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[LOGO]
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 will seek 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 will sell and redeem 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 will initially be 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- have been approved for listing on the New
York Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance.
It is expected that the non-redeemable CB Shares-SM- will trade on the NYSE
during the day at prices that 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, will serve 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 March 5, 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 March 5, 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 and S&P will calculate the
U.S. indices. The Fund is not
2
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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 March 1,
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$1.3034, FF 5.0720, DM
1.4785, HK$ 7.7320, IL1,563.0, Y 105.7, R 3.9050, and L .6548. 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.
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<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
initial 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 initial nine Series of 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>
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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").
TRADING OF CB SHARES-SM- ON THE
NEW YORK STOCK EXCHANGE.......... The CB Shares-SM- of each Series have been approved for
listing on the New York Stock Exchange, Inc. (the
"NYSE"), subject to official notice of issuance. Their
respective symbols are:
</TABLE>
<TABLE>
<CAPTION>
SERIES TRADING SYMBOL
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<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>
It is expected that the non-redeemable CB Shares-SM- of
each Series will 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 will be
the record or registered owner of all outstanding CB
Shares-SM-. Beneficial ownership of CB Shares-SM- will
be shown on the records of the Depositary or its
participants. Certificates will not be issued for CB
Shares-SM-. Beneficial owners of CB Shares-SM- will
exercise their rights through DTC and such participants.
See "The Fund -- Book-Entry Only System".
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5
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<TABLE>
<S> <C>
PURCHASES AND REDEMPTIONS OF
CREATION UNIT AGGREGATIONS OF CB
SHARES-SM-....................... The Fund will issue and redeem CB Shares-SM- of any
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 will offer and sell 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.
For information about the initial issuance of Creation
Units of each Series and the commencement of trading on
the NYSE of CB Shares-SM-, see "Purchase and Issuance of
Fund Shares in Creation Unit Aggregations -- Initial
Issuance of Creation Units and Commencement of Trading"
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") will act as investment adviser and, in
addition, will provide management and certain
administrative services to the Fund. DMG is a wholly
owned indirect subsidiary of Deutsche Bank AG, a major
German banking institution.
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6
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<TABLE>
<S> <C>
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")
will act as administrator of the Fund (in such capacity,
the "Administrator").
FEES.............................. For its services as Adviser to each Series, including
services in connection with lending portfolio securities
(see "The Fund -- Lending of Securities"), DMG will
receive 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 will be .45%, and the
US Index Series, for which such annual rate will be
.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 will pay 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 will also be paid a marketing
fee and will be reimbursed for certain expenses. Subject
to certain conditions, each Series will also make a
quarterly contribution to bonus payments to be made by
the Distributor to certain employees engaged in
marketing activities with respect to Fund shares. Each
Series will also pay certain expenses of printing and
distributing prospectuses and make 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 will be made under
the 12b-1 Plan (as defined herein) of such Series and
will not exceed, in the aggregate, on an annualized
basis, .25% of its average daily net assets. See "The
Fund -- Fees".
The Administrator will receive monthly administrative
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.
</TABLE>
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<TABLE>
<S> <C>
INVESTMENT CONSIDERATIONS AND
RISKS............................ An investment in CB Shares-SM- of the initial nine
Series of the Fund 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.
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".
Prior to the date of this Prospectus, there has been no
market for CB Shares-SM- and, consequently, there can be
no assurance that active trading markets will develop.
The Distributor will 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. The market prices
of CB Shares-SM- will fluctuate in accordance with
supply and demand on the NYSE. The Fund cannot predict
whether the CB Shares-SM- will trade below, at or above
their net asset value. See "The Fund -- Investment
Considerations and Risks".
The securities held by each Series, except for the US
Index Series, will primarily be 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 will engage in the lending of portfolio
securities (see "The Fund -- Lending of Securities") and
engage 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.
</TABLE>
8
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<TABLE>
<S> <C>
As of December 29, 1995, 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".
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
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SUMMARY OF FUND EXPENSES
The purpose of the following tables is to assist investors in understanding
the various costs and expenses an investor will bear directly and indirectly in
respect of each Series of the Fund. The tables show all expenses and fees the
Fund is expected to incur and are based on estimates expressed as a percentage
of average net assets. "Other Expenses" are estimated amounts for the current
fiscal year. 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>
THE THE
THE THE THE HONG THE THE SOUTH
AUSTRALIA FRANCE GERMANY KONG ITALY JAPAN AFRICA THE UK THE 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)....... $1,886 $3,737 $1,952 $3,192 $1,593 $12,123 $1,408 $5,535 $12,103
Local Stock Transfer Taxes (as a percentage
of the value of Fund Basket contributed)
(b)......................................... .30% 0% 0% .15% 0% 0% 1.0% .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)................................ $1,312 $3,030 $1,525 $2,800 $1,180 $8,980 $1,100 $4,100 $7,644
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 (e).......................... .30% .30% .30% .45% .30% .30% .45% .30% .20%
Distribution Fees (12b-1) (f)................ .25% .25% .25% .25% .25% .25% .25% .25% .25%
Other Expenses............................... .24% .26% .23% .36% .28% .26% .26% .25% .24%
--------- ------ ------- ------ ------ ------ ------ ------ ------
Total Operating Expenses..................... .79% .81% .78% 1.06% .83% .81% .96% .80% .69%
--------- ------ ------- ------ ------ ------ ------ ------ ------
--------- ------ ------- ------ ------ ------ ------ ------ ------
</TABLE>
(FOOTNOTES TO FUND EXPENSE TABLE ON FOLLOWING PAGE)
- ------------------------
(1) As of December 29, 1995, the minimum 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) for an in-kind
purchase or redemption of a Creation Unit aggregation of shares of each
Series would have been as follows: the Australia Index Series, $1,900,000;
the France Index Series, $3,587,500; the Germany Index Series, $3,275,000;
the Hong Kong Index Series, $2,587,500; the Italy Index Series, $2,462,500;
the Japan Index Series, $9,687,500; the South Africa Index Series,
$1,925,000; the UK Index Series, $3,837,500; and the US Index Series,
$5,025,000.
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(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 will bear the costs of transferring the securities in the Fund
Basket to the Fund and an investor redeeming Creation Unit aggregations of
shares will bear the costs of transferring securities in the Fund Basket
constituting a portion of the redemption proceeds from the Fund to the
investor. Such costs will include 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
February 27, 1996. Such costs will vary with the number of constituent
securities in a Fund Basket for the relevant Series, but will not vary
according to the number of Fund Baskets submitted on purchase or delivered
on redemption, as the case may be. Investors will 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, South Africa and UK Index Series) or to the
redeeming investor (on redemptions of Creation Units of shares of 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 will bear 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 U.S. 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 South Africa Index Series, for which such
annual rate will be .45%, and the US Index Series, for which such annual
rate will be .20%. See "The Fund -- Fees". In addition, each Series will
pay 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".
(f) The Distributor will be 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 will also be paid a
marketing fee and will be reimbursed for certain expenses. Subject to
certain conditions, each Series will also make 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 will also make payments to certain dealers and other
persons for marketing and stockholder services, will pay certain expenses
of printing and distributing prospectuses and, to the extent of amounts
available under such Series' 12b-1 Plan, will reimburse 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, will be made under the 12b-1
Plan of such Series and will 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:
<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>
1 year.............. $ 13 $ 10 $ 9 $ 16 $ 10 $ 14 $ 21 $ 16 $ 11
--- ------ ------- ------ ------ ------ ------ ------ ------
--- ------ ------- ------ ------ ------ ------ ------ ------
3 years............. $ 30 $ 28 $ 26 $ 39 $ 28 $ 31 $ 42 $ 33 $ 26
--- ------ ------- ------ ------ ------ ------ ------ ------
--- ------ ------- ------ ------ ------ ------ ------ ------
</TABLE>
(b) An investor would pay the following expenses on the same investment,
assuming no redemptions:
<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>
1 year.............. $ 12 $ 9 $ 9 $ 13 $ 9 $ 10 $ 21 $ 15 $ 9
--- ------ ------- ------ ------ ------ ------ ------ ------
--- ------ ------- ------ ------ ------ ------ ------ ------
3 years............. $ 29 $ 27 $ 26 $ 36 $ 27 $ 27 $ 41 $ 32 $ 24
--- ------ ------- ------ ------ ------ ------ ------ ------
--- ------ ------- ------ ------ ------ ------ ------ ------
</TABLE>
EXPLANATION OF TABLE
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.
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 estimated at .074% of the average daily net assets of each
Series, based on estimated average net assets of US $250,000,000, are included
in "Other Expenses" and are paid to State Street, as Administrator, to provide
the Fund with administrative services. 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
12
<PAGE>
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 would have been valued as of December 29, 1995 at
between $1,900,000 and $9,687,500, 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. Based on the 1995 annual rates of return of the FT
Index components represented by each Series, the annual rate of return of each
Series, assuming aggregate net assets of $250,000,000 for each Series,
reinvestment of dividends and 100% correlation between such annual FT Index
rates of return and those of the respective Series, after estimated expenses
applicable to the respective Series, would have been 14.4% for the Australia
Index Series, 12.4% for the France Index Series, 15.7% for the Germany Index
Series, 22.5% for the Hong Kong Index Series, -1.2% for the Italy Index Series,
- -1.2% for the Japan Index Series, 17.2% for the South Africa Index Series, 22.5%
for the UK Index Series and 36.6% for the US Index Series. These rates of return
do not include interest earned on collateral from securities loaned, which would
have been increased to the extent of any net interest income so earned, and are
not indicative of future results. See "The FT Index -- Performance" in the
Statement of Additional Information.
13
<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. Initially, nine Series of the Fund will 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 will seek 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 will invest 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 will be 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 will be 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.
14
<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 will 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
15
<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 and
Standard & Poor's will calculate 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
minerals, commercial and other banking and real estate represented approximately
31.7%, 20.7% and 5.6%,
16
<PAGE>
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.
17
<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 will act as investment adviser to the Fund and, subject to the
supervision of the Board of Directors of the Fund, will be 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
18
<PAGE>
Investment 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- will be 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 will not be 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 will receive 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 will act as Administrator of the Fund pursuant to an
Administration Agreement with the Fund and will be 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 will be paid a 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
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<PAGE>
such annual rate will be .45%, and the US Index Series, for which such annual
rate will be .20%, plus in each case 40% of the gross investment income,
excluding dividends on securities held in the portfolio, of such Series. 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 will pay 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 will also pay 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. Subject to the approval
of the Board of Directors of the Fund, including a majority of the Directors who
are not "interested persons" of the Fund (as defined under the 1940 Act) and
have no direct or indirect financial interest in the operation of the 12b-1
Plans, 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 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
will pay certain expenses of printing and distributing prospectuses and make
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 expected to be a party to
such an agreement.
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.
The Administrator will receive 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 will be reimbursed for its own
out-of-pocket costs incurred in providing administration services.
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<PAGE>
In addition to the fees described above, the Fund will be responsible for
the payment of expenses that will 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 will bear 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 have been approved for listing on the NYSE,
subject to official notice of issuance. The CB Shares-SM- are expected to trade
on the NYSE 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 will sell and redeem 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 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.
