COUNTRYBASKET INDEX FUND INC /NY/, 497, 1996-08-15

COUNTRYBASKET INDEX FUND INC /NY/
497, 1996-08-15

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THE COUNTRYBASKETS-SM- INDEX FUND, INC.

THE COUNTRYBASKETS-SM- INDEX FUND, INC. (the "Fund") is a management
investment company organized as a series fund, with each series of shares (a
"Series") representing a broad-based index of publicly traded equity securities
in a particular country, geographical region or industry sector.

The initial nine Series offered by this Prospectus are the Australia Index
Series, the France Index Series, the Germany Index Series, the Hong Kong Index
Series, the Italy Index Series, the Japan Index Series, the South Africa Index
Series, the UK Index Series and the US Index Series. The Board of Directors of
the Fund may authorize additional Series.

The primary investment objective of each of the initial nine Series is to
provide investment results that substantially correspond to the price and yield
performance of a broad-based index of publicly traded equity securities in a
particular country. To achieve this investment objective, each of the nine
Series seeks to provide investment results that substantially correspond to the
price and yield performance of its respective country component of the FT/S&P
Actuaries World Indices-SM- (the "FT Index"). See "The Fund -- FT/S&P Actuaries
World Indices-TM-".

The shares of common stock of each Series offered hereby are sometimes
referred to herein as "CB Shares-SM-". The Fund sells and redeems shares of each
Series only in aggregations of a specified number of shares for such Series
(each, a "Creation Unit") at their net asset value principally for an in-kind
portfolio of equity securities of the relevant FT Index component, together with
some cash. Except in Creation Unit size aggregations, the CB Shares-SM- are not
redeemable securities of the Fund. The number of CB Shares-SM- constituting a
Creation Unit is currently 250,000 CB Shares-SM- in the case of the Japan Index
Series and 100,000 CB Shares-SM- in the case of each other Series. See "The Fund
- -- Purchase and Issuance of Fund Shares in Creation Unit Aggregations" and "--
Redemption of Fund Shares in Creation Unit Aggregations".

INVESTORS MAY NOT REDEEM CB SHARES-SM- IN LESS THAN CREATION UNIT
AGGREGATIONS.

The non-redeemable CB Shares-SM- are listed and trade on the New York Stock
Exchange, Inc. (the "NYSE"). CB Shares-SM- trade on the NYSE during the day at
prices that may differ to some degree from their net asset value. See "The Fund
- -- Exchange Listing and Trading", "-- Investment Considerations and Risks" and
"-- Determination of Net Asset Value".

Deutsche Morgan Grenfell/C. J. Lawrence Inc. ("DMG"), a subsidiary of
Deutsche Bank AG, serves as investment adviser to each Series of the Fund,
providing investment advisory, management and certain administrative services.
ALPS Mutual Funds Services, Inc. is the distributor of the Fund. See "The Fund
- -- Investment Management" and "-- Distributor".
--------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------

This Prospectus sets forth concisely the information about the Fund that an
investor should know before investing. It should be read and retained for future
reference. A Statement of Additional Information, dated August 13, 1996,
provides further discussion of certain topics referred to in this Prospectus and
other matters which may be of interest to investors. The Statement of Additional
Information has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Statement of Additional Information may be
obtained without charge by writing to the Fund or the Distributor (at its
address set forth on the back cover of this Prospectus). The Fund's address is
c/o Deutsche Morgan Grenfell/ C. J. Lawrence Inc., 31 West 52nd Street, New
York, New York 10019.
--------------------------

"The CountryBaskets Index Fund, Inc.", "CountryBaskets" and "CB Shares" are
service marks of DMG. DMG has filed applications for registration of such
service marks with the U.S. Patent and Trademark Office. The Fund is an
authorized licensee of such marks.
--------------------------

DISTRIBUTOR:
ALPS MUTUAL FUNDS SERVICES, INC.
INVESTOR INFORMATION: 1-800-482-3940

Prospectus dated August 13, 1996
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"Financial Times/Standard & Poor's Actuaries World Indices" and "FT/S&P
Actuaries World Indices" are trademarks of The Financial Times Limited ("FT")
and Standard & Poor's ("S&P") and have been licensed for use by DMG. The Fund is
an authorized sublicensee thereof. The Fund and the CB Shares-SM- are not
sponsored, endorsed, sold or promoted by FT or S&P and neither FT nor S&P makes
any representation regarding the advisability of investing therein.
------------------------

THE FUND AND THE SECURITIES DESCRIBED HEREIN (THE "PRODUCTS") HAVE BEEN
PRODUCED BY REFERENCE TO VARIOUS COUNTRY INDICES INCLUDED IN THE FT/S&P
ACTUARIES WORLD INDICES-TM- (THE "INDICES"), COPYRIGHT 1996, WHICH ARE
OWNED AND JOINTLY COMPILED BY FT-SE INTERNATIONAL LIMITED ("FT-SE"),
GOLDMAN, SACHS & CO. ("GS") AND S&P IN CONJUNCTION WITH THE INSTITUTE OF
ACTUARIES AND THE FACULTY OF ACTUARIES (TOGETHER WITH FT-SE, GS AND S&P,
THE "OWNERS"). NATWEST SECURITIES LIMITED WAS A CO-FOUNDER OF THE
INDICES.

THE PRODUCTS ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE OWNERS.
THE OWNERS MAKE NO WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE
PRODUCTS OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF
INVESTING IN SECURITIES GENERALLY OR IN THE PRODUCTS PARTICULARLY OR THE
ABILITY OF THE INDICES TO TRACK GENERAL STOCK MARKET PERFORMANCE. THE
OWNERS' ONLY RELATIONSHIP TO DEUTSCHE MORGAN GRENFELL/C. J. LAWRENCE INC.
(THE "LICENSEE") IS THE LICENSING OF CERTAIN TRADEMARKS AND TRADE NAMES
AND OF THE INDICES, WHICH ARE DETERMINED, COMPOSED AND CALCULATED WITHOUT
REGARD TO THE LICENSEE OR THE PRODUCTS. THE OWNERS HAVE NO OBLIGATION TO
TAKE THE NEEDS OF LICENSEE OR THE OWNERS OF THE PRODUCTS INTO
CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE INDICES. THE
OWNERS ARE NOT RESPONSIBLE FOR AND HAVE NOT PARTICIPATED IN THE
DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE PRODUCTS ARE TO
BE CONVERTED INTO CASH. THE OWNERS HAVE NO OBLIGATION OR LIABILITY IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE PRODUCTS.

THE OWNERS DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDICES OR ANY DATA INCLUDED THEREIN AND THE OWNERS SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. THE OWNERS
MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL
WARRANTIES OF QUALITY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE INDICES OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE OWNERS HAVE
ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.
------------------------

The FT-Actuaries World Indices-TM- were originally developed by Goldman,
Sachs & Co., NatWest Securities Limited and FT in 1986, and until May 23, 1995,
were jointly published by them. On May 23, 1995, Standard & Poor's, a division
of The McGraw-Hill Companies, Inc., joined FT and Goldman, Sachs & Co. as a
co-publisher of the FT- Actuaries World Indices-TM-, now known as the Financial
Times/Standard & Poor's Actuaries World Indices-TM- or the FT/S&P Actuaries
World Indices-TM-. The FT/S&P Actuaries World Indices-TM- are a continuation of
the FT-Actuaries World Indices-TM-. Following the current transition period, FT
and S&P will jointly calculate the indices. In November 1995, FT transferred its
ownership rights in the FT/S&P Actuaries World Indices-TM- to FT-SE, a company
jointly owned by FT, the London Stock Exchange and the Institute of Actuaries.
By the end of 1996, it is expected that FT-SE will assume responsibility for
calculating the European and Asia-Pacific indices. As of August 7, 1996, S&P
began calculating the U.S.

2
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indices. The Fund is not sponsored by or affiliated with S&P, FT-SE or FT.
References herein to the "FT Index" and to certain index data prior to May 23,
1995 are to the FT-Actuaries World Index-TM-; references thereafter are to the
FT/S&P Actuaries World Indices-TM-.

Unless otherwise specified, all references in this Prospectus to "dollars",
"US $" or "$" are to United States dollars, all references to "A$" are to
Australian dollars, all references to "FF" are to French francs, all references
to "DM" are to Deutsche marks, all references to "HK $" are to Hong Kong
dollars, all references to "IL" are to Italian lira, all references to "Y" are
to Japanese Yen, all references to "CR" are to South African commercial rands (a
currency abandoned as of March 20, 1995), all references to "R" are to South
African rands and all references to "L" are to pounds sterling. On August 9,
1996, the noon buying rates in New York City for cable transfers payable in the
applicable currency, as certified for customs purposes by the Federal Reserve
Bank of New York, were as follows for each US $1.00: A$1.2845, FF 5.0582, DM
1.4785, HK$ 7.7373, IL1,517.3, Y 108.1, R 4.5375, and L .6456. Some numbers in
this Prospectus have been rounded. All US-dollar equivalents provided in this
Prospectus are calculated at the exchange rate prevailing on the date to which
the corresponding foreign currency amount refers.

3
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Statement of
Additional Information.

<TABLE>
<S> <C>
THE FUND AND ITS INVESTMENT
OBJECTIVE........................ The CountryBaskets-SM- Index Fund, Inc., a Maryland
corporation (the "Fund"), is a management investment
company organized as a series fund. The primary
investment objective of each series of shares (a
"Series") of the Fund is to provide investment results
that substantially correspond to the price and yield
performance of a broad-based index of publicly traded
equity securities in a particular country, geographical
region or industry sector. In the case of each of the
initial nine Series offered by this Prospectus, the
relevant index is a broad-based index of publicly traded
equity securities in a particular country. The primary
investment objective of each Series is fundamental and
may not be changed without a vote of that Series'
stockholders. There can be no assurance that the
investment objective of any Series will be achieved. See
"The Fund -- The CountryBaskets-SM- Index Fund, Inc. and
its Investment Objective".

To achieve its primary investment objective, each of the
nine Series offered by this Prospectus seeks to provide
investment results that substantially correspond to the
price and yield performance of its respective country
component of the FT/S&P Actuaries World Indices-TM- (the
"FT Index"). This secondary investment objective is not
fundamental and may be changed by the Board of Directors
without a stockholder vote. The country components of
the FT Index are based on equity securities trading in
the markets of a particular country.

The nine Series currently offered by the Fund are the
Australia Index Series, the France Index Series, the
Germany Index Series, the Hong Kong Index Series, the
Italy Index Series, the Japan Index Series, the South
Africa Index Series, the UK Index Series and the US
Index Series. Each such Series is non-diversified. Such
Series represent separate portfolios of equity
securities, each substantially corresponding in
composition and weighting to its respective country
component of the FT Index. The net asset value of shares
of each Series will fluctuate. See "The Fund --
Determination of Net Asset Value".
</TABLE>

4
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<TABLE>
<S> <C>
CB SHARES-SM-..................... The shares of common stock of each Series are sometimes
referred to herein as the "CB Shares-SM-". Except in the
Creation Unit aggregations referred to below, CB
Shares-SM- are not redeemable securities of the Fund.
The acquisition of CB Shares-SM- of each Series by
investment companies is subject to the restrictions of
Section 12(d)(1) of the Investment Company Act of 1940
(the "1940 Act") and applicable state regulations.

TRADING OF CB SHARES-SM- ON THE
NEW YORK STOCK EXCHANGE.......... The CB Shares-SM- of each Series are listed and trade on
the New York Stock Exchange, Inc. (the "NYSE"). Their
respective symbols are:
</TABLE>

<TABLE>
<CAPTION>
SERIES TRADING SYMBOL
---------------------------- -----------------
<S> <C> <C>
Australia CB Shares-SM- GXA
France CB Shares-SM- GXF
Germany CB Shares-SM- GXG
Hong Kong CB Shares-SM- GXH
Italy CB Shares-SM- GXI
Japan CB Shares-SM- GXJ
South Africa CB Shares-SM- GXR
UK CB Shares-SM- GXK
US CB Shares-SM- GXU
</TABLE>

<TABLE>
<S> <C>
The non-redeemable CB Shares-SM- of each Series trade on
the NYSE at prices that may differ to some degree from
their net asset value. See "The Fund -- Exchange Listing
and Trading", "-- Investment Considerations and Risks"
and "-- Determination of Net Asset Value". The CB
Shares-SM- are not redeemable except in Creation Unit
aggregations. See "CB Shares-SM-" above.

BOOK ENTRY OWNERSHIP OF CB
SHARES-SM-....................... The Depository Trust Company, a limited purpose trust
company organized under the laws of the State of New
York (the "Depositary" or "DTC"), or its nominee is the
record or registered owner of all outstanding CB
Shares-SM-. Beneficial ownership of CB Shares-SM- is
shown on the records of the Depositary or its
participants. Certificates are not issued for CB
Shares-SM-. Beneficial owners of CB Shares-SM- exercise
their rights through DTC and such participants. See "The
Fund -- Book-Entry Only System".
</TABLE>

5
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<TABLE>
<S> <C>
PURCHASES AND REDEMPTIONS OF
CREATION UNIT AGGREGATIONS OF CB
SHARES-SM-....................... The Fund sells and redeems CB Shares-SM- of each Series
only in aggregations of a specified number of shares
(each, a "Creation Unit") at their net asset value. A
Creation Unit of the Japan Index Series consists of
250,000 CB Shares-SM- and a Creation Unit of each other
Series consists of 100,000 CB Shares-SM-.

The Fund offers and sells Creation Unit size
aggregations of shares of each Series continuously
through the Distributor (see below) at their net asset
value next determined after receipt of a purchase order
in proper form. Creation Unit aggregations of shares are
sold for an in-kind portfolio of equity securities
included in the relevant component of the FT Index (the
"Fund Basket") and cash in an amount equal to the
difference between the value of a Fund Basket and the
net asset value of the Creation Unit aggregation of
shares (the "Cash Component"), as described more fully
herein. See "The Fund -- Purchase and Issuance of Fund
Shares in Creation Unit Aggregations" in this Prospectus
and "Purchase and Issuance of Fund Shares in Creation
Unit Aggregations" in the Statement of Additional
Information.

The Fund will generally redeem shares of each Series
only in Creation Unit size aggregations at their net
asset value, principally in kind for a Fund Basket and a
cash payment equal to the difference between the value
of the Fund Basket and the net asset value of the shares
to be redeemed, as described more fully herein. See "The
Fund -- Redemption of Fund Shares in Creation Unit
Aggregations" in this Prospectus and "Redemption of Fund
Shares in Creation Unit Aggregations" in the Statement
of Additional Information.

INVESTMENT MANAGEMENT............. Deutsche Morgan Grenfell/C. J. Lawrence Inc. ("DMG" or
the "Adviser") acts as investment adviser and, in
addition, provides management and certain administrative
services to the Fund. DMG is a wholly owned indirect
subsidiary of Deutsche Bank AG, a major German banking
institution.

DISTRIBUTOR....................... ALPS Mutual Funds Services, Inc. ("ALPS") is the
distributor of the Fund shares (the "Distributor").
Information about purchases of CB Shares-SM- in Creation
Unit aggregations may be obtained from the Distributor.

ADMINISTRATOR..................... State Street Bank and Trust Company ("State Street")
acts as administrator of the Fund (in such capacity, the
"Administrator").
</TABLE>

6
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<TABLE>
<S> <C>
FEES.............................. For its services as Adviser to each Series, including
services in connection with lending portfolio securities
(see "The Fund -- Lending of Securities"), DMG receives
a monthly investment management fee at an annual rate of
.30% of the average daily net assets of each Series,
except for the Hong Kong and South Africa Index Series,
for which such annual rate is .45%, and the US Index
Series, for which such annual rate is .20%, plus in each
case 40% of the gross investment income excluding
dividends on portfolio securities of each Series. See
"The Fund -- Fees".

Each Series pays the Distributor for its distribution
services a monthly distribution services fee equal to
such Series' allocable portion of .02% per annum of the
average aggregate daily net assets ("Aggregate Net
Assets") of all Series up to Aggregate Net Assets of
$2.5 billion, plus .015% per annum of Aggregate Net
Assets of all Series in excess of $2.5 billion up to $5
billion, plus .005% per annum of Aggregate Net Assets of
all Series in excess of $5 billion. The Distributor is
also paid a marketing fee and reimbursed for certain
expenses. Subject to certain conditions, each Series
also makes a quarterly contribution to bonus payments to
be made by the Distributor to certain employees engaged
in marketing activities with respect to Fund shares. In
addition, each Series pays certain expenses of printing
and distributing prospectuses and makes payments to
dealers and other persons for marketing and stockholder
services. All payments by each Series to the Distributor
and to such dealers or other persons are made under the
12b-1 Plan (as defined herein) of such Series and may
not exceed, in the aggregate, on an annualized basis,
.25% of its average daily net assets. See "The Fund --
Fees".

The Administrator receives monthly administration fees
for each Series at an annual rate of .08% of the average
daily net assets of each Series up to $125 million, plus
.06% of the average daily net assets of such Series in
excess of $125 million up to $250 million and .04% of
average daily net assets of such Series in excess of
$250 million, subject to a minimum annual fee of $95,000
for each Series. See "The Fund -- Fees".

INVESTMENT CONSIDERATIONS AND
RISKS............................ An investment in CB Shares-SM- involves risks similar to
those of investing in a broad-based portfolio of equity
securities traded on exchanges in the respective
countries represented by their corresponding FT Index
components. These risks include equity market
fluctuations caused by such factors as economic and
political developments, changes in interest rates and
perceived trends in stock prices and, with respect to
each Series other than the US Index Series,
exchange-rate fluctuations.
</TABLE>

7
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<TABLE>
<S> <C>
The net asset value of shares of each Series will
fluctuate with changes in the market value of its
portfolio securities and, in the case of each Series
except the US Index Series, changes in the market rate
of exchange between the US dollar and the national
currency in which the relevant component of the FT Index
is denominated. See "The Fund -- Investment
Considerations and Risks".

The Series commenced operations in March 1996 (April
1996 in the case of the South Africa Index Series), and
the CB Shares-SM- were first listed and began trading on
the NYSE at such time. The market prices of CB
Shares-SM- fluctuate in accordance with supply and
demand on the NYSE, and may be below, at or above their
net asset value. The Distributor will not maintain a
secondary market in CB Shares-SM-. See "The Fund --
Investment Considerations and Risks".

The securities held by each Series, except for the US
Index Series, are primarily equity securities of
non-U.S. companies. Non-U.S. companies generally do not
provide all or the same kind of disclosure required by
U.S. law and accounting practice. See "The Fund --
Investment Considerations and Risks" in this Prospectus
and "Investment Policies and Restrictions" in the
Statement of Additional Information.

The Fund engages in the lending of portfolio securities
(see "The Fund -- Lending of Securities") and in certain
foreign currency transactions designed to maintain the
value of each non-US Index Series' assets in terms of
the foreign currency value of its respective FT Index
component. See "The Fund -- Investment Policies" in this
Prospectus and "Investment Policies and Restrictions --
Currency Transactions" in the Statement of Additional
Information.

As of June 28, 1996, the following FT Index components
were each concentrated (in excess of 25% of such
component) in the stocks of the indicated industry
group: Australia -- Mining, Metals and Minerals; Hong
Kong -- Real Estate; Italy -- Utilities; and South
Africa -- Precious Metals and Minerals. The portfolio
securities of each such Series will generally have such
industry concentration for so long as the corresponding
FT Index component is so concentrated. See "The Fund --
Investment Restrictions of the Fund" and "-- Investment
Considerations and Risks".
</TABLE>

8
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<TABLE>
<S> <C>
DIVIDENDS AND CAPITAL
GAINS DISTRIBUTIONS.............. Dividends from net investment income of all Series other
than the US Index Series will be declared and paid at
least annually and, in the case of the US Index Series,
quarterly. Capital gains of each Series, if any, will be
distributed at least annually. Dividends and capital
gains distributions will be distributed by each Series
in US dollars. The Fund does not currently maintain a
plan for the automatic reinvestment of cash
distributions in additional shares of the Fund. See "The
Fund -- Dividends and Capital Gains Distributions".

TAX MATTERS....................... The purchase, sale and redemption of CB Shares-SM- are
taxable events and may result in a capital gain or loss
to investors. Dividend distributions, capital gains
distributions and capital gains or losses from
redemptions and sales of CB Shares-SM- may be subject to
federal, state and local taxes. See "The Fund -- Tax
Matters".
</TABLE>

9
<PAGE>
SUMMARY OF FUND EXPENSES

The purpose of the following tables is to assist investors in understanding the
various costs and expenses which stockholders of a Series bear directly and
indirectly. The annual operating expenses a Series is expected to incur are
based on estimates expressed as a percentage of average net assets. "Other
Expenses" are estimated amounts for the current fiscal year ending October 31,
1996. The examples set forth below under Section C (Examples of Expenses) are
presented for an investment of $1,000(1) as required by rules of the Securities
and Exchange Commission (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.

FUND EXPENSE TABLE

<TABLE>
<CAPTION>
HONG SOUTH
AUSTRALIA FRANCE GERMANY KONG ITALY JAPAN AFRICA UK US
INDEX INDEX INDEX INDEX INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
--------- ------ ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A. STOCKHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases of
Creation Unit aggregations of Shares (as a
percentage of amount of investment)......... None None None None None None None None None
Estimated Cost to Investor of Transferring
Securities in Fund Basket to Fund (a)....... $1,863 $3,626 $1,824 $3,363 $1,593 $12,528 $1,440 $5,400 $7,524
Local Stock Transfer Taxes (as a percentage
of the value of Fund Basket contributed)
(b)......................................... .30% 0% 0% .15% 0% 0% 0.50% 0.50% 0%
Purchases -- Cash Component Transaction Fee
(c)
as a percentage of cash amount of
investment.............................. 1.15% 1.00% 1.00% 1.20% 1.00% 1.32% 2.00% 1.50% 0%
as a percentage of total investment
amount.................................. .0115% .01% .01% .012% .01% .013% .02% .015% 0%
Deferred Sales Load.......................... None None None None None None None None None
Estimated Cost to Redeemer of Transferring
Securities in Fund Basket from Fund to
Redeemer (a)................................ $1,296 $2,940 $1,425 $2,950 $1,180 $9,280 $1,125 $4,000 $7,524
Local Stock Transfer Taxes (as a percentage
of the value of Fund Basket delivered on
redemption) (b)............................. 0% 0% 0% .15% 0% .30% 0% 0% 0%
Redemptions -- Transaction Fee on Cash
Portion (d)
as a percentage of cash redemption
proceeds................................ 1.15% 1.00% 1.00% 1.20% 1.00% 1.32% 1.00% 1.00% 0%
as a percentage of total redemption
proceeds................................ .0115% .01% .01% .012% .01% .013% .01% .01% 0%
B.ANNUAL SERIES OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (before fee waiver) (e)...... .30% .30% .30% .45% .30% .30% .45% .30% .20%
Management Fees (after fee waiver)
(e) (f)................................... .00% .00% .00% .00% .00% .11% .00% .00% .00%
Distribution Fees (12b-1) (g)................ .25% .25% .25% .25% .25% .25% .25% .25% .25%
Other Expenses (after fee waivers and expense
reimbursement) (f).......................... .75% .75% .75% .75% .75% .64% .75% .75% .75%
--------- ------ ------- ------ ------ ------ ------ ------ ------
Total Operating Expenses (after fee waivers
and expense reimbursement) (f).............. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
--------- ------ ------- ------ ------ ------ ------ ------ ------
--------- ------ ------- ------ ------ ------ ------ ------ ------
</TABLE>

(FOOTNOTES TO FUND EXPENSE TABLE ON FOLLOWING PAGE)

- ------------------------
(1) The total value of a portfolio of index securities comprising a Fund Basket
(assuming the inclusion of all stocks in the relevant FT Index component in
their exact weightings) effective for an in-kind purchase or redemption of a
Creation Unit aggregation of shares of each Series on June 28, 1996 was as
follows: the Australia Index Series, $2,012,356; the France Index Series,
$3,956,902; the Germany Index Series, $3,477,034; the Hong Kong Index
Series, $2,949,443; the Italy Index Series, $2,871,904; the Japan Index
Series, $9,915,297; the South Africa Index Series, $1,900,439; the UK Index
Series, $3,976,065; and the US Index Series, $5,466,785. The number of
constituent stocks in the relevant FT Index component as of June 28, 1996,
was respectively as follows: 79 for Australia, 96 for France, 60 for
Germany, 59 for Hong Kong, 59 for Italy, 481 for Japan, 45 for South Africa,
200 for the UK and 627 for the US component.

10
<PAGE>
- ------------------------------
(a) Estimated based on a delivery to or from the Fund of one or more Fund
Baskets of securities. An investor purchasing shares in Creation Unit
aggregations bears the costs of transferring the securities in the Fund
Basket to the Fund and an investor redeeming Creation Unit aggregations of
shares bears the costs of transferring securities in the Fund Basket
constituting a portion of the redemption proceeds from the Fund to the
investor. Such costs includes settlement and custody charges, registration
costs and similar charges. Such estimated costs are based on the number of
constituent securities in a Fund Basket for each Series as of June 28,
1996. Such costs vary with the number of constituent securities in a Fund
Basket for the relevant Series, but do not vary according to the number of
Fund Baskets submitted on purchase or delivered on redemption, as the case
may be. Investors also bear certain stock transfer taxes or stamp duties on
purchases or redemptions of Creation Units of shares of certain Series. See
the line item "Local Stock Transfer Taxes" above. See "Purchase and
Issuance of Fund Shares in Creation Unit Aggregations -- The Fund Basket"
and "Redemption of Fund Shares in Creation Unit Aggregations -- Redemption
Proceeds" in the Statement of Additional Information.

(b) Based on the stock transfer taxes or stamp duty currently payable in the
indicated countries in connection with the registration of transfers of
Fund Basket securities to the Fund (on purchases of Creation Units of
shares of the Australia, Hong Kong, South Africa and UK Index Series) or to
the redeeming investor (on redemptions of Creation Units of shares of the
Hong Kong and the Japan Index Series).

(c) Paid to the Fund and applicable only to the amount of a purchase
represented by the Cash Component to offset the Fund's brokerage and other
transaction costs of investing cash in portfolio securities of each Series
other than the US Index Series. The cash purchase transaction fee is not a
sales charge. The Cash Component is generally estimated to be 1% of the
total purchase price, but may amount to a higher portion that will not
exceed 10% of the total purchase price except in certain circumstances
under which cash is permitted or required by the Adviser to be substituted
for a security or securities in the applicable Fund Basket. See "The Fund
-- Purchase and Issuance of Fund Shares in Creation Unit Aggregations" in
this Prospectus and "Purchase and Issuance of Fund Shares in Creation Unit
Aggregations" in the Statement of Additional Information. The US Index
Series bears brokerage and other transaction expenses associated with
investing the Cash Component contributed on purchases of Creation Unit
aggregations of shares of the US Index Series in portfolio securities of
that Series.

(d) Paid to the Fund and applicable only to the amount of redemption proceeds
represented by the cash portion to offset the Fund's brokerage and other
transaction costs of selling portfolio securities of each Series other than
the US Index Series to pay a portion of redemption proceeds. The cash
portion is generally estimated to be 1% of the total redemption proceeds of
a Creation Unit aggregation of shares, but the cash portion could in
certain limited circumstances amount to up to 100% of such proceeds. See
"The Fund -- Redemption of Fund Shares in Creation Unit Aggregations" in
this Prospectus and "Redemption of Fund Shares in Creation Unit
Aggregations" in the Statement of Additional Information.

(e) Management fees are .30% of the average daily net assets of each Series,
except for the Hong Kong and the South Africa Index Series, for which such
annual rate is .45%, and the US Index Series, for which such annual rate is
.20%. See "The Fund -- Fees". In addition, each Series pays to the Adviser
40% of the gross investment income, excluding dividends on portfolio
securities, of the Series. Such investment income is received primarily
from interest earned on the collateral for securities loaned. See "The Fund
-- Lending of Securities". The Adviser voluntarily has agreed to waive all
or a portion of its investment management fees through October 31, 1996.
See note (f) below.

(f) The Administrator agreed to waive all of its administrative fees through
April 30, 1996, and the Adviser has agreed to waive all or a portion of its
management fees and agreed to make such reimbursement as may be necessary
to assure that the annualized ratio of operating expenses to average daily
net assets of each Series will not exceed 1.00% for the period from the
commencement of a Series' operations to the Fund's first fiscal year end on
October 31, 1996. There can be no assurance that such fee waivers or
expense reimbursement will continue after such date. Without such fee
waivers and expense reimbursements, "Other Expenses" and "Total Operating
Expenses" for each Series for the fiscal year ending October 31, 1996,
based on estimated average aggregate net assets, would be as follows: 2.68%
and 3.23%, respectively, for the Australia Index Series; 1.01% and 1.56%,
respectively, for the France Index Series; 1.46% and 2.01%, respectively,
for the Germany Index Series; 1.47% and 2.17%, respectively, for the Hong
Kong Index Series; 1.08% and 1.63%, respectively, for the Italy Index
Series; .66% and 1.21%, respectively, for the Japan Index Series; 1.93% and
2.63%, respectively, for the South Africa Index Series; 3.00% and 3.55%,
respectively, for the UK Index Series; and 1.24% and 1.69%, respectively,
for the US Index Series. For the estimated amount of average net assets for
each Series for the fiscal year ending October 31, 1996, see Section B
under "Explanation of Tables."

(g) The Distributor is paid distribution services fees by each Series equal to
such Series' allocable portion of: .02% per annum of the Aggregate Net
Assets of all Series up to Aggregate Net Assets of $2.0 billion, plus .015%
per annum of Aggregate Net Assets of all Series in excess of $2.0 billion
up to $5 billion, plus .005% per annum of Aggregate Net Assets of all
Series in excess of $5 billion. The Distributor is also be paid a marketing
fee and reimbursed for certain expenses. Subject to certain conditions,
each Series also makes a quarterly contribution to bonus payments to be
made by the Distributor to certain employees engaged in marketing
activities with respect to the secondary market for Fund shares. Each
Series also makes payments to certain dealers and other persons for
marketing and stockholder services, pays certain expenses of printing and
distributing prospectuses and, to the extent of amounts available under
such Series' 12b-1 Plan, reimburses the Distributor and/or the Adviser for
its costs incurred in producing advertising or marketing material, all as
more fully described under "The Fund -- Fees". All payments by each Series
to the Distributor and to such dealers and other persons, and all such
reimbursements, are made under the 12b-1 Plan of such Series and may not
exceed, in the aggregate, on an annualized basis, .25% of its average daily
net assets. Because the fees and expenses paid under the 12b-1 Plan of each
Series are charged against the assets of the Series, long-term stockholders
may indirectly pay an amount that is more than the economic equivalent of
the maximum front-end sales charge that such Series would be permitted to
charge. See "The Fund -- Fees".

11
<PAGE>
C. EXAMPLES OF EXPENSES

(a) An investor would pay the following expenses on a $1,000 investment (payment
with a ratable portion of a Fund Basket and a Cash Component of $10
(estimated as 1% of the total purchase price)), assuming (1) a 5% annual
return and (2) redemption (delivery of a Fund Basket and a cash redemption
payment of $10 (estimated as 1% of the total redemption proceeds)) at the
end of each indicated time period:

(b) An investor would pay the following expenses on the same investment,
assuming no redemptions:

EXPLANATION OF TABLES

A. Stockholder Transaction Expenses are charges that investors pay to buy or
sell Creation Unit aggregations of shares of the Fund. See "The Fund -- Purchase
and Issuance of Fund Shares in Creation Unit Aggregations" and "-- Redemption of
Fund Shares in Creation Unit Aggregations" in this Prospectus and "Purchase and
Issuance of Fund Shares in Creation Unit Aggregations " and "Redemption of Fund
Shares in Creation Unit Aggregations" in the Statement of Additional Information
for an explanation of how these charges apply.

B. Annual Series Operating Expenses are based on estimated expenses. For
the purpose of determining such expenses, the average net assets of each Series
for the period from commencement of operations to the fiscal year end on October
31, 1996 have been estimated respectively as follows: US $16.3 million for the
Australia Index Series; US $56.7 million for the France Index Series; US $32.3
million for the Germany Index Series; US $35.3 million for the Hong Kong Index
Series; US $53.7 million for the Italy Index Series; US $92.7 million for the
Japan Index Series; US $23.9 million for the South Africa Index Series; US $14.6
million for the UK Index Series; and US $40.7 million for the US Index Series.
Management Fees are paid to DMG to provide each Series with investment advisory,
management and certain administrative services and services in connection with
the lending of portfolio securities. See "The Fund -- Lending of Securities".
Administration fees are included in "Other Expenses" and are paid to State
Street, as Administrator, to provide the Fund with administrative services. The
Administrator voluntarily agreed to waive all of its administrative fees for the
period from the commencement of operations of each Series through April 30,
1996. As indicated above, the Adviser voluntarily has agreed to waive all or a
portion of its investment management fees and to reimburse other expenses of
each Series to assure that the annualized ratio of operating expense to average
daily net assets of each Series will not exceed 1.00% for the period from the
commencement of operations of each Series through October 31, 1996. Absent the
fee waiver by the Adviser, the investment management fee would be .30% of the
average daily net assets of each Series other than the Hong Kong and South
Africa Index Series, for which such annual rate would be .45%, and the US

12
<PAGE>
Index Series, for which such annual rate would be .20%. Absent the fee waiver by
the Administrator and the fee waiver and expense reimbursement by the Adviser,
and assuming no state expense limitations, "Other Expenses" and "Total Operating
Expenses" for each Series would be as follows: 2.68% and 3.23%, respectively,
for the Australia Index Series; 1.01% and 1.56, respectively, for the France
Index Series; 1.46% and 2.01%, respectively, for the Germany Index Series; 1.47%
and 2.17%, respectively, for the Hong Kong Index Series; 1.08% and 1.63%,
respectively, for the Italy Index Series; .64% and 1.21%, respectively, for the
Japan Index Series; 1.93% and 2.63%, respectively, for the South Africa Index
Series; 3.00% and 3.55%, respectively, for the UK Index Series; and 1.24% and
1.69%, respectively, for the US Index Series. See "The Fund -- Fees" and the
Fund's (unaudited) financial statements for the period from commencement of
operations through April 30, 1996 included in the Statement of Additional
Information. There can be no assurance that such waivers and/or expense
reimbursements will be continued for any period beyond October 31, 1996.

Distribution fees are paid to ALPS, as Distributor, to provide distribution
services to the Fund. The Distributor will also be paid a marketing fee, will be
reimbursed for certain expenses and, subject to certain conditions, will receive
contributions toward bonus payments to be made to certain employees of the
Distributor. Each Series will also pay certain expenses of printing and
distributing prospectuses and make payments to dealers and other persons
providing marketing and stockholder services. See "The Fund -- Investment
Management", "-- Distributor", "-- Administrator" and "-- Fees" for additional
information.

C. Examples of Expenses. The examples illustrate the estimated expenses
associated with a $1,000 investment in a Creation Unit aggregation of Fund
shares over periods of 1 and 3 years, based on the expenses in the table and an
assumed annual rate of return of 5%. The return of 5% and estimated expenses are
for illustration purposes only and should not be considered indications of
expected Series expenses or performance, both of which may vary. The expenses
associated with a hypothetical $1,000 investment in CB Shares-SM- include a pro
rata portion of stockholder transaction expenses associated with the purchase or
sale of a Creation Unit aggregation of shares, which was valued as of June 28,
1996 at between $1,900,000 and $9,900,000, depending on the Series, assuming for
this purpose that the net asset value of a Creation Unit aggregation of shares
were the same as the value of the Fund Basket as of such date. See footnote 1 to
the Summary of Fund Expenses.

13
<PAGE>
FINANCIAL HIGHLIGHTS

The following sets forth selected data for a single CB Share-SM- of each
Series outstanding throughout the period from the commencement of such Series'
operations through April 30, 1996. The amounts shown below are unaudited and are
derived from the unaudited financial statements of the Series for the periods
ended April 30, 1996 included in the Statement of Additional Information.

The per share operating performance data (other than total return based on
market price) is designed to allow investors to trace the operating performance,
on a per share basis, from a Series' beginning net asset value to its ending net
asset value so that investors may understand what effect the individual items
have on their investment, assuming it was held throughout the period. Generally,
the per share amounts are derived by converting the actual dollar amounts
incurred for each item, as disclosed in the financial statements, to their
equivalent per share amount.

14
<PAGE>
<TABLE>
<CAPTION>
AUSTRALIA FRANCE GERMANY HONG KONG ITALY
INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
(3/25/96 - (3/28/96 - (3/22/96 - (3/25/96 - (3/28/96 -
4/30/96) 4/30/96) 4/30/96) 4/30/96) 4/30/96)

Net asset value at beginning of
period......................... $ 19.67 $ 37.70 $ 34.67 $ 29.14 $ 24.61
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Net investment income (loss)
(d)........................ 0.07 (0.01) 0.04 0.21 (0.02)
Net realized and unrealized
gain (loss) on investments
and foreign currency....... 0.94 1.28 (1.36) (0.17) 4.30
------- ------- ------- ------- -------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS.......... 1.01 1.27 (1.32) 0.04 4.28
------- ------- ------- ------- -------
NET ASSET VALUE AT END OF
PERIOD......................... $ 20.68 $ 38.97 $ 33.35 $ 29.18 $ 28.89
------- ------- ------- ------- -------
------- ------- ------- ------- -------
MARKET PRICE AT END OF PERIOD... $ 20.625 $ 38.75 $ 33.50 $ 29.125 $ 28.875
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN BASED ON:
Net asset value (a) (c)..... 5.13% 3.37% (3.81%) 0.14% 17.39%
Market price (a) (c)........ 3.13% 0.65% (4.29%) (1.69%) 15.50%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period
(000's).................... $ 14,486 $ 42,875 $ 20,022 $ 29,193 $ 34,687
Ratio to average net assets:
Expenses (b) (d).......... 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income
(loss) (b)............... 3.54% (0.21%) 1.04% 7.40% (0.97%)
Portfolio turnover rate (a)
(e)........................ 0.50% 1.73% 0.95% 1.84% 10.13%
Average brokerage
commissions (f)............ $ 0.0051 $ 0.0236 $ 0.0850 $ 0.0036 $ 0.0029

<CAPTION>
JAPAN SOUTH AFRICA UK US
INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
(3/22/96 - (3/26/96 - (3/20/96 -
4/30/96) (4/1/96 - 4/30/96) 4/30/96) 4/30/96)
Net asset value at beginning of
period......................... $ 37.98 $ 20.13 $ 38.42 $ 53.14
------- ------- ------- -------
INVESTMENT OPERATIONS:
Net investment income (loss)
(d)........................ 0.08 0.03 0.12 0.03
Net realized and unrealized
gain (loss) on investments
and foreign currency....... 3.43 (0.75) 0.91 0.20
------- ------- ------- -------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS.......... 3.51 (0.72) 1.03 0.23
------- ------- ------- -------
NET ASSET VALUE AT END OF
PERIOD......................... $ 41.49 $ 19.41 $ 39.45 $ 53.37
------- ------- ------- -------
------- ------- ------- -------
MARKET PRICE AT END OF PERIOD... $ 41.375 $ 19.25 $ 39.75 $ 53.00
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN BASED ON:
Net asset value (a) (c)..... 9.24% (3.58%) 2.68% 0.43%
Market price (a) (c)........ 5.75% (2.53%) 3.92% (0.93%)
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period
(000's).................... $ 83,001 $ 17,477 $ 11,846 $ 32,036
Ratio to average net assets:
Expenses (b) (d).......... 1.00% 1.00% 1.00% 1.00%
Net investment income
(loss) (b)............... 2.00% 1.98% 3.23% 0.55%
Portfolio turnover rate (a)
(e)........................ 5.00% 0.00% 0.00% 0.11%
Average brokerage
commissions (f)............ $ 0.0122 $ 0.0203 $ 0.0154 $ 0.0633
</TABLE>

(a) Not annualized.
(b) Annualized.
(c) Total return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value
at commencement of operations and a sale on the last day of the period, also
at net asset value. Total return based on market price, excluding the effect
of brokerage commissions, assumes a purchase of common stock at the opening
price on the commencement date of trading and a sale on the last day of the
period at the closing market price. During the period, total return based on
net asset value would have been lower had certain fees and expenses not been
reimbursed and/or waived by the Administrator and the Adviser.
(d) Net of certain fees and expenses reimbursed and/or waived by the
Administrator and the Adviser. Had the Administrator and the Adviser not
undertaken to reimburse and/or waive such fees and expenses, net investment
income (loss) per share and the ratio of expenses to average net assets
would have been as follows: Australia Index Series, $0 and 4.49%; France
Index Series, $(0.04) and 1.87%; Germany Index Series, $(0.04) and 3.22%;
Hong Kong Index Series, $0.16 and 2.69%; Italy Index Series, $(0.05) and
2.29%; Japan Index Series, $0.07 and 1.29%; South Africa Index Series,
$(0.01) and 3.92%; UK Index Series, $(0.04) and 5.34%; and US Index Series,
$(0.05) and 2.35%, respectively.
(e) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(f) Represents average brokerage commission rate per share of total security
trades on which brokerage commissions were charged.

15
<PAGE>
THE FUND

THE COUNTRYBASKETS-SM- INDEX FUND, INC. AND ITS INVESTMENT OBJECTIVE

The Fund is a non-diversified, open-end management investment company
registered under the 1940 Act, organized as a series fund. Each Series of the
Fund seeks to provide investment results that substantially correspond to the
price and yield performance of a broad-based index of publicly traded equity
securities in a particular country, geographic region or industry sector.

THE INITIAL SERIES. Currently, nine Series of the Fund issue shares: the
Australia Index Series, the France Index Series, the Germany Index Series, the
Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the
South Africa Index Series, the UK Index Series and the US Index Series. Each
such Series seeks to provide investment results that substantially correspond to
the price and yield performance of a broad-based index of publicly traded equity
securities in the relevant country. This primary investment objective is
fundamental and may not be changed without the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the respective
Series. The Board of Directors of the Fund may authorize additional Series. To
achieve its primary investment objective, each of the nine Series seeks
investment results substantially corresponding to the price and yield
performance of its respective country component of the FT Index. This secondary
investment objective is not fundamental, and in the case of any Series the index
may be changed by the Board of Directors, subject to any applicable regulatory
approvals, to another broad-based index of equity securities in the relevant
country without a stockholder vote. See "Investment Policies and Restrictions --
Investment Restrictions" in the Statement of Additional Information. There can
be no assurance that the investment objective of any Series will be achieved.

INVESTMENT POLICIES

Each Series seeks to implement its investment objectives by a policy of
remaining fully invested, except as described below, in a portfolio of equity
securities that will provide investment results that substantially correspond to
the price and yield performance of its respective country component of the FT
Index. Each country component of the FT Index is a capitalization-weighted index
of equity securities traded on the principal securities exchange(s) and, in some
cases, the over-the-counter market, of that country. See "The FT Index
Components". Each Series invests the largest proportion of its net assets
practicable, in any event at least 95% of its net assets, in the securities of
its respective component of the FT Index, and the weighting of the portfolio
securities of each Series will substantially correspond to their proportional
representation in the relevant component of the FT Index. These investment
policies are not fundamental and so may be changed by the Board of Directors of
the Fund without stockholder approval.

CORRELATION WITH THE FT INDEX. The correlation between the performance of
each Series and its respective FT Index component is expected to be at least
0.95 (1.00 indicating a perfect correlation) on an annual basis. The ability to
correlate the performance of a Series with that of the corresponding component
of the FT Index is affected by, among other things, changes in securities
markets, the manner in which the FT Index is calculated (see "FT/S&P Actuaries
World Indices-TM-"), the expenses incurred by such Series, the asset size of
such Series, and the timing and size of purchases and redemptions of Creation
Unit aggregations of shares. Investment changes to accommodate purchases and
redemptions of shares in Creation Unit size aggregations are made at the
direction of the Adviser to maintain to the extent practicable the correlation
of each Series' portfolio to its corresponding component of the FT Index. In the
event, considered unlikely by the Fund, that the Adviser is unable to maintain
an annual correlation of 0.95 between a Series' performance and that of its
respective FT Index component, the Fund's Board of Directors will consider
alternative investment advisory arrangements for that Series.

16
<PAGE>
Each Series may invest in high quality, short-term fixed income obligations
as cash reserves, including obligations denominated in US dollars and in the
principal foreign currency or currencies of the portfolio securities of such
Series (the "Series Currency") and repurchase agreements collateralized by U.S.
Government securities. To a limited extent each Series may also purchase
securities of U.S. or foreign investment companies, stock index futures
contracts and options thereon traded on recognized exchanges in the markets
relevant to such Series, and purchase exchange-traded call options, and write
(sell) put options, on securities and indices in such markets. A Series will
invest in such instruments (or combinations thereof) only for the purpose of
exposing cash reserves and short-term money market investments to the equity
risk and return of the corresponding component of the FT Index in order to
achieve a higher correlation to such component. A Series will not purchase or
sell over-the-counter equity or fixed-income derivative instruments. Investment
company securities, stock index futures, options and options on futures in which
a Series may invest will be those which the Adviser believes would, alone or in
combination with other instruments, replicate the performance of the relevant FT
Index component better than the uninvested cash. In addition, if market
conditions make it impracticable to purchase a security in the relevant FT Index
component, a Series may purchase another equity security that the Adviser
considers an appropriate substitute for such FT Index constituent security or
may purchase or write an option or combination of options on such FT Index
security (or a security expected to perform similarly to the missing index
security) to expose the uninvested assets to the equity risk and return of such
unavailable security and thereby improve the correlation of the Series with the
relevant FT Index component. A Series will not invest in options and futures
contracts and options thereon for speculative purposes. See "Investment Policies
and Restrictions -- Other Fund Investments" in the Statement of Additional
Information.

Investments other than the equity securities included in the applicable FT
Index component will not exceed 5% of each Series' net assets. As described
above, such investments include cash and cash equivalents, repurchase
agreements, investment company securities, call and put options and stock index
futures contracts and options thereon, and equity securities not included in the
relevant component of the FT Index that may be an appropriate substitute for an
index equity security if market conditions make it impracticable to purchase the
index security in the relevant FT Index component. See "Investment Policies and
Restrictions -- Other Fund Investments" in the Statement of Additional
Information. The activities of the Fund are subject to certain restrictions that
may not be changed without stockholder approval. See "Investment Restrictions of
the Fund" in this Prospectus and "Investment Policies and Restrictions --
Investment Restrictions" in the Statement of Additional Information.

Each Series may lend its portfolio securities in an amount up to 33 1/3% of
the value of its total assets in order to earn income and thereby reduce the
effect that expenses have on the Series' ability to provide investment results
that substantially correspond to the price and yield performance of the relevant
FT Index component. See "Lending of Securities". Each Series may also engage in
certain foreign currency transactions that are designed to maintain the
correlation between the value of the Series' assets and the foreign
currency-denominated values of the respective indices. A Series will not hold
illiquid assets in excess of 15% of its net assets. For purposes of this
restriction, "illiquid" securities shall mean securities which may not be sold
or disposed of in the ordinary course of business within seven days at
approximately the value at which the Series has valued the securities. See
"Investment Policies and Restrictions" in the Statement of Additional
Information.

PORTFOLIO TURNOVER. Each Series of the Fund is permitted to sell securities
irrespective of how long they have been held. Given that the investment
management of each Series is fundamentally "passive" in that it seeks to provide
investment results corresponding to that of an index, the portfolio turnover
rate for each

17
<PAGE>
Series is expected to be under 50%. Ordinarily, securities will be purchased or
sold by a Series only to reflect changes in the composition of the corresponding
component of the FT Index or to accommodate cash flows required by, among other
things, redemptions of Creation Unit aggregations of shares.

FT/S&P ACTUARIES WORLD INDICES-TM-

The FT/S&P Actuaries World Indices-TM- are jointly owned by FT-SE
International Limited (a company jointly owned by The Financial Times Limited,
the London Stock Exchange and the Institute of Actuaries) ("FT-SE"), Standard &
Poor's, a division of The McGraw-Hill Companies, Inc., and Goldman, Sachs & Co.
(collectively, the "Owners"). On May 23, 1995, Standard & Poor's replaced
NatWest Securities Limited to join The Financial Times Limited and Goldman,
Sachs & Co. as a co-publisher of the FT Index and, following the current
transition period, The Financial Times Limited and Standard & Poor's will be
jointly responsible for the calculation of the FT Index components. In November
1995, FT-SE assumed the ownership rights of The Financial Times Limited in the
FT Index. By the end of 1996, it is expected that FT-SE will assume
responsibility for calculating the Asia-Pacific and European indices. As of
August 7, 1996, Standard & Poor's began calculating the U.S. indices. The
Institute of Actuaries and The Faculty of Actuaries, the English and Scottish
bodies, respectively, that represent the actuarial profession in the United
Kingdom (together with the Owners, the "Consortium") provide assistance in
managing the FT Index. The aim of the Consortium is to create and maintain a
series of equity indices for use by the global investment community.

SELECTION CRITERIA. The World Index Policy Committee (the "WIPC") makes all
policy decisions concerning the FT Index, including: objectives, selection
criteria, market representativeness, calculation methodologies and additions and
deletions of constituent securities. The WIPC makes these decisions in a manner
that is consistent with the stated aims and objectives of the Consortium. With
respect to each country, regional or sector component of the FT Index, WIPC's
objective is to capture 85% of the equity available (known as the "investible
universe") in such country, region or sector. The "investible universe" for a
particular component of the FT Index consists of the aggregate capitalization of
all equity securities listed on the exchanges monitored within the relevant
market after application of five exclusionary "screens" and certain other rules
to the universe of such exchange-traded equities. A fuller description of the FT
Index and the selection methodology is included in the Statement of Additional
Information.

MARKET CAPITALIZATION WEIGHTING. The proportional representation of equity
securities in the FT Index is based on each security's total market
capitalization (that is, its market price times the number of shares
outstanding) relative to other securities in the same market. The percentage of
a Series' assets to be invested in each equity security will not deviate
significantly from such security's corresponding proportional representation in
the relevant component of the FT Index. FT Index values include dividends on
portfolio securities based on the most up-to-date indicated annualized rates,
adjusted for any interim changes in, and any firm and precise forecasts of,
expected dividends. Each Series will reinvest dividends and distributions it
receives as soon as practicable.

THE FT INDEX COMPONENTS

THE AUSTRALIA COMPONENT. The Australia component of the FT Index consists
of stocks that are traded on the Australian Stock Exchange Limited. As of
December 29, 1995, stocks of 81 issuers were included. The three largest stocks
and the approximate percentages of the Australia component represented thereby
were Broken Hill Proprietaries (16.3%), National Australia Bank (7.6%) and CRA
(5.6%), for a total of 29.5% of the Australia component. The ten largest equity
issues in the Australia component represented approximately 52.2% of the
Australia component. As of December 29, 1995, equities of the mining, metals and

18
<PAGE>
minerals, commercial and other banking and real estate represented approximately
31.7%, 20.7% and 5.6%, respectively, or a total of 58%, of the Australia
component. Equities comprising the Australia component of the FT Index accounted
for approximately 83.9% of the aggregate investible Australian market
capitalization.

THE FRANCE COMPONENT. The France component of the FT Index consists of
stocks traded on the Paris Bourse. As of December 29, 1995, stocks of 100
issuers were included. The three largest stocks and the approximate percentages
of the France component of the FT Index represented thereby were Elf Aquitaine
(5.4%), LVMH-Moet Vuitton (4.9%) and L'Oreal (4.4%), for a total of 14.7% of the
France component. The ten largest equity issues in the France component
represented approximately 39% of the France component. Equities of the health
and personal care, oil and commercial and other banks represented approximately
9.9%, 9.6% and 8.9%, respectively, or a total of 28.4%, of the France component.
As of December 29, 1995, equities comprising the France component of the FT
Index accounted for approximately 88.2% of the aggregate investible French
market capitalization.

THE GERMANY COMPONENT. The Germany component of the FT Index consists of
stocks that are traded on the official (AMTLICHER HANDEL) and the regulated
unlisted (GEREGELTER MARKT) markets of the Frankfurt Stock Exchange. As of
December 29, 1995, stocks of 59 issuers were included. The three largest stocks
and the approximate percentages of the Germany component of the FT Index
represented thereby were Allianz AG (11.4%), Siemens AG (7.5%) and Daimler Benz
AG (6.5%) for a total of 25.4% of the Germany component. The ten largest equity
issues in the Germany component represented approximately 56% of the Germany
component. Equities of the insurance, commercial and other banking, and
chemicals industries represented approximately 17.9%, 15.1% and 13.8%,
respectively, or a total of 46.8%, of the Germany component. As of December 29,
1995, equities comprising the Germany component of the FT Index accounted for
approximately 89% of the aggregate investible German market capitalization.

THE HONG KONG COMPONENT. The Hong Kong component of the FT Index consists
primarily of stocks traded on the Stock Exchange of Hong Kong Limited (the
"HKX"). As of December 29, 1995, stocks of 55 issuers (including five issuers
listed on the Singapore Stock Exchange but not on the HKX) were included. The
three largest stocks and the approximate percentages of the Hong Kong component
represented thereby were Hutchison Whampoa (10.3%), Hong Kong Telecomm (9.4%)
and Sun Hung Kai Properties (8.9%), for a total of 28.6% of the Hong Kong
component. The ten largest equity issues in the Hong Kong component represented
approximately 62% of the Hong Kong component. Equities of the real estate,
utilities and diversified consumer goods industries represented approximately
37.0%, 18.7% and 12.7%, respectively, or a total of 68.4%, of the Hong Kong
component. As of December 29, 1995, equities comprising the Hong Kong component
of the FT Index accounted for approximately 85.7% of the aggregate investible
market capitalization of Hong Kong.

THE ITALY COMPONENT. The Italy component of the FT Index consists of stocks
on the official list (LISTINO DELLA BORSA) of the Italian Stock Exchange. As of
December 29, 1995, stocks of 59 issuers were included. The three largest stocks
and the approximate percentages of the Italy component represented thereby were
Generali (13.9%), Telecom Italia Mobile (8.4%) and Stet (7.8%), for a total of
30.1% of the Italy component. The ten largest equity issues in the Italy
component represented approximately 61% of the Italy component. Equities of the
utilities, insurance and automobile industries represented approximately 29.6%,
24.5% and 9.7%, respectively, or a total of 63.8%, of the Italy component. As of
December 29, 1995, equities comprising the Italy component of the FT Index
accounted for approximately 89.7% of the aggregate investible Italian market
capitalization.

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<PAGE>
THE JAPAN COMPONENT. The Japan component of the FT Index consists of stocks
traded on the first and second sections of the Tokyo Stock Exchange and the
first section of the Osaka Stock Exchange. As of December 29, 1995, stocks of
483 issuers were included. The three largest stocks and the approximate
percentages of the Japan component represented thereby were Toyota Motor (2.8%),
Industrial Bank of Japan (2.5%) and Mitsubishi Bank (2.4%), for a total of 7.7%
of the Japan component. The ten largest equity issues in the Japan component
represented approximately 21% of the Japan component. Equities of the commercial
and other banks, financial institutions and utilities represented approximately
22.5%, 6.2% and 6.1%, respectively, or a total of 34.8%, of the Japan component.
As of December 29, 1995, equities comprising the Japan component of the FT Index
accounted for approximately 83.1% of the aggregate investible Japanese market
capitalization.

THE SOUTH AFRICA COMPONENT. The South Africa component of the FT Index
consists of stocks that are traded on the Johannesburg Stock Exchange. As of
December 29, 1995, stocks of 45 issuers were included. The three largest stocks
and the approximate percentages of the South Africa component represented
thereby were Anglo American Corp. (10.1%), De Beers/Centenary (8.2%) and South
African Breweries (7.7%), for a total of 26% of the South Africa component. The
ten largest equity issues in the South Africa component represented
approximately 52% of the South Africa component. Equities of the precious metals
and minerals, diversified holding companies and beverages and tobacco industries
represented approximately 34.9%, 11.6% and 11.3%, respectively, or a total of
57.8%, of the South Africa component. As of December 29, 1995, equities
comprising the South Africa component of the FT Index accounted for
approximately 82.2% of the aggregate investible market capitalization of the
Johannesburg Stock Exchange.

THE UK COMPONENT. The UK component of the FT Index consists of stocks on
the official list of the London Stock Exchange. As of December 29, 1995, stocks
of 205 issuers were included. The three largest stocks and the approximate
percentages of the UK component represented thereby were Glaxo Wellcome (4.6%),
British Petroleum (4.3%) and Shell Transport & Trading (4.0%), for a total of
12.9% of the UK component. The ten largest equity issues in the UK component
represented approximately 29% of the UK component. Equities of the commercial
and other banks, utilities and health and personal care industries represented
approximately 12.5%, 11.8% and 9.7%, respectively, or a total of 34.0%, of the
UK component. As of December 29, 1995, equities comprising the UK component of
the FT Index accounted for approximately 82.6% of the aggregate investible
market capitalization of the United Kingdom.

THE US COMPONENT. The US component of the FT Index consists of stocks
traded on the NYSE, the American Stock Exchange and the National Association of
Securities Dealers Automated Quotation (NASDAQ) system. As of December 29, 1995,
stocks of 639 issuers were included. The three largest stocks and the
approximate percentages of the US component represented thereby were General
Electric (2.5%), AT&T (2.1%) and Exxon Corp. (2.0%), for a total of 6.6% of the
US component. The ten largest equity issues in the US component represented
approximately 16% of the US component. Equities of the utilities, health and
personal care and commercial and other bank industries represented approximately
13.1%, 11.1% and 7.8%, respectively, or a total of 32%, of the US component. As
of December 29, 1995, equities comprising the US component of the FT Index
accounted for approximately 73.8% of the aggregate investible market
capitalization of the United States.

INVESTMENT MANAGEMENT

DMG acts as investment adviser to the Fund and, subject to the supervision
of the Board of Directors of the Fund, is responsible for management of each
Series' affairs, including providing certain administrative services and
services in connection with the lending of portfolio securities, pursuant to an
Investment

20
<PAGE>
Management Agreement entered into with the Fund with respect to each Series. The
Adviser receives a fee from the Fund for its services. See "Fees" in this
Prospectus and "Investment Advisory, Management and Other Services -- The
Investment Adviser" in the Statement of Additional Information. DMG is organized
under Delaware law and is registered as an investment adviser under the
Investment Advisers Act of 1940 and as a broker-dealer under the Securities
Exchange Act of 1934 (the "Exchange Act"). DMG is a wholly owned indirect
subsidiary of Deutsche Bank AG, a major German banking institution ("Deutsche
Bank").

DMG is engaged in the securities underwriting and securities brokerage
businesses. The principal business address of DMG is 31 West 52nd Street, New
York, New York 10019. Subject to obtaining the best price together with
efficient execution, the Fund may place orders for the purchase and sale of
securities for the Fund's portfolio with both DMG and/or Deutsche Bank, among
other brokers and dealers, and incur brokerage commissions for such
transactions. Except as permitted by exemptive order or applicable rule or
regulation, no purchase or sale transaction on a principal basis will be done
with DMG, Deutsche Bank or their affiliates in securities, foreign currency or
other assets. Deutsche Bank and its affiliates may have commercial lending
relationships with companies whose securities may be held by a Series of the
Fund.

