums to, their net asset value), the Index Fund believes that large
discounts or premiums to the net asset value of WEBS should not be
sustainable.
Lending of Securities. Although each WEBS Index Series receives
collateral in connection with all loans of portfolio securities, and
such collateral is marked to market, the WEBS Index Series would be
exposed to the risk of loss should a borrower default on its obligation
to return the borrowed securities (e.g., the loaned securities may have
appreciated beyond the value of the collateral held by the Fund). In
addition, each WEBS Index Series bears the risk of loss of any
collateral that it invests in Short-Term Investments.
Use of Certain Instruments. The risk of loss associated with futures
contracts is potentially unlimited due both to the low margin deposits
required and the extremely high degree of leverage involved in futures
pricing. As a result, a relatively small price movement in a futures
contract may result in an immediate and substantial loss or gain.
However, no WEBS Index Series will use futures contracts, options or
swap agreements for speculative purposes or to leverage its net assets
and each WEBS Index Series will comply with applicable SEC requirements
regarding the segregation of assets in connection with futures
positions. Accordingly, the primary risks associated with the use of
futures contracts, options and swap agreements by a WEBS Index Series
are: (i) imperfect correlation between the change in market value of the
stocks in the benchmark index or held by the WEBS Index Series and the
prices of futures contracts, options and swap agreements; (ii) possible
lack of a liquid secondary market for a futures contract or listed
option and the resulting inability to close futures or listed option
positions prior to their maturity date; and (iii) the risk of the
counterparty or guaranteeing agent defaulting. Over-the-counter options
and swap agreements are generally less liquid than exchange traded
securities and the SEC staff considers most over-the-counter options to
be illiquid. The Index Fund will treat such options as illiquid to the
extent required by applicable SEC staff positions. Illiquid assets may
not represent more than 15% of the net assets of a WEBS Index Series.
Since there are generally no futures traded on the MSCI Indices, it may
be necessary for a WEBS Index Series to utilize other futures contracts
or combinations thereof to simulate the performance of the relevant MSCI
Index. This process may magnify the "tracking error" of the WEBS Index
Series' performance compared to that of the MSCI Index, due to the lower
correlation of the selected futures with the MSCI Index. The Adviser
will attempt to reduce this tracking error by investing in futures
contracts whose behavior is expected to represent the market performance
of the WEBS Index Series' underlying securities, although there can be
Page 32
no assurance that these selected futures will in fact correlate with the
performance of the relevant MSCI Index. Certain foreign stock index
futures contracts and options thereon are not currently available to
U.S. persons such as the Index Fund under applicable law.
See also "Special Considerations and Risks" in the Index Fund's
Statement of Additional Information.
Determination of Net Asset Value
Net asset value per share for each WEBS Index Series is computed by
dividing the value of the net assets of such WEBS Index Series (i.e.,
the value of its total assets less total liabilities) by the total
number of WEBS outstanding, rounded to the nearest cent. Expenses and
fees, including the management, administration and distribution fees,
are accrued daily and taken into account for purposes of determining net
asset value. The net asset value of each WEBS Index Series is determined
as of the close of the regular trading session on the New York Stock
Exchange, Inc. (ordinarily 4:00 p.m., New York City time) on each day
that such exchange is open.
In computing a WEBS Index Series' net asset value, the WEBS Index
Series' portfolio securities are valued based on their last quoted
current price. Price information on listed securities is taken from the
exchange where the security is primarily traded. Securities regularly
traded in the over-the-counter market are valued at the latest quoted
bid price. Other portfolio securities and assets for which market
quotations are not readily available are valued based on fair value as
determined in good faith by the Adviser in accordance with procedures
adopted by the Board of Directors of the Index Fund. Foreign currency
values are converted into U.S. dollars using the same exchange rates
utilized by MSCI in the calculation of the relevant MSCI Indices
(currently, exchange rates as of 4:00 p.m. London time).
Creation Units
The Index Fund issues and redeems WEBS of each WEBS Index Series only in
aggregations of WEBS specified for each WEBS Index Series and referred
to as "Creation Units." The Trust has acquired WEBS through the
Authorized Participants (as that term is defined in the Index Fund's
Statement of Additional Information), which may be derived from Creation
Units, or in open market transactions on the AMEX. The Trust has not
purchased Creation Units from the Index Fund.
Dividends and Capital Gains Distributions
Dividends from net investment income, including net foreign currency
gains, if any, are declared and paid at least annually and net realized
securities gains, if any, are distributed at least annually. Dividends
may be declared and paid more frequently than annually for certain WEBS
Index Series to improve tracking error or to comply with the
distribution requirements of the Internal Revenue Code. In addition, the
Index Fund intends to distribute at least annually amounts representing
the full dividend yield on the underlying portfolio securities of each
WEBS Index Series net of expenses of such WEBS Index Series, as if such
WEBS Index Series owned such underlying portfolio securities for the
entire dividend period. As a result, some portion of each distribution
may result in a return of capital. See "Tax Matters." Dividends and
securities gains distributions are distributed in U.S. dollars and
cannot be automatically reinvested in additional WEBS. The Index Fund
will inform shareholders within 60 days after the close of the WEBS
Index Series' taxable year of the amount and nature of all distributions
made to them.
Tax Matters
Each WEBS Index Series intends to qualify for and to elect treatment as
a "regulated investment company" under Subchapter M of the Internal
Revenue Code. As a regulated investment company, a WEBS Index Series is
not subject to U.S. Federal income tax on its income and gains that it
distributes to shareholders, provided that it distributes annually at
least 90% of its investment company taxable income. Investment company
taxable income generally includes income from dividends and interest and
gains and losses from currency transactions net of operating expenses
plus the WEBS Index Series' net short-term capital gains in excess of
its net long-term capital losses. Each WEBS Index Series distributes to
its shareholders at least annually all of its investment company taxable
income and any realized net long-term capital gains.
Page 33
Dividends paid out of a WEBS Index Series' investment company taxable
income are taxable to a US. investor as ordinary income. Distributions
of net long-term capital gains, if any, in excess of net short-term
capital losses are taxable to a U.S. investor as long-term capital
gains, regardless of how long the investor has held the WEBS. Dividends
paid by a WEBS Index Series generally will not qualify for the deduction
for dividends received by corporations. Distributions in excess of a
WEBS Index Series' current and accumulated earnings and profits are
treated as a tax-free return of capital to each of the WEBS Index
Series' investors to the extent of the investor's basis in its WEBS, and
as capital gain thereafter. Any dividend declared by a WEBS Index Series
in October, November or December of any calendar year and payable to
investors of record on a specified date in such a month shall be deemed
to have been received by each investor on December 31 of such calendar
year and to have been paid by the WEBS Index Series not later than such
December 31 so long as the dividend is actually paid by the WEBS Index
Series during January of the following calendar year. A distribution by
a WEBS Index Series will reduce its net asset value per share and may be
taxable to the investor as ordinary income or net capital gain as
described above even though, from an investment standpoint, it may
constitute a return of capital and this phenomenon may be more
pronounced given the WEBS Index Series' policy of making distributions
in excess of the sum of its investment company taxable income and its
net long-term capital gains.
Any gain or loss realized upon a sale or redemption of WEBS by a
shareholder that is not a dealer in securities is generally treated as
long-term capital gain or loss if the WEBS have been held for more than
eighteen months, a mid-term capital gain or loss if held for more than
twelve months up to and including eighteen months and otherwise as a
short-term capital gain or loss. However, if WEBS on which an adjusted
net long-term capital gain distribution or a mid-term capital gain
distribution has been received are subsequently sold or redeemed and
such WEBS have been held for six months or less, any loss realized will
be treated as either an adjusted net long-term capital loss or a mid-
term capital loss to the extent that it offsets the corresponding
adjusted net long-term capital gain distribution or mid-term capital
gain distribution. Moreover, any loss realized on a sale or exchange of
WEBS will be deferred to the extent that the shares disposed of are
replaced within a 61-day period beginning 30 days before and ending 30
days after the disposition of the shares, in which case the basis of the
shares acquired will be adjusted upward to reflect the deferred loss.
Each WEBS Index Series may be subject to foreign income taxes withheld
at source. As more than 50% of the value of the total assets of each
WEBS Index Series at the close of its taxable year will consist of stock
or securities of foreign corporations, a WEBS Index Series will be
eligible (and intends) to file an election with the Internal Revenue
Service to "pass through" to its investors the amount of foreign income
taxes (including withholding taxes) paid by the WEBS Index Series,
provided that the WEBS Index Series and its investor held the security
on the dividend entitlement date and for at least fifteen additional
days immediately before and/or thereafter. Subject to certain
limitations, the foreign income taxes passed through may qualify as a
deduction in calculating U.S. taxable income or as a credit in
calculating U.S. Federal income tax. Each investor will be notified of
the investor's portion of the foreign income taxes paid to each country
and the portion of dividends that represents income derived from sources
within each country.