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
21
<PAGE>
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 Fund is a newly organized investment company with no previous operating
history. As indicated above, the CB Shares-SM-of each Series have been approved
for listing on the NYSE, subject to official notice of issuance. There can be no
assurance that active trading markets for the CB Shares-SM- will develop. The
Distributor will 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- inadvisable. In addition, trading in CB Shares-SM- on the NYSE will
be 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
22
<PAGE>
rate of exchange between the US dollar and the Series Currency. The market
prices of CB Shares-SM- will fluctuate in accordance with supply and demand on
the NYSE. The Fund cannot predict whether the CB Shares-SM- will trade below, at
or above their net asset value. Price differences may be due, in large part, to
the fact that supply and demand forces at work in the secondary trading market
for 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, will
generally be 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 will primarily be 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 December 29, 1995, 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.
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.
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<PAGE>
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-.
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
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<PAGE>
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, the Series will receive collateral equal to
at least 100% of the current market value of the loaned securities, as marked to
market each day that the net asset value of the Series is determined, consisting
of cash, U.S. government securities or other assets permitted by applicable
regulations. A Series will pay reasonable administrative and custodial fees in
connection with the loan of securities. The interest income the Series earns
from the loan collateral 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 intends to observe 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 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
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<PAGE>
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 December 29, 1995, 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".
In computing a Series' net asset value, the Series' portfolio securities 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. 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
26
<PAGE>
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 will have 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 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, immediately prior to the initial public offering of
the CB Shares-SM-, the sole holder of the capital stock of each Series will be
ALPS. ALPS will therefore be a "control person" of the Fund. Upon the
commencement of trading of CB Shares-SM- on the NYSE, each Series may have a
number of
27
<PAGE>
stockholders each holding more than 5% of the outstanding shares of such Series
in Creation Unit size aggregations. Morgan Grenfell & Co. Ltd., an affiliate of
the Adviser, is expected initially to be among the control persons of each
Series. The Fund cannot predict the length of time that any such persons will
remain control persons of a Series.
BOOK-ENTRY ONLY SYSTEM
DTC will act as securities depositary for the CB Shares-SM-. CB Shares-SM-
will be represented by global securities, which will be 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- will be 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") will be shown on, and the transfer of ownership will be 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 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.
28
<PAGE>
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 shall 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 shall 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 shall 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 shall 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, shall 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 will have 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.
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".
29
<PAGE>
PURCHASE AND ISSUANCE OF FUND SHARES IN CREATION UNIT AGGREGATIONS
The Fund will issue and sell 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. See "Business Day". The
consideration for purchase of a Creation Unit size aggregation of shares of a
Series will be 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 (currently by 8:00 p.m., New York time, on the previous 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, will be made available through
the Distributor and the facilities of the National Securities Clearing
Corporation ("NSCC"), a clearing agency registered with the SEC. Such Fund
Basket for each Series will be in effect on such NYSE business day for
redemptions for that Series and for purchases of Creation Unit aggregations of
Fund shares of the US Index Series and will be in effect for purchases of
Creation Unit aggregations of shares of all other Series on a specified Business
Day subsequent to such NYSE business day designated for each such Series. The
Business Day on which the shares of a Series are purchased and issued is
referred to as an "Issue Date". 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 will generally change 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 Issue Date. 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 shall have 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 Issue Date,
will not exceed 10% of the total purchase price of a Creation Unit aggregation
of shares on such date. In the event that the Fund accepts the substitution of
cash for omitted Fund Basket securities as described above, however, 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
30
<PAGE>
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.
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.
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. Investors who are not
Authorized Participants must make appropriate arrangements with an Authorized
Participant in order to purchase Creation Unit size aggregations of shares from
the Fund. A list of the Authorized Participants may be obtained from the
Distributor. These arrangements include making available in advance of each
purchase of shares an amount of cash 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.
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.
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
31
<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 only 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, South Africa and UK Index Series, all applicable stock transfer taxes
or stamp duties. See "Summary of Fund Expenses".
The foregoing procedures for purchase of Creation Units of CB Shares-SM- are
subject to modifications applicable to an alternative purchase option
contemplated by the Fund. See "Purchase and Issuance of Fund Shares in Creation
Unit Aggregations -- Possible Alternative Purchase Procedure Option" in the
Statement of Additional Information.
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.
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, 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 and information about
the initial issuance of Creation Units of each Series and the commencement of
trading of CB Shares-SM- on the NYSE, 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 will be 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
32
<PAGE>
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 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 will redeem a Creation Unit aggregation of shares of any
Series principally on an in-kind basis for a Fund Basket as announced by the
Distributor 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.
33
<PAGE>
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-.
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 December 29, 1995, is indicated in Note 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 will 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.
34
<PAGE>
APPENDIX A
THE COUNTRYBASKETS-SM- INDEX FUND, INC.
LOCAL HOLIDAYS*
<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) and Boxing Day (12/26/96)
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) and Christmas Day (12/25/96)
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) and New Year's Eve
(12/31/96)
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)
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) and Christmas
Holiday (12/26/96)
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) and Bank Holiday
(12/31/96)
</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 during
1996 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 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) and Day of Goodwill (12/26/96)
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) and
Boxing Day (12/26/96)
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) and Christmas Day (12/25/96)
</TABLE>
Instances in 1996 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
</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
Management of the Fund.................................................... 29
Investment Advisory, Management and Other Services........................ 32
Brokerage Transactions.................................................... 33
Purchase and Issuance of Fund Shares in Creation Unit Aggregations........ 34
Redemption of Fund Shares in Creation Unit Aggregations................... 42
Determining Net Asset Value............................................... 46
Dividends and Distributions............................................... 46
Taxes..................................................................... 46
Capital Stock and Stockholder Reports..................................... 48
Counsel and Independent Accountants....................................... 49
Report of Independent Accountants......................................... 50
Statement of Assets and Liabilities....................................... 51
Notes to Financial Statements............................................. 52
APPENDICES
</TABLE>
<TABLE>
<S> <C> <C>
A. FT/S&P Actuaries Australia Index Constituency Summary................. A-1
B. FT/S&P Actuaries France Index Constituency Summary.................... B-1
C. FT/S&P Actuaries Germany Index Constituency Summary................... C-1
D. FT/S&P Actuaries Hong Kong Index Constituency Summary................. D-1
E. FT/S&P Actuaries Italy Index Constituency Summary..................... E-1
F. FT/S&P Actuaries Japan Index Constituency Summary..................... F-1
G. FT/S&P Actuaries South Africa Index Constituency Summary.............. G-1
H. FT/S&P Actuaries UK Index Constituency Summary........................ H-1
I. FT/S&P Actuaries US Index Constituency Summary........................ I-1
</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
The Fund....................................... 14
The CountryBaskets-SM- Index Fund, Inc. and
its Investment Objective.................... 14
Investment Policies.......................... 14
FT/S&P Actuaries World Indices-TM-........... 16
The FT Index Components...................... 16
Investment Management........................ 18
Distributor.................................. 19
Administrator................................ 19
Custodian and Transfer Agent................. 19
Fees......................................... 19
CB Shares-SM-................................ 21
Exchange Listing and Trading................. 21
Creation Units............................... 21
Investment Considerations and Risks.......... 21
Dividends and Capital Gains Distributions.... 24
Tax Matters.................................. 24
Lending of Securities........................ 25
Investment Restrictions of the Fund.......... 25
Determination of Net Asset Value............. 26
Board of Directors........................... 27
Capital Stock................................ 27
Book-Entry Only System....................... 28
Business Day................................. 29
Purchase and Issuance of Fund Shares in
Creation Unit Aggregations.................. 30
Redemption of Fund Shares in Creation Unit
Aggregations................................ 32
Available Information........................ 34
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
---------------------
MARCH 5, 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 March 5, 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.
MARCH 5, 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
Management of the Fund................................................ 29
Investment Advisory, Management and Other Services.................... 32
Brokerage Transactions................................................ 33
Purchase and Issuance of Fund Shares in Creation Unit Aggregations.... 34
Redemption of Fund Shares in Creation Unit Aggregations............... 42
Determining Net Asset Value........................................... 46
Dividends and Distributions........................................... 46
Taxes................................................................. 46
Capital Stock and Stockholder Reports................................. 48
Counsel and Independent Accountants................................... 49
Report of Independent Accountants..................................... 50
Statement of Assets and Liabilities................................... 51
Notes to Financial Statements......................................... 52
APPENDICES
</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.
------------------------
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.
(i)
<PAGE>
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 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 and S&P will calculate 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 March 1, 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
$1.00: A$ 1.3034, FF 5.0720, DM 1.4785, HK$ 7.7320, IL1,563.0, Y 105.7, R 3.9050
and L .6548. 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 will seek 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 Fund 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.
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 estimated 1995 Gross Domestic Product
("GDP") of Australia, based on data provided by the Adviser, was US$346.7
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
estimated 1995 GDP of France, based on data provided by the Adviser, was US$1.5
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 estimated
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 (as defined by the WIPC)
of Hong Kong was approximately HK $1,920.3 billion, or US $248.3 billion, as of
-2-
<PAGE>
December 29, 1995. The leading major market index is the Hang Seng, owned and
published by HSI Services. The estimated 1995 GDP of Hong Kong, based on data
provided by the Adviser, was US$144.9 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 estimated 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 estimated 1995 GDP of Japan, based on data provided by
the Adviser, was US$5.6 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 estimated 1995 GDP of South Africa, based on data provided by the
Adviser, was US$133.5 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
estimated 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 estimated 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 will 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.
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 will pay
reasonable administrative and custodial fees in connection with the loan of
securities. The interest income the Series receives from the loan collateral 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.
-7-
<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 will 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 would 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
-8-
<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 December 29, 1995, 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.
-10-
<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.
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<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 and S&P will calculate 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 December 29, 1995.
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
-14-
<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-
-15-
<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
All index performance information contained in this SAI is based on
historical information and is not intended to indicate future returns of the
indices. 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 or will demonstrate in the future. See "The Fund -- Investment
Considerations and Risks" in the Prospectus. Performance data for the FT Index
are based on information provided to the Adviser by Ibbotson Associates of
Chicago, Illinois, except as otherwise indicated.
AVERAGE ANNUAL TOTAL RETURNS. Average annual total return, a common measure
of fund or index performance, is reported below for each of the FT Index
components corresponding to the initial nine Series of the Fund for the one-,
three-, five- and ten-year periods ending December 29, 1995. Average annual
total return is calculated by determining the growth or decline in the value of
the index over a stated period, after giving effect to the reinvestment of
dividends and distributions during the period, and then calculating the
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<PAGE>
annual compounded percentage rate that would have produced the same result if
the rate of growth or decline in value 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 average annual
total returns reported herein are US dollar returns. 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 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 average annual total returns are a convenient means of comparing
alternative investments, investors should realize that the performance of 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 of the index. In addition, all average annual total return figures
presented in this SAI do not make any allowance for federal, state or local
income taxes, which holders of 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.
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 WITH OTHER INDICES. The description set forth below of each
Series' corresponding FT Index component also 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. Each correlation is an indication of
the extent to which, during such six-year period, the record of the FT Index
component, based only on changes in the market prices of the underlying stocks,
followed the record of the compared index, whether in rising or falling markets.
A correlation of 1.00 between two indices would indicate that movements in one
index tracked movements in the other exactly over the relevant period. A
correlation of 0, on the other hand, would indicate that movements in the two
indices were entirely independent over the relevant period.