DISTRIBUTOR

ALPS Mutual Funds Services, Inc. is the Distributor of CB Shares-SM- (see
"CB Shares-SM-" below). Its address is 370 17th Street, Suite 2700, Denver,
Colorado 80202, and investor information can be obtained by calling
1-800-482-3940. CB Shares-SM- are sold by the Fund and distributed only in
Creation Unit size aggregations, as described below under "Purchase and Issuance
of Fund Shares in Creation Unit Aggregations". CB Shares-SM- in less than
Creation Unit size aggregations are not distributed by the Distributor. The
Distributor is a registered broker-dealer under the Exchange Act and was
incorporated in 1986 under Colorado law. The Distributor has entered into a
Distribution Agreement with the Fund pursuant to which it will distribute Fund
shares. The Distributor receives fees from the Fund for its services pursuant to
the 12b-1 Plans described below. See "Fees" below and "Purchase and Issuance of
Fund Shares in Creation Unit Aggregations -- The Distributor" in the Statement
of Additional Information.

ADMINISTRATOR

State Street acts as Administrator of the Fund pursuant to an Administration
Agreement with the Fund and is responsible for certain clerical, record keeping
and bookkeeping services, except those to be performed by the Adviser or by
State Street as the Fund's custodian (in such capacity, the "Custodian"). See
"Investment Advisory, Management and Other Services -- The Administrator,
Custodian and Transfer Agent" in the Statement of Additional Information.

CUSTODIAN AND TRANSFER AGENT

State Street serves as the Custodian for the cash and portfolio securities
of each Series of the Fund and provides fund accounting services pursuant to a
Custodian Agreement between State Street and the Fund. State Street also
provides transfer agency services (in such capacity, the "Transfer Agent")
pursuant to an agreement with the Fund. State Street, as Custodian and Transfer
Agent, has no role in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund. The principal business
address of State Street is 225 Franklin Street, Boston, Massachusetts 02110.

FEES

As Adviser, DMG is paid an investment management fee, computed daily and
paid monthly, at an annual rate of .30% of the average daily net assets of each
Series, except for the Hong Kong and South Africa Index Series, for which such
annual rate is .45%, and the US Index Series, for which such annual rate

21
<PAGE>
is .20%, plus in each case 40% of the gross investment income, excluding
dividends on securities held in the portfolio, of such Series. The Adviser
voluntarily has agreed to waive all or a portion of its investment management
fees and to reimburse other expenses of each Series to assure that the
annualized ratio of operating expenses to average daily net assets of each
Series will not exceed 1.00% for the period from the commencement of operations
of each Series through October 31, 1996. There can be no assurance that the
Adviser will continue such fee waiver or expense reimbursement after such date.
See "Summary of Fund Expenses" for the fee for each Series.

Pursuant to a plan with respect to each Series (each, a "12b-1 Plan")
adopted by the Board of Directors of the Fund under Rule 12b-1 under the 1940
Act, each Series pays the Distributor such Series' allocable portion of the
aggregate distribution services fees payable by all Series of the Fund subject
to the Distribution Agreement (the "Distribution Agreement") with the
Distributor, equal to .02% per annum of the aggregate average daily net assets
("Aggregate Net Assets") of all such Series up to Aggregate Net Assets of $2.0
billion, plus .015% per annum of Aggregate Net Assets of all such Series in
excess of $2.0 billion up to $5 billion, plus .005% per annum of Aggregate Net
Assets of all such Series in excess of $5 billion. Each Series also pays the
Distributor for marketing and promotional services pursuant to a Marketing
Agreement with the Distributor (the "Marketing Agreement") such Series'
allocable portion of the aggregate marketing fees payable by all Series subject
to the Marketing Agreement, equal to .23% per annum of the Aggregate Net Assets
of all such Series up to Aggregate Net Assets of $200 million, plus .03% per
annum of Aggregate Net Assets of all such Series in excess of $1.5 billion up to
$5 billion, plus .02% per annum of Aggregate Net Assets of all such Series in
excess of $5 billion up to $10 billion, plus .015% per annum of the Aggregate
Net Assets of all such Series in excess of $10 billion. Each Series also pays to
the Distributor such Series' allocable portion of .01% per annum of the
Aggregate Net Assets of all Series in excess of $500 million up to Aggregate Net
Assets of $2.5 billion as a contribution toward certain bonus payments to be
made by the Distributor to employees engaged in marketing activities with
respect to the secondary market for Fund shares. In addition, subject to the
aggregate limitation on payments under each 12b-1 Plan, the Fund pays certain
expenses of printing and distributing prospectuses and makes payments to certain
dealers or other persons which have entered into agreements with the Distributor
to provide marketing and stockholder services. Such payments will be made by the
Fund to each such dealer or other person at the rate of .05% of the Aggregate
Net Assets in excess of $200 million of all Series subject to such an agreement.
Smith Barney Inc. is a party to such an agreement. The Distributor may also
enter into stockholder servicing agreements with broker-dealers or other persons
that are DTC Participants to provide stockholder services to their clients
holding CB Shares-SM-. Under the terms of each stockholder servicing agreement,
such broker-dealer or other person will be paid stockholder servicing fees under
the 12b-1 Plan of each Series other than the US Index Series of 0.1% of the
aggregate net asset value of CB Shares-SM- held through DTC for the account of
such DTC Participant.

To the extent of amounts available under its 12b-1 Plan, each Series will
also reimburse the Distributor and/or the Adviser for its costs incurred in
producing advertising or marketing material prepared at the request of the
Series. The fees paid by a Series under its 12b-1 Plan as compensation for
distribution, marketing or stockholder services for that Series may exceed the
expenses actually incurred by the recipients of such fees. Aggregate payments
under each 12b-1 Plan, including reimbursements to the Adviser or the
Distributor of costs of advertising or marketing material, will not exceed, on
an annualized basis, .25% of average daily net assets of the applicable Series.
Each 12b-1 Plan is subject to approval annually by the Board of Directors. See
"Purchase and Issuance of Fund Shares in Creation Unit Aggregations -- The
Distributor" in the Statement of Additional Information.

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<PAGE>
The Administrator receives monthly administrative fees from the Fund at an
annual rate of .08% of the average daily net assets of each Series up to $125
million, plus .06% of the average daily net assets of each Series in excess of
$125 million up to $250 million and .04% of the average daily net assets of each
Series in excess of $250 million, subject to a minimum annual fee for each
Series of $95,000. In addition, the Administrator is reimbursed for its own
out-of-pocket costs incurred in providing administration services. The
Administrator voluntarily agreed to waive all of its administrative fees for the
period from the commencement of operations of each Series through April 30,
1996. There can be no assurance that the Administrator would agree to continue
part or all of such fee waiver for any period after April 30, 1996.

In addition to the fees described above, the Fund is responsible for the
payment of expenses that include, among other things, organizational expenses,
compensation of the Directors of the Fund, reimbursement of out-of-pocket
expenses incurred by certain service providers, exchange listing fees, brokerage
costs and litigation and extraordinary expenses. In addition, the US Index
Series bears brokerage and other transaction expenses associated with investing
the Cash Component (as defined herein) contributed on purchases of Creation Unit
aggregations of shares of such Series in portfolio securities of that Series.

CB SHARES-SM-

The shares of common stock, par value $.001 per share, of each Series are
referred to herein as the "CB Shares-SM-". The CB Shares-SM- of the initial nine
series of the Fund are the "Australia CB Shares-SM-", the "France CB
Shares-SM-", the "Germany CB Shares-SM-", the "Hong Kong CB Shares-SM-", the
"Italy CB Shares-SM-", the "Japan CB Shares-SM-", the "South Africa CB
Shares-SM-", the "UK CB Shares-SM-" and the "US CB Shares-SM-". Except in the
Creation Unit size aggregations described under "Creation Units" below, CB
Shares-SM- are not redeemable securities of the Fund.

EXCHANGE LISTING AND TRADING

The CB Shares-SM- of each Series are listed on the NYSE and trade at prices
that may differ to some degree from their net asset value. See "Investment
Considerations and Risks" and "Determination of Net Asset Value". There can be
no assurance that the requirements of the NYSE necessary to maintain the listing
of CB Shares-SM- of any Series will continue to be met or will remain unchanged.
The NYSE may remove the CB Shares-SM- of a Series from listing if (1) following
the initial twelve-month period beginning upon the commencement of trading of a
Series of CB Shares-SM-, there are fewer than 50 record and/or beneficial
holders of such CB Shares-SM- for 30 or more consecutive trading days, (2) the
value of the underlying index or portfolio of securities on which such Series is
based is no longer calculated or available or (3) such other event shall occur
or conditions exist that, in the opinion of the NYSE, makes further dealings on
the NYSE inadvisable. In addition, the NYSE will remove the CB Shares-SM- from
listing and trading upon termination of the Fund.

CREATION UNITS

The Fund sells and redeems CB Shares-SM- of each Series only in aggregations
of a specific number of shares applicable to a Series. See "Purchase and
Issuance of Fund Shares in Creation Unit Aggregations" and "Redemption of Fund
Shares in Creation Unit Aggregations". A Creation Unit of the Japan Index Series
currently consists of 250,000 CB Shares-SM- and a Creation Unit of each other
Series consists of 100,000 CB Shares-SM-. The Board of Directors of the Fund
reserves the right to declare a split in the number of CB Shares-SM- outstanding
of any Series, and to make a corresponding change in the number of CB Shares-SM-
constituting a Creation Unit, in the event that the per CB Share-SM- price in
the secondary market rises to an amount that exceeds the desirable retail range.

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<PAGE>
INVESTMENT CONSIDERATIONS AND RISKS

An investment in CB Shares-SM- of each Series involves risks similar to
those of investing in a broad-based portfolio of equity securities traded on
exchanges in the countries represented by the relevant FT Index component, 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 Fund Series whose portfolios contain securities of non-U.S. issuers
involves certain risks and considerations not typically associated with
investing in the securities of U.S. issuers. These risks include generally
greater price volatility; reduced liquidity and the significantly smaller market
capitalization of most non-U.S. securities markets; 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.

The Adviser has advised the Fund that investments in the Hong Kong and South
African equity markets in particular may entail special risks of political and
economic uncertainty. In 1997, the People's Republic of China will take control
of the colony of Hong Kong. The extent to which China may change the regulatory
or financial structures of Hong Kong, and the possible adverse effects of any
such changes on the Hong Kong equity markets, cannot be predicted. Investors
should also be aware that although South Africa currently has a democratic
government, risks of political and economic instability remain that could
adversely affect the country's equity markets.

Each Series of the Fund is classified as "non-diversified" for purposes of
the 1940 Act, which means the 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. However, each Series 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 of 1986
(the "Code"), which will relieve the Series of any liability for Federal income
tax to the extent that its earnings are distributed to stockholders. See
"Dividends and Capital Gains Distributions" in this Prospectus and "Taxes" in
the Statement of Additional Information.

To a limited extent, each Series may purchase stock index futures contracts
and options thereon traded on recognized exchanges in the markets relevant to
such Series. Each Series may also purchase exchange-traded call options and
write (sell) covered put options on securities and indices in such markets. The
purpose of purchasing stock index futures and options thereon, purchasing call
options and writing put options is to expose cash reserves and short-term money
market investments to the equity risk and return of the corresponding component
of the FT Index in order to achieve a higher correlation to such component. The
aggregate value of futures contracts and options thereon, plus the segregated
assets in respect of such contracts and written put options, any equity
securities in which the Fund invests as temporary substitutes for FT Index
securities that are unavailable, investment company securities, repurchase
agreements and any other temporary cash and short-term investments, will not
exceed 5% of the Series' net assets. See "Investment Policies and Restrictions
- -- Other Fund Investments" and "Special Considerations and Risks -- Options and
Futures" in the Statement of Additional Information.

The Series commenced operations in March 1996 (April 1996 in the case of the
South Africa Index Series), and, as indicated above, the CB Shares-SM-of each
Series were first listed and began trading on the NYSE at such time. The
Distributor does not maintain a secondary market in CB Shares-SM-. See "Purchase
and Issuance of Fund Shares in Creation Unit Aggregations -- The Distributor" in
the Statement of Additional Information. Trading in CB Shares-SM- on the NYSE
may be halted due to market conditions or, in light of NYSE rules and
procedures, for reasons that, in the view of the NYSE, make trading in CB
Shares-SM-

24
<PAGE>
inadvisable. In addition, trading in CB Shares-SM- on the NYSE is subject to
trading halts caused by extraordinary market volatility pursuant to NYSE
"circuit breaker" rules that require trading in securities on the NYSE to be
halted for a specified time period in the event of a specified market decline.
There can be no assurance that the requirements of the NYSE necessary to
maintain the listing of CB Shares-SM- of any Series will continue to be met or
will remain unchanged. See "Exchange Listing and Trading".

The net asset value of the CB Shares-SM- of each Series will fluctuate with
changes in the market value of the portfolio securities of the Series and, in
each case other than the US Index Series, changes in the market rate of exchange
between the US dollar and the Series Currency. The market prices of CB
Shares-SM- fluctuate in accordance with supply and demand on the NYSE. The Fund
cannot predict whether the CB Shares-SM- may 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 CB
Shares-SM- will be closely related to, but not identical to, the same forces
influencing the prices of the stocks of the relevant FT Index component trading
individually or in the aggregate at any point in time.

Because each Series' assets, except those of the US Index Series, are
generally invested in non-U.S. securities, the US dollar equivalent of a Series'
net assets would be adversely affected by reductions in the value of such
foreign currencies relative to the dollar and would be positively affected by
increases in the value of such foreign currencies relative to the dollar. The
Fund does not expect to engage in currency transactions for the purpose of
hedging against the decline in value of any Series Currency. Each Series may,
however, purchase forward contracts, currency futures contracts and options on
such contracts and currency call options in the Series Currency (other than the
US dollar) up to the aggregate amount of any US dollar-denominated assets to
maintain exposure to the Series Currency and may engage in currency transactions
for the purpose of meeting the US dollar cash requirements of redemptions of
Series shares in Creation Unit size aggregations. See "Investment Policies and
Restrictions -- Currency Transactions" in the Statement of Additional
Information.

CB Shares-SM- 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 in the equity securities of the relevant market
than the Fund Series. In addition, the securities held by each Series other than
the US Index Series are primarily equity securities of non-U.S. companies, which
do not provide all or the same kind of disclosure required by U.S. law and
accounting practice.

The Adviser has advised the Fund that as of June 28, 1996, the following FT
Index components were each concentrated (in excess of 25% of such component) in
the stocks of the indicated industry group: Australia -- Mining, Metals and
Minerals; Hong Kong -- Real Estate; Italy -- Utilities; and South Africa --
Precious Metals and Minerals. The portfolio securities of each corresponding
Series will generally have the same industry concentration for as long as its
corresponding FT Index component is so concentrated. An investment in the CB
Shares-SM- of each such Series therefore involves a greater exposure to the
performance and risks associated with the relevant industry group than would be
the case if such Series' portfolio securities were more broadly diversified
among industry groups. The Adviser has advised the Fund of certain risks
associated with such concentrations:

AUSTRALIA -- Mining, Metals and Minerals

Australia has known reserves of several major minerals, such as
aluminum, copper and gold, with current production sufficient for
domestic demand and exports. Although production has increased in
several areas, the mining sector is volatile, with relatively small
commodity price rises prompting large-scale investment in new capacity.

25
<PAGE>
HONG KONG -- Real Estate

Despite weakness in the Hong Kong property market, the total return
for the Real Estate Sector of the FT Index Hong Kong was over 27% in US
dollar terms for 1995. Although property prices have begun to recover
from recent declines, this sector faces several risks in the near
future. For example, the Hong Kong real estate market may be adversely
affected by any increase in interest rates, with consequently higher
borrowing costs.

ITALY -- Utilities

Italy is preparing for major changes in the utilities industry,
specifically the planned privatization of ENEL, the
government-controlled national electric power agency. Italian utilities,
traditionally a counter-cyclical industry, may be adversely affected by
increases in interest rates due to a relatively high level of debt
financing in the industry.

SOUTH AFRICA -- Precious Metals & Minerals

South African Precious Metals & Minerals have demonstrated
historical volatility in total returns. In 1995, the total return of
equities in this sector was -13.58%, versus a five-year annualized
return of 9.86%. The risks in this sector include fluctuating gold,
diamond and other precious metals prices.

Purchasers of Creation Unit aggregations of CB Shares-SM- should also see
"Special Considerations and Risks -- Continuous Offering" in the Statement of
Additional Information.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

Dividends from net investment income, including net foreign currency gains,
if any, of all Series other than the US Index Series will be declared and paid
at least annually and, in the case of the US Index Series, quarterly. Capital
gains of each Series, if any, will be distributed at least annually. Dividends
and capital gains distributions will be distributed by each Series in US
dollars. The Fund does not currently maintain a plan for the automatic
reinvestment of cash distributions in additional CB Shares-SM-. The Fund will
inform stockholders of the amount and nature of all distributions made to them.

TAX MATTERS

Each Series intends to qualify for and to elect treatment as a "regulated
investment company" under Subchapter M of the Code. As a regulated investment
company, a Series will not be subject to U.S. federal income tax on its income
and gains that it distributes to stockholders, provided that it distributes
annually at least 90% of its net investment income. Net investment income
includes income from dividends and interest and gains and losses from foreign
currency transactions net of operating expenses plus the Series' net short-term
capital gains in excess of its net long-term capital losses. Each Series intends
to distribute at least annually or, in the case of the US Index Series,
quarterly to its stockholders all of its net investment income and any net
long-term capital gains. See "Taxes -- Tax Treatment of the Fund" in the
Statement of Additional Information.

Dividends paid out of a Series' net investment income and distributions of
net realized short-term capital gains in excess of long-term capital losses are
taxable to a U.S. 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 CB Shares-SM-.

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<PAGE>
Dividends and distributions paid by a Series other than the US Index Series
generally will not qualify for the deduction for dividends received by
corporations. Distributions in excess of a Series' current and accumulated
earnings and profits will generally be treated as a tax-free return of capital
to each of the Series' investors to the extent of the investor's basis in its CB
Shares-SM- of the Series, and as capital gain thereafter.

Since more than 50% of the value of the total assets of each Series other
than the US Index Series will consist of stock or securities of foreign
corporations at the close of its taxable year, each such Series will be eligible
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 such Series. The foreign income taxes passed through (other than foreign
income taxes paid with respect to dividend equivalents received on portfolio
securities on loan) may qualify as a deduction against income or as a foreign
tax credit against U.S. federal income taxes. Each investor will be notified
within 60 days after the close of the Series' taxable year 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 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 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.

For further information on taxes, see "Taxes" in the Statement of Additional
Information.

LENDING OF SECURITIES

The Fund may lend securities from the portfolio of each Series to brokers,
dealers and other financial institutions needing to borrow securities to
complete transactions and for other purposes. Because the cash, U.S. government
securities or other assets that are pledged as collateral to the Fund earn
interest, securities lending enables a Series to earn additional income, which
may partially offset the expenses of the Series and thereby reduce the effect
that expenses have on the Series' ability to provide investment results that
substantially correspond to the price and yield performance of the relevant
component of the FT Index. These loans may not exceed 33 1/3% of a Series' total
assets. The Fund will comply with the conditions for lending established by the
SEC. In connection with these loans, a Series receives 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 Series is determined, consisting
of cash, U.S. government securities or other assets permitted by applicable
regulations. A Series may pay reasonable administrative and custodial fees in
connection with the loan of securities. The interest income a Series earns from
the loan collateral (net of any rebates to borrowers) is included in the Series'
gross investment income on which a portion of the management fee paid to DMG is
based. See "Fees". The Fund will not pay any finder's fees in connection with
the lending of portfolio securities. See "Investment Policies and Restrictions
- -- Lending Portfolio Securities" in the Statement of Additional Information for
further details of the lending transactions.

INVESTMENT RESTRICTIONS OF THE FUND

Each Series has adopted certain limitations on its investment practices.
Specifically, a Series may not:

(i) lend any funds or other assets except that a Series may enter into
repurchase agreements and may lend its portfolio securities in an amount not
to exceed 33 1/3% of the value of its total assets;

(ii) issue senior securities or borrow money, except borrowings from
banks (which may be from an affiliate of the Adviser) for temporary or
emergency purposes in an amount up to 33 1/3% of the value of

27
<PAGE>
the 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 Series will not
purchase securities while borrowings in excess of 5% of the 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 in an amount up to 33 1/3% of the value of its total assets, to
secure permitted borrowings, provided that the deposit of underlying
securities and other assets in escrow and collateral arrangements with
respect to initial or variation margin for currency transactions, options,
futures contracts and options on futures will not be deemed to be pledges of
the Series' assets;

(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 particular industry, except that a
Series will invest 25% or more of its total assets in a single industry in
the event that the relevant component of the FT Index becomes so
concentrated.

See "The FT Index" in the Statement of Additional Information for a
description of the ten most highly represented industry sectors in the FT Index
component for each Series. Except with regard to a Series' borrowing 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 Series' portfolio. With respect to the
fundamental restriction set forth in (iv) above, the Adviser has advised the
Fund that as of June 28, 1996, the following FT Index components were
concentrated (in excess of 25% of such component) in the stocks of the indicated
industry groups (as defined by the Consortium):

<TABLE>
<S> <C>
AUSTRALIA Mining, Metals and Minerals
HONG KONG Real Estate
ITALY Utilities
SOUTH AFRICA Precious Metals and Minerals
</TABLE>

See "Investment Considerations and Risks". The investment limitations
described here, and certain additional limitations described under "Investment
Policies and Restrictions -- Investment Restrictions" in the Statement of
Additional Information, may be changed with respect to a Series only by the vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of such Series.

For a description of additional investment restrictions of the Fund, see the
Statement of Additional Information.

DETERMINATION OF NET ASSET VALUE

Net asset value per share for each Series of the Fund is computed by
dividing the value of the net assets of such Series (I.E., the value of its
total assets less total liabilities) by the total number of CB Shares-SM- of
such Series outstanding, rounded to the nearest cent. Expenses and fees,
including management, administration and distribution fees, are accrued daily
and taken into account for purposes of determining net asset value.

The net asset value per CB Share-SM- of each Series is determined as of the
close of the regular trading session on the NYSE (currently 4:00 p.m., New York
time) on each day that the NYSE is open. See "Business Day".

28
<PAGE>
In computing a Series' net asset value, the portfolio securities of each
Series other than equity securities held by the UK Index Series are valued based
on their last quoted current sales price (or, if no sales price is available,
the arithmetic mean of the most recent bid and asked prices or, if no asked
price is available, at the bid price) on the primary exchange or market upon
which they trade. Equity securities held by the UK Index Series are valued based
on the arithmetic mean of the closing bid and asked prices on the London Stock
Exchange (or, if no asked price is available, at the bid price). However, when
market quotations are not readily available, portfolio securities 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 Fund. Events affecting
the values of portfolio securities that occur between the time their prices are
determined on the primary exchange or market in which they are traded and the
close of regular trading on the NYSE will not be reflected in the calculation of
a Series' net asset value unless the Adviser determines that the particular
event would materially affect net asset value, in which case an adjustment will
be made.

The values of portfolio securities denominated in currencies other than the
US dollar, determined as described above, are converted into US dollars at the
relevant foreign exchange rate for each Series in effect at 4:00 p.m., London
time, on the day that the foreign-currency values of the securities are
determined.

BOARD OF DIRECTORS

The Board of Directors of the Fund has responsibility for the overall
management of the Fund, including general supervision of the duties performed by
the Adviser and other service providers. Additional information about the Board
of Directors and the officers of the Fund appears in the Statement of Additional
Information under the heading "Management of the Fund -- Directors and Officers
of the Fund".

CAPITAL STOCK

The Fund, a Maryland corporation incorporated on August 8, 1994, is
currently comprised of nine series of shares of common stock, par value $.001
per share, referred to herein as "CB Shares-SM-": the Australia Index Series,
the France Index Series, the Germany Index Series, the Hong Kong Index Series,
the Italy Index Series, the Japan Index Series, the South Africa Index Series,
the UK Index Series and the US Index Series. The Board of Directors of the Fund
may designate additional series of common stock and classify shares of a
particular series into one or more classes of that series.

Each CB Share-SM- issued by the Fund has a PRO RATA interest in the assets
of the corresponding Series. The Fund is currently authorized to issue 5 billion
shares of common stock, including 200 million shares of each of the initial nine
Series. Fractional shares may be issued. Each CB Share-SM- has one vote with
respect to matters upon which a stockholder vote is required; stockholders 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 Series it will be voted on only by that Series and if a matter
affects a particular Series differently from other Series, that Series will vote
separately on such matter. Under Maryland law, the Fund is not required to hold
an annual meeting of stockholders unless required to do so under the 1940 Act.
The policy of the Fund is not to hold an annual meeting of stockholders unless
required to do so under the 1940 Act. All shares of the Fund (regardless of
Series) have noncumulative voting rights for the election of Directors. Under
Maryland law, Directors of the Fund may be removed by vote of the stockholders.

The Fund has provisions in its charter and by-laws that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund. The Board of Directors currently consists of six Directors, divided
into three classes. At each annual meeting of stockholders of the Fund, the term
of one class expires and the successor or successors elected to such class will
serve until the third succeeding annual

29
<PAGE>
meeting, provided that, in the event the Fund is not required to hold an annual
meeting in one or more years, the term of any class will not exceed five years.
These provisions could delay for up to two years the replacement of a majority
of the Board of Directors by the stockholders of the Fund. The replacement of a
majority of the Board could be delayed for substantially longer periods when the
Fund is not required to hold annual stockholder meetings.

The Fund expects that each Series may have one or more stockholders each
holding more than 5% of the outstanding shares of such Series. As of August 13,
1996, Morgan Grenfell & Co. Limited, a company organized in the United Kingdom,
and Bain Securities Limited, an Australian company, affiliates of the Adviser
and wholly owned subsidiaries of Deutsche Bank, beneficially owned over 5% of
the outstanding shares of one or more Series as indicated below.

As of August 13, 1996, Morgan Grenfell & Co. Limited beneficially owned 27%
of the outstanding shares of the France Index Series, 49% of the Germany Index
Series, 31% of the Hong Kong Index Series, 25% of the Italy Index Series, 37% of
the Japan Index Series, 33% of the South Africa Index Series and 49% of the US
Index Series. As of August 13, 1996, Bain Securities Limited beneficially owned
49% of the Australia Index Series.

As a result of these holdings, Morgan Grenfell & Co. Limited and Bain
Securities Limited may be deemed to control the respective Series. Based on
publicly available information, the Fund is not aware of any other control
person or beneficial owner of over 5% of the outstanding shares of a Series.

BOOK-ENTRY ONLY SYSTEM

DTC acts as securities depositary for the CB Shares-SM-. CB Shares-SM- are
represented by global securities, which are registered in the name of DTC or its
nominee and deposited with, or on behalf of, DTC. Except as provided below,
certificates will not be issued for CB Shares-SM-.

DTC has advised the Fund as follows: it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participants (the "DTC Participants") and to facilitate the
clearance and settlement of securities transactions among the DTC Participants
in such securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the NYSE, the American Stock Exchange,
Inc. and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly (the "Indirect Participants"). DTC
agrees with and represents to its Participants that it will administer its
book-entry system in accordance with its rules and by-laws and requirements of
law.

Beneficial ownership of CB Shares-SM- is limited to DTC Participants,
Indirect Participants and persons holding interests through DTC Participants and
Indirect Participants. Ownership of beneficial interests in CB Shares-SM-
(owners of such beneficial interests are referred to herein as "Beneficial
Owners") is shown on, and the transfer of ownership is effected only through,
records maintained by DTC (with respect to DTC Participants) and on the records
of DTC Participants (with respect to Indirect Participants and Beneficial Owners
that are not DTC Participants). Beneficial Owners are expected to receive from
or through the DTC

30
<PAGE>
Participant a written confirmation relating to their purchase of CB Shares-SM-.
The laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability of certain investors to acquire beneficial interests in CB
Shares-SM-.

So long as Cede & Co., as nominee of DTC, is the registered owner of CB
Shares-SM-, the registered or record owners of CB Shares-SM- shall not be the
Beneficial Owners of CB Shares-SM-. Beneficial Owners of CB Shares-SM- will not
be entitled to have CB Shares-SM- registered in their names, will not receive or
be entitled to receive physical delivery of certificates in definitive form and
will not be considered the record or registered holder thereof. Accordingly,
each Beneficial Owner must rely on the procedures of DTC, the DTC Participant
and any Indirect Participant through which such Beneficial Owner holds its
interests, to exercise any rights of a holder of CB Shares-SM-. The Fund
understands that under existing industry practice, in the event the Fund
requests any action of holders of CB Shares-SM-, or a Beneficial Owner desires
to take any action that DTC, as the record owner of all outstanding CB
Shares-SM-, is entitled to take, DTC would authorize the DTC Participants to
take such action and that the DTC Participants would authorize the Indirect
Participants and Beneficial Owners acting through such DTC Participants to take
such action and would otherwise act upon the instructions of Beneficial Owners
owning through them.

As described above, the Fund recognizes DTC or its nominee as the owner of
all CB Shares-SM- for all purposes. Conveyance of all notices, statements and
other communications to Beneficial Owners is effected as follows. Pursuant to
the Letter of Representations among the Fund, the Transfer Agent and DTC, DTC is
required to make available to the Fund upon request and for a fee to be charged
to the Fund a listing of the CB Share-SM- holdings of each DTC Participant. The
Fund will inquire of each such DTC Participant as to the number of Beneficial
Owners holding CB Shares-SM-, directly or indirectly, through such DTC
Participant. The Fund will provide each such DTC Participant with copies of such
notice, statement or other communication, in such form, number and at such place
as such DTC Participant may reasonably request, in order that such notice,
statement or communication may be transmitted by such DTC Participant, directly
or indirectly, to such Beneficial Owners. In addition, the Fund will pay to each
such DTC Participant a fair and reasonable amount as reimbursement for the
expenses attendant to such transmittal, all subject to applicable statutory and
regulatory requirements.

Distributions with respect to CB Shares-SM- of each Series will be made to
DTC or its nominee, Cede & Co., as the registered owner of all CB Shares-SM-.
The Fund expects that DTC or its nominee, upon receipt of any such
distributions, will credit immediately DTC Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in CB
Shares-SM- as shown on the records of DTC or its nominee. The Fund also expects
that payments by DTC Participants to Indirect Participants and Beneficial Owners
of CB Shares-SM-held through such DTC Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such DTC Participants. The Fund has no
responsibility or liability for any aspects of the records relating to or
notices to Beneficial Owners, or payments made on account of beneficial
ownership interests in such CB Shares-SM-, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between DTC and the DTC Participants or the
relationship between such DTC Participants and the Indirect Participants and
Beneficial Owners owning through such DTC Participants.

31
<PAGE>
DTC may determine to discontinue providing its service with respect to CB
Shares-SM- at any time by giving reasonable (currently 90 days') notice to the
Fund and discharging its responsibilities with respect thereto under applicable
law. Under such circumstances, the Fund shall take action either to find a
replacement for DTC to perform its functions at a comparable cost or, if such a
replacement is unavailable, to issue and deliver printed certificates
representing ownership of CB Shares-SM-, unless the Fund makes other
arrangements with respect thereto satisfactory to the NYSE (or such other
exchange on which the CB Shares-SM- may be listed).

BUSINESS DAY

For purposes of purchasing a Creation Unit aggregation of shares, a
"Business Day" with respect to each Series other than the US Index Series is any
day on which (i) the NYSE, (ii) the stock exchange(s) and subcustodian(s)
relevant to such Series and (iii) financial institutions in Massachusetts are
open for business and, with respect to the US Index Series, is any day on which
the NYSE and financial institutions in Massachusetts are open for business. As
of the date of this Prospectus, the NYSE observes the following holidays: New
Year's Day, President's Day (Washington's Birthday), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
local holidays for each current Series of the Fund are set forth in Appendix A
to this Prospectus. Massachusetts financial institutions, such as the Fund's
Custodian, are open on all days when the NYSE is open except Columbus Day,
Veterans Day and Martin Luther King Day (observed) for such Series. See
"Purchase and Issuance of Fund Shares in Creation Unit Aggregations".

PURCHASE AND ISSUANCE OF FUND SHARES IN CREATION UNIT AGGREGATIONS

The Fund issues and sells shares of each Series only in Creation Unit size
aggregations on a continuous basis through the Distributor at their net asset
value next determined after receipt of a purchase order in proper form, without
an initial sales charge, on any Business Day for such Series. See "Business
Day". The consideration for purchase of a Creation Unit size aggregation of
shares of a Series is the in-kind deposit of a designated portfolio of equity
securities substantially corresponding in composition and weighting to the
corresponding FT Index component (the "Fund Basket") and an amount of cash
computed as described below (the "Cash Component"). Together, the Fund Basket
and the Cash Component constitute the "Fund Deposit" which represents the
minimum initial and subsequent investment amount for shares of any Series from
the Fund.

Prior to the opening of business on the NYSE on each day that the NYSE is
open (normally by 8:00 p.m., New York time, on the previous NYSE business day),
the names and number of shares of each security constituting the Fund Basket, as
determined by the Adviser following the calculation of the net asset value of CB
Shares-SM- of each Series after the close of business on the NYSE (currently
4:00 p.m., New York time) on such previous day, is made available through the
Distributor and the facilities of the National Securities Clearing Corporation
("NSCC"), a clearing agency registered with the SEC. (Under certain
extraordinary circumstances which may make it impossible for NSCC to provide
such information on a given NYSE business day, NSCC will use the information
regarding the identity and weightings of the securities in the Fund Basket on
the previous NYSE business day.) The Fund Basket so determined or made available
following the close of business on the NYSE on a given NYSE business day will be
in effect on the following NYSE business day (i) for redemptions on such date of
Creation Unit aggregations of shares of each Series and (ii) for purchases on
such date of Creation Unit aggregations of shares of the US Index Series and of
shares of each other Series pursuant to the Alternative Purchase Option
described below. Such Fund Basket will also be in effect for purchases of
Creation Unit aggregations of CB Shares-SM- of each Series (other than the US
Index Series) on a specified Business Day designated for such Series subsequent
to such NYSE

32
<PAGE>
business day. Such a designated subsequent Business Day on which the shares of
these Series may be purchased and issued is referred to as an "Issue Date". For
the US Index Series, the Business Day on which a purchase order for a Creation
Unit of shares is submitted is the Issue Date for the purchase of such Creation
Unit. Each Fund Basket is subject to adjustment by the Adviser to reflect
changes known to the Adviser on the date of the announcement of such Fund Basket
to be in effect on the Issue Date in the relevant component of the FT Index or
resulting from stock splits and other corporate actions. The Fund Basket for
each Series generally changes with changes in the corresponding FT Index
component. See "Purchase and Issuance of Fund Shares in Creation Unit
Aggregations -- The Fund Basket" in the Statement of Additional Information.

Except as described below, the Cash Component will equal the difference
between the value of the Fund Basket and the net asset value of a Creation Unit
aggregation of shares as determined on the date a purchase order in proper form
is accepted for such Creation Unit. If the value of the Fund Basket should
exceed the net asset value of a Creation Unit size aggregation of shares on a
Business Day, the Adviser may determine to accept fewer (or none) of each, or a
designated portion, of the portfolio securities comprising the Fund Basket and
may request some cash to be substituted for the omitted securities in order to
limit the value of the Fund Basket as tendered to the net asset value of the
Creation Unit of shares. If an investor is restricted by regulation or otherwise
from investing or engaging in a transaction in one or more Fund Basket
securities, the Adviser has the right, in its discretion, to permit the cash
equivalent value of such Fund Basket security or securities to be included as
part of the Cash Component in lieu thereof, subject to any applicable cash
transaction fee. In addition, the Adviser reserves the right to permit or
require the substitution of an amount of cash to be added to the Cash Component
to replace any security in the relevant FT Index component which may not be
available in sufficient quantity for delivery or for other similar reasons. The
Cash Component, as calculated based on delivery in full of the Fund Basket
announced for a designated date, may not exceed 10% of the total purchase price
of a Creation Unit aggregation of shares on the date of acceptance of the
purchase order for such Creation Unit. However, in the event that the Fund
accepts the substitution of cash for omitted Fund Basket securities as described
above, the Cash Component may in certain limited circumstances exceed 10% of the
total purchase price. Securities not accepted as part of the Fund Basket will be
returned promptly. The net asset value per share of each Series will be computed
as described above under "Determination of Net Asset Value" at the close of
business on the NYSE (currently 4:00 p.m., New York time). Tendered securities
in the Fund Basket will be valued in the same manner as the relevant Series
values its portfolio securities.

Set forth below is a brief description of the present purchase procedure. In
addition, on or about September 1, 1996, the Fund expects to make available an
alternative purchase process (the "Alternative Purchase Option") for Creation
Unit aggregations of shares (other than shares of the US Index Series) as more
fully described below.

Purchase orders for Creation Unit size aggregations of shares may be placed
with the Distributor only by an "Authorized Participant", I.E., a DTC
Participant who has entered into an Authorized Participant Agreement (as the
same may be amended from time to time, the "Authorized Participant Agreement")
with the Fund, the Distributor and State Street, as Custodian and Transfer Agent
for the Fund. The Authorized Participant Agreement sets forth procedures for the
purchase and redemption of Creation Unit aggregations of Fund shares that
supplement those discussed in this Prospectus and the Statement of Additional
Information. The Fund does not expect to enter into Authorized Participant
Agreements with more than a few Authorized Participants. A list of the
Authorized Participants may be obtained from the Distributor. Investors who are
not Authorized Participants must make appropriate arrangements with an
Authorized

33
<PAGE>
Participant in order to purchase Creation Unit size aggregations of shares from
the Fund. These arrangements include making available an amount of cash
estimated to be sufficient to pay the Cash Component, once the net asset value
of a Creation Unit is next determined after receipt of the purchase order in
proper form, together with the cash transaction fee described below.

In accordance with the present procedures, the Fund Basket must be delivered
for receipt on the Issue Date (provided that for the France Index Series and the
South Africa Index Series delivery of the Fund Basket must be made on the day
prior to the Issue Date) into an account maintained at the Custodian, in the
case of the US Index Series (unless the Fund Basket is delivered by the CB
Shares-SM- Clearing Process as described below), or at the applicable local
subcustodian, in the case of each other Series. Delivery procedures of local
subcustodians will vary from country to country. The estimated amounts needed to
pay the Cash Component and the cash transaction fee must be made available by a
purchaser in advance of the determination of the net asset value of the shares
on the date the purchase order is submitted.

For a purchase order submitted by an Authorized Participant (on its own or
on another investor's behalf), other than one submitted through the CB
Shares-SM- Clearing Process (as defined below) for CB Shares-SM- of the US Index
Series, to be in "proper form" means that a properly completed purchase order
has been submitted to the Distributor not later than 4:00 p.m., New York time,
on the intended Issue Date; that delivery of the applicable Fund Basket has been
confirmed on such date by the Custodian; and that arrangements satisfactory to
the Fund have been made for the payment to the Custodian on such date of the
Cash Component (together with the Cash Component transaction fee applicable to
each Series other than the US Index Series), as next determined upon computation
of the net asset value of shares of the Series at 4:00 p.m. on such Issue Date.
Currently, information needed to confirm the delivery of the Fund Basket will
generally be available to the Custodian by 3:00 p.m., New York time, in the case
of the US Index Series and by 1:00 p.m., New York time, in the case of the other
Series. The Fund and the Distributor on behalf of the Fund reserve the right to
reject any order.

The foregoing procedures will be modified in certain respects for all Series
other than the US Index Series by the Alternative Purchase Option which will
permit an Authorized Participant, acting as principal, for itself or on behalf
of another person, to place a purchase order for a Creation Unit of shares of a
Series on a Business Day for the Series at the net asset value of such shares
next computed on such date, with payment of the Cash Component required on the
same date, but with the settlement of the order and delivery of the Fund Basket,
together with the cash purchase transaction fee, to be made on a designated
subsequent Business Day. It is expected that the Alternative Purchase Option
will become available from and after September 1, 1996. Following the date that
the Alternative Purchase Option becomes effective, both purchase procedures (in
addition to the CB Shares-SM- Clearing Process (described below) for the US
Index Series) will be available to investors. Investors may contact the
Distributor with respect to the effective date of the Alternative Purchase
Option. There can be no assurance whether or when the Alternative Purchase
Option will be available.

In the case of the US Index Series, an Authorized Participant that is a
participant in the Continuous Net Settlement ("CNS") System of the NSCC may
alternatively deliver the Fund Basket and the Cash Component through the CNS
clearing processes of the NSCC, as such processes have been enhanced to effect
purchases and redemptions of Creation Unit size aggregations of CB Shares-SM- of
the US Index Series (referred to herein as the "CB Shares-SM- Clearing
Process"). In such event, a purchase order to be effective on a particular Issue
Date will be deemed in proper form if it is received by 4:00 p.m., New York
time, as described above on such date and the other procedures with respect to
the CB Shares-SM- Clearing Process set forth in the Authorized Participant
Agreement are followed. The Distributor will upon request

34
<PAGE>
provide a list of Authorized Participants that are participants in the CNS
System of the NSCC. For additional information about the use of the CB
Shares-SM- Clearing Process, see "Purchase and Issuance of Fund Shares in
Creation Unit Aggregations" in the Statement of Additional Information.

A cash transaction fee payable to the Fund is imposed on purchases of
Creation Unit aggregations of shares of all Series other than the US Index
Series on the amount of the Cash Component to compensate the Fund for the
brokerage and other costs of investing the cash in portfolio securities of the
applicable Series. Investors are also responsible for payment of the costs of
transferring the Fund Basket securities to the Fund and, in the case of the
Australia, Hong Kong, South Africa and UK Index Series, all applicable stock
transfer taxes or stamp duties. See "Summary of Fund Expenses".

Purchase orders for Creation Unit aggregations of shares may be directed to
the Distributor through an Authorized Participant by a dealer which has entered
into an agreement with the Distributor for solicitation of purchases of Creation
Unit aggregations of shares.

The acquisition of CB Shares-SM- of each Series by investment companies is
subject to the restrictions of Section 12(d)(1) of the 1940 Act and applicable
state regulations.

Absent an applicable exemption, beneficial owners of 10% of the CB
Shares-SM- of any Series will be subject to the insider reporting, short-swing
profit and short sale provisions under the Exchange Act. The Exchange Act
provides that, with certain exceptions, any gain realized by any such beneficial
owner from any purchase and sale or sale and purchase of CB Shares-SM- of a
Series within any period of less than six months is recoverable by the Series.
Additionally, subject to an applicable exemption, every such 10%-or-more
beneficial owner must file with the SEC a statement showing ownership and
changes in ownership of CB Shares-SM- within ten days after the end of any
calendar month in which there has been a change in such beneficial owner's
ownership of CB Shares-SM-.

See "Distributor" and "Fees", above, and "Purchase and Issuance of Fund
Shares in Creation Unit Aggregations -- The Distributor" in the Statement of
Additional Information, for additional information concerning the distribution
arrangements for Fund shares. For additional details concerning the purchase of
CB Shares-SM- from the Fund in Creation Unit aggregations, see "Purchase and
Issuance of Fund Shares in Creation Unit Aggregations" in the Statement of
Additional Information.

REDEMPTION OF FUND SHARES IN CREATION UNIT AGGREGATIONS

CB Shares-SM- in less than Creation Unit size aggregations are not
redeemable. CB Shares-SM- of a Series are redeemed by the Fund only in Creation
Unit size aggregations on any day that the NYSE is open for trading at their net
asset value next determined after receipt of a redemption request in proper form
by the Transfer Agent on behalf of the Fund. "Proper form" for a redemption
request, other than one submitted through the CB Shares-SM- Clearing Process for
CB Shares-SM- of the US Index Series, means receipt of a duly completed
redemption request form by the Transfer Agent from an Authorized Participant by
4:00 p.m., New York time, on any day the NYSE is open, and delivery of the
shares being redeemed to the Transfer Agent through the facilities of DTC by
4:00 p.m. on such day. Creation Units of CB Shares-SM- of the US Index Series
may also be redeemed through the CB Shares-SM- Clearing Process, as described
below. Requests for redemption may not be made to the Distributor. On Columbus
Day, Veterans Day and Martin Luther King Day when the NYSE is open but DTC and
NSCC facilities for transfer of securities are closed, CB Shares-SM- must be
delivered to the Transfer Agent at the opening of business on the business day
following the day the redemption request is received. Except in the case of
redemption through the CB Shares-SM- Clearing Process, if the Transfer Agent
does not receive the redeeming investor's CB Shares-SM- through DTC facilities
by

35
<PAGE>
4:00 p.m. on the same day that the redemption request is received or, in the
case of the aforementioned DTC and NSCC holidays, at the opening of business on
the following day, the redemption request shall be rejected and may be
resubmitted the next day that the NYSE is open for business. Investors other
than Authorized Participants must make arrangements through an Authorized
Participant in order to redeem their Creation Unit aggregations of shares. Such
investors should allow for the additional time that may be required to effect
redemptions through their banks, brokers or other financial intermediaries if
such intermediaries are not Authorized Participants. Authorized Participants
will not charge any fee for handling redemptions of CB Shares-SM-. Investors who
use the services of a broker or other such intermediary may be charged a fee for
their services. The Distributor will furnish a list of the Authorized
Participants on request.

The Fund generally redeems a Creation Unit aggregation of shares of any
Series principally on an in-kind basis for a Fund Basket as announced by the
Distributor and the NSCC on the NYSE trading day prior to the request for
redemption, plus cash in an amount equal to the difference between the net asset
value of the shares being redeemed, as next determined after a receipt of a
request in proper form, and the value of the Fund Basket, less the redemption
cash transaction fee described below.

If the value of the Fund Basket should exceed the net asset value of a
Creation Unit size aggregation of shares, the Adviser may determine that fewer
(or none) of each, or a designated portion, of the portfolio securities
comprising the Fund Basket will be required to be delivered and an amount of
cash may be substituted for the omitted securities in order to limit the value
of the redemption proceeds to the net asset value of the Creation Unit
aggregation of shares being redeemed. At its sole option, the Fund may pay
redemption proceeds entirely in cash or include additional amounts of cash as
redemption proceeds in order to provide for timely delivery of such proceeds in
accordance with applicable regulations as described below.

Normally, cash redemption proceeds will be paid as soon as practicable after
the date the redemption request is received in proper form (usually one business
day), but in any event not later than seven calendar days after the date of
redemption. In-kind redemption proceeds will be delivered within the time
permitted by applicable law and regulations. Subject to applicable law or SEC
rule, enforcement position or order, the time for such delivery in some cases
could be extended, but not later than seven calendar days from the date of
redemption (other than in the case of the Japan Index Series and the UK Index
Series where in accordance with an SEC order because of local holidays, delivery
may be made in some cases within a few additional days). See Appendix A to this
Prospectus. The Fund reserves the right to redeem Creation Unit aggregations of
shares entirely for cash when local holiday schedules or other unforeseen
circumstances in the relevant local markets would otherwise result in deliveries
of in-kind redemption proceeds after the time permitted by applicable
regulations or SEC order. See "Redemption of Fund Shares in Creation Unit
Aggregations" in the Statement of Additional Information.

Redemptions of Creation Units of the US Index Series may be made through the
CB Shares-SM- Clearing Process. In any such case, State Street, as Custodian,
Transfer Agent and Index Receipt Agent (as such term is used in rules of the
NSCC), will effect a transfer of the cash redemption payment and the Fund Basket
of securities through the facilities of the NSCC as more fully described under
"Redemption of Fund Shares in Creation Unit Aggregations" in the Statement of
Additional Information. Investors may, upon request, obtain a list of the
Authorized Participants eligible to use the CB Shares-SM- Clearing Process by
calling 800-482-3940.

Investors may purchase CB Shares-SM- in the secondary market and aggregate
such purchases into a Creation Unit for redemption. There can be no assurance,
however, that there always will be sufficient liquidity in the public trading
market to permit assembly of a Creation Unit size aggregation of CB Shares-SM-.

36
<PAGE>
Investors should expect to incur brokerage and other costs in connection with
assembling a sufficient number of CB Shares-SM- to constitute a redeemable
Creation Unit. The approximate cost of a Creation Unit of each Series, based on
FT Index values at June 28, 1996, is indicated in footnote 1 under "Summary of
Fund Expenses".

For additional details concerning the redemption of Fund shares in Creation
Unit aggregations, see "Redemption of Fund Shares in Creation Unit Aggregations"
in the Statement of Additional Information.

A cash redemption transaction fee payable to each Series of the Fund other
than the US Index Series is imposed only on the cash portion of the redemption
proceeds, as described above, to offset brokerage and other transaction costs
that may be incurred by the Series. Investors also bear the costs of
transferring the Fund Basket securities from the Fund to their account or on
their order and, in the case of the Japan Index Series, all applicable stock
transfer taxes. See "Summary of Fund Expenses".

Because the portfolio securities of a Series may trade on the relevant
exchange(s) on days that the NYSE is closed or are otherwise not Business Days
for such Series, stockholders may not be able to purchase or redeem, as the case
may be, Creation Unit aggregations of shares of such Series, or to purchase or
sell CB Shares-SM- on the NYSE, on days when the net asset value of such Series
could be significantly affected by price movements in the relevant foreign
markets. Similarly, on any of the three days when Massachusetts financial
institutions are closed but both the relevant foreign exchange and the NYSE are
open, stockholders will not have the ability to purchase Creation Unit
aggregations of shares when price movements in the foreign market could
significantly affect their prices.

A stockholder redeeming CB Shares-SM- in Creation Unit aggregations will
generally receive redemption proceeds in the form of the applicable Fund Basket
and will be required to sell such securities proceeds for its own account if the
stockholder desires to obtain cash. Because such securities proceeds may be
delivered several days after the date of redemption, the stockholder may receive
significantly less cash proceeds than the redemption value of the CB Shares-SM-
redeemed due to intervening fluctuations in the market value of such securities
and, in the case of each Series other than the US Index Series, exchange rate
fluctuations between the applicable Series Currency and the US dollar. In
addition, such stockholder may incur certain transaction costs and significant
commission expenses with respect to the sale of such securities proceeds.

AVAILABLE INFORMATION

This Prospectus does not contain all the information included in the
Registration Statement filed with the 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 office of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Such documents
and other information concerning the Fund may also be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.

Statements contained in this Prospectus 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 of which this Prospectus forms
a part, each such statement being qualified in all respects by such reference.

Stockholder inquiries may be directed to the Fund in writing, c/o Deutsche
Morgan Grenfell/ C. J. Lawrence Inc., 31 West 52nd Street, New York, New York
10019, and by telephone, at (212) 469-8000.

37
<PAGE>
APPENDIX A
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
LOCAL HOLIDAYS (THROUGH MARCH 31, 1997)*

<TABLE>
<CAPTION>
SERIES LOCAL HOLIDAYS
- -------------------------------- -----------------------------------------------------------------
<S> <C>
The Australia Index Series New Year's Day (1/1/96), Australia Day (1/26/96), Good Friday
(4/5/96), Easter Monday (4/8/96), ANZAC Day (4/25/96), Queen's
Birthday (6/10/96), Bank Holiday (8/5/96), Labour Day (10/7/96),
Christmas Day (12/25/96), Boxing Day (12/26/96), New Year's Day
(1/1/97), Australia Day (1/27/97), Labor Day (3/10/97), Good
Friday (3/28/97), and Easter Monday (3/31/97)
The France Index Series New Year's Day (1/1/96), Good Friday (4/5/96), Easter Monday
(4/8/96), Labour Day (5/1/96), Victory Day (5/8/96), Ascension
Day (5/16/96), Whit Monday (5/27/96), National Day (7/14/96),
Assumption Day (8/15/96), All Saints Day (11/1/96), Armistice
Day (11/11/96), Christmas Day (12/25/96), New Year's Day
(1/1/97), Good Friday (3/28/97), and Easter Monday (3/31/97)
The Germany Index Series New Year's Day (1/1/96), Epiphany Day (1/6/96), Carnival
(2/19/96), Good Friday (4/5/96), Easter Monday (4/8/96), Labour
Day (5/1/96), Ascension Day (5/16/96), Whit Monday (5/27/96),
Corpus Christi Day (6/6/96), Assumption Day (8/15/96), German
Unity Day (10/3/96), All Saints Day (11/1/96), Prayer &
Repentance (11/20/96), Christmas Eve (12/24/96), Christmas Day
(12/25/96), Christmas Holiday (12/26/96), New Year's Eve
(12/31/96), New Year's Day (1/1/97), Good Friday (3/28/97), and
Easter Monday (3/31/97)
The Hong Kong Index Series New Year's Day (1/1/96), Lunar New Year (2/19/96), Day After LNY
(2/20/96 and 2/21/96), Ching Ming Festival (4/4/96), Good Friday
(4/5/96), Easter Saturday (4/6/96), Easter Monday (4/8/96),
Queen's Birthday (6/17/96), Tueng Ng Festival (6/20/96),
Liberation Day (8/26/96), Mid Autumn Festival (9/28/96), Chung
Yeung Festival (11/21/96), Christmas Day (12/25/96) and Boxing
Day (12/26/96), New Year's Day (1/1/97), Lunar New Year (2/6/97,
2/7/97 and 2/8/97), Hari Raya Pusan (2/10/97), Good Friday
(3/28/97), Easter Saturday (3/29/97) and Easter Monday (3/31/97)
The Italy Index Series New Year's Day (1/1/96), Epiphany Day (1/6/96), Easter Monday
(4/8/96), Liberation Day (4/25/96), Labour Day (5/1/96),
Assumption Day (8/15/96), All Saints Day (11/1/96), Immaculate
Conception (12/8/96), Christmas Day (12/25/96), Christmas
Holiday (12/26/96), New Year's Day (1/1/97), Epiphany Day
(1/6/97) and Easter Monday (3/31/97)
</TABLE>

- ------------------------
*Days that are not Business Days for purchases of Creation Unit aggregations of
shares of the indicated Series. The dates on which such holidays fall are
indicated in parentheses. In addition to the days listed in the table, days on
which the NYSE or financial institutions in Massachusetts are closed for
business are not Business Days for any Series. See "Business Day".

A-1
<PAGE>
<TABLE>
<CAPTION>
SERIES LOCAL HOLIDAYS
- -------------------------------- -----------------------------------------------------------------
<S> <C>
The Japan Index Series Bank Holiday (1/1/96, 1/2/96 and 1/3/96), Coming of Age Day
(1/15/96), National Foundation Day (2/12/96), Vernal Equinox
(3/20/96), Constitutional Memorial Day (5/3/96), National
Holiday (5/4/96), Children's Day (5/6/96), Youth Day (6/16/96),
Respect For Aged (9/16/96), Autumnal Equinox (9/23/96), Health
Sports Day (10/10/96), Culture Day (11/4/96), Labor-Thanksgiving
Day (11/23/96), Emperor's Birthday (12/23/96), Bank Holiday
(12/31/96), Bank Holiday (1/1/97, 1/2/97 and 1/3/97), Coming of
Age Day (1/15/97), National Foundation Day (2/11/97) and Vernal
Equinox (3/20/97)
The South Africa Index Series New Year's (1/1/96), Human Rights Day (3/21/96), Good Friday
(4/5/96), Family Day (4/17/96), Constitution Day (4/27/96),
Worker's Day (5/1/96), Women's Day (8/9/96), Heritage Day
(9/26/96), Day of Reconciliation (12/16/96), Christmas Day
(12/25/96), Day of Goodwill (12/26/96), New Year's Day (1/1/97),
Human Rights Day (3/21/97), Good Friday (3/28/97) and Family Day
(3/31/97)
The UK Index Series New Year's Day (1/1/96), Good Friday (4/5/96), Easter Monday
(4/8/96), May Day (5/6/96), Spring Bank Holiday (5/27/96),
Summer Bank Holiday (8/26/96), Christmas Day (12/25/96), Boxing
Day (12/26/96), New Year's Day (1/1/97), Good Friday (3/28/97)
and Easter Monday (3/31/97)
The US Index Series New Year's Day (1/1/96), Martin Luther King Day (1/15/96),
President's Day (2/19/96), Good Friday (4/5/96), Memorial Day
(5/27/96), Independence Day (7/4/96), Labor Day (9/2/96),
Columbus Day (10/14/96), Veteran's Day (11/11/96), Thanksgiving
Day (11/28/96), Christmas Day (12/25/96), New Year's Day
(1/1/97), Martin Luther King Day (1/20/97), President's Day
(2/17/97) and Good Friday (3/28/97)
</TABLE>

Instances in 1996 and through March 31, 1997 in which local holidays will
require a time period longer than seven calendar days for delivery of in-kind
redemption proceeds for the Japan Index Series and the UK Index Series are set
forth below.

THE JAPAN INDEX SERIES

<TABLE>
<CAPTION>
REDEMPTION REDEMPTION PERIOD IN
REQUEST DATE DELIVERY DATE CALENDAR DAYS
- -------------- -------------- --------------
<S> <C> <C>
12/26/96 1/6/97 11
12/27/96 1/7/97 11
12/30/96 1/8/97 9
12/31/96 1/8/97 8
</TABLE>

A-2
<PAGE>
THE UK INDEX SERIES

<TABLE>
<CAPTION>
REDEMPTION REDEMPTION PERIOD IN
REQUEST DATE DELIVERY DATE CALENDAR DAYS
- -------------- -------------- --------------
<S> <C> <C>
3/29/96 4/9/96 11
4/1/96 4/10/96 9
4/2/96 4/11/96 9
4/3/96 4/12/96 9
4/4/96 4/15/96 11
4/29/96 5/7/96 8
4/30/96 5/8/96 8
5/1/96 5/9/96 8
5/2/96 5/10/96 8
5/3/96 5/13/96 10
5/20/96 5/28/96 8
5/21/96 5/29/96 8
5/22/96 5/30/96 8
5/23/96 5/31/96 8
5/24/96 6/3/96 10
8/19/96 8/27/96 8
8/20/96 8/28/96 8
8/21/96 8/29/96 8
8/22/96 8/30/96 8
8/23/96 9/2/96 10
12/18/96 12/27/96 9
12/19/96 12/30/96 11
12/20/96 12/31/96 11
12/23/96 1/2/97 10
12/24/96 1/3/97 10
12/26/96 1/3/97 8
12/27/96 1/6/97 10
12/30/96 1/7/97 8
12/31/96 1/8/97 8
3/21/97 4/1/97 11
3/24/97 4/2/97 9
3/25/97 4/3/97 9
3/26/97 4/4/97 9
3/27/97 4/7/97 11
3/28/97 4/7/97 10
</TABLE>

A-3
<PAGE>
TABLE OF CONTENTS
OF STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
General Description of the Fund........................................... 1
Investment Policies and Restrictions...................................... 1
Special Considerations and Risks.......................................... 11
The FT Index.............................................................. 13
Exchange Listing and Trading.............................................. 27
Reasons for Investors to Purchase CB Shares-SM-........................... 27
Information and Comparisons Relating to the Fund, Secondary Market
Trading, Net Asset Size, Performance and Tax Treatment................... 29
Management of the Fund.................................................... 32
Investment Advisory, Management and Other Services........................ 35
Brokerage Transactions.................................................... 36
Purchase and Issuance of Fund Shares in Creation Unit Aggregations........ 37
Redemption of Fund Shares in Creation Unit Aggregations................... 47
Determining Net Asset Value............................................... 51
Dividends and Distributions............................................... 51
Taxes..................................................................... 51
Capital Stock and Stockholder Reports..................................... 53
Counsel and Independent Accountants....................................... 54
Report of Independent Accountants......................................... 55
Statement of Assets and Liabilities (Audited)............................. 56
Notes to Financial Statements (Audited)................................... 57
Financial Statements for the Periods ended April 30, 1996 (Unaudited)..... 59
Notes to Financial Statements (Unaudited)................................. 101
</TABLE>

B-1
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND'S SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY SHARES IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY MAY NOT LAWFULLY BE MADE.
--------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 4
Summary of Fund Expenses....................... 10
Financial Highlights........................... 14
The Fund....................................... 16
The CountryBaskets-SM- Index Fund, Inc. and
its Investment Objective.................... 16
Investment Policies.......................... 16
FT/S&P Actuaries World Indices-TM-........... 18
The FT Index Components...................... 18
Investment Management........................ 20
Distributor.................................. 21
Administrator................................ 21
Custodian and Transfer Agent................. 21
Fees......................................... 21
CB Shares-SM-................................ 23
Exchange Listing and Trading................. 23
Creation Units............................... 23
Investment Considerations and Risks.......... 24
Dividends and Capital Gains Distributions.... 26
Tax Matters.................................. 26
Lending of Securities........................ 27
Investment Restrictions of the Fund.......... 27
Determination of Net Asset Value............. 28
Board of Directors........................... 29
Capital Stock................................ 29
Book-Entry Only System....................... 30
Business Day................................. 32
Purchase and Issuance of Fund Shares in
Creation Unit Aggregations.................. 32
Redemption of Fund Shares in Creation Unit
Aggregations................................ 35
Available Information........................ 37
Appendix A..................................... A-1
Table of Contents of Statement of Additional
Information................................... B-1
</TABLE>

--------------------------

DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, ARE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
ANY OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS.