The Index Fund may be required to withhold for U.S. Federal income tax
purposes 31% of the dividends and distributions payable to investors who
fail to provide the Index Fund with their correct taxpayer
identification number or to make required certifications, or who have
been notified by the U.S. Internal Revenue Service that they are subject
to backup withholding. Backup withholding is not an additional tax;
amounts withheld may be credited against the investor's U.S. Federal
income tax liability.
An investor in a WEBS Index Series that is a foreign corporation or an
individual who is a nonresident alien for U.S. tax purposes will be
subject to significant adverse U.S. tax consequences. For example,
dividends paid out of a WEBS Index Series' investment company taxable
income will generally be subject to U.S. Federal withholding tax at a
rate of 30% (or lower treaty rate if the foreign investor is eligible
for the benefits of an income tax treaty). Foreign investors are urged
to consult their own tax advisors regarding the U.S. tax treatment, in
their particular circumstances, of ownership of shares in a WEBS Index
Series.
For further information on taxes see "Taxes" in the Index Fund's
Statement of Additional Information.
Page 34
Performance
The performance of the WEBS Index Series may be quoted in
advertisements, sales literature or reports to shareholders in terms of
average annual total return, cumulative total return and yield.
Quotations of average annual total return will be expressed in terms of
average annual rate of return of a hypothetical investment in a WEBS
Index Series over periods of 1, 5 and 10 years (or the life of the WEBS
Index Series, if shorter). Such total return figures reflect the
deduction of a proportional share of such WEBS Index Series' expenses on
an annual basis, and assume that all dividends and distributions are
reinvested when paid.
Quotations of a cumulative total return are calculated for any specified
period by assuming a hypothetical investment in a WEBS Index Series on
the date of the commencement of the period and assume that all dividends
and distributions are reinvested on ex-date. However, currently there is
no dividend reinvestment option available to shareholders of WEBS and
such calculation is provided for informational purposes only. The net
increase or decrease in the value of the investment over the period is
divided by its beginning value to arrive at cumulative total return.
Total return calculated in this manner will differ from the calculation
of average annual total return in that it is not expressed in terms of
an average rate of return.
The yield of a WEBS Index Series refers to income generated by an
investment in such WEBS Index Series over a specified 30-day (one month)
period. Yields for the WEBS Index Series are expressed as annualized
percentages.
Quotations of average annual total return, cumulative total return or
yield reflect only the performance of a hypothetical investment in a
WEBS Index Series during the particular time period on which the
calculations are based. Such quotations for a WEBS Index Series will
vary based on changes in market conditions and the level of such WEBS
Index Series' expenses, and no reported performance figure should be
considered an indication of performance which may be expected in the
future.
General Information
The Index Fund is organized as a Maryland corporation. The Articles of
Incorporation, as amended, currently permit the Index Fund to issue 6
billion shares of common stock with a par value of $.001 per share.
Fractional shares will not be issued. In addition to the seventeen WEBS
Index Series currently existing, the Board of Directors of the Index
Fund may designate additional series of common stock and classify shares
of a particular series into one or more classes of that series. Any such
additional series may seek to track the investment results represented
by an equity securities index compiled by MSCI or by another index
compiler. The shares of each series are fully paid and non-assessable;
have no preference as to conversion, exchange, dividends, retirement or
other features; and have no pre-emptive rights. Each share has one vote
with respect to matters upon which a shareholder vote is required;
shareholders have no cumulative voting rights with respect to their
shares. Shares of all series vote together as a single class except that
if the matter being voted on affects only a particular WEBS Index Series
it will be voted on only by that WEBS Index Series and if a matter
affects a particular WEBS Index Series differently from other WEBS Index
Series, that WEBS Index Series will vote separately on such matter.
Annual meetings of shareholders will not be held except as required by
the 1940 Act and other applicable law.
Absent an applicable exemption or other relief from the SEC or its
staff, officers and directors of the Index Fund and beneficial owners of
10% of the WEBS of a WEBS Index Series ("Insiders") would be subject to
the insider reporting, short-swing profit and short sale provisions in
Section 16 of the Exchange Act and the SEC's rules thereunder. In a "no
action letter", the SEC staff advised the Index Fund that the staff will
not recommend SEC enforcement action if Insiders do not file reports
required by Section 16(a) of the Exchange Act and the rules thereunder
with respect to transactions in the WEBS of the relevant WEBS Index
Series. Insiders should consult with their own legal counsel concerning
their obligations under Section 16 of the Exchange Act, and should note
that the no action letter does not address other requirements under the
Exchange Act, including those imposed by Section 13(d) thereof and the
rules thereunder.
Independent Auditors audit the Index Fund's financial statements
annually.
Available Information
The information contained herein does not contain all the information
included in the Registration Statement for the Index Fund filed with the
Page 35
SEC under the Securities Act of 1933 with respect to the securities
offered hereby, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. The Registration Statement,
including the exhibits filed therewith and the Statement of Additional
Information, may be examined at the offices of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W, Washington D.C. 20549. Such
documents and other information concerning the Index Fund may also be
inspected at the offices of the American Stock Exchange, Inc., 86
Trinity Place, New York, New York 10006.
Statements contained herein as to the contents of any agreement or other
document referred to are not necessarily complete, and, in each
instance, reference is made to the copy of such agreement or other
document filed as an exhibit to the Registration Statement for the Index
Fund each such statement being qualified in all respects by such
reference.
Shareholder inquiries may be directed to the Index Fund in writing, to
c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in the Trust.
Risk Factors. The Trust consists of such of the Equity Securities listed
under "Schedule of Investments" as may continue to be held from time to
time in the Trust and any additional Equity Securities acquired and held
by the Trust pursuant to the provisions of the Trust Agreement together
with cash held in the Income and Capital Accounts. Due to the relatively
short duration of the Trust, there is no guarantee that the Trust's
objective will be achieved or that the Trust will provide for capital
appreciation in excess of the Trust's expenses. Neither the Sponsor nor
the Trustee shall be liable in any way for any failure in any of the
Equity Securities. However, should any contract for the purchase of any
of the Equity Securities initially deposited hereunder fail, the Sponsor
will, unless substantially all of the moneys held in the Trust to cover
such purchase are reinvested in substitute Equity Securities in
accordance with the Trust Agreement, refund the cash and sales charge
attributable to such failed contract to all Unit holders on the next
distribution date.
Because certain of the Equity Securities from time to time may be sold
under certain circumstances described herein, and because the proceeds
from such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that the Trust will retain for any
length of time its present size and composition. Although the Portfolio
is not managed, the Sponsor may instruct the Trustee to sell Equity
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity Securities
such as those acquired in connection with a merger or other transaction.
See "Rights of Unit Holders-How May Equity Securities be Removed from
the Trust?" Equity Securities, however, will not be sold by the Trust to
take advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation. In fact, no Equity Security will be sold
prior to termination of the Trust (except to satisfy redemption requests
or to pay expenses and in certain other limited circumstances) even if
the Sponsor comes to believe that such Equity Security no longer has the
potential for capital appreciation, or issues a "sell" recommendation
with respect to such Equity Security.
Whether or not the Equity Securities are listed on a national securities
exchange, the principal trading market for the Equity Securities may be
in the over-the-counter market. As a result, the existence of a liquid
trading market for the Equity Securities may depend on whether dealers
will make a market in the Equity Securities. There can be no assurance
that a market will be made for any of the Equity Securities, that any
market for the Equity Securities will be maintained or of the liquidity
of the Equity Securities in any markets made. In addition, the Trust may
be restricted under the 1940 Act from selling Equity Securities to the
Sponsor. The price at which the Equity Securities may be sold to meet
redemptions, and the value of the Trust, will be adversely affected if
trading markets for the Equity Securities are limited or absent.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that
the financial condition of the issuers of the Equity Securities or the
Page 36
general condition of the common stock market may worsen and the value of
the Equity Securities and therefore the value of the Units may decline.