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 a hypothetical investment in a Series would tend to make its correlation
with comparative indexes weaker than that of the FT Index component.
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
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<PAGE>
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. Appendix A hereto contains a complete list of the securities in the
Australia component as of December 29, 1995.
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 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.
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<PAGE>
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>
Appendix B hereto contains a complete list of the securities in the France
component as of December 29, 1995.
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>
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.
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<PAGE>
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>
Appendix C hereto contains a complete list of the component securities of the
Germany component as of December 29, 1995.
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 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 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.
-20-
<PAGE>
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>
Appendix D hereto contains a complete list of the securities in the Hong Kong
component as of December 29, 1995.
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 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.
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.
-21-
<PAGE>
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>
Appendix E hereto contains a complete list of the securities constituting the
Italy component as of December 29, 1995.
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 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>
Appendix F hereto contains a complete list of the securities constituting the
Japan component as of December 29, 1995.
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 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>
Appendix G hereto contains a complete list of the securities in the South Africa
component as of December 29, 1995.
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 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>
Appendix H hereto contains a complete list of the component securities of the UK
component as of December 29, 1995.
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 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>
Appendix I hereto contains a complete list of the securities in the US component
as of December 29, 1995.
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>
OTHER COMPONENTS OF THE FT INDEX
In addition to the country components of the FT Index represented by the
initial 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 CB Shares-SM- of each Series have been approved for listing on the NYSE,
subject to official notice of issuance. The NYSE has approved modifications to
its Rules to permit the listing of CB Shares-SM-. The non-redeemable CB
Shares-SM- are expected to trade on the NYSE 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.
The size of each Series' Fund Basket and the related size of its Creation
Unit was designed to provide an initial net asset value per CB Share-SM-,
depending on the Series, of between approximately $19 and $56. Because of the
range of initial net asset values, it is expected that initial trading of CB
Shares-SM-of the various Series on the NYSE will commence at market prices
within or close to this range. Price movements in CB Shares-SM- on the NYSE will
be quoted in 1/8ths. The Adviser anticipates that the movements in the 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 will be 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 expects that each Series
will have a cost structure roughly equivalent to comparable institutional
index-based investments. The average of the estimated annual operating expense
ratios of the nine initial Series, assuming aggregate net assets of $250 million
for each Series, is .84% per annum. At the lower level of $100 million in
aggregate net assets for each Series, such average would be 1.06% per annum, and
at $500 million, .73% per annum. See "Summary of Fund Expenses" in the
Prospectus. Such expense ratios compare with an average of 1.69% among open-end
"foreign stock" funds tracked by Morningstar, Inc., as of July 7, 1995.
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
without the use of derivatives, to gain international exposure 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
-27-
<PAGE>
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.
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 intends to make
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. In
addition, since CB Shares-SM- will be 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 submitted a request to the Commission
for certain no-action relief that would permit short sales of CB Shares-SM-
notwithstanding Rule 10a-1 under the Securities Exchange Act of 1934 (the
"Exchange Act"). There can be no assurance that such no-action relief will be
obtained.
Because the securities portfolio of each Series will substantially replicate
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 will 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. The NYSE has submitted a request for no-action relief from certain
rules of the Commission that would permit broker-dealers generally 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 relief, the extension of
credit on CB Shares-SM- by broker-dealers participating in the distribution of
CB Shares-SM- would be subject to certain limitations. There can be no assurance
that any such no-action relief will be obtained.
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 will 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- can 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>
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. 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, in turn, 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 March 1,
1996, the Directors and officers of the Fund owned of record as a group none of
the outstanding shares of the Fund. 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 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 Director (since 1994) and Vice President (1992 to
31 West 52nd Street 1994) of Deutsche Morgan Grenfell/C. J. Lawrence
New York, New York 10019 Inc.; Vice President, Nomura Securities
International (1990 to 1992).
W. Carter McClelland* Director and Chairman President and Chief Executive Officer, Deutsche Mor-
31 West 52nd Street gan Grenfell/C. J. Lawrence Inc. (since 1995); Divi-
New York, New York 10019 sion Director and other positions, Morgan Stanley &
Co. (1974 to 1995).
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS DURING
NAME AND ADDRESS THE FUND PAST FIVE YEARS
- ------------------------------ ----------------------------- -----------------------------------------------------
Lawrence C. McQuade Director Chairman, Qualitas International (international con-
125 East 72nd Street 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.
<S> <C> <C>
Karl M. von der Heyden Director Senior Advisor, The Clipper Group (since 1994);
12 East 49th Street 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 (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 Vice President and Counsel, Deutsche Bank AG (New
31 West 52nd Street Secretary York Branch) (since 1995); Associate, Cleary, Got-
New York, New York 10019 tlieb, 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 Assistant Vice President (since 1994) and Associate
31 West 52nd Street (1991-1994), Deutsche Morgan Grenfell/C. J. Law-
New York, New York 10019 rence Inc.; Assistant Secretary and Assistant
Treasurer (since 1993), The Germany Fund, Inc., The
Central European Equity Fund, Inc. and The New
Germany Fund, Inc.
</TABLE>
-30-
<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........................................... * *
Director
Joseph A. La Corte........................................ NONE NONE
Director and President
W. Carter McClelland...................................... NONE NONE
Director and Chairman
Lawrence C. McQuade....................................... * *
Director
Karl M. von der Heyden.................................... * *
Director
Robert H. Wadsworth....................................... * *
Director **
Thomas A. Curtis.......................................... NONE NONE
Vice President and Secretary
Joseph Cheung............................................. NONE NONE
Vice President and Treasurer
</TABLE>
- ------------------------
*The Fund will pay each Director $7,000 per annum, $2,000 per directors'
meeting attended and $500 per committee meeting attended.
**Mr. Wadsworth received $42,000 in aggregate compensation in 1995 for his
services as a director of The Germany Fund, Inc., The Central European Equity
Fund, Inc. and The New Germany Fund, Inc., 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 Director, respectively, of DMG. Messrs. Curtis and
Cheung, officers of the Fund, are Vice President and Counsel of Deutsche Bank AG
(New York Branch) and Assistant Vice President of DMG, respectively.
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<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, will manage 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 will be responsible for
placing purchase and sale orders and providing continuous supervision of the
investment portfolio of each Series. In addition, the Adviser will provide
administrative services to the Fund that will include negotiating and overseeing
the Fund's contractual arrangements with third-party service providers. Each
Series will pay 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
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.
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.
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<PAGE>
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 will
provide 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.
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.
The Adviser will assume 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
-33-
<PAGE>
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 will offer and sell 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 will issue and sell shares of a Series only on a Business Day. 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 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".
For information on the initial issuance of Creation Units of CB Shares-SM-
and the commencement of trading on the NYSE, see "Initial Issuance of Creation
Units and Commencement of Trading" below.
THE FUND BASKET
Prior to the opening of business on the NYSE on each day that the NYSE is
open (currently 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, will be made available through the Distributor and the
National Securities Clearing Corporation ("NSCC"), a clearing agency registered
with the Securities and Exchange Commission (the "Commission"). Such Fund Basket
will be in effect for redemptions of Creation Units of CB Shares-SM- of each
Series and purchases of Creation Units of the US Index Series on such NYSE
business day and for purchases of Creation Units of CB Shares-SM- of each other
Series on a specified Business Day for such Series subsequent to such NYSE
business day (except as may be provided otherwise in the case of an alternative
purchase option; see "Possible Alternative Purchase Procedure Option" below).
The date of
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<PAGE>
purchase and issuance of Creation Units of CB Shares-SM- of each Series is
referred to as an "Issue Date". The Issue Date for a purchase of Creation Units
of the US Index Series is the same day as the effective date for the applicable
Fund Basket. The 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, April 16, 1996, for redemptions on such date will be made
available presently by 8:00 p.m., New York time, on Monday, April 15, 1996, the
previous business day on which the NYSE is open. Such Fund Basket will be
applicable to purchases of a Creation Unit of CB Shares-SM- of the France Index
Series on Friday, April 19, 1996 (the subsequent third Business Day). 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 will change 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 Issue Date, 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 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 "Possible
Alternative Purchase Procedure 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 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 December 29, 1995, 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, $1,886; the France Index Series,
$3,737; the Germany Index Series, $1,952; the Hong Kong Index Series, $3,192;
the Italy Index Series, $1,593; the Japan Index Series, $12,123; the South
Africa Index Series, $1,408; the UK Index Series, $5,535; and the US Index
Series, $12,103. 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%, 1.0% 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.
-35-
<PAGE>
THE CASH COMPONENT
The Cash Component will be equal to the difference between the value of the
Fund Basket delivered for the purchase of a Creation Unit of CB Shares-SM- on
the Issue Date and the net asset value of the Creation Unit aggregation of
shares 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 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 shall
have 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 announced for a designated Issue
Date, will not exceed 10% of the total purchase price of a Creation Unit
aggregation of shares on such date. In the event that the Fund accepts the
substitution of cash for omitted Fund Basket securities as described above,
however, 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 an Issue Date 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 will bear 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 on the date of
purchase in order for shares to be issued. See "Procedures for Purchasing
Creation Units" below.
PROCEDURES FOR PURCHASING CREATION UNITS
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 procedures set forth herein.
Investors who are not Authorized Participants must make appropriate arrangements
with an Authorized Participant to purchase
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<PAGE>
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.
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.
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.
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<PAGE>
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.
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 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.
As indicated above, Fund Deposits for the US Index Series submitted 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. Pursuant to
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. 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
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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.
The foregoing procedures may be modified with respect to the possible
alternative purchase procedure described below.
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 above; (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,
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-.
INITIAL ISSUANCE OF CREATION UNITS AND COMMENCEMENT OF TRADING
In connection with the commencement of trading on the NYSE of CB Shares-SM-
of each Series, the Fund and the Distributor will enter into purchase agreements
with the purchasers of the initial Creation Units of CB Shares-SM- of such
Series to meet the conditions to listing on the NYSE. The agreement will provide
that the Fund and the Distributor may waive delivery of the notice of intention
otherwise required for all Series except the US Index Series and that such
initial Creation Units of CB Shares-SM- of the Series will be sold at the net
asset value of the CB Shares-SM- computed at the close of trading on the NYSE
(currently 4:00 p.m., New York time) on the effective date of the agreement with
respect to such Series. Such Creation Units of CB Shares-SM- will be issued at
the end of the same business day on the books of the Transfer Agent. The
purchase agreement will provide for delivery of the Fund Basket and the Cash
Component (together with any cash purchase transaction fees) by the close of
trading on the NYSE (currently at 4:00 p.m., New York time) on the effective
date of the purchase agreement for a Series or for delivery of the Fund Basket
and the applicable Cash Component (and applicable fees) on a designated
subsequent Business Day applicable to that Series as described under "The Fund
Basket" above. In the case of the latter, an irrevocable stand-by letter of
credit acceptable to the Fund will be delivered to State Street as Custodian for
the benefit of the Fund to secure the settlement of the Fund Basket securities,
the Cash Component and any Cash Component transaction fees.