[LOGO]

THE COUNTRYBASKETS-SM-
INDEX FUND, INC.

---------------------

PROSPECTUS
---------------------

AUGUST 13, 1996

INVESTMENT ADVISER
Deutsche Morgan Grenfell/C. J. Lawrence Inc.
31 West 52nd Street
New York, New York 10019

ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

DISTRIBUTOR
ALPS Mutual Funds Services, Inc.
370 Seventeenth Street, Suite 2700
Denver, Colorado 80202
Investor Information: 1-800-482-3940

- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
FORM #GP0589
<PAGE>
[LOGO]

THE COUNTRYBASKETS-SM- INDEX FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information is not a Prospectus, and should be
read in conjunction with the Prospectus dated August 13, 1996 (the "Prospectus")
for The CountryBaskets-SM- Index Fund, Inc. (the "Fund") as it may be revised
from time to time. A copy of the Prospectus for the Fund may be obtained without
charge from ALPS Mutual Funds Services, Inc. at the address set forth herein.

AUGUST 13, 1996
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
General Description of the Fund....................................... 1
Investment Policies and Restrictions.................................. 1
Special Considerations and Risks...................................... 11
The FT Index.......................................................... 13
Exchange Listing and Trading.......................................... 27
Reasons for Investors to Purchase CB Shares-SM-....................... 27
Information and Comparisons Relating to the Fund, Secondary Market
Trading, Net Asset Size, Performance and Tax Treatment............... 29
Management of the Fund................................................ 32
Investment Advisory, Management and Other Services.................... 35
Brokerage Transactions................................................ 36
Purchase and Issuance of Fund Shares in Creation Unit Aggregations.... 37
Redemption of Fund Shares in Creation Unit Aggregations............... 47
Determining Net Asset Value........................................... 51
Dividends and Distributions........................................... 51
Taxes................................................................. 51
Capital Stock and Stockholder Reports................................. 53
Counsel and Independent Accountants................................... 54
Report of Independent Accountants..................................... 55
Statement of Assets and Liabilities (Audited)......................... 56
Notes to Financial Statements (Audited)............................... 57
Financial Statements for the Periods ended April 30, 1996
(Unaudited).......................................................... 59
Notes to Financial Statements (Unaudited)............................. 101
</TABLE>

------------------------

"The CountryBaskets Index Fund, Inc.", "CountryBaskets" and "CB Shares" are
service marks of Deutsche Morgan Grenfell/C. J. Lawrence Inc. ("DMG"). DMG has
filed applications for registration of such service marks with the U.S. Patent
and Trademark Office. The Fund is an authorized licensee of such marks.

------------------------

"Financial Times/Standard & Poor's Actuaries World Indices" and "FT/S&P
Actuaries World Indices" are trademarks of The Financial Times Limited ("FT")
and Standard & Poor's ("S&P"), and have been licensed for use by DMG. The Fund
is an authorized sublicensee thereof. The Fund and the CB Shares-SM- are not
sponsored, endorsed, sold or promoted by FT or S&P and neither FT nor S&P makes
any representation regarding the advisability of investing therein.
------------------------

(i)
<PAGE>
OWNERS OF THE PRODUCTS INTO CONSIDERATION IN DETERMINING, COMPOSING OR
CALCULATING THE INDICES. THE OWNERS ARE NOT RESPONSIBLE FOR AND HAVE NOT
PARTICIPATED IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY
WHICH THE PRODUCTS ARE TO BE CONVERTED INTO CASH. THE OWNERS HAVE NO
OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING
OR TRADING OF THE PRODUCTS.

The FT-Actuaries World Indices-TM- were originally developed by Goldman,
Sachs & Co., NatWest Securities Limited and FT in 1986, and until May 23, 1995,
were jointly published by them. On May 23, 1995, Standard & Poor's, a division
of The McGraw-Hill Companies, Inc., joined FT and Goldman, Sachs & Co. as a
co-publisher of the FT-Actuaries World Indices-TM-, now known as the Financial
Times/Standard & Poor's Actuaries World Indices-TM- or FT/S&P Actuaries World
Indices-TM-. The FT/S&P Actuaries World Indices-TM- are a continuation of the
FT-Actuaries World Indices-TM-. Following the current transition period, FT and
S&P will jointly calculate the indices. In November 1995, FT transferred its
ownership rights in the FT/S&P Actuaries World Indices-TM- to FT-SE, a company
jointly owned by FT, the London Stock Exchange and the Institute of Actuaries.
By the end of 1996, it is expected that FT-SE will assume responsibility for
calculating the European and Asia-Pacific indices. As of August 7, 1996, S&P
began calculating the U.S. indices. The Fund is not sponsored by or affiliated
with S&P, FT-SE or FT. References herein to the "FT Index" and to certain index
data prior to May 23, 1995 are to the FT-Actuaries World Index-TM-; references
thereafter are to the FT/S&P Actuaries World Indices-TM-.
------------------------

Unless otherwise specified, all references in this Statement of Additional
Information ("SAI") to "dollars", "US $" or "$" are to United States dollars,
all references to "A$" are to Australian dollars, all references to "FF" are to
French francs, all references to "DM" are to Deutsche marks, all references to
"HK$" are to Hong Kong dollars, all references to "IL" are to Italian lira, all
references to "Y" are to Japanese Yen, all references to "CR" are to South
African commercial rands (a currency abandoned as of March 20, 1995), all
references to "R" are to South African rands and all references to "L" are to
pounds sterling. On August 9, 1996, the noon buying rates in New York City for
cable transfers payable in the applicable currency, as certified for customs
purposes by the Federal Reserve Bank of New York, were as follows for each
US$1.00: A$1.2845, FF 5.0582, DM 1.4785, HK$ 7.7373, IL1,517.3, Y 108.1, R
4.5375 and L .6456. Some numbers in this SAI have been rounded. All US-dollar
equivalents provided in this SAI are calculated at the exchange rate prevailing
on the date to which the corresponding foreign currency amount refers.

(ii)
<PAGE>
GENERAL DESCRIPTION OF THE FUND

The CountryBaskets-SM- Index Fund, Inc. (the "Fund") is a management
investment company organized as a series fund. The Fund was incorporated under
the laws of the State of Maryland under the name "Eurofund, Inc." on August 8,
1994. The Fund is authorized to issue shares of common stock, with a par value
of $.001 per share, in one or more series. The Fund's shares of common stock
(sometimes referred to herein as "CB Shares-SM-" or "CountryBaskets-SM-")
currently are issued in nine series (each, a "Series"): the Australia Index
Series, the France Index Series, the Germany Index Series, the Hong Kong Index
Series, the Italy Index Series, the Japan Index Series, the South Africa Index
Series, the UK Index Series and the US Index Series.

INVESTMENT POLICIES AND RESTRICTIONS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE SECTIONS ENTITLED "THE FUND -- INVESTMENT POLICIES" AND "-- INVESTMENT
RESTRICTIONS OF THE FUND" IN THE PROSPECTUS.

Each of the initial nine Series seeks to remain fully invested, except to
the extent described below under "Other Fund Investments", in a portfolio of
common stocks and other equity securities which will provide investment results
that substantially correspond to the price and yield performance of the
corresponding country component of the FT Index. Brief descriptions of the
equity markets in which the Series will be invested are provided below. Unless
otherwise indicated, numerical data set forth below with respect to the equity
markets represented by the Series of the Fund were provided by Goldman, Sachs &
Co. Neither the Fund nor the Adviser has independently verified such data.
References below to "GDP" are to nominal Gross Domestic Product, I.E., total
national output of goods and services valued at current market prices.

THE AUSTRALIAN EQUITY MARKETS

GENERAL BACKGROUND. Publicly traded Australian equity securities are listed
on the Australian Stock Exchange Limited ("ASX"), which maintains wholly-owned
subsidiary exchanges in Sydney, Adelaide, Brisbane, Hobart, Melbourne and Perth.
The local exchange hours are 10:00 a.m. to 4:00 p.m. (6:00 p.m. - 12:00 a.m.
Eastern Standard Time ("EST")). Only equity securities traded on the ASX are
currently eligible for inclusion in the Australia component of the FT Index.

REPORTING, ACCOUNTING AND AUDITING. Australian reporting, accounting and
auditing practices are regulated by the Australian Securities Commission. These
practices bear many similarities to American standards, but differ significantly
in some important respects. In general, Australian corporations are not required
to provide all of the disclosure required by American law and accounting
practice, and such disclosure may be less timely and frequent than that required
of U.S. corporations.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the total market
capitalization of the Australian equity markets was approximately A$304.3
billion, or US $227.1 billion. The aggregate "investible" market capitalization
(as defined by the World Index Policy Committee ("WIPC") of the FT Index,
described below under "The FT Index -- The World Index Policy Committee") of
Australia was approximately A$269.4 billion, or US $201.1 billion, as of
December 29, 1995. The leading major market index is the All Ordinaries Index,
owned and published by the ASX. The 1995 GDP of Australia, based on data
provided by the Adviser, was US $354.2 billion.

THE FRENCH EQUITY MARKETS

GENERAL BACKGROUND. Equity securities trade on the BOURSE DE PARIS (Paris
Stock Exchange), which since 1991 lists all of the securities previously traded
on France's seven regional stock exchanges. Trading in most of the stocks listed
on the Bourse takes place through the Cotation Assistee en Continu (CAC), a
computer order-driven trading system. The local exchange hours for the Paris
Stock Exchange are 10:00 a.m. - 5:00 p.m. (4:00 a.m. - 11:00 a.m. EST). Only
equities traded on the Official List (MARCHE OFFICIEL) are currently eligible
for inclusion in the France component of the FT Index.

REPORTING, ACCOUNTING AND AUDITING. Although French reporting, accounting
and auditing practices are considered rigorous by European standards, they are
not identical to U.S. standards in some important
<PAGE>
respects. In general, French corporations are not required to provide all of the
disclosure required by U.S. law and accounting practice, and such disclosure may
be less timely and frequent than that required of U.S. corporations.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the total market
capitalization of the French equity markets was approximately FF2,515.1 billion,
or US $514.3 billion. The aggregate investible market capitalization (as defined
by the WIPC) of France was approximately FF2,058.6 billion, or US $421.0
billion, as of December 29, 1995. The leading major market index in France is
the CAC-40, owned and published by the Societe des Bourses Francais. The 1995
GDP of France, based on data provided by the Adviser, was US $1.6 trillion.

THE GERMAN EQUITY MARKETS

GENERAL BACKGROUND. Equity securities trade on Germany's eight independent
local stock exchanges. The Frankfurt Stock Exchange, which accounted for
approximately 73.9% of the total trading volume on the German stock exchanges in
1994, is the principal stock exchange in Germany. Exchange securities are
denominated in Deutsche marks, the official currency of Germany. The local
exchange hours are 10:30 a.m. - 1:30 p.m. (4:30 a.m. - 7:30 a.m. EST). German
stock exchanges offer three different market segments in which stocks are
traded: the official market segment (AMTLICHER HANDEL); the regulated unlisted
market (GEREGELTER MARKT); and the unofficial, unregulated, over-the-counter
market (FREIVERKEHR). The official market comprises trading in shares that have
been formally admitted to official listing by the admissions committee of the
relevant stock exchange, based upon disclosure in the listing application or
"prospectus". The regulated unlisted market comprises trading in shares admitted
to the stock exchange but not traded in the official market. Only equity
securities traded on the official and regulated unlisted markets of the
Frankfurt Stock Exchange are currently eligible for inclusion in the German
component of the FT Index.

REPORTING, ACCOUNTING AND AUDITING. German reporting, accounting and
auditing standards differ from U.S. standards in important respects. German
corporations, other than subsidiaries of U.S. companies, normally do not provide
all or the same kind of disclosure required by U.S. law and accounting practice,
and such disclosure may be less timely and less frequent than required of public
corporations in the United States.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the total market
capitalization of Germany was approximately DM 785.9 billion, or US $549.0
billion. The aggregate investible market capitalization (as defined by the WIPC)
of Germany was approximately DM 646.4 billion, or US $451.6 billion, as of
December 29, 1995. The leading major market index in Germany is the DEUTSCHER
AKTIENINDEX, or "DAX", published by the Frankfurt Stock Exchange. The 1995 GDP
of Germany, based on data provided by the Adviser, was US $2.4 trillion.

THE HONG KONG EQUITY MARKETS

GENERAL BACKGROUND. The publicly traded equity securities of Hong Kong are
listed on the Stock Exchange of Hong Kong Limited ("HKX"), Hong Kong's sole
stock exchange. Exchange securities are denominated in Hong Kong dollars, the
official currency of Hong Kong. The local exchange hours are 10:00 a.m. - 12:30
p.m. and 2:30 p.m. - 3:55 p.m. (9:00 p.m. - 11:30 p.m. EST and 1:30 a.m. - 2:55
a.m. EST). Only equity securities traded on the HKX and shares of certain Hong
Kong issuers that are listed on the Singapore Stock Exchange are currently
eligible for inclusion in the Hong Kong component of the FT Index.

REPORTING, ACCOUNTING AND AUDITING. While Hong Kong has significantly
upgraded reporting, accounting and auditing practices during the last decade,
its standards remain significantly less rigorous than U.S. standards. In
general, Hong Kong corporations are not required to provide all or the same kind
of disclosure required by U.S. law and accounting practice, and such disclosure
may be less timely and frequent than that required of U.S. corporations.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the total market
capitalization of Hong Kong was approximately HK $2,067.5 billion, or US $267.3
billion. The aggregate investible market capitalization

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<PAGE>
(as defined by the WIPC) of Hong Kong was approximately HK $1,920.3 billion, or
US $248.3 billion, as of December 29, 1995. The leading major market index is
the Hang Seng, owned and published by HSI Services. The 1995 GDP of Hong Kong,
based on data provided by the Adviser, was US $144.3 billion.

THE ITALIAN EQUITY MARKETS

GENERAL BACKGROUND. Italy's ten stock exchanges were consolidated in 1993
into one national stock exchange, BORSA VALORI ITALIANA (the "Italian Stock
Exchange"). The Italian market is dominated by financial companies and utilities
and is not representative of that country's overall economy. Only equity
securities on the official list (LISTINO DELLA BORSA) of the Italian Stock
Exchange are currently eligible for inclusion in the Italy component of the FT
Index. The local exchange hours of the Italian Stock Exchange are 10:00 a.m. -
5:00 p.m. (4:00 a.m. - 11:00 a.m. EST).

REPORTING, ACCOUNTING AND AUDITING. Italian reporting, accounting and
auditing practices are regulated by Italy's National Control Commission. These
practices bear some similarities to American standards, but differ significantly
in many important respects. Generally, Italian corporations are not required to
provide all or the same kind of disclosure required by U.S. law and accounting
practice, and such disclosure may be less timely, frequent and consistent than
that required of U.S. corporations.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the aggregate
capitalization of the Italian markets was approximately IL312.1 trillion, or US
$196.8 billion. The aggregate investible market capitalization (as defined by
the WIPC) of Italy was approximately IL247.1 trillion, or US $155.7 billion, as
of December 29, 1995. The leading major market index is the MIB-30, owned and
published by the Milan Stock Exchange. The 1995 GDP of Italy, based on data
provided by the Adviser, was US $1.1 trillion.

THE JAPANESE EQUITY MARKETS

GENERAL BACKGROUND. Equity securities trade on Japan's eight stock
exchanges, as well as in an over-the-counter market. Japan is second only to the
U.S. in aggregate stock market capitalization. Only equity securities traded on
the first and second sections of the Tokyo Stock Exchange and the first section
of the Osaka Stock Exchange, which together accounted for approximately 93.1% of
the total trading volume on the Japanese stock exchanges in 1994, are currently
eligible for inclusion in the Japan component of the FT Index. The local
exchange hours of the Tokyo and Osaka Stock Exchanges are 9:00 a.m. - 11:00 a.m.
and 12:30 p.m. - 3:00 p.m. (7:00 p.m. - 9:00 p.m. and 10:30 p.m. - 1:00 a.m.
EST).

REPORTING, ACCOUNTING AND AUDITING. Although some Japanese reporting,
accounting and auditing practices are substantially based on U.S. principles,
these standards are not identical to American ones in some important respects,
particularly with regard to unconsolidated subsidiaries and related structures.
Generally, Japanese corporations are not required to provide all or the same
kind of disclosure required by U.S. law and accounting practice, and such
disclosure may be less timely and frequent than that required of U.S.
corporations.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the total market
capitalization of Japan was approximately Y392.6 trillion, or US $3.8 trillion.
The aggregate investible market capitalization (as defined by the WIPC) of Japan
was approximately Y353.4 trillion, or US $3.4 trillion, as of December 29, 1995.
A leading major market index in Japan is the Nikkei-225, owned and published by
Nihon Keizai Shimbun. The 1995 GDP of Japan, based on data provided by the
Adviser, was US $4.6 trillion.

THE SOUTH AFRICAN EQUITY MARKETS

GENERAL BACKGROUND. South Africa's publicly traded equity securities are
listed on the Johannesburg Stock Exchange ("JSX"), South Africa's sole stock
exchange. The JSX, which has historically concentrated in mining industries, is
far less diversified than the overall South African economy. The aggregate
market capitalization of the JSX was equal to more than 100% of South Africa's
GDP as of December 30, 1994. The local exchange hours are 9:30 a.m. - 1:00 p.m.
and 2:00 p.m. - 4:00 p.m. (2:30 a.m. - 6:00 a.m. and 7:00 a.m. - 9:00 a.m. EST).
Prior to March 20, 1995, South Africa had maintained a two-currency system that
included the Commercial Rand, but now it has only a single unit of currency, the
Rand ("R").

-3-
<PAGE>
REPORTING, ACCOUNTING AND AUDITING. South Africa's reporting, accounting
and auditing practices differ significantly from American standards in many
respects. In general, South African corporations are not required to provide all
or the same kind of disclosure required by U.S. law and accounting practice, and
such disclosure may be less timely and frequent than that required of U.S.
corporations.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the total market
capitalization of South Africa was approximately R766.9 billion, or US $210.4
billion. The aggregate investible market capitalization (as defined by the WIPC)
of South Africa was approximately R621.4 billion, or US $170.4 billion, as of
December 29, 1995. A leading broad major market index in South Africa is All
Share Index, jointly published by the JSX and the Actuarial Society of South
Africa. The 1995 GDP of South Africa, based on data provided by the Adviser, was
US $136.0 billion.

THE UNITED KINGDOM EQUITY MARKETS

GENERAL BACKGROUND. The United Kingdom is Europe's largest equity market in
terms of aggregate market capitalization. Trading is fully computerized under
the Stock Exchange Automated Quotation System. The London Stock Exchange has the
largest volume of trading in international equities in the world. The local
exchange hours are 8:30 a.m. - 4:30 p.m. (3:30 a.m. - 11:30 a.m. EST). Only
stocks traded on the official list of the London Stock Exchange are currently
eligible for inclusion in the UK component of the FT Index.

REPORTING, ACCOUNTING AND AUDITING. Although United Kingdom reporting,
accounting and auditing standards are among the most stringent outside the
United States, such standards are not identical to U.S. standards in some
important respects. Some United Kingdom corporations are not required to provide
all or the same kind of disclosure required by U.S. law and accounting practice,
and such disclosure may, in certain cases, be less timely and less frequent than
that required of U.S. corporations.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the aggregate market
capitalization of the United Kingdom was approximately L895.4 billion, or US
$1,390.2 billion. The aggregate investible market capitalization (as defined by
the WIPC) of the United Kingdom was approximately L851 billion, or US $1,321.2
billion, as of December 29, 1995. A leading major market index in the United
Kingdom is the FT-SE 100, published by the London Stock Exchange in association
with The Financial Times Limited and the Institute and Faculty of Actuaries. The
1995 GDP of the United Kingdom, based on data provided by the Adviser, was US
$1.1 trillion.

THE UNITED STATES EQUITY MARKETS

GENERAL BACKGROUND. Equity securities trade on nine U.S. stock exchanges.
The New York Stock Exchange, Inc. (the "NYSE"), the American Stock Exchange (the
"AMEX") and the National Association of Securities Dealers Automated Quotation
("NASDAQ") system accounted for more than 91.2% of the total U.S. equity trading
volume in 1994. Only stocks traded on the NYSE, the AMEX and the NASDAQ are
currently eligible for inclusion in the US component of the FT Index. The
exchange hours for the NYSE, AMEX and NASDAQ are 9:30 a.m. - 4:00 p.m., EST.

REPORTING, ACCOUNTING AND AUDITING. U.S. reporting, accounting and auditing
practices are generally regarded as the most stringent of all major global
markets.

STRUCTURE OF EQUITY MARKETS. As of December 29, 1995, the aggregate
capitalization of the U.S. equity markets was approximately US $7.2 trillion.
The aggregate investible market capitalization (as defined by the WIPC) of the
United States was approximately US $6.7 trillion as of December 29, 1995. A
leading broad major market index in the U.S. is the Standard & Poor's 500 Index*
(the "S&P 500"), owned and published by S&P. The 1995 GDP of the United States,
based on data provided by the Adviser, was US $7.1 trillion.

- ------------------------
*"S&P", "Standard & Poor's", "S&P 500" and "Standard & Poor's 500" are
trademarks of Standard & Poor's, a division of The McGraw-Hill Companies, Inc.

-4-
<PAGE>
OTHER FUND INVESTMENTS

Because the investment objective of each Series is to provide investment
results that substantially correspond to the price and yield performance of the
equity securities in the applicable component of the FT Index, each Series will
invest the largest proportion of its assets as is practicable, in any event at
least 95% of its net assets, in the equity securities of the relevant FT Index
component.

The remainder of each Series' assets will consist of temporary cash which
may be used to purchase high quality, short-term fixed income securities
denominated in US dollars or foreign currency, including obligations of the U.S.
Government and its agencies or instrumentalities, obligations issued or
guaranteed by foreign sovereigns, certificates of deposit and other short-term
obligations of domestic and foreign banks and commercial paper; repurchase
agreements collateralized by obligations issued or guaranteed by the U.S.
Government or an agency thereof; securities of U.S. and foreign investment
companies; stock index futures contracts or options on such contracts; and
exchange-traded call options on securities and indices in the relevant market.
Each Series may also purchase other equity securities that are not components of
the relevant FT Index component but may be an appropriate substitution for a
security in the relevant FT Index component if market conditions make it
impracticable to purchase such index security. Such "substitute" securities will
be carefully selected for the high degree of positive correlation between the
values of such securities and the values of the FT Index securities to which the
Series seeks exposure.

Investments in foreign obligations involve certain investment risks that are
somewhat different from those affecting domestic obligations. Foreign issuers
are not generally subject to uniform accounting, auditing and financial
reporting standards or governmental supervision comparable to those applicable
to U.S. issuers. In addition, there is a possibility that liquidity could be
impaired because of future political and economic developments, that the foreign
obligations may be less marketable than comparable obligations of U.S. entities,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on foreign debt obligations, that deposits in foreign banks may be
seized or nationalized and that governmental restrictions (such as foreign
exchange controls) may be adopted which might adversely affect the payment of
principal and interest on those obligations.

The Adviser may make short-term investments of the available cash of any
Series in securities of U.S. or foreign investment companies that are invested
principally in the equity securities of the country relevant to such Series, for
the purpose of exposing such available cash to the equity risk and return of
that country's equity market. A Series may invest in investment company
securities only in order to achieve a higher correlation with its corresponding
FT Index component than could be obtained if cash reserves were invested in
short-term debt obligations. A Series' investments in investment company
securities are limited by Section 12(d)(1) of the 1940 Act and any applicable
state regulations.

Regulatory requirements designed to eliminate leverage accompanying
investments in futures contracts and options on futures contracts require each
Series to segregate in an account with the Fund's custodian (see "Investment
Advisory, Management and Other Services -- The Administrator, Custodian and
Transfer Agent" below) an amount of its assets equal to the obligation to
purchase the assets underlying such contracts. The assets segregated will be
cash, U.S. Government securities or other liquid, high-grade, short-term debt
securities denominated in the currency or currencies of the portfolio equity
securities of the particular Series (the "Series Currency").

The purpose of investing in futures contracts and options on futures
contracts and purchasing call options and the related activity of writing put
options (explained below) is to expose cash reserves and short term money market
investments to the equity risk and return of the corresponding component of the
FT Index in order to achieve a higher correlation with such component. A Series
will not invest in options and futures contracts and options thereon for
speculative purposes. Certain of the risks typically associated with such
contracts, E.G., the risk that the portfolio manager's view of future market
movements may be mistaken, are therefore not applicable to the Fund.

-5-
<PAGE>
The total value of options and futures contracts and options thereon, plus
the related segregated assets, the "substitute" securities for FT Index
component securities and the investment company securities referred to above,
repurchase agreements and any other temporary cash and short-term investments,
will not exceed 5% of the net asset value of a Series.

OPTIONS ON SECURITIES

PURCHASE OF CALL OPTIONS

Each Series may purchase call options on securities and indices thereof.
Call options are contracts which give the buyer the right, but not the
obligation, to buy a fixed amount of securities at a fixed price for a fixed
period of time or, in the case of options on indices, to make or receive a cash
settlement. A Series will only purchase call options, in combination with other
instruments, for the purpose of exposing the Series' cash reserves and
short-term investments to the equity risk and return of the corresponding
component of the FT Index in order to achieve a higher correlation with such
component. It will not purchase call options for purposes of benefiting from
anticipated market appreciation without the risk of market decline. Each Series
may purchase only options that are traded on recognized United States and
foreign exchanges.

WRITING PUT OPTIONS

When the Fund writes (sells) a put option, the purchaser has the right, for
a specified period of time, to sell the securities or index subject to the
option to the Fund at the specified exercise price. The Fund receives a premium
for writing the put option which it retains whether or not the option is
exercised.

A Series will write a covered put option only in connection with its
purchase of a related call option on the same security or index. This technique
will allow a Series to expose uninvested cash to the risk of both market
appreciation and market decline in the value of the relevant security or index.

FUTURES CONTRACTS

A Series will enter into futures contracts only for the purpose of exposing
the Series' cash reserves and short-term investments to the equity risk and
return of the corresponding component of the FT Index in order to achieve a
higher correlation with such component. A Series will not use futures for
speculative purposes. Each Series intends to invest only in contracts on indices
of securities which the Adviser believes will provide appropriate proxies for
the performance of the FT Index component relevant to such Series. A Series may
enter into such futures contracts on any recognized futures exchange, if
permitted by applicable U.S. law.

A futures contract on a stock index is an agreement between two parties to
buy and sell an index of securities at its closing value at a specified future
time. Stock index futures are settled by delivery by one party of the net cash
settlement price rather than the securities underlying the contract. Each Series
will only take "long" futures positions, I.E., the Series will assume the
obligation to acquire the index of securities underlying the contract.

In order to open and maintain a position in futures contracts, the Fund is
required to make a good faith deposit, known as "initial margin", in cash or
government securities, which are held in the broker's name in an account at the
Fund's custodian. A Series expects to earn interest income on its initial margin
deposits. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish initial margin requirements
which are higher than the exchange minimums. Initial margin requirements
typically range upward from less than 5% of the underlying value of the contract
being traded. After a futures contract position is opened, the value of the
contract is marked to market daily. The change in the futures contract's closing
value is settled each day by paying or receiving "variation margin", depending
upon the direction of change in the value of the futures contract. Variation
margin payments are made to and from the futures broker for as long as the
contract remains open.

A Series will invest in futures contracts and options thereon only to the
extent that the Fund, the Adviser or any related persons will not as a result of
such contracts be required to register as a "commodity pool operator" with the
Commodity Futures Trading Commission (the "CFTC"). Under CFTC regulations, each
Series will be required to limit the amount of initial margin and premiums on
positions in futures or options

-6-
<PAGE>
on futures entered into by the Series for non-hedging purposes to not more than
5% of the net assets of such Series. A Series will limit its investments to
those which have been approved by the CFTC for investment by United States
investors.

OPTIONS ON FUTURES CONTRACTS

Each Series may also enter into options on futures contracts for the same
purposes described above with respect to options and futures contracts. The Fund
may purchase only call options on futures contracts. A call option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a long position in a futures contract at a specified exercise price at
any time during the option exercise period.

REPURCHASE AGREEMENTS

Each Series may invest in repurchase agreements collateralized by
obligations issued or guaranteed by the U.S. Government or any agency thereof
for the purpose of generating income from its excess cash balances. A repurchase
agreement is an agreement under which a Series purchases a security or money
market instrument and simultaneously commits to resell that security or
instrument to the seller (a bank or securities dealer) at an agreed upon price
on an agreed upon date (usually within seven days of purchase). A repurchase
agreement may be considered a loan collateralized by such security or
instrument. The resale price reflects the purchase price plus an agreed upon
market rate of interest unrelated to the coupon rate or date of maturity of the
purchased security. In these transactions, the securities acquired by the Series
(including accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement and will be held by State Street Bank and
Trust Company ("State Street"), the Fund's custodian (the "Custodian"), until
repurchased. A Series will enter into repurchase agreements only with a seller
meeting creditworthiness standards approved by the Fund's Board of Directors and
the Adviser will monitor the creditworthiness of the seller under the general
supervision of the Board of Directors. The Custodian will continually monitor
the value of the underlying securities to ensure that their value always equals
or exceeds the total value of the repurchase agreement.

The use of repurchase agreements involves certain risks. For example, if the
seller of securities under the agreement defaults on its obligation to
repurchase the underlying security at a time when the value of the security has
declined, the Series holding the repurchase agreement may incur a loss upon
disposition of the security. If the seller under the agreement becomes insolvent
and subject to liquidation or reorganization under the U.S. Bankruptcy Code or
other laws, a court may determine that the underlying security is collateral for
a loan by the Series not within the control of the Series and therefore the
Series may not be able to substantiate its interest in the underlying security
and may be deemed an unsecured creditor of the seller. While the Adviser
acknowledges these risks, it is expected that they can be controlled through
careful monitoring procedures.

LENDING PORTFOLIO SECURITIES

To a limited extent each Series may lend its portfolio securities to
brokers, dealers and other financial institutions, provided it receives
collateral in US dollar or Series Currency cash, U.S. Government securities or
other assets permitted by applicable regulations, the total value of which at
all times is maintained in an amount equal to at least 100% of the current
market value of the securities loaned. By lending its portfolio securities, a
Series can increase its income through securities lending fees and through the
investment of the collateral and help offset the effect that the expenses of the
Series have on the ability of such Series to provide investment results that
correspond to that of its applicable component of the FT Index. Cash collateral
received by any Series against securities loans will be invested only in high
quality, short-term debt securities, repurchase agreements or certain commingled
money market investment vehicles offered by the Fund's Custodian. These loans
may not exceed 33 1/3% of each Series' total assets. Each Series may pay
reasonable administrative and custodial fees in connection with the loan of
securities. The interest income a Series earns from the loan collateral (net of
any rebates to borrowers) is included in the Series' gross investment income on
which a portion of the management fee paid to DMG, in its capacity as investment
adviser to the Fund, is based. See "Investment Advisory, Management and Other
Services -- The Investment Adviser". The Fund will pay no finder's fees in
connection with the lending of its securities.

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<PAGE>
The following conditions will be met whenever portfolio securities are
loaned: (1) the Series must receive at least 100% collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities loaned rises above the level of the collateral; (3) the Series must
be able to terminate the loan at any time; (4) the Series must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions on the loaned securities, and any increase in market value; (5)
the Series may pay only reasonable custodian fees in connection with the loan
and will pay no finder's fees; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board of Directors (the "Board"
or the "Directors") must terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs. Each
Series will comply with the foregoing conditions. DMG will provide securities
lending services to the Fund under its investment advisory and management
agreement with the Fund. DMG may delegate certain duties with respect to
securities lending to State Street, which acts as Custodian, or to other
qualified persons approved by the Fund's Board of Directors, pursuant to an
agency agreement. See "Investment Advisory, Management and Other Services -- The
Investment Adviser".

CURRENCY TRANSACTIONS

The investment policy of each Series is to remain as fully invested as
practicable in the equity securities of the relevant FT Index component. Hence,
no Series of the Fund expects to engage in currency transactions for the purpose
of hedging against declines in the value of the Series Currency.

Each Series may engage in currency transactions for the purpose of meeting
the US dollar cash requirements of redemptions of Series shares in Creation Unit
size aggregations (see "Purchase and Issuance of Fund Shares in Creation Unit
Aggregations -- Generally") and Series expenses and distributions. This is
considered a "transaction hedge". In addition, to the extent a Series (other
than the US Index Series) holds US dollar-denominated cash balances or
short-term money market-type investments, it may purchase a forward currency
contract or other instruments which would enable it to purchase the applicable
Series Currency at a fixed price in the future and eliminate the risk that the
US dollar-denominated assets of the Series would widen any deviation between the
performance of the applicable FT Index component and the Series in the event
that the value of the Series Currency rose in relation to the US dollar. This is
considered a "position hedge". A non-US Series may also enter into arrangements
under which its cash reserves in the applicable Series Currency (for example,
foreign currency received by such Series as collateral against loans of
portfolio securities) would be converted into US dollars for purposes of
investing in an available US dollar-denominated short-term money market
investment vehicle and the money market investment (including accrued interest)
would be converted back to Series Currency the following day at an exchange rate
adjusted for any differential between prevailing US dollar and Series Currency
short-term interest rates.

Since it is not expected that US dollar-denominated assets will exceed 5% of
net assets of any Series other than the US Index Series (and would under normal
conditions be significantly less than 5%), the value of forward currency
contracts, currency futures contracts and options on such contracts, currency
options and or other currency instruments should not exceed 5% of a Series' net
assets and net forward currency contracts and other currency instruments should
not exceed the value of US dollar-denominated assets.

Transaction hedging is the purchase or sale of a forward contract with
respect to specific receivables or payables of a Series generally arising in
connection with the purchase or sale of its portfolio securities and accruals of
interest or dividends receivable and Series expenses. Position hedging is the
sale of a foreign currency with respect to portfolio security positions
denominated or quoted in that currency. A forward currency contract involves 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. A Series may purchase
currency forward contracts traded over-the-counter with dealers in such
contracts. Currency options give the buyer the right, but not the obligation, to
buy or sell a fixed amount of a specific currency at a fixed price for a fixed
period of time. A currency futures contract is a contract involving an
obligation to deliver or acquire the specified amount of currency at a specified
price at a specified future

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<PAGE>
time. Futures contracts may be settled on a net cash payment basis rather than
by the sale and delivery of the underlying currency. Certain risks of
transactions in foreign currency and related derivatives are described below
under "Special Considerations and Risks -- Currency Transactions".

INVESTMENT RESTRICTIONS

The Fund has adopted the following investment restrictions as fundamental
policies with respect to each Series. These restrictions cannot be changed with
respect to a Series without the approval of the holders of a majority of such
Series' outstanding voting securities. For purposes of the Investment Company
Act of 1940, as amended (the "1940 Act"), a majority of the outstanding voting
securities of a Series means the vote, at an annual or a special meeting of the
security holders of the Fund, of the lesser of (1) 67% or more of the voting
securities of the Series present at such meeting, if the holders of more than
50% of the outstanding voting securities of such Series are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of the Series. A Series may not:

1. Change its investment objective, which is to provide investment
results that substantially correspond to the price and yield performance of
a broad-based index of publicly traded equity securities in a specified
country, geographical region or industry sector;

2. Lend any funds or other assets except that a Series may enter into
repurchase agreements and may lend its portfolio securities in an amount not
to exceed 33 1/3% of the value of its total assets;

3. Issue senior securities or borrow money, except borrowings from
banks for temporary or emergency purposes in an amount up to 33 1/3% of the
value of the 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 Series will not
purchase securities while borrowings in excess of 5% of the 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;

4. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 33 1/3% of the value of its total assets to secure
permitted borrowings, except that the deposit of underlying securities and
other assets in escrow and collateral arrangements with respect to initial
or variation margin for currency transactions, options, futures contracts
and options on futures will not be deemed to be pledges of the Series'
assets;

5. Purchase a security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result 25% or more of its total
assets would be invested in a particular industry, except that a Series will
invest 25% or more of its total assets in a single industry in the event
that its corresponding equity index is or becomes similarly concentrated;

6. Purchase, hold or deal in real estate, or oil, gas or mineral
interests or leases, but a Series may purchase and sell securities that are
issued by companies that invest or deal in such assets;

7. Act as an underwriter of securities of other issuers, except to the
extent the Series may be deemed an underwriter in connection with the sale
of securities in its portfolio;

8. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, except that a Series may
make margin deposits in connection with transactions in currencies, options,
futures and options on futures;

9. Sell securities short, but reserves the right to sell securities
short if it owns the security;

10. Invest in commodities or commodity contracts, except that the Series
may buy and sell currencies and forward contracts with respect thereto,
futures contracts on securities, stock indices and currencies and options on
such futures contracts and make margin deposits in connection with such
contracts; or

11. Write call options on securities or indices. A Series may write
covered put options on securities and indices.

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<PAGE>
With respect to the fundamental restriction set forth in (5), above, the
Adviser has advised the Fund that as of June 28, 1996, the following FT Index
components were concentrated (in excess of 25% of such component) in stocks of
the indicated industry groups, as defined by the Consortium of the FT Index (see
"The FT Index" below):

<TABLE>
<S> <C>
AUSTRALIA Mining, Metals and Minerals
HONG KONG Real Estate
ITALY Utilities
SOUTH AFRICA Precious Metals and Minerals
</TABLE>

The securities portfolios of the Australia Index Series, the Hong Kong Index
Series, the Italy Index Series and the South Africa Index Series will be
concentrated in the indicated industries for so long as the corresponding FT
Index components are so concentrated. An investment in the CB Shares-SM- of each
such Series therefore involves a greater exposure to the performance and risks
associated with the relevant industry group than would be the case if such
Series' portfolio securities were more broadly diversified among industry
groups. See "The Fund -- Investment Considerations and Risks" in the Prospectus.

In addition to the investment restrictions adopted as fundamental policies
as set forth above, each Series will observe the following restrictions, which
may be changed by the Board without a stockholder vote. A Series will not:

1. Invest in the securities of a company for the purpose of exercising
management or control, or in any event purchase and hold more than 10% of
the securities of a single issuer, provided that the Fund may vote the
investment securities owned by each Series in accordance with its views;

2. Hold illiquid assets in excess of 15% of its net assets. An illiquid
asset is any asset which may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which the
Series has valued the investment; or

3. Buy or sell put or call options, except that the Series may buy call
options on securities, stock indices and currencies traded on any recognized
U.S. or foreign exchange, may buy and sell options on futures contracts and
may write covered put options.

For purposes of the percentage limitation on each Series' investments in
illiquid securities, with respect to each Series other than the US Index Series,
foreign equity securities, though not registered under the Securities Act of
1933 (the "Securities Act"), will not be deemed PER SE illiquid if they are
listed on an exchange and are not legally restricted from sale by the Series.
The Consortium, I.E. the Owners of the FT Index and their associates (see "The
FT Index -- In General"), automatically excludes a security from the FT Index if
it fails to trade for more than fifteen working days within each of two
successive calendar quarters. The Adviser will monitor the liquidity of
restricted securities in each Series' portfolio under the supervision of the
Fund's Board of Directors. In reaching liquidity decisions, the Adviser will
consider, among other things, the following factors:

(1) the frequency of trades and quotes for the security;

(2) the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers;

(3) dealer undertakings to make a market in the security; and

(4) the nature of the security and the nature of the marketplace in
which it trades (E.G., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer).

If a percentage limitation is adhered to at the time of investment or
contract, a later increase or decrease in percentage resulting from any change
in value or total or net assets will not result in a violation of such
restriction, except that the percentage limitations with respect to the
borrowing of money and illiquid securities will be observed continuously.

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<PAGE>
SPECIAL CONSIDERATIONS AND RISKS

A discussion of the risks associated with an investment in the Fund is
contained in the Prospectus under the heading "The Fund -- Investment
Considerations and Risks". The discussion below supplements, and should be read
in conjunction with, such section of the Prospectus.

NON-U.S. EQUITY PORTFOLIOS

Investing in securities issued by companies domiciled in countries other
than the domicile of the investor and denominated in currencies other than an
investor's local currency entails certain considerations and risks not typically
encountered by the investor in making investments in its home country and in
that country's currency. These considerations include favorable or unfavorable
changes in interest rates, currency exchange rates and exchange control
regulations, and the costs that may be incurred in connection with conversions
between various currencies. In addition, investments in countries other than the
United States could be affected by other factors generally not thought to be
present in the United States, including less liquid and less efficient
securities markets, greater price volatility, less publicly available
information about issuers, the imposition of withholding or other taxes,
restrictions on the expatriation of funds or other assets of a Series, higher
transaction and custody costs, delays attendant in settlement procedures and
difficulties in enforcing contractual obligations.

CURRENCY TRANSACTIONS

Foreign exchange transactions involve a significant degree of risk and the
markets in which foreign exchange transactions are effected are highly volatile,
highly specialized and highly technical. Significant changes, including changes
in liquidity and prices, can occur in such markets within very short periods of
time, often within minutes. Foreign exchange trading risks include, but are not
limited to, exchange rate risk, maturity gaps, interest rate risk and potential
interference by foreign governments through regulation of local exchange
markets, foreign investment or particular transactions in foreign currency. The
risks associated with foreign currency options and futures contracts generally
include those discussed under "Investment Policies and Restrictions -- Options
on Securities" and "-- Futures Contracts", with respect to stock index futures,
options on securities and indices and options on futures, and below under
"Options and Futures". If the Adviser applies a currency hedging strategy at an
inappropriate time or judges market correlations incorrectly, foreign currency
derivatives strategies may not serve their intended purpose of improving the
correlation of a Series' return with the performance of the corresponding FT
Index component and may lower the Series' return. The Series could experience
losses if the values of its currency forwards, options and futures positions
were poorly correlated with its other investments or if it could not close out
its positions because of an illiquid market. In addition, each Series will incur
transaction costs, including trading commissions, in connection with its foreign
currency transactions.

OPTIONS AND FUTURES

A Series' ability to establish and close out positions in options, futures
contracts and options on futures contracts will be subject to the existence of a
liquid market. Although a Series will engage in transactions only in those
options, futures contracts and options thereon which are traded on recognized
U.S. or foreign exchanges, there can be no assurance that a liquid market will
exist for any particular option or futures contract or option thereon in which
the Series maintains a position. Thus, it may not be possible to effect a
closing transaction in any contract or to do so at a satisfactory price and the
Series would have to either make or take delivery under the contract or, in the
case of a written option, wait to sell the underlying securities until the
option expires or is exercised or, in the case of a purchased option, exercise
the option. In the case of a futures contract that the Series has purchased and
which the Fund is unable to close, the Series may be required to maintain margin
deposits on the futures contract and to make variation margin payments until the
contract is closed. In such situations, if a Series has insufficient cash, it
may have to sell portfolio securities to meet applicable daily margin
requirements. Closing transactions in these contracts may result in short-term
capital gains. These transactions may be limited by U.S. tax considerations
because the beneficial treatment accorded regulated investment companies under
Subchapter M of the Code (as defined herein) limits the amount of permissible
short-term gain.

-11-
<PAGE>
Futures contracts and options on futures based on foreign stock indices may
be purchased by a Series only if the futures or options contracts have been
approved by the CFTC for purchase by U.S. persons. Currently, futures contracts
and options on futures based on foreign equity indices are approved for certain
Australian, French, German, Hong Kong, Italian, Japanese and United Kingdom
equity indices.

Because the futures strategies of each Series are engaged in only for the
purpose of seeking a higher correlation with the corresponding component of the
FT Index and its use of futures will be unleveraged, the Fund does not believe
that the Series are subject to the risks of loss frequently associated with
futures transactions. A Series would presumably have sustained comparable losses
if, instead of the futures contract, it had invested in the underlying security
or index of securities and sold it after the decline.

Successful use of futures contracts and options thereon by any Series is
subject to the ability of the Adviser to predict correctly correlations between
the movements in the values of such contracts (or the underlying securities or
indices) with the direction of the relevant FT Index component or securities to
which the Series seeks exposure. If the Adviser's expectations are not met, the
Series would be in a worse position than if the futures exposure had not been
effected. If a Series buys futures contracts on stock indices that historically
have had a high degree of positive correlation to the value of the FT Index, and
such historical experience were not to obtain in the future, the value of the
relevant FT Index component might rise or decline more rapidly than the value of
such an imperfectly correlated futures contract. In that case, the futures
strategy will be less effective than if the correlation had been greater. In a
similar but more extreme situation, the value of the futures position might in
fact decline while the value of the relevant FT Index component holds steady or
rises. This would result in a loss that would not have occurred but for the
futures position.

CONTINUOUS OFFERING

Since new Creation Unit aggregations of shares can be issued and sold by the
Fund on an ongoing basis, at any point during the life of the offering a
"distribution", as such term is used in the Securities Act, may be occurring.
Broker-dealers and other persons are cautioned that some activities on their
part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus-delivery and liability
provisions of the Securities Act. For example, a broker-dealer firm or its
client may be deemed a statutory underwriter if it takes Creation Unit
aggregations of shares after placing a purchase order with ALPS Mutual Funds
Services, Inc., the Fund's principal underwriter ("ALPS" or the "Distributor"),
breaks them down into the constituent CB Shares-SM-, and sells the CB Shares-SM-
directly to its customers; or if it chooses to couple the acquisition of a
supply of new CB Shares-SM- with an active selling effort involving solicitation
of secondary market demand for CB Shares-SM-. A determination of whether one is
an underwriter must take into account all the facts and circumstances pertaining
to the activities of a broker-dealer or its client in the particular case, and
the examples mentioned above should not be considered a complete description of
all the activities that could lead to categorization as an underwriter.

Broker-dealer firms should also note that dealers who are not "underwriters"
but are participating in a distribution (as contrasted with ordinary secondary
trading transactions), and thus dealing with shares that are part of an "unsold
allotment" within the meaning of Section 4(3)(C) of the Securities Act, would be
unable to take advantage of the prospectus-delivery exemption provided by
Section 4(3) of the Securities Act. Firms that do incur a prospectus-delivery
obligation with respect to CB Shares-SM- are reminded that under Securities Act
Rule 153 a prospectus-delivery obligation under Section 5(b)(2) of the
Securities Act owed to a NYSE member in connection with a sale on the NYSE is
satisfied by the fact that prospectuses will be available at the NYSE upon
request. Of course, the prospectus-delivery mechanism provided in Rule 153 is
only available with respect to transactions on an exchange.

-12-
<PAGE>
THE FT INDEX

IN GENERAL

The FT-Actuaries World Indices-TM- were originally developed by Goldman,
Sachs & Co., NatWest Securities Limited and The Financial Times Limited in 1986,
and until May 23, 1995, were jointly published by them. On May 23, 1995, S&P
joined FT and Goldman, Sachs & Co. as a co-publisher of the FT-Actuaries World
Indices-TM-, now known as the Financial Times/Standard & Poor's Actuaries World
Indices-TM- or the FT/ S&P Actuaries World Indices-TM-. The FT/S&P Actuaries
World Indices-TM- are a continuation of the FT-Actuaries World Indices-TM-.
Following the current transition period, S&P and FT will jointly calculate the
indices (in such capacity, the "Compilers"). The Compilers are responsible for
the day-to-day data processes that enable the calculation of the FT Index. In
November 1995, FT transferred its ownership rights in the FT/ S&P Actuaries
World Indices-TM- to FT-SE, a company jointly owned by FT, the London Stock
Exchange and the Institute of Actuaries. Together, S&P, Goldman, Sachs & Co. and
FT-SE are referred to in this SAI as the "Owners". By the end of 1996, it is
expected that FT-SE will assume responsibility for calculating the European and
Asia-Pacific indices. As of August 7, 1996, S&P began calculating the U.S.
indices. The Fund is not sponsored by or affiliated with S&P, FT-SE or FT. The
FT Index is managed with the assistance of The Institute of Actuaries and The
Faculty of Actuaries, the English and Scottish bodies, respectively, that
represent the actuarial profession in the United Kingdom (together with the
Owners, the "Consortium"). NatWest Securities Limited has withdrawn as an owner
of the FT Index, but will continue to be recognized as a founding member.

The following summary of the compilation and operation of the FT Index is
based on information provided by Goldman, Sachs & Co. and S&P.*

The FT Index offers measures of stock price performance for the major world
stock markets as well as for regional areas, broad economic sectors and industry
groups. The components of the FT Index represent separately each of 26
countries, 12 geographic regions and 7 broad economic sectors. In total over
1,000 indices are calculated daily across countries, regions, industry groups
and economic sectors. Among the criteria that the FT Index is structured to
satisfy are coverage of the investible opportunities available in the world's
equity markets for the international investor and an objectively constructed
measure of the changes in market value of international investors' portfolios
resulting from market activity.

THE WORLD INDEX POLICY COMMITTEE

Daily and quarterly review of and policy decisions made concerning the FT
Index are the responsibility of the WIPC. FT, Goldman, Sachs & Co. and S&P each
have one vote on the WIPC, and they can each appoint two additional voting
members to the WIPC to act as representatives of actual or prospective main user
groups of the FT Index. In addition, The Institute of Actuaries and The Faculty
of Actuaries have two voting members on the WIPC, including the Chairman.
NatWest Securities Limited has one vote on the WIPC until 1998. To the best of
the Adviser's knowledge, the WIPC included no employees of the Adviser or
Deutsche Bank AG as of May 31, 1996.

Specifically, the WIPC determines the overall policy and objectives of the
FT Index; establishes selection criteria, liquidity requirements, calculation
methodologies, rules and representation for inclusion of index components and
the timing and disclosure of additions and deletions of FT Index constituents;
determines what data on distributions to stockholders and other capital changes
are included; and scrutinizes and ensures that the FT Index is theoretically and
operationally correct and accurate. The guidelines for the determinations of the
Consortium, and its calculation methodologies, are publicly available. The WIPC
may at any time change the stock exchange or exchanges from which the
constituents of a particular FT Index component may be selected.

- ------------------------------
*See THE FT-ACTUARIES WORLD INDICES-TM- -- AN INTRODUCTION (The Financial Times
Limited, Goldman, Sachs & Co. and Wood MacKenzie & Co., Ltd., 1987);
FT-ACTUARIES WORLD INDICES-TM- -- CONSTRUCTION AND MAINTENANCE RULES (The
Financial Times Limited, Goldman, Sachs & Co. and County NatWest Securities
Limited, 1991); FT-ACTUARIES WORLD INDICES-TM- -- CONSTRUCTION AND MAINTENANCE
RULES AMENDMENTS (Goldman, Sachs & Co. and NatWest Securities Limited, April
1993); FT-ACTUARIES WORLD INDICES-TM- -- CONSTRUCTION AND MAINTENANCE RULES
AMENDMENTS (The Financial Times Limited, Goldman, Sachs & Co. and NatWest
Securities Limited, March 1995).

-13-
<PAGE>
DELIVERY AND AVAILABILITY

The FT Index's values and related performance figures for various periods of
time are calculated after the close of the NYSE for publication the following
day in the various editions of the FINANCIAL TIMES. The FT Index components are
reported in local currency, US dollars and UK pounds sterling to allow an
explicit valuation of the impact of the currency component on various user
groups. Constituent changes during a quarter are noted at the foot of the FT
Index table. Where possible, these are shown prior to the actual day of
implementation. Decisions regarding the addition of new eligible constituents
which are unrelated to existing index constituents, or investible weighting
changes to existing constituents, will be announced in the FINANCIAL TIMES at
least four working days before they are implemented in the indices which are
published in the daily table. Monday editions of the FINANCIAL TIMES show all
constituent changes made during the previous week together with base values for
the country indices. Quarter-end changes are published as soon as is practicable
following the quarterly WIPC meeting but before the quarter-end. The FT Index
components are calculated on weekdays when one or more of the constituent
markets are open; the indices are syndicated and published in the financial
sections of several newspapers worldwide, including THE NEW YORK TIMES. FT Index
data also may be purchased electronically through Goldman, Sachs & Co. Extensive
index data will be available through a number of market data vendors to their
subscribers. The Adviser will make available on diskette to certain financial
institutions that have entered into agreements with the Distributor to provide
stockholder support services and undertake certain marketing-related activities
certain historical data on the FT Index components corresponding to the initial
nine Series of the Fund. See "Purchase and Issuance of Fund Shares in Creation
Unit Aggregations -- The Distributor".

SELECTION

COUNTRY SELECTION CRITERIA. In order for a country to be included in the FT
Index, the following criteria must be satisfied: (1) direct equity investment by
non-nationals must be permitted; (2) accurate and timely data must be available;
(3) no significant exchange controls exist which would prevent the timely
repatriation of capital or dividends; (4) significant international investor
interest in the local equity market must have been demonstrated; and (5)
adequate liquidity must exist.

ALLOCATION OF STOCKS TO COUNTRIES. In most instances stocks are included in
the index component of that country where the company is legally registered and
is recognized for taxation purposes, including regulation of its financial
affairs. However, exceptions may be made where the international investor's
recognition of the area of the company's business or its market listings clearly
suggests a different allocation.

CLASSES INCLUDED. Companies whose business is that of holding equity and
other investments (E.G., United Kingdom investment trusts) are eligible for
inclusion. Split capital investment trusts are excluded. Those whose price is a
direct derivation of underlying holdings (E.G., mutual funds) are also excluded.

INVESTIBILITY SCREENS. All securities are subjected to the five
investibility screens described below.

1. A "Size Screen". All securities comprising the bottom 5% of any
market's capitalization are excluded from the FT Index. The average size of
the remaining 95% of the companies represents the "Large Company Cut-Off
Size".

2. A "Total Restriction Screen". A security is totally excluded from
the FT Index if foreign investors are barred from ownership.

3. A "Partial Restriction Screen". An "investibility weight" is
attached to those securities for which there are partial restrictions on
foreign ownership. The capitalization included, therefore, for any such
security generally is restricted to that portion available to foreign
investors. Consideration will also be given to what extent this portion is
effectively reduced by "strategic" foreign holdings which may either require
a commensurate adjustment to the investibility weight or lead to a company
being considered ineligible for inclusion.

4. A "'Free Float' Screen". The full capitalization of a security is
eligible for inclusion in the FT Index if 25% or more of the outstanding
securities is publicly available for investment and not in the hands of a
single party or parties "acting in concert". A government's shareholdings
are included in this

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<PAGE>
total if these holdings have a stock exchange listing and could be offered
to the public. However, when a government is a holder of shares but either
the shares are not listed or the government is constrained through requiring
legislation before being able to sell them, a weighting factor will be
applied. Two or more identifiable holders of more than 75% of a single
security may be deemed to be acting in concert unless evidence is available
to the contrary.

Securities will also be considered for inclusion, however, if the
existing "free float" is less than 25% but more than 10% and if the free
float capitalization is more than one half of the large-company cut-off size
(described below) in that particular market. Only that portion of
capitalization deemed to be "free float" will be eligible for inclusion,
this being considered to be equivalent to the application of the "Partial
Restriction Screen". The free float will be automatically included if its
size is greater than the large-company cut-off size. The free float may be
considered for inclusion if it is more than one half of but less than the
Large Company Cut-Off Size.

5. A "Liquidity Screen". A security is deemed to be illiquid, and
therefore ineligible for inclusion, if it fails to trade for more than 15
working days within each of two successive quarters.

STOCK SELECTION CRITERIA. The "investible universe" consists of the
aggregate capitalization of all equity securities listed on the exchanges
monitored (in some cases, only certain sections of particular exchanges are
monitored) within a market after the application of the five investibility
screens described above and after certain "multiple equity line" rules are
applied. Where there are multiple lines of equity capital in the one company,
all are included and priced separately, except that lines will be excluded if:
(i) they are not available owing to failure under the investibility screens;
(ii) the size of the line is less than 50% of the market's minimum size; or
(iii) the size of the line is between 50% and 100% of the market's minimum size
but is less than 25% of the company's main line of equity. All partly-paid
classes of equity are priced on a fully-paid basis if the calls are payable at
known future dates. Those recognized as being "permanently partly-paid" are
priced on a partly-paid basis.

An objective of the FT Index in selecting constituent stocks is to capture
85% of the investible universe in each market. In practice, representation is
maintained within a band of 82-88% of the investible universe. For the purposes
of the implementation of the current FT Index rules, a band of 82-90% is used in
order to restrict turnover to 5%-7% for the larger markets. Large additions of
stocks to the investible universe of an FT Index market, or dramatic price
movements in stocks within the investible universe, over a short period of time
may temporarily reduce the relevant FT Index component's representation of the
investible universe below the normal band of 82-88%. This may occur where, for
example, a number of new public offerings of investible stocks occur
simultaneously and the adjustments required to the constituents of the relevant
FT Index components to maintain such representation cannot be made quickly or
simultaneously because such adjustments would violate other FT Index rules.
Consideration is also given in assembling the equities comprising any market to
the economic sector distribution of the sample chosen. The objective is that
this distribution reflect the overall economic sector distribution of the
investible universe.

Companies greater in size than the "Large Company Cut-Off Size" qualify for
inclusion in an FT Index component automatically should they remain eligible
after application of all other investibility screens. Stocks in the investible
universe below the Large Company Cut-Off Size are selected and added to the
existing sample using the methods described below.

Stocks are added in descending order of size within economic sectors such
that any divergences in economic sector weights between the Large Company sample
and the investible universe are minimized. The selection process continues until
the aggregate capitalization of the sample represents as closely as possible 85%
of the capitalization of the investible universe. The representation of each
market is reviewed as a rolling process and at any time that there is evidence
that representation of the investible universe has fallen outside the normal
band of 82%-88%.

CONSTITUENT CHANGES

Additions may be made to existing FT Index components for six reasons: (1)
the current representation of the total investible market is below the required
level or is not representative of its economic sector make-

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<PAGE>
up; (2) a non-constituent has gained in importance and replaces an existing
constituent under the rules of review; (3) market events indicate that the
current representation is below that required; (4) a new, eligible security
becomes available whose capitalization available for foreign investment, taking
into account all relevant factors including application of the investibility
screens and consideration of any existing strategic foreign holdings, is 1% or
more of the current capitalization of the relevant FT Index component and is
greater than the Large Company Cut-Off Size, as last calculated; (5) an existing
constituent "spins off" a part of its business and issues new equity to the
existing stockholders; or (6) changes in investibility factors lead to a stock
being eligible for inclusion and that stock now qualifies on other grounds.