Common stocks are especially susceptible to general stock market
movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors including expectations regarding
government, economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Shareholders of common
stocks have rights to receive payments from the issuers of those common
stocks that are generally subordinate to those of creditors of, or
holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Trust have a right
to receive dividends only when and if, and in the amounts, declared by
the issuer's board of directors and have a right to participate in
amounts available for distribution by the issuer only after all other
claims on the issuer have been paid or provided for. Common stocks do
not represent an obligation of the issuer and, therefore, do not offer
any assurance of income or provide the same degree of protection of
capital as do debt securities. The issuance of additional debt
securities or preferred stock will create prior claims for payment of
principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its
common stock or the rights of holders of common stock with respect to
assets of the issuer upon liquidation or bankruptcy. The value of common
stocks is subject to market fluctuations for as long as the common
stocks remain outstanding, and thus the value of the Equity Securities
in the Portfolio may be expected to fluctuate over the life of the Trust
to values higher or lower than those prevailing on the Initial Date of
Deposit.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of
the entity, have generally inferior rights to receive payments from the
issuer in comparison with the rights of creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Cumulative
preferred stock dividends must be paid before common stock dividends and
any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
Unit holders will be unable to dispose of any of the Equity Securities
in the Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee will
have the right to vote all of the voting stocks in the Trust and will
vote such stocks in accordance with the instructions of the Sponsor.
The value of the Equity Securities will fluctuate over the life of the
Trust and may be more or less than the value at the time they were
deposited in the Trust. The Equity Securities may appreciate or
depreciate in value (or pay dividends) depending on the full range of
economic and market influences affecting these securities, including the
impact of the Sponsor's purchase and sale of the Equity Securities
(especially during the primary offering period of Units of the Trust and
during the Special Redemption and Liquidation Period) and other factors.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any Equity Security. In the event of a
notice that any Equity Security will not be delivered ("Failed Contract
Obligations") to the Trust, the Sponsor is authorized under the
Indenture to direct the Trustee to acquire other Equity Securities
("Replacement Securities"). Any Replacement Security will be identical
to those which were the subject of the failed contract. The Replacement
Securities must be purchased within 20 days after delivery of the notice
of a failed contract and the purchase price may not exceed the amount of
funds reserved for the purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraphs is not utilized to acquire Replacement Securities in the
event of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
the Trust and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in the Trust. In addition,
Unit holders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such
proceeds would have earned for Unit holders of the Trust.
The Indenture also authorizes the Sponsor to increase the size of the
Trust and the number of Units thereof by the deposit of additional
Page 37
Equity Securities or cash (including a letter of credit) with
instructions to purchase additional Equity Securities in the Trust and
the issuance of a corresponding number of additional Units. If the
Sponsor deposits cash, however, existing and new investors may
experience a dilution of their investment and a reduction in their
anticipated income because of fluctuations in the prices of the Equity
Securities between the time of the cash deposit and the purchase of the
Equity Securities and because the Trust will pay the associated
brokerage fees.
The Trust consists of the Equity Securities listed under "Schedule of
Investments" (or contracts to purchase such Securities) as may continue
to be held from time to time in the Trust and any additional Equity
Securities acquired and held by the Trust pursuant to the provisions of
the Indenture (including provisions with respect to deposits into the
Trust of Equity Securities or cash in connection with the issuance of
additional Units).
Like other investment companies, financial and business organizations
and individuals around the world, the Trust could be adversely affected
if the computer systems used by the Sponsor, Evaluator, Portfolio
Supervisor or Trustee or other service providers to the Trust do not
properly process and calculate date-related information and data from
and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Sponsor, Evaluator, Portfolio Supervisor and Trustee are
taking steps that they believe are reasonably designed to address the
Year 2000 Problem with respect to computer systems that they use and to
obtain reasonable assurances that comparable steps are being taken by
the Trust's other service providers. At this time, however, there can be
no assurance that these steps will be sufficient to avoid any adverse
impact to the Trust.
The Year 2000 Problem is expected to impact corporations, which may
include issuers of the common stocks contained in each WEBS Index Series
contained in the Trust, to varying degrees based upon various factors,
including, but not limited to, their industry sector and degree of
technological sophistication. The Sponsor is unable to predict what
impact, if any, the Year 2000 Problem will have on the Equity Securities
contained in the Trust.
To the best of the Sponsor's knowledge, there is no litigation pending
as of the Initial Date of Deposit in respect of any Equity Security
which might reasonably be expected to have a material adverse effect on
the Trust. At any time after the Initial Date of Deposit, litigation may
be instituted on a variety of grounds with respect to the Equity
Securities. The Sponsor is unable to predict whether any such litigation
will be instituted, or if instituted, whether such litigation might have
a material adverse effect on the Trust.
Legislation. From time to time Congress considers proposals to reduce
the rate of the dividends-received deductions. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return
to investors who can take advantage of the deduction. Unit holders are
urged to consult their own tax advisors. Further, at any time after the
Initial Date of Deposit, legislation may be enacted that could
negatively affect the Equity Securities in the Trust or the issuers of
the Equity Securities. Changing approaches to regulation, particularly
with respect to the environment or with respect to the petroleum
industry, may have a negative impact on certain companies represented in
the Trust. There can be no assurance that future legislation, regulation
or deregulation will not have a material adverse effect on the Trust or
will not impair the ability of the issuers of the Equity Securities to
achieve their business goals.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price, which is based on the
aggregate underlying value of the Equity Securities in the Trust
(generally determined by the closing sale prices of the Equity
Securities) plus or minus cash, if any, in the Income and Capital
Accounts of such Trust, plus an initial sales charge with respect to the
Trust equal to the difference between the maximum sales charge for the
Trust (3.95% of the Public Offering Price) and the maximum remaining
deferred sales charge (initially $.295 per Unit for the Trust) divided
by the amount of Units of the Trust outstanding. Commencing ________,
1998, and on the last business day of each month thereafter, through
________, 1998, Unit holders will be assessed a deferred sales charge of
$____ per Unit per month. Units purchased subsequent to the initial
deferred sales charge payment will be subject to the initial sales
charge and the remaining deferred sales charge payments. The deferred
sales charge will be paid from funds in the Capital Account, if
Page 38
sufficient, or from the periodic sale of Equity Securities. The total
maximum sales charge assessed to Unit holders on a per Unit basis will
be 3.95% of the Public Offering Price (equivalent to 3.990% of the net
amount invested, exclusive of the deferred sales charge).
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate underlying value of the Equity Securities in the
Trust (generally determined by the closing sale prices of the Equity
Securities), plus or minus cash, if any, in the Income and Capital
Accounts of the Trust divided by the number of Units of the Trust
outstanding. For secondary market sales after the completion of the
initial offering period, the Public Offering Price is also based on the
aggregate underlying value of the Equity Securities in the Trust
(generally determined by the closing sale prices of the Equity
Securities), plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus an initial sales charge (equal to the
difference between the maximum sales charge for the Trust (3.95% of the
Public Offering Price) and the maximum remaining deferred sales charge)
and the remaining deferred sales charge payments, divided by the number
of outstanding Units of the Trust.
The minimum amount an investor may purchase in the Trust is $1,000. The
applicable sales charge of the Trust for primary market sales is reduced
by a discount as indicated below for volume purchases as a percentage of
the Public Offering Price (except for sales made pursuant to a "wrap fee
account" or similar arrangements as set forth below):
<TABLE>
<CAPTION>
Maximum
Dollar Amount of Transaction Sales Net Dealer
at Public Offering Price* Discount Charge Concession
____________________________ ________ _______ __________
<S> <C> <C> <C>
$50,000 but less than $100,000 .25% 3.70% 2.75%
$100,000 but less than $150,000 .50% 3.45% 2.50%
$150,000 but less than $500,000 .85% 3.10% 2.15%
$500,000 or more 1.00% 2.95% 2.00%
____________
<FN>
* The breakpoint sales charges are also applied on a Unit basis
utilizing a breakpoint equivalent in the above table of $10 per Unit and
will be applied on whichever basis is more favorable to the investor.
The breakpoints will be adjusted to take into consideration purchase
orders stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
</FN>
</TABLE>
Any such reduced sales charge shall be the responsibility of the
Principal Underwriters or selling dealer. The sales charge reduction for
quantity purchases will not apply to Rollover Unit holders. Rollover
Unit holders of prior series of the Trusts may purchase Units of the
Trusts subject to a maximum sales charge of ____% of the Public Offering
Price, deferred as set forth above. The reduced sales charge structure
will apply on all purchases of Units in a Trust by the same person on
any one day from the dealer. Additionally, Units purchased in the name
of the spouse of a purchaser or in the name of a child of such purchaser
under 21 years of age will be deemed, for the purposes of calculating
the applicable sales charge, to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a
trustee or other fiduciary purchasing securities for a single trust
estate or single fiduciary account. The purchaser must inform the dealer
of any such combined purchase prior to the sale in order to obtain the
indicated discount. Employees, officers and directors (including their
immediate family members, defined as spouses, children, grandchildren,
parents, grandparents, siblings, mothers-in-law, fathers-in-law, sons-in-
law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons) of the Sponsor, related companies of the
Sponsor, Principal Underwriter, dealers and their affiliates and vendors
providing services to the Sponsor will be able to purchase Units at the
Public Offering Price, less the applicable dealer concession.