It is anticipated that trading on the NYSE of CB Shares-SM- of such Series
will commence within two NYSE business days following the date of the issuance
of the initial Creation Unit aggregations of such CB Shares-SM- or shortly
thereafter. The Fund and the Distributor will jointly announce the date on which
NYSE trading of CB Shares-SM- of that Series will commence at the time of
effectiveness of the purchase agreements for that Series. Additional purchase
orders for Creation Units of such Series will be accepted from and after the
date that NYSE trading of CB Shares-SM- of such Series commences. In the case of
the initial purchase of Creation Units of the US Index Series, Fund Deposits
will be accepted only through the CB Shares-SM- Clearing Process. In all other
respects, the procedures for purchase of a Creation Unit of CB Shares-SM- will
be as described above under "Procedures for Purchasing Creation Units" and will
require, as provided in the
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purchase agreement, the tender on the date of purchase of a properly completed
purchase order by or through an Authorized Participant. The Distributor shall
reject any order that is not submitted in proper form.
SEQUENCE OF COMMENCEMENT OF TRADING FOR THE NINE COUNTRYBASKETS INDEX SERIES
It is presently intended that the sale of Creation Units offered hereby and
trading of CB Shares-SM- on the NYSE will commence on or about March 25, 1996,
with CB Shares-SM- of the Germany Index Series, the Japan Index Series and the
US Index Series. The Distributor anticipates that commencement of trading on the
NYSE of CB Shares-SM- of the Australia Index Series, the Hong Kong Index Series,
the South Africa Index Series and the UK Index Series will follow within
approximately two NYSE business days, and of the France Index Series and the
Italy Index Series within approximately two NYSE business days thereafter. The
foregoing schedule is subject to change at the Fund's and the Distributor's
discretion.
POSSIBLE ALTERNATIVE PURCHASE PROCEDURE OPTION
The Fund will seek to offer investors an additional purchase procedure
option for Creation Unit aggregations of CB Shares-SM- of any Series. As
presently contemplated, the Authorized Participant on its own behalf and on
behalf of investors for whom it is acting would maintain with the Custodian on
behalf of the Fund an irrevocable stand-by letter of credit acceptable to the
Fund in an amount equal to at least 105% of the amount of the Fund Deposit and
applicable Cash Component transaction fees of Creation Units of any Series for
which it intends to submit purchase orders in order to secure delivery and
settlement of the Fund Basket, Cash Component and any such fees. The net asset
value of a Creation Unit of CB Shares-SM- being purchased pursuant to this
option would be determined at the close of trading on the NYSE (currently 4:00
p.m., New York time) on the date the purchase order is submitted in proper form.
The Fund Basket would be the one announced at 8:00 p.m., New York time, on the
previous NYSE trading day and effective for the Business Day on which the
purchase is made. An appropriate form would be submitted with the purchase order
to provide for delivery instructions by the Authorized Participant to the
Custodian or subcustodian, as the case may be. Delivery of the Fund Basket
securities and cash would be due on the designated subsequent Business Day for
the Series as described under "The Fund Basket" above. Pursuant to procedures to
be established, the Custodian would be authorized to draw on the letter of
credit as required for the amounts needed to acquire the Fund Basket securities
and for cash payments due and to pay for the associated transaction costs. The
Authorized Participant Agreement would be appropriately amended to provide for
the letter of credit purchase option procedures ("LC Purchase Procedures"). A
purchase order for shares of any Series will be considered in "proper form"
pursuant to the LC Purchase Procedures 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 letter of credit in the required
amount is confirmed on such date by the Custodian and (iii) all other procedures
applicable to the LC Purchase Procedures set forth in the Authorized Participant
Agreement, as so amended, are properly followed. In other respects, the purchase
procedures for a Creation Unit of CB Shares-SM- would be as described above.
There can be no assurance whether or when such purchase procedure option
will be available.
THE DISTRIBUTOR
Creation Unit size aggregations of shares for each Series will be
continuously offered for sale through the Fund's principal underwriter and
Distributor, ALPS. The Distributor will serve 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 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
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purpose of voting on the Distribution Agreement. The Distributor will act 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
will pay 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") is expected to enter 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 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 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
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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 expects to enter into stockholder services agreements with
certain participating financial institutions ("PFIs"). Such agreements will not
provide for any payments from the Fund or the Distributor. Pursuant to the
agreements, PFIs will, among other things, agree 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 will provide or will arrange 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 will redeem 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 will be 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 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
Prior to the opening of business on the NYSE on each day that the NYSE is
open (currently 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 at the close of business on the NYSE on such previous
day, will be made available through the Distributor and the NSCC for each Series
and will be in effect for redemptions on such NYSE business day. For example,
the Fund Basket for the France Index Series to be in effect on Tuesday, April
16, 1996 for redemptions on such date will be made available presently by 8:00
p.m., New York time, on Monday, April 15, 1996. The redemption proceeds for a
Creation
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Unit aggregation of shares generally will consist of a Fund Basket together with
a cash redemption payment equal to the difference, if any, between the net asset
value of the Creation Unit aggregation of shares being redeemed next determined
following receipt of a redemption request in proper form, and the value of the
Fund Basket. The cash redemption transaction fee described below will be
deducted from such proceeds. Net asset value is determined at the close of the
regular trading session on the NYSE (currently 4:00 p.m., New York time). For
this purpose the securities in the Fund Basket will be valued in the same manner
as the relevant Series values its portfolio securities. See "The Fund --
Determination of Net Asset Value" in the Prospectus and "Determining Net Asset
Value" in this Statement of Additional Information.
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 under "Redemption
Procedures" below.
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 will also bear 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, $1,312; the France Index Series, $3,030; the Germany Index Series,
$1,525; the Hong Kong Index Series, $2,800; the Italy Index Series, $1,180; the
Japan Index Series, $8,980; the South Africa Index Series, $1,100; the UK Index
Series, $4,100; and the US Index Series, $7,644. 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 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
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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 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
-44-
<PAGE>
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); (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.
-45-
<PAGE>
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 a 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. 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.
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
-46-
<PAGE>
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.
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
-47-
<PAGE>
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 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, immediately prior to the initial
public offering of Fund shares contemplated hereby, the sole stockholder and