Deletions from the FT Index may be made for any of four reasons: (1) the FT
Index component comprises too high a percentage of its representative universe
or is such that it does not represent the market's sectoral make-up; (2) a
review shows that a constituent has declined in importance and should be
replaced by a non-constituent; (3) market events result in evidence that the
current representation is above that required; or (4) evidence of a change in
circumstances regarding investibility would make an existing constituent
ineligible if a full market review were to be undertaken.

Certain adjustments may be made to the constituents of an FT Index component
immediately. For example, if an existing constituent is acquired for eligible
shares by a quoted non-constituent in the same market, then the acquiring
company is added to the FT Index immediately if eligible on all other counts.
The existing constituent is deleted immediately.

CALCULATION METHODOLOGIES

The FT Index values are calculated through widely accepted mathematical
formulae, with the effect that the components are weighted arithmetic averages
of the price relatives of the constituents -- as produced solely by changes in
the marketplace -- adjusted for intervening capital changes. The FT Index
component values are base-weighted aggregates of the initial market
capitalization, the price of each issue being weighted by the number of shares
outstanding. The FT Index components are modified to maintain continuity when
subsequent capital changes occur. Values are derived to illustrate the
longer-term changes associated with the value of the component over time,
although still reflecting day-to-day movements. The arithmetic average is the
sum of the values divided by the total shares in a component. The arithmetic
average is suitable so long as the series of data is not widely dispersed.

DIVIDENDS. The FT Index uses the most up-to-date indicated annualized
rates, adjusted for any interim changes and updated also for any firm and
precise forecasts.

POLICY CHANGES. Policy changes made by the WIPC are disseminated to all
end-users through the FINANCIAL TIMES and in advance of any implementation.

SPECIAL ISSUES. Where the WIPC has given special consideration to issues of
particular importance to end-users of the FT Index, and where the decision is
not to implement a change, then users will be notified through the FINANCIAL
TIMES that such issues have been reviewed.

PERFORMANCE

From time to time the Fund may advertise or report to current or prospective
investors the yield and total return of the Series and of the related FT Index
components. BOTH YIELD AND TOTAL RETURN FIGURES ARE BASED ON HISTORICAL
PERFORMANCE AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Furthermore,
historical performance information for an FT Index country component may or may
not be indicative of the market performance that CB Shares-SM- of the
corresponding Fund Series would have demonstrated over the relevant periods. See
"The Fund -- Investment Considerations and Risks" in the Prospectus. Performance
data for the FT Index set forth in this Statement of Additional Information are
based on information provided to the Adviser by Ibbotson Associates of Chicago,
Illinois, except as otherwise indicated.

YIELD. In accordance with industry guidelines set forth by the Commission,
the "30-day yield" of a Series is calculated by dividing net investment income
per share earned during the 30-day period by the net asset value per share on
the last day of the period. Net investment income includes interest and dividend
income earned on the Series' securities; it is net of all expenses and all
recurring and non-recurring charges

-16-
<PAGE>
that have been applied to all stockholder accounts. The yield calculation
assumes that net investment income earned over 30 days is compounded monthly for
six months and then annualized. Methods used to calculate advertised yields are
standardized for all stock and bond funds.

TOTAL RETURN. Total return is the change in the value of an investment in a
Series, or in the securities in an index, over a stated period of time beginning
with the value at the beginning of the period and ending with the value at the
end of the period, assuming reinvestment of any dividends and distributions
during the period. A CUMULATIVE TOTAL RETURN is calculated by determining the
actual growth or decline in the value of such investment over the period.
AVERAGE ANNUAL TOTAL RETURN is calculated by determining the annual compounded
percentage rate that would have produced the same result if the rate of growth
or decline had been constant over the period. For example, a cumulative total
return of 100% over 10 years would produce an average annual return of 7.18%,
which is the steady annual rate of return that would equal 100% growth on a
compounded basis in ten years. All total return figures reported herein or
advertised by the Fund are US dollar returns. Total return is reported below for
each Series for the period from commencement of its operations through April 30,
1996, and average annual total return for each of the corresponding FT Index
components is reported for the one-, three-, five- and ten-year periods ending
December 29, 1995.

While the annual average total returns reported below for the FT Index
components assume the reinvestment of dividends and other distributions on the
underlying securities, the FT Index returns do not reflect deductions for
administrative or management costs and expenses. If each Series of the Fund had
been operating over the relevant period, the corresponding average annual
returns for such Series, however, would reflect deductions for costs and
expenses of the Series and deductions for estimated cash transaction fees paid
by an investor on an initial purchase of Creation Unit aggregations of shares of
such Series and on redemption of such shares at the end of the indicated period.

While total return is a convenient means of comparing alternative
investments, investors should realize that the performance of a Series or an
index is not constant over time, but changes from year to year, and that average
annual returns represent averaged figures as opposed to the actual year-to-year
performance. In addition, total return figures do not make any allowance for
federal, state or local income taxes, which holders of Fund shares or equity
securities comprising any index must pay on a current basis, or for foreign
taxes or withholding that may be applicable to income on such securities.

Information on the performance of CB Shares-SM- as advertised or reported to
current or prospective investors from time to time may be based on changes in
the market prices of CB Shares-SM- as well as in their respective net asset
values, and may include performance data based on no reinvestment of dividends
and distributions of capital in additional CB Shares-SM-.

Average annual returns of the respective FT Index country components for
one-, three- and five-year periods were provided to the Adviser by Goldman,
Sachs & Co. and for the ten-year period by Ibbotson Associates.

CORRELATIONS AND OTHER COMPARATIVE MEASURES. Information on the price
performance of CB Shares relative to other securities, the relevant FT Index
component and/or other indices, or the relative price performance between two
indices, may be represented in the form of "correlation," "standard deviation,"
"variance" or "tracking error". For example, the description set forth below of
each Series' corresponding FT Index component contains coefficients of
correlation between the performance of the component and the performance of a
leading major market index in the relevant country and of the S&P 500 over the
six-year period ended December 29, 1995. Correlation is a standard measure of
the degree of linear association between two series of historical prices, and
ranges from zero (no linear association) to 1 (perfect linear association).
Variance is the square of the difference between a variable and its mean.
Standard deviation is the square root of variance. Both variance and standard
deviation are standard measures of the volatility of stock prices, with zero
indicating no volatility, and increasing variance and standard deviations
indicating increasing volatility. Tracking error is a standard comparison of the
similarity of performance numbers (E.G., total returns), with 0% signifying
identical performance. Higher tracking errors indicate increasingly

-17-
<PAGE>

divergent performance figures. For example, the tracking error of the Italy
Index Series (without reinvestment of dividends and distributions) to the FT
Index - Italy from commencement of operations through April 30, 1996 was .06%.

The correlation of each FT Index component with the leading market index in
the relevant country is provided for the information of investors who are
interested in the extent to which the performance of the FT Index component has
tended historically to move in tandem with, or independently of, the overall
performance of a widely recognized equity index in the same market. Similarly,
the correlation with the S&P 500 is provided to give investors an indication of
whether the performance of the particular FT Index component has tended
historically to move in tandem with, or independently of, the performance of a
broad average of U.S. equities. The correlations provided are historical and are
not intended to predict the future relationship between the performance of the
FT Index component and the leading market index or the S&P 500. Furthermore,
correlations with the performance of any FT Index component are not intended to
be equivalent to correlations with the performance of the corresponding Series
because the management, administrative and other costs and expenses associated
with an investment in a Series would tend to make its correlation with
comparative indices lower than that of the FT Index component with such other
indices.

THE AUSTRALIA COMPONENT

On December 29, 1995, the Australia component of the FT Index consisted of
81 stocks with an aggregate market capitalization of approximately A$227.2
billion, or US $168.9 billion. In percentage terms, the Australia component
represented approximately 83.9% of the aggregate investible Australian market
capitalization. The ten largest constituents of the Australia component and the
respective approximate percentages of the Australia component represented by
such constituents were, in order: Broken Hill Proprietaries (16.3%), National
Australia Bank (7.6%), CRA (5.6%), Westpac (4.9%), Western Mining (4.2%), ANZ
Bank (4.0%), Amcor (2.6%), News Corp (2.5%), Coca-Cola Amatil (2.3%) and
Commonwealth Bank of Australia (2.3%).

Over the six-year period ended December 29, 1995, the performance of the
Australia component of the FT Index had a correlation of 0.994 with the All
Ordinaries Index, a broad-based capitalization weighted index of all common
stocks listed on the ASX, and 0.717 with the S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 39% of the market capitalization of the Australia component; the
largest ten holdings comprised approximately 52% of the market capitalization of
the Australia component; and the largest 20 holdings comprised approximately 70%
of the market capitalization of the Australia component.

The ten most highly represented industry sectors in the Australia component
of the FT Index, and the approximate percentages of the Australia component
represented thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Mining, Metals & Minerals............................... 31.7%
2) Banks: Commercial & Other............................... 20.7
3) Real Estate............................................. 5.6
4) Construction & Building Materials....................... 5.2
5) Diversified Industrials................................. 4.0
6) Oil..................................................... 3.8
7) Retail Trade............................................ 3.5
8) Precious Metals and Minerals............................ 3.3
9) Diversified Consumer Goods.............................. 3.1
10) Media................................................... 3.1
</TABLE>

The consumer goods and services sector, represented by the Diversified Consumer
Goods and Services, Media and Retail Trade industries, have in the aggregate
accounted for an increasing share of the Australia component since December 31,
1990.

-18-
<PAGE>
The average annual total return in US Dollars of the Australia component of
the FT Index is set forth below for the indicated periods prior to December 29,
1995:

<TABLE>
<CAPTION>
FT INDEX-
AUSTRALIA
-------------
<S> <C>
1 Year.................................................................. 15.2%
3 Years................................................................. 19.3
5 Years................................................................. 14.7
10 Years................................................................. 15.0
</TABLE>

The total return (based on net asset value) for the Australia Index Series
from commencement of operations through April 30, 1996 was 5.13%. This total
rate of return is for a short period and should not be annualized.

THE FRANCE COMPONENT

On December 29, 1995, the France component of the FT Index consisted of 100
stocks with an aggregate market capitalization of approximately FF1,815.9
billion, or US $371.3 billion. In percentage terms, the France component
represented approximately 88.2% of the aggregate investible French market
capitalization. The ten largest constituents of the France component and the
respective approximate percentages of the France component represented by such
constituents were, in order: Elf Aquitaine (5.4%), LVMH-Moet Vuitton (4.9%),
L'Oreal (4.4%), Total (4.3%), Carrefour (4.2%), Alcatel Alsthom (3.5%), Eaux
(3.2%), Danone (3.2%), Axa (3.0%) and Air Liquide (3.0%).

Over the six-year period ended December 29, 1995, the performance of the
France component of the FT Index had a correlation of 0.968 with the performance
of the CAC 40, a narrow-based, capitalization-weighted index of 40 companies
listed on the Paris Stock Exchange, and 0.762 with that of the S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 23% of the market capitalization of the France component; the
largest ten holdings comprised approximately 39% of the market capitalization of
the France component; and the largest 20 holdings comprised approximately 60% of
the market capitalization of the France component.

The ten most highly represented industry sectors in the France component of
the FT Index, and the approximate percentages of the France component
represented thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Health and Personal Care................................ 9.9%
2) Oil..................................................... 9.6
3) Banks: Commercial and Other............................. 8.9
4) Retail Trade............................................ 8.8
5) Construction & Building Materials....................... 6.7
6) Beverages & Tobacco..................................... 5.8
7) Food & Grocery Products................................. 5.6
8) Insurance Multi/Property/Casualty....................... 5.4
9) Chemicals............................................... 4.8
10) Utilities............................................... 4.7
</TABLE>

The average annual total return in US Dollars of the France component of the
FT Index is set forth below for the indicated periods prior to December 29,
1995:

<TABLE>
<CAPTION>
FT INDEX-
FRANCE
-------------
<S> <C>
1 Year.................................................................. 13.2%
3 Years................................................................. 10.2
5 Years................................................................. 9.9
10 Years................................................................. 15.7
</TABLE>

-19-
<PAGE>
The total return (based on net asset value) for the France Index Series from
commencement of operations through April 30, 1996 was 3.37%. This total rate of
return is for a short period and should not be annualized.

THE GERMANY COMPONENT

On December 29, 1995, the Germany component of the FT Index consisted of 59
stocks with an aggregate market capitalization of approximately DM 575.3 billion
or US $401.9 billion. In percentage terms, the Germany component represented
approximately 89% of the aggregate investible German market capitalization. The
ten largest constituents of the Germany component and the respective approximate
percentages of the Germany component represented by such constituents were, in
order: Allianz (11.4%), Siemens (7.5%), Daimler Benz (6.5%), Deutsche Bank
(5.9%), Veba (5.2%), Bayer (4.6%), Munich Re (4.3%), Hoechst (4.0%), BASF (3.4%)
and RWE (3.0%). In addition to these large-capitalization companies, the FT
Index-Germany also includes a number of well known mid-capitalization German
companies, such as Continental and Deutsche Babcock.

Over the six-year period ended December 29, 1995, the performance of the
Germany component of the FT Index had a correlation of 0.952 with the
performance of the DAX, a total rate of return index consisting of 30 selected
German stocks traded on the Frankfurt Stock Exchange, and 0.701 with that of the
S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 36% of the market capitalization of the Germany component; the
largest ten holdings comprised approximately 56% of the market capitalization of
the German component; and the largest 20 holdings comprised approximately 77% of
the market capitalization of the Germany component.

The ten most highly represented industry sectors in the Germany component of
the FT Index and the approximate percentages of the Germany component
represented thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Insurance Multi/Property/Casualty........................ 17.9%
2) Banks: Commercial & Other................................ 15.1
3) Chemicals................................................ 13.8
4) Automobiles.............................................. 11.6
5) Electrical Equipment..................................... 8.1
6) Utilities................................................ 6.5
7) Machinery & Engineering Services......................... 5.3
8) Diversified Holding Companies............................ 5.2
9) Mining, Metals & Minerals................................ 5.1
10) Retail Trade............................................. 2.4
</TABLE>

The average annual total return in US Dollars of the Germany component of
the FT Index is set forth below for the indicated periods prior to December 29,
1995:

<TABLE>
<CAPTION>
FT INDEX-
GERMANY
-------------
<S> <C>
1 Year.................................................................. 16.5%
3 Years................................................................. 18.6
5 Years................................................................. 10.2
10 Years................................................................. 10.6
</TABLE>

The total return (based on net asset value) for the Germany Index Series
from commencement of operations through April 30, 1996 was -3.81%. This total
rate of return is for a short period and should not be annualized.

THE HONG KONG COMPONENT

On December 29, 1995, the Hong Kong component of the FT Index consisted of
55 stocks with an aggregate market capitalization of approximately HK $1,645.7
billion, or US $212.8 billion. In percentage terms, the Hong Kong component
represented approximately 85.7% of the aggregate investible market
capitalization of Hong Kong. The ten largest constituents of the Hong Kong
component and the respective

-20-
<PAGE>
approximate percentages of the Hong Kong component represented by such
constituents were, in order: Hutchison Whampoa (10.3%), Hong Kong Telecomm
(9.4%), Sun Hung Kai Properties (8.9%), Hang Seng Bank (8.1%), Cheung Kong
(6.3%), Henderson Land (4.5%), China Light & Power (4.3%), Swire Pacific (3.5%),
New World Dev. (3.4%) and Wharf Holdings (3.4%). Many of the companies
comprising the FT Index-Hong Kong maintain investments in the People's Republic
of China and in other regional economies, such as Singapore.

Over the six-year period ended December 29, 1995, the performance of the
Hong Kong component of the FT Index had a correlation of 0.998 with the
performance of the Hang Seng, a capitalization-weighted index of the 33 stocks
traded on the HKX, and 0.845 with that of the S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 43% of the market capitalization of the Hong Kong component; the
largest ten holdings comprised approximately 62% of the market capitalization of
the Hong Kong component; and the largest 20 holdings comprised approximately 84%
of the market capitalization of the Hong Kong component.

The ten most highly represented industry sectors in the Hong Kong component
of the FT Index, and the approximate percentages of the Hong Kong component
represented thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Real Estate............................................. 37.0%
2) Utilities............................................... 18.7
3) Diversified Consumer Goods.............................. 12.7
4) Diversified Holding Companies........................... 10.3
5) Banks: Commercial & Other............................... 9.6
6) Transportation and Storage.............................. 3.2
7) Retail Trade............................................ 2.9
8) Entertainment/Leisure/Toys.............................. 2.2
9) Media................................................... 1.1
10) Financial Institutions & Services....................... 1.0
</TABLE>

The average annual total return in US Dollars of the Hong Kong component of
the FT Index is set forth below for the indicated periods prior to December 29,
1995:

<TABLE>
<CAPTION>
FT INDEX-
HONG KONG
-------------
<S> <C>
1 Year................................................................. 23.6%
3 Years................................................................ 24.7
5 Years................................................................ 30.8
10 Years................................................................ 23.6
</TABLE>

The total return (based on net asset value) for the Hong Kong Index Series
from commencement of operations through April 30, 1996 was 0.14%. This total
rate of return is for a short period and should not be annualized.

THE ITALY COMPONENT

On December 29, 1995, the Italy component of the FT Index consisted of 59
stocks with an aggregate market capitalization of approximately IL221.7
trillion, or US $139.7 billion. In percentage terms, the Italy component
represented approximately 89.7% of the aggregate investible market
capitalization of Italy. The ten largest constituents of the Italy component and
the respective approximate percentages of the Italy component represented by
such constituents were, in order: Generali (13.9%), Telecom Italia Mobile
(8.4%), Stet (7.8%), Fiat (7.6%), Telecom Italia (7.4%), INA (3.8%), Alleanza
(3.8%), San Paolo (3.1%), ENI (3.0%) and IMI (2.7%).

Over the six-year period ended December 29, 1995, the performance of the
Italy component of the FT Index had a correlation of 0.990 with the performance
of the MIB-30, a capitalization-weighted index of 30 Italian stocks traded on
the Milan Stock Exchange, and -0.357 with that of the S&P 500.

-21-
<PAGE>
As of December 29, 1995, the largest five holdings together comprised
approximately 45% of the market capitalization of the Italy component; the
largest ten holdings comprised approximately 61% of the market capitalization of
the Italy component; and the largest 20 holdings comprised approximately 81% of
the market capitalization of the Italy component.

The ten most highly represented industry sectors in the Italy component of
the FT Index, and the approximate percentages of the Italy component represented
thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Utilities............................................... 29.6%
2) Insurance Multi/Property/Casualty....................... 24.5
3) Automobiles............................................. 9.7
4) Banks: Commercial & Other............................... 8.6
5) Financial Institutions & Services....................... 6.5
6) Insurance: Life & Agents/Brokers........................ 3.8
7) Diversified Holding Companies........................... 3.6
8) Oil..................................................... 3.0
9) Computers/Office Equipment.............................. 2.9
10) Food and Grocery Products............................... 1.9
</TABLE>

The average annual total return in US Dollars of the Italy component of the
FT Index is set forth below for the indicated periods prior to December 29,
1995:

<TABLE>
<CAPTION>
FT INDEX-
ITALY
-----------
<S> <C>
1 Year................................................................. -0.4%
3 Years................................................................ 12.5
5 Years................................................................ 1.4
10 Years................................................................ 7.3
</TABLE>

The total return (based on net asset value) for the Italy Index Series from
commencement of operations through April 30, 1996 was 17.39%. This total rate of
return is for a short period and should not be annualized.

THE JAPAN COMPONENT

On December 29, 1995, the Japan component of the FT Index consisted of 483
stocks with an aggregate market capitalization of approximately Y293.6 trillion,
or US $2.8 trillion. In percentage terms, the Japan component represented
approximately 83.1% of the aggregate investible Japanese market capitalization.
The ten largest constituents of the Japan component and the respective
approximate percentages of the Japan component represented by such constituents
were, in order: Toyota Motor (2.8%), Industrial Bank of Japan (2.5%), Mitsubishi
Bank (2.4%), Sumitomo Bank (2.3%), Fuji Bank (2.3%), Dai-ichi Kangyo Bank
(2.2%), Sanwa Bank (2.1%), Sakura Bank (1.5%), Nomura Securities (1.5%) and
Tokyo Electric Power (1.3%). Many of the companies comprising the FT Index-Japan
have contributed to the export economy of Japan, which over the period 1990 to
1994 produced trade surpluses with the rest of the world averaging US $75.4
billion per annum, based on data provided by the Adviser.

Over the six-year period ended December 29, 1995, the performance of the
Japan component of the FT Index had a correlation of 0.979 with the performance
of the Nikkei-225, a broad-based price-weighted index of 225 major equity
securities traded on the first section of the Tokyo Stock Exchange, and 0.231
with that of the S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 12% of the market capitalization of the Japan component; the
largest ten holdings comprised approximately 21% of the market capitalization of
the Japan component; and the largest 20 holdings comprised approximately 31% of
the market capitalization of the Japan component.

-22-
<PAGE>
The ten most highly represented industry sectors in the Japan component of
the FT Index, and the approximate percentages of the Japan component represented
thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Banks: Commercial and Other............................. 22.5%
2) Financial Institutions.................................. 6.2
3) Utilities............................................... 6.1
4) Electronics & Instrumentation........................... 6.1
5) Automobiles............................................. 5.2
6) Transportation and Storage.............................. 4.9
7) Construction and Building Materials..................... 4.3
8) Retail Trade............................................ 4.3
9) Household Durables & Appliances......................... 3.7
10) Chemicals............................................... 3.6
</TABLE>

The average annual total return in US Dollars of the Japan component of the
FT Index is set forth below for the indicated periods prior to December 29,
1995:

<TABLE>
<CAPTION>
FT INDEX-
JAPAN
-----------
<S> <C>
1 Year................................................................. -0.4%
3 Years................................................................ 14.8
5 Years................................................................ 5.3
10 Years................................................................ 12.5
</TABLE>

The total return (based on net asset value) for the Japan Index Series from
commencement of operations through April 30, 1996 was 9.24%. This total rate of
return is for a short period and should not be annualized.

THE SOUTH AFRICA COMPONENT

On December 29, 1995, the South Africa component of the FT Index consisted
of 45 stocks with an aggregate market capitalization of approximately R510.8
billion, or US $140.1 billion. In percentage terms, the South Africa component
represented approximately 82.2% of the aggregate investible South Africa market
capitalization. The ten largest constituents of the South Africa component and
the respective approximate percentages of the South Africa component represented
by such constituents were, in order: Anglo American Corp. (10.1%), De
Beers/Centenary (8.2%), South African Breweries (7.7%), Liberty Life Association
(5.4%), Standard Bank Inv. (4.1%), Rembrandt Group (3.6%), SASOL (3.5%), Gencor
(3.5%), Liberty Holdings (2.9%) and First National Bank (2.9%).

Over the six-year period ended December 29, 1995, the performance of the
South Africa component of the FT Index had a correlation of 0.998 with the
performance of the All Share Index, a capitalization-weighted index of South
African stocks, and 0.747 with that of the S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 35% of the market capitalization of the South Africa component;
the largest ten holdings comprised approximately 52% of the market
capitalization of the South Africa component; and the largest 20 holdings
comprised approximately 72% of the market capitalization of the South Africa
component.

-23-
<PAGE>
The ten most highly represented industry sectors in the South Africa
component of the FT Index, and the approximate percentages of the South Africa
component represented thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Precious Metals & Minerals.............................. 34.9%
2) Diversified Holding Companies........................... 11.6
3) Beverages & Tobacco..................................... 11.3
4) Insurance: Life and Agents/Brokers...................... 9.8
5) Banks: Commercial & Other............................... 9.6
6) Food & Grocery Products................................. 4.0
7) Forestry and Paper Products............................. 3.7
8) Mining, Metals & Minerals............................... 3.7
9) Oil..................................................... 3.5
10) Construction & Bldg. Materials.......................... 1.7
</TABLE>

The average annual total return in US Dollars of the South Africa component
of the FT Index is set forth below for the indicated periods prior to December
29, 1995:

<TABLE>
<CAPTION>
FT INDEX-
SOUTH AFRICA
---------------
<S> <C>
1 Year............................................................... 18.2%
3 Years.............................................................. 41.3
5 Years.............................................................. 19.5
10 Years.............................................................. 16.9
</TABLE>

The total return (based on net asset value) for the South Africa Index
Series from commencement of operations through April 30, 1996 was -3.58%. This
total rate of return is for a short period and should not be annualized.

THE UK COMPONENT

On December 29, 1995, the UK component of the FT Index consisted of 205
stocks with an aggregate market capitalization of approximately L702.9 billion,
or US $1,091.3 billion. In percentage terms, the UK component represented
approximately 82.6% of the aggregate investible market capitalization of the
United Kingdom. The ten largest constituents of the UK component and the
respective approximate percentages of the UK component represented by such
constituents were, in order: Glaxo Wellcome (4.6%), British Petroleum (4.3%),
Shell Transport & Trading (4.0%), British Telecom (3.2%), BAT Industries (2.5%),
HSBC Holdings (2.5%), Lloyds TSB Group (2.4%), Marks & Spencer (1.8%), BTR
(1.8%) and Barclays (1.7%).

Over the six-year period ended December 29, 1995, the performance of the UK
component of the FT Index had a correlation of 0.998 with the performance of the
FT-SE 100 Index, an index of 100 UK companies ranked by market capitalization,
and 0.892 with that of the S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 19% of the market capitalization of the UK component; the largest
ten holdings comprised approximately 29% of the market capitalization of the UK
component; and the largest 20 holdings comprised approximately 44% of the market
capitalization of the UK component.

-24-
<PAGE>
The ten most highly represented industry sectors in the UK component of the
FT Index, and the approximate percentages of the UK component represented
thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Banks: Commercial & Other............................... 12.5%
2) Utilities............................................... 11.8
3) Health & Personal Care.................................. 9.7
4) Oil..................................................... 9.1
5) Retail Trade............................................ 8.8
6) Beverages & Tobacco..................................... 8.3
7) Media................................................... 4.4
8) Food & Grocery Products................................. 3.9
9) Construction and Building Materials..................... 3.1
10) Diversified Industrials................................. 2.8
</TABLE>

The average annual total return in US Dollars of the UK component of the FT
Index is set forth below for the indicated periods prior to December 29, 1995:

<TABLE>
<CAPTION>
FT INDEX- UK
-------------
<S> <C>
1 Year.................................................................. 23.3%
3 Years................................................................. 14.7
5 Years................................................................. 11.6
10 Years................................................................. 16.1
</TABLE>

The total return (based on net asset value) for the UK Index Series from
commencement of operations through April 30, 1996 was 2.68%. This total rate of
return is for a short period and should not be annualized.

THE US COMPONENT

On December 29, 1995, the US component of the FT Index consisted of 639
stocks with an aggregate market capitalization of approximately US $4.9
trillion. In percentage terms, the US component represented approximately 73.8%
of the aggregate investible market capitalization of the U.S. markets. The ten
largest constituents of the US component and the respective approximate
percentages of the US component represented by such constituents were, in order:
General Electric (2.5%), AT&T (2.1%), Exxon Corp. (2.0%), Coca-Cola (1.9%),
Merck & Co (1.6%), Philip Morris (1.5%), Procter & Gamble (1.2%), Johnson &
Johnson (1.1%), IBM (1.1%) and Microsoft Corp. (1.1%).

Over the six-year period ended December 29, 1995, the performance of the US
component of the FT Index had a correlation of 1.000 with the performance of the
S&P 500.

As of December 29, 1995, the largest five holdings together comprised
approximately 10% of the market capitalization of the US component; the largest
ten holdings comprised approximately 16% of the market capitalization of the US
component; and the largest 20 holdings comprised approximately 25% of the market
capitalization of the US component.

-25-
<PAGE>
The ten most highly represented industry sectors in the US component of the
FT Index, and the approximate percentages of the US component represented
thereby, as of December 29, 1995, were:

<TABLE>
<C> <S> <C>
1) Utilities............................................... 13.1%
2) Health & Personal Care.................................. 11.1
3) Banks: Commercial & Other............................... 7.8
4) Oil..................................................... 6.4
5) Beverages & Tobacco..................................... 5.3
6) Computer and Office Equipment........................... 4.7
7) Retail Trade............................................ 4.5
8) Food and Grocery........................................ 4.1
9) Electrical Equipment.................................... 3.5
10) Business Services & Computer Software................... 3.5
</TABLE>

The average annual total return of the US component of the FT Index is set
forth below for the indicated periods prior to December 29, 1995:

<TABLE>
<CAPTION>
FT INDEX- US
-------------
<S> <C>
1 Year.................................................................. 37.3%
3 Years................................................................. 15.3
5 Years................................................................. 16.8
10 Years................................................................. 14.6
</TABLE>

The total return (based on net asset value) for the US Index Series from
commencement of operations through April 30, 1996 was 0.43%. This total rate of
return is for a short period and should not be annualized.

OTHER COMPONENTS OF THE FT INDEX

In addition to the country components of the FT Index represented by the
nine Series offered hereby, the FT Index includes components representing
fifteen other countries, twelve regions grouped by geographic areas, thirty-six
groups classified by industry sectors and seven broad economic sectors. It is
anticipated that Series of the Fund covering additional national markets will be
organized in the future, although there can be no assurance that any such
additional Series will be created.

-26-
<PAGE>
EXCHANGE LISTING AND TRADING

The non-redeemable CB Shares-SM- of each Series are listed on the NYSE and
trade at prices that may differ to some degree from their net asset value. See
"Special Considerations and Risks" and "Determining Net Asset Value". There can
be no assurance that the requirements of the NYSE necessary to maintain the
listing of CB Shares-SM- of any Series will continue to be met. The NYSE may
remove the CB Shares-SM- of a Series from listing if (1) following the initial
twelve-month period beginning upon the commencement of trading of a Series of CB
Shares-SM-, there are fewer than 50 record and/or beneficial holders of the CB
Shares-SM- for 30 or more consecutive trading days, (2) the value of the
underlying index or portfolio of securities on which such Series is based is no
longer calculated or available or (3) such other event shall occur or condition
exist that, in the opinion of the NYSE, makes further dealings on the NYSE
inadvisable. In addition, the NYSE will remove the shares from listing and
trading upon termination of the Fund.

CB Shares-SM-of the various Series generally are expected to trade on the
NYSE at market prices close to their respective net asset values. Price
movements in CB Shares-SM- on the NYSE are quoted in 1/8ths. The Adviser
anticipates that the movements in the market price of CB Shares-SM- will
correlate closely with the value of the respective FT Index component. As in the
case of other stocks traded on the NYSE, brokers' commissions on transactions
are based on negotiated commission rates at customary levels for retail
customers and rates which are anticipated to range between $.015 to $.12 per
share for institutions and high net worth individuals.

Within the next year management of the Fund plans to apply for listing CB
Shares-SM- on a number of foreign stock exchanges such as the Deutsche Borse and
the Australian Stock Exchange with the eventual intention of creating a 24-hour
global market for the CB Shares-SM-. There can be no assurance that any such
listings will be applied for or obtained.

REASONS FOR INVESTORS TO PURCHASE CB SHARES-SM-

USER RATIONALE

Investors with differing investment objectives and trading styles may
consider using CB Shares-SM- as part of their investment program. For
investments of less than US $25 million, the Adviser believes the expense ratio
(after waivers and reimbursements) of 1% is roughly equivalent to comparable
institutional index-based investments. Such expense ratio compares with an
average of 1.69% among open-end "foreign stock" funds tracked by Morningstar,
Inc. as of July 7, 1995. There can be no assurance that the current fee waivers
and reimbursements will continue past the Fund's fiscal year end on October 31,
1996. Individual investors, who may not have the analytic resources available to
make well-informed selections of individual company stocks, could use
CountryBaskets-SM- to gain access to global investment opportunities, as
represented by the various FT Index components, both for investment and trading.
In addition, CB Shares-SM- may be used in combination with foreign securities or
shares of mutual funds for hedging or to pursue various trading strategies.
Professional investors could use CB Shares-SM- for arbitrage, hedging and
trading, including as an alternative to futures based on different foreign
market indices, when the investor wants exposure to foreign markets. It is
expected that arbitrage involving the purchase and redemption of multiple
Creation Units would eventually enable dealers and other investors to benefit
from certain economies of scale in transactional costs. Institutional investors
could use CB Shares-SM- as a management tool for tactical asset allocation, to
gain international exposure without the necessity of using derivatives and,
depending on future experiences with costs and liquidity, for long-term holdings
in core positions for their investment portfolio. In addition, CB Shares-SM- may
be used by asset managers to gain market exposure in markets for their clients
where they do not necessarily possess the analytic resources needed to select
individual securities; to invest cash balances on a short- to medium-term basis;
to reduce or neutralize portfolio exposure in a specific national market by
short selling CB Shares-SM-; in tandem with use of other securities and
derivatives, to tailor portfolio exposure to foreign markets to meet specific
investment objectives; to reallocate relative market exposures of a portfolio
without disposing of existing portfolio components; and to take advantage of
potential liquidity and pricing disparities and potential stock lending returns.

-27-
<PAGE>
POSSIBLE USER BENEFITS

CountryBaskets-SM- are designed to provide investors with a highly liquid
mechanism, using securities rather than derivatives, for investing in the
national markets represented by each Series. The Adviser is engaged in
reasonable efforts to foster a liquid and transparent market, which is generally
characteristic of securities trading on the NYSE. There can be no assurance,
however, that active trading markets for the CB Shares-SM- will develop or
continue. In addition, since CB Shares-SM- are quoted on the NYSE, CB Shares-SM-
are expected to serve as a price discovery mechanism during U.S. trading hours
for investment in the various foreign markets represented by the Series. Subject
to any suspension of trading by the NYSE, CB Shares-SM- may be traded throughout
the regular trading session of the NYSE, including at times when the relevant
foreign markets are closed. The NYSE has been granted certain no-action relief
that permits short sales of CB Shares-SM- on "minus" or "zero-minus" ticks
notwithstanding Rule 10a-1 under the Securities Exchange Act of 1934 (the
"Exchange Act").

Because the securities portfolio of each Series will substantially
correspond to the securities comprising the corresponding FT Index component,
the Adviser expects that the potential for index tracking error relative to
index-based products relying on optimization or similar management strategies
should be substantially reduced. Moreover, CB Shares-SM- do not entail the
counterparty risk present in over-the-counter derivatives contracts, like index
swaps, to which CB Shares-SM- are an alternative.

Individual, non-redeemable CB Shares-SM- are book-entry securities subject
to normal U.S. settlement procedures, including a three-day settlement cycle.
Unlike many direct investments in foreign equities, CB Shares-SM- traded in the
secondary market do not entail complicated foreign custody and settlement
arrangements, stamp taxes and other levies associated with trading in non-U.S.
equities. In addition, CB Shares-SM- may be loaned on the same basis as other
U.S. equity securities, creating potential for increasing the total return to an
investor. On the basis of a no-action position of the Commission, broker-dealers
are generally permitted to extend credit on CB Shares-SM- just as on other
marginable securities, subject to the applicable provisions of Regulation T of
the Board of Governors of the Federal Reserve System. Under the terms of such
no-action position, the extension of credit on CB Shares-SM- by broker-dealers
participating in the distribution of CB Shares-SM- is subject to certain
limitations.

INVESTMENT RATIONALE

The wealth of the domestic economies of the nine countries represented by
the initial nine Series (as measured by per capita GDP) has shown a general
upward trend over the seven years ending December 31, 1995. Their respective
stock markets represent opportunities for investing in the potential of, and the
risks associated with, such economies. Since the basket of securities held by
each Series is represented by an individual stock, the CB Share-SM- of such
Series, it is anticipated that investors will trade CB Shares-SM- based on their
investment outlook for the particular national market represented by the Series.
Accordingly, it is expected that much of the trading in CB Shares-SM- will be
driven by macroeconomic fundamentals applied to an assessment of the prospects
for the particular national market. Because no Series may borrow money for the
purpose of leveraging its portfolio, an investment in CB Shares-SM- does not
carry the risks associated with investment in a leveraged portfolio. The CB
Shares-SM- of each Series have statistical characteristics normally associated
with shares of stock of any company (price/earnings ratios, price/book value
ratios, price/cash flow ratios, earnings per share, etc.). Because of these
characteristics, CB Shares-SM- may be included in an investment portfolio in
much the same way as other stocks and ADRs, such as those of General Electric,
AT&T, Intel, Royal Dutch Shell or Norsk Hydro. The Adviser has made arrangements
with third party vendors, including Bloomberg Financial Markets, Reuters Ltd.,
Dow Jones Telerate and Automated Data Processing, to make available to
subscribers through their on-line data services certain real-time or daily
updated news and information relating to the country markets represented by the
respective Series (E.G., spot foreign exchange rates and major market index
prices).

-28-
<PAGE>

INFORMATION AND COMPARISONS RELATING TO THE FUND, SECONDARY MARKET TRADING, NET
ASSET SIZE, PERFORMANCE AND TAX TREATMENT

Information regarding various aspects of each Series, including the net
asset size thereof, as well as the secondary market trading, the performance and
the tax treatment of CB Shares-SM-, may be included from time to time in
advertisements, sales literature and other communications as well as in reports
to current or prospective investors.

Information may be provided to prospective investors to help such investors
assess their specific investment goals and to aid in their understanding of
various financial strategies. Such information may present current economic and
political trends and conditions and may describe general principles of investing
such as asset allocation, diversification and risk tolerance, as well as
specific investment techniques such as indexing and hedging. In addition,
information may be presented to prospective or current investors regarding the
purchase of CB Shares-SM- in the secondary market, such as margin requirements,
types of orders that may be entered, and information concerning short sales.
Similarly, market data symbols, trading fractions, other trading information and
the CUSIP numbers relating to CB Shares-SM- may be included in such information.
Comparisons with other investment vehicles, such as individual stocks, mutual
funds and closed-end funds, may be made with respect to the application of such
requirements and rules applicable to short sales.

Information regarding the net asset size of the respective Series may be
stated in communications to prospective or current investors for one or more
time periods, including annual, year-to-date or daily periods. Such information
may also be expressed in terms of the total number of CB Shares-SM- outstanding
as of one or more time periods. Factors integral to the size of a Series' net
assets, such as the volume and activity of purchases and redemptions of Creation
Units, may also be discussed, and may be specified from time to time or with
respect to various periods of time. Comparisons of such information during
various periods may also be made and may be expressed by means of percentages.

Information may be provided to investors regarding the ability to engage in
short sales of CB Shares-SM-. See "Reasons for Investors to Purchase CB
Shares-SM- -- Possible User Benefits". Institutional investors may be advised
that short sales in CB Shares-SM- may permit partial use of proceeds of the
short sale, and such investors may also be informed that short sales in CB
Shares-SM- may provide a useful source of additional income for certain
institutional investors who have arranged to lend CB Shares-SM- and that a stock
loan premium may exist.

Information may be provided to investors regarding capital gains
distributions by the Series, including historical information relating to such
distributions. Comparisons between the Fund and other investment vehicles such
as mutual funds or closed-end funds may be made regarding such capital gains
distributions, including the expected effects of differing levels of portfolio
adjustments on such distributions and the potential tax consequences thereof.
See "Taxes" for discussion of tax consequences to holders of CB Shares-SM- in
connection with the sale or redemption of CB Shares-SM-.

Information may also be provided in communications to prospective or current
investors comparing and contrasting the relative advantages of investing in CB
Shares-SM- as compared to other investment vehicles, such as mutual funds, both
on an individual and a group basis (E.G., stock index mutual funds), or futures
contracts. Such information may include comparisons of costs, expense ratios and
"fair values", expressed either in dollars or basis points, stock lending
activities, permitted investments and hedging activities (E.G., engaging in
options or futures transactions), price volatility and portfolio turnover data
and analyses. In addition, such information may quote, reprint or include
portions of financial, scholarly or business publications or periodicals,
including model allocation schedules or portfolios as the foregoing relate to
the comparison of CB Shares-SM- to other investment vehicles, current economic
financial and political conditions, investment philosophy or techniques or the
desirability of owning CB Shares-SM-.

Information on the performance of CB Shares-SM- on the basis of changes in
price per CB Share, with or without reinvesting all dividends and/or any
distributions of capital in additional CB Shares-SM-, may be included from time
to time in the Fund's performance reporting. The various measures of performance
that

-29-
<PAGE>

may be reported are described above under "The FT Index -- Performance".
Information on the FT Index contained in this Statement of Additional
Information, as updated from time to time, may also be included from time to
time in such material. The performance of the Fund, the FT Index or both may
also be compared to the performance of money managers as reported in market
surveys such as SEI Fund Evaluation Survey (a leading data base of tax-exempt
fund) or mutual funds such as those reported by Lipper Analytical Services Inc.,
Money Magazine Fund Watch or Wiesenberger Investment Companies Service, each of
which measures performance following their own specific and well-defined
calculation measures, or of the NYSE Composite Index, the American Stock
Exchange Index (indices of stocks traded on the New York and American Stock
Exchanges, respectively), the Dow Jones Industrial Average (an index of 30
widely traded industrial common stocks), the S&P 500, the NASDAQ Composite Index
(an unmanaged index of over-the counter stocks), any widely recognized foreign
stock index or similar measurement standards during the same period of time.
Information may also be included regarding the aggregate amount of assets
committed to index investing generally by various types of investors, such as
pension funds and other institutional investors.

Information relating to the relative price performance of CB Shares-SM- may
be compared against a wide variety of investment categories and asset classes,
including common stocks, small capitalization stocks, ADRs, long and
intermediate term corporate and government bonds, Treasury bills, futures
contracts, the rate of inflation in the United States (based on the Consumer
Price Index ("CPI") or other recognized indices) and other capital markets and
combinations thereof. Historical returns of the capital markets relating to the
current Fund Series may be provided by independent statistical studies and
sources, such as those provided by Ibbotson Associates. The performance of these
capital markets is based on the returns of different indices. Information may be
presented using the performance of these and other capital markets to
demonstrate general investment strategies. So, for example, performance of CB
Shares-SM- may be compared to the performance of selected asset classes such as
short-term U.S. Treasury bills, long-term U.S. Treasury bonds, long-term
corporate bonds, mid-capitalization stocks, small capitalization stocks and
various classes of foreign stocks and may also be measured against the rate of
inflation as set forth in well-known indices (such as the CPI). Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. Performance of CB Shares-SM- may also be compared to that
of other indices or compilations that may be developed and made available to the
investing public in the future. Of course, such comparisons will only reflect
past performance of CB Shares-SM- and the investment categories, indices or
compilations chosen and no guarantees can be made of future results regarding
the performance of either CB Shares-SM- or the asset classes chosen for such
comparisons.

Information regarding secondary market trading activity of CB Shares-SM-
also may be presented over one or more stated time periods, such as intra-day,
daily, weekly, monthly, quarterly, or annual periods. CB Shares-SM- secondary
market trading volume information may be compared with similar information
relating to other securities or instruments that trade on various stock or
futures exchanges during the same reporting period. Average daily, weekly, and
monthly trading volume may be reported from time to time. Comparisons of such
information during various periods may also be made, and may be expressed by
means of percentages. Intra-day trading information, such as bid-ask spread,
price, trade size, bid-ask size, number of individual trades per day and trade
sizes, premium or discount of the actual prices of CB Shares-SM- on the NYSE to
official and indicative net asset values may be reported in terms of both actual
and average levels (over various periods of time), by individual Series or
averaged over all Series.

Information comparing the constituents of the FT Index component relating to
a particular Series, or of the Fund Basket effective for a Series, with those of
relevant stock indices or other investment vehicles, such as mutual funds or
futures contracts, may be advertised or reported by the Fund. For example,
futures on the DAX Index in Germany represent exposure to the price movement of
the DAX Index, which consists of 30 German securities. The FT Index -- Germany
contained 60 securities as of June 28, 1996, while the Fund Basket effective for
the Germany Index Series on such date contained 58 securities. The securities
that are in the FT Index component or in a Fund Basket but not in the DAX Index,
or vice versa, may be referred to as "Tail" securities. The Tail securities may
be identified and the performance characteristics of these securities and the
other constituent groups mentioned above, including volatility measures, equity
analytic measures,

-30-
<PAGE>

such as price/earnings ratio, price/book value and price/cash flow and market
capitalizations, may be reported on an historical basis or on the basis of
independent forecasts. The historical performance or relative performance of the
Tail securities to other securities or indices might also be reported.

Information may be provided by the Fund on the total return for various
composites of the different Series. For example, the price and total returns of
the nine Series, or some combination of fewer Series, or of the FT Index
components, may be weighted equally or by market capitalization, gross domestic
product or some other weighting scheme to create composite returns. These
composite returns might be compared to other securities or indices utilizing any
of the comparative measures that might be used for the individual Series,
including correlations, standard deviation, and tracking error analysis.

-31-
<PAGE>
MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS OF THE FUND

The Fund's Board consists of six Directors. The Board of Directors is
divided into three classes: Class I (one year class); Class II (two year class);
and Class III (three year class). At each annual meeting of stockholders, the
term of one class expires and the successor or successors elected to such class
will serve until the third succeeding annual meeting of stockholders, provided
that, in the event the Fund is not required to hold an annual meeting in one or
more years, the term of any class will not exceed five years. These provisions
could delay the replacement of a majority of the Board of Directors by the
stockholders of the Fund for up to two years. The replacement of a majority of
the Board could be delayed for substantially longer periods when the Fund is not
required to hold annual stockholder meetings. See "Capital Stock and Stockholder
Reports". The Board has the responsibility for the overall management of the
Fund, including general supervision and review of its investment activities. The
Board elects the officers of the Fund. The addresses, principal occupations and
present positions, including any affiliations with the Adviser, State Street,
the Fund's administrator (the "Administrator"), or ALPS, the Fund's Distributor,
of the Directors and the officers of the Fund and their principal occupations
for the past five years are listed below. As of June 30, 1996, the Directors and
officers of the Fund owned beneficially as a group less than 1% of the
outstanding shares of each Series. Directors who are deemed to be interested
persons of the Fund, as defined in the 1940 Act, are indicated by an asterisk
(*).

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS DURING
NAME AND ADDRESS THE FUND PAST FIVE YEARS
- ------------------------------ ----------------------------- -----------------------------------------------------
<S> <C> <C>
Warner Heineman Director Senior Advisor (consultant), 1st Business Bank, Los
1800 Avenue of the Stars Class I Angeles (since 1992); Senior Vice President, Bank of
Los Angeles, California 90067 Los Angeles (1989 to 1992); Senior Vice-President,
City National Bank, Beverly Hills (1981 to 1988);
Vice Chairman and Director (and other positions),
Union Bank, Los Angeles (1943 to 1981); Director,
FHP International Corporation (a health maintenance
organization) (since 1990); Director, FHP Life
Insurance Company (1992 to 1994); Director, Great
States Insurance Company (1993 to 1994); Director,
FHP Financial Corporation (holding company for FHP
Life Insurance Company and Great States Insurance
Company) (since 1994); Director, Alexander Haagen
Properties, Inc. (real estate investment trust)
(since 1994); Director, Capital Market Fund, Inc.
(mutual fund) (1990 to 1995); Trustee, Southwestern
University School of Law (since 1983); Member of the
Board of Advisors, UCLA Medical Center (since 1985);
Member of Board of Visitors, UCLA School of Medicine
(since 1988); Director, Los Angeles Music Center
Opera (since 1967); Director, FHP Foundation
(philanthropic organization) (since 1995); and
Member of the Advisory Board, Recording for the
Blind, Inc.
Joseph A. La Corte* Director and President Managing Director (since April 1996); Director (since
31 West 52nd Street Class III 1994) and Vice President (1992 to 1994) of Deutsche
New York, New York 10019 Morgan Grenfell/C. J. Lawrence Inc.; Vice President,
Nomura Securities International (1990 to 1992).
W. Carter McClelland* Director and Chairman President of Deutsche Bank, North America, since
31 West 52nd Street Class II April 1996; President and Chief Executive Officer,
New York, New York 10019 Deutsche Morgan Grenfell/C. J. Lawrence Inc. (since
1995); Managing Director and other positions, Mor-
gan Stanley & Co. (1974 to 1995).
</TABLE>

-32-
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS DURING
NAME AND ADDRESS THE FUND PAST FIVE YEARS
- ------------------------------ ----------------------------- -----------------------------------------------------
<S> <C> <C>
Lawrence C. McQuade Director Chairman, Qualitas International (international con-
125 East 72nd Street Class I sulting) (since 1995); Director, Bunzl PLC (paper
New York, New York 10021 distributor) (since 1991); Director, Quixote
Corporation (highway safety, manufacturer of CDs and
CD ROMS) (since 1992); Director, Applied Bioscience
Inc. (conducts clinical trials for pharmaceutical
companies (since 1995); Chairman (since 1995) and
Director (since 1994), Czech & Slovak American
Enterprise Fund (investment fund); Director, Oxford
Analytica Inc. (provides political, economic and
business information) (since 1988); Vice-Chairman,
Prudential Mutual Fund Management (1988 to 1995);
served as President and Director (until 1995) of 39
investment companies advised by Prudential Mutual
Fund Management.
Karl M. von der Heyden Director Senior Advisor, The Clipper Group (since 1994);
12 East 49th Street Class III Chairman, Financial Accounting Standards Advisory
New York, New York 10017 Council (since 1995); President and Chief Executive
Officer, Metallgesellschaft Corp. (1993 to 1994);
Chief Financial Officer (1989 to 1993) and Co-Chair-
man and Chief Executive Officer (1993 to 1993), RJR
Nabisco Holdings Corp.; Director, Federated De-
partment Stores (retail department stores) (since
1992); Director, Trizec Corporation Ltd. (real
estate developer) (since 1994); Member of the Board
of Trustees, Duke University (since 1995); and Vice
Chairman of the Board of Trustees, YMCA of Greater
New York.
Robert H. Wadsworth Director President, Robert H. Wadsworth & Associates, Inc.
4455 E. Camelback Road Class II (financial services consulting); President,
Suite 261 E Investment Company Administration Corporation (since
Phoenix, Arizona 85018 1992); President, First Fund Distributors, Inc.;
Vice President, Professionally Managed Portfolios
(since 1991); Member of the Board of Supervisory
Directors of ML High Yield-Treasury Securities Fund
N.V. (since 1991); Member of the Boards of Directors
of The Central European Equity Fund, Inc. (since
1990), The Germany Fund, Inc. (since 1986) and The
New Germany Fund, Inc. (since 1990).
Thomas A. Curtis Vice President and Director and Counsel, Deutsche Bank AG (New York
31 West 52nd Street Secretary Branch) (since 1995); Associate, Cleary, Gottlieb,
New York, New York 10019 Steen & Hamilton (law firm) (1986 to 1993 and 1994
to 1995); Executive Vice President and General
Counsel, Del Monte Fresh Produce Company (1993).
Joseph Cheung Vice President and Treasurer Vice President, Deutsche Morgan Grenfell/C. J. Law-
31 West 52nd Street rence Inc.; Assistant Secretary and Assistant
New York, New York 10019 Treasurer (since 1993), The Germany Fund, Inc., The
Central European Equity Fund, Inc. and The New
Germany Fund, Inc.
</TABLE>

-33-
<PAGE>
The following table sets forth the remuneration of Directors and officers of
the Fund:

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM THE
AGGREGATE FUND AND FUND
COMPENSATION COMPLEX PAID
NAME OF PERSON, POSITION FROM THE FUND TO DIRECTORS
- ----------------------------------------------------------- ------------- --------------
<S> <C> <C>
Warner Heineman............................................ 13,750* 13,750*
Director
Joseph A. La Corte......................................... NONE NONE
Director and President
W. Carter McClelland....................................... NONE NONE
Director and Chairman
Lawrence C. McQuade........................................ 13,750* 13,750*
Director
Karl M. von der Heyden..................................... 11,750* 11,750*
Director
Robert H. Wadsworth........................................ 13,750* $ 55,750* **
Director
Thomas A. Curtis........................................... NONE NONE
Vice President and Secretary
Joseph Cheung.............................................. NONE NONE
Vice President and Treasurer
</TABLE>

- ------------------------
*Includes payments from the Fund for the period from February 8, 1996 through
April 30, 1996 and estimated payments that will be made by the Fund for the
period May 1, 1996 through the end of the Fund's fiscal year on October 31,
1996 to the directors who are not affiliated with the Adviser or the
Distributor.

**Includes payments for services as a director during 1995 from three closed-end
funds for which DMG serves as manager and Deutsche Asset Management GmbH, an
affiliate of DMG, serves as investment adviser.

No Director or officer of the Fund is entitled to any pension or retirement
benefits from the Fund.

CERTAIN AFFILIATED RELATIONSHIPS

Messrs. McClelland and La Corte, Directors of the Fund, are President and
Chief Executive Officer, and Managing Director, respectively, of DMG. Messrs.
Curtis and Cheung, officers of the Fund, are Director and Counsel of Deutsche
Bank AG (New York Branch) and Vice President of DMG, respectively.

-34-
<PAGE>
INVESTMENT ADVISORY, MANAGEMENT AND OTHER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE SECTIONS IN THE PROSPECTUS ENTITLED "THE FUND -- INVESTMENT MANAGEMENT" AND
"-- ADMINISTRATOR".

THE INVESTMENT ADVISER

DMG, a corporation organized under the laws of the State of Delaware, is a
wholly owned direct subsidiary of DB U.S. Financial Markets Holding Corporation
and a wholly owned indirect subsidiary of Deutsche Bank AG, a major German
banking institution. DMG is engaged in the securities underwriting, investment
advisory and securities brokerage business. It is a member of the NYSE and other
principal U.S. stock exchanges. DMG has significant global investment management
experience. As of December 29, 1995, Deutsche Bank AG and its affiliates
together managed over US $130 billion in institutional and mutual fund assets.

DMG serves as investment adviser to each Series pursuant to an Investment
Management Agreement (the "Management Agreement") between the Fund and DMG.
Under the Management Agreement, the Adviser, subject to the supervision of the
Fund's Board of Directors and in conformity with the stated investment policies
of each Series, manages the investment of each Series' assets. The Adviser has
not previously acted as investment adviser to an investment company that seeks
to track the performance of an index. The Adviser is responsible for placing
purchase and sale orders and providing continuous supervision of the investment
portfolio of each Series. In addition, the Adviser provides administrative
services to the Fund that will include negotiating and overseeing the Fund's
contractual arrangements with third-party service providers. Each Series pays
the Adviser an investment advisory and management fee, computed daily and paid
monthly, equal to an annual rate of (i) .20% (in the case of the US Index
Series), .30% (in the case of the Australia Index Series, the France Index
Series, the Germany Index Series, the Italy Index Series, the Japan Index Series
and the UK Index Series) or .45% (in the case of the Hong Kong Index Series and
the South Africa Index Series) of the average daily net assets of such Series,
plus (ii) in the case of each Series, as remuneration for the Adviser's services
in connection with lending portfolio securities of the Series, 40% of the
Series' gross investment income, excluding dividends on portfolio securities. In
addition, DMG will be reimbursed by each Series for its out-of-pocket costs
incurred in providing certain administrative services. See "Investment Policies
and Restrictions -- Lending Portfolio Securities". The Adviser agreed
voluntarily to waive all or a portion of its investment management fees and to
reimburse other expenses of each Series to assure that the annualized ratio of
operating expense to average daily net assets of each Series will not exceed
1.00% for the period from the commencement of operations of each Series through
October 31, 1996. For the fiscal period ended April 30, 1996, reimbursement of
other expenses for each Series amounted to $33,952 for the Australia Index
Series, $12,479 for the France Index Series, $31,338 for the Germany Index
Series, $24,960 for the Hong Kong Index Series, $19,212 for the Italy Index
Series, $0 for the Japan Index Series, $25,867 for the South Africa Index
Series, $35,723 for the UK Index Series and $27,839 for the US Index Series.

The Management Agreement will continue in effect until February 8, 1998, and
thereafter will be subject to annual approval by (1) the Fund's Board of
Directors or (2) vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, provided that in either event the
continuance also is approved by a majority of the Fund's Board who are not
interested persons (as defined in the 1940 Act) of the Fund by vote cast in
person at a meeting called for the purpose of voting on such approval. The
Management Agreement is terminable without penalty, on 60 days' notice, by the
Fund's Board or by vote of the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting securities. The Management Agreement is
also terminable upon 60 days' notice by DMG and will terminate automatically in
the event of its assignment (as defined in the 1940 Act).

The Management Agreement provides that the Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the Management Agreement relates, except
for a loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties under
the Management Agreement.

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The Adviser will reimburse, on a PRO RATA basis, each Series for annual
expenses of such Series which exceed the most stringent limits prescribed by any
state in which shares of the Series are offered for sale. Currently, the only
limitation which the Fund believes would be applicable requires the Adviser to
reimburse a Series to the extent that aggregate operating expenses of the Series
(excluding interest, taxes, brokerage commissions, distribution expenses, if
any, and extraordinary expenses) exceed in any year 2.5% of the first $30
million of average net assets of such Series, 2.0% of the next $70 million of
average net assets of the Series and 1.5% of average net assets of the Series in
excess of $100 million.

THE ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT

State Street, a Massachusetts trust company, provides certain administrative
services to the Fund, including clerical, bookkeeping and recordkeeping services
not otherwise performed by the Adviser or the Custodian, pursuant to an
Administration Agreement (the "Administration Agreement") between the Fund and
State Street. Pursuant to the Administration Agreement, State Street provides
administrative services to the Fund which include, among other things,
monitoring and administering payment of Fund expenses, preparing the Fund's
financial statements and regulatory filings and preparing the Fund's tax
returns. The Administration Agreement is terminable with respect to the Fund
without penalty, on 60 days' notice, by the Fund's Board. The Administration
Agreement is also terminable upon 60 days' notice by State Street.

The Administration Agreement provides that State Street will not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which the Administration Agreement relates,
except for a loss resulting from willful misfeasance, bad faith or negligence on
the part of State Street in the performance of its obligations and duties under
the Administration Agreement.

For its administrative services to the Fund, State Street is entitled to a
fee, computed daily and paid monthly, equal to an annual rate of .08% of the
average daily net assets of each Series up to $125 million, plus .06% of the
average daily net assets of such Series in excess of $125 million up to $250
million and .04% of the average daily net assets of such Series in excess of
$250 million, subject to a minimum annual fee of $95,000 for each Series. In
addition, State Street will be reimbursed by the Fund for certain out-of-pocket
costs incurred in providing administrative services. The Administrator
voluntarily agreed to waive all of its administration fees for the period from
the commencement of operations of each Series through April 30, 1996. There can
be no assurance that the Administrator would agree to continue all or a part of
such waiver for any period after April 30, 1996.

State Street will also act as Custodian and transfer agent (the "Transfer
Agent") for the Fund. See "The Fund -- Custodian and Transfer Agent" in the
Prospectus. State Street served as custodian for more than $2 trillion in assets
worldwide as of September 30, 1995, and manages securities processing operations
and treasury centers in the United States, Europe and the Pacific Basin.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio securities, the Adviser looks for prompt execution of the order at a
favorable price. Generally, the Adviser works with recognized dealers in these
securities, except when a better price and execution of the order can be
obtained elsewhere. The Fund will not deal with affiliates in principal
transactions unless permitted by exemptive order or applicable rule or
regulation. Since the investment objective of each Series is investment
performance that corresponds to that of an index, the Adviser does not intend to
select brokers and dealers for the purpose of receiving research services in
addition to a favorable price and prompt execution either from that broker or an
unaffiliated third party. Orders for agency brokerage transactions may be placed
with Deutsche Bank AG as well as DMG. The Fund's policy requires that
commissions paid to Deutsche Bank AG and DMG comply with Section 17(e) of the
1940 Act and the rules thereunder.