Investors who purchase Units through registered broker/dealers who
charge periodic fees for financial planning, investment advisory or
asset management services or provide such services in connection with
the establishment of an investment account for which a comprehensive
"wrap fee" charge is imposed may purchase Units in the primary or
secondary market at the Public Offering Price, less the concession the
Sponsor typically would allow such broker/dealer. See "Public Offering-
How are Units Distributed?"
Had the Units of the Trust been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price would
have been as indicated in "Summary of Essential Information." The Public
Page 39
Offering Price of Units on the date of the prospectus or during the
initial offering period may vary from the amount stated under "Summary
of Essential Information" in accordance with fluctuations in the prices
of the underlying Equity Securities. During the initial offering period,
the aggregate value of the Units of the Trust shall be determined on the
basis of the aggregate underlying value of the Equity Securities therein
plus or minus cash, if any, in the Income and Capital Accounts of the
Trust. The aggregate underlying value of the Equity Securities will be
determined in the following manner: since the Equity Securities are
listed on a national securities exchange, this evaluation is generally
based on the closing sale prices on that exchange (unless it is
determined that these prices are inappropriate as a basis for valuation)
or, if there is no closing sale price on that exchange, at the closing
ask prices. If, in the future, the Equity Securities are not so listed
or, if so listed and the principal market therefor is other than on the
exchange, the evaluation shall generally be based on the current ask
prices on the over-the-counter market (unless it is determined that
these prices are inappropriate as a basis for evaluation). If current
ask prices are unavailable, the evaluation is generally determined (a)
on the basis of current ask prices for comparable securities, (b) by
appraising the value of the Equity Securities on the ask side of the
market or (c) by any combination of the above.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
value of the Equity Securities therein, plus or minus cash, if any, in
the Income and Capital Accounts of the Trust plus the applicable sales
charge. The calculation of the aggregate underlying value of the Equity
Securities for secondary market sales is determined in the same manner
as described above for sales made during the initial offering period
with the exception that bid prices are used instead of ask prices.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units may be
used in the Sponsor's business and may be deemed to be a benefit to the
Sponsor, subject to the limitations of the Securities Exchange Act of
1934. Delivery of Certificates representing Units so ordered will be
made three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
During the initial offering period (i) for Units issued on the Initial
Date of Deposit and (ii) for additional Units issued after such date as
additional Equity Securities or cash are deposited by the Sponsor, Units
will be distributed to the public at the then current Public Offering
Price. During such period, the Sponsor may deposit additional Equity
Securities or cash in the Trust and create additional Units. Units
reacquired by the Sponsor during the initial offering period (at prices
based upon the aggregate underlying value of the Equity Securities in
the Trust plus or minus a pro rata share of cash, if any in the Income
and Capital Accounts of the Trust) may be resold at the then current
Public Offering Price. Upon the termination of the initial offering
period, unsold Units created or reacquired during the initial offering
period will be sold or resold at the then current Public Offering Price.
Upon completion of the initial offering, Units repurchased in the
secondary market (see "Public Offering-Will There be a Secondary
Market?") may be offered by this prospectus at the secondary market
public offering price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust for
sale in a number of states. Sales will be made to dealers and others at
prices which represent a concession or agency commission of % of
the Public Offering Price for primary and secondary market sales. The
Principal Underwriter, dealers and others will receive a concession or
agency commission of $ per Unit on purchases by Rollover Unit
holders ($ for rollover purchases of $1,000,000 or more). In
addition, the Principal Underwriter, dealers and others will receive a
maximum concession of up to $ per Unit on purchases of Units
resulting from the automatic reinvestment of income or capital
distributions into additional Units. Such concession will vary based
upon the month of the Trust's Initial Date of Deposit.
However, resales of Units of the Trust by such dealers and others to the
public will be made at the Public Offering Price described in the
Page 40
prospectus. The Sponsor reserves the right to change the amount of the
concession or agency commission from time to time. In the event the
Sponsor reacquires, or the Trustee redeems, Units from the Principal
Underwriter, brokers, dealers and others while a market is being
maintained for such Units, such entities agree to repay immediately to
the Sponsor any such concession or agency commission relating to such
reacquired Units. Certain commercial banks may be making Units of the
Trust available to their customers on an agency basis. A portion of the
sales charge paid by these customers is retained by or remitted to the
banks in the amounts indicated above. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units; however, the Glass-
Steagall Act does permit certain agency transactions and the banking
regulators have not indicated that these particular agency transactions
are not permitted under such Act. In Texas and in certain other states,
any banks making Units available must be registered as broker/dealers
under state law.
From time to time the Sponsor may implement programs under which the
dealers of the Trust may receive nominal awards from the Sponsor for
each of their registered representatives who have sold a minimum number
of UIT Units during a specified time period. In addition, at various
times the Sponsor may implement other programs under which the sales
force of the dealers may be eligible to win other nominal awards for
certain sales efforts, or under which the Sponsor will reallow to any
such dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Sponsor, or participates in
sales programs sponsored by Sponsor, an amount not exceeding the total
applicable sales charges on the sales generated by such person at the
public offering price during such programs. Also, the Sponsor in its
discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to the qualifying dealers for
certain services or activities which are primarily intended to result in
sales of Units of the Trust. Such payments are made by the Sponsor out
of its own assets, and not out of the assets of the Trust. These
programs will not change the price Unit holders pay for their Units or
the amount that the Trust will receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar Trusts sponsored by Nike Securities
L.P. or investment strategies utilized by the Trust (which may show
performance net of expenses and charges which the Trust would have
charged) with returns on other taxable investments such as the common
stocks comprising the Dow Jones Industrial Average, the S&P 500, the S&P
Industrial Index, other investment indices, corporate or U.S. Government
bonds, bank CDs and money market accounts or money market funds, each of
which has investment characteristics that may differ from those of the
Trust. U.S. Government bonds, for example, are backed by the full faith
and credit of the U.S. Government and bank CDs and money market accounts
are insured by an agency of the federal government. Money market
accounts and money market funds provide stability of principal, but pay
interest at rates that vary with the condition of the short-term debt
market. The investment characteristics of the Trust are described more
fully elsewhere in this Prospectus.
Information on percentage changes in the dollar value of Units, on the
basis of changes in Unit price may be included from time to time in
advertisements, sales literature, reports and other information
furnished to current or prospective Unit holders. Total return figures
are not averaged, and may not reflect deduction of the sales charge,
which would decrease the return. Average annualized return figures
reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance may not be indicative of future results. The Trust's
portfolio is not managed. Unit price and return fluctuate with the value
of the common stocks in the Trust's portfolio, so there may be a gain or
loss when Units are sold.
Trust performance may be compared to performance on a total return basis
of the Dow Jones Industrial Average, the S&P 500 Composite Price Stock
Index, or performance data from Lipper Analytical Services, Inc. and
Morningstar Publications, Inc. or from publications such as Money, The
New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of the Trust's relative performance for
any future period.
Page 41
What are the Sponsor's and Funds Distributor Inc.'s Profits?
The Sponsor of the Trust will receive a gross sales commission equal to
3.95% of the Public Offering Price of the Units (equivalent to 3.990% of
the net amount invested, exclusive of the deferred sales charge), less
any reduced sales charge as described under "Public Offering-How is the
Public Offering Price Determined?" Funds Distributor, Inc. will receive
from the Sponsor .12% of the Public Offering Price per Unit sold. The
Sponsor reserves the right to change the amount received by Funds
Distributor, Inc. In addition, the Sponsor may be considered to have
realized a profit or to have sustained a loss, as the case may be, in
the amount of any difference between the cost of the Equity Securities
to the Trust (which is based on the Evaluator's determination of the
aggregate offering price of the underlying Equity Securities of such
Trust on the Initial Date of Deposit as well as subsequent deposits) and
the cost of such Equity Securities to the Sponsor. See Note (2) of
"Schedule of Investments." During the initial offering period, the
Principal Underwriters, the dealers and other selling agents also may
realize profits or sustain losses as a result of fluctuations after the
Initial Date of Deposit in the Public Offering Price received by such
entities upon the sale of Units.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are
resold (which price includes a sales charge of 3.95%) or redeemed. The
secondary market public offering price of Units may be greater or less
than the cost of such Units to the Sponsor.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated to do
so, the Sponsor intends to maintain a market for the Units and
continuously offer to purchase Units at prices, subject to change at any
time, based upon the aggregate underlying value of the Equity Securities
in the Trust plus or minus cash, if any, in the Income and Capital
Accounts of the Trust. All expenses incurred in maintaining a secondary
market, other than the fees of the Evaluator and the costs of the
Trustee in transferring and recording the ownership of Units, will be
borne by the Sponsor. If the supply of Units exceeds demand, or for some
other business reason, the Sponsor may discontinue purchases of Units at
such prices. IF A UNIT HOLDER WISHES TO DISPOSE OF HIS OR HER UNITS, HE
OR SHE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR
TO MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. Units sold or tendered
for redemption prior to such time as the entire deferred sales charge on
such Units has been collected will be assessed the amount of the
remaining deferred sales charge at the time of sale or redemption.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
following such order or shortly thereafter. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer. Certificates to be redeemed must be properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unit
holder must sign exactly as his or her name appears on the face of the
certificate with signature guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP") or such other signature
guaranty program in addition to, or in substitution for, STAMP, as may
be accepted by the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority. Record ownership may occur before
settlement.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated (book
entry) form. ONLY UNIT HOLDERS WHO ELECT TO HOLD UNITS IN UNCERTIFICATED
Page 42
(BOOK ENTRY) FORM ARE ELIGIBLE TO PARTICIPATE AS A ROLLOVER UNIT HOLDER.
The Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated (book entry)
Units are transferable through the same procedures applicable to Units
evidenced by certificates (described above), except that no certificate
need be presented to the Trustee and no certificate will be issued upon
the transfer unless requested by the Unit holder. A Unit holder may at
any time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income received with respect to any
of the securities in the Trust as part of the final liquidation
distribution. See "Summary of Essential Information." Persons who
purchase Units will commence receiving distributions only after such
person becomes a Record Owner. Notification to the Trustee of the
transfer of Units is the responsibility of the purchaser, but in the
normal course of business such notice is provided by the selling
broker/dealer. Proceeds received on the sale of any Equity Securities in
the Trust, to the extent not used to meet redemptions of Units, pay the
deferred sales charge or pay expenses, will, however, be distributed on
the last day of each month to Unit holders of record on the fifteenth
day of each month if the amount available for distribution equals at
least $0.01 per Unit. The Trustee is not required to pay interest on
funds held in the Capital Account of the Trust (but may itself earn
interest thereon and therefore benefit from the use of such funds).
Notwithstanding, distributions of funds in the Capital Account, if any,
will be made as part of the final liquidation distribution, and in
certain circumstances, earlier. See "What is the Federal Tax Status of
Unit Holders?"
It is anticipated that the deferred sales charge will be collected from
the Capital Account and that amounts in the Capital Account will be
sufficient to cover the cost of the deferred sales charge. However, to
the extent that amounts in the Capital Account are insufficient to
satisfy the then current deferred sales charge obligation, Equity
Securities may be sold to meet such shortfall. Distributions of amounts
necessary to pay the deferred portion of the sales charge will be made
to an account designated by the Sponsor for purposes of satisfying Unit
holders' deferred sales charge obligations.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder under certain circumstances by
contacting the Trustee, otherwise the amount may be recoverable only
when filing a tax return. Under normal circumstances the Trustee obtains
the Unit holder's tax identification number from the selling broker.
However, a Unit holder should examine his or her statements from the
Trustee to make sure that the Trustee has been provided a certified tax
identification number in order to avoid this possible "back-up
withholding." In the event the Trustee has not been previously provided
such number, one should be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
who is not a Rollover Unit holder will, upon surrender of his or her
Units for redemption, receive (i) the pro rata share of the amounts
realized upon the disposition of Equity Securities, unless he or she
elects an In-Kind Distribution as described under "Other Information-How
May the Indenture be Amended or Terminated?" and (ii) a pro rata share
of any other assets of the Trust, less expenses of such Trust.
Page 43
The Trustee will credit to the Income Account of the Trust any dividends
received on the Equity Securities therein. All other receipts (e.g.,
return of capital, etc.) are credited to the Capital Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any governmental charges
payable out of the Trust.
Distribution Reinvestment Option. Any Unit holder may elect to have each
distribution of income or capital on his Units, other than the final
liquidating distribution in connection with the termination of the
Trust, automatically reinvested in additional Units of the Trust. Each
person who purchases Units of the Trust may elect to become a
participant in the Distribution Reinvestment Option by notifying the
Trustee of their election. The Distribution Reinvestment Option may not
be available in all states. In order to enable a Unit holder to
participate in the Distribution Reinvestment Option with respect to a
particular distribution on his Units, the card must be received by the
Trustee within 10 days prior to the Record Date for such distribution.
Each subsequent distribution of income or capital on the participant's
Units will be automatically applied by the Trustee to purchase
additional Units of the Trust. The remaining deferred sales charge
payments will be assessed on Units acquired pursuant to the
Distributions Reinvestment Option. IT SHOULD BE REMEMBERED THAT EVEN IF
DISTRIBUTIONS ARE REINVESTED, THEY ARE STILL TREATED AS DISTRIBUTIONS
FOR INCOME TAX PURPOSES.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable period of
time after the end of each calendar year, the Trustee shall furnish to
each person who at any time during the calendar year was a Unit holder
of the Trust the following information in reasonable detail: (1) a
summary of transactions in such Trust for such year; (2) any Equity
Securities sold during the year and the Equity Securities held at the
end of such year by such Trust; (3) the redemption price per Unit based
upon a computation thereof on the 31st day of December of such year (or
the last business day prior thereto); and (4) amounts of income and
capital distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his or her Units by tender
to the Trustee at its unit investment trust office in the City of New
York of the certificates representing the Units to be redeemed, or in
the case of uncertificated Units, delivery of a request for redemption,
duly endorsed or accompanied by proper instruments of transfer with
signature guaranteed as explained above (or by providing satisfactory
indemnity, as in connection with lost, stolen or destroyed
certificates), and payment of applicable governmental charges, if any.
No redemption fee will be charged. On the third business day following
such tender, the Unit holder will be entitled to receive in cash an
amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received by the
Trustee (if such day is a day in which the New York Stock Exchange is
open for trading), except that as regards Units received after 4:00 p.m.
Eastern time (or as of any earlier closing time on a day on which the
New York Stock Exchange is scheduled in advance to close at such earlier
time), the date of tender is the next day on which the New York Stock
Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled. Units
tendered for redemption prior to such time as the entire deferred sales
charge on such Units has been collected will be assessed the amount of
the remaining deferred sales charge at the time of redemption.
Any Unit holder tendering 2,500 Units or more of the Trust for
redemption may request by written notice submitted at the time of tender
from the Trustee in lieu of a cash redemption a distribution of WEBS of
the underlying WEBS Index Series in an amount and value of such WEBS per
Unit equal to the Redemption Price Per Unit as determined as of the
evaluation next following tender. However, no in-kind distribution
request submitted during the nine business days prior to the Mandatory
Page 44
Termination Date will be honored. To the extent possible, in-kind
distributions ("In-Kind Distributions") shall be made by the Trustee
through the distribution of each of the Equity Securities in book-entry
form to the account of the Unit holder's bank or broker/dealer at the
Depository Trust Company. An In-Kind Distribution will be reduced by
customary transfer and registration charges. The tendering Unit holder
will receive his or her pro rata number of whole WEBS of each of the
underlying WEBS Index Series comprising a portfolio and cash from the
Capital Account equal to the fractional shares to which the tendering
Unit holder is entitled. The Trustee may adjust the number of WEBS of
any issue of the underlying WEBS Index Series included in a Unit
holder's In-Kind Distribution to facilitate the distribution of whole
shares, such adjustment to be made on the basis of the value of such
WEBS on the date of tender. If funds in the Capital Account are
insufficient to cover the required cash distribution to the tendering
Unit holder, the Trustee may sell Equity Securities in the manner
described above.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"Rights of Unit Holders-How are Income and Capital Distributed?" In the
event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other
amounts paid on redemption shall be withdrawn from the Capital Account
of the Trust.
The Trustee is empowered to sell Equity Securities of the Trust in order
to make funds available for redemption. To the extent that Equity
Securities are sold, the size of the Trust will be and the diversity of
the Trust may be reduced. Such sales may be required at a time when
Equity Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
The Redemption Price per Unit will be determined on the basis of the
aggregate underlying value of the Equity Securities in the Trust plus or
minus cash, if any, in the Income and Capital Accounts of the Trust. The
Redemption Price per Unit is the pro rata share of each Unit determined
by the Trustee by adding: (1) the cash on hand in the Trust other than
cash deposited in the Trust to purchase Equity Securities not applied to
the purchase of such Equity Securities; (2) the aggregate value of the
Equity Securities (including "when issued" contracts, if any) held in
the Trust, as determined by the Evaluator on the basis of the aggregate
underlying value of the Equity Securities in the Trust next computed;
and (3) dividends receivable on the Equity Securities trading ex-
dividend as of the date of computation; and deducting therefrom: (1)
amounts representing any applicable taxes or governmental charges
payable out of the Trust; (2) any amounts owing to the Trustee for its
advances; (3) an amount representing estimated accrued expenses of the
Trust, including but not limited to fees and expenses of the Trustee
(including legal fees), the Evaluator and supervisory fees, if any; (4)
cash held for distribution to Unit holders of record of the Trust as of
the business day prior to the evaluation being made; and (5) other
liabilities incurred by the Trust; and finally dividing the results of
such computation by the number of Units of the Trust outstanding as of
the date thereof. The Redemption Price per Unit will be assessed the
amount, if any, of the remaining deferred sales charge at the time of
redemption.