controlling person of each Series will be ALPS. ALPS will therefore be a
"control person" of the Fund. Upon the commencement of trading of CB Shares-SM-
on the NYSE, each Series may have a number of stockholders each holding more
than 5% of the outstanding shares
-48-
<PAGE>
of such Series. Morgan Grenfell & Co. Ltd., an affiliate of the Adviser, is
expected initially to be among the control persons of each Series. The Fund
cannot predict the length of time that any such persons will remain control
persons of each Series.
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.
-49-
<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
-50-
<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.
-52-
<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%).
-53-
<PAGE>
APPENDIX A
FT/S&P-Actuaries World Indices
Australia Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ ---------------------------------------- ------------- --------
<S> <C> <C> <C>
BROKEN HILL PROP Mining & Extractive Industries 27,496.58 16.28%
NATL AUSTRALIA BANK Commercial Banks & Other Banks 12,857.05 7.61%
CRA Mining & Extractive Industries 9,435.03 5.59%
WESTPAC Commercial Banks & Other Banks 8,252.97 4.89%
WESTERN MINING Mining & Extractive Industries 7,131.23 4.22%
ANZ BANK Commercial Banks & Other Banks 6,819.86 4.04%
AMCOR Paper & Paper Products 4,353.46 2.58%
NEWS CORP Publishing 4,135.48 2.45%
COCA-COLA AMATIL Diversified Consumer Goods & Services 3,922.34 2.32%
COMMONWLTH BK OF AUS Commercial Banks & Other Banks 3,808.62 2.26%
WOODSIDE PETROLEUM Oil -- Crude Producers 3,411.94 2.02%
LEND LEASE CORP Real Estate 3,382.31 2.00%
COLES MYER Retail -- Department Stores 3,355.04 1.99%
FOSTERS BREWING GR Diversified Industrials 3,222.26 1.91%
CSR Building Materials 3,107.59 1.84%
COMALCO Non-Ferrous Metals 3,006.84 1.78%
BORAL Building Materials 2,780.45 1.65%
WOOLWORTHS LTD. Retail -- Grocery Chains 2,590.98 1.53%
BRAMBLES INDUSTRIES Freight Forwarders 2,458.20 1.46%
PACIFIC DUNLOP Diversified Industrials 2,449.90 1.45%
PIONEER INTERNATIONL Building Materials 2,288.16 1.36%
ICI AUSTRALIA Chemicals, Fibres, Paints & Gases 2,270.38 1.34%
MIM HOLDINGS Mining & Extractive Industries 2,222.64 1.32%
NORTH LTD Mining & Extractive Industries 1,941.74 1.15%
WESTFIELD TRUST Real Estate 1,794.95 1.06%
SANTOS Oil -- Crude Producers 1,570.25 0.93%
ADVANCE BANK AUST Commercial Banks & Other Banks 1,433.03 0.85%
MAYNE NICKLESS Freight Forwarders 1,378.50 0.82%
WESFARMERS Agriculture & Fishing 1,374.75 0.81%
SOUTHCORP HOLDINGS Beverages -- Brewers 1,321.18 0.78%
GIO AUSTRALIA Insurance -- Multiline 1,320.33 0.78%
GENERAL PROPERTY TST Real Estate 1,264.25 0.75%
GOODMAN FIELDER LTD Food Processors 1,201.98 0.71%
BURNS PHILP Diversified Consumer Goods & Services 1,148.49 0.68%
POSGOLD Precious Metals & Minerals 1,147.78 0.68%
WESTFIELD HDGS Real Estate 1,130.10 0.67%
ST. GEORGE BANK Commercial Banks & Other Banks 1,109.63 0.66%
AUST GAS LIGHT Natural Gas Utilities 1,078.79 0.64%
QBE INSURANCE GP Insurance -- Multiline 1,034.34 0.61%
RGC LIMITED Mining & Extractive Industries 1,014.97 0.60%
NEWCREST MINING LTD. Precious Metals & Minerals 973.91 0.58%
PASMINCO Metal Ore Mining 945.65 0.56%
ARNOTTS Food Processors 932.10 0.55%
GOLD MINE KALGOORLIE Precious Metals & Minerals 887.90 0.53%
TUBEMAKERS Heavy Engineering & Shipbuilding 867.33 0.51%
PLUTONIC RESOURCES Precious Metals & Minerals 858.65 0.51%
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ ---------------------------------------- ------------- --------
<S> <C> <C> <C>
SMITH (HOWARD) Non-Oil Energy Sources 843.57 0.50%
NORMANDY MINING Precious Metals & Minerals 771.57 0.46%
T.N.T Rail & Road Transport 769.98 0.46%
QCT RESOURCES Non-Oil Energy Sources 733.10 0.43%
STOCKLAND TST Real Estate 717.35 0.42%
AUST FOUNDATION Investment Trusts 712.61 0.42%
CALTEX AUSTRALIA Petroleum Products & Refineries 711.00 0.42%
EMAIL Household Durables & Appliances 674.50 0.40%
HARDIE (JAMES) INDS Building Materials 666.04 0.39%
AMPOLEX LTD. Oil -- Crude Producers 638.87 0.38%
JOHN FAIRFAX HOLDING Publishing -- Newspapers 628.22 0.37%
BANK OF MELBOURNE Commercial Banks & Other Banks 623.58 0.37%
AUST NATIONAL INDS Diversified Industrials 584.60 0.35%
FAULDING & CO Drugs 521.05 0.31%
ROTHMANS HDG Tobacco Manufacturers 498.72 0.30%
GANDEL RETAIL TRUST Real Estate 478.17 0.28%
SIMSMETAL Engineering Services & Pollution Control 453.95 0.27%
FRANKED INCOME Investment Trusts 448.95 0.27%
DAVIDS Wholesale -- Nondurables 441.30 0.26%
SCHRODERS PROP FUND Real Estate 426.89 0.25%
METAL MANUFACTURES Diversified Industrials 412.90 0.24%
ASHTON MINING Precious Metals & Minerals 406.26 0.24%
SONS OF GWALIA LTD Precious Metals & Minerals 394.98 0.23%
FOODLAND ASSOCIATED Wholesale -- Nondurables 346.81 0.21%
NATIONAL FOODS Food -- Sugar & Confectionary 325.96 0.19%
AAPC Restaurants & Hotels 289.77 0.17%
ORBITAL ENGINE CORP Machinery -- Industrial & Speciality 286.15 0.17%
CAPITAL PROPERTY Real Estate 271.67 0.16%
PUBLISH AND BCST ORD Broadcasting Media 231.13 0.14%
OPSM PROTECTOR LTD Diversified Consumer Goods & Services 221.19 0.13%
ABERFOYLE Non-Ferrous Metals 207.35 0.12%
BOUGAINVILLE COPPER Non-Ferrous Metals 179.01 0.11%
KIDSTON GOLD MINES Precious Metals & Minerals 172.02 0.10%
SEVEN NETWORK Broadcasting Media 160.27 0.09%
PUBLISH AND BCST PRF Broadcasting Media 120.91 0.07%
FT-AUSTRALIA 168,860.31
</TABLE>
A-2
<PAGE>
APPENDIX B
FT/S&P-Actuaries World Indices
France Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- ------------- --------
<S> <C> <C> <C>
ELF AQUITAINE Oil Internationals 19,981.04 5.38%
LVMH -- MOET VUITTON Beverages -- Distillers 18,149.14 4.89%
L'OREAL Cosmetics 16,470.27 4.44%
TOTAL Oil Internationals 15,794.06 4.25%
CARREFOUR Retail -- Grocery Chains 15,577.00 4.20%
ALCATEL ALSTHOM Communications Equipment 12,996.90 3.50%
EAUX (GENERALE DES) Electric Utilities & Water Works Supply 11,736.00 3.16%
DANONE Food Processors 11,735.45 3.16%
AXA Insurance -- Property & Casualty 11,094.36 2.99%
AIR LIQUIDE Chemicals, Fibres, Paints & Gases 10,957.16 2.95%
SOCIETE GENERALE Commercial Banks & Other Banks 10,791.03 2.91%
SAINT GOBAIN Building Materials 9,118.67 2.46%
BANQUE NATIONALE DE PARIS Commercial Banks & Other Banks 8,680.80 2.34%
U.A.P Insurance -- Multiline 7,874.64 2.12%
RENAULT Automobiles 6,890.94 1.86%
RHONE POULENC A ORD Chemicals (Diversified) 6,866.56 1.85%
PEUGEOT S.A Automobiles 6,609.79 1.78%
PARIBAS Commercial Banks & Other Banks 6,598.55 1.78%
ELF SANOFI Drugs 6,587.25 1.77%
SUEZ (FINANCIERE) Commercial Banks & Other Banks 6,586.18 1.77%
LAFARGE Building Materials 5,918.02 1.59%
LYONNAISE DES EAUX-DUMEZ Electric Utilities & Water Works Supply 5,584.15 1.50%
ROUSSEL-UCLAF Drugs 4,604.57 1.24%
CHRISTIAN DIOR Cosmetics 4,533.75 1.22%
PINAULT-PRINTEMPS/La REDOUTE Retail -- Department Stores 4,471.97 1.20%
ERIDANIA/BEGHIN-SAY Food Processors 4,455.32 1.20%
SCHNEIDER SA Construction 4,356.91 1.17%
MICHELIN 'B' Tyre & Rubber Goods 4,289.93 1.16%
CANAL PLUS Broadcasting Media 4,136.02 1.11%
PROMODES Retail -- Grocery Chains 4,117.52 1.11%
HAVAS Advertising 4,009.64 1.08%
CMB PACKAGING S.A Containers 3,769.50 1.02%
ACCOR Restaurants & Hotels 3,748.60 1.01%
CREDIT. COMM. FRANCE Financial Services 3,537.54 0.95%
LEGRAND Electrical Equipment 3,309.06 0.89%
USINOR SACILOR Iron & Steel 3,220.20 0.87%
PERNOD RICARD Beverages -- Distillers 3,208.77 0.86%
VALEO Auto Parts -- Original Equipment 3,202.84 0.86%
BANCAIRE (CIE) Financial Institutions 3,052.69 0.82%
SYNTHELABO Drugs 3,029.38 0.82%
CREDIT LOCAL DE FRANCE Financial Services 2,941.30 0.79%
BIC Diversified Consumer Goods & Services 2,815.40 0.76%
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- ------------- --------
<S> <C> <C> <C>
THOMSON-CSF Electronics 2,602.63 0.70%
CASTORAMA DUBOIS Retail -- General Merchandise 2,562.04 0.69%
BOUYGUES Construction 2,310.51 0.62%
NAVIGATION MIXTE Diversified Holding Companies 2,152.28 0.58%
POLIET Building Materials 2,152.13 0.58%
SIDEL Machinery -- Industrial & Speciality 2,148.04 0.58%
SAINT -- LOUIS Food Processors 2,127.37 0.57%
DOCKS DE FRANCE Retail -- Grocery Chains 1,975.43 0.53%
S.E.B Household Durables & Appliances 1,847.11 0.50%
IMETAL Non-Ferrous Metals 1,772.88 0.48%
CASINO Retail -- Grocery Chains 1,770.61 0.48%
EURO DISNEY Entertainment & Leisure Time 1,744.24 0.47%
COMPTOIRS MODERNES Retail -- Miscellaneous & Speciality 1,673.07 0.45%
LAGARDERE GROUPE Communications Equipment 1,578.37 0.43%
GROUPE WORMS ET CIE Diversified Holding Companies 1,557.42 0.42%
CHARGEURS Diversified Holding Companies 1,539.51 0.41%
SAGEM Electrical Equipment 1,529.05 0.41%
PECHINEY INTL. Containers 1,526.19 0.41%
ECCO Business Services 1,518.21 0.41%
CAP GEMINI SOGETI Computer Software & Services 1,497.61 0.40%
ESSILOR INTL Health Care 1,441.56 0.39%
SIMCO Real Estate 1,423.48 0.38%
FROMAGERIES Food Processors 1,369.78 0.37%
C.G.I.P Diversified Holding Companies 1,280.04 0.34%