Subject to allocating brokerage to receive a favorable price and prompt
execution, the Adviser may select brokers who are willing to provide payments to
third party service suppliers to a Series to reduce expenses of the Series.

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Since the commencement of its operations, each of the Germany Index Series,
the South Africa Index Series and the US Index Series has acquired securities of
an issuer or issuers affiliated with one or more brokers or dealers that have
engaged in portfolio transactions, as agent, with one or more Series of the
Fund. The names of such brokers or dealers, and the value of the Fund's
aggregate holdings of the subject issuer as of August 12, 1996, are as follows:
Deutsche Morgan Grenfell/C. J. Lawrence Inc. -- $1,223,946 of Deutsche Bank AG
stock held by the Germany Index Series; Standard Bank and Standard Bank London
Limited -- $598,599 of Standard Bank Investment stock held by the South Africa
Index Series; Lehman Brothers Inc. -- $14,787 of Lehman Brothers Holdings Inc.
stock held by the US Index Series; Merrill Lynch Pierce Fenner & Smith
Incorporated -- $70,221 of Merrill Lynch & Co. Inc. stock held by the US Index
Series; and Salomon Brothers Inc -- $29,160 of Salomon Inc. stock held by the US
Index Series.

The Adviser assumes general supervision over placing orders on behalf of the
Fund for the purchase or sale of portfolio securities. If purchases or sales of
portfolio securities of the Fund and one or more other investment companies or
clients supervised by the Adviser are considered at or about the same time,
transactions in such securities will be allocated among the several investment
companies and clients in a manner deemed equitable to all by the Adviser, taking
into account the sizes of such other investment companies and clients and the
amount of securities to be purchased or sold. In some cases this procedure could
have a detrimental effect on the price or volume of the security so far as the
Fund is concerned. However, in other cases it is possible that the ability to
participate in volume transactions and to negotiate lower brokerage commissions
will be beneficial to the Fund. The primary consideration is prompt execution of
orders at the most favorable net price. Portfolio turnover may vary from year to
year, as well as within a year. High turnover rates are likely to result in
comparatively greater brokerage expenses. The portfolio turnover rate for each
Series is expected to be under 50%. See "The Fund -- Investment Policies --
Portfolio Turnover" in the Prospectus. The overall reasonableness of brokerage
commissions is evaluated by the Adviser based upon its knowledge of available
information as to the general level of commissions paid by other institutional
investors for comparable services.

PURCHASE AND ISSUANCE OF FUND SHARES IN CREATION UNIT AGGREGATIONS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE SECTION IN THE PROSPECTUS ENTITLED "THE FUND -- PURCHASE AND ISSUANCE OF
FUND SHARES IN CREATION UNIT AGGREGATIONS".

GENERALLY

The Fund offers and sells shares of each Series on a continuous basis only
in aggregations of a specified number of shares for such Series as set forth
below (each, a "Creation Unit"), without an initial sales charge, at the net
asset value of the shares next determined after receipt of an order in proper
form (as described below under "Procedures for Purchasing Creation Units"). The
consideration for a purchase of each Creation Unit aggregation of shares of a
Series is an in-kind deposit of a designated portfolio of equity securities
substantially corresponding in composition and weighting to the relevant
component of the FT Index (a "Fund Basket"), plus a specified amount of cash
(the "Cash Component"). Together, a single Fund Basket and related Cash
Component (the "Fund Deposit") represent the minimum initial and subsequent
investment amount required for the purchase of shares of a Series, which may
only be made in Creation Unit size aggregations. The number of shares
constituting a Creation Unit of each Series, subject to any stock splits or
reclassifications by the Board of Directors, is 250,000 for the Japan Index
Series and 100,000 for each other Series. The aggregate net asset value of a
Creation Unit of shares is expected to be between US $1.9 million and US $10
million. Orders for Creation Units must be placed with ALPS, the Fund's
Distributor. The address and telephone number of the Distributor are 370
Seventeenth Street, Suite 2700, Denver, Colorado, 1-800-482-3940; facsimiles
should be sent to 303-623-0472. See "Procedures for Purchasing Creation Units"
below.

The Fund issues and sells shares of a Series only on a Business Day for such
Series. A "Business Day" with respect to a Series other than the US Index Series
is any day on which (i) the NYSE, (ii) the stock exchange(s) and Fund
subcustodian(s) relevant to such Series and (iii) financial institutions in
Massachusetts are open for business, and in the case of the US Index Series, any
day on which the NYSE is open and

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financial institutions in Massachusetts are open for business. As of the date of
this Statement of Additional Information, the NYSE observes the following
holidays: New Year's Day, President's Day (Washington's Birthday), Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The stock exchange and/or subcustodian holidays relevant to each
Series are set forth in Appendix A to the Prospectus. Massachusetts financial
institutions are open on all days when the NYSE is open except Columbus Day,
Veterans Day and Martin Luther King Day (observed). See also "Special
Considerations and Risks -- Continuous Offering".

The Fund reserves the absolute right to reject a purchase order transmitted
to the Distributor in respect of any Fund Basket or any component thereof if (a)
the purchaser or group of purchasers, upon obtaining the shares ordered, would
own 80% or more of the current outstanding shares of any Series; (b) the Fund
Basket delivered is not as specified by the Adviser, as described below; (c)
acceptance of the Fund Basket would have certain adverse tax consequences to the
Fund; (d) the acceptance of the Fund Deposit would, in the opinion of counsel,
be unlawful; (e) the acceptance of the Fund Deposit would otherwise, in the
discretion of the Fund or the Adviser, have an adverse effect on the Fund or the
rights of beneficial owners; or (f) in the event that circumstances outside the
control of the Fund, the Distributor and the Adviser make it for all practical
purposes impossible to process purchase orders. The Fund and the Distributor are
under no duty to give notification of any defects or irregularities in the
delivery of Fund Deposits or any component thereof nor shall either of them
incur any liability for the failure to give any such notification.

Absent an applicable exemption, beneficial owners of 10% of the CB
Shares-SM- of any Series will be subject to the insider reporting, short-swing
profit and short sale provisions under the Exchange Act. The Exchange Act
provides that, with certain exceptions, any gain realized by any such beneficial
owner from any purchase and sale or sale and purchase of CB Shares-SM- within
any period of less than six months is recoverable by the Series. Additionally,
subject to any applicable exemption, every such 10%-or-more beneficial owner
must file with the Commission a statement showing ownership and change in
ownership of CB Shares-SM- within ten days after the end of any calendar month
in which there has been a change in such beneficial owner's ownership of CB
Shares-SM-.

THE FUND BASKET

Prior to the opening of business on the NYSE on each day that the NYSE is
open (normally by 8:00 p.m., New York time, on the previous NYSE business day),
the names and number of shares of each security constituting the Fund Basket for
each Series, as determined by the Adviser at the close of business on the NYSE
on such previous day, are made available through the Distributor and the
National Securities Clearing Corporation ("NSCC"), a clearing agency registered
with the Securities and Exchange Commission (the "Commission"). (Under certain
extraordinary circumstances which may make it impossible for NSCC to provide
such information on a given NYSE business day, NSCC will use the information
regarding the identity and weightings of the securities in the Fund Basket on
the previous NYSE business day.) The Fund Basket so determined or made available
following the close of business on the NYSE on a given NYSE business day will be
in effect on the following NYSE business day (i) for redemptions on such date of
Creation Units of CB Shares-SM- of each Series and (ii) for purchases on such
date of Creation Unit aggregations of shares of the US Index Series and of
shares of each other Series pursuant to the Alternative Purchase Option
described below. Such Fund Basket will also be in effect for purchases of
Creation Unit aggregations of CB Shares-SM- of each Series (other than the US
Index Series) on a specified Business Day designated for such Series subsequent
to such NYSE business day. Such a designated subsequent Business Day on which
the shares of these Series may be purchased and issued is referred to as the
"Issue Date". The designated subsequent Issue Date for each non-US Index Series
will be the indicated number of days after the effective date of the applicable
Fund Basket: the Australia Index Series, the third Business Day; the France
Index Series, the third Business Day; the Germany Index Series, the second
Business Day; the Hong Kong Index Series, the second Business Day; the Italy
Index Series, the third Business Day; the Japan Index Series, the third Business
Day; the South Africa Index Series, the fourth Business Day; and the UK Index
Series, the fifth Business Day. For example, the Fund Basket for the France
Index Series to be in effect on Tuesday, September 17, 1996, for redemptions on
such date will be made available normally by 8:00 p.m., New York time, on
Monday, September 16, 1996, the previous business day on which the NYSE is open.

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Such Fund Basket will be applicable to purchases of a Creation Unit of CB
Shares-SM- of the France Index Series (other than pursuant to the Alternative
Purchase Option) on Friday, September 20, 1996 (the subsequent third Business
Day). For the US Index Series, the Business Day on which a purchase order for a
Creation Unit of shares is submitted is the Issue Date for the purchase of such
Creation Unit.

On each day the NYSE is open, the Distributor and the NSCC will also make
available on the morning of each day that the NYSE is open the amount of the
Cash Component for the previous Business Day for each Series.

The composition of the Fund Basket generally changes with changes in the
relevant FT Index component. In addition, in the event that the Adviser
determines, in its discretion, that a security is likely to be unavailable or
available in insufficient quantities for delivery as part of a Fund Basket or
that, for example, an investor is legally prohibited from acquiring a particular
security, the cash equivalent value of such security may be required or
permitted to be delivered in lieu of the security in the Fund Basket. Such
amount will be added to the Cash Component (see "The Cash Component" below). The
announcement of a Fund Basket for a Series will include the announcement of any
adjustments to the Fund Basket that will be in effect for purchases of such
Series' shares on the Issue Date in order to reflect stock splits, mergers,
issuer replacements or other corporate events. If the securities tendered by an
investor for a purchase of a Creation Unit aggregation of shares will not
constitute the complete Fund Basket for the date on which the purchase order is
accepted, the Adviser in its discretion may waive any deficiency in the Fund
Basket delivered and require the cash equivalent value of any undelivered
securities to be included in the Cash Component of the Fund Deposit.

No shares of any Series will be issued and delivered until the transfer of
good title to the Fund of the Fund Basket and the payment of the Cash Component
(together, in the case of each Series other than the US Index Series, with the
applicable Cash Component transaction fee) have been completed, subject in the
case of the US Index Series to the provisions for guarantee of completion of
delivery of the CB Shares-SM- Clearing Process (as defined herein) described
below under "Procedures for Purchasing Creation Units" or as provided under
"Alternative Purchase Option". All questions as to the number of shares of each
security in the Fund Basket required to be delivered, and the waiver of any
deficiency in the Fund Basket delivered, shall be determined by the Adviser,
whose determination shall be final. The Custodian's determination of the
validity, form and acceptance or rejection for deposit of the securities
delivered by an Authorized Participant (as defined under "Procedures for
Purchasing Creation Units") shall be final and binding on the Authorized
Participant.

Purchasers of Fund shares in Creation Unit size aggregations are responsible
for the costs of transferring the Fund Basket securities to the account of the
Fund. As of June 28, 1996, the estimated costs of transferring the securities in
a Fund Basket to the Fund, which may include, among others, settlement and
custody charges, securities registration costs and similar costs, are as
follows: the Australia Index Series, $1,863; the France Index Series, $3,626;
the Germany Index Series, $1,824; the Hong Kong Index Series, $3,363; the Italy
Index Series, $1,593; the Japan Index Series, $12,528; the South Africa Index
Series, $1,440; the UK Index Series, $5,400; and the US Index Series, $7,524.
Such transfer costs will vary with the number of constituent securities in the
relevant Fund Basket, but will not vary according to the number of Fund Baskets
delivered to the Fund's subcustodian simultaneously in respect of a single
purchase order. In addition, investors purchasing Creation Units of CB
Shares-SM- of the Australia, Hong Kong, South Africa and UK Index Series will
pay stock transfer taxes or stamp duties of .30%, .15%, .50% and .50%,
respectively, of the value of each Fund Basket delivered to the relevant
subcustodian in connection with the registration of transfer of such Fund Basket
securities to the Fund. See "Summary of Fund Expenses" in the Prospectus.

THE CASH COMPONENT

The Cash Component will be equal to the difference between the value of the
Fund Basket for the purchase of a Creation Unit of CB Shares-SM- on the date a
purchase order in proper form is accepted for such Creation Unit and the net
asset value of the Creation Unit of the particular Series next computed on such
Business Day and will be determined at the close of the NYSE (currently 4:00
p.m., New York time) on such Business Day when the net asset value of Fund
shares is determined. If the value of the Fund Basket should

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exceed the net asset value of a Creation Unit size aggregation of shares on a
Business Day, the Adviser may determine to accept fewer (or none) of each, or a
designated portion, of the portfolio securities comprising the Fund Basket and
may request some cash to be substituted for the omitted securities in order to
limit the value of the Fund Basket as tendered to the net asset value of the
Creation Unit aggregation of shares. If an investor is restricted by regulation
or otherwise from investing or engaging in a transaction in one or more Fund
Basket securities, including accepting the return of one or more Fund Basket
securities should these exceed the net asset value of the Creation Unit of CB
Shares-SM- being acquired, the Adviser has the right, in its discretion, to
permit the cash equivalent value of such Fund Basket security or securities to
be included as part of the Cash Component in lieu thereof, subject to the
applicable Cash Component transaction fee, or, as the case may be, to purchase
for the Fund the Fund Basket securities otherwise to be returned and reimburse
the amount of the excess to the investor in cash. With respect to a
determination whether to accept or permit cash to be substituted in lieu of Fund
Basket securities, the Distributor shall communicate the request to the Adviser
without providing any information disclosing the identity of the Authorized
Participant or the investor concerned. In addition, the Adviser reserves the
right to permit or require the substitution of an amount of cash to be added to
the Cash Component to replace any security in the relevant FT Index component
which may not be available in sufficient quantity for delivery or for other
similar reasons. The Cash Component, as calculated based on delivery in full of
the Fund Basket applicable for the purchase of a Creation Unit of shares on a
given Business Day, may not exceed 10% of the total purchase price of a Creation
Unit aggregation of shares on the date of acceptance of the purchase order for
such Creation Unit. However, in the event that the Fund accepts the substitution
of cash for omitted Fund Basket securities as described above or elsewhere
herein, the Cash Component may in certain limited circumstances exceed 10% of
the total purchase price. Securities not accepted as part of the Fund Basket
will be returned promptly. The tendered securities in the Fund Basket will be
valued on the date the purchase order is accepted in the same manner as the
relevant Series values its portfolio securities for purposes of calculating the
Series' net asset value. See "Determining Net Asset Value". The Distributor and
NSCC will also make available on the morning of each Business Day information
with respect to the Cash Component for purchases of shares of such Series at the
end of the previous Business Day.

In the case of each Series other than the US Index Series, a cash
transaction fee will be imposed by the Fund on the Cash Component of the Fund
Deposit to offset the Fund's brokerage and other transaction costs of investing
such cash. The Cash Component transaction fee for the purchase of shares of the
applicable Series, as a percentage of the Cash Component, is as follows: the
Australia Index Series, 1.15%; the France Index Series, 1.0%; the Germany Index
Series, 1.0%; the Hong Kong Index Series, 1.2%; the Italy Index Series, 1.0%;
the Japan Index Series, 1.32%; the South Africa Index Series, 2.0%; and the UK
Index Series, 1.5%. See "Summary of Fund Expenses" in the Prospectus. The US
Index Series bears brokerage and other transaction costs associated with
investing the Cash Component received on purchases of Creation Unit aggregations
of US CB Shares-SM-. Arrangements satisfactory to the Fund for delivery of the
Cash Component and the cash purchase transaction fee must be made in advance in
order for shares to be issued and delivered. See "Procedures for Purchasing
Creation Units" below.

PROCEDURES FOR PURCHASING CREATION UNITS

Set forth below is a brief description of the present purchase procedures.
In addition, on or about September 1, 1996, the Fund expects to make available
an alternative purchase process (the "Alternative Purchase Option") for Creation
Unit aggregations of CB Shares-SM- (other than of the US Index Series) as more
fully described below under "Alternative Purchase Option".

ISSUE DATE PURCHASE PROCEDURE

In accordance with the present purchase procedures, orders for Creation Unit
size aggregations of shares of any Series may be placed with the Distributor
only by an "Authorized Participant", I.E., a participant (a "DTC Participant")
in The Depository Trust Company ("DTC") who has entered into an Authorized
Participant Agreement (the "Authorized Participant Agreement") with the Fund,
the Distributor and State Street, as Custodian and Transfer Agent. The
Authorized Participant Agreement provides for procedures with respect to the
purchase and redemption of Creation Unit aggregations of shares that supplement
the

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procedures set forth herein. Investors who are not Authorized Participants must
make appropriate arrangements with an Authorized Participant to purchase
Creation Unit aggregations of shares. Investors should be aware that their
particular broker may not be a DTC Participant or may not have executed an
Authorized Participant Agreement and that therefore orders to purchase Creation
Unit aggregations of Fund shares may have to be placed by the investor's broker
through an Authorized Participant. As a result, purchase orders placed through
an Authorized Participant may result in additional charges to such investor. The
Fund anticipates that it will enter into Authorized Participant Agreements with
only a few DTC Participants. Investors seeking to purchase Creation Unit size
aggregations of Fund shares are directed to contact the Distributor for a
current list of Authorized Participants. Purchase orders for Creation Unit
aggregations of shares may be directed to the Distributor through an Authorized
Participant by a dealer which has entered into an agreement with the Distributor
for solicitation of purchases of Creation Unit aggregations of shares. All
shares of the Fund will be entered on the records of DTC in the name of Cede &
Co. for the account of the Authorized Participant. For additional information,
see "The Fund -- Book-Entry Only System" in the Prospectus. In placing an order,
an Authorized Participant agrees that it will provide for payment of the Cash
Component and related Cash Component transaction fee on its own behalf or on
behalf of the investor for which it acts. Investors are responsible for making
their own arrangements with an Authorized Participant for payment to it of the
Cash Component amount and related cash purchase transaction fee.

To place an order for shares of any Series other than the US Index Series to
be issued on an Issue Date, the Authorized Participant must first give notice to
the Distributor on the day a Fund Basket becomes effective for purchases on a
subsequent Business Day (see "The Fund Basket") by delivering a notice of
intention to purchase one or more Creation Unit aggregations of shares on the
applicable Issue Date. No notice of intention is required for a purchase of
shares of the US Index Series. The Authorized Participant must cause to be
delivered or arrange for the investor to deliver the securities constituting the
Fund Basket to the account maintained by the Custodian, in the case of the US
Index Series, or with the appropriate subcustodian in the jurisdiction where the
portfolio securities of the Series are traded, in the case of each other Series,
by the intended Issue Date, provided that for the France Index Series and the
South Africa Index Series delivery of the Fund Basket must be made to the
appropriate subcustodian on the day prior to the Issue Date.

Following the notice of intention, an order to purchase Creation Units on an
Issue Date, in the form required by the Fund, must be received on the designated
Business Day, I.E., the Issue Date, by the Distributor from an Authorized
Participant on its own or another investor's behalf by the closing time of the
regular trading session on the NYSE (currently 4:00 p.m., New York time) in
order for the issuance of Creation Unit aggregations of shares to be effected at
the net asset value next determined at the close of trading on the NYSE on such
date. Those placing orders to purchase Creation Units through an Authorized
Participant should afford sufficient time to permit proper submission of the
purchase order to the Distributor in time for issuance on the desired Issue
Date. Orders must be transmitted by the Authorized Participant to the
Distributor by facsimile or electronic transmission as provided in the
Authorized Participant Agreement.

The Authorized Participant shall have also made arrangements satisfactory to
the Fund for the payment, in immediately available or same day funds, of the
Cash Component determined on the Issue Date (together with the Cash Component
transaction fee applicable to each Series other than the US Index Series) on
such date, subject in the case of the US Index Series to payment of the Cash
Component through the CB Shares-SM- Clearing Process. Any excess funds will be
returned. Those placing orders should ascertain the applicable deadline for cash
transfers by contacting the operations department of the broker or depositary
institution effectuating the transfer of the Cash Component. This deadline is
likely to be significantly earlier than the closing time of the regular trading
session on the NYSE.

In accordance with the foregoing procedures, a purchase order for shares of
any Series will be considered in "proper form" if (i) a properly completed
purchase order, in the form required by the Fund (available through the
Distributor), has been submitted on the intended date of purchase, whether on
its own or another customer's behalf, by the Authorized Participant by the 4:00
p.m. close of trading on the NYSE, (ii) delivery of the Fund Basket is confirmed
on such date by the Custodian, subject in the case of the

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<PAGE>
US Index Series to the provisions for guarantee of completion of delivery of the
CB Shares-SM- Clearing Process and (iii) arrangements satisfactory to the Fund
have been made for the payment to the Custodian on such date of any Cash
Component (together with the Cash Component transaction fee, if any) which may
be due based on the determination of the net asset value of the shares at the
close of trading on the NYSE (4:00 p.m.) on such Issue Date. Currently,
information as to the delivery of the Fund Basket will be available to the
Custodian by 1:00 p.m., New York time, in the case of each Series except the US
Index Series, for which confirmation of delivery of the Fund Basket will be
available by 3:00 p.m., New York time, on the Issue Date, subject in the case of
the US Index Series to the provisions for guarantee of completion of delivery of
the CB Shares-SM- Clearing Process. If the Authorized Participant's purchase
order is received in proper form, the Distributor, on behalf of the Fund, will
accept the order and upon determination of the net asset value of the shares of
such Series at the close of business on the NYSE, the Fund will issue the
appropriate number of Creation Unit aggregations of shares. Either the Fund or
the Distributor may at its sole discretion reject any purchase order. Upon
payment in full, the Transfer Agent will issue the shares to DTC on the same
Business Day for credit to the account of the Authorized Participant on the
following Business Day. Once an order is accepted, the Distributor will transmit
a confirmation of acceptance to the Authorized Participant that placed the
order. Investors should be aware that an Authorized Participant may require
orders for purchases of CB Shares-SM- placed with an Authorized Participant to
be in the form required by the individual Authorized Participant, which form
will not be the same as the form of purchase order specified by the Fund, which
the Authorized Participant must deliver to the Distributor.

If the Fund Basket delivered by an Authorized Participant to the Custodian
or the applicable subcustodian, as the case may be, on an intended Issue Date is
incomplete, and cash is not permitted by the Adviser to be substituted for the
omitted Fund Basket securities (as described above under "The Fund Basket"), the
Authorized Participant may at its option request the Custodian or the applicable
subcustodian to retain the securities that have been delivered for up to two
NYSE business days in order to permit such Authorized Participant to complete
delivery of the Fund Basket in effect on the date that the relevant purchase
order was submitted to the Distributor. On the date of completion of delivery of
such Fund Basket, the Authorized Participant will be required to submit a new
purchase order form, properly completed, to the Distributor. Subject to the
foregoing and to the completion of arrangements satisfactory to the Fund for the
payment to the Custodian on the new date of purchase of any Cash Component
(together with the Cash Component transaction fee, if any) which may be due
based on the determination of the net asset value of the shares of the
applicable Series at the close of trading on the NYSE on such new date of
purchase, the Fund will issue the appropriate number of Creation Unit
aggregations of shares at their net asset value on such date as described above.

US INDEX SERIES -- NSCC PROCEDURES

In addition, in the case of the US Index Series, an Authorized Participant
that is a participant in the Continuous Net Settlement ("CNS") System of the
NSCC may alternatively deliver the Fund Basket and the Cash Component through
the CNS clearing processes of the NSCC, as such processes have been enhanced to
effect purchases and redemptions of Creation Unit size aggregations of CB
Shares-SM- of the US Index Series (referred to herein as the "CB Shares-SM-
Clearing Process"). The Distributor will upon request provide a list of
Authorized Participants that are participants in the CNS System of the NSCC. The
Authorized Participant authorizes State Street, as Index Receipt Agent (as such
term is defined in the rules of the NSCC, the "Agent") to transmit to NSCC on
behalf of the Authorized Participant such trade instructions as are necessary to
effect the purchase order. Pursuant to such trade instructions from the Agent to
NSCC, the Authorized Participant agrees to transfer the requisite Fund Basket
securities and the Cash Component to the Agent, together with such additional
information as may be required by the Agent. In accordance with its procedures
in effect from time to time, the NSCC will guarantee delivery of the Fund Basket
and the related Cash Component to the Fund for each purchase effected through
the CNS System. An order to purchase a Creation Unit of CB Shares-SM- of the US
Index Series through the CB Shares-SM- Clearing Process is deemed received by
the Distributor on the Issue Date if (i) such order is received by the
Distributor not later than the close of the regular trading session on the NYSE
(currently 4:00 p.m., New York time), on such date and (ii) all other procedures
set forth in the Authorized Participant Agreement are properly followed.

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ALTERNATIVE PURCHASE OPTION

As indicated above, from and after September 1, 1996, the Alternative
Purchase Option, as more fully described below, is expected to become available.
The procedures described under "Issue Date Purchase Procedure" (other than the
procedures applicable to the CB Shares Clearing Process) will be modified in
certain respects for purposes of the Alternative Purchase Option, which will
permit an Authorized Participant, acting as principal, for itself or on behalf
of another person, to place a purchase order for a Creation Unit of CB
Shares-SM- (other than of the US Index Series) on a Business Day for the Series
at the net asset value of such shares next computed on such date, with payment
of the Cash Component required on the same date, but with the settlement of the
order and delivery of the Fund Basket, together with the cash purchase
transaction fee, to be made on a designated subsequent Business Day. Following
the date when (and if) the Alternative Purchase Option becomes effective, both
purchase procedures, in addition to the CB Shares-SM- Clearing Process for the
US Index Series, will be available to investors. Investors may contact the
Distributor for information with respect to the effective date of the
Alternative Purchase Option.

Upon effectiveness of the Alternative Purchase Option, Creation Units of
each Series (other than the US Index Series) may be purchased by following the
alternative purchase procedures described below. To place orders using the
Alternative Purchase Option, an Authorized Participant must have executed an
addendum (the "Addendum") to the Authorized Participant Agreement with respect
to such procedures. The Addendum provides, among other matters, that with
respect to any purchase order submitted in accordance with such procedures, the
Authorized Participant shall be liable to the Fund as a principal. Such an
Authorized Participant may then submit to the Distributor an irrevocable
purchase order on any Business Day for a given Series (the date on which the
purchase order is submitted is referred to as the "Trade Date") in accordance
with the alternative purchase procedures for a Creation Unit aggregation of CB
Shares-SM- of such Series. As part of such purchase procedures, the Authorized
Participant must provide information for the Fund's subcustodian for such Series
regarding delivery of the Fund Basket securities by or on behalf of the
Authorized Participant to the account of such subcustodian on or before the
applicable settlement date. The Fund Basket for such purchase for a Series will
be the one in effect for the Trade Date, as announced as described above
(normally by 8:00 p.m., New York time) on the NYSE trading day immediately
preceding such Business Day. Such Creation Unit of CB Shares-SM- will be sold at
the net asset value of such shares determined on the Trade Date. The Authorized
Participant must also make arrangements satisfactory to the Fund for the payment
on such date, in immediately available or same day funds, of the Cash Component
determined on the Trade Date.

Subject to the terms and conditions and procedures set forth herein, as
supplemented by the Authorized Participant Agreement and the Addendum, if an
irrevocable purchase order has been submitted by the Authorized Participant in
proper form not later than the closing time of the regular trading session on
the NYSE as described above (currently at 4:00 p.m. New York time) on the Trade
Date, the Fund will accept the order, subject to its right (and the right of the
Distributor) to reject any order until acceptance, and upon next determination
of the net asset value of the shares of such Series on such Trade Date, the Fund
will confirm the issuance, against receipt of payment, of a Creation Unit of CB
Shares-SM- of the Series at such net asset value. The Distributor will then
transmit a confirmation of acceptance to the Authorized Participant that placed
the order.

A purchase order for a Creation Unit of CB Shares-SM- of a Series will be
considered in "proper form" for purposes of the Alternative Purchase Option if
by the close of business on the NYSE (normally 4:00 p.m. New York time) on the
Trade Date, (i) the Distributor has received from the Authorized Participant a
duly completed irrevocable purchase order in the form authorized by the Fund for
use in connection with the alternative purchase procedure, (ii) the Fund Basket
delivery information has been provided to the relevant subcustodian, (iii)
arrangements satisfactory to the Fund have been made for the payment to the
Custodian on the Trade Date of any Cash Component which may be due based on the
determination of the net asset value of the CB Shares-SM- of the Series at the
close of business on the NYSE on the Trade Date, and (iv) all other procedures
applicable to the purchase of Creation Units pursuant to the alternative
purchase method as set forth in the Authorized Participant Agreement,
supplemented by the Addendum, are properly followed. Any excess funds provided
for the Cash Component will be returned to the Authorized Participant.

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<PAGE>
As indicated under "The Fund Basket" above, a Creation Unit of CB Shares-SM-
of a Series will not be delivered until the payment of the Cash Component, the
transfer of good title to the Fund of the Fund Basket securities and the payment
of any applicable Cash Component transaction fee have been completed (or the
cash value thereof has been received, as provided below).

The settlement date for a purchase of a Creation Unit of CB Shares-SM- in
accordance with the Alternative Purchase Option for a given Series is the
subsequent Business Day for such Series following the effective date of the Fund
Basket specified as the Issue Date as indicated under "The Fund Basket" above
(the "Settlement Date"). For example, in the case of the France Index Series,
the Settlement Date would be the third Business Day after the Trade Date. As
described below, the Addendum to the Authorized Participant Agreement provides
that, in certain circumstances, the Settlement Date may be extended to a
specific date taking into account local market settlement cycles.

If on the Settlement Date, the Authorized Participant (i) delivers the
applicable Cash Component transaction fee in immediately available or same day
funds to the account specified by the Custodian and (ii) the subcustodian
confirms receipt of all Fund Basket securities (currently such information is
available by 1:00 p.m., New York time), the Custodian will notify the
Distributor and the Transfer Agent, and the Fund will issue and cause the
delivery of the Creation Unit of CB Shares-SM- to the Authorized Participant.
Normally, the Creation Unit would be delivered to the Authorized Participant's
DTC account by 10:00 a.m., New York time, on the next DTC business day.

If, however, on the Settlement Date, the Authorized Participant has paid the
Cash Component transaction fees, but delivery of the Fund Basket is incomplete
because certain Fund Basket securities are missing, the Fund may, in its sole
discretion, notwithstanding such deficiency, extend the Settlement Date in
reliance on the undertaking of the Authorized Participant to deliver the missing
Fund Basket securities as soon as possible, provided that its undertaking is
secured by delivery on the Settlement Date and maintenance thereafter of either
(i) collateral or (ii) an irrevocable stand-by bank letter of credit (the "LC"),
in either case, equal to at least 105% of the value of the missing Fund Basket
securities, to be marked to market daily, together with an amount representing
the estimated Cash Component transaction fee payable with respect to any missing
Fund Basket securities that must be purchased by the Fund. The collateral must
consist of cash or short-term U.S. Government securities. The LC must be issued
by a person other than the Authorized Participant (or any affiliate of such
Participant) having more than $500 million in total assets and otherwise
satisfactory to the Fund. In any such case, if the collateral or the LC is
delivered on the Settlement Date, in order to permit the Participant to complete
delivery of the Fund Basket securities, the Fund will extend the Settlement Date
to a date taking into account the local market settlement cycle, plus one
Business Day (the "Extended Settlement Date"), as provided in the Addendum.

The Custodian will monitor daily that the collateral or the amount available
under the LC is maintained at 105% of the value of the missing Fund Basket
securities (together with the estimated Cash Component transaction fee thereon)
required to be delivered on the Extended Settlement Date, as marked to market on
each NYSE trading day upon determination of the net asset value of the CB
Shares-SM- of the Series. The Authorized Participant must deliver any additional
amount of collateral required or cause the amount available under the LC to be
increased by such additional amount by the morning of the next NYSE business
day. If the Authorized Participant fails to do so, the Fund has the right to
take ownership of the collateral or to draw down the amount available under the
LC and to pursue its rights for any deficiency against the Authorized
Participant. The Fund also has the right to take the same actions if the value
of the collateral or amount available under the LC falls below the value of the
missing securities and cash required to be delivered on the Extended Settlement
Date. The Authorized Participant will be subject to liability as principal for
any shortfall between the cost to the Fund of purchasing such missing securities
and the collateral or amount available under the LC and for any and all other
costs, losses or damages the Fund and its stockholders may incur as a result of
the Authorized Participant's failure to make or complete such delivery.

Delivery of the Creation Unit of CB Shares-SM- will not take place until
completion of delivery of the Fund Basket securities (and payment of any Cash
Component transaction fees) on the Extended Settlement Date

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<PAGE>
(or, if earlier, upon completion of the delivery of all Fund Basket securities
and payment of any cash amounts due). Purchasers of Fund shares in Creation Unit
size aggregations are also responsible for the costs of transferring the Fund
Basket securities to the account of the Fund. See "Fund Basket" above.

Should delivery of the Fund Basket securities not be completed on the
Extended Settlement Date, the Fund in its sole discretion may take ownership of
the collateral or draw down on the LC for the amounts required to purchase the
undelivered Fund Basket securities, together with the applicable Cash Component
transaction fee, and any related costs and expenses. Any excess funds from the
collateral or the LC will be returned to the Authorized Participant. If payment
in full of the Fund Deposit is received, the Creation Unit of CB Shares-SM- will
be delivered to the Authorized Participant. If, for any reason, the collateral
or the amount available under the LC on the Extended Settlement Date would not
cover the costs of purchasing the missing securities (and the related cash
purchase transaction fees), the Fund may nevertheless in its discretion deliver
the Creation Unit of CB Shares-SM- if the Authorized Participant pays in
immediately available funds on such date the costs of acquiring the remaining
missing Fund Basket securities (including the Cash Component transaction fee)
and any other related expenses of the Fund.

Notwithstanding the foregoing, if on the Settlement Date, the Authorized
Participant has not delivered the Cash Component transaction fee to the
Custodian or the Fund Basket securities to the applicable subcustodian, the Fund
may in its sole discretion rescind the transaction and cancel the issuance of
the Creation Unit of CB Shares-SM-. In any such case, the Authorized Participant
will be liable to the Fund for the full amount of any losses, costs and damages
to the Fund by reason of the Authorized Participant's failure to deliver the
full Fund Deposit in payment for the Creation Unit pursuant to its irrevocable
purchase order submitted on the Trade Date. The Cash Component delivered on the
Trade Date will constitute a fund against which the Fund may charge such costs
and damages (with any excess to be returned to the Authorized Participant).
Similarly, if on the Extended Settlement Date delivery of any remaining Fund
Basket securities is not completed, the Fund may, in its sole discretion, and in
view of the factors described below, cancel and rescind the issuance of the
Creation Unit of CB Shares-SM-. As indicated, in such case the Authorized
Participant shall be liable to the Fund for the full amount of any shortfall and
any losses or damages caused by the Authorized Participant's failure to complete
the transaction and to deliver the Fund Deposit. Any cash or Fund Basket
securities previously delivered will, in such case, constitute a fund from which
the Fund may be reimbursed for such costs and damages.

In making any determination in its discretion whether to (i) accept
collateral or an LC and extend the Settlement Date, (ii) cancel the transaction
and rescind the issuance of the Creation Unit of CB Shares-SM- or (iii) exercise
its rights against any collateral or draw on the LC, the Fund may, among other
matters, consider the degree to which delivery of the Fund Basket securities at
such date is complete and the reasonable likelihood that delivery of the missing
Fund Basket securities can be completed in a timely manner, the adequacy of the
amount of the collateral held by the Custodian or available to be drawn down
under the LC at such date, as well as the factors described in the third
paragraph under "Generally" above.

All questions as to the number of shares of each security in the Fund Basket
and the validity, form, eligibility and acceptance for deposit of any securities
delivered shall be determined by the Fund, and the Fund's determination shall be
final and binding. The prices on each day used to determine the market value of
the Fund Basket securities will be the same as those used by the Fund to
determine the NAV of shares of such Series. Except as otherwise expressly
described above, the purchase procedures for a Creation Unit aggregation of CB
Shares-SM- pursuant to the Alternative Purchase Option are the same as those
applicable as described under "Issue Date Purchase Procedure" above.

There can be no assurance whether or when the Alternative Purchase Option
will be available.

THE DISTRIBUTOR

Creation Unit size aggregations of shares for each Series are continuously
offered for sale through the Fund's principal underwriter and Distributor, ALPS.
The Distributor serves as the principal underwriter for each Series pursuant to
an agreement which by its terms will continue, unless earlier terminated as
described below, until February 8, 1998 (the "Distribution Agreement"). The
Distribution Agreement is subject to

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<PAGE>
renewal in 1997 with respect to each Series and will remain in effect only if
its continuance is specifically approved annually thereafter as to such Series
by the affirmative vote of both the Fund's Board of Directors or a majority of
the outstanding voting securities (as defined in the 1940 Act) of such Series
and a majority of the Directors who are not "interested persons" (as defined in
the 1940 Act) of the Fund and have no direct or indirect financial interest in
the operation of the 12b-1 Plan (as defined below) of such Series or in any
related agreements (the "Non-Interested Directors"), cast in person at a meeting
called for the purpose of voting on the Distribution Agreement. The Distributor
acts as agent for the Fund. Pursuant to the Distribution Agreement, the Fund has
agreed to indemnify the Distributor against certain liabilities under the
Securities Act.

Pursuant to plans adopted by the Board of Directors of the Fund for each
Series under Rule 12b-1 under the 1940 Act (each, a "12b-1 Plan"), each Series
pays the Distributor distribution services fees, calculated daily and payable
monthly, equal to such Series' allocable portion of the aggregate distribution
services fees payable by the Fund as follows: .02% per annum of the average
aggregate daily net assets ("Aggregate Net Assets") of all Series subject to the
Distribution Agreement up to Aggregate Net Assets of $2.0 billion, plus .015%
per annum of Aggregate Net Assets of all such Series in excess of $2.0 billion
up to $5 billion, plus .005% per annum of Aggregate Net Assets of all such
Series in excess of $5 billion. In addition, pursuant to a Marketing Agreement
with the Distributor (the "Marketing Agreement"), each Series will pay the
Distributor for marketing and promotional services its allocable portion of the
aggregate marketing fees payable by the Fund, equal to .23% per annum of the
Aggregate Net Assets of all Series subject to the Marketing Agreement up to
Aggregate Net Assets of $200 million, plus .03% per annum of Aggregate Net
Assets of such Series in excess of $1.5 billion up to $5 billion, plus .02% per
annum of Aggregate Net Assets of such Series in excess of $5 billion up to $10
billion, plus .015% per annum of Aggregate Net Assets of such Series in excess
of $10 billion. Subject to the approval by the Board of Directors of the Fund,
including a majority of the Non-Interested Directors, of the Supplemental
Compensation Agreement between the Fund and the Distributor (the "Supplemental
Compensation Agreement"), each Series will also pay to the Distributor, on a
quarterly basis commencing with such approval, such Series' allocable portion of
.01% per annum of the Aggregate Net Assets of the nine Series in excess of $500
million up to Aggregate Net Assets of $2.5 billion as a contribution toward
certain bonus payments to be made by the Distributor to employees engaged in
marketing activities with respect to the secondary market for Fund shares. The
allocation among the Series of fees and expenses payable under the Distribution
Agreement, Marketing Agreement and Supplemental Compensation Agreement will be
made PRO RATA in accordance with the daily net assets of the respective Series.

Pursuant to agreements entered into with such persons ("Fund Payment
Agreements"), each Series will make payments under its 12b-1 Plan to certain
broker-dealers or other persons ("Investor Services Organizations") that enter
into investor services agreements with the Distributor to provide marketing
and/or stockholder services to such Series ("Investor Services Agreements").
Smith Barney Inc. ("Smith Barney") has entered into a Fund Payment Agreement and
Investor Services Agreement. Each of the Fund Payment Agreements and Investor
Services Agreements will be a "related agreement" under the 12b-1 Plan of each
Series. Each Fund Payment Agreement will provide annual fees of 0.05% of the
average daily net assets in excess of $200 million of all Series subject to the
applicable Investor Services Agreement. Pursuant to the Fund Payment Agreement
with Smith Barney, the Fund will indemnify Smith Barney against certain
liabilities under the Securities Act. The Distributor may also enter into
stockholder servicing agreements with broker-dealers or other persons that are
DTC Participants to provide stockholder services to their clients holding CB
Shares-SM-. Under the terms of each stockholder servicing agreement, such
broker-dealer or other person will be paid stockholder servicing fees under the
12b-1 Plan of each Series other than the US Index Series of 0.1% of the
aggregate net asset value of CB Shares-SM- held through DTC for the account of
such DTC Participant.

The fees paid by a Series under its 12b-1 Plan will be compensation for
distribution or marketing services for that Series. To the extent the foregoing
12b-1 Plan fees aggregate less than .25% per annum of the average daily net
assets of a Series, each Series will also reimburse the Distributor and the
Adviser for

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their respective costs incurred in producing advertising or marketing material
prepared at the request of the Series. The aggregate payments under each 12b-1
Plan will not exceed, on an annualized basis, .25% of average daily net assets
of the applicable Series.

The continuation of the 12b-1 Plan of each Series, the Distribution
Agreement, the Marketing Agreement and each of the other related agreements
referred to above is subject to the annual approval of the Fund's Board,
including by a majority of the Non-Interested Directors.

Each of the Distribution Agreement, the Marketing Agreement and the
Supplemental Compensation Agreement, and each Investor Services Agreement and
Fund Payment Agreement referred to above, will provide that it may be terminated
at any time, without the payment of any penalty, (i) by vote of a majority of
the Non-Interested Directors or (ii) by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the relevant Series, on at
least 60 days' written notice to the other party. Each of the Distribution
Agreement and the Marketing Agreement is also terminable upon 60 days' notice by
the Distributor and will terminate automatically in the event of its assignment
(as defined in the 1940 Act). Each Investor Services Agreement and Fund Payment
Agreement is also terminable by the Investor Services Organization upon 60 days'
notice to the other party thereto and will terminate automatically upon the
termination of the Distribution Agreement. The Supplemental Compensation
Agreement will terminate automatically upon the termination of the Marketing
Agreement.

The Distributor has entered into stockholder services agreements with
certain participating financial institutions ("PFIs"). Such agreements do not
provide for any payments from the Fund or the Distributor. Pursuant to the
agreements, PFIs agree, among other things, to provide stockholder support
services and research and promotional services related to the secondary market
trading of CB Shares-SM- and make a market in CB Shares-SM- and/or Fund Basket
securities. The Distributor will provide or arrange with third parties to
provide PFIs with, among other things, sales and advertising material relating
to CB Shares-SM-, education and data support for PFIs' research and sales
promotion activities and a limited pool of CB Shares-SM- available for lending
to PFIs at preferential rates to settle secondary market transactions in CB
Shares-SM-. The Distributor provides or arranges for third parties to provide
similar services to NYSE specialist firms ("Specialist Institutions") registered
in CB Shares-SM- of one or more designated Series, in each case pursuant to an
agreement under which the Specialist Institution agreed to enter into a purchase
agreement with the Fund to purchase a certain number of Creation Units of CB
Shares-SM- of such designated Series prior to the commencement of trading of
such CB Shares-SM- on the NYSE.

The Distributor may enter into agreements with securities dealers
("Soliciting Dealers") who will solicit purchases of Creation Unit aggregations
of Fund shares. Such Soliciting Dealers may also be Authorized Participants
and/or PFIs.

The Distributor is a broker-dealer registered under the Exchange Act and a
member of the National Association of Securities Dealers, Inc.

REDEMPTION OF FUND SHARES IN CREATION UNIT AGGREGATIONS

SEE "THE FUND -- REDEMPTION OF FUND SHARES IN CREATION UNIT AGGREGATIONS" IN
THE PROSPECTUS FOR INFORMATION CONCERNING REDEMPTIONS OF FUND SHARES. THE
FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH SUCH
SECTION.

GENERALLY

The Fund redeems shares of a Series only in Creation Unit size aggregations
and only on a day on which the NYSE is open for trading. The Fund will not
redeem Fund shares in less than Creation Unit size aggregations of Fund shares.
Generally, redemption proceeds for a Creation Unit aggregation of shares will
consist of a Fund Basket and a minimal amount of cash. See "Redemption
Procedures". All redemptions are effected at the net asset value next determined
after receipt of a redemption request in proper form. Investors may purchase CB
Shares-SM- in the secondary market and aggregate such purchases into Creation
Units for redemption. There can be no assurance, however, that there will be
sufficient liquidity in the public trading market at any time to permit assembly
of a Creation Unit size aggregation of CB Shares-SM-. See "The

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<PAGE>
Fund -- Investment Considerations and Risks" in the Prospectus. Investors will
incur brokerage and other costs in connection with such purchase in the
secondary market. See "Summary of Fund Expenses" in the Prospectus for
information about the dollar value of Creation Unit aggregations of shares.

REDEMPTION PROCEEDS

A cash redemption transaction fee payable to the Fund will be imposed on the
cash portion of the redemption proceeds of shares of each Series, other than the
US Index Series, in Creation Unit size aggregations to offset brokerage and
other transaction costs of the portfolio transactions that may be required. The
fee that will be imposed ranges from 1% to 1.32%, depending on the Series. See
"Summary of Fund Expenses" in the Prospectus. Investors redeeming shares of the
Fund also bears the costs of transferring the Fund Basket, which may include,
without limitation, settlement and custody charges, registration fees and
similar fees, from the Fund to their account or on their order. Currently, the
estimated redemption transfer costs for each Series based on the number of
constituent securities in the relevant Fund Basket are as follows: the Australia
Index Series, $1,296; the France Index Series, $2,940; the Germany Index Series,
$1,425; the Hong Kong Index Series, $2,950; the Italy Index Series, $1,180; the
Japan Index Series, $9,280; the South Africa Index Series, $1,125; the UK Index
Series, $4,000; and the US Index Series, $7,524. Such transfer costs will vary
with the number of constituent securities in the relevant Fund Basket, but will
not vary according to the number of Fund Baskets delivered to an investor on
execution of a single redemption request. An investor redeeming Creation Units
of Hong Kong CB Shares-SM- or Japan CB Shares-SM- will pay a stock transfer tax
of .15% and .30%, respectively, of the value of each Fund Basket delivered on
redemption in connection with the registration of transfer of such Fund Basket
securities to such investor. Investors who use the services of a broker or other
such intermediary may be charged a fee for their services.

A stockholder redeeming CB Shares-SM- in Creation Unit aggregations will
generally receive redemption proceeds in the form of the applicable Fund Basket
and will be required to sell such securities for its own account if the
stockholder desires to obtain cash. Because such securities proceeds generally
will be delivered, in each case other than the US Index Series, several days
after the date of redemption, the stockholder may receive significantly less
cash proceeds than the redemption value of the CB Shares-SM- redeemed due to
intervening fluctuations in the market value of such securities and (in the case
of each

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Series other than the US Index Series) exchange rate fluctuations between the
applicable Series Currency and the US dollar. In addition, such stockholder may
incur certain transaction costs and significant commission expenses with respect
to the sale of such securities proceeds.

REDEMPTION PROCEDURES

Redemption requests in respect of shares of any Series must be submitted to
State Street, as the Fund's Transfer Agent, by or through an Authorized
Participant on a day that the NYSE is open for business. Investors other than
Authorized Participants are responsible for making arrangements for a redemption
request to be made through an Authorized Participant. Upon request, an investor
may obtain a list of current Authorized Participants by calling 1-800-482-3940.
A Creation Unit aggregation of shares will be redeemed at the net asset value
determined at the close of the NYSE on the day that the redemption request is
received in proper form, provided that such request is received by the Transfer
Agent from an Authorized Participant by 4:00 p.m., New York time, and the CB
Shares-SM- to be redeemed are delivered through the facilities of DTC by 4:00
p.m., New York time, on such day (except as provided below), provided that
redemption requests for Creation Units of the US Index Series may also be placed
through the CB Shares-SM- Clearing Process as described below. Redemption
requests received after such time will be rejected and may be resubmitted on the
next day that the NYSE is open for business.

The Authorized Participant must transmit the request for redemption, in the
form required by the Fund, to the North Quincy, Massachusetts office of the
Transfer Agent in accordance with procedures set forth in the Authorized
Participant Agreement. Redemption requests may not be transmitted to the
Distributor. Investors should be aware that their particular broker may not have
executed an Authorized Participant Agreement, and that, therefore, requests to
redeem Creation Unit size aggregations of shares may have to be placed by the
investor's broker through an Authorized Participant who has executed an
Authorized Participant Agreement. At any given time there may be only a limited
number of persons that have executed an Authorized Participant Agreement.
Investors making redemption requests should be aware that an Authorized
Participant acting on its behalf may require that such request be in the
irrevocable form specified by such Authorized Participant. Investors making
requests to redeem shares should afford sufficient time to permit proper
submission of the request by an Authorized Participant and transfer of the CB
Shares-SM- to the Fund's Transfer Agent. A redemption request will be considered
to be in proper form if (i) a duly completed request form is received by the
Transfer Agent by 4:00 p.m., New York time, and (ii) the Authorized Participant
has transferred or caused to be transferred to the Transfer Agent the Creation
Unit aggregation of shares being redeemed through the DTC book-entry system by
4:00 p.m., New York time, on the same day that the redemption request is
received (except in the case of the US Index Series, if the CB Shares-SM-
Clearing Process is used). On Columbus Day, Veterans Day and Martin Luther King
Day, when the NYSE is open but DTC facilities for transfer of securities are
closed, CB Shares-SM- must be delivered to the Transfer Agent at the opening of
business on the business day following the day the redemption request is
received. Except in the case of redemption through the CB Shares-SM- Clearing
Process, if the Transfer Agent does not receive the investor's Fund shares
through DTC facilities by 4:00 p.m. on the same day that the redemption request
is received or, in the case of the aforementioned DTC holidays, at the opening
of business on the following day, the redemption request shall be rejected and
may be resubmitted the next day that the NYSE is open for business. Those making
redemption requests should ascertain the deadline applicable to transfers of
shares through the DTC system by contacting the operations department of the
broker or depositary institution effecting the transfer of the CB Shares-SM-.

Except with respect to a redemption of Creation Units of the US Index Series
using the CB Shares-SM- Clearing Process (discussed below), the tender of an
investor's Fund shares for redemption will be effected through the relevant
Authorized Participant and DTC. The distribution of the cash redemption payment
in respect of Creation Units redeemed will be effected through DTC and the
relevant Authorized Participant to the beneficial owner thereof as recorded on
the book-entry system of DTC or the DTC Participant through which such investor
holds shares, as the case may be, or by such other means specified by the
Authorized Participant submitting the redemption request. See "The Fund --
Book-Entry Only System" in the Prospectus. In the case of the US Index Series,
the Fund will transfer the Fund Basket to or on the order of the relevant
Authorized Participant through the DTC system or, if the CB Shares-SM- Clearing
Process is

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used, through the CNS System and, in the case of each other Series, to the
account of the Authorized Participant or beneficial owner in the foreign
jurisdiction where such securities are traded. Normally, cash redemption
proceeds will be paid as soon as practicable after the date the redemption
request is received in proper form (usually one business day), but in any event
not later than seven calendar days after the date of redemption. In-kind
redemption proceeds will be delivered within the time permitted by applicable
law and regulations. Subject to applicable law or Commission rule, enforcement
position or order, the time for such delivery in some cases could be extended,
but not later than seven calendar days from the date of redemption, except in
certain instances, in the case of the Japan Index Series and the UK Index
Series, where holiday schedules in the respective national markets will require
a longer delivery process for the in-kind redemption proceeds. In such
instances, pursuant to an order of the Commission, the Fund will make delivery
of in-kind redemption proceeds within a number of days not to exceed 10 calendar
days in the case of the Japan Index Series and 12 calendar days in the case of
the UK Index Series. The dates of redemption in 1996 when such delays in the
delivery process would occur are set forth in Appendix A to the Prospectus. In
the event that local holiday schedules or other unforeseen circumstances in the
relevant local markets
would not permit delivery of in-kind redemption proceeds within the time
permitted by Commission order or applicable regulations, the Fund may redeem
Creation Unit aggregations of CB Shares-SM- entirely for cash. Cash redemptions
are subject to the cash redemption transaction fee applicable to each Series.

In order to accept delivery of the portfolio securities in the Fund Basket,
a redeeming investor or the Authorized Participant on its behalf must maintain
appropriate securities broker-dealer, bank or other custody arrangements in the
jurisdiction in which the portfolio securities of the Series are customarily
traded, to which account such portfolio securities will be delivered. In the
event that neither the redeeming investor nor the Authorized Participant acting
on its behalf has appropriate arrangements in place to take delivery of the
portfolio securities in the applicable jurisdiction, and it is not possible to
make other comparable arrangements satisfactory to the Fund, or if it is not
possible to effect deliveries of the portfolio securities in such jurisdiction,
the Fund will exercise its option to redeem such shares in cash and the
redeeming beneficial owner will be required to receive the redemption proceeds
entirely in cash. In such a case the cash redemption transaction fee will be
charged by the Fund upon and be subtracted from the entire redemption proceeds.

Orders to redeem CB Shares-SM- of the US Index Series in Creation Unit size
aggregations through the CB Shares-SM- Clearing Process must be delivered
through an Authorized Participant that is a participant in the CNS System of the
NSCC. Investors may obtain a list of such Authorized Participants upon request
by calling 1-800-482-3940. An order to redeem CB Shares-SM- of the US Index
Series using the CB Shares-SM- Clearing Process is deemed received in proper
form if (i) such request is received by State Street, as Transfer Agent, not
later than the close of the regular trading session on the NYSE (currently 4:00
p.m., New York time) on a day the NYSE is open and (ii) all other procedures
applicable to the CB Shares-SM- Clearing Process have been properly followed.
Redemption requests made in proper form but received by the Transfer Agent after
the 4:00 p.m. NYSE closing time will be deemed received on the next succeeding
business day. The Authorized Participant Agreement authorizes State Street as
Agent to transmit to NSCC on behalf of the beneficial owner of the Creation Unit
of CB Shares-SM- tendered for redemption such trade instructions as are
necessary to effect the redemption order. Pursuant to such trade instructions
from the Agent to NSCC, the Agent will transfer to the relevant Authorized
Participant the requisite securities by the third NSCC Business Day following
the date on which such request for redemption is deemed received. The Agent will
also effect a transfer of the cash redemption payment to the relevant Authorized
Participant via DTC cash transfer facilities or by federal funds wire by the
same date. An "NSCC Business Day" for purposes hereof is a day when the NSCC is
open for business, currently each day on which the NYSE is open for business
except for Columbus Day, Veterans Day and Martin Luther King Day. The Fund
Basket securities are covered by NSCC's guarantee of completion of such
delivery.

SUSPENSION OF REDEMPTION

The right of redemption may be suspended or the date of payment postponed
with respect to any Series (1) during any period when the NYSE is closed (other
than customary weekend and holiday closings);

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<PAGE>
(2) when trading on the NYSE is suspended or restricted; or (3) when an
emergency exists as a result of which disposal of the Series' portfolio
securities or determination of its net asset value is not reasonably
practicable.

DETERMINING NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE SECTION IN THE PROSPECTUS ENTITLED "THE FUND -- DETERMINATION OF NET ASSET
VALUE".

Each Series calculates its net asset value per share at the close of the
regular trading session on the NYSE (currently 4:00 p.m., New York time) on each
day when the NYSE is open for business. See "Purchase and Issuance of Fund
Shares in Creation Unit Aggregations".

VALUATION OF PORTFOLIO SECURITIES BY THE FUND

Portfolio securities held by each Series other than equity securities held
by the UK Index Series are valued, for purposes of determining the net asset
value per share of the Series, at the last quoted sales price on the securities
exchange or national securities market on which such securities are primarily
traded. Equity securities held by the UK Index Series are valued based on the
arithmetic mean of the closing bid and asked prices on the London Stock Exchange
(or, if no asked price is available, at the bid price). The value of portfolio
securities delivered to the Fund as part of the in-kind deposit of portfolio
securities (I.E., the Fund Basket) required for a purchase of Creation Units on
any Business Day will be determined on the same basis. Securities not listed on
an exchange or national securities market, or securities in which there were no
transactions, are valued at the arithmetic mean of the most recent bid and asked
prices, or if no asked price is available, at the bid price. However, when
market quotations are not readily available, portfolio securities and other
assets 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 Fund.
Events affecting the values of portfolio securities that occur between the time
their prices are determined on the primary exchange or market in which they are
traded and the close of regular trading on the NYSE will not be reflected in the
calculation of a Series' net asset value unless the Adviser determines that the
particular event would materially affect net asset value, in which case an
adjustment will be made. The values of portfolio securities denominated in
currencies other than the US dollar are converted into US dollars at the WM
Reuters spot rate for the relevant Series Currency at 4:00 p.m., London time, on
the day that the foreign currency values of the securities are determined, or at
such other quoted exchange rate as may be determined by the Adviser to be
appropriate. Expenses and fees, including the investment advisory,
administration and distribution fees of each Series, are accrued daily and taken
into account for the purpose of determining the net asset value of shares of
that Series.

DIVIDENDS AND DISTRIBUTIONS

See "The Fund -- Dividends and Capital Gains Distributions" in the
Prospectus for information concerning the Fund's policy on dividends and
distributions.

TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE SECTIONS IN THE PROSPECTUS ENTITLED "THE FUND -- DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS" AND "-- TAX MATTERS".

TAX TREATMENT OF THE FUND

Each Series is expected to be treated as a separate entity for tax purposes.
As such, each Series must calculate its income and losses, and satisfy the
requirements as to its status as a regulated investment company, separately. It
is intended that each Series will qualify for and elect treatment as a regulated
investment company (a "RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"). Such treatment generally will relieve a Series of federal income
tax liability to the extent it distributes its net investment income and net
capital gain income to stockholders.

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<PAGE>
To qualify for treatment as a RIC, a company must annually distribute at
least 90 percent of its net investment company taxable income (which includes
dividends, interest and net short-term capital gains) and meet several other
requirements. Among such other requirements are the following: (1) at least 90
percent of the company's annual gross income must be derived from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities or foreign currencies, or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
(2) at the close of each quarter of the company's taxable year, (a) at least 50
percent of the market value of the company's total assets must be represented by
cash and cash items, U.S. government securities, securities of other RICs and
other securities, with such other securities limited for purposes of this
calculation in respect of any one issuer to an amount not greater than 5% of the
value of the company's assets and not greater than 10% of the outstanding voting
securities of such issuer, and (b) not more than 25 percent of the value of its
total assets may be invested in the securities of any one issuer or of two or
more issuers that are controlled by the company (within the meaning of Section
851(b)(4)(B) of the Code) that are engaged in the same or similar trades or
businesses or related trades or businesses (other than U.S. government
securities or the securities of other RICs); and (3) the company may not derive
30 percent or more of its annual gross income from the sale or other disposition
of (i) stock or securities, (ii) options, futures or forward contracts on stock
or securities (other than options, futures or forward contracts on foreign
currencies) or (iii) foreign currencies (including options, futures and forward
contracts on foreign currencies) not directly related to the company's principal
business of investing in stock, securities or foreign currencies, in each case
held for less than three months.

Any dividend declared by a 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 Series not later than such
December 31 so long as the dividend is actually paid by the Series during
January of the following calendar year.