The aggregate value of the Equity Securities will be determined in the
following manner: since the Equity Securities are listed on a national
securities exchange, this evaluation is generally based on the closing
sale prices on that exchange (unless it is determined that these prices
are inappropriate as a basis for valuation) or, if there is no closing
sale price on that exchange, at the closing bid prices. If, in the
future, the Equity Securities are not so listed or, if so listed and the
principal market therefore is other than on the exchange, the evaluation
shall generally be based on the current bid prices on the over-the-
counter market (unless these prices are inappropriate as a basis for
evaluation). If current bid prices are unavailable, the evaluation is
generally determined (a) on the basis of current bid prices for
comparable securities, (b) by appraising the value of the Equity
Securities on the bid side of the market or (c) by any combination of
the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
Page 45
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Equity Securities is not
reasonably practicable, or for such other periods as the Securities and
Exchange Commission may by order permit. Under certain extreme
circumstances, the Sponsor may apply to the Securities and Exchange
Commission for an order permitting a full or partial suspension of the
right of Unit holders to redeem their Units. The Trustee is not liable
to any person in any way for any loss or damage which may result from
any such suspension or postponement.
Special Redemption, Liquidation and Investment in a New Trust
If the 2000 Trust is offered to investors, a special redemption and
liquidation will be made of all Units of the Trust held by any Unit
holder (a "Rollover Unit holder") who affirmatively notifies the Trustee
in writing that he or she desires to participate as a Rollover Unit
holder by the Rollover Notification Date specified in the "Summary of
Essential Information."
All Units of Rollover Unit holders will be redeemed In-Kind during the
Special Redemption and Liquidation Period and the underlying Equity
Securities will be distributed to the Distribution Agent on behalf of
the Rollover Unit holders. During the Special Redemption and Liquidation
Period (as set forth in "Summary of Essential Information"), the
Distribution Agent will be required to sell all of the underlying Equity
Securities on behalf of Rollover Unit holders. The sales proceeds will
be net of brokerage fees, governmental charges or any expenses involved
in the sales.
The Distribution Agent may engage the Sponsor, as its agent, or other
brokers to sell the distributed Equity Securities. The Equity Securities
will be sold as quickly as is practicable during the Special Redemption
and Liquidation Period. The Sponsor does not anticipate that the period
will be longer than ten business days, and it could be as short as one
day, given that the Equity Securities are usually highly liquid. The
liquidity of any Equity Security depends on the daily trading volume of
the Equity Security and the amount that the Sponsor has available for
sale on any particular day.
It is expected (but not required) that the Sponsor will generally follow
the following guidelines in selling the Equity Securities: for highly
liquid Equity Securities, the Sponsor will generally sell Equity
Securities on the first day of the Special Redemption and Liquidation
Period; for less liquid Equity Securities, on each of the first two days
of the Special Redemption and Liquidation Period, the Sponsor will
generally sell any amount of any underlying Equity Securities at a price
no less than 1/2 of one point under the closing sale price of those
Equity Securities on the preceding day. Thereafter, the Sponsor intends
to sell without any price restrictions at least a portion of the
remaining underlying Equity Securities, the numerator of which is one
and the denominator of which is the total number of days remaining
(including that day) in the Special Redemption and Liquidation Period.
The Rollover Unit holders' proceeds will be invested in the 2000 Trust,
if it is registered and offered for sale. The proceeds of redemption
available on each day will be used to buy 2000 Trust Units as the
proceeds become available at the Public Offering Price of the 2000
Trust, including a reduced sales charge per Unit. Units purchased other
than with redemption proceeds will be subject to the full sales charge.
The Sponsor intends to create 2000 Trust Units as quickly as possible,
dependent upon the availability and reasonably favorable prices of the
equity securities included in the 2000 Trust portfolio, and it is
intended that Rollover Unit holders will be given first priority to
purchase the 2000 Trust Units. There can be no assurance, however, that
the 2000 Trust will be created, or if created, as to the exact timing of
the creation of the 2000 Trust Units or the aggregate number of 2000
Trust Units which the Sponsor will create. The Sponsor may, in its sole
discretion, stop creating new Units (whether permanently or temporarily)
at any time it chooses, regardless of whether all proceeds of the
Special Redemption and Liquidation have been invested on behalf of
Rollover Unit holders. Cash which has not been invested on behalf of the
Rollover Unit holders in 2000 Trust Units will be distributed within a
reasonable time after such occurrence. However, since the Sponsor can
create Units, the Sponsor anticipates that sufficient Units can be
created, although moneys in the 2000 Trust may not be fully invested on
the next business day.
Any Rollover Unit holder may thus be redeemed out of the Trust and
become a holder of an entirely different Trust, the 2000 Trust, with a
different portfolio of equity securities. The Rollover Unit holders'
Units will be redeemed In-Kind and the distributed Equity Securities
Page 46
shall be sold during the Special Redemption and Liquidation Period. In
accordance with the Rollover Unit holders' offer to purchase the 2000
Trust Units, the proceeds of the sales (and any other cash distributed
upon redemption) will be invested in the 2000 Trust, at the public
offering price, including a reduced sales charge per Unit.
This process of redemption, liquidation, and investment in a new Trust
is intended to allow for the fact that the portfolios selected are
chosen on the basis of growth and income potential only for two years,
at which point a new portfolio is chosen. It is contemplated that a
similar process of redemption, liquidation and investment in a new trust
will be available for the 2000 Trust and each subsequent series of the
Trust, approximately a year after that Series' creation. However, there
is no assurance that any such subsequent series of the Trust will be
offered.
The Sponsor believes that the gradual redemption, liquidation and
investment in the Trust will help mitigate any negative market price
consequences stemming from the trading of large volumes of securities
and of the underlying Equity Securities in the Trust in a short,
publicized period of time. The above procedures may, however, be
insufficient or unsuccessful in avoiding such price consequences. In
fact, market price trends may make it advantageous to sell or buy more
quickly or more slowly than permitted by these procedures. Rollover Unit
holders could then receive a less favorable average Unit price than if
they bought all their Units of the Trust on any given day of the period.
It should also be noted that Rollover Unit holders may realize taxable
capital gains on the Special Redemption and Liquidation but, in certain
unlikely circumstances, will not be entitled to a deduction for certain
capital losses and, due to the procedures for investing in the 2000
Trust, no cash would be distributed at that time to pay any taxes.
Included in the cash for the Special Redemption and Liquidation may be
an amount of cash attributable to the distribution of dividend income;
accordingly, Rollover Unit holders also will not have cash distributed
to pay any taxes. See "What is the Federal Tax Status of Unit holders?"
In addition, during this period a Unit holder will be at risk to the
extent that Equity Securities are not sold and will not have the benefit
of any stock appreciation to the extent that moneys have not been
invested; for this reason, the Sponsor will be inclined to sell and
purchase the Equity Securities in as short a period as they can without
materially adversely affecting the price of the Equity Securities.
Unit holders who do not inform the Distribution Agent that they wish to
have their Units so redeemed and liquidated ("Remaining Unit Holders")
will continue to hold Units of the Trust as described in this Prospectus
until the Trust is terminated or until the Mandatory Termination Date
listed in the Summary of Essential Information, whichever occurs first.
These Remaining Unit holders will not realize capital gains or losses
due to the Special Redemption and Liquidation, and will not be charged
any additional sales charge. If a large percentage of Unit holders
become Rollover Unit holders, the aggregate size of the Trust will be
sharply reduced. As a consequence, expenses, if any, in excess of the
amount to be borne by the Trustee would constitute a higher percentage
amount per Unit than prior to the Special Redemption, Liquidation and
Investment in the 2000 Trust. The Trust might also be reduced below the
Discretionary Liquidation Amount listed in the Summary of Essential
Information because of the lesser number of Units in the Trust, and
possibly also due to a value reduction, however temporary, in Units
caused by the Sponsor's sales of Equity Securities; if so, the Sponsor
could then choose to liquidate the Trust without the consent of the
remaining Unit holders. See "Other Information-How May the Indenture be
Amended or Terminated?" The Equity Securities remaining in the Trust
after the Special Redemption and Liquidation Period will be sold by the
Sponsor as quickly as possible without, in its judgment, materially
adversely affecting the market price of the Equity Securities.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor the 2000 Trust or any subsequent series of the Trust, without
penalty or incurring liability to any Unit holder. If the Sponsor so
decides, the Sponsor shall notify the Unit holders before the Special
Redemption and Liquidation Period would have commenced. All Unit holders
will then be remaining Unit holders, with rights to ordinary redemption
as before. See "Rights of Unit Holders-How May Units be Redeemed?" The
Sponsor may modify the terms of the 2000 Trust or any subsequent series
of the Trust. The Sponsor may also modify, suspend or terminate the
Rollover Option upon notice to the Unit holders of such amendment at
least 60 days prior to the effective date of such amendment.