EURAFRANCE Financial Services 1,169.55 0.32%
AGF Insurance -- Multiline 1,141.38 0.31%
BONGRAIN Food Processors 1,085.75 0.29%
CLUB MEDITERRANEE Restaurants & Hotels 1,072.46 0.29%
CREDIT NATIONAL Financial Services 1,054.49 0.28%
SEFIMEG Real Estate 1,053.58 0.28%
G.T.M. ENTREPOSE Construction 1,029.31 0.28%
UNIBAIL Financial Services 972.79 0.26%
GAZ ET EAUX Diversified Holding Companies 970.88 0.26%
SALOMON Entertainment & Leisure Time 899.79 0.24%
GROUPE DE LA CITE Publishing 852.24 0.23%
CPR (PARIS REESC.) Financial Services 819.34 0.22%
UIF Real Estate 723.07 0.19%
EUROTUNNEL Rail & Road Transport 625.19 0.17%
SOMMER ALLIBERT Household Durables & Appliances 571.34 0.15%
CR FONCIER FRANCE Financial Institutions 545.93 0.15%
DAMART S.A Clothing 495.09 0.13%
UFB LOCABAIL Commercial Banks & Other Banks 461.22 0.12%
LABINAL Aerospace & Defence 456.07 0.12%
EURO RSCG Advertising 440.12 0.12%
S.I.L.I.C. Financial Services 436.99 0.12%
EBF Auto Parts -- Original Equipment 430.66 0.12%
IMMEUBLES DE FRANCE Real Estate 408.34 0.11%
CASINO PREF. Retail -- Grocery Chains 387.08 0.10%
MOULINEX Household Durables & Appliances 384.59 0.10%
FONCIERE LYONNAISE Real Estate 368.35 0.10%
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- ------------- --------
<S> <C> <C> <C>
NORD -- EST Diversified Holding Companies 326.39 0.09%
VALLOUREC Iron & Steel 291.36 0.08%
LEGRIS Machinery -- Industrial & Speciality 280.93 0.08%
INTERBAIL Financial Services 280.71 0.08%
D.M.C. Textile Products 266.47 0.07%
TAITTINGER Beverages -- Distillers 246.36 0.07%
FINEXTEL Financial Services 163.59 0.04%
GEOPHYSIQUE Energy Equipment & Services 101.27 0.03%
FT-FRANCE 371,321.09
</TABLE>
B-3
<PAGE>
APPENDIX C
FT/S&P-Actuaries World Indices
Germany Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
ALLIANZ AG HLDG. Insurance -- Multiline 45,863.03 11.41%
SIEMENS Electrical Equipment 30,194.79 7.51%
DAIMLER BENZ Automobiles 25,912.27 6.45%
DEUTSCHE BANK Commercial Banks & Other Banks 23,738.29 5.91%
VEBA Diversified Holding Companies 20,687.19 5.15%
BAYER Chemicals (Diversified) 18,652.81 4.64%
MUNICH RE (PART PD. REG) Insurance -- Multiline 17,323.93 4.31%
HOECHST Chemicals (Diversified) 15,979.46 3.98%
BASF Chemicals (Diversified) 13,614.18 3.39%
RWE Electric Utilities & Water Works Supply 12,002.14 2.99%
DRESDNER BANK Commercial Banks & Other Banks 11,921.93 2.97%
MANNESMANN Machinery 11,713.37 2.91%
BMW (BR.) Automobiles 9,492.00 2.36%
COMMERZBANK Commercial Banks & Other Banks 9,231.14 2.30%
VOLKSWAGEN REGD. Automobiles 9,047.16 2.25%
VIAG Non-Ferrous Metals 8,270.86 2.06%
BAYERISCHE VEREINSBANK Commercial Banks & Other Banks 6,839.45 1.70%
BAY. HYP.-U. WECHSEL BANK. Commercial Banks & Other Banks 6,492.33 1.62%
SAP AG Computer Software & Services 6,102.32 1.52%
THYSSEN Iron & Steel 5,698.86 1.42%
RWE PREF Electric Utilities & Water Works Supply 5,573.84 1.39%
LUFTHANSA Airlines 5,265.56 1.31%
VEW Electric Utilities & Water Works Supply 5,022.33 1.25%
LINDE Machinery -- Industrial & Speciality 4,911.99 1.22%
SCHERING Chemicals (Diversified) 4,537.51 1.13%
PREUSSAG Non-Ferrous Metals 4,267.36 1.06%
GEHE Wholesale -- Nondurables 3,718.09 0.93%
KARSTADT Retail -- Department Stores 3,450.85 0.86%
BER. KRAFT UND LICHT (BEWAG) Electric Utilities & Water Works Supply 3,360.86 0.84%
AACH. & MUNCH. BETEIL REGD. Insurance -- Multiline 3,039.93 0.76%
HOCHTIEF Construction 2,993.08 0.74%
MAN Machinery -- Industrial & Speciality 2,989.50 0.74%
BEIERSDORF Cosmetics 2,949.07 0.73%
DEGUSSA Precious Metals & Minerals 2,864.93 0.71%
VICTORIA HLDG. REGD. Insurance -- Multiline 2,513.10 0.63%
HENKEL KGA PREF. Chemicals (Diversified) 2,487.22 0.62%
KAUFHOF Retail -- Department Stores 2,478.70 0.62%
HEIDELBERGER ZEMENT Building Materials 2,420.88 0.60%
METALLGESELLSCHAFT Non-Ferrous Metals 2,377.80 0.59%
SPRINGER (AXEL) VERLAG REG Publishing 2,280.44 0.57%
ALTANA Drugs 2,275.20 0.57%
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
BHF-BANK Commercial Banks & Other Banks 2,271.68 0.57%
COLONIA KONZERN REGD. Insurance -- Multiline 2,199.25 0.55%
RHEINELEKTRA Electrical Equipment 2,171.45 0.54%
ASKO DEUTSCHE KAUFHAUS Retail -- Department Stores 2,076.35 0.52%
VOLKSWAGEN PREF Automobiles 1,569.89 0.39%
HOLZMANN (PHILIPP) Construction 1,548.02 0.39%
BILFINGER & BERGER Construction 1,365.75 0.34%
CONTINENTAL Tyre & Rubber Goods 1,323.99 0.33%
DOUGLAS HLDG. Retail -- Drug Chains 1,058.78 0.26%
PWA Paper & Paper Products 1,055.40 0.26%
MAN PREF. Machinery -- Industrial & Speciality 949.71 0.24%
AGIV Diversified Industrials 850.97 0.21%
DEUTSCHE BABCOCK Engineering Services & Pollution Control 643.12 0.16%
AACH. & MUNCH. BET. BR. Insurance -- Multiline 559.49 0.14%
MUNICH RE Insurance -- Multiline 555.44 0.14%
KAUFHOF PREF Retail -- Department Stores 485.75 0.12%
BMW (PREF.) Automobiles 457.23 0.11%
LINOTYPE-HELL Electronics 247.33 0.06%
FT -- GERMANY 401,945.36
</TABLE>
C-2
<PAGE>
APPENDIX D
FT/S&P-Actuaries World Indices
Hong Kong Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
HUTCHISON WHAMPOA Diversified Consumer Goods & Services 22,015.24 10.34%
HONG KONG TELECOMM Telephone Companies 19,904.87 9.35%
SUN HUNG KAI PROPS Real Estate 19,014.92 8.93%
HANG SENG BANK Commercial Banks & Other Banks 17,298.63 8.13%
CHEUNG KONG Real Estate 13,386.22 6.29%
HENDERSON LAND Real Estate 9,618.63 4.52%
CHINA LIGHT & POWER Electric Utilities & Water Works Supply 9,165.22 4.31%
SWIRE PACIFIC 'A' Diversified Holding Companies 7,527.04 3.54%
NEW WORLD DEV Real Estate 7,302.91 3.43%
WHARF HLDS Diversified Holding Companies 7,223.95 3.39%
CITIC PACIFIC $HK0.40 Real Estate 6,886.63 3.24%
HONG KONG ELECTRIC Electric Utilities & Water Works Supply 6,623.66 3.11%
JARDINE MATHESON Diversified Consumer Goods & Services 5,070.87 2.38%
HONG KONG LAND Real Estate 5,006.61 2.35%
CATHAY PACIFIC A/WYS Airlines 4,371.49 2.05%
HK & CHINA GAS Natural Gas Utilities 3,999.14 1.88%
SWIRE PACIFIC 'B' Diversified Holding Companies 3,839.82 1.80%
WHEELOCK AND CO. Retail -- Miscellaneous & Speciality 3,453.73 1.62%
JARDINE STRATEGIC Diversified Holding Companies 3,249.38 1.53%
BANK OF EAST ASIA Commercial Banks & Other Banks 3,215.07 1.51%
HYSAN DEV Real Estate 2,666.36 1.25%
HOPEWELL Real Estate 2,516.39 1.18%
AMOY PROPERTIES Real Estate 2,489.72 1.17%
HANG LUNG DEV Real Estate 2,144.49 1.01%
HENDERSON INVESTMENT Real Estate 2,106.35 0.99%
GUOCO GROUP LIMITED Financial Services 2,058.06 0.97%
SINO LAND Real Estate 1,900.90 0.89%
DAIRY FARM INTL Retail -- Miscellaneous & Speciality 1,608.60 0.76%
HK & SHANGHAI HOTELS Restaurants & Hotels 1,562.77 0.73%
TELEVISION BROADCAST Broadcasting Media 1,496.48 0.70%
MIRAMAR HOTEL Restaurants & Hotels 1,216.84 0.57%
GREAT EAGLE HLDS Real Estate 1,163.53 0.55%
SHUN TAK HOLDINGS LTD Sea Transport 1,031.33 0.48%
CHINESE ESTATES Real Estate 1,030.83 0.48%
SOUTH CHINA MORNING POST Publishing -- Newspapers 916.62 0.43%
$HK0.10
MANDARIN ORIENTAL Restaurants & Hotels 864.04 0.41%
NEW ASIA REALTY & TS Real Estate 695.67 0.33%
JOHNSON ELECTRIC Electrical Equipment 680.34 0.32%
REALTY DEV 'A' Real Estate 658.41 0.31%
KOWLOON MOTOR Rail & Road Transport 657.75 0.31%
</TABLE>
D-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
DICKSON CONCEPTS INT Retail -- Miscellaneous & Speciality 632.69 0.30%
SEMI-TECH (GLOBAL) Household Durables & Appliances 569.63 0.27%
JARDINE INTNL. MOTOR Automobiles 543.26 0.26%
HK AIRCRAFT Aircraft Manufacturers 479.02 0.23%
SIME DARBY Wholesale -- Durables 449.17 0.21%
SHAW BROS Entertainment & Leisure Time 437.95 0.21%
CHINA MOTOR BUS Rail & Road Transport 400.92 0.19%
HARBOUR CENTRE DEV Restaurants & Hotels 364.61 0.17%
CROSS-HARBOUR TUNNEL Storage, Warehousing & Supporting Transport
Services 363.09 0.17%
WING ON CO INTL LTD Retail -- Department Stores 285.29 0.13%
WINSOR INDUSTRIAL Textile Products 219.98 0.10%
SUN HUNG KAI Financial Institutions 147.62 0.07%
PLAYMATES TOYS HLDG Toys 131.68 0.06%
LANE CRAWFORD INTL A Retail -- Miscellaneous & Speciality 91.23 0.04%
PLAYMATES PROP HLDGS Real Estate 78.64 0.04%
FT-HONG KONG 212,834.30
</TABLE>
D-2
<PAGE>
APPENDIX E
FT/S&P-Actuaries World Indices
Italy Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
GENERALI (ASSICURAZIONI) Insurance -- Multiline 19,428.59 13.90%
TELECOM ITAL MOBILE Telephone Companies 11,696.76 8.37%
STET Telephone Companies 10,851.94 7.77%
FIAT Automobiles 10,682.56 7.64%
TELECOM ITALIA Telephone Companies 10,336.68 7.40%
INA Insurance -- Life & Agents & Brokers 5,307.45 3.80%
ALLEANZA (ASSICURAZIONI) Insurance -- Multiline 5,261.50 3.77%
SAN PAOLO Commercial Banks & Other Banks 4,342.75 3.11%
ENI Oil Internationals 4,197.64 3.00%
IMI Financial Institutions 3,782.03 2.71%
MONTEDISON Diversified Holding Companies 3,569.69 2.55%
RAS Insurance -- Multiline 3,402.06 2.43%
BANCA COMM. ITALIANA Commercial Banks & Other Banks 3,363.31 2.41%
MEDIOBANCA Financial Institutions 3,298.95 2.36%
STET RISP Telephone Companies 2,955.00 2.11%