TAX TREATMENT OF INVESTORS

A person other than a tax-exempt entity who exchanges securities for
Creation Units of Fund shares generally will recognize gain or loss equal to the
difference between the market value of the Creation Units and the sum of his
aggregate basis in the securities surrendered and the Cash Component paid. A
person other than a tax-exempt entity who redeems Creation Units of Fund shares
generally will recognize gain or loss equal to the difference between the sum of
the market value of the securities received and the cash redemption payment and
his aggregate basis in the Fund shares redeemed.

Generally, persons who are not subject to tax on their income will not be
taxed upon distributions from the Fund (unless the persons are subject to the
U.S. federal tax on unrelated business income and incur indebtedness allocable
to shares of the Fund). The Series' dividends and distributions will not be a
specified preference item for purposes of the U.S. federal alternative minimum
tax imposed on individuals and corporations. Other investors will be taxed upon
the distribution of dividends from the Fund. Dividends paid from net investment
income will generally be taxable as ordinary income for federal income tax
purposes. Distributions in excess of a Series' current and accumulated earnings
and profits will, as to each of the Series' investors, be treated as a tax-free
return of capital, to the extent of the investor's basis in his shares and as a
capital gain thereafter. Investors should consult their own tax advisers
regarding the treatment of distributions under applicable state law. Dividends
of net investment income from a Series other than the US Index Series generally
will not qualify for the dividends-received deduction permitted to corporate
owners under Section 243 of the Code. Regardless of the length of time a
stockholder has held his shares, distributions designated as being from a
Series' net long-term capital gains (I.E., the excess of net long-term capital
gains over net short-term capital losses) will be taxable as such.

A distribution by a Series will reduce its net asset value per share. Such a
distribution may be taxable to the investor as ordinary income or capital gain
as described above even though, from an investment standpoint, it may constitute
a return of capital.

-52-
<PAGE>
Upon the sale or exchange of Fund shares (other than a redemption of a
Creation Unit aggregation of Fund Shares, the treatment of which is described
above), an investor will realize a taxable gain or loss equal to the difference
between the amount realized and the investor's basis in the shares. Such gain or
loss will be treated as capital gain or loss, if the shares are capital assets
in the investor's hands, and will be long-term or short-term depending upon the
investor's holding period for the shares. Any loss realized on a sale or
exchange will be disallowed 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 such a case, the basis of the shares
acquired will be adjusted upward to reflect the disallowed loss. Any loss
realized by an investor on a disposition of the Fund's shares held by the
investor for six months or less will be treated as a long-term capital loss for
U.S. income tax purposes to the extent of any distributions of long-term capital
gains received by the investor (and any amounts retained by the Fund that were
designated as undistributed capital gains), with respect to such shares.

The Fund will make annual reports of the federal income tax status of
distributions to owners of shares. Such reports will set forth the dollar
amounts of dividends from net investment income and long-term capital gains, the
investor's portion of the foreign income taxes paid to each country, the portion
of dividends that represents income derived from sources within each country
and, in the case of the US Index Series, dividends which may qualify for the
dividends-received deduction described above. Investors should consult their own
tax advisers to determine the consequences of holding shares in a Series under
state, local or other tax law.

The 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 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. Corporate investors and other
investors specified in the Code are or may be exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the stockholder's U.S. federal income tax liability.

THE FOREGOING DISCUSSION IS A SUMMARY ONLY AND IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. PURCHASERS OF SHARES OF THE FUND SHOULD
CONSULT THEIR OWN TAX ADVISERS AS TO THE TAX CONSEQUENCES OF INVESTING IN SUCH
SHARES, INCLUDING UNDER STATE, LOCAL AND OTHER TAX LAWS. Finally, the foregoing
discussion is based on applicable provisions of the Code, regulations, judicial
authority and administrative interpretations in effect on the date hereof.
Changes in applicable authority could materially affect the conclusions
discussed above, and such changes often occur.

CAPITAL STOCK AND STOCKHOLDER REPORTS

Each Fund share has one vote as to matters affecting the holder thereof and,
when issued and paid for in accordance with the terms of purchase described
under "Purchase and Issuance of Fund Shares in Creation Unit Aggregations", will
be fully paid and non-assessable. Shares have no preemptive, exchange,
subscription or conversion rights and are freely transferable. 200,000,000
shares are currently authorized for each Series of the Fund.

Shares of all Series vote together as a single class except that if the
matter being voted on affects only a particular Series it will be voted on only
by that Series and if a matter affects a particular Series differently from
other Series, that Series will vote separately on such matter. Fractional shares
of the Fund may be issued. Each share is entitled to participate equally in
dividends and distributions declared by the Board of Directors with respect to
the relevant Series, and in the net distributable assets of such Series on
liquidation. Stockholders are entitled to require the Fund to redeem only
Creation Unit size aggregations of their shares. The Board of Directors of the
Fund may from time to time change the number of shares constituting a Creation
Unit aggregation of shares of any Series.

A registered investment company incorporated in Maryland, such as the Fund,
is not required to hold annual stockholder meetings if its charter or bylaws
provide that such meetings would not be held in any year such a meeting is not
required to be held for certain purposes specified in the 1940 Act. Accordingly,
the Fund's bylaws provide that it is not required to hold annual stockholder
meetings for the purpose of electing

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<PAGE>
Directors as long as two-thirds of the Directors then in office have been
elected by the stockholders. Under Maryland law, Directors of the Fund may be
removed by the vote of the holders of a majority of the outstanding shares of
the Fund. The Fund does not intend to hold stockholder meetings unless required
to for certain purposes specified in the 1940 Act.

CONTROL PERSONS. The Fund expects that each Series may have one or more
stockholders each holding more than 5% of the outstanding shares of such Series.
As of August 13, 1996, each of Morgan Grenfell & Co. Limited, a company
organized in the United Kingdom, and Bain Securities Limited, an Australian
company, affiliates of the Adviser and wholly owned subsidiaries of Deutsche
Bank AG, a German company, beneficially owned over 5% of the outstanding shares
of one or more Series as indicated below.

As of August 13, 1996, Morgan Grenfell & Co. Limited beneficially owned 27%
of the France Index Series, 49% of the Germany Index Series, 31% of the Hong
Kong Index Series, 25% of the Italy Index Series, 37% of the Japan Index Series,
33% of the South Africa Index Series and 49% of the US Index Series. As of
August 13, 1996, Bain Securities Limited beneficially owned 49% of the Australia
Index Series. Morgan Grenfell & Co. Limited is a wholly owned subsidiary of
Morgan Grenfell Group PLC, which is owned by DB Investments (GB) Limited (a
wholly owned subsidiary of Deutsche Bank AG) and Deutsche Bank AG. Bain
Securities Limited is a wholly owned subsidiary of Bain & Company, Ltd., which
is a wholly owned subsidiary of Bain Trust, which is a wholly owned subsidiary
of Bain Unit Trust, all of whose voting stock is owned by DB Australia Ltd.,
which is a wholly owned subsidiary of Deutsche Bank AG.

The address of Morgan Grenfell & Co. Limited is 150 Leadenhall Street,
London, England EC3V 4RJ, and of Bain Securities Limited is Level 18, Grosvenor
Place, 225 George Street, Sydney, New South Wales, Australia.

REPORTS. The Fund will issue to its stockholders semi-annual reports
containing unaudited financial statements and annual reports containing
financial statements audited by independent accountants approved by the Fund's
Directors and by the stockholders when meetings are held.

STOCKHOLDER INQUIRIES. Stockholder inquiries may be made by writing to the
Fund, c/o Deutsche Morgan Grenfell/C. J. Lawrence Inc., 31 West 52nd Street, New
York, New York 10019.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, is counsel
to the Fund and has passed upon the validity of the Fund shares. Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036, serves as
the independent accountants of the Fund.

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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Directors
of The CountryBaskets-SM- Index Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of the
Australia Index Series, the France Index Series, the Germany Index Series, the
Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the
South Africa Index Series, the UK Index Series and the US Index Series (nine
separate portfolios constituting The CountryBaskets-SM- Index Fund, Inc.,
hereafter referred to as the "Funds") at February 29, 1996 in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Funds' management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

[/S/ PRICE WATERHOUSE LLP]

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
March 1, 1996

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<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
HONG S.
AUSTRALIA FRANCE GERMANY KONG ITALY JAPAN AFRICA
INDEX INDEX INDEX INDEX INDEX INDEX INDEX UK INDEX US INDEX
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
---------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash........................ $ 11,487 $ 11,499 $11,476 $11,481 $ 11,493 $ 11,470 $11,494 $ 11,488 $ 11,478
Deferred organization
expenses................... 248,000 248,000 248,000 248,000 248,000 248,000 248,000 248,000 248,000
---------- -------- -------- -------- -------- -------- -------- -------- --------
Total Assets.............. 259,487 259,499 259,476 259,481 259,493 259,470 258,494 259,488 259,478
---------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- --------
LIABILITIES
Organization expenses
payable.................... 248,000 248,000 248,000 248,000 248,000 248,000 248,000 248,000 248,000
---------- -------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities......... 248,000 248,000 248,000 248,000 248,000 248,000 248,000 248,000 248,000
---------- -------- -------- -------- -------- -------- -------- -------- --------
Net Assets................ $ 11,487 $ 11,499 $11,476 $11,481 $ 11,493 $ 11,470 $11,494 $ 11,488 $ 11,478
---------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- --------
Shares outstanding ($.001 par
value)....................... 584 305 331 394 467 302 571 299 216
---------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value per share..... $ 19.67 $ 37.70 $ 34.67 $ 29.14 $ 24.61 $ 37.98 $ 20.13 $ 38.42 $ 53.14
---------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- --------
Composition of net assets
Capital stock............... $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 $ 1
Paid-in capital............. 11,486 11,498 11,475 11,480 11,492 11,469 11,493 11,487 11,477
---------- -------- -------- -------- -------- -------- -------- -------- --------
Net Assets, February 29,
1996..................... $ 11,487 $ 11,499 $11,476 $11,481 $ 11,493 $ 11,470 $11,494 $ 11,488 $ 11,478
---------- -------- -------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>

See Notes to Financial Statements.

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<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
NOTES TO FINANCIAL STATEMENTS

FEBRUARY 29, 1996

1. GENERAL
The CountryBaskets-SM- Index Fund, Inc. (the "Fund") was incorporated under
the laws of the State of Maryland on August 8, 1994. The Fund is registered
under the Investment Company Act of 1940 (the "Act") as an open-end management
investment company. The Fund currently has nine common stock series: the
Australia Index Series; the France Index Series; the Germany Index Series; the
Hong Kong Index Series; the Italy Index Series; the Japan Index Series; the
South Africa Index Series; the UK Index Series; and the US Index Series (each, a
"Series").

Deutsche Morgan Grenfell/C. J. Lawrence Inc. ("DMG"), an indirect subsidiary
of Deutsche Bank AG, intends to serve as investment adviser (the "Adviser") to
the Fund. State Street Bank and Trust Company ("State Street") intends to serve
as administrator, custodian and transfer agent to the Fund, and ALPS Mutual
Funds Services, Inc. ("ALPS") intends to serve as distributor of the Fund.

The Series have had no operations other than the sale of the following Fund
Series shares to ALPS for the noted amounts: Australia Index Series (584 shares
for proceeds of $11,487); France Index Series (305 shares for proceeds of
$11,499); Germany Index Series (331 shares for proceeds of $11,476); Hong Kong
Index Series (394 shares for proceeds of $11,481); Italy Index Series (467
shares for proceeds of $11,493); Japan Index Series (302 shares for proceeds of
$11,470); South Africa Index Series (571 shares for proceeds of $11,494); UK
Index Series (299 shares for proceeds of $11,488); and US Index Series (216
shares for proceeds of $11,478).

The costs of organizing the Fund and registering its shares will be paid
initially by DMG and reimbursed by the Fund at the time of the initial offering.
These costs in turn will be allocated to each Series as provided for by the
Fund's Board. Such organization costs will be deferred and will be amortized
ratably over a period of sixty months from the commencement of operations of the
Series. If any of the initial shares are redeemed before the end of the
amortization period, the proceeds of the redemption will be reduced by the pro
rata share of the unamortized organization costs.

2. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Fund intends to enter into an Investment Management Agreement (the
"Management Agreement") with DMG. As investment adviser, DMG manages the
investments of each of the Series. For its services, DMG is entitled to receive
a fee from each Series at an annual rate of .20% of the average daily net
assets, in the case of the US Index Series, .45% of the average daily net assets
in the case of the Hong Kong Index Series and the South Africa Index Series, and
.30% of the average daily net assets of each other Series, plus, in the case of
each Series, 40% of the gross investment income, less dividends on securities
held in the portfolio. The Management Agreement also provides that DMG will be
reimbursed for out-of-pocket expenses incurred in providing certain
administrative services.

The Fund intends to enter into an Administration Agreement with State
Street. Under the Administration Agreement, State Street will assist in
supervising the operations of the Series. For its services, State Street is
entitled to receive a fee from each Series at an annual rate of .08% of the
average daily net assets of such Series up to $125 million, plus .06% of the
average daily net assets of such Series in excess of $125 million up to $250
million, and .04% of the average daily net assets of such Series in excess of
$250 million, subject to a minimum annual fee of $95,000 per Series. The
Administration Agreement also provides that State Street will be reimbursed for
out-of-pocket expenses incurred in providing certain services.

The Fund intends to enter into a Distribution Agreement and a Marketing
Agreement with ALPS. Under the Distribution Agreement, ALPS serves as
Distributor of the shares of the Series. The Fund also has established a 12b-1
Plan for each Series (each, a "Plan"), pursuant to which each Series pays the
Distributor a distribution services fee for activities intended to result in the
sale of shares of the Series.

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<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FEBRUARY 29, 1996

2. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
Under the Marketing Agreement the Distributor will also be paid a marketing fee,
will receive contributions from the Fund toward certain bonus payments to be
made to employees of the Distributor, and will be reimbursed for certain
expenses. Each Series will also pay certain expenses of printing and
distributing prospectuses and will make payments made to dealers and other
persons for marketing and stockholder services, including payments to each such
person entering into an investor services agreement with ALPS. All payments to
the Distributor and such dealers and other persons by each Series, and all
reimbursements to the Distributor or the Adviser for their respective costs
incurred in producing advertising or marketing material prepared at the request
of the Series, will be made under the 12b-1 Plan of such Series and will not
exceed in the aggregate, on an annualized basis, .25% of the average daily net
assets of the Series.

3. CAPITAL SHARES
The Fund is authorized to issue 5,000,000,000 shares of common stock.
Currently, the Board has created nine Series of stock and allocated the
following number of shares to each Series: Australia Index Series (200,000,000
shares); France Index Series (200,000,000 shares); Germany Index Series
(200,000,000 shares); Hong Kong Index Series (200,000,000 shares); Italy Index
Series (200,000,000 shares); Japan Index Series (200,000,000 shares); South
Africa Index Series (200,000,000 shares); UK Index Series (200,000,000 shares);
and US Index Series (200,000,000 shares). Shares of each Series are offered at
net asset value without a sales charge, in exchange for an in-kind deposit of a
designated portfolio of securities specified by the Distributor each day, plus a
specified amount of cash. Redemptions of the shares of the Series are made
principally in portfolio securities. The Fund imposes a transaction fee to the
cash portion of each purchase and of each redemption of Series shares (other
than shares of the US Index Series). The percentage fee imposed on the cash
portion of purchases, for each Series other than the US Index Series, is as
follows: Australia Index Series (1.15%); France Index Series (1.0%); Germany
Index Series (1.0%); Hong Kong Index Series (1.2%); Italy Index Series (1.0%);
Japan Index Series (1.32%); South Africa Index Series (2.0%); and UK Index
Series (1.5%). The percentage fee imposed on the cash portion of redemption
proceeds for each Series other than the US Index Series is as follows: Australia
Index Series (1.15%); France Index Series (1.0%); Germany Index Series (1.0%);
Hong Kong Index Series (1.2%); Italy Index Series (1.0%); Japan Index Series
(1.32%); South Africa Index Series (1.0%); and UK Index Series (1.0%).

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FINANCIAL STATEMENTS FOR THE PERIODS ENDED APRIL 30, 1996 (UNAUDITED)

The unaudited financial statements of each Series of the Fund for the period
from the commencement of operations through April 30, 1996 reflect all
adjustments which are, in the opinion of management of the Fund, necessary to a
fair statement of the results for the interim period presented. Such adjustments
are of a normal recurring nature.

-59-
<PAGE>
THE COUNTRYBASKETS -SM- INDEX FUND, INC.

AUSTRALIA INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Broken Hill Proprietary................................ 149,550 $2,303,528 15.90%
National Australia Bank................................ 111,455 1,000,779 6.91%
CRA Ltd................................................ 49,281 799,764 5.52%
Westpac Bank Corp. .................................... 145,772 708,329 4.89%
Western Mining Corpration.............................. 5,357 622,816 4.30%
Australia & NZ Bank Group.............................. 112,190 536,328 3.70%
Coca Cola Amatil....................................... 37,804 398,007 2.75%
News Corp.............................................. 59,407 348,457 2.41%
Amcor Ltd.............................................. 47,644 342,395 2.36%
Commonwealth Bank...................................... 37,223 305,844 2.11%
Coles Myer Ltd......................................... 82,188 297,262 2.05%
Woodside Petroleum..................................... 51,143 295,963 2.04%
Lend Lease Corp........................................ 18,168 277,129 1.91%
Fosters Brewing Group.................................. 150,440 275,608 1.90%
CSR Ltd................................................ 74,911 270,353 1.87%
Comalco Ltd............................................ 43,008 260,383 1.80%
Brambles Industries Ltd................................ 16,911 232,026 1.60%
Boral Ltd.............................................. 85,092 222,126 1.53%
Woolworths Ltd......................................... 82,355 210,449 1.45%
ICI Australia.......................................... 22,673 209,469 1.45%
Pioneer International Ltd.............................. 67,837 206,419 1.42%
Pacific Dunlop Ltd..................................... 79,975 194,934 1.35%
Mim Holdings Ltd....................................... 124,243 183,655 1.27%
North Ltd.............................................. 53,249 160,355 1.11%
Santos Ltd............................................. 41,083 146,653 1.01%
Mayne Nickless Ltd..................................... 23,695 142,152 0.98%
Westfield Trust........................................ 81,509 139,712 0.96%
Posgold Ltd............................................ 44,037 119,110 0.82%
Southcorp Holdings Ltd................................. 43,722 118,946 0.82%
Westfield Holdings..................................... 7,497 116,420 0.80%
Advance Bank Australia................................. 27,356 112,708 0.78%
Wesfarmers............................................. 17,297 109,073 0.75%
GIO Australia Holding.................................. 44,380 102,940 0.71%
St. George Bank Ltd.................................... 15,661 97,402 0.67%
General Property Trust................................. 54,824 94,834 0.65%
Goodman Fielder Ltd.................................... 93,341 92,473 0.64%
Australia Gas & Light.................................. 21,966 91,538 0.63%
QBE Insurance Group.................................... 17,206 90,371 0.62%
Pasminco Ltd........................................... 60,774 88,880 0.61%
Plutonic Resources..................................... 14,360 87,504 0.60%
Newcrest Mining........................................ 17,696 85,292 0.59%
Gold Mines of Kalgoorlie............................... 73,038 84,993 0.59%
RGC Ltd................................................ 15,848 83,861 0.58%
Burns Philp & Co....................................... 39,263 80,574 0.56%
Smith (Howard)......................................... 13,657 79,462 0.55%
Ampolex Ltd............................................ 22,344 $76,423 0.53%
Normandy Mining Ltd.................................... 41,830 73,673 0.51%
Arnotts Ltd............................................ 10,647 70,990 0.49%
QCT Resources.......................................... 49,924 65,946 0.46%
Hardie James Industries................................ 29,519 64,988 0.45%
Email Ltd.............................................. 21,945 61,599 0.43%
Caltex Australia....................................... 13,769 60,085 0.41%
Australia Foundation Investor.......................... 35,063 59,273 0.41%
T.N.T.................................................. 44,478 59,102 0.41%
Stockland Trust Group.................................. 24,395 56,009 0.39%
Australia National Industries.......................... 60,116 54,830 0.38%
Fairfax (John) Holding................................. 23,072 54,785 0.38%
Bank of Melbourne...................................... 9,163 51,873 0.36%
F.H. Faulding & Co..................................... 9,058 51,635 0.36%
Rothmans Holdings...................................... 9,324 45,307 0.31%
Davids Ltd............................................. 27,839 42,903 0.30%
Sons of Gwalia Ltd..................................... 5,488 39,051 0.27%
Ashton Mining Ltd...................................... 21,420 38,400 0.27%
Gandel Retail Trust.................................... 55,244 36,487 0.25%
Metal Manufactures..................................... 14,539 35,438 0.24%
Simsmetal Ltd.......................................... 5,922 34,922 0.24%
Schroders Property Fund................................ 19,950 34,353 0.24%
Franked Income Fund.................................... 17,766 33,386 0.23%
Foodland Associates.................................... 7,756 29,577 0.20%
AAPC Ltd............................................... 41,317 27,613 0.19%
National Foods Ltd..................................... 20,314 25,715 0.18%
Publishing & Broadcasting Ltd.
(ordinary)........................................... 5,068 23,192 0.16%
Capital Property Trust................................. 12,950 21,485 0.15%
Aberfoyle.............................................. 7,231 21,150 0.15%
OPSM Protector Ltd..................................... 10,927 19,675 0.14%
Orbital Engine Corp.................................... 24,731 17,501 0.12%
Bougainville Coppper Ltd............................... 30,681 15,922 0.11%
Kidston Gold Mines..................................... 9,562 15,789 0.11%
Seven Network Ltd...................................... 4,389 13,114 0.09%
Publishing & Broadcasting Ltd.
(preferred).......................................... 2,646 12,129 0.08%
St. George Bank Ltd. (rights).......................... 1,842 2,188 0.02%
Mim Holdings (rights).................................. 24,849 1,954 0.01%
----------- ------
TOTAL INVESTMENTS -
(Cost $13,614,766)................................... 14,275,738 98.55%
OTHER ASSETS LESS LIABILITIES.......................... 210,237 1.45%
----------- ------
NET ASSETS............................................. $14,485,975 100%
----------- ------
----------- ------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-60-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

AUSTRALIA INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Mining, metals and minerals............................ $ 4,542,269 31.8%
Commercial banks and other banks....................... 2,815,453 19.7%
Real estate............................................ 776,428 5.4%
Construction and building materials.................... 763,886 5.4%
Oil.................................................... 579,123 4.1%
Diversified industrials................................ 560,811 3.9%
Precious metals and minerals........................... 543,812 3.8%
Retail trade........................................... 507,710 3.6%
Diversified consumer goods and services................ 498,256 3.5%
Media.................................................. 451,677 3.2%
Transportation......................................... 433,281 3.0%
Forestry and paper products............................ 342,395 2.4%
Food and grocery products.............................. 298,252 2.1%
Chemicals.............................................. 209,469 1.5%
Insurance -- multiline and property and casualty....... 193,310 1.3%
Beverage industry and tobacco manufacturing............ 164,253 1.2%
Other energy (non-oil)................................. 145,408 1.0%
Financial institutions and services.................... 92,659 0.6%
Utilities.............................................. 91,537 0.6%
Wholesale trade........................................ 72,479 0.5%
Household durables and appliances...................... 61,599 0.4%
Machinery and engineering services..................... 52,423 0.4%
Health and personal care............................... 51,635 0.4%
Entertainment and leisure toys......................... 27,613 0.2%
----------- -----------
$14,275,738 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-61-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

FRANCE INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C>
LVMH Moet Hennessy..................................... 9,075 $2,317,337 5.40%
Elf Aquitaine.......................................... 28,180 2,091,811 4.88%
Carrefour.............................................. 2,667 2,080,177 4.85%
L'Oreal................................................ 6,392 1,971,754 4.60%
Total.................................................. 24,354 1,649,746 3.85%
Alcatel Alsthom........................................ 15,659 1,469,980 3.43%
Eaux Cie Generale...................................... 12,416 1,347,811 3.14%
L'Air Liquide.......................................... 6,896 1,250,760 2.92%
AXA.................................................... 19,562 1,163,413 2.71%
Danone................................................. 7,416 1,118,747 2.61%
Societe Generale....................................... 9,096 1,054,175 2.46%
Cie de St Gobain....................................... 8,691 1,039,134 2.42%
Sanofi................................................. 10,703 862,090 2.01%
Banque National de Paris............................... 20,069 836,543 1.95%
Cie Finance Paribas.................................... 12,505 802,889 1.87%
Rhone Poulenc SA....................................... 33,294 797,441 1.86%
Renault Regie Nationale................................ 24,873 752,849 1.76%
Peugeot SA............................................. 5,212 726,863 1.70%
Pinault-Printemps La Redoute........................... 2,328 705,532 1.65%
Uap Cie Uap............................................ 32,035 692,414 1.61%
Cie de Suez............................................ 16,590 686,079 1.60%
Roussel Uclaf.......................................... 2,822 663,919 1.55%
Schneider SA........................................... 13,828 643,172 1.50%
Lafarge................................................ 9,593 613,329 1.43%
Lyonnaise des Eaux SA.................................. 6,038 605,301 1.41%
Michelin CGDE.......................................... 11,914 589,357 1.37%
Christian Dior......................................... 4,367 581,184 1.36%
Canal Plus............................................. 2,291 560,234 1.31%
Havas.................................................. 6,665 552,549 1.29%
Promodes............................................... 1,820 522,046 1.22%
Legrand................................................ 2,299 446,289 1.04%
Eridania Beghin........................................ 2,699 439,482 1.03%
Accor.................................................. 3,007 417,031 0.97%
Valeo.................................................. 7,447 412,545 0.96%
Synthelabo............................................. 5,192 404,258 0.94%
Usinor Sacilor......................................... 26,136 403,616 0.94%
Pernod Ricard.......................................... 6,061 394,769 0.92%
Pechiney "A"........................................... 8,217 386,477 0.90%
Credit Commercial France............................... 7,480 374,063 0.87%
CSF Thomson............................................ 12,540 333,294 0.78%
BIC.................................................... 2,970 326,996 0.76%
Cie Bancaire........................................... 2,937 323,930 0.76%
Castorama Dubois....................................... 1,683 321,508 0.75%
Credit Local de France................................. 3,938 310,423 0.72%
Poliet................................................. 2,838 290,536 0.68%
S.E.B. SA.............................................. 1,628 273,580 0.64%
Docks de France........................................ 1,397 264,444 0.62%
Saint Louis............................................ 869 252,620 0.59%
Bouygues............................................... 2,486 252,099 0.59%
Imetal................................................. 1,595 249,241 0.58%
Lagardere Groupe....................................... 9,218 246,959 0.58%
Casino Guichard Perrachon.............................. 6,523 245,063 0.57%
Ecco................................................... 1,078 $241,747 0.56%
Euro Disney SCA........................................ 79,669 236,985 0.55%
Chargeurs SA........................................... 825 219,113 0.51%
Comptoirs Modernes..................................... 550 212,473 0.50%
Capital Gemini Sogeti.................................. 5,698 205,814 0.48%
Essilor International.................................. 814 205,657 0.48%
Worms & Cie............................................ 3,531 188,993 0.44%
Sagem SA............................................... 297 185,011 0.43%
Sidel.................................................. 737 175,099 0.41%
CGIP................................................... 693 154,606 0.36%
Simco.................................................. 1,606 153,244 0.36%
Eurafrance............................................. 396 152,063 0.35%
Fromageries Bel........................................ 154 148,136 0.35%
Club Mediterranee...................................... 1,441 136,386 0.32%
Gaz Et Eaux............................................ 297 123,283 0.29%
Credit National........................................ 1,540 120,294 0.28%
Sefimeg................................................ 1,705 116,650 0.27%
Bongrain SA............................................ 209 115,861 0.27%
Salomon SA............................................. 165 114,735 0.27%
GTM Entrepose.......................................... 1,573 101,177 0.24%
Assic General de France................................ 3,652 99,533 0.23%
Unibail SA............................................. 1,012 98,715 0.23%
CPR-Parisienne Reescompte.............................. 1,078 93,284 0.22%
Union Immobiliere de France............................ 891 77,791 0.18%
Havas Advertising...................................... 583 65,990 0.15%
Sommer Allibert........................................ 231 65,858 0.15%
Fonciere Lyonnaise..................................... 583 64,751 0.15%
Labinal................................................ 440 62,467 0.15%
Bertrand Faure Ex Ebf.................................. 1,815 59,599 0.14%
UFB Locabail........................................... 605 57,028 0.13%
Eurotunnel............................................. 49,401 55,822 0.13%
Damart SA.............................................. 66 50,993 0.12%
Societe des Immeubles.................................. 737 50,508 0.12%
Moulinex............................................... 3,014 50,067 0.12%
Casino Guichard Perrachon (preferred).................. 1,837 49,960 0.12%
Credit Foncier France.................................. 4,048 49,221 0.11%
Legris................................................. 924 45,690 0.11%
Vallourec Usin......................................... 880 42,665 0.10%
Nord Est............................................... 1,518 41,138 0.10%
DMC.................................................... 704 38,347 0.09%
Interbail Societe Financiere........................... 561 27,404 0.06%
Taittinger............................................. 66 23,202 0.05%
Cie General Geophysique................................ 330 22,756 0.05%
Finextel Society Finance............................... 1,210 17,751 0.04%
Silic.................................................. 100 13,946 0.03%
-- ------
TOTAL INVESTMENTS -
(Cost $41,374,403)................................... 42,749,672 99.71%
OTHER ASSETS LESS LIABILITIES.......................... 125,138 0.29%
-- ------
NET ASSETS............................................. $42,874,810 100%
-- ------
-- ------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-62-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

FRANCE INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Health and personal care............................... $ 4,688,862 11.0%
Retail trade........................................... 4,401,203 10.2%
Oil.................................................... 3,741,557 8.7%
Commercial banks and other banks....................... 3,436,714 8.0%
Construction and building materials.................... 2,939,447 6.9%
Beverage industry and tobacco manufacturing............ 2,735,307 6.4%
Food and grocery products.............................. 2,074,846 4.9%
Chemicals.............................................. 2,048,201 4.8%
Insurance -- multiline and property and casualty....... 1,955,360 4.6%
Utilities.............................................. 1,953,112 4.6%
Computers and communications and office equipment...... 1,716,938 4.0%
Financial institutions and services.................... 1,581,093 3.7%
Automobiles............................................ 1,479,713 3.5%
Media.................................................. 1,178,773 2.8%
Auto components........................................ 1,061,501 2.5%
Entertainment and leisure toys......................... 905,138 2.1%
Diversified holding companies.......................... 727,132 1.7%
Mining, metals and minerals............................ 695,522 1.6%
Electrical equipment................................... 631,300 1.5%
Real estate............................................ 462,944 1.1%
Business services and computer software................ 447,562 1.0%
Household durables and appliances...................... 389,505 0.9%
Fabricated metal products.............................. 386,477 0.9%
Electronics and instrumentation........................ 333,294 0.8%
Diversified consumer goods and services................ 326,996 0.8%
Machinery and engineering services..................... 220,789 0.5%
Textiles and wearing apparel........................... 89,341 0.2%
Aerospace and defense composite........................ 62,467 0.1%
Transportation and storage............................. 55,822 0.1%
Other energy (non-oil)................................. 22,756 0.1%
----------- -----------
$42,749,672 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-63-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

GERMANY INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Allianz AG Holdings.................................... 1,142 $1,958,540 9.79%
Siemens AG............................................. 2,660 1,454,091 7.27%
Daimler Benz AG........................................ 2,480 1,356,018 6.77%
VEBA AG................................................ 23,544 1,168,357 5.84%
Deutsche Bank AG (a)................................... 24,108 1,153,427 5.76%
Bayer AG............................................... 3,416 1,098,185 5.48%
Hoechst AG............................................. 2,830 951,502 4.75%
BASF AG................................................ 2,958 806,278 4.03%
Munchener Ruckversicherungs AG......................... 390 707,001 3.53%
RWE AG*................................................ 15,944 619,661 3.09%
Mannesmann AG.......................................... 1,770 603,650 3.01%
Dresdner Bank AG....................................... 21,482 539,600 2.70%
Bayerische Motoren Werke AG............................ 880 474,281 2.37%
Volkswagen AG (registered)............................. 1,296 446,643 2.23%
Commerzbank AG......................................... 1,936 418,504 2.09%
VIAG AG................................................ 1,008 394,715 1.97%
Bayerische Vereinsbank AG.............................. 11,568 339,454 1.70%
Bayerische Hypotheken -
und Wechsel - Bank AG................................ 12,300 305,431 1.53%
Lufthansa AG........................................... 1,872 296,391 1.48%
RWE AG (preferred)*.................................... 9,780 284,117 1.42%
Thyssen AG............................................. 1,536 277,949 1.39%
SAP AG................................................. 1,974 261,695 1.31%
Linde AG............................................... 414 252,689 1.26%
Schering AG............................................ 3,348 245,611 1.23%
Gehe AG................................................ 360 207,523 1.04%
Preussag AG............................................ 744 200,128 1.00%
VEW AG................................................. 672 192,811 0.96%
Beiersdorf AG.......................................... 204 171,605 0.86%
Adidas AG.............................................. 2,226 169,107 0.84%
Karstadt AG............................................ 414 154,367 0.77%
Degussa AG............................................. 420 150,908 0.75%
Berliner Kraft and Light AG............................ 552 150,822 0.75%
Manitoba AG............................................ 540 144,127 0.72%
Hochtief AG............................................ 342 $129,349 0.65%
Henkel Kgaa (preferred)................................ 324 124,021 0.62%
Kaufhof Holding AG..................................... 396 123,175 0.62%
Altana AG.............................................. 192 118,191 0.59%
AMB Aachener & Muencher Beteil AG...................... 198 117,494 0.59%
Heidelberg Zement AG................................... 186 115,832 0.58%
Asko Deutsche Kaufhaus AG.............................. 192 113,934 0.57%
VIAG AG................................................ 288 110,428 0.55%
Rheinelektra AG........................................ 138 98,988 0.49%
BHF Bank AG............................................ 4,038 98,928 0.49%
Metallgesellschaft AG.................................. 5,246 98,453 0.49%
Victoria Holding AG.................................... 164 93,576 0.47%
CKAG Colonia Konzern AG................................ 126 86,272 0.43%
Volkswagen AG preferred................................ 318 80,665 0.40%
Continental AG......................................... 4,656 80,306 0.40%
Holzmann Philipp AG.................................... 216 69,581 0.35%
Bilfinger & Berger AG.................................. 174 65,753 0.33%
Douglas Holding AG..................................... 1,470 48,600 0.24%
PWA Papier Waldhof AG.................................. 348 46,974 0.23%
Manitoba AG (preferred)................................ 216 43,509 0.22%
AGIV AG................................................ 1,962 41,709 0.21%
Bayerische Motoren Werke AG
(preferred).......................................... 60 22,889 0.11%
Kaufhof Holding AG (preferred)......................... 96 22,787 0.11%
AMB Aachener & Muencher Beteil AG (bearer)............. 42 21,910 0.11%
Deutsche Babcock....................................... 342 18,510 0.09%
Linotype Hell AG....................................... 120 8,780 0.04%
----------- ------
TOTAL INVESTMENTS -
(Cost $20,770,098)................................... 19,955,803 99.67%
OTHER ASSETS LESS LIABILITIES.......................... 65,892 0.33%
----------- ------
NET ASSETS............................................. $20,021,695 100%
----------- ------
----------- ------
</TABLE>

(a) Represents investment in an affiliate.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.

-64-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

GERMANY INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Chemicals.............................................. $ 3,225,597 16.2%
Insurance -- multiline and property and casualty....... 2,984,793 15.0%
Commercial banks and other banks....................... 2,855,343 14.3%
Automobiles............................................ 2,380,496 11.9%
Electrical equipment................................... 1,553,079 7.8%
Utilities.............................................. 1,247,411 6.3%
Diversified holding companies.......................... 1,168,357 5.9%
Mining, metals and minerals............................ 1,081,673 5.4%
Machinery and engineering services..................... 1,062,487 5.3%
Retail trade........................................... 462,863 2.3%
Construction and building materials.................... 380,515 1.9%
Transportation and storage............................. 296,391 1.5%
Health and personal care............................... 289,796 1.5%
Business services and computer software................ 261,695 1.3%
Wholesale trade........................................ 207,523 1.0%
Entertainment and leisure toys......................... 169,107 0.8%
Precious metals and minerals........................... 150,908 0.8%
Auto components........................................ 80,306 0.4%
Forestry and paper products............................ 46,974 0.2%
Diversified industrials................................ 41,709 0.2%
Electronics and instrumentation........................ 8,780 0.0%
----------- -----------
$19,955,803 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-65-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

HONG KONG INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Sun Hung Kai Properties................................ 275,000 $2,621,929 8.98%
Hutchison Whampoa...................................... 417,000 2,587,638 8.86%
Hong Kong Telecommunications........................... 1,303,000 2,484,636 8.51%
Hang Seng Bank......................................... 223,000 2,263,085 7.75%
Cheung Kong Holdings................................... 266,000 1,899,941 6.51%
Henderson Land Development............................. 190,000 1,363,242 4.67%
China Light & Power.................................... 230,000 1,085,293 3.72%
Citic Pacific Ltd...................................... 247,000 970,726 3.33%
Swire Pacific.......................................... 110,000 938,562 3.21%
Wharf Holdings......................................... 252,000 933,365 3.20%
New World Development Co............................... 197,000 883,735 3.03%
Hong Kong Electric..................................... 234,000 744,179 2.55%
Jardine Matheson....................................... 86,000 688,000 2.36%
Hong Kong Land Holdings................................ 313,000 669,820 2.29%
Cathay Pacific Air..................................... 332,000 579,426 1.98%
Hong Kong & China Gas.................................. 348,000 571,359 1.96%
Swire Pacific.......................................... 359,500 487,994 1.67%
Wheelock & Co.......................................... 234,000 477,968 1.64%
Bank of East Asia...................................... 125,000 420,155 1.44%
Jardine Strategic...................................... 122,000 400,160 1.37%
Hysan Development...................................... 120,000 385,508 1.32%
First Pacific Co....................................... 263,000 350,202 1.20%
Amoy Properties........................................ 290,000 326,170 1.12%
Hopewell Holdings...................................... 520,000 317,637 1.09%
Dao Heng Bank Group.................................... 80,000 306,131 1.05%
Hang Lung Development Co............................... 160,000 303,029 1.04%
Sino Land Co........................................... 304,000 300,650 1.03%
Henderson Investment................................... 300,000 261,789 0.90%
Guoco Group............................................ 50,000 248,861 0.85%
Shangri Louisiana Asia Ltd............................. 169,000 232,682 0.80%
Hong Kong & Shang Hotel................................ 130,000 224,363 0.77%
National Mutual Asia................................... 249,000 210,847 0.72%
Television Broadcasting................................ 50,000 200,382 0.69%
Dairy Farm International............................... 202,000 187,860 0.64%
Chinese Estates........................................ 200,000 $180,990 0.62%
Great Eagle Holdings................................... 50,000 143,499 0.49%
Miramar Hotel & Investment............................. 66,000 143,344 0.49%
New Asia Realty........................................ 40,000 133,932 0.46%
Shun Tak Holdings...................................... 169,000 122,349 0.42%
CDL Hotels International............................... 214,000 121,729 0.42%
South China Morning Post............................... 172,000 116,738 0.40%
Mandarin Oriental...................................... 81,000 115,020 0.39%
Dickson Concepts....................................... 80,000 92,563 0.32%
Johnson Electric Holdings.............................. 40,000 90,495 0.31%
Kowloon Motor Bus...................................... 49,800 86,270 0.30%
Realty Development Corp................................ 24,000 83,617 0.29%
Jardine International Motor............................ 58,000 74,982 0.26%
Semi Tech Global....................................... 40,000 59,210 0.20%
Shaw Brothers HK Ltd................................... 46,000 55,305 0.19%
Varitronix International............................... 30,000 55,073 0.19%
Hong Kong Aircraft..................................... 20,000 50,677 0.17%
Sime Darby HK.......................................... 49,000 47,510 0.16%
Cross Harbour Tunnel................................... 20,000 39,301 0.13%
Harbour Centre Development............................. 28,000 38,008 0.13%
Chen Hsong Holding..................................... 69,000 35,458 0.12%
Wing On Co. Interest Ltd............................... 30,000 31,415 0.11%
Winsor Industrial...................................... 30,000 27,536 0.09%
China Motor Bus Co..................................... 3,000 27,052 0.09%
Sun Hung Kai Co........................................ 80,000 24,562 0.08%
Hong Kong & China Gas
(warrants) (a)....................................... 29,000 0 0.00%
Hysan Development (warrants) (a)....................... 6,000 0 0.00%
----------- ------
TOTAL INVESTMENTS -
(Cost $29,200,152)................................... 28,923,959 99.08%
OTHER ASSETS LESS LIABILITIES.......................... 269,324 0.92%
----------- ------
NET ASSETS............................................. $29,193,283 100%
----------- ------
----------- ------
</TABLE>

(a) Fair valued securities.
The accompanying notes are an integral part of the financial statements.

-66-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

HONG KONG INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Real estate............................................ $10,846,214 37.5%
Utilities.............................................. 4,885,466 16.9%
Diversified consumer goods and services................ 3,275,638 11.3%
Diversified holding companies.......................... 3,110,283 10.8%
Commercial banks and other banks....................... 2,989,371 10.3%
Food and grocery products.............................. 930,451 3.2%
Transportation and storage............................. 854,398 3.0%
Retail trade........................................... 789,806 2.7%
Media.................................................. 317,120 1.1%
Financial institutions and services.................... 273,424 0.9%
Insurance -- multiline and property and casualty....... 210,847 0.7%
Electrical equipment................................... 90,495 0.3%
Automobiles............................................ 74,982 0.3%
Household durables and appliances...................... 59,210 0.2%
Electronics and instrumentation........................ 55,073 0.2%
Aerospace and defense composite........................ 50,677 0.2%
Wholesale trade........................................ 47,510 0.2%
Machinery and engineering services..................... 35,458 0.1%
Textiles and wearing apparel........................... 27,536 0.1%
----------- -----------
$28,923,959 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-67-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

ITALY INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Telecom Italia Mobile.................................. 1,456,256 $3,211,174 9.25%
Assicurazioni Generali................................. 119,863 2,984,005 8.59%
Telecom Italia......................................... 1,375,505 2,800,132 8.07%
Stet................................................... 781,047 2,635,834 7.60%
Fiat SPA............................................... 646,764 2,201,265 6.35%
Instituto Nazionale Assicurazioni...................... 995,561 1,527,165 4.40%
Alleanza Assicuraz..................................... 155,239 1,463,524 4.22%
Istituto Banco San Paolo............................... 179,697 1,169,793 3.37%
Eni SPA................................................ 264,263 1,140,111 3.29%
Mediobanca SPA......................................... 148,148 1,060,998 3.06%
Istituto Mobiliare Italiano............................ 132,102 1,046,979 3.02%
Banca Commerciale Italiana............................. 389,387 876,054 2.53%
RAS.................................................... 72,475 807,175 2.33%
Montedison SPA......................................... 1,302,915 787,797 2.27%
Stet (saving shares)................................... 299,959 785,096 2.26%
Italgas Society Italiana............................... 221,124 763,197 2.20%
Olivetti & Cia SPA..................................... 991,563 633,764 1.83%
Pirelli SPA............................................ 391,292 610,236 1.76%
Sirti SPA.............................................. 94,630 599,390 1.73%
Telecom Italia Mobilaria
(saving shares)...................................... 344,513 482,233 1.39%
Credito Italiano....................................... 375,320 478,097 1.38%
Gemina................................................. 980,344 447,387 1.29%
Sai Society Assic...................................... 39,804 429,952 1.24%
Telecom Italia (saving shares)......................... 254,159 420,739 1.21%
Louisiana Fondiaria Assicurazioni SPA.................. 82,924 405,461 1.17%
BANCO Ambros Veneto.................................... 110,510 333,388 0.96%
Saipem................................................. 87,706 319,530 0.92%
Ifil Ist Finance Italia................................ 160,959 280,342 0.81%
Ifil Ist Finance Italia (saving shares)................ 84,441 276,332 0.80%
SME Meridonale......................................... 246,520 274,005 0.79%
Marzotto & Figli....................................... 37,232 264,147 0.76%
RAS (saving shares).................................... 44,788 253,345 0.73%
Fiat SPA (saving shares)............................... 122,493 233,702 0.67%
Burgo Cartiere SPA..................................... 39,398 $224,871 0.65%
Ifi Istit Finance Industry............................. 19,519 203,291 0.59%
Toro Assicurazioni..................................... 32,326 201,345 0.58%
Italcementi............................................ 26,103 189,279 0.55%
Toro Assicurazioni (saving shares)..................... 13,140 178,048 0.51%
Toro Assicurazioni (preferred)......................... 28,227 167,876 0.48%
Fidis.................................................. 57,153 156,712 0.45%
Alleanza Assicurazio (saving shares)................... 17,868 123,569 0.36%
Magneti Marelli........................................ 81,564 123,553 0.36%
Rinascente Louisiana................................... 17,270 119,323 0.34%
Editor L'Espresso...................................... 49,684 117,179 0.34%
Fiat SPA preferred..................................... 60,756 110,479 0.32%
Milano Assicurazio..................................... 29,904 101,874 0.29%
Montedison SPA (saving shares)......................... 149,688 85,341 0.25%
Cir Compagnie Industries............................... 116,472 78,910 0.23%
BANCO Ambros Veneto
(saving shares)...................................... 46,320 74,162 0.21%
Sasib.................................................. 17,352 68,540 0.20%
Snia BPD............................................... 59,191 66,282 0.19%
Italcementi (saving shares)............................ 20,964 57,751 0.17%
Sai Society Assic (saving shares)...................... 12,120 52,367 0.15%
Unicem................................................. 4,337 29,661 0.09%
Unicem (saving shares)................................. 8,928 27,362 0.08%
Sasib (saving shares).................................. 13,308 25,858 0.07%
Cir Compagnie Industries
(saving shares)...................................... 59,256 20,263 0.06%
BANCA Commerce Italiana
(saving shares)...................................... 3,228 7,097 0.02%
----------- ------
TOTAL INVESTMENTS -
(Cost $29,794,388)................................... 34,613,342 99.79%
OTHER ASSETS LESS LIABILITIES.......................... 74,020 0.21%
----------- ------
NET ASSETS............................................. $34,687,362 100%
----------- ------
----------- ------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-68-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

ITALY INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Utilities.............................................. $11,098,404 32.1%
Insurance -- multiline and property and casualty....... 7,168,541 20.7%
Commercial banks and other banks....................... 2,938,592 8.5%
Financial institutions and services.................... 2,712,077 7.8%
Automobiles............................................ 2,545,446 7.4%
Insurance -- life and agents and brokers............... 1,527,165 4.4%
Computers and communications and office equipment...... 1,233,154 3.6%
Diversified holding companies.......................... 1,175,602 3.4%
Oil.................................................... 1,140,111 3.3%
Food and grocery products.............................. 830,679 2.4%
Auto components........................................ 733,789 2.1%
Other energy (non-oil)................................. 319,530 0.9%
Construction and building materials.................... 304,052 0.9%
Textiles and wearing apparel........................... 264,147 0.8%
Forestry and paper products............................ 224,871 0.6%
Retail trade........................................... 119,323 0.3%
Media.................................................. 117,179 0.3%
Machinery and engineering services..................... 94,398 0.3%
Chemicals.............................................. 66,282 0.2%
----------- -----------
$34,613,342 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-69-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

JAPAN INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Toyota Motor Corp...................................... 104,000 $2,372,854 2.87%
Sumitomo Bank.......................................... 88,000 1,881,787 2.28%
Bank of Tokyo Mitsubishi............................... 79,000 1,825,081 2.21%
Fuji Bank.............................................. 80,000 1,748,901 2.12%
Dai Ichi Kangyo Bank................................... 85,000 1,728,376 2.09%
Bank of Japan Industries............................... 64,000 1,710,715 2.07%
Sanwa Bank............................................. 80,000 1,619,070 1.96%
Nomura Securities...................................... 53,000 1,153,587 1.40%
Sakura Bank............................................ 96,000 1,127,239 1.37%
Bank of Tokyo Mitsubishi............................... 44,800 1,030,706 1.25%
Tokyo Electric Power................................... 37,600 1,022,992 1.24%
Hitachi................................................ 94,000 1,014,019 1.23%
Matsushita Electric Industries......................... 56,000 989,007 1.19%
Asahi Bank............................................. 64,000 824,809 0.99%
Mitsubishi Heavy Industry.............................. 88,000 784,638 0.95%
Seven Eleven Japan..................................... 11,000 778,127 0.94%
Tokai Bank............................................. 56,000 716,362 0.86%
Nippon Steel Corp...................................... 192,000 692,840 0.83%
Toshiba Corp........................................... 88,000 683,828 0.82%
Nippon Telegraph & Telephone Corp...................... 88 681,308 0.82%
Sony Corp.............................................. 10,400 675,122 0.81%
Seibu Railway Co....................................... 12,000 673,594 0.81%
Kansai Electric Power.................................. 27,200 659,542 0.79%
Ito Yokado Co.......................................... 11,000 647,914 0.78%
Mitsubishi Trust & Banking............................. 35,000 604,765 0.73%
East Japan Railway..................................... 112 597,681 0.72%
Honda Motor Co......................................... 26,000 593,213 0.71%
Mitsubishi Corp........................................ 40,000 568,966 0.69%
Long Credit Bank of Japan.............................. 64,000 554,150 0.67%
Daiwa Securities....................................... 36,000 553,309 0.67%
Tokio Marine & Fire.................................... 40,000 549,873 0.66%
Nissan Motor Co........................................ 64,000 540,097 0.65%
Chubu Electric Power................................... 20,800 526,198 0.63%
Nippondenso Co......................................... 24,000 522,379 0.63%
Sharp Corp............................................. 30,000 521,234 0.63%
NEC Corp............................................... 40,000 507,869 0.61%
Nikko Securities....................................... 40,000 507,869 0.61%
Fujitsu................................................ 48,000 494,886 0.60%
Sumitomo Trust & Banking............................... 32,000 467,392 0.56%
Kyocera Corp........................................... 6,000 451,354 0.54%
Mitsubishi Estate...................................... 32,000 449,063 0.54%
Mitsubishi Electric Corp............................... 56,000 440,509 0.53%
Canon Inc.............................................. 22,000 436,843 0.53%
Fuji Photo Film Co..................................... 14,000 435,698 0.52%
Takeda Chemical Industries............................. 24,000 414,696 0.50%
Bridgestone Corp....................................... 21,000 388,920 0.47%
Asahi Glass Co......................................... 32,000 387,966 0.47%
Mitsui Trust & Banking................................. 32,000 384,911 0.46%
Mitsui & Co............................................ 40,000 $380,711 0.46%
Kirin Brewery Co....................................... 29,000 376,510 0.45%
Dai Nippon Printng..................................... 20,000 376,128 0.45%
Sumitomo Corp.......................................... 30,000 357,990 0.43%
Tohoku Electric Power.................................. 13,600 337,561 0.41%
Kawasaki Steel Corp.................................... 88,000 321,752 0.39%
Kinki Nippon Railway................................... 41,200 320,156 0.39%
Kyushu Electric Power.................................. 12,800 317,704 0.38%
Nippon Express Co...................................... 30,000 312,167 0.38%
Daiwa Bank............................................. 40,000 311,213 0.37%
Murata Manufacturing Co................................ 8,000 310,067 0.37%
Mitsubishi Chemical.................................... 56,000 306,860 0.37%
Sanyo Electric Co...................................... 48,000 306,096 0.37%
Itochu Corp............................................ 40,000 304,339 0.37%
Asahi Chemical Industries.............................. 40,000 303,576 0.37%
NKK Corp............................................... 96,000 300,597 0.36%
Sankyo Co.............................................. 12,000 290,974 0.35%
Mitsui Fudosan Co...................................... 22,000 289,829 0.35%
Bank of Yokohama....................................... 32,000 286,850 0.35%
Shizuoka Bank.......................................... 21,000 284,674 0.34%
Secom Co............................................... 4,000 282,574 0.34%
Tokyo Gas Co........................................... 72,000 282,497 0.34%
Sumitomo Metal Industries.............................. 88,000 282,268 0.34%
Fanuc.................................................. 6,400 277,991 0.33%
Kajima Corp............................................ 24,000 270,354 0.33%
Osaka Gas Co........................................... 64,000 255,996 0.31%
Rohm Co................................................ 4,000 254,316 0.31%
Yamaichi Securities Co................................. 32,000 252,636 0.30%
Jusco Co............................................... 8,000 247,443 0.30%
Chugoku Electric Power................................. 10,400 247,214 0.30%
Nintendo Co............................................ 3,200 246,832 0.30%
Shimizu Corp........................................... 21,000 240,569 0.29%
Marubeni Corp.......................................... 40,000 239,424 0.29%
Toyo Trust & Banking................................... 22,000 239,424 0.29%
Tonen Corp............................................. 16,000 238,278 0.29%
Toppan Printing Co..................................... 16,000 235,223 0.28%
Komatsu................................................ 24,000 231,405 0.28%
Sumitomo Electric Industries........................... 16,000 229,114 0.28%
TDK Corp............................................... 4,000 228,732 0.28%
Kobe Steel............................................. 72,000 223,386 0.27%
Kubota Corp............................................ 32,000 222,698 0.27%
Nippon Oil Co.......................................... 32,000 221,477 0.27%
Toray Industries Inc................................... 32,000 217,505 0.26%
Daiei Inc.............................................. 16,000 216,894 0.26%
Mitsubishi Motor....................................... 24,000 216,283 0.26%
Kao Corp............................................... 16,000 213,839 0.26%
Sumitomo Chemical...................................... 40,000 212,694 0.26%
Toyo Seikan Kaisha..................................... 6,000 212,503 0.26%
Daiwa House Industries................................. 13,000 207,252 0.25%
</TABLE>

-70-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

JAPAN INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Ajinomoto Co. Inc...................................... 16,000 $200,093 0.24%
Sekisui House.......................................... 16,000 198,565 0.24%
Tokyu Corp............................................. 24,000 195,434 0.24%
Nippon Yusen........................................... 32,000 193,983 0.23%
Nippon Credit Bank..................................... 47,000 191,587 0.23%
Yamanouchi Pharmaceutical.............................. 8,000 189,401 0.23%
Sekisui Chemical....................................... 15,000 189,019 0.23%
Yasuda Fire & Marine Insurance......................... 24,000 189,019 0.23%
Ricoh Co............................................... 16,000 187,873 0.23%
Tostem Corp............................................ 6,000 186,155 0.22%
Tokyo Electron......................................... 5,000 185,678 0.22%
Taisei Corp............................................ 24,000 185,582 0.22%
Hachijuni Bank......................................... 16,000 184,818 0.22%
Shin Etsu Chemical Co.................................. 8,400 183,635 0.22%
Matsushita Electric Works.............................. 16,000 181,763 0.22%
Omron Corp............................................. 8,000 180,236 0.22%
Shikoku Electric Power................................. 7,200 176,647 0.21%
Marui Co............................................... 8,000 176,418 0.21%
Nippon Paper Industries................................ 24,000 175,501 0.21%
Taisho Pharmaceutical Co............................... 8,000 174,890 0.21%
Eisai Co............................................... 8,400 165,993 0.20%
Tobu Railway Co........................................ 24,000 165,878 0.20%
Toyoda Auto Loom....................................... 8,000 165,726 0.20%
Kawasaki Heavy Industries.............................. 32,000 165,267 0.20%
Suzuki Motor Corp...................................... 13,000 165,057 0.20%
Yamazaki Baking Co..................................... 8,000 163,434 0.20%
Isuzu Motors........................................... 28,000 160,112 0.19%
Yasuda Trust & Banking................................. 24,000 159,005 0.19%
Ishi Kawajima-Harima Heavy Industry.................... 32,000 158,852 0.19%
Mitsukoshi............................................. 14,000 155,034 0.19%
Uny Co................................................. 8,000 155,034 0.19%
Sumitomo Marine & Fire................................. 16,000 152,131 0.18%
Sumitomo Metal Mining.................................. 15,000 151,788 0.18%
Ono Pharmaceutical..................................... 4,000 150,833 0.18%
Gunma Bank............................................. 13,000 150,165 0.18%
Obayashi Corp.......................................... 16,000 148,618 0.18%
New Oji Paper Co....................................... 16,000 147,702 0.18%
All Nippon Airways..................................... 13,000 147,683 0.18%
Hankyu Corp............................................ 24,000 146,404 0.18%
Chiba Bank............................................. 16,000 144,342 0.17%
Mitsubishi Materials................................... 24,000 144,342 0.17%
Yamaha Corp............................................ 8,000 143,578 0.17%
Hoya Corp.............................................. 4,000 141,287 0.17%
National House Industrial.............................. 8,000 141,287 0.17%
Kinden Corp............................................ 8,800 140,294 0.17%
Bank of Fukuoka........................................ 16,000 140,218 0.17%
Yamaguchi Bank......................................... 8,000 136,704 0.16%
Mitsui Marine & Fire................................... 16,000 $135,483 0.16%
Onward Kashiyama....................................... 8,000 135,177 0.16%
Daiichi Pharmaceutical Co.............................. 8,000 134,413 0.16%
Mitsubishi Warehouse................................... 8,000 134,413 0.16%
Hokkaido Electric Power................................ 5,600 134,184 0.16%
Hokuriku Electric Power................................ 5,600 133,650 0.16%
Matsushita Commerce.................................... 5,000 133,650 0.16%
Matsushita Kotobuk..................................... 5,000 133,650 0.16%
Teijin................................................. 24,000 131,740 0.16%
Hitachi Zosen Corp..................................... 24,000 131,511 0.16%
Joyo Bank.............................................. 16,000 130,748 0.16%
Takashimaya Co......................................... 8,000 130,595 0.16%
Sony Music Entertainment............................... 2,400 129,907 0.16%
Makita Corp............................................ 8,000 129,067 0.16%
Nichii Co.............................................. 8,000 128,304 0.15%
Japan Air Lines Co..................................... 16,000 127,845 0.15%
Nippon Meat Packer..................................... 8,000 126,776 0.15%
Oki Electric Industries................................ 16,000 126,776 0.15%
Aisin Seiki Co......................................... 8,000 126,013 0.15%
Ebara Corp............................................. 8,000 124,485 0.15%
Sumitomo Forestry...................................... 8,000 122,958 0.15%
Sega Enterprises....................................... 2,400 122,347 0.15%
NSK.................................................... 15,000 121,001 0.15%
Nissho Iwai Corp....................................... 21,000 120,285 0.14%
Kandenko Co............................................ 8,800 120,132 0.14%
Isetan Co.............................................. 8,000 118,375 0.14%
Toto................................................... 8,000 118,375 0.14%
Odakyu Electric Railway................................ 16,480 117,994 0.14%
Yakult Honsha Co....................................... 8,000 117,612 0.14%
Familymart Co.......................................... 2,400 117,306 0.14%
Hankyu Department Stores............................... 8,000 116,848 0.14%
Nippon Fire & Marine................................... 16,000 116,848 0.14%
Mazda Motor Corp....................................... 24,000 116,161 0.14%
Banyu Pharmaceutical................................... 8,000 115,321 0.14%
Kokusai Securities..................................... 7,000 113,602 0.14%
Seiyu.................................................. 8,000 112,266 0.14%
Canon Sales Co. Inc.................................... 4,000 111,884 0.13%
Pioneer Electronic..................................... 5,000 111,693 0.13%
Kokuyo Co.............................................. 4,000 110,738 0.13%
Victor Co. of Japan.................................... 8,000 110,738 0.13%
Kurita Water Industries................................ 4,400 110,471 0.13%
Nissin Food Products................................... 4,000 109,593 0.13%
Matsuzakaya Co......................................... 8,000 108,447 0.13%
Wacoal Corp............................................ 8,000 108,447 0.13%
Ashikaga Bank.......................................... 16,000 107,989 0.13%
Hokuriku Bank.......................................... 16,000 107,683 0.13%
Nikon Corp............................................. 8,000 107,683 0.13%
Nisshin Steel Co....................................... 24,000 105,851 0.13%
Keyence Corp........................................... 800 105,392 0.13%
</TABLE>