Page 47
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he or she would have
received on redemption of the Units.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then effective
prospectus describing such Units. Any profit or loss resulting from the
resale or redemption of such Units will belong to the Sponsor.
How May Equity Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or the
Trustee. Their respective activities described herein are governed
solely by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of an
Equity Security in the event that an issuer defaults in the payment of a
dividend that has been declared, that any action or proceeding has been
instituted restraining the payment of dividends or there exists any
legal question or impediment affecting such Equity Security, that the
issuer of the Equity Security has breached a covenant which would affect
the payments of dividends, the credit standing of the issuer or
otherwise impair the sound investment character of the Equity Security,
that the issuer has defaulted on the payment on any other of its
outstanding obligations, that the price of the Equity Security has
declined to such an extent or other such credit factors exist so that in
the opinion of the Sponsor, the retention of such Equity Securities
would be detrimental to the Trust. Except as stated under "Portfolio-
What are Some Additional Considerations for Investors?" for Failed
Contract Obligations, the acquisition by the Trust of any securities or
other property other than the Equity Securities is prohibited. Pursuant
to the Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity Securities
such as those acquired in connection with a merger or other transaction.
If offered such new or exchanged securities or property, the Trustee
shall reject the offer. However, in the event such securities or
property are nonetheless acquired by the Trust, they may be accepted for
deposit in the Trust and either sold by the Trustee or held in the Trust
pursuant to the direction of the Sponsor (who may rely on the advice of
the Portfolio Supervisor). Proceeds from the sale of Equity Securities
by the Trustee are credited to the Capital Account of the Trust for
distribution to Unit holders or to meet redemptions. The Trustee may
from time to time retain and pay compensation to the Sponsor (or an
affiliate of the Sponsor) to act as agent for the Trust with respect to
selling Equity Securities from the Trust. In acting in such capacity the
Sponsor or its affiliate will be held subject to the restrictions under
the 1940 Act.
The Trustee may also sell Equity Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose of
redeeming Units of a Trust tendered for redemption and the payment of
expenses.
The Sponsor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Equity Securities. To the extent this is not
practicable, the composition and diversity of the Equity Securities may
be altered. In order to obtain the best price for the Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Equity Securities are to be sold. The Sponsor
may consider sales of Units of unit investment trusts which it sponsors
in making recommendations to the Trustee as to the selection of
broker/dealers to execute the Trust's portfolio transactions.
Page 48
INFORMATION AS TO SPONSOR, FUNDS DISTRIBUTOR, INC.,
TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, FT Series (formerly knows as The First Trust Special Situations
Trust), The First Trust Insured Corporate Trust, The First Trust of
Insured Municipal Bonds, The First Trust GNMA, Templeton Growth and
Treasury Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First Trust
introduced the first insured unit investment trust in 1974 and to date
more than $9 billion in First Trust unit investment trusts have been
deposited. The Sponsor's employees include a team of professionals with
many years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities Dealers,
Inc. and Securities Investor Protection Corporation and has its
principal offices at 1001 Warrenville Road, Lisle, Illinois 60532;
telephone number (630) 241-4141. As of December 31, 1997, the total
partners' capital of Nike Securities L.P. was $11,724,071 (audited).
(This paragraph relates only to the Sponsor and not to the Trust or to
any series thereof. The information is included herein only for the
purpose of informing investors as to the financial responsibility of the
Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor
upon request).
Who is Funds Distributor, Inc.?
Funds Distributor, Inc. is a Principal Underwriter of the Trust as well
as distributor and principal underwriter of WEBS of the WEBS Index
Series. Its address is 60 State Street, Suite 1300, Boston, MA 02109.
Funds Distributor, Inc. is a registered broker/dealer under the
Securities Exchange Act of 1934 and a member of the National Association
of Securities Dealers, Inc.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trust may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Equity Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Page 49
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Equity Securities. In the event of the failure of
the Sponsor to act under the Indenture, the Trustee may act thereunder
and shall not be liable for any action taken by it in good faith under
the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Equity Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of a Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532. The
Evaluator may resign or may be removed by the Sponsor and the Trustee,
in which event the Sponsor and the Trustee are to use their best efforts
to appoint a satisfactory successor. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor
Evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the Mandatory
Termination Date indicated herein under "Summary of Essential
Information." The Trust may be liquidated at any time by consent of 100%
of the Unit holders of the Trust or by the Trustee when the value of the
Equity Securities owned by such Trust as shown by any evaluation, is
less than the lower of $2,000,000 or 20% of the total value of Equity
Securities deposited in the Trust during the primary offering period, or
in the event that Units of the Trust not yet sold aggregating more than
60% of the Units of the Trust are tendered for redemption by a
broker/dealer, including the Sponsor. If the Trust is liquidated because
of the redemption of unsold Units of the Trust by a broker/dealer, the
Sponsor will refund to each purchaser of Units of the Trust the entire
sales charge paid by such purchaser. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit holders
of the Trust. Within a reasonable period after termination, the Trustee
Page 50
will follow the procedures set forth under "Rights of Unit Holders-How
are Income and Capital Distributed?" Also, because of the Special
Redemption and Liquidation in a New Trust, there is a possibility that
the Trust may be reduced below the Discretionary Liquidation Amount and
that the Trust could therefore be terminated at that time before the
Mandatory Termination Date of the Trust.
Commencing during the period beginning nine business days prior to, and
no later than, the Mandatory Termination Date, Equity Securities will
begin to be sold in connection with the termination of the Trust. The
Sponsor will determine the manner, timing and execution of the sale of
the Equity Securities. Written notice of any termination of the Trust
specifying the time or times at which Unit holders may surrender their
certificates for cancellation shall be given by the Trustee to each Unit
holder at his or her address appearing on the registration books of the
Trust maintained by the Trustee. At least 30 days prior to the Mandatory
Termination Date of the Trust the Trustee will provide written notice
thereof to all Unit holders and will include with such notice a form to
enable Unit holders to elect a distribution of the WEBS of the
underlying WEBS Index Series (reduced by customary transfer and
registration charges), if such Unit holder owns at least 2,500 Units of
the Trust, rather than to receive payment in cash for such Unit holder's
pro rata share of the amounts realized upon the disposition by the
Trustee of Equity Securities. To be effective, the election form,
together with surrendered certificates and other documentation required
by the Trustee, must be returned to the Trustee at least ten business
days prior to the Mandatory Termination Date of the Trust. Qualifying
Unit holders requesting an In-Kind Distribution will receive cash in
lieu of fractional WEBS of the underlying WEBS Index Series. A Unit
holder receiving an In-Kind Distribution may, of course, at any time
after the underlying WEBS are distributed to him or her by the Trust,
sell all or a portion of the WEBS. Unit holders not electing a
distribution of the WEBS of the underlying WEBS Index Series and who do
not elect the Rollover Option will receive a cash distribution from the
sale of the remaining Equity Securities within a reasonable time after
the Trust is terminated. Regardless of the distribution involved, the
Trustee will deduct from the funds of the Trust any accrued costs,
expenses, advances or indemnities provided by the Trust Agreement,
including estimated compensation of the Trustee and costs of liquidation
and any amounts required as a reserve to provide for payment of any
applicable taxes or other governmental charges. Any sale of Equity
Securities in the Trust upon termination may result in a lower amount
than might otherwise be realized if such sale were not required at such
time. In addition, to the extent that Equity Securities are sold prior
to the Mandatory Termination Date, Unit holders will not benefit from
any stock appreciation they would have received had the Equity
Securities not been sold at such time. The Trustee will then distribute
to each Unit holder his or her pro rata share of the balance of the
Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The statement of net assets, including the schedule of investments, of
the Trust at the opening of business on the Initial Date of Deposit
appearing in this Prospectus and Registration Statement has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement,
and is included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
Page 51
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
FT 229
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 229, comprised of WEBS European Growth
Trust, Series 1, as of the opening of business on ____________, 1998.