OLIVETTI ORD Office Equipment 2,833.56 2.03%
CREDITO ITALIANO Commercial Banks & Other Banks 2,588.75 1.85%
ITALGAS Natural Gas Utilities 2,015.53 1.44%
TELECOM ITALIA SVGS Telephone Companies 1,915.69 1.37%
PIRELLI SPA Tyre & Rubber Goods 1,898.25 1.36%
FIAT PTC PREF Automobiles 1,738.11 1.24%
FONDIARIA Insurance -- Multiline 1,685.93 1.21%
TELECOM ITAL MOB RIS Telephone Companies 1,647.37 1.18%
BANCO AMBROVENETO Commercial Banks & Other Banks 1,368.18 0.98%
SAI Insurance -- Multiline 1,256.43 0.90%
SIRTI Communications Equipment 1,236.98 0.89%
GEMINA Investment Companies 1,229.42 0.88%
IFIL Food Processors 1,178.70 0.84%
FIAT SVG N/CV Automobiles 1,135.19 0.81%
ITALCEMENTI Building Materials 974.05 0.70%
RINASCENTE ORD Retail -- Department Stores 957.79 0.69%
SME Food Processors 928.35 0.66%
SAIPEM Energy Equipment & Services 918.74 0.66%
TORO ASSICURAZIONI Insurance -- Multiline 840.89 0.60%
FIDIS Investment Companies 719.77 0.52%
RAS SVGS N/CV Insurance -- Multiline 690.82 0.49%
BURGO (CARTIERE) Paper & Paper Products 629.75 0.45%
ALLEANZA ASSIC N\CV Insurance -- Multiline 607.24 0.43%
IFIL N/C SVGS. Food Processors 586.08 0.42%
IFI PTC PREF Diversified Holding Companies 573.34 0.41%
SNIA BPD Chemicals, Fibres, Paints & Gases 568.98 0.41%
MAGNETI MARELLI Auto Parts -- Original Equipment 483.43 0.35%
MILANO ASSICURAZIONI Insurance -- Multiline 482.60 0.35%
MONTEDISON SVG. N/CV. Diversified Holding Companies 428.79 0.31%
CIR-COMPAGNIE Diversified Holding Companies 376.23 0.27%
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
SASIB Machinery 370.09 0.26%
UNICEM Building Materials 342.40 0.25%
MARZOTTO Clothing 339.45 0.24%
BANCO AMBROVEN N/C SVGS Commercial Banks & Other Banks 282.29 0.20%
ITALCEMENTI SVGS N/CV Building Materials 249.79 0.18%
SAI SVGS N/CV Insurance -- Multiline 243.43 0.17%
TORO ASSICURAZIONI SVG N/CV Insurance -- Multiline 201.86 0.14%
EDITOR L'ESPRESSO Publishing -- Newspapers 181.79 0.13%
SASIB SVG N/CV Machinery 157.35 0.11%
TORO ASS. PTC PREF Insurance -- Multiline 130.31 0.09%
UNICEM SVG N/CV Building Materials 109.72 0.08%
CIR-COMPAGNIE SVG N/CV Diversified Holding Companies 101.85 0.07%
BANCA COMM. ITALIANA SVGS N/CV Commercial Banks & Other Banks 32.23 0.02%
CREDITO ITALIANO SVG N/CV Commercial Banks & Other Banks 21.89 0.02%
FT-ITALY 139,736.27
</TABLE>
E-2
<PAGE>
APPENDIX F
FT/S&P-Actuaries World Indices
Japan Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
TOYOTA MOTOR Automobiles 79,406.90 2.79%
IND BANK OF JAPAN Commercial Banks & Other Banks 71,349.68 2.51%
MITSUBISHI BANK Commercial Banks & Other Banks 67,859.35 2.38%
SUMITOMO BANK Commercial Banks & Other Banks 66,685.34 2.34%
FUJI BANK Commercial Banks & Other Banks 64,038.21 2.25%
DAI-ICHI KANGYO BANK Commercial Banks & Other Banks 61,412.70 2.16%
SANWA BANK Commercial Banks & Other Banks 59,057.54 2.07%
SAKURA BANK LTD. Commercial Banks & Other Banks 43,484.60 1.53%
NOMURA SECURITIES Financial Institutions 42,816.14 1.50%
TOKYO ELEC POWER Electric Utilities & Water Works Supply 36,197.12 1.27%
BANK OF TOKYO Commercial Banks & Other Banks 35,709.59 1.25%
HITACHI Electronics 34,241.16 1.20%
MATSUSHITA ELECT IND Household Durables & Appliances 34,156.38 1.20%
ASAHI BANK Commercial Banks & Other Banks 29,261.94 1.03%
TOKAI BANK Commercial Banks & Other Banks 28,323.71 1.00%
MITSUBISHI HEAVY IND Heavy Engineering & Shipbuilding 26,884.56 0.94%
SEVEN-ELEVEN Retail -- Grocery Chains 26,718.13 0.94%
NTT Telephone Companies 26,265.41 0.92%
ITO YOKADO Retail -- Grocery Chains 25,583.50 0.90%
TOSHIBA Electronics 25,245.00 0.89%
KANSAI ELEC POWER Electric Utilities & Water Works Supply 23,717.67 0.83%
NIPPON STEEL Iron & Steel 23,644.28 0.83%
SONY CORP Household Durables & Appliances 22,438.87 0.79%
MITSUBISHI TRUST BNK Financial Services 21,714.51 0.76%
DAIWA SECURITIES Financial Institutions 20,591.39 0.72%
FUJITSU Computers 20,526.15 0.72%
LONG TERM CREDIT BK Commercial Banks & Other Banks 20,413.51 0.72%
TOKIO MARINE & FIRE Insurance -- Property & Casualty 20,254.45 0.71%
SEIBU RAILWAY Rail & Road Transport 20,162.49 0.71%
HONDA MOTOR Automobiles 20,115.40 0.71%
EAST JAPAN RAILWAY Rail & Road Transport 19,465.85 0.68%
NISSAN MOTOR Automobiles 19,316.44 0.68%
MITSUBISHI CORP Wholesale -- Durables 19,292.14 0.68%
NIKKO SECS Financial Institutions 18,939.50 0.67%
NEC CORP Electronics 18,879.40 0.66%
SHARP CORP Household Durables & Appliances 17,823.42 0.63%
CHUBU ELEC POWER Electric Utilities & Water Works Supply 17,631.17 0.62%
SUMITOMO TRUST BANK Financial Services 17,609.11 0.62%
NIPPONDENSO Auto Parts -- Original Equipment 16,265.63 0.57%
MITSUBISHI ESTATE Real Estate 16,246.90 0.57%
MITSUBISHI ELECTRIC Electronics 15,464.00 0.54%
CANON Office Equipment 15,156.16 0.53%
FUJI PHOTO FILM Photography 14,866.80 0.52%
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
TAKEDA CHEMICAL Drugs 14,431.88 0.51%
KYOCERA Electronics 13,900.60 0.49%
MITSUI Wholesale -- Durables 13,640.48 0.48%
MITSUI TRUST&BANKING Financial Services 13,126.61 0.46%
ASAHI GLASS Diversified Industrials 13,101.77 0.46%
DAI-NIPPON PRINTING Printing 12,725.06 0.45%
BRIDGESTONE CORP Tyre & Rubber Goods 12,465.85 0.44%
KIRIN BREWERY Beverages -- Brewers 12,447.56 0.44%
DAIWA BANK Commercial Banks & Other Banks 12,308.55 0.43%
TOHOKU ELEC POWER Electric Utilities & Water Works Supply 12,138.80 0.43%
KINKI NIPPON RAILWAY Rail & Road Transport 11,892.95 0.42%
KAWASAKI STEEL Iron & Steel 11,347.58 0.40%
SANYO ELECTRIC Household Durables & Appliances 11,249.29 0.40%
KYUSHU ELEC POWER Electric Utilities & Water Works Supply 11,216.20 0.39%
ASAHI CHEMICAL INDS Chemicals (Diversified) 11,048.09 0.39%
SUMITOMO SHOJI Wholesale -- Durables 10,834.51 0.38%
NINTENDO Toys 10,780.88 0.38%
MITSUBISHI KASEI Chemicals, Fibres, Paints & Gases 10,661.87 0.37%
FANUC Instrumentation & Control Equipment 10,370.85 0.36%
NIPPON EXPRESS Freight Forwarders 10,351.93 0.36%
SHIZUOKA BANK Commercial Banks & Other Banks 10,139.71 0.36%
SANKYO Drugs 10,081.00 0.35%
MITSUI FUDOSAN Real Estate 10,001.95 0.35%
TOKYO GAS Natural Gas Utilities 9,915.51 0.35%
KAJIMA Construction 9,674.07 0.34%
ITOCHU CORP Wholesale -- Durables 9,603.20 0.34%
SUMITOMO METAL Iron & Steel 9,544.00 0.34%
NKK Iron & Steel 9,495.96 0.33%
TONEN CORP Petroleum Products & Refineries 9,464.25 0.33%
YAMAICHI SECURITIES Financial Institutions 9,408.69 0.33%
BANK OF YOKOHAMA Commercial Banks & Other Banks 9,320.34 0.33%
TORAY INDS Chemicals, Fibres, Paints & Gases 9,238.60 0.32%
TOPPAN PRINTING Printing 9,219.27 0.32%
KUBOTA Machinery -- Farm Equipment 9,087.50 0.32%
SEKISUI HOUSE Homebuilding 8,796.95 0.31%
KOBE STEEL Iron & Steel 8,768.40 0.31%
OSAKA GAS Natural Gas Utilities 8,749.49 0.31%
MURATA MFG Electronics 8,677.20 0.30%
DAIEI Retail -- Grocery Chains 8,648.34 0.30%
CHUGOKU ELEC POWER Electric Utilities & Water Works Supply 8,597.00 0.30%
SUMITOMO ELECTRIC Electrical Equipment 8,545.74 0.30%
KOMATSU Machinery -- Construction 8,272.34 0.29%
SEKISUI CHEMICAL Building Materials 8,132.73 0.29%
SUMITOMO CHEMICAL Chemicals, Fibres, Paints & Gases 8,096.21 0.28%
MARUBENI CORP Wholesale -- Durables 8,092.34 0.28%
JUSCO Retail -- Grocery Chains 8,046.79 0.28%
SHIMIZU CORP Construction 8,025.73 0.28%
NIPPON CREDIT BANK Commercial Banks & Other Banks 7,941.01 0.28%
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
SECOM Business Services 7,922.50 0.28%
DAIWA HOUSE INDUSTRY Homebuilding 7,887.99 0.28%
MATSUSHITA ELEC WKS Electrical Equipment 7,849.75 0.28%
TOKYU Rail & Road Transport 7,761.96 0.27%
NIPPON OIL Petroleum Products & Refineries 7,726.07 0.27%
MARUI Retail -- Department Stores 7,676.89 0.27%
MITSUBISHI MOTORS Automobiles 7,504.84 0.26%
KAO Soaps 7,451.16 0.26%
TOSTEM CORP Building Materials 7,272.88 0.26%
AJINOMOTO Food Processors 7,234.23 0.25%
RICOH Office Equipment 7,138.67 0.25%
CHIBA BANK Commercial Banks & Other Banks 7,013.02 0.25%
YAMANOUCHI PHARM Drugs 6,958.55 0.24%
TOYO TST AND BANKING Financial Institutions 6,948.65 0.24%
NIPPON YUSEN Sea Transport 6,817.73 0.24%
TAISEI CORP Construction 6,810.75 0.24%
SHIN-ETSU CHEMICAL Chemicals (Diversified) 6,734.68 0.24%
NEW OJI PAPER Paper & Paper Products 6,726.98 0.24%
TDK Household Durables & Appliances 6,717.99 0.24%
TAISHO PHARM Drugs 6,713.00 0.24%
NIPPON PAPER CO. Paper & Paper Products 6,592.71 0.23%
YASUDA TST AND BANK Financial Institutions 6,534.85 0.23%
JOYO BANK Commercial Banks & Other Banks 6,469.90 0.23%
SHIKOKU ELEC POWER Electric Utilities & Water Works Supply 6,463.18 0.23%
HACHIJUNI BANK Commercial Banks & Other Banks 6,327.78 0.22%
YASUDA FIRE & MARINE Insurance -- Property & Casualty 6,285.02 0.22%
ROHM (OK) Electronics 6,226.83 0.22%
KAWASAKI HEAVY Heavy Engineering & Shipbuilding 6,216.55 0.22%
OMRON TATEISI ELECT Electrical Equipment 6,047.21 0.21%
TOYO SEIKAN Containers 6,042.51 0.21%
OHBAYASHI-GUMI Construction 5,923.37 0.21%
MITSUBISHI MATERIALS Non-Ferrous Metals 5,881.77 0.21%