-71-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

JAPAN INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Cosmo Oil Co........................................... 16,000 $104,629 0.13%
Hitachi Metals......................................... 8,000 104,629 0.13%
Jgc Corp............................................... 8,000 102,337 0.12%
Terumo Corp............................................ 8,000 101,574 0.12%
Shiseido Co............................................ 8,000 100,810 0.12%
NGK Spark Plug Co...................................... 8,000 99,283 0.12%
Chichibu Onoda Cement.................................. 16,000 98,672 0.12%
Japan Energy Corp...................................... 24,000 98,290 0.12%
Yamato Transport....................................... 8,000 97,755 0.12%
Keio Teito Electric Railway............................ 16,000 97,602 0.12%
Asahi Breweries........................................ 8,000 96,991 0.12%
Chiyoda Corp........................................... 8,000 96,991 0.12%
Furukawa Electric...................................... 16,000 96,839 0.12%
Alps Electric Co....................................... 8,000 93,937 0.11%
Nishimatsu Construction................................ 8,000 93,937 0.11%
Amada Co............................................... 8,000 93,173 0.11%
Yokogawa Electric...................................... 8,000 93,173 0.11%
Nippon Electric Glass.................................. 5,000 93,077 0.11%
Fuji Electric Co....................................... 16,000 92,562 0.11%
Kuraray Co............................................. 8,000 92,409 0.11%
Takara Shuzo Co........................................ 8,000 91,645 0.11%
Yamato Kogyo Co........................................ 8,000 91,645 0.11%
Tokyo Dome Corp........................................ 5,000 91,168 0.11%
NGK Insulators......................................... 8,000 90,882 0.11%
Fujisawa Pharmaceutical Co............................. 8,000 89,354 0.11%
Hiroshima Bank......................................... 16,000 89,354 0.11%
Daikin Industries...................................... 8,000 88,591 0.11%
Nisshinbo Industries Inc............................... 8,000 88,591 0.11%
Fujita Kanko Inc....................................... 4,000 87,827 0.11%
Japan Wool Textile..................................... 8,000 87,827 0.11%
Okuma Corp............................................. 8,000 87,827 0.11%
Inax Corp.............................................. 8,000 87,063 0.10%
Mitsui Osk Lines....................................... 24,000 87,063 0.10%
Nippon Shokubai Co..................................... 8,000 87,063 0.10%
Toda Corp.............................................. 8,000 87,063 0.10%
Dainippon Ink & Chemicals.............................. 16,000 86,910 0.10%
Toho Co................................................ 500 86,872 0.10%
Nagoya Railroad Co..................................... 16,000 86,452 0.10%
Fukuyama Transport..................................... 8,000 86,299 0.10%
Olympus Optical Co..................................... 8,000 86,299 0.10%
Maeda Corp............................................. 8,000 85,536 0.10%
Showa Shell Sekiyu..................................... 8,000 85,536 0.10%
Casio Computer Co...................................... 8,000 84,772 0.10%
Hitachi Koki Co........................................ 8,000 84,772 0.10%
Japan Telecom Co....................................... 4 84,008 0.10%
Kyushu Matsushita...................................... 4,000 84,008 0.10%
Ezaki Glico Co......................................... 8,000 83,245 0.10%
Noritake Co............................................ 8,000 83,245 0.10%
Sanyo Chemical Industries.............................. 8,000 83,245 0.10%
Nisshin Flour Mill..................................... 6,300 $82,996 0.10%
77Th Bank.............................................. 8,000 82,481 0.10%
NCR Japan Ltd.......................................... 8,000 82,481 0.10%
Yoshitomi Pharmaceutical............................... 8,400 81,794 0.10%
Nippon Sharyo.......................................... 8,000 81,717 0.10%
Shimano Inc............................................ 4,000 81,335 0.10%
Nitto Denko Corp....................................... 5,000 80,667 0.10%
Tokyo Steel Manufacturing.............................. 4,000 80,572 0.10%
Chuo Trust & Banking................................... 8,000 80,190 0.10%
House Food Corp........................................ 4,000 80,190 0.10%
Mizuno Corp............................................ 8,000 80,190 0.10%
Nagase & Co............................................ 8,000 79,426 0.10%
Showa Denko Kk......................................... 24,000 79,273 0.10%
Kokusai Den Kdd........................................ 800 78,662 0.09%
Kyowa Hakko Kogyo...................................... 8,000 78,662 0.09%
Chugai Pharmaceutical Co............................... 8,000 77,899 0.09%
Koyo Seiko Co.......................................... 8,000 77,135 0.09%
Nok Corp............................................... 8,000 77,135 0.09%
Sapporo Breweries...................................... 8,000 77,135 0.09%
Okumura Corp........................................... 8,000 76,371 0.09%
General Sekiyu......................................... 8,000 76,066 0.09%
Autobacs Seven Co...................................... 800 75,989 0.09%
Fuji Heavy Industries.................................. 16,000 75,455 0.09%
Sanwa Shutter Corp..................................... 8,000 75,455 0.09%
Fudo Construction...................................... 8,000 75,378 0.09%
Tosoh Corp............................................. 16,000 74,997 0.09%
Hitachi Credit Corp.................................... 4,000 74,844 0.09%
Daishowa Paper Manufacturing........................... 8,000 74,080 0.09%
Koito Manufacturing Co................................. 8,000 74,004 0.09%
Japan Tobacco Inc...................................... 8 73,927 0.09%
Misawa Homes Co........................................ 8,000 73,698 0.09%
Shionogi & Co.......................................... 8,000 73,622 0.09%
Minebea Co............................................. 8,000 73,393 0.09%
Kaken Pharmaceutical................................... 8,000 72,935 0.09%
Mitsubishi Oil Co...................................... 8,000 71,942 0.09%
Yomiuri Land Co........................................ 8,000 71,789 0.09%
Hino Motors............................................ 8,000 71,102 0.09%
Nippon Hodo Co......................................... 4,000 71,025 0.09%
Mitsui Toatsu Chemical................................. 16,000 70,872 0.09%
Nichido Fire & Marine.................................. 8,400 70,567 0.09%
Seino Transportation................................... 4,000 70,262 0.08%
Citizen Watch Co....................................... 8,000 69,880 0.08%
Hokkaido Takushoku..................................... 24,000 69,421 0.08%
Sumitomo Heavy Industries.............................. 16,000 69,192 0.08%
Nippon Road Co......................................... 8,000 68,963 0.08%
Seiko Corp............................................. 8,000 68,734 0.08%
Kumagai Gumi Co........................................ 16,000 68,581 0.08%
Mitsui Soko Co......................................... 8,000 68,581 0.08%
Mori Seiki Co.......................................... 3,000 68,448 0.08%
</TABLE>

-72-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

JAPAN INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Calsonic Corp.......................................... 8,000 $68,352 0.08%
Hitachi Cable.......................................... 8,000 68,276 0.08%
Mitsubishi Rayon....................................... 16,000 68,276 0.08%
Tanabe Seiyaku Co...................................... 8,000 67,512 0.08%
Mitsui Petrochemical................................... 8,000 67,436 0.08%
Mercian Corp........................................... 8,000 66,519 0.08%
Ube Industries......................................... 16,000 65,832 0.08%
Skylark Co............................................. 3,000 65,584 0.08%
Tomen Corp............................................. 16,000 65,374 0.08%
Itoham Foods Inc....................................... 8,000 64,992 0.08%
Toyobo Co.............................................. 16,000 64,916 0.08%
Hitachi Maxell......................................... 3,000 64,725 0.08%
Nissin Electric........................................ 8,000 64,610 0.08%
Nisshin Oil Mills...................................... 8,000 64,534 0.08%
Sumitomo Realty & Development.......................... 8,000 64,305 0.08%
Matsushita Refrigeration............................... 8,000 64,152 0.08%
Sumitomo Bakelite...................................... 8,000 64,152 0.08%
Kikkoman Corp.......................................... 8,000 63,770 0.08%
Marudai Food Co........................................ 8,000 63,770 0.08%
Maruichi Steel Tube.................................... 3,000 63,293 0.08%
Nissan Fire & Marine Insurance......................... 8,000 63,159 0.08%
Daifuku Co............................................. 4,000 63,006 0.08%
Daimaru Inc............................................ 8,000 63,006 0.08%
Dai Tokyo Fire & Marine................................ 8,000 62,777 0.08%
Konica Corp............................................ 8,000 62,624 0.08%
Fujikura............................................... 8,000 62,395 0.08%
Japan Radio Co......................................... 4,000 61,861 0.07%
Hirose Electric........................................ 1,000 61,670 0.07%
Japan Storage Battery.................................. 8,000 60,868 0.07%
Tekken Corp............................................ 8,000 60,562 0.07%
Penta Ocean Construction............................... 8,000 60,410 0.07%
Teikoku Oil Co......................................... 8,000 60,333 0.07%
Heiwa Corp............................................. 2,500 59,904 0.07%
Daikyo Inc............................................. 8,000 59,875 0.07%
Nippon Shinpan Co...................................... 8,000 59,646 0.07%
Toyota Tsusho Corp..................................... 8,000 59,570 0.07%
Sanden Corp............................................ 8,000 59,417 0.07%
Zexel Corp............................................. 8,000 59,111 0.07%
Stanley Electric....................................... 8,000 59,035 0.07%
Sumitomo Warehouse..................................... 8,000 59,035 0.07%
Kawasaki Kisen......................................... 16,000 58,959 0.07%
NTN Toyo Bearing....................................... 8,000 58,653 0.07%
Nippon Kayaku Co....................................... 8,000 58,424 0.07%
Nichirei Corp.......................................... 8,000 58,042 0.07%
Snow Brand Milk........................................ 8,000 57,966 0.07%
Honshu Paper Co........................................ 8,000 57,889 0.07%
Gakken Co.............................................. 8,000 57,660 0.07%
Tokuyama Corp.......................................... 8,000 $57,660 0.07%
Toei Co................................................ 8,000 57,431 0.07%
Toshiba Machine Co..................................... 8,000 57,431 0.07%
Izumiya Co............................................. 3,000 57,278 0.07%
Mochida Pharmaceutical Co.............................. 4,000 57,278 0.07%
Nihon Cement Co........................................ 8,000 56,973 0.07%
Tokyu Department Store................................. 8,000 56,515 0.07%
Tsubakimoto Chain...................................... 8,000 56,438 0.07%
Japan Synthetic Rubber................................. 8,000 56,286 0.07%
Toa Corp............................................... 8,000 56,056 0.07%
Kaneka Corp............................................ 8,000 55,980 0.07%
Hitachi Chemical....................................... 5,000 55,369 0.07%
New Japan Securities................................... 8,000 55,369 0.07%
Toshoku................................................ 8,000 55,369 0.07%
Bank of Kyoto.......................................... 8,000 53,994 0.07%
Mitsuboshi Belting..................................... 8,000 53,765 0.06%
Chiyoda Fire & Marine.................................. 8,000 53,689 0.06%
Yokohama Rubber Co..................................... 8,000 53,383 0.06%
Yuasa Corp............................................. 8,000 53,383 0.06%
Daicel Chemical Industries............................. 8,000 53,307 0.06%
Tokyo Style Co......................................... 3,000 53,269 0.06%
Dainippon Pharmaceutical............................... 5,000 52,983 0.06%
Yamamura Glass Co...................................... 8,000 52,773 0.06%
Gunze Ltd.............................................. 8,000 52,467 0.06%
Meiji Milk Product..................................... 8,000 52,162 0.06%
Nippon Light Metal..................................... 8,000 51,932 0.06%
Brother Industries..................................... 8,000 51,856 0.06%
Mitsubishi Paper....................................... 8,000 51,321 0.06%
Nippon Zeon Co......................................... 8,000 51,016 0.06%
Mitsui Engineer & Shipbuilding......................... 16,000 50,863 0.06%
Keihin Electric Express Railway........................ 8,240 50,816 0.06%
Takaoka Electric Manufacturing......................... 8,000 50,787 0.06%
Sato Kogyo Co.......................................... 8,000 50,634 0.06%
Meiji Seika Kaisha..................................... 8,000 50,481 0.06%
Orient Corp............................................ 8,000 50,405 0.06%
Tokyu Car Corp......................................... 8,000 50,329 0.06%
Aoyama Trading Co...................................... 1,600 50,252 0.06%
Lion Corp.............................................. 8,000 50,176 0.06%
CSK Corp............................................... 1,600 49,641 0.06%
Toyo Ink Manufacturing Co.............................. 8,000 49,641 0.06%
Iwatsu Electric Co..................................... 8,000 49,259 0.06%
Mabuchi Motor Co....................................... 800 49,183 0.06%
Shima Seiki Manufacturing.............................. 800 49,183 0.06%
Minolta Co............................................. 8,000 48,878 0.06%
Kureha Chemical Industries Co.......................... 8,000 48,801 0.06%
Nippon Flour Mills..................................... 8,000 48,801 0.06%
NHK Spring Co.......................................... 8,000 48,343 0.06%
Dowa Fire & Marine..................................... 8,000 48,037 0.06%
Tokai Carbon Co........................................ 8,000 47,732 0.06%
</TABLE>

-73-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

JAPAN INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Daito Trust Construct Co. Ltd.......................... 3,200 $47,350 0.06%
Fujiya Co. Ltd......................................... 8,000 47,350 0.06%
Green Cross Corp....................................... 8,000 47,274 0.06%
Mitsubishi Plastic..................................... 8,000 47,197 0.06%
Fuji Fire & Marine..................................... 8,000 46,816 0.06%
Mitsubishi Steel....................................... 8,000 46,816 0.06%
Best Denki Co.......................................... 3,000 46,109 0.06%
Japan Metal & Chemical................................. 8,000 45,441 0.05%
Nippon Paint Co........................................ 8,000 45,441 0.05%
Toyo Construction...................................... 8,000 45,365 0.05%
Nissan Diesel Motor.................................... 8,000 44,983 0.05%
Showa Aluminium Co..................................... 8,000 44,983 0.05%
Showa Electric Wire.................................... 8,000 44,906 0.05%
Nagasakiya Co.......................................... 8,000 44,677 0.05%
Tokyo Rope Manufacturing Co............................ 8,000 44,677 0.05%
Iwatani International Corp............................. 8,000 44,372 0.05%
Gun Ei Chemical Industries............................. 8,000 44,295 0.05%
Nippon Sanso Corp...................................... 8,000 44,219 0.05%
Daido Steel Co......................................... 8,000 44,143 0.05%
Anritsu Corp........................................... 3,000 44,104 0.05%
Showa Sangyo Co........................................ 8,000 43,990 0.05%
Ryobi.................................................. 8,000 43,913 0.05%
Toyo Kanetsu Kk........................................ 8,000 43,837 0.05%
Asahi Optical Co.*..................................... 8,000 43,226 0.05%
Tokico Co.............................................. 8,000 43,073 0.05%
Atsugi Nylon Industrial................................ 8,000 42,997 0.05%
Morinaga Milk Industries............................... 8,000 42,997 0.05%
Dowa Mining Co......................................... 8,000 42,768 0.05%
Kansai Paint Co........................................ 8,000 42,768 0.05%
Amano Corp............................................. 3,000 42,672 0.05%
Sumitomo Osaka Cement.................................. 8,000 42,310 0.05%
Yaskawa Electric Corp.................................. 8,000 42,310 0.05%
Nippon Yakin Kogyo..................................... 8,000 41,622 0.05%
Orix Corp.............................................. 1,000 41,336 0.05%
Nippon Sheet Glass..................................... 8,000 41,088 0.05%
Tokyu Land Corp........................................ 8,000 41,011 0.05%
Fujita Corp............................................ 8,000 39,942 0.05%
Tokyu Construction..................................... 8,000 39,713 0.05%
Arabian Oil Co......................................... 800 39,637 0.05%
Mitsubishi Gas Chemical................................ 8,000 39,408 0.05%
Nachi Fujikoshi Co..................................... 8,000 39,255 0.05%
Central Finance Co..................................... 8,000 38,949 0.05%
Sankyu Inc............................................. 8,000 $38,949 0.05%
Iseki & Co............................................. 8,000 38,797 0.05%
Kanematsu Corp......................................... 8,000 38,567 0.05%
Toyo Tire & Rubber..................................... 8,000 37,422 0.05%
Hanshin Electric Railway............................... 8,000 36,811 0.04%
Haseko Corp............................................ 8,000 36,811 0.04%
Mitsui Mining & Smelting............................... 8,000 36,658 0.04%
Hazama Corp............................................ 8,000 35,971 0.04%
Nippon Suisan.......................................... 8,000 35,665 0.04%
Nippon Yakin Kogyo..................................... 8,000 35,589 0.04%
Prima Meat Packers..................................... 8,000 35,131 0.04%
Kurabo Industries...................................... 8,000 34,978 0.04%
Tobishima Corp......................................... 8,000 34,825 0.04%
Nankai Electric Rail................................... 5,250 34,682 0.04%
Central Glass Co....................................... 8,000 34,673 0.04%
Nichiro Corp........................................... 8,000 33,909 0.04%
Heiwa Real Estate...................................... 4,000 33,794 0.04%
Renown Inc............................................. 8,000 33,603 0.04%
Aoki Corp.............................................. 8,000 33,451 0.04%
Shokusan Jutaku Co..................................... 8,000 33,451 0.04%
Sumitomo Light Metropolitan............................ 8,000 32,458 0.04%
York Benimaru Co....................................... 800 32,076 0.04%
Hanwa Co............................................... 8,000 31,770 0.04%
Maruha Corp............................................ 8,000 31,312 0.04%
Makino Milling......................................... 3,000 31,217 0.04%
Niigata England........................................ 8,000 31,159 0.04%
Settsu Corp............................................ 8,000 30,014 0.04%
Ishihara Sangyo........................................ 8,000 29,632 0.04%
Nitto Boseki Co........................................ 8,000 28,792 0.03%
Asics Corp............................................. 8,000 28,257 0.03%
Japan Steel Works...................................... 8,000 27,341 0.03%
Navix Line............................................. 8,000 26,119 0.03%
Kanebo................................................. 8,000 25,279 0.03%
Unitika................................................ 8,000 25,279 0.03%
Nippon TV Network...................................... 80 25,126 0.03%
----------- ------
TOTAL INVESTMENTS -
(Cost $75,880,908)................................... 82,692,791 99.63%
OTHER ASSETS LESS LIABILITIES.......................... 308,279 0.37%
----------- ------
NET ASSETS............................................. $83,001,070 100%
----------- ------
----------- ------
</TABLE>

* Non-income producing security.
The accompanying notes are an integral part of the financial statements.

-74-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

JAPAN INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ----------------------------------------------------------------------------
Commercial banks and other banks....................... $17,239,437 20.9%
Electronics and instrumentation........................ 5,161,034 6.3%
Utilities.............................................. 4,938,163 6.0%
Financial institutions and services.................... 4,837,239 5.8%
Automobiles............................................ 4,355,317 5.4%
Transportation and storage............................. 4,090,661 4.9%
Construction and building materials.................... 3,710,820 4.5%
Retail trade........................................... 3,588,798 4.3%
Household durables and appliances...................... 3,223,667 3.9%
Chemicals.............................................. 2,839,291 3.4%
Mining, metals and minerals............................ 2,797,993 3.4%
Health and personal care............................... 2,596,641 3.1%
Wholesale trade........................................ 2,398,476 2.9%
Auto components........................................ 2,148,208 2.6%
Food and grocery products.............................. 2,000,372 2.5%
Computers and communications and office equipment...... 1,960,087 2.4%
Entertainment and leisure toys......................... 1,931,037 2.3%
Machinery and engineering services..................... 1,883,610 2.3%
Heavy engineering and shipbuilding..................... 1,559,653 1.9%
Insurance -- multiline and property and casualty....... 1,488,399 1.8%
Electrical equipment................................... 1,412,486 1.7%
Oil.................................................... 935,853 1.1%
Real Estate............................................ 878,002 1.1%
Textiles and wearing apparel........................... 784,600 0.9%
Beverage industry and tobacco manufacturing............ 782,729 0.9%
Media.................................................. 694,138 0.8%
Forestry and paper products............................ 659,466 0.8%
Diversified industrials................................ 613,013 0.7%
Fabricated metal products.............................. 595,428 0.7%
Business services and computer software................ 332,215 0.4%
Precious metals and minerals........................... 151,788 0.2%
Other energy (non-oil)................................. 104,170 0.1%
----------- ------
$82,692,791 100%
----------- ------
----------- ------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-75-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

SOUTH AFRICA INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Anglo America Corp. SA................................. 29,984 $2,032,537 11.63%
DeBeers Centenary...................................... 48,797 1,555,128 8.90%
South Africa Breweries................................. 38,104 1,112,969 6.37%
Liberty Life Association............................... 31,416 937,609 5.36%
Sasol.................................................. 76,595 797,433 4.56%
Gencor................................................. 178,657 717,135 4.10%
Rembrandt Group........................................ 67,198 575,227 3.29%
Standard Bank Investment............................... 15,429 571,135 3.27%
Liberty Holdings....................................... 6,248 478,465 2.74%
Driefontein Consolidated Ltd........................... 26,258 419,172 2.40%
Gold Fields of South Africa............................ 12,540 414,873 2.37%
First National Bank.................................... 56,063 402,086 2.30%
Anglo America Industrial Corp.......................... 8,624 397,048 2.27%
Nedcor Ltd............................................. 27,834 391,204 2.24%
Samancor Ltd........................................... 24,737 371,999 2.13%
Smith C.G.............................................. 60,563 325,770 1.86%
Rustenberg Platinum.................................... 16,137 319,205 1.83%
Anglo America Gold..................................... 3,051 316,935 1.81%
Barlow Ltd............................................. 26,252 302,160 1.73%
Nampak................................................. 63,756 280,257 1.60%
Iscor.................................................. 298,377 272,674 1.56%
Rembrandt Controlling Investor......................... 45,450 268,136 1.53%
Tiger Oats............................................. 19,026 263,007 1.51%
Sappi.................................................. 19,188 240,830 1.37%
Southern Life Association.............................. 23,238 239,243 1.37%
Vaal Reefs Exploration & Mining........................ 2,412 236,605 1.36%
Safmarine & Rennie..................................... 70,173 $215,113 1.23%
Johnnies Indiana Corp.................................. 19,026 213,487 1.22%
Anglovaal Industries................................... 40,068 213,210 1.22%
Kloof Gold Mining...................................... 17,496 208,462 1.19%
Anglovaal Ltd.......................................... 5,805 201,453 1.15%
Murray & Roberts....................................... 41,661 190,361 1.09%
Western Deep Levels.................................... 3,567 179,079 1.03%
Free State Consolidated Gold Mines Ltd................. 15,021 166,810 0.96%
Tongaat Hulett Group Ltd............................... 11,952 165,219 0.95%
JCI Ltd................................................ 18,855 161,402 0.92%
Middle Witwatersrand................................... 40,608 159,714 0.91%
Genbel South Africa.................................... 55,161 158,247 0.91%
Angelo America Plat Corp............................... 21,546 157,021 0.90%
Premier Group.......................................... 106,524 147,870 0.85%
Impala Platinum........................................ 7,857 145,421 0.83%
Reunert................................................ 24,174 119,966 0.69%
Wooltru A Shares....................................... 25,353 105,287 0.60%
Wooltru Ltd............................................ 20,349 85,919 0.49%
Highveld Steel & Vanadium.............................. 11,718 79,975 0.46%
----------- ------
TOTAL INVESTMENTS -
(Cost $18,001,143)................................... 17,312,858 99.06%
OTHER ASSETS LESS LIABILITIES.......................... 164,598 0.94%
----------- ------
NET ASSETS............................................. $17,477,456 100%
----------- ------
----------- ------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-76-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

SOUTH AFRICA INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Precious metals and minerals........................... $ 7,189,498 41.5%
Diversified holding companies.......................... 1,707,778 9.9%
Beverage industry and tobacco manufacturing............ 1,688,197 9.8%
Insurance -- life and agents and brokers............... 1,655,318 9.6%
Commercial banks and other banks....................... 1,364,426 7.9%
Oil.................................................... 797,433 4.6%
Mining, metals and minerals............................ 724,648 4.2%
Food and grocery products.............................. 576,096 3.3%
Forestry and paper products............................ 521,087 3.0%
Transportation and storage............................. 215,113 1.2%
Diversified industrials................................ 213,487 1.2%
Retail trade........................................... 191,206 1.1%
Construction and building materials.................... 190,360 1.1%
Financial institutions and services.................... 158,246 0.9%
Electrical equipment................................... 119,965 0.7%
----------- -----------
$17,312,858 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-77-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

UK INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
British Petroleum...................................... 59,704 $537,103 4.53%
Shell Transport & Trading.............................. 35,378 465,318 3.93%
Glaxo Wellcome......................................... 37,530 453,638 3.82%
British Telecom........................................ 67,153 367,306 3.10%
Smithkline Beecham..................................... 29,061 307,443 2.60%
HSBC Holdings.......................................... 18,831 277,916 2.34%
Lloyds TSB Group....................................... 54,364 259,828 2.19%
Bat Industries......................................... 32,859 247,527 2.09%
Zeneca Group........................................... 10,047 209,941 1.76%
Reuters Holdings....................................... 17,805 200,921 1.70%
Marks & Spencer........................................ 29,859 198,716 1.67%
BTR.................................................... 41,043 197,085 1.66%
Barclays............................................... 16,794 185,732 1.57%
Cable & Wireless....................................... 23,523 184,082 1.54%
RTZ Corp............................................... 11,340 177,996 1.50%
National Westminster................................... 18,813 172,914 1.45%
British Gas............................................ 46,479 164,602 1.39%
Hanson................................................. 55,083 162,835 1.36%
Unilever............................................... 8,649 157,821 1.33%
General Electric....................................... 29,247 157,339 1.33%
Guinness............................................... 21,498 154,202 1.29%
Grand Metropolitan..................................... 22,218 145,697 1.23%
Prudential Corp........................................ 20,289 139,289 1.18%
HSBC Holdings (ordinary)............................... 9,132 134,774 1.13%
British Sky Broadcasting............................... 18,198 130,532 1.10%
Vodafone Group......................................... 32,427 129,192 1.09%
Thorn EMI.............................................. 4,569 126,326 1.07%
Abbey National......................................... 14,213 121,143 1.02%
Great University Stores................................ 10,674 116,046 0.97%
Granada Group.......................................... 9,054 111,884 0.94%
BASS................................................... 9,327 109,659 0.93%
Sainsbury J............................................ 19,410 106,604 0.90%
Imperial Chemical Industries........................... 7,692 103,884 0.88%
Reed International..................................... 6,006 103,014 0.87%
National Power......................................... 12,063 101,460 0.85%
Standard Chartered..................................... 10,335 96,464 0.80%
Tesco.................................................. 22,863 96,235 0.80%
Boots Co............................................... 10,119 96,194 0.80%
BAA.................................................... 10,980 89,962 0.76%
Allied Domecq Plc...................................... 10,995 84,723 0.72%
Cadbury Schweppes...................................... 10,545 81,493 0.68%
BOC Group.............................................. 5,112 70,804 0.60%
Rank Organisation...................................... 8,841 70,712 0.60%
Scot & Newcastle....................................... 6,504 67,099 0.57%
Royal Bank of Scotland Group........................... 8,583 66,781 0.56%
Powergen............................................... 7,728 64,709 0.55%
British Steel.......................................... 21,600 64,340 0.54%
Kingfisher............................................. 7,107 63,402 0.54%
Pearson................................................ 5,907 62,226 0.53%
Commercial Union....................................... 7,068 61,145 0.52%
Argyll Group........................................... 12,117 60,367 0.51%
Rentokil Group......................................... 10,473 60,192 0.51%
Lloyds Abbey Life...................................... 7,413 59,597 0.50%
Siebe.................................................. 4,551 58,663 0.50%
Whitbread.............................................. 5,127 57,779 0.49%
Associated British Foods............................... 9,546 57,012 0.48%
Legal & General Group.................................. 5,238 $56,279 0.48%
Scottish Power......................................... 9,966 55,707 0.47%
National Grid Group.................................... 17,949 55,081 0.46%
GKN.................................................... 3,705 54,624 0.46%
Land Securities........................................ 5,415 53,183 0.45%
Asda Group............................................. 31,038 52,863 0.45%
Tomkins................................................ 12,603 51,819 0.44%
United News & Media Plc................................ 4,848 50,450 0.43%
Peninsula & Oriental Steam............................. 6,420 50,385 0.43%
United Utilities....................................... 5,547 49,444 0.42%
Reckitt & Colman....................................... 4,506 49,293 0.42%
General Accident....................................... 5,091 48,282 0.41%
Bank of Scotland....................................... 12,552 46,995 0.40%
Sun Alliance Group..................................... 8,655 46,106 0.39%
Blue Circle Industries................................. 7,782 43,733 0.37%
Carlton Communicatons.................................. 6,183 43,237 0.36%
3I Group............................................... 6,240 43,167 0.36%
RMC Group.............................................. 2,634 43,123 0.36%
Wolseley............................................... 5,862 41,212 0.35%
TI Group............................................... 4,983 40,902 0.35%
Royal Insurance........................................ 7,002 38,141 0.32%
Thames Water........................................... 4,284 36,771 0.31%
Ladbroke Group......................................... 12,378 36,313 0.31%
Burton Group........................................... 15,114 35,381 0.30%
Redland................................................ 5,511 35,312 0.30%
Enterprise Oil......................................... 5,232 35,134 0.30%
Severn Trent........................................... 3,891 34,887 0.29%
Burmah Castrol Plc..................................... 2,160 34,439 0.29%
Cookson Group.......................................... 7,227 34,270 0.29%
Pilkington............................................. 10,653 34,050 0.29%
Smiths Industries...................................... 3,207 34,024 0.29%
Southern Electric...................................... 2,703 33,970 0.29%
BET.................................................... 10,083 33,968 0.29%
Smith & Nephew......................................... 11,691 33,947 0.29%
Tate & Lyle............................................ 4,641 33,533 0.28%
Vendome Luxury Group SA................................ 3,702 32,498 0.27%
Guardian Royal Exchange Plc............................ 9,546 32,302 0.27%
Williams Holdings...................................... 6,159 31,886 0.27%
Rexam.................................................. 5,346 31,768 0.27%
Schroders.............................................. 1,599 31,613 0.27%
Next................................................... 3,972 31,590 0.27%
Farnell Electronic..................................... 2,858 31,565 0.27%
Dixons Group........................................... 4,263 31,538 0.27%
Argos.................................................. 3,234 31,471 0.27%
Lucas Industries....................................... 9,306 29,954 0.25%
British Land Co........................................ 4,572 29,604 0.25%
Greenalls Group........................................ 3,159 29,580 0.25%
Lasmo.................................................. 10,248 29,526 0.25%
MEPC................................................... 4,530 29,128 0.25%
Foreign & Colonial Investor Trust...................... 11,154 27,701 0.23%
Courtaulds............................................. 4,302 27,630 0.23%
Electrocomponents...................................... 4,494 26,874 0.23%
BPB Industries......................................... 5,355 26,679 0.23%
De Louisiana Rue....................................... 2,373 26,440 0.22%
Mercury Asset Manitoba Group........................... 1,938 26,043 0.22%
</TABLE>

-78-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

UK INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Anglian Water.......................................... 2,853 $24,788 0.21%
Telewest............................................... 9,762 24,683 0.21%
Inchcape............................................... 5,604 24,555 0.21%
Sears.................................................. 16,158 24,368 0.21%
Lonrho................................................. 8,259 23,981 0.20%
Midlands Electric...................................... 4,062 23,894 0.20%
Arjo Wiggins Apple..................................... 8,712 23,859 0.20%
Laporte................................................ 2,049 22,938 0.19%
BBA Group.............................................. 4,392 22,903 0.19%
Storehouse............................................. 4,446 22,884 0.19%
London Electricity..................................... 1,806 22,358 0.19%
Smith WH Group......................................... 2,979 22,039 0.19%
Caradon Plc............................................ 6,363 21,961 0.19%
Coats Viyella.......................................... 7,443 21,389 0.18%
Scottish Hydro......................................... 4,077 21,168 0.18%
Johnson Matthey........................................ 2,292 20,894 0.18%
Provident Financial.................................... 1,434 20,658 0.17%
IMI.................................................... 3,648 20,337 0.17%
United Biscuits........................................ 5,613 20,299 0.17%
Yorkshire Electric Group............................... 1,635 20,082 0.17%
Hillsdown Holdings..................................... 7,422 20,047 0.17%
British Airways........................................ 2,547 19,836 0.17%
East Midlands Electric................................. 2,106 19,799 0.17%
BICC................................................... 3,759 19,573 0.17%
Tarmac................................................. 9,819 19,228 0.16%
NFC.................................................... 7,377 19,040 0.16%
Associated British Ports............................... 4,050 18,232 0.15%
Dalgety................................................ 3,066 17,851 0.15%
British Aerospace...................................... 1,341 17,517 0.15%
Hammerson Plc.......................................... 3,009 17,407 0.15%
Harrison & Crosfield................................... 7,545 16,813 0.14%
Northern Foods......................................... 6,147 16,557 0.14%
Rolls Royce............................................ 4,596 16,345 0.14%
Witan Investment....................................... 3,984 16,291 0.14%
Bunzl.................................................. 4,716 16,241 0.14%
Edinburgh Investor Trust............................... 3,117 15,903 0.13%
Unigate................................................ 2,499 15,581 0.13%
Morgan Crucible Co..................................... 2,346 15,208 0.13%
T & N.................................................. 5,637 15,184 0.13%
FKI.................................................... 5,988 15,006 0.13%
Slough Estates......................................... 4,146 14,901 0.13%
M & G Group............................................ 792 14,499 0.12%
Glynwed International.................................. 2,589 14,316 0.12%
English China Clay..................................... 3,252 14,225 0.12%
Booker................................................. 2,394 13,867 0.12%
Bowthorpe.............................................. 2,055 13,769 0.12%
Vickers................................................ 3,540 13,705 0.12%
Charter................................................ 921 13,130 0.11%
Rugby Group............................................ 6,798 13,057 0.11%
Sedgwick Group......................................... 5,799 12,183 0.10%
Hepworth............................................... 2,589 11,713 0.10%

Kwik Save Group........................................ 1,650 $11,662 0.10%
Allied Colloids........................................ 5,655 11,201 0.09%
Electra Investor Trust................................. 1,836 11,158 0.09%
Invesco Plc............................................ 2,835 10,763 0.09%
Taylor Woodrow......................................... 4,095 10,692 0.09%
First Leisure Corp..................................... 1,737 10,361 0.09%
Willis Corroon Group................................... 4,452 10,221 0.09%
Great Portland Estates Plc............................. 3,432 9,347 0.08%
Meyer International.................................... 1,344 9,146 0.08%
Spirax Sarco Engineering............................... 834 9,123 0.08%
Scapa Group............................................ 2,532 9,062 0.08%
Wimpey George.......................................... 3,840 8,298 0.07%
Trafalgar House........................................ 11,122 8,261 0.07%
Halma.................................................. 2,838 8,241 0.07%
Mckechnie.............................................. 1,044 8,146 0.07%
Highland Distilleries.................................. 1,413 7,930 0.07%
Fleming Mercantile Investment
Trust................................................ 1,533 7,925 0.07%
Barratt Development.................................... 1,959 7,922 0.07%
Marley................................................. 3,564 7,808 0.07%
Schroders (non-voting)................................. 468 7,234 0.06%
City of London Trust................................... 2,799 7,182 0.06%
Brixton Estate......................................... 2,478 6,916 0.06%
Courtaulds Textile..................................... 1,101 6,898 0.06%
Vaux Group............................................. 1,494 6,883 0.06%
Hambros................................................ 1,878 6,876 0.06%
Trust Small Companies
Investor Trust....................................... 1,890 6,622 0.06%
Bryant Group........................................... 2,970 5,928 0.05%
Wilson C Holdings...................................... 2,097 5,853 0.05%
Albert Fisher Group.................................... 7,563 5,845 0.05%
Christies International................................ 1,743 5,767 0.05%
Eurotunnel SA*......................................... 4,881 5,493 0.05%
Bradford Property Trust................................ 1,551 5,481 0.05%
Merchants Trust........................................ 1,086 4,645 0.04%
APV.................................................... 3,141 4,478 0.04%
Diploma................................................ 594 3,699 0.03%
Baird William.......................................... 1,230 3,664 0.03%
Amstrad................................................ 1,236 3,635 0.03%
Bilton................................................. 933 3,318 0.03%
Dawson International................................... 2,076 2,788 0.02%
Laing John............................................. 486 2,312 0.02%
Laing John 'A'......................................... 480 2,215 0.02%
Barratt Development (rights) (a)....................... 1 1 0.00%
----------- ------
TOTAL INVESTMENTS -
(Cost $11,472,087)................................... 11,743,145 99.13%
OTHER ASSETS LESS LIABILITIES.......................... 102,767 0.87%
----------- ------
NET ASSETS............................................. $11,845,912 100%
----------- ------
----------- ------
</TABLE>

(a) Fair valued security.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.

-79-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

UK INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Utilities.............................................. $ 1,433,985 12.1%
Commercial banks and other banks....................... 1,362,546 11.5%
Oil.................................................... 1,101,520 9.4%
Health and personal care............................... 1,054,261 9.0%
Retail trade........................................... 1,007,126 8.6%
Beverage industry and tobacco manufacturing............ 911,080 7.8%
Media.................................................. 616,819 5.3%
Food and grocery products.............................. 434,062 3.7%
Construction and building materials.................... 377,598 3.2%
Entertainment and leisure toys......................... 355,597 3.0%
Chemicals.............................................. 330,917 2.8%
Diversified industrials................................ 327,088 2.8%
Insurance -- life and agents and brokers............... 277,568 2.4%
Financial institutions and services.................... 266,541 2.3%
Mining, metals and minerals............................ 242,336 2.1%
Electronics and instrumentation........................ 236,881 2.0%
Insurance -- multiline and property and casualty....... 225,977 1.9%
Diversified holding companies.......................... 220,785 1.9%
Transportation and storage............................. 202,949 1.7%
Real Estate............................................ 169,285 1.4%
Auto components........................................ 107,481 0.9%
Machinery and engineering services..................... 105,771 0.9%
Fabricated metal products.............................. 80,302 0.7%
Forestry and paper products............................ 71,868 0.6%
Aerospace and defense composite........................ 67,886 0.6%
Wholesale trade........................................ 47,213 0.4%
Textiles and wearing apparel........................... 34,738 0.3%
Diversified consumer goods and services................ 32,498 0.3%
Precious metals and minerals........................... 20,894 0.2%
Electrical equipment................................... 19,573 0.2%
----------- -----------
$11,743,145 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-80-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
General Electric Co.................................... 10,242 $793,755 2.47%
Exxon Corp............................................. 7,560 642,600 2.00%
Coca Cola Co........................................... 7,638 622,497 1.94%
AT & T Corp............................................ 9,732 596,085 1.85%
Philip Morris Cos., Inc................................ 5,082 458,015 1.42%
Merck & Co. Inc........................................ 7,494 453,387 1.41%
Microsoft Corp.*....................................... 3,618 410,191 1.27%
Johnson & Johnson...................................... 4,056 375,180 1.16%
International Business Machines........................ 3,462 372,165 1.14%
Procter & Gamble Co.................................... 4,182 353,379 1.09%
Intel Corp............................................. 4,998 338,614 1.05%
Wal Mart Stores Inc.................................... 13,968 333,486 1.03%
Hewlett Packard Co..................................... 3,102 328,424 1.02%
Pepsico Inc............................................ 4,800 304,800 0.94%
Mobil Corp............................................. 2,400 276,000 0.85%
Du Pont (E I) De Nemours & Co.......................... 3,378 271,507 0.84%
Pfizer Inc............................................. 3,876 266,959 0.82%
American International Group Inc....................... 2,886 263,708 0.81%
GTE Corp............................................... 5,898 255,826 0.79%
Disney (Walt) Co....................................... 4,122 255,564 0.79%
Bristol Myers Squibb Co................................ 3,072 252,672 0.78%
General Motors Corp.................................... 4,560 247,380 0.76%
Bellsouth Corp......................................... 6,054 242,160 0.76%
Ford Motor Co.......................................... 6,540 234,622 0.73%
Berkshire Hathaway Inc.*............................... 7 234,500 0.73%
Citicorp............................................... 2,958 232,942 0.73%
Chevron Corp........................................... 3,972 230,376 0.72%
Motorola Inc........................................... 3,600 220,500 0.69%
Amoco Corp............................................. 2,988 218,124 0.68%
Federal National Mortgage Association.................. 6,648 203,595 0.64%
McDonald's Corp........................................ 4,242 203,086 0.63%
American Home Products Corp............................ 1,884 198,762 0.62%
Lilly Eli & Co......................................... 3,360 198,240 0.62%
Ameritech Corp......................................... 3,372 196,840 0.62%
Abbott Laboratories.................................... 4,830 196,219 0.61%
SBC Communications Inc................................. 3,714 185,700 0.58%
Chase Manhattan Corp................................... 2,659 183,139 0.57%
Cisco Systems Inc.*.................................... 3,366 174,611 0.55%
Bell Atlantic Corp..................................... 2,658 172,770 0.54%
BankAmerica Corp....................................... 2,268 171,801 0.54%
Boeing Co.............................................. 2,082 170,984 0.53%
Minnesota Mining & Manufacturing Co.................... 2,556 168,057 0.53%
Eastman Kodak Co....................................... 2,082 159,273 0.50%
General Motors Corp.................................... 2,670 150,521 0.47%
Gillette Co............................................ 2,700 145,800 0.46%
Wells Fargo & Co....................................... 596 $144,604 0.45%
Chrysler Corp.......................................... 2,304 144,576 0.45%
Nationsbank Corp....................................... 1,806 144,028 0.45%
Columbia / HCA Healthcare Corp......................... 2,700 143,437 0.45%
American Express Co.................................... 2,952 143,172 0.45%
Dow Chemical Co........................................ 1,596 141,844 0.44%
Home Depot Inc......................................... 2,904 137,577 0.43%
Texaco Inc............................................. 1,608 137,484 0.43%
Oracle Systems Corp.................................... 3,978 134,257 0.42%
Schlumberger Ltd....................................... 1,470 129,727 0.41%
NYNEX Corp............................................. 2,616 128,511 0.40%
Schering Plough Corp................................... 2,220 127,372 0.40%
Kimberly Clark Corp.................................... 1,698 123,317 0.39%
MCI Communications Corp................................ 4,146 122,048 0.38%
Travelers Group Inc.................................... 1,926 118,449 0.37%
Sears Roebuck & Co..................................... 2,370 118,204 0.37%
Pharmacia & Upjohn Inc................................. 3,066 117,274 0.37%
Atlantic Richfield Co.................................. 978 115,159 0.36%
Emerson Electric Co.................................... 1,362 113,897 0.36%
Computer Associates International Inc.................. 1,470 107,861 0.34%
Monsanto Co............................................ 708 107,262 0.34%
First Union Corp....................................... 1,734 106,641 0.33%
Allstate Corp.......................................... 2,724 105,895 0.33%
Anheuser Busch Cos., Inc............................... 1,554 104,312 0.33%
First Data Corp........................................ 1,356 103,056 0.32%
WMX Technologies Inc................................... 2,964 102,999 0.32%
Allied Signal Inc...................................... 1,722 100,091 0.31%
Lockheed Martin Corp................................... 1,212 97,717 0.31%
Time Warner Inc........................................ 2,358 96,383 0.30%
Morgan (J P) & Co. Inc................................. 1,140 95,902 0.30%
Xerox Corp............................................. 654 95,811 0.30%
Campbell Soup Co....................................... 1,518 94,875 0.30%
Kellogg Co............................................. 1,326 94,643 0.30%
Airtouch Communications Inc.*.......................... 3,018 94,312 0.29%
U.S. West Inc.......................................... 2,868 93,927 0.29%
Amgen Inc.*............................................ 1,602 92,115 0.29%
Warner Lambert Co...................................... 822 91,858 0.29%
Federal Home Loan Mortgage Corp........................ 1,098 91,546 0.29%
Sara Lee Corp.......................................... 2,946 91,326 0.29%
Banc One Corp.......................................... 2,622 91,114 0.28%
Sprint Corp............................................ 2,124 89,473 0.28%
Pacific Telesis Group.................................. 2,610 89,392 0.28%
Southern Co............................................ 4,056 89,232 0.28%
Union Pacific Corp..................................... 1,248 85,020 0.27%
United Technologies Corp............................... 744 82,212 0.26%
First Chicago NBD Corp................................. 1,968 81,180 0.25%
</TABLE>

-81-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Viacom Inc.*........................................... 1,938 $79,458 0.25%
Norwest Corp........................................... 2,148 77,596 0.24%
May Department Stores Co............................... 1,518 77,418 0.24%
Rockwell International Corp............................ 1,320 77,220 0.24%
H.J. Heinz Co.......................................... 2,250 76,219 0.24%
Nike Inc............................................... 870 76,125 0.24%
Compaq Computer Corp.*................................. 1,626 75,812 0.24%
Caterpillar Inc........................................ 1,182 75,648 0.24%
Burlington Northern Santa Fe........................... 864 75,600 0.24%
Medtronic Inc.......................................... 1,416 75,225 0.24%
Raytheon Co............................................ 1,476 74,722 0.23%
Tele Communications Inc. (new)*........................ 3,852 73,669 0.23%
Baxter International Inc............................... 1,650 73,012 0.23%
International Paper Co................................. 1,800 71,775 0.22%
General Re Corp........................................ 498 71,152 0.22%
Fleet Financial Group Inc.............................. 1,620 69,660 0.22%
Automatic Data Processing Inc.......................... 1,770 68,809 0.22%
Colgate Palmolive Co................................... 888 68,043 0.21%
Aluminum Co. America................................... 1,086 67,739 0.21%
Penney (J.C.) Co., Inc................................. 1,362 67,419 0.21%
Norfolk Southern Corp.................................. 798 67,032 0.21%
Phillips Petroleum Co.................................. 1,596 66,234 0.21%
McDonnell Douglas Corp................................. 684 66,006 0.21%
CSX Corp............................................... 1,284 65,805 0.21%
Texas Instruments Inc.................................. 1,152 65,088 0.20%
Merrill Lynch & Co. Inc................................ 1,068 64,480 0.20%
Dun & Bradstreet Corp.................................. 1,032 62,823 0.20%
PNC Bank Corp.......................................... 2,076 62,799 0.20%
U.S. Healthcare Corp................................... 1,062 62,127 0.19%
Deere & Co............................................. 1,596 62,044 0.19%
Enron Corp............................................. 1,530 61,582 0.19%
CPC International Inc.................................. 888 61,383 0.19%
Weyerhaeuser Co........................................ 1,230 60,885 0.19%
Sun Microsystems Inc.*................................. 1,116 60,543 0.19%
Archer Daniels Midland Co.............................. 3,168 59,796 0.19%
PPG Industries Inc..................................... 1,176 59,535 0.19%
Albertsons Inc......................................... 1,542 59,367 0.19%
Amp Inc................................................ 1,326 59,338 0.19%
Duke Power Co.......................................... 1,248 58,656 0.18%
Gannett Inc............................................ 852 58,255 0.18%
Pacific Gas & Electric Co.............................. 2,550 58,012 0.18%
Tenneco Inc............................................ 1,056 57,948 0.18%
Conagra Inc............................................ 1,500 57,937 0.18%
Bank of New York Inc................................... 1,170 56,745 0.18%
Dean Witter Discover & Co.............................. 1,038 56,571 0.18%
U.S. West Inc.*........................................ 2,868 55,926 0.17%
Keycorp................................................ 1,440 55,620 0.17%
Digital Equipment Corp.*............................... 930 55,567 0.17%
Texas Utilities Co..................................... 1,374 55,303 0.17%
Worldcom Inc.*......................................... 1,176 $55,272 0.17%
Loews Corp............................................. 720 54,900 0.17%
General Mills Inc...................................... 966 53,613 0.17%
First Bank Systems Inc................................. 888 53,502 0.17%
Gap Inc................................................ 1,752 52,779 0.16%
Cigna Corp............................................. 462 52,379 0.16%
Rhone Poulenc Rorer Inc................................ 816 50,592 0.16%
Carnival Corp.......................................... 1,734 50,286 0.16%
Aetna Life & Casualty Co............................... 702 50,017 0.16%
Chubb Corp............................................. 528 49,962 0.16%
Occidental Petroleum Corp.............................. 1,938 49,903 0.16%
RJR Nabisco Holdings Corp.............................. 1,662 49,652 0.16%
Corestates Financial Corp.............................. 1,272 49,608 0.16%
U.S. Healthcare Inc.................................... 936 48,789 0.15%
FPL Group Inc.......................................... 1,128 48,645 0.15%
Suntrust Banks Inc..................................... 690 48,645 0.15%
Corning Inc............................................ 1,398 48,580 0.15%
Goodyear Tire & Rubber................................. 930 48,476 0.15%
Unocal Corp............................................ 1,500 48,187 0.15%
Walgreen Co............................................ 1,500 48,000 0.15%
Westinghouse Electric Corp............................. 2,526 47,678 0.15%
Morgan Stanley Group Inc............................... 948 47,637 0.15%
American Brands Inc.................................... 1,134 47,203 0.15%
Illinois Tool Works Inc................................ 696 46,806 0.15%
Toys R Us Inc.*........................................ 1,662 46,328 0.14%
3Com Corp.*............................................ 1,002 46,217 0.14%
Mellon Bank Corp....................................... 858 46,117 0.14%
American Electric Power Inc............................ 1,134 46,069 0.14%
Grace W R & Co......................................... 594 46,035 0.14%
Micron Technology Inc.................................. 1,260 45,832 0.14%
Wachovia Corp. (new)................................... 1,038 45,672 0.14%
Alco Standard Corp..................................... 780 45,142 0.14%
Pitney Bowes Inc....................................... 924 45,045 0.14%
Textron Inc............................................ 516 44,247 0.14%
ITT Corp. (new)*....................................... 726 44,195 0.14%
American General Corp.................................. 1,248 43,836 0.14%
Safeway Inc.*.......................................... 1,296 43,740 0.14%
Applied Materials Inc.*................................ 1,092 43,680 0.14%
Mattel Inc............................................. 1,680 43,680 0.14%
Edison International................................... 2,712 43,392 0.14%
Georgia Pacific Corp................................... 558 43,384 0.14%
Consolidated Edison Co.
New York Inc......................................... 1,428 41,947 0.13%
Dayton Hudson Corp..................................... 438 41,829 0.13%
Browning Ferris Industries Inc......................... 1,296 41,796 0.13%
Marsh & Mclennan Cos., Inc............................. 444 41,736 0.13%
Household International Inc............................ 600 41,475 0.13%
Federated Department Stores Inc*....................... 1,236 41,251 0.13%
</TABLE>

-82-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
AMR Corp.*............................................. 462 $41,233 0.13%
Dominion Resources Inc................................. 1,068 41,118 0.13%
Honeywell Inc.......................................... 774 40,732 0.13%
Hercules Inc........................................... 672 40,656 0.13%
Freeport McMoran Copper & Gold......................... 1,230 40,436 0.13%
United States Robotics Corp............................ 258 40,377 0.13%
Halliburton Co......................................... 696 39,933 0.12%
Boston Scientific Corp.*............................... 924 39,847 0.12%
UST Inc................................................ 1,230 39,360 0.12%
Public Service Enterprise Group........................ 1,488 38,874 0.12%
Air Products & Chemicals Inc........................... 678 38,731 0.12%
USX Marathon Group..................................... 1,752 38,544 0.12%
MBNA Corp.............................................. 1,356 38,476 0.12%
Genentech Inc.*........................................ 720 38,070 0.12%
Union Carbide Corp..................................... 834 37,947 0.12%
Service Corp. International............................ 714 37,931 0.12%
Alltel Corp............................................ 1,152 37,872 0.12%
Ralston Purina Co...................................... 648 37,827 0.12%
TRW Inc................................................ 402 37,738 0.12%
Wrigley (Wm) Jr. Co.................................... 708 37,258 0.12%
Marriot International Inc.............................. 762 37,147 0.12%
Avon Products Inc...................................... 414 36,794 0.12%
Entergy Corp........................................... 1,386 36,729 0.11%
Barnett Banks Inc...................................... 576 36,504 0.11%
CUC International Inc.................................. 1,110 36,491 0.11%
Unicom Corp............................................ 1,308 35,970 0.11%
Hershey Foods Corp..................................... 474 35,965 0.11%
General Motors Corp.................................... 588 35,941 0.11%
Tyco Interest Ltd...................................... 930 35,921 0.11%
Crown Cork & Seal Inc.................................. 762 35,909 0.11%
Sysco Corp............................................. 1,116 35,851 0.11%
Pacificorp............................................. 1,782 35,640 0.11%
Dover Corp............................................. 690 35,535 0.11%
Bay Networks Inc.*..................................... 1,122 35,343 0.11%
Dresser Industries Inc................................. 1,104 35,190 0.11%
Aon Corp............................................... 654 35,071 0.11%
Seagate Technology*.................................... 600 34,800 0.11%
ITT Hartford Group Inc................................. 708 34,603 0.11%
Limited Inc............................................ 1,662 34,486 0.11%
Central & South West Corp.............................. 1,260 34,335 0.11%
Houston Industries Inc................................. 1,602 34,243 0.11%
Carolina Power & Light Co.............................. 948 34,128 0.11%
Fifth Third Bancorp.................................... 612 33,813 0.11%
Fluor Corp............................................. 510 33,724 0.11%
Donnelley R.R. & Sons Co............................... 936 33,696 0.11%
Peco Energy Co......................................... 1,350 33,581 0.10%
Newmont Mining Corp.................................... 576 33,336 0.10%
International Flavours................................. 678 33,307 0.10%
Bankers Trust New York Corp............................ 480 $33,300 0.10%
Genuine Parts Co....................................... 750 33,187 0.10%
Bank of Boston Corp.................................... 684 33,088 0.10%
Eastman Chemical Co.................................... 492 33,087 0.10%
Conrail Inc............................................ 474 33,061 0.10%
Cabletron Systems Inc.*................................ 438 33,014 0.10%
Duracell International Inc............................. 726 32,851 0.10%
Autozone Inc.*......................................... 900 32,850 0.10%
National City Corp..................................... 888 32,745 0.10%
Novell Inc.*........................................... 2,238 32,451 0.10%
Praxair Inc............................................ 840 32,445 0.10%
Amerada Hess Corp...................................... 564 31,936 0.10%
Lowes Companies., Inc.................................. 978 31,663 0.10%
Morton International Inc............................... 894 31,625 0.10%
Williams Companies Inc................................. 618 31,595 0.10%
Comerica Inc........................................... 726 31,581 0.10%
Transamerica Corp...................................... 414 31,464 0.10%
Becton Dickinson & Co.................................. 390 31,444 0.10%
Phelps Dodge Corp...................................... 426 31,311 0.10%
Thermo Electron Corp................................... 504 31,059 0.10%
Hilton Hotels Corp..................................... 294 31,017 0.10%
Parametric Technology Corp.*........................... 768 30,912 0.10%
Kroger Co.*............................................ 750 30,844 0.10%
Winn Dixie Stores Inc.................................. 930 30,690 0.10%
Boatmens Bancshares Inc................................ 786 30,457 0.10%
Lincoln National Corp.................................. 630 30,397 0.10%
Nucor Corp............................................. 534 30,037 0.09%
U.S. Bancorp (Oregon).................................. 924 29,914 0.09%
American Stores Co. (new).............................. 894 29,837 0.09%
Tellabs Inc............................................ 540 29,835 0.09%
Panenergy Corp......................................... 912 29,754 0.09%
Silicon Graphics Inc.*................................. 990 29,329 0.09%
Mirage Resorts Inc.*................................... 558 29,225 0.09%
Eaton Corp............................................. 474 28,677 0.09%
Burlington Resources Inc............................... 768 28,608 0.09%
Pioneer Hawaii Bred International Inc.................. 510 28,432 0.09%
Champion International Corp............................ 588 28,371 0.09%
K Mart Corp............................................ 2,796 28,309 0.09%
LSI Logic Corp.*....................................... 786 28,296 0.09%
Franklin Resources Inc................................. 492 28,167 0.09%
Green Tree Financial Corp.............................. 834 28,147 0.09%
Times Mirror Co. (new)................................. 660 28,132 0.09%
Student Loan Marketing Assn............................ 384 28,128 0.09%
Federal Express Corp.*................................. 348 28,101 0.09%
Quaker Oats Co......................................... 816 28,050 0.09%
Cinergy Corp........................................... 960 27,840 0.09%
Cooper Industries Inc.................................. 654 27,795 0.09%
Dillard Department Stores Inc.......................... 690 27,686 0.09%
</TABLE>