This statement of net assets is the responsibility of the Trust's
Sponsor. Our responsibility is to express an opinion on this statement
of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement
of net assets. Our procedures included confirmation of the letter of
credit held by the Trustee and deposited in the Trust on ____________,
1998. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statement of net assets. We believe that our
audit of the statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 229,
comprised of WEBS European Growth Trust, Series 1, at the opening of
business on ____________, 1998 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
____________, 1998
Page 52
Statement of Net Assets
WEBS EUROPEAN GROWTH TRUST, SERIES 1
FT 229
At the Opening of Business on the
Initial Date of Deposit-____________, 1998
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by purchase contracts (1) (2) $
Organizational and offering costs (3)
__________
Less accrued organizational and offering costs (3) ( )
Less liability for deferred sales charge (4) ( )
__________
Net assets $
==========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $
Less sales charge (5) ( )
__________
Net assets $
==========
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $ issued by
The Chase Manhattan Bank has been deposited with the Trustee as
collateral, covering the monies necessary for the purchase of the Equity
Securities pursuant to purchase contracts for such Equity Securities.
(3) The Trust will bear all or a portion of its estimated organizational
and offering costs which will be deferred and charged off over a period
not to exceed one year from the Initial Date of Deposit. The estimated
organizational and offering costs are based on Units of
the Trust expected to be issued. To the extent the number of Units
issued is larger or smaller, the estimate will vary.
(4) Represents the amount of mandatory distributions from the Trust
($____ per Unit), payable to the Sponsor in ten equal monthly
installments beginning on ________, 1998, and on the last business day
of each month thereafter through ________, 1998. If Units are redeemed
prior to ________, 1998, the remaining amount of the deferred sales
charge applicable to such Units will be payable at the time of redemption.
(5) The aggregate cost to investors includes a maximum total sales charge
computed at the rate of 3.95% of the Public Offering Price (equivalent
to 3.990% of the net amount invested, exclusive of the deferred sales
charge) assuming no reduction of sales charge as set forth under "Public
Offering-How is the Public Offering Price Determined?"
</FN>
</TABLE>
Page 53
Schedule of Investments
WEBS EUROPEAN GROWTH TRUST, SERIES 1
FT 229
At the Opening of Business on the
Initial Date of Deposit-____________, 1998
<TABLE>
<CAPTION>
Approximate
Percentage Market Cost of
of Aggregate Value Equity
Number Ticker Symbol and Offering per Securities
of Shares Name of Issuer of Equity Securities (1) Price (3) Share to Trust (2)
_________ _______________________________________ ____________ ______ ____________
<C> <S> <C> <C> <C>
% $ $
%
%
%
%
%
%
_______ ________
Total Investments 100% $
======= ========
____________
<FN>
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
purchase contracts for the Equity Securities were entered into by the
Sponsor on ________, 1998. The Trust has a mandatory termination date of
________, 2000.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of the listed
Equity Securities on the business day preceding the Initial Date of
Deposit). The valuation of the Equity Securities has been determined by
the Evaluator, an affiliate of the Sponsor. The aggregate underlying
value of the Equity Securities on the Initial Date of Deposit was $ .
Cost and loss to Sponsor relating to the Equity Securities sold to the
Trust were $ and $ , respectively.
(3) The portfolio may contain additional Equity Securities each of which
will not exceed approximately ___% of the Aggregate Offering Price.
Although it is not the Sponsor's intention, certain of the Equity
Securities listed above may not be included in the final portfolio.
Also, the percentages of the Aggregate Offering Price for the Equity
Securities are approximate amounts and may vary in the final portfolio.
</FN>
</TABLE>
Page 54
This page is intentionally left blank.
Page 55
CONTENTS:
Summary of Essential Information:
WEBS European Growth Trust, Series 1 4
FT 229:
What is the FT Series? 6
What are the Expenses and Charges? 7
What is the Federal Tax Status of Unit Holders? 8
Are Investments in the Trust Eligible for
Retirement Plans? 12
Portfolio:
What are the WEBS Index Series? 12
What are Some Additional Considerations for
Investors? 36
Risk Factors 36
Public Offering:
How is the Public Offering Price Determined? 38
How are Units Distributed? 40
What are the Sponsor's and Funds Distributor Inc.'s
Profits? 42
Will There be a Secondary Market? 42
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 42
How are Income and Capital Distributed? 43
What Reports will Unit Holders Receive? 44
How May Units be Redeemed? 44
Special Redemption, Liquidation and Investment
in a New Trust 46
How May Units be Purchased by the Sponsor? 48
How May Equity Securities be
Removed from the Trust? 48
Information as to Sponsor, Funds Distributor, Inc.,
Trustee and Evaluator:
Who is the Sponsor? 49
Who is Funds Distributor, Inc.? 49
Who is the Trustee? 49
Limitations on Liabilities of Sponsor and Trustee 50
Who is the Evaluator? 50
Other Information:
How May the Indenture be Amended or Terminated? 50
Legal Opinions 51
Experts 51
Report of Independent Auditors 52
Statement of Net Assets 53
Notes to Statement of Net Assets 53
Schedule of Investments 54
___________
When Units of the Trust are no longer available, or for investors who
will reinvest into subsequent series of the Trust, this Prospectus may
be used as a preliminary prospectus for a future series; in which case
investors should note the following:
INFORMATION CONTAINED HEREIN IS SUBJECT TO AMENDMENT. A REGISTRATION
STATEMENT RELATING TO SECURITIES OF A FUTURE SERIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
WEBS EUROPEAN GROWTH TRUST
SERIES 1
Nike Securities, L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
FUNDS DISTRIBUTOR, INC.
60 State Street, Suite 1300
Boston, Massachusetts 02109
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
____________, 1998
Page 56
-APPENDIX-
The graph which appears on pages 24-28 of the prospectus measures the
total return on an annual basis of the MSCI Index of each of the
countries listed below.
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
______ _______ _______ _______ _______ ______ ______ ______ ______ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MSCI Austria Index 0.57% 103.91% 8.33% -12.23% -10.55% 28.09% -6.28% 4.72% 12.81% -3.00%
MSCI Belgium Index 53.63% 17.29% -10.98% 13.77% -1.47% 23.51% 8.24% 25.88% 21.08% 4.60%
MSCI France Index 37.87% 36.15% -13.83% 17.83% 2.81% 20.91% -5.18% 14.12% 29.68% 2.60%
MSCI Germany Index 20.60% 46.26% -9.36% 8.16% -10.27% 35.64% 4.66% 16.41% 23.03% 15.40%
MSCI Italy Index 11.46% 19.42% -19.19% -1.82% -22.22% 28.53% 11.56% 1.05% 8.64% 14.50%
MSCI Netherlands Index 14.19% 35.79% -3.19% 17.80% 2.30% 35.28% 11.70% 27.71% 37.19% 17.00%
MSCI Spain Index 13.53% 9.76% -13.85% 15.63% -21.87% 28.78% -4.80% 29.83% 49.10% 11.60%
MSCI Sweden Index 48.33% 31.79% -20.99% 14.42% -14.41% 36.99% 18.34% 33.36% 41.08% 13.40%
MSCI Switzerland Index 6.18% 26.21% -6.23% 15.77% 17.23% 45.79% 3.54% 44.12% 19.65% 20.90%
MSCI United Kingdom Index 5.95% 21.87% 10.29% 16.02% -3.65% 24.44% -1.63% 21.27% 15.78% 12.5%
</TABLE>
MEMORANDUM
Re: FT 229
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between FT
211, which is the current fund, and FT 229, the filing of which
this memorandum accompanies, is the change in the series number.
The list of securities comprising the Fund, the evaluation,
record and distribution dates and other changes pertaining
specifically to the new series, such as size and number of Units
in the Fund and the statement of condition of the new Fund, will
be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the FT
211 Prospectus relate to the series number and size and the date
and various items of information which will be derived from and
apply specifically to the securities deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
Exhibits
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 229 has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on April 2, 1998.
FT 229
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of
Nike Securities April 2, 1998
Corporation, the
General Partner of
Nike Securities L.P. Robert M. Porcellino
Attorney-in-Fact**
David J. Allen Director of Nike
Securities Corporation,
the General Partner
of Nike Securities L.P.
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement is
filed as Exhibit 4.1 to the Registration Statement.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike
Financial Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-43693] filed on behalf of The First Trust
Special Situations Trust, Series 22).
1.1.1* Form of Trust Agreement for FT 229 among Nike Securities
L.P., as Depositor, The Chase Manhattan Bank, as Trustee
and First Trust Advisors L.P., as Evaluator and Portfolio
Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
3.1* Opinion of counsel as to legality of Securities being
registered.
3.2* Opinion of counsel as to Federal income tax status of
Securities being registered.
S-4
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-63483] filed on behalf of The First Trust Combined
Series 258).
___________________________________
* To be filed by amendment.
S-5