-83-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Baker Hughes Inc....................................... 870 $27,623 0.09%
Tribune Co. (new)...................................... 396 27,621 0.09%
Newell Co.............................................. 966 27,531 0.09%
General Instrument Corp.*.............................. 840 27,510 0.09%
St. Paul Companies Inc................................. 516 27,413 0.09%
Aflac Inc.............................................. 882 27,342 0.09%
DTE Energy Co.......................................... 882 27,342 0.09%
Rubbermaid Inc......................................... 960 27,120 0.08%
Rohm & Haas Co......................................... 408 27,081 0.08%
Whirlpool Corp......................................... 450 27,056 0.08%
Great Lakes Chemical Corp.............................. 396 27,027 0.08%
McGraw Hill Cos., Inc.................................. 612 27,005 0.08%
Providian Corp......................................... 582 26,845 0.08%
E M C Corp.*........................................... 1,308 26,814 0.08%
Readers Digest Association Inc......................... 654 26,814 0.08%
Masco Corp............................................. 978 26,651 0.08%
Consolidated Natural Gas Co............................ 570 26,648 0.08%
Equitable Cos., Inc.................................... 1,122 26,507 0.08%
Unum Corp.............................................. 444 26,418 0.08%
Salomon Inc............................................ 648 26,325 0.08%
Clorox Co.............................................. 318 26,275 0.08%
Tenet Healthcare Corp.*................................ 1,272 26,076 0.08%
Southwest Airlines Co.................................. 876 26,061 0.08%
Schwab Charles Corp.................................... 1,062 26,019 0.08%
Dell Computer Corp.*................................... 564 25,874 0.08%
Ingersoll Rand Co...................................... 666 25,808 0.08%
Comcast Corp........................................... 1,458 25,515 0.08%
Coastal Corp........................................... 642 25,439 0.08%
Safeco Corp............................................ 768 25,344 0.08%
Computer Sciences Corp.*............................... 342 25,308 0.08%
State Street Boston Corp............................... 504 25,137 0.08%
Northwest Airlines Corp.*.............................. 552 25,116 0.08%
Delta Air Lines Inc.................................... 312 25,077 0.08%
Nordstrom Inc.......................................... 492 25,031 0.08%
Melville Corp.......................................... 642 24,958 0.08%
Chiron Corp.*.......................................... 252 24,287 0.08%
General Dynamics Corp.................................. 384 24,240 0.08%
Humana Inc.*........................................... 984 24,231 0.08%
Sherwin Williams Co.................................... 516 24,123 0.08%
Union Electric Co...................................... 624 24,102 0.08%
Atmel Corp.*........................................... 594 23,760 0.07%
Baltimore Gas & Electric Co............................ 900 23,738 0.07%
Informix Corp.*........................................ 900 23,738 0.07%
Southern Pacific Rail Corp.*........................... 948 23,700 0.07%
Equifax Inc............................................ 954 23,373 0.07%
General Public Utilities Corp.......................... 732 23,241 0.07%
Union Camp Corp........................................ 426 23,164 0.07%
Circus Circus Enterprises Inc.*........................ 624 22,932 0.07%
Jefferson Pilot Corp................................... 432 22,788 0.07%
Sonat Inc.............................................. 522 $22,772 0.07%
Turner Broadcasting Systems Inc........................ 840 22,680 0.07%
Price Costco Inc.*..................................... 1,188 22,572 0.07%
Coca Cola Enterprises Inc.............................. 762 22,479 0.07%
V F Corp............................................... 390 22,230 0.07%
Interpublic Group Cos., Inc............................ 474 22,160 0.07%
Block H & R Inc........................................ 630 22,129 0.07%
Engelhard Corp......................................... 876 22,010 0.07%
Dow Jones & Co. Inc.................................... 588 21,977 0.07%
DSC Communications Corp.*.............................. 696 21,924 0.07%
P P & L Resources Inc.................................. 966 21,856 0.07%
Case Corp.............................................. 432 21,816 0.07%
Grainger With Warrants Inc............................. 312 21,528 0.07%
Harrahs Entertainment Inc.*............................ 624 21,528 0.07%
Allegheny Power Systems Inc............................ 732 21,411 0.07%
Knight Ridder Inc...................................... 294 21,278 0.07%
Black & Decker Corp.................................... 528 21,252 0.07%
Office Depot Inc.*..................................... 948 21,212 0.07%
Firstar Corp. (new).................................... 456 21,204 0.07%
Ivax Corp.............................................. 726 21,145 0.07%
Raychem Corp........................................... 270 21,026 0.07%
Anadarko Petroleum Corp................................ 360 20,970 0.07%
Reynolds Metals Co..................................... 390 20,963 0.07%
Willamette Industries Inc.............................. 336 20,664 0.06%
Scripps E W Co......................................... 486 20,655 0.06%
IMC Global Inc......................................... 558 20,576 0.06%
Dana Corp.............................................. 618 20,549 0.06%
Tandy Corp............................................. 396 20,543 0.06%
Progressive Corp....................................... 438 20,422 0.06%
Republic New York Corp................................. 342 20,306 0.06%
Huntington Bancshares Inc.............................. 834 20,225 0.06%
ITT Industries Inc..................................... 726 19,965 0.06%
Kerr Mcgee Corp........................................ 312 19,929 0.06%
Molex Inc.............................................. 612 19,890 0.06%
Cincinnati Financial Corp.............................. 336 19,824 0.06%
Omnicom Group.......................................... 456 19,779 0.06%
Pall Corp.............................................. 702 19,656 0.06%
Hasbro Inc............................................. 534 19,625 0.06%
First USA Inc.......................................... 348 19,575 0.06%
Harcourt General Inc................................... 444 19,536 0.06%
Western Atlas Inc.*.................................... 324 19,440 0.06%
Ohio Edison Co......................................... 930 19,414 0.06%
Florida Progress Corp.................................. 588 19,404 0.06%
Washington Post Co..................................... 66 19,404 0.06%
Northern States Power Co............................... 414 19,355 0.06%
MGIC Investment Corp................................... 354 19,205 0.06%
Ceridian Corp.*........................................ 402 19,196 0.06%
Great Western Financial Corp........................... 834 19,182 0.06%
</TABLE>

-84-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Premark International Inc.............................. 372 $19,112 0.06%
New York Times Co...................................... 588 19,110 0.06%
Adobe Systems Inc...................................... 444 19,092 0.06%
Parker Hannifin Corp................................... 450 19,013 0.06%
Westvaco Corp.......................................... 612 18,972 0.06%
Golden West Financial Corp............................. 360 18,945 0.06%
Northern Trust Corp.................................... 336 18,900 0.06%
Circuit City Stores Inc................................ 594 18,860 0.06%
Torchmark Inc.......................................... 438 18,834 0.06%
Northrop Grumman Corp.................................. 300 18,563 0.06%
Avery Dennison Corp.................................... 324 18,468 0.06%
MBIA Inc............................................... 258 18,415 0.06%
Mead Corp.............................................. 330 18,356 0.06%
Apple Computer......................................... 750 18,281 0.06%
Viacom Inc.*........................................... 456 18,240 0.06%
Johnson Controls Inc................................... 252 18,018 0.06%
Sunamerica Inc......................................... 330 17,985 0.06%
Wheelabrator Technologies Inc.......................... 1,122 17,952 0.06%
Bear Stearns Cos., Inc................................. 714 17,939 0.06%
Analog Devices Inc.*................................... 696 17,922 0.06%
Potomac Electric Power Co.............................. 720 17,910 0.06%
Beneficial Corp........................................ 324 17,901 0.06%
Wisconsin Energy Corp.................................. 672 17,892 0.06%
Mallinckrodt Group Inc................................. 450 17,719 0.06%
Regions Financial Corp................................. 384 17,712 0.06%
De Luxe Corp........................................... 504 17,640 0.06%
Southern National Corp................................. 630 17,561 0.05%
First America Bank Corp................................ 384 17,376 0.05%
Andrew Corp.*.......................................... 354 16,992 0.05%
Ahmanson H F & Co...................................... 714 16,958 0.05%
Stanley Works.......................................... 270 16,943 0.05%
Homestake Mining Co.................................... 840 16,905 0.05%
UAL Corp.*............................................. 78 16,731 0.05%
USX United States Steel Group.......................... 504 16,632 0.05%
Temple Inland Inc...................................... 342 16,587 0.05%
Sigma Aldrich.......................................... 306 16,524 0.05%
Teco Energy Inc........................................ 708 16,461 0.05%
Louisiana Pacific Corp................................. 654 16,432 0.05%
Liz Claiborne.......................................... 450 16,369 0.05%
Whitman Corp........................................... 642 16,211 0.05%
Hillenbrand Industries Inc............................. 426 16,188 0.05%
Lehman Brothers Holdings Inc........................... 636 16,139 0.05%
Freeport McMoran Copper & Gold......................... 510 16,129 0.05%
ADC Telecommunications Inc............................. 384 16,128 0.05%
CMS Energy Corp........................................ 552 16,077 0.05%
Ashland Inc............................................ 390 16,039 0.05%
Dial Corp.............................................. 570 16,031 0.05%
Xilinx Inc.*........................................... 432 15,930 0.05%
Synovus Financial Corp................................. 702 $15,795 0.05%
Sonoco Products Co..................................... 552 15,663 0.05%
Advanced Micro Devices Inc............................. 834 15,638 0.05%
St. Jude Medical Inc.*................................. 426 15,549 0.05%
Woolworth Corp......................................... 810 15,491 0.05%
Linear Technology Corp................................. 450 15,469 0.05%
FMC Corp.*............................................. 222 15,401 0.05%
Marshall & Ilsley Corp................................. 570 15,390 0.05%
Cyprus Amax Minerals Co................................ 564 15,299 0.05%
Enova Corp............................................. 708 15,222 0.05%
Manor Care Inc......................................... 378 15,167 0.05%
Rite Aid Corp.......................................... 510 15,109 0.05%
Harris Corp............................................ 240 14,820 0.05%
Consolidated Papers Inc................................ 270 14,783 0.05%
Dole Food Inc.......................................... 366 14,640 0.05%
Integra Financial Corp................................. 198 14,627 0.05%
Columbia Gas Systems Inc............................... 300 14,588 0.05%
Perkin Elmer Corp...................................... 264 14,487 0.05%
Southtrust Corp........................................ 534 14,485 0.05%
Pinnacle West Capital Corp............................. 534 14,218 0.04%
Maytag Corp............................................ 660 14,190 0.04%
Mylan Labs Inc......................................... 726 14,157 0.04%
Mercantile BanCorp. Inc................................ 318 14,151 0.04%
Sun Inc................................................ 456 14,136 0.04%
Arrow Electronics Inc.*................................ 282 14,135 0.04%
Sundstrand Corp........................................ 384 14,112 0.04%
Ryder Systems Inc...................................... 480 13,980 0.04%
New England Electric Systems........................... 396 13,959 0.04%
Avnet Inc.............................................. 264 13,926 0.04%
Bausch & Lomb Inc...................................... 348 13,877 0.04%
Mercantile Stores Inc.................................. 222 13,847 0.04%
James River Corp. of Virginia.......................... 516 13,803 0.04%
Amsouth BanCorp........................................ 354 13,585 0.04%
Countrywide Credit Industries Inc...................... 624 13,494 0.04%
First Tennessee National Corp.......................... 408 13,464 0.04%
Reebok International Ltd............................... 462 13,398 0.04%
Boise Cascade Corp..................................... 288 13,392 0.04%
Pacific Enterprises.................................... 516 13,287 0.04%
Darden Restaurants Inc................................. 966 13,283 0.04%
Olin Corp.............................................. 150 13,275 0.04%
Supervalu Inc.......................................... 414 13,248 0.04%
Leggett & Platt Inc.................................... 510 13,133 0.04%
Host Marriott Corp.*................................... 972 13,001 0.04%
TJX Cos., Inc. (new)................................... 438 12,921 0.04%
Goodrich B F Co........................................ 324 12,879 0.04%
Mckesson Corp. (new)................................... 270 12,859 0.04%
Crestar Financial Corp................................. 228 12,854 0.04%
Brunswick Corp......................................... 582 12,804 0.04%
</TABLE>

-85-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
Litton Industries Inc.*................................ 282 $12,796 0.04%
Echlin Inc............................................. 372 12,788 0.04%
Teledyne Inc........................................... 342 12,697 0.04%
Ecolab Inc............................................. 390 12,675 0.04%
Armstrong World Industries Inc......................... 222 12,654 0.04%
American Greetings Corp................................ 456 12,597 0.04%
Summit Bancorp......................................... 354 12,567 0.04%
DQE.................................................... 474 12,561 0.04%
Owens Corning*......................................... 312 12,558 0.04%
Kansas City Southern Industries Inc.................... 258 12,513 0.04%
Pennzoil Co............................................ 282 12,479 0.04%
Nalco Chemical Co...................................... 408 12,444 0.04%
Polaroid Corp.......................................... 276 12,420 0.04%
Vulcan Materials Co.................................... 216 12,420 0.04%
Paine Webber Group Inc................................. 594 12,400 0.04%
Meditrust.............................................. 360 12,195 0.04%
Northeast Utilities.................................... 768 12,192 0.04%
Washington Mutual Inc.................................. 438 12,155 0.04%
Mercury Finance Co..................................... 1,056 12,144 0.04%
Wendys International Inc............................... 630 12,049 0.04%
American Re Corp....................................... 288 11,952 0.04%
Baybanks Inc........................................... 114 11,942 0.04%
Long Island Lighting Co................................ 732 11,895 0.04%
Santa Fe Pacific Gold Corp............................. 798 11,870 0.04%
Capital One Financial Corp............................. 402 11,859 0.04%
Star Banc Corp......................................... 180 11,858 0.04%
National Semiconductor Corp.*.......................... 750 11,813 0.04%
Snap On Inc............................................ 246 11,808 0.04%
Illinova Corp.......................................... 462 11,781 0.04%
St Joe Paper Co........................................ 186 11,765 0.04%
Witco Corp............................................. 342 11,671 0.04%
Paccar Inc............................................. 234 11,583 0.04%
Cabot Corp............................................. 432 11,556 0.04%
First Security Corp.................................... 456 11,514 0.04%
Cummins Engine Inc..................................... 246 11,501 0.04%
Tyson Foods Inc........................................ 462 11,492 0.04%
Harnischfeger Industries Inc........................... 282 11,421 0.04%
Illinois Central Corp.................................. 378 11,340 0.04%
Millipore Corp......................................... 270 11,306 0.04%
Worthington Industries................................. 552 11,247 0.04%
Provident Cos., Inc.................................... 330 11,179 0.03%
Food Lion Inc.......................................... 1,464 11,163 0.03%
Lubrizol Corp.......................................... 384 11,136 0.03%
TIG Holdings Inc....................................... 366 11,117 0.03%
Louisiana Land & Exploration Co........................ 204 11,042 0.03%
Food Lion Inc.......................................... 1,470 11,025 0.03%
General Signal Corp.................................... 288 $10,944 0.03%
Unitrin Inc............................................ 234 10,910 0.03%
Citizens Utilities Co.*................................ 948 10,902 0.03%
National Service Industries Inc........................ 294 10,878 0.03%
USF& G Corp............................................ 684 10,859 0.03%
Hubbell Inc............................................ 168 10,857 0.03%
Autodesk Inc........................................... 264 10,758 0.03%
American National Insurance Co......................... 162 10,652 0.03%
Tambrands Inc.......................................... 222 10,628 0.03%
Diebold Inc............................................ 276 10,626 0.03%
Loctite Corp........................................... 210 10,605 0.03%
Ambac Inc.............................................. 216 10,503 0.03%
Old Republic International Corp........................ 318 10,494 0.03%
Varity Corp.*.......................................... 246 10,486 0.03%
Old Kent Financial Corp................................ 276 10,350 0.03%
Teradyne Inc........................................... 504 10,332 0.03%
Stone Container Corp................................... 606 10,302 0.03%
American Financial Group Inc........................... 336 10,290 0.03%
Shaw Industries Inc.................................... 828 10,247 0.03%
Oryx Energy Co.*....................................... 636 10,176 0.03%
Foster Wheeler Corp.................................... 216 9,990 0.03%
Shared Medical System.................................. 144 9,864 0.03%
Allmerica Property & Casualty Companies Inc............ 372 9,812 0.03%
Brown Forman Corp...................................... 246 9,717 0.03%
Reliastar Financial Corp............................... 222 9,685 0.03%
King World Productions Inc.*........................... 222 9,657 0.03%
Caliber Systems Inc.................................... 240 9,630 0.03%
Tri Continental Corp................................... 390 9,604 0.03%
Bowater Inc............................................ 240 9,600 0.03%
Pacificare Health Systems Inc.*........................ 114 9,562 0.03%
Leucadia National Corp................................. 366 9,516 0.03%
Bethleham Steel Corp.*................................. 684 9,320 0.03%
Puget Sound Power & Light Co........................... 390 9,263 0.03%
Amdahl Corp.*.......................................... 726 9,257 0.03%
Greenpoint Financial Corp.............................. 318 9,182 0.03%
Molex Inc.............................................. 306 9,180 0.03%
PMI Group Inc.......................................... 216 9,180 0.03%
Sensormatics Electrics Corp............................ 450 9,169 0.03%
Security Capital Pacific Trust......................... 438 9,143 0.03%
Bancorp Hawaii Inc..................................... 252 9,135 0.03%
Tandem Computers Inc.*................................. 714 9,104 0.03%
Transatlantic Holdings Inc............................. 138 9,039 0.03%
A G Edwards Inc........................................ 384 9,024 0.03%
Equity Income Fund..................................... 108 8,991 0.03%
Enserch Corp........................................... 414 8,901 0.03%
</TABLE>

-86-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
NET
COMMON STOCKS SHARES VALUE ASSETS
<S> <C> <C> <C>

- -------------------------------------------------------------------------------------
KLA Instruments Corp.*................................. 306 $8,836 0.03%
Signet Banking Corp.................................... 360 8,820 0.03%
Trinity Industries Inc................................. 252 8,789 0.03%
Comsat Corp............................................ 288 8,784 0.03%
Belo A H Corp.......................................... 234 8,717 0.03%
Scientific Atlanta Inc................................. 468 8,658 0.03%
Asarco Inc............................................. 258 8,546 0.03%
Nicor Inc.............................................. 306 8,530 0.03%
Central Fidelity Banks Inc............................. 246 8,487 0.03%
Noram Energy Corp...................................... 756 8,316 0.03%
First Virginia Banks Inc............................... 204 8,186 0.03%
Great Atlantic & Pacific Tea Inc....................... 234 8,161 0.03%
Simon Property Group Inc............................... 354 8,142 0.03%
Bandag Inc............................................. 162 8,120 0.03%
Tektronix Inc.......................................... 204 8,084 0.03%
Briggs & Stratton Corp................................. 174 7,895 0.02%
Brooklyn Union Gas Co.................................. 300 7,875 0.02%
Weis Markets Inc....................................... 264 7,821 0.02%
Chris Craft Industries Inc.*........................... 180 7,695 0.02%
Ethyl Corp............................................. 720 7,470 0.02%
Delmarva Power & Light Co.............................. 372 7,301 0.02%
Beverly Enterprises Inc.*.............................. 600 7,275 0.02%
Inland Steel Industries Inc............................ 294 7,240 0.02%
Advanta Corp........................................... 144 7,218 0.02%
Cypress Semiconductor Corp.*........................... 510 7,204 0.02%
American Power Conversion Corp.*....................... 564 7,050 0.02%
Pittston Brinks Group.................................. 252 7,025 0.02%
EG & G Inc............................................. 318 6,996 0.02%
Mcdermott International Inc............................ 330 6,930 0.02%
Consolidated Freightways Inc........................... 264 6,897 0.02%
Brown Forman Corp...................................... 174 6,786 0.02%
Alexander & Baldwin Inc................................ 276 6,762 0.02%
Rouse Co............................................... 294 6,762 0.02%
UsAir Group Inc.*...................................... 378 $6,710 0.02%
Peoples Energy Corp.................................... 210 6,615 0.02%
Niagara Mohawk Power Corp.............................. 876 6,570 0.02%
Pacificare Health Systems Inc.*........................ 78 6,318 0.02%
Unisys Corp.*.......................................... 1,044 6,264 0.02%
Russell Corp........................................... 240 6,240 0.02%
Centerior Energy Corp.................................. 900 6,188 0.02%
Trinova Corp........................................... 174 6,134 0.02%
Advanta Corp........................................... 108 6,035 0.02%
Mentor Graphics Corp.*................................. 372 5,952 0.02%
USlife Corp............................................ 210 5,906 0.02%
Gaylord Entertainment Co............................... 222 5,883 0.02%
Ball Corp.............................................. 186 5,789 0.02%
Washington Gas Light Co................................ 264 5,544 0.02%
Cincinnati Milacron Inc................................ 210 5,539 0.02%
Navistar International Corp. Inc.*..................... 450 5,400 0.02%
Safety Kleen Corp...................................... 354 5,310 0.02%
Citizens Utilities Co.*................................ 438 5,147 0.02%
Arco Chemical Co....................................... 96 5,100 0.02%
Alexander & Alexander Services......................... 270 5,096 0.02%
Freeport McMoran Inc................................... 138 5,037 0.02%
NL Industries Inc...................................... 312 4,485 0.01%
Battle Mountain Gold Co................................ 492 4,367 0.01%
Comcast Corp........................................... 228 3,990 0.01%
Armco Inc.............................................. 648 3,645 0.01%
Fleming Companies Inc.................................. 228 3,135 0.01%
----------- ------
TOTAL INVESTMENTS -
(Cost $31,746,945)................................... 31,862,064 99.46%
OTHER ASSETS LESS LIABILITIES.......................... 173,903 0.54%
----------- ------
NET ASSETS............................................. $32,035,967 100%
----------- ------
----------- ------
</TABLE>

* Non-income producing security.
The accompanying notes are an integral part of the financial statements.

-87-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.

US INDEX SERIES
SCHEDULE OF INVESTMENTS BY MARKET SECTOR
APRIL 30, 1996 (UNAUDITED)

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
% OF
INDUSTRY VALUE INVESTMENTS
<S> <C> <C>

- ---------------------------------------------------------------------------------
Utilities.............................................. $4,117,869 13.0%
Health and personal care............................... 3,380,527 10.7%
Commercial banks and other banks....................... 2,559,248 8.1%
Oil.................................................... 2,046,341 6.5%
Computers and communications and office equipment...... 1,668,847 5.2%
Beverage industry and tobacco manufacturing............ 1,664,822 5.2%
Retail trade........................................... 1,539,440 4.8%
Food and grocery products.............................. 1,247,365 3.9%
Business services and computer software................ 1,225,761 3.8%
Electrical equipment................................... 1,124,920 3.5%
Chemicals.............................................. 1,108,410 3.5%
Financial institutions and services.................... 1,089,492 3.4%
Insurance -- multiline and property and casualty....... 1,021,325 3.2%
Electronics and instrumentation........................ 1,020,269 3.2%
Entertainment and leisure toys......................... 986,997 3.1%
Media.................................................. 820,584 2.6%
Automobiles............................................ 626,579 2.0%
Transportation and storage............................. 587,394 1.8%
Forestry and paper products............................ 576,357 1.8%
Diversified industrials................................ 489,926 1.5%
Machinery and engineering services..................... 477,672 1.5%
Insurance -- life and agents and brokers............... 279,341 0.9%
Aerospace and defense composite........................ 255,553 0.8%
Diversified consumer goods and services................ 254,987 0.8%
Auto components........................................ 254,910 0.8%
Other energy (non-oil)................................. 251,913 0.8%
Diversified holding companies.......................... 234,500 0.7%
Mining, metals and minerals............................ 221,978 0.7%
Household durables and appliances...................... 138,388 0.4%
Textiles and wearing apparel........................... 134,362 0.4%
Precious metals and minerals........................... 128,080 0.4%
Wholesale trade........................................ 87,665 0.3%
Construction and building materials.................... 86,213 0.3%
Fabricated metal products.............................. 77,138 0.2%
Heavy engineering and shipbuilding..................... 40,654 0.1%
Real estate............................................ 36,237 0.1%
----------- -----------
$31,862,064 100%
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-88-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
AUSTRALIA FRANCE
INDEX INDEX
SERIES SERIES
---------- ----------
<S> <C> <C>
ASSETS
Investments, at
value................. $14,275,738 $42,749,672
Foreign currency....... 159,182 117,766
Cash................... 23,475 20,876
Interest receivable.... 290 191
Dividends receivable... 42,793 16,073
Receivable for
securities sold....... 0 0
Foreign withholding tax
reclaim receivable.... 0 12,246
Deferred organization
costs................. 243,108 243,516
Prepaid expenses....... 3,876 3,911
Receivable from Adviser
for expense
reimbursement......... 33,952 12,479
---------- ----------
TOTAL ASSETS......... 14,782,414 43,176,730
---------- ----------
LIABILITIES
Investment management
fees payable.......... 0 0
Distribution fees
payable............... 3,469 9,576
Payable for securities
purchased............. 0 0
Directors' fees and
expenses payable...... 1,162 1,080
Organization costs
payable............... 248,000 248,000
Accounts payable and
accrued expenses...... 43,808 43,264
---------- ----------
TOTAL LIABILITIES.... 296,439 301,920
---------- ----------
NET ASSETS........... $14,485,975 $42,874,810
---------- ----------
---------- ----------
NET ASSETS CONSIST OF:
Paid-in capital, $.001
par value (Authorized
200,000,000 shares per
Series)............... $13,783,564 $41,489,510
Undistributed
(accumulated) net
investment income
(loss)................ 49,155 (8,097)
Undistributed
(accumulated) net
realized gain (loss)
on investments and
foreign currency
transactions.......... (7,707) 20,027
Net unrealized
appreciation
(depreciation) of
investments and
foreign currency
translations.......... 660,963 1,373,370
---------- ----------
NET ASSETS........... $14,485,975 $42,874,810
---------- ----------
---------- ----------
Net asset value,
offering and
redemption price per
share................. $ 20.68 $ 38.97
Shares outstanding at
end of period......... 700,584 1,100,305
Cost of investments.... $13,614,766 $41,374,403
Cost of foreign
currency.............. $ 159,395 $ 119,520
</TABLE>

The accompanying notes are an integral part of the financial statements.

-89-
<PAGE>

<TABLE>
<CAPTION>
SOUTH
GERMANY HONG KONG ITALY JAPAN AFRICA
INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at
value................. $19,955,803 $28,923,959 $34,613,342 $82,692,791 $17,312,858
Foreign currency....... 146,792 139,572 150,202 83,817 130,642
Cash................... 24,763 21,296 23,478 51,807 23,012
Interest receivable.... 136 219 739 0 1,769
Dividends receivable... 0 150,254 0 303,217 35,060
Receivable for
securities sold....... 0 0 3,061,568 0 0
Foreign withholding tax
reclaim receivable.... 8,311 0 0 0 0
Deferred organization
costs................. 242,700 243,108 243,516 242,700 244,059
Prepaid expenses....... 3,841 3,876 3,911 3,841 3,959
Receivable from Adviser
for expense
reimbursement......... 31,338 24,960 19,212 0 25,867
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS......... 20,413,684 29,507,244 38,115,968 83,378,173 17,777,226
---------- ---------- ---------- ---------- ----------
LIABILITIES
Investment management
fees payable.......... 0 0 0 11,701 0
Distribution fees
payable............... 5,522 7,115 7,217 21,090 3,457
Payable for securities
purchased............. 92,023 0 3,133,102 0 12,055
Directors' fees and
expenses payable...... 1,253 1,162 1,080 1,253 967
Organization costs
payable............... 248,000 248,000 248,000 248,000 248,000
Accounts payable and
accrued expenses...... 45,191 57,684 39,207 95,059 35,291
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES.... 391,989 313,961 3,428,606 377,103 299,770
---------- ---------- ---------- ---------- ----------
NET ASSETS........... $20,021,695 $29,193,283 $34,687,362 $83,001,070 $17,477,456
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET ASSETS CONSIST OF:
Paid-in capital, $.001
par value (Authorized
200,000,000 shares per
Series)............... $20,814,512 $29,264,409 $29,562,377 $75,983,580 $18,141,749
Undistributed
(accumulated) net
investment income
(loss)................ 23,023 210,516 (28,129) 169,045 27,380
Undistributed
(accumulated) net
realized gain (loss)
on investments and
foreign currency
transactions.......... (1,188) (5,432) 333,685 31,528 4,211
Net unrealized
appreciation
(depreciation) of
investments and
foreign currency
translations.......... (814,652) (276,210) 4,819,429 6,816,917 (695,884)
---------- ---------- ---------- ---------- ----------
NET ASSETS........... $20,021,695 $29,193,283 $34,687,362 $83,001,070 $17,477,456
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net asset value,
offering and
redemption price per
share................. $ 33.35 $ 29.18 $ 28.89 $ 41.49 $ 19.41
Shares outstanding at
end of period......... 600,331 1,000,394 1,200,467 2,000,302 900,571
Cost of investments.... $20,770,098 $29,200,152 $29,794,388 $75,880,908 $18,001,143
Cost of foreign
currency.............. $ 148,435 $ 139,581 $ 149,837 $ 82,394 $ 135,781
</TABLE>

-90-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
UK US
INDEX INDEX
SERIES SERIES
------------- -------------
<S> <C> <C>
ASSETS
Investments, at value............................................................ $ 11,743,145 $ 31,862,064
Foreign currency................................................................. 62,691 0
Cash............................................................................. 21,572 112,600
Interest receivable.............................................................. 175 0
Dividends receivable............................................................. 52,627 41,283
Receivable for securities sold................................................... 20,698 54,736
Foreign withholding tax reclaim receivable....................................... 2,555 0
Deferred organization costs...................................................... 243,244 242,429
Prepaid expenses................................................................. 3,888 3,816
Receivable from Adviser for expense reimbursement................................ 35,723 27,839
------------- -------------
TOTAL ASSETS................................................................... 12,186,318 32,344,767
------------- -------------
LIABILITIES
Investment management fees payable............................................... 0 0
Distribution fees payable........................................................ 2,830 8,889
Payable for securities purchased................................................. 38,095 0
Directors' fees and expenses payable............................................. 1,135 1,294
Organization costs payable....................................................... 248,000 248,000
Accounts payable and accrued expenses............................................ 50,346 50,617
------------- -------------
TOTAL LIABILITIES.............................................................. 340,406 308,800
------------- -------------
NET ASSETS..................................................................... $ 11,845,912 $ 32,035,967
------------- -------------
------------- -------------
NET ASSETS CONSIST OF:
Paid-in capital, $.001 par value (Authorized 200,000,000 shares per Series)...... $ 11,539,202 $ 31,895,478
Undistributed (accumulated) net investment income (loss)......................... 36,521 19,158
Undistributed (accumulated) net realized gain (loss) on investments and foreign
currency transactions........................................................... 426 6,212
Net unrealized appreciation (depreciation) of investments and foreign currency
translations.................................................................... 269,763 115,119
------------- -------------
NET ASSETS..................................................................... $ 11,845,912 $ 32,035,967
------------- -------------
------------- -------------
Net asset value, offering and redemption price per share......................... $ 39.45 $ 53.37
Shares outstanding at end of period.............................................. 300,299 600,216
Cost of investments.............................................................. $ 11,472,087 $ 31,746,945
Cost of foreign currency......................................................... $ 63,446 $ 0
</TABLE>

The accompanying notes are an integral part of the financial statements.

-91-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS TO APRIL 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
AUSTRALIA FRANCE
INDEX INDEX
SERIES SERIES
---------------- ----------------
<S> <C> <C>
(3/25/96 - (3/28/96 -
4/30/96) 4/30/96)
INVESTMENT INCOME
Dividend income............................................................ $ 64,962 $ 35,313
Less: foreign withholding taxes............................................ (2,223) (5,297)
-------- ----------------
Net dividend income...................................................... 62,739 30,016
Interest income............................................................ 291 192
-------- ----------------
TOTAL INCOME........................................................... 63,030 30,208
-------- ----------------
EXPENSES
Investment management fees................................................. 4,162 11,491
Distribution fees.......................................................... 3,469 9,576
Administration fees........................................................ 10,316 9,457
Custody and accounting fees................................................ 10,254 9,693
Transfer agent fees........................................................ 4,315 3,955
Legal fees................................................................. 888 814
Audit fees................................................................. 5,891 5,475
Directors' fees and expenses............................................... 1,162 1,080
Printing and postage fees.................................................. 4,091 3,802
Registration fees.......................................................... 5,683 5,282
NYSE listing fees.......................................................... 3,649 3,345
Amortization of organization costs......................................... 4,892 4,484
Other expenses............................................................. 3,533 3,278
-------- ----------------
TOTAL EXPENSES......................................................... 62,305 71,732
Administration fees waived by Administrator................................ (10,316) (9,457)
Investment management fees waived by Adviser............................... (4,162) (11,491)
Expenses borne by Adviser.................................................. (33,952) (12,479)
-------- ----------------
NET EXPENSES........................................................... 13,875 38,305
-------- ----------------
NET INVESTMENT INCOME (LOSS)........................................... 49,155 (8,097)
-------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
Net realized gain (loss) on:
Investments................................................................ (4,961) 21,779
Foreign currency transactions.............................................. (2,746) (1,752)
Net change in unrealized appreciation (depreciation) on:
Investments................................................................ 660,972 1,375,269
Foreign currency translation............................................... (9) (1,899)
-------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY.............................................................. 653,256 1,393,397
-------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 702,411 $ 1,385,300
-------- ----------------
-------- ----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-92-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS TO APRIL 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
GERMANY HONG KONG
INDEX INDEX
SERIES SERIES
------------- ------------------
<S> <C> <C>
(3/22/96 - (3/25/96 -
4/30/96) 4/30/96)
INVESTMENT INCOME
Dividend income........ $ 49,964 $ 252,314
Less: foreign
withholding taxes..... (4,996) (13,557)
------------- ----------
Net dividend
income.............. 44,968 238,757
Interest income........ 141 218
------------- ----------
TOTAL INCOME......... 45,109 238,975
------------- ----------
EXPENSES
Investment management
fees.................. 6,626 12,807
Distribution fees...... 5,522 7,115
Administration fees.... 11,176 10,316
Custody and accounting
fees.................. 11,054 12,201
Transfer agent fees.... 4,675 4,315
Legal fees............. 962 888
Audit fees............. 6,353 5,891
Directors' fees and
expenses.............. 1,253 1,162
Printing and postage
fees.................. 4,412 4,091
Registration fees...... 6,129 5,683
NYSE listing fees...... 3,953 3,649
Amortization of
organization costs.... 5,300 4,892
Other expenses......... 3,811 3,532
------------- ----------
TOTAL EXPENSES....... 71,226 76,542
Administration fees
waived by
Administrator......... (11,176) (10,316)
Investment management
fees waived by
Adviser............... (6,626) (12,807)
Expenses borne by
Adviser............... (31,338) (24,960)
------------- ----------
NET EXPENSES......... 22,086 28,459
------------- ----------
NET INVESTMENT INCOME
(LOSS).............. 23,023 210,516
------------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY
Net realized gain (loss)
on:
Investments............ (806) (5,276)
Foreign currency
transactions.......... (382) (156)
Net change in unrealized
appreciation
(depreciation) on:
Investments............ (814,295) (276,193)
Foreign currency
translation........... (357) (17)
------------- ----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS AND
FOREIGN CURRENCY.... (815,840) (281,642)
------------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $(792,817) $ (71,126)
------------- ----------
------------- ----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-93-
<PAGE>

<TABLE>
<CAPTION>
ITALY JAPAN SOUTH AFRICA UK US
INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES
------------------- ------------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
(4/1/96 -
(3/28/96 - 4/30/96) (3/22/96 - 4/30/96) 4/30/96) (3/26/96 - 4/30/96) (3/20/96 - 4/30/96)
INVESTMENT INCOME
Dividend income........ $ 0 $ 298,122 $ 39,300 $ 55,906 $ 53,874
Less: foreign
withholding taxes..... 0 (44,719) 0 (8,243) 0
------------------- ------------------- ----------------- -------- --------
Net dividend
income.............. 0 253,403 39,300 47,663 53,874
Interest income........ 737 0 1,910 177 0
------------------- ------------------- ----------------- -------- --------
TOTAL INCOME......... 737 253,403 41,210 47,840 53,874
------------------- ------------------- ----------------- -------- --------
EXPENSES
Investment management
fees.................. 8,660 25,307 6,223 3,396 7,111
Distribution fees...... 7,217 21,090 3,457 2,830 8,889
Administration fees.... 9,457 11,176 8,310 10,030 11,742
Custody and accounting
fees.................. 9,346 14,719 8,239 10,967 15,330
Transfer agent fees.... 3,955 4,675 3,476 4,195 4,914
Legal fees............. 814 962 715 863 1,011
Audit fees............. 5,475 6,353 4,901 5,753 6,560
Directors' fees and
expenses.............. 1,080 1,253 967 1,135 1,294
Printing and postage
fees.................. 3,802 4,412 3,404 3,996 4,556
Registration fees...... 5,282 6,129 4,728 5,550 6,329
NYSE listing fees...... 3,345 3,953 2,940 3,548 4,156
Amortization of
organization costs.... 4,484 5,300 3,941 4,756 5,571
Other expenses......... 3,278 3,811 2,929 3,449 3,945
------------------- ------------------- ----------------- -------- --------
TOTAL EXPENSES....... 66,195 109,140 54,230 60,468 81,408
Administration fees
waived by
Administrator......... (9,457) (11,176) (8,310) (10,030) (11,742)
Investment management
fees waived by
Adviser............... (8,660) (13,606) (6,223) (3,396) (7,111)
Expenses borne by
Adviser............... (19,212) 0 (25,867) (35,723) (27,839)
------------------- ------------------- ----------------- -------- --------
NET EXPENSES......... 28,866 84,358 13,830 11,319 34,716
------------------- ------------------- ----------------- -------- --------
NET INVESTMENT INCOME
(LOSS).............. (28,129) 169,045 27,380 36,521 19,158
------------------- ------------------- ----------------- -------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS AND FOREIGN
CURRENCY
Net realized gain (loss)
on:
Investments............ 341,254 33,631 0 472 6,212
Foreign currency
transactions.......... (7,569) (2,103) 4,211 (46) 0
Net change in unrealized
appreciation
(depreciation) on:
Investments............ 4,818,954 6,811,883 (688,285) 271,058 115,119
Foreign currency
translation........... 475 5,034 (7,599) (1,295) 0
------------------- ------------------- ----------------- -------- --------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS AND
FOREIGN CURRENCY.... 5,153,114 6,848,445 (691,673) 270,189 121,331
------------------- ------------------- ----------------- -------- --------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $5,124,985 $7,017,490 $(664,293) $306,710 $140,489
------------------- ------------------- ----------------- -------- --------
------------------- ------------------- ----------------- -------- --------
</TABLE>

-94-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS TO APRIL 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
AUSTRALIA FRANCE
INDEX INDEX
SERIES SERIES
------------- -------------
<S> <C> <C>
(3/25/96 - (3/28/96 -
4/30/96) 4/30/96)
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income
(loss).............. $ 49,155 $ (8,097 )
Net realized gain
(loss) on:
Investments........ (4,961 ) 21,779
Foreign currency
transactions...... (2,746 ) (1,752 )
Net change in
unrealized
appreciation
(depreciation) on:
Investments........ 660,972 1,375,269
Foreign currency
translation....... (9 ) (1,899 )
------------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... 702,411 1,385,300
Capital share
transactions (1):
Net proceeds from
sale of shares.... 13,772,077 41,478,011
------------- -------------
Total increase..... 14,474,488 42,863,311
Net assets:
Beginning of
period............ 11,487 11,499
------------- -------------
End of period
(2)............... $ 14,485,975 $ 42,874,810
------------- -------------
------------- -------------
(1) Shares sold...... 700,000 1,100,000
------------- -------------
Net increase in
shares
outstanding......... 700,000 1,100,000
------------- -------------
------------- -------------
(2) Including
undistributed
(accumulated) net
investment income
(loss)........... $ 49,155 $ (8,097 )
</TABLE>

The accompanying notes are an integral part of the financial statements.

-95-
<PAGE>

<TABLE>
<CAPTION>
GERMANY HONG KONG ITALY JAPAN SOUTH AFRICA
INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
(3/22/96 - (3/25/96 - (3/28/96 - (3/22/96 - (4/1/96 -
4/30/96) 4/30/96) 4/30/96) 4/30/96) 4/30/96)
INCREASE (DECREASE) IN
NET ASSETS
Operations:
Net investment income
(loss).............. $ 23,023 $ 210,516 $ (28,129 ) $ 169,045 $ 27,380
Net realized gain
(loss) on:
Investments........ (806 ) (5,276 ) 341,254 33,631 0
Foreign currency
transactions...... (382 ) (156 ) (7,569 ) (2,103 ) 4,211
Net change in
unrealized
appreciation
(depreciation) on:
Investments........ (814,295 ) (276,193 ) 4,818,954 6,811,883 (688,285 )
Foreign currency
translation....... (357 ) (17 ) 475 5,034 (7,599 )
---------------- ---------------- ---------------- ---------------- ----------------
Net increase
(decrease) in net
assets resulting
from operations..... (792,817 ) (71,126 ) 5,124,985 7,017,490 (664,293 )
Capital share
transactions (1):
Net proceeds from
sale of shares.... 20,803,036 29,252,928 29,550,884 75,972,110 18,130,255
---------------- ---------------- ---------------- ---------------- ----------------
Total increase..... 20,010,219 29,181,802 34,675,869 82,989,600 17,465,962
Net assets:
Beginning of
period............ 11,476 11,481 11,493 11,470 11,494
---------------- ---------------- ---------------- ---------------- ----------------
End of period
(2)............... $ 20,021,695 $ 29,193,283 $ 34,687,362 $ 83,001,070 $ 17,477,456
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
(1) Shares sold...... 600,000 1,000,000 1,200,000 2,000,000 900,000
---------------- ---------------- ---------------- ---------------- ----------------
Net increase in
shares
outstanding......... 600,000 1,000,000 1,200,000 2,000,000 900,000
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
(2) Including
undistributed
(accumulated) net
investment income
(loss)........... $ 23,023 $ 210,516 $ (28,129 ) $ 169,045 $ 27,380
</TABLE>

-96-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS TO APRIL 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
UK US
INDEX INDEX
SERIES SERIES
---------------- ----------------
<S> <C> <C>
(3/26/96 - (3/20/96 -
4/30/96) 4/30/96)
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss)................................................. $ 36,521 $ 19,158
Net realized gain (loss) on:
Investments................................................................ 472 6,212
Foreign currency transactions.............................................. (46) 0
Net change in unrealized appreciation (depreciation) on:
Investments................................................................ 271,058 115,119
Foreign currency translation............................................... (1,295) 0
---------------- ----------------
Net increase (decrease) in net assets resulting from operations.............. 306,710 140,489

Capital share transactions (1):
Net proceeds from sale of shares........................................... 11,527,714 31,884,000
---------------- ----------------
Total increase............................................................. 11,834,424 32,024,489
Net assets:
Beginning of period........................................................ 11,488 11,478
---------------- ----------------
End of period (2).......................................................... $ 11,845,912 $ 32,035,967
---------------- ----------------
---------------- ----------------
(1) Shares sold.............................................................. 300,000 600,000
---------------- ----------------
Net increase in shares outstanding......................................... 300,000 600,000
---------------- ----------------
---------------- ----------------
(2) Including undistributed (accumulated) net investment income (loss)....... $ 36,521 $ 19,158
</TABLE>

The accompanying notes are an integral part of the financial statements.

-97-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIOD
INDICATED (UNAUDITED)

<TABLE>
<CAPTION>
AUSTRALIA FRANCE
INDEX INDEX
SERIES SERIES
---------------- ----------------
<S> <C> <C>
(3/25/96 - (3/28/96 -
4/30/96) 4/30/96)
Net asset value at beginning of period........................................... $ 19.67 $ 37.70
------- -------
INVESTMENT OPERATIONS:
Net investment income (loss) (d)............................................. 0.07 (0.01)
Net realized and unrealized gain (loss) on investments and foreign
currency.................................................................... 0.94 1.28
------- -------
INCREASE (DECREASE) FROM INVESTMENT OPERATIONS................................... 1.01 1.27
------- -------
NET ASSET VALUE AT END OF PERIOD................................................. $ 20.68 $ 38.97
------- -------
------- -------
MARKET PRICE AT END OF PERIOD.................................................... $ 20.625 $ 38.75
------- -------
------- -------
TOTAL RETURN BASED ON:
Net asset value (a) (c)...................................................... 5.13% 3.37%
Market price (a) (c)......................................................... 3.13% 0.65%
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's).......................................... $ 14,486 $ 42,875
Ratio to average net assets:
Expenses (b) (d)........................................................... 1.00% 1.00%
Net investment income (loss) (b)........................................... 3.54% (0.21%)
Portfolio turnover rate (a) (e).............................................. 0.50% 1.73%
Average brokerage commissions (f)............................................ $ 0.0051 $ 0.0236
</TABLE>

(a) Not annualized.
(b) Annualized.
(c) Total return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value
at commencement of operations and a sale on the last day of the period, also
at net asset value. Total return based on market price, excluding the effect
of brokerage commissions, assumes a purchase of common stock at the opening
price on the commencement date of trading and a sale on the last day of the
period at the closing market price. During the period, total return based on
net asset value would have been lower had certain fees and expenses not been
reimbursed and/or waived by the Administrator and the Adviser.
(d) Net of certain fees and expenses reimbursed and/or waived by the
Administrator and the Adviser. Had the Administrator and the Adviser not
undertaken to reimburse and/or waive such fees and expenses, net investment
income (loss) per share and the ratio of expenses to average net assets
would have been as follows: Australia Index Series, $.00 and 4.49%; and
France Index Series, $(0.04) and 1.87%, respectively.
(e) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(f) Represents average brokerage commission rate per share of total security
trades on which brokerage commissions were charged.

The accompanying notes are an integral part of the financial statements.

-98-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIOD
INDICATED (UNAUDITED)

<TABLE>
<CAPTION>
GERMANY HONG KONG
INDEX INDEX
SERIES SERIES
-------------- --------------
<S> <C> <C>
(3/22/96 - (3/25/96 -
4/30/96) 4/30/96)
Net asset value at
beginning of period.... $ 34.67 $ 29.14
------- -------
INVESTMENT OPERATIONS:
Net investment income
(loss) (d).......... 0.04 0.21
Net realized and
unrealized gain
(loss) on
investments and
foreign currency.... (1.36 ) (0.17 )
------- -------
INCREASE (DECREASE) FROM
INVESTMENT
OPERATIONS............. (1.32 ) 0.04
------- -------
NET ASSET VALUE AT END OF
PERIOD................. $ 33.35 $ 29.18
------- -------
------- -------
MARKET PRICE AT END OF
PERIOD................. $ 33.50 $ 29.125
------- -------
------- -------
TOTAL RETURN BASED ON:
Net asset value (a)
(c)................. (3.81 %) 0.14 %
Market price (a)
(c)................. (4.29 %) (1.69 %)
RATIOS AND SUPPLEMENTAL
DATA:
Net assets at end of
period (000's)...... $ 20,022 $ 29,193
Ratio to average net
assets:
Expenses (b) (d)... 1.00 % 1.00 %
Net investment
income (loss)
(b)............... 1.04 % 7.40 %
Portfolio turnover
rate (a) (e)........ 0.95 % 1.84 %
Average brokerage
commissions (f)..... $ 0.0850 $ 0.0036
</TABLE>

(a) Not annualized.
(b) Annualized.
(c) Total return based on net asset value, excluding the effect of shareholder
transaction charges, assumes a purchase of common stock at net asset value
at commencement of operations and a sale on the last day of the period, also
at net asset value. Total return based on market price, excluding the effect
of brokerage commissions, assumes a purchase of common stock at the opening
price on the commencement date of trading and a sale on the last day of the
period at the closing market price. During the period, total return based on
net asset value would have been lower had certain fees and expenses not been
reimbursed and/or waived by the Administrator and the Adviser.
(d) Net of certain fees and expenses reimbursed and/or waived by the
Administrator and the Adviser. Had the Administrator and the Adviser not
undertaken to reimburse and/or waive such fees and expenses, net investment
income (loss) per share and the ratio of expenses to average net assets
would have been as follows: Germany Index Series, $(0.04) and 3.22%; Hong
Kong Index Series, $0.16 and 2.69%; Italy Index Series, $(0.05) and 2.29%;
Japan Index Series, $0.07 and 1.29%; South Africa Index Series, $(0.01) and
3.92%; UK Index Series, $(0.04) and 5.34%; and US Index Series, $(0.05) and
2.35%, respectively.
(e) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(f) Represents average brokerage commission rate per share of total security
trades on which brokerage commissions were charged.

The accompanying notes are an integral part of the financial statements.

-99-
<PAGE>

<TABLE>
<CAPTION>
ITALY JAPAN SOUTH AFRICA UK US
INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(3/28/96 - (3/22/96 - (4/1/96 - (3/26/96 - (3/20/96 -
4/30/96) 4/30/96) 4/30/96) 4/30/96) 4/30/96)
Net asset value at
beginning of period.... $ 24.61 $ 37.98 $ 20.13 $ 38.42 $ 53.14
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Net investment income
(loss) (d).......... (0.02 ) 0.08 0.03 0.12 0.03
Net realized and
unrealized gain
(loss) on
investments and
foreign currency.... 4.30 3.43 (0.75 ) 0.91 0.20
------- ------- ------- ------- -------
INCREASE (DECREASE) FROM
INVESTMENT
OPERATIONS............. 4.28 3.51 (0.72 ) 1.03 0.23
------- ------- ------- ------- -------
NET ASSET VALUE AT END OF
PERIOD................. $ 28.89 $ 41.49 $ 19.41 $ 39.45 $ 53.37
------- ------- ------- ------- -------
------- ------- ------- ------- -------
MARKET PRICE AT END OF
PERIOD................. $ 28.875 $ 41.375 $ 19.25 $ 39.75 $ 53.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN BASED ON:
Net asset value (a)
(c)................. 17.39 % 9.24 % (3.58 %) 2.68 % 0.43 %
Market price (a)
(c)................. 15.50 % 5.75 % (2.53 %) 3.92 % (0.93 %)
RATIOS AND SUPPLEMENTAL
DATA:
Net assets at end of
period (000's)...... $ 34,687 $ 83,001 $ 17,477 $ 11,846 $ 32,036
Ratio to average net
assets:
Expenses (b) (d)... 1.00 % 1.00 % 1.00 % 1.00 % 1.00 %
Net investment
income (loss)
(b)............... (0.97 %) 2.00 % 1.98 % 3.23 % 0.55 %
Portfolio turnover
rate (a) (e)........ 10.13 % 5.00 % 0.00 % 0.00 % 0.11 %
Average brokerage
commissions (f)..... $ 0.0029 $ 0.0122 $ 0.0203 $ 0.0154 $ 0.0633
</TABLE>

-100-
<PAGE>
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 -- ORGANIZATION
The CountryBaskets-SM- Index Fund, Inc. (the "Fund") was incorporated under the
laws of the State of Maryland on August 8, 1994. The Fund is registered under
the Investment Company Act of 1940 as an open-end, non-diversified management
investment company. The Fund currently has nine common stock series: the
Australia Index Series; the France Index Series; the Germany Index Series; the
Hong Kong Index Series; the Italy Index Series; the Japan Index Series; the
South Africa Index Series; the UK Index Series; and the US Index Series (each, a
"Series").

The primary investment objective of each Series is to provide investment results
that substantially correspond to the price and yield performance of a
broad-based index of publicly traded equity securities in a particular country.
To achieve this investment objective, each Series seeks to provide investment
results that substantially correspond to the price and yield performance of its
respective country component of the FT/ S&P Actuaries World Indices-TM- (the "FT
Index").

The Series commenced operations on the following dates: the Australia Index
Series, March 25, 1996; the France Index Series, March 28, 1996; the Germany
Index Series, March 22, 1996; the Hong Kong Index Series, March 25, 1996; the
Italy Index Series, March 28, 1996; the Japan Index Series, March 22, 1996; the
South Africa Index Series, April 1, 1996; the UK Index Series, March 26, 1996;
and the US Index Series, March 20, 1996.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund.

SECURITY VALUATION: Portfolio securities held by a Series are valued at the
last quoted sales price on the securities exchange or national securities market
on which such securities are primarily traded. Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the arithmetic mean of the most recent bid and asked
prices, or if no asked price is available, at the bid price. However, when
market quotations are not readily available, portfolio securities and other
assets are valued based on fair value as determined in good faith by Deutsche
Morgan Grenfell/C.J. Lawrence Inc. ("DMG"), as investment adviser to the Fund
(the "Adviser") in accordance with procedures adopted by the Board of Directors
of the Fund.

-101-
<PAGE>
INVESTMENT TRANSACTIONS: Investment transactions are recorded on the trade
date. Cost of securities sold is calculated using the identified cost method.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis. Such dividend income is recorded net of foreign
withholding tax.

FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in US dollars. Assets and liabilities denominated in foreign currency amounts
are translated into US dollars at the relevant foreign exchange rate for each
Series in effect at 4:00 p.m., London time. Purchases and sales of investment
securities, income and expenses are reported at the prevailing exchange rate on
the respective dates of such transactions. The resultant gains and losses
arising from exchange rate fluctuations are identified separately in the
Statement of Operations, except for such amounts attributable to investments
which are included in net realized and unrealized gains and losses on
investments. Foreign investments may involve certain considerations and risks
not typically associated with those of domestic origin as a result of, among
others, the possibility of political and economic developments and the level of
governmental supervision and regulation of foreign securities markets.

FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract
("Forward") is an agreement between parties to buy and sell currency at a set
price on a future date. The market value of the Forward fluctuates with changes
in currency exchange rates. The Forward is marked-to-market daily and the change
in the market value is recorded by the Fund as unrealized gain or loss. When the
Forward is closed, the Fund records a realized gain or loss equal to the
difference between the value at the time it was opened and the time it was
closed. The Fund could be exposed to risk if a counterparty is unable to meet
the terms of the contract or if the value of the currency changes unfavorably.
The Series may engage in Forwards for the purpose of meeting US dollar cash
requirements of redemptions, Series expenses and distributions, and in
connection with the purchase and sale of their portfolio securities.

FEDERAL INCOME TAXES: It is the policy of the Fund for each Series to qualify
for and elect treatment as a "regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986, as amended. Accordingly, each Series would
not be subject to U.S. federal income taxes to the extent it distributes all of
its taxable income including any net realized capital gains for each fiscal
year. In addition, by distributing, during each calendar year, substantially all
of its net investment income and capital gains, if any, each Series would not be
subject to U.S. federal excise tax.

EXPENSES: Expenses are recorded on an accrual basis. Expenses of the Series
which are directly identifiable to a specific Series are allocated to that
Series. Expenses not directly attributed to a specific Series are allocated
among the Series in such a manner as deemed equitable by the Board of Directors
of the Fund.

DISTRIBUTION TO STOCKHOLDERS: Dividends from net investment income, including
net foreign currency gains, if any, of all Series other than the US Index Series
are declared and paid at least annually and, in the case of the US Index Series,
quarterly. Capital gains of each Series, if any, are distributed at least
annually. Dividends and capital gains distributions are distributed by each
Series in US dollars. The Fund records all distributions to stockholders on the
ex-dividend date. Income and capital gain distributions are determined

-102-
<PAGE>
in accordance with U.S. Federal income tax regulations which may differ from
generally accepted accounting principles. These differences, which could be
temporary or permanent in nature, may result in reclassification of
distributions; however, net investment income, net realized gains and net assets
are not affected.

DEFERRED ORGANIZATION COSTS: The costs of organizing the Fund were paid by DMG,
the Adviser. Such organization costs, for which DMG will be reimbursed by the
Fund, are deferred and amortized ratably over a period of sixty months from the
respective commencement of operations for each of the Series.

In the event that during the amortization period, the initial shares of each
Series issued to the Fund's distributor, ALPS Mutual Funds Services, Inc., are
redeemed, the redemption proceeds will be reduced by the pro rata share of the
unamortized organization costs as of the date of such redemption.

NOTE 3 -- SIGNIFICANT AGREEMENTS AND TRANSACTIONS WITH AFFILIATES

The Fund has entered into an Investment Management Agreement (the "Management
Agreement") with DMG, an indirect subsidiary of Deutsche Bank AG. As the
Adviser, DMG provides investment advisory, management and certain administrative
services, including services in connection with the lending of portfolio
securities. For its services, DMG is entitled to receive a fee from each Series
at an annual rate of .20% of the average daily net assets in the case of the US
Index Series, .45% of the average daily net assets in the case of the Hong Kong
Index Series and the South Africa Index Series, and .30% of the average daily
net assets of each other Series, plus, in the case of each Series, 40% of the
gross investment income less dividends on securities held in the portfolio. The
Management Agreement also provides that DMG will be reimbursed for out-of-pocket
expenses incurred in providing certain administrative services.

The Fund has entered into an Administration Agreement with State Street Bank and
Trust Company (the "Administrator"). Under the Administration Agreement, the
Fund pays compensation to the Administrator at the following annual rates based
on the average daily net assets of each Series taken separately: .08% of the
first $125 million of each Series' average daily net assets, .06% of the next
$125 million of each Series' average daily net assets and .04% of each Series'
average daily net assets in excess of $250 million, subject to certain minimum
requirements.

ALPS Mutual Funds Services, Inc. (the "Distributor") serves as distributor of
the shares of the Series. The Fund has established a Rule 12b-1 plan for each
Series (each, a "Plan"), pursuant to which each Series pays the Distributor a
distribution services fee for activities intended to result in the sale of
shares of the Series. Under a separate marketing agreement, the Distributor is
also paid a marketing fee, receives contributions from the Fund toward certain
bonus payments to be made to the Distributor, and is reimbursed for certain
expenses. Each Series also pays certain expenses relating to printing and
distributing prospectuses and makes payments due to dealers and other persons
for marketing and stockholder services, including payments to each such person
entering into an investor services agreement with the Distributor. All payments
to the Distributor and such dealers and other persons by each Series, and all
reimbursements to the Distributor or the Adviser for their respective costs
incurred in producing advertising or marketing material prepared at the request
of the Series, are made under the Plan of such Series and will not exceed in the
aggregate, on an annualized basis, .25% of the average daily net assets of the
Series.

-103-
<PAGE>
FEE WAIVERS AND EXPENSE REIMBURSEMENTS: In order to maintain an expense
limitation of 1% of the average daily net assets for each Series, the
Administrator and the Adviser have agreed to waive all or a portion of their
respective fees. The Adviser has agreed to waive its investment management fees
and make such reimbursement as may be necessary to assure that the annualized
ratio of operating expenses to average daily net assets of each Series will not
exceed 1.00% for the first fiscal year of the Fund's operations ending October
31, 1996.

For the period ending April 30, 1996, DMG received brokerage commissions as a
result of executing agency transactions in portfolio securities of the following
Series: Australia Index Series, $374; Hong Kong Index Series, $1,516; Japan
Index Series, $1,093; UK Index Series, $94; and US Index Series, $35. Certain
directors and officers of the Fund are also directors and officers of the
Adviser.

NOTE 4 -- PORTFOLIO SECURITIES

Purchases and proceeds from the sale of securities, other than obligations of
the US government and its agencies and short-term securities, and portfolio
securities received and delivered as a result of processing capital share
transactions in Creation Unit(s) issued and redeemed in Creation Unit
aggregations, respectively, for the period ending April 30, 1996, were as
follows:

<TABLE>
<CAPTION>
SECURITIES SALES SECURITIES
SERIES PURCHASES RECEIVED PROCEEDS DELIVERED
- ----------------------- --------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
Australia Index Series $187,527 $13,501,490 $69,290 $ 0
France Index Series 731,190 41,599,540 978,106 0
Germany Index Series 194,502 20,779,721 203,319 0
Hong Kong Index Series 1,048,225 28,635,565 478,362 0
Italy Index Series 4,875,731 27,643,606 3,066,203 0
Japan Index Series 4,323,514 75,455,952 3,932,189 0
South Africa Index
Series 546,902 17,454,241 0 0
UK Index Series 54,013 11,418,074 472 0
US Index Series 34,485 31,780,490 74,242 0
</TABLE>

NOTE 5 -- CAPITAL

The Fund is authorized to issue 5,000,000,000 shares of common stock. Currently
the Board has authorized nine Series of stock and allocated 200,000,000 shares
to each Series. The Fund will sell and redeem shares of each Series at their
respective net asset value, principally for an in-kind portfolio of equity
securities of the relevant FT Index component, together with some cash. The Fund
sells and redeems shares of each Series only in aggregations of a specified
number of shares (each, a "Creation Unit"). The number of shares constituting a
Creation Unit is currently 250,000 shares in the case of the Japan Index Series
and 100,000 shares in the case of each other Series. Shares in less than
Creation Unit aggregations are not redeemable.

-104-
<PAGE>
The Fund imposes transaction fees on the cash portion of each purchase and
redemption of Series shares (other than shares of the US Index Series). The
percentage fee imposed on the cash portion of purchases and redemptions are as
follows:

<TABLE>
<CAPTION>
PERCENTAGE FEE PERCENTAGE FEE
IMPOSED ON CASH IMPOSED ON CASH
PORTION OF PORTION OF
SERIES PURCHASES REDEMPTIONS
- ----------------------- ----------------- -----------------
<S> <C> <C>
Australia Index Series 1.15% 1.15%
France Index Series 1.00 1.00
Germany Index Series 1.00 1.00
Hong Kong Index Series 1.20 1.20
Italy Index Series 1.00 1.00
Japan Index Series 1.32 1.32
South Africa Index
Series 2.00 1.00
UK Index Series 1.50 1.00
US Index Series 0.00 0.00
</TABLE>

-105-