TOKYO ELECTRON Electronics 5,805.10 0.20%
SONY MUSIC ENTMNT Entertainment & Leisure Time 5,663.02 0.20%
SEGA ENTERPRISES Toys 5,560.68 0.20%
GUNMA BANK Commercial Banks & Other Banks 5,507.80 0.19%
OKI ELECTRIC Communications Equipment 5,507.35 0.19%
SUMITOMO MARINE&FIRE Insurance -- Property & Casualty 5,487.01 0.19%
IHI Heavy Engineering & Shipbuilding 5,475.70 0.19%
TOBU RAILWAY Rail & Road Transport 5,377.37 0.19%
HITACHI ZOSEN Heavy Engineering & Shipbuilding 5,197.44 0.18%
MITSUI MARINE & FIRE Insurance -- Property & Casualty 5,182.16 0.18%
HOKKAIDO ELEC POWER Electric Utilities & Water Works Supply 5,125.30 0.18%
HOKURIKU ELEC POWER Electric Utilities & Water Works Supply 5,126.27 0.18%
TOYODA AUTO LOOM Machinery -- Industrial & Speciality 5,058.92 0.18%
ASAHI BREWERIES Beverages -- Brewers 5,023.68 0.18%
NIKON CORP Instrumentation & Control Equipment 5,020.59 0.18%
BANK OF FUKUOKA Commercial Banks & Other Banks 5,017.53 0.18%
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
SUMITOMO METAL MNG Precious Metals & Minerals 5,005.86 0.18%
SUZUKI MOTOR Automobiles 5,001.85 0.18%
TEIJIN Chemicals, Fibres, Paints & Gases 4,987.81 0.18%
ODAKYU ELEC RAILWAY Rail & Road Transport 4,860.02 0.17%
ISUZU MOTORS Automobiles 4,806.25 0.17%
ALL NIPPON AIRWAYS Airlines 4,801.36 0.17%
SHISEIDO Cosmetics 4,772.09 0.17%
TOTO Building Materials 4,715.62 0.17%
ONO PHARMACEUTICAL Drugs 4,706.80 0.17%
HANKYU CORP Rail & Road Transport 4,701.32 0.17%
MAZDA MOTOR Automobiles 4,588.39 0.16%
MITSUKOSHI Retail -- Department Stores 4,524.41 0.16%
EISAI Drugs 4,513.19 0.16%
TAKASHIMAYA Retail -- Department Stores 4,493.50 0.16%
HITACHI METALS Iron & Steel 4,466.56 0.16%
MATSUSHITA COMMS Communications Equipment 4,376.80 0.15%
YAMATO TRANSPORT Freight Forwarders 4,343.62 0.15%
HOKURIKU BANK Commercial Banks & Other Banks 4,303.33 0.15%
KYOWA HAKKO KOGYO Drugs 4,214.42 0.15%
EBARA Machinery -- Industrial & Speciality 4,205.88 0.15%
KINDEN Electrical Equipment 4,124.94 0.14%
NISSHIN STEEL Iron & Steel 4,109.31 0.14%
YAMAZAKI BAKING Food Processors 4,100.06 0.14%
NIPPON SEIKO Machinery -- Industrial & Speciality 4,071.32 0.14%
KOKUSAI SECURITIES Financial Institutions 4,066.46 0.14%
NISSHO-IWAI Wholesale -- Durables 4,027.54 0.14%
MATSUSHITA KOTOBUKI Household Durables & Appliances 4,016.70 0.14%
NAGOYA RAILROAD Rail & Road Transport 4,014.03 0.14%
HOYA Instrumentation & Control Equipment 3,996.33 0.14%
MITSUBISHI OIL Petroleum Products & Refineries 3,989.52 0.14%
KEYENCE CORP Instrumentation & Control Equipment 3,959.30 0.14%
NIPPON FIRE & MARINE Insurance -- Property & Casualty 3,940.48 0.14%
JAPAN AIR LINES Airlines 3,937.29 0.14%
ASHIKAGA BANK Commercial Banks & Other Banks 3,883.31 0.14%
DAIICHI SEIYAKU Drugs 3,875.33 0.14%
KEIO TEITO ELEC RAIL Rail & Road Transport 3,762.63 0.13%
DAINIPPON INK & CHEM Chemicals (Diversified) 3,697.07 0.13%
JAPAN ENERGY CORP. Petroleum Products & Refineries 3,669.24 0.13%
NICHII Retail -- Grocery Chains 3,658.73 0.13%
AISIN SEIKI Auto Parts -- Original Equipment 3,653.15 0.13%
FUJI ELECTRIC Electrical Equipment 3,639.24 0.13%
ISETAN Retail -- Department Stores 3,631.31 0.13%
FAMILYMART Retail -- Grocery Chains 3,592.31 0.13%
UNY CO Y50 Retail -- General Merchandise 3,560.01 0.13%
NGK INSULATORS Diversified Industrials 3,549.32 0.12%
MITSUI OSK LINES Sea Transport 3,519.79 0.12%
SEVENTY-SEVEN BANK Commercial Banks & Other Banks 3,512.74 0.12%
YAMAHA Entertainment & Leisure Time 3,499.49 0.12%
GENERAL SEKIYU Petroleum Products & Refineries 3,479.55 0.12%
COSMO OIL Petroleum Products & Refineries 3,453.85 0.12%
NICHIDO FIRE & MAR Insurance -- Multiline 3,443.01 0.12%
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
JAPAN TOBACCO Tobacco Manufacturers 3,420.84 0.12%
YAMAGUCHI BANK Commercial Banks & Other Banks 3,412.34 0.12%
KURARAY Chemicals, Fibres, Paints & Gases 3,409.08 0.12%
CANON SALES Wholesale -- Durables 3,320.81 0.12%
NIPPON MEAT PACKERS Food Processors 3,312.28 0.12%
PIONEER ELECTRONIC Household Durables & Appliances 3,290.11 0.12%
MINEBEA Machinery 3,264.81 0.11%
SHOWA DENKO Chemicals, Fibres, Paints & Gases 3,260.37 0.11%
BANYU PHARMACEUTICAL Drugs 3,250.16 0.11%
NISHIMATSU CONSTRN Construction 3,240.48 0.11%
BANK OF HIROSHIMA Commercial Banks & Other Banks 3,230.37 0.11%
VICTOR CO OF JAPAN Household Durables & Appliances 3,228.23 0.11%
KURITA WATER Machinery -- Industrial & Speciality 3,218.46 0.11%
FURUKAWA ELECTRIC Electrical Equipment 3,212.61 0.11%
HEIWA Entertainment & Leisure Time 3,190.81 0.11%
UBE INDUSTRIES Chemicals (Diversified) 3,167.69 0.11%
SHOWA SHELL SEKIYU Petroleum Products & Refineries 3,160.06 0.11%
SAPPORO BREWERIES Beverages -- Brewers 3,150.97 0.11%
AUTOBACS Retail -- Miscellaneous & Speciality 3,142.42 0.11%
MITSUI TOATSU CHEM Chemicals, Fibres, Paints & Gases 3,143.79 0.11%
NATIONAL HOUSE Homebuilding 3,130.32 0.11%
NANKAI ELECTRIC RAIL Rail & Road Transport 3,125.96 0.11%
NISSIN FOOD Food Processors 3,120.58 0.11%
DAI TOKYO FIRE & MARINE Insurance -- Property & Casualty 3,110.06 0.11%
INSURANC
NTN TOYO-BEARING Machinery -- Industrial & Speciality 3,097.37 0.11%
ONODA CEMENT Building Materials 3,082.14 0.11%
FUJISAWA PHARM Drugs 3,081.26 0.11%
NIPPON LIGHT METAL Non-Ferrous Metals 3,080.79 0.11%
HINO MOTORS Automobiles 3,052.86 0.11%
KYUSHU MATSUSHITA Electronics 3,043.18 0.11%
KOKUYO Office Equipment 3,040.96 0.11%
NIPPON ELECTR GLASS Diversified Industrials 3,035.72 0.11%
KEIHIN ELEC EXP RAIL Rail & Road Transport 2,984.32 0.10%
SHIONOGI Drugs 2,958.04 0.10%
MABUCHI MOTORS Auto Parts -- Original Equipment 2,913.73 0.10%
TOSOH CORP Chemicals (Diversified) 2,894.00 0.10%
SUMITOMO REALTY Real Estate 2,878.89 0.10%
TOKYO STEEL Iron & Steel 2,874.53 0.10%
AMADA Machine Tools 2,866.51 0.10%
NEW JAPAN SECURITIES Financial Institutions 2,791.45 0.10%
TODA CORP Construction 2,790.98 0.10%
TOKYO DOME CORP Entertainment & Leisure Time 2,785.49 0.10%
SEIYU Retail -- Grocery Chains 2,777.11 0.10%
HOKKAIDO TAKUSHOKU Commercial Banks & Other Banks 2,763.14 0.10%
PENTA OCEAN CONST Construction 2,742.77 0.10%
SUMITOMO FORESTRY Forestry Products 2,742.76 0.10%
HANKYU DEPT STORES Retail -- Department Stores 2,740.41 0.10%
TOHO Entertainment & Leisure Time 2,740.54 0.10%
KUMAGAI-GUMI Construction 2,738.61 0.10%
NGK SPARK PLUG CO Auto Parts -- Original Equipment 2,732.01 0.10%
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
CASIO COMPUTER Computers 2,702.97 0.10%
FUJITA TOURIST Restaurants & Hotels 2,698.17 0.09%
NISSHIN FLOUR Food Processors 2,692.66 0.09%
ORIX CORPORATION Financial Services 2,672.67 0.09%
FUKUYAMA TRANSPTNG Rail & Road Transport 2,669.14 0.09%
HITACHI CABLE Fabricated Metal Products 2,667.50 0.09%
JAPAN TELECOM Telephone Companies 2,622.34 0.09%
MITSUBISHI WAREHOUSE Storage, Warehousing & Supporting Transport
Services 2,623.05 0.09%
KONICA Photography 2,593.44 0.09%
DAIKIN INDUSTRIES Machinery -- Industrial & Speciality 2,583.03 0.09%
MAKITA ELECTRIC WKS Electrical Equipment 2,575.32 0.09%
MITSUBISHI RAYON Chemicals, Fibres, Paints & Gases 2,572.83 0.09%
OLYMPUS OPTICAL Instrumentation & Control Equipment 2,561.44 0.09%
SEINO TRANSPORT Rail & Road Transport 2,559.31 0.09%
MITSUI PETROCHEMICAL Chemicals (Diversified) 2,553.06 0.09%
TOYOBO Textile Products 2,485.20 0.09%
ONWARD KASHIYAMA Clothing 2,480.18 0.09%
TOMEN CORP Y50 Wholesale -- Durables 2,473.52 0.09%
YOKOGAWA ELECTRIC Instrumentation & Control Equipment 2,453.42 0.09%
SHIMANO IND Toys 2,404.80 0.08%
YAKULT HONSHA Food Processors 2,404.47 0.08%
CITIZEN WATCH Instrumentation & Control Equipment 2,401.22 0.08%
CHUGAI PHARM Drugs 2,362.93 0.08%
NITTO ELECTRIC IND Electronics 2,350.37 0.08%
MEIJI SEIKA Food -- Sugar & Confectionary 2,348.18 0.08%
NIPPON SHINPAN Financial Services 2,349.76 0.08%
KANDENKO Electrical Equipment 2,333.84 0.08%
MITSUI ENG & SHIPBLD Heavy Engineering & Shipbuilding 2,311.99 0.08%
FUJI HEAVY INDS Automobiles 2,309.50 0.08%
AOYAMA TRADING Retail -- Miscellaneous & Speciality 2,292.15 0.08%
NISSHINBO INDS Textile Products 2,292.08 0.08%
INAX Building Materials 2,280.12 0.08%
OKUMURA CORP Construction 2,259.45 0.08%
HIROSE ELECTRONICS Electronics 2,256.88 0.08%
SHIMA SEIKI MANUFACT Machinery -- Industrial & Speciality 2,249.53 0.08%
MITSUBISHI GAS CHEM Chemicals, Fibres, Paints & Gases 2,247.35 0.08%
CHUO TST AND BANKING Financial Institutions 2,234.87 0.08%
FUJITA CORP Construction 2,233.45 0.08%
ARABIAN OIL Oil -- Crude Producers 2,215.02 0.08%
FUJIKURA Fabricated Metal Products 2,213.68 0.08%
KANEGAFUCHI CHEMICAL Chemicals (Diversified) 2,208.61 0.08%
MORI SEIKI Machine Tools 2,196.07 0.08%
NIHON CEMENT Building Materials 2,190.86 0.08%
MATSUZAKAYA Retail -- Department Stores 2,169.78 0.08%
DAIDO STEEL Iron & Steel 2,165.37 0.08%
HITACHI CREDIT Financial Services 2,153.09 0.08%
DAICEL CHEMICAL Chemicals, Fibres, Paints & Gases 2,127.98 0.07%
SUMITOMO OSAKA CEMNT Building Materials 2,127.41 0.07%
HONSHU PAPER Paper & Paper Products 2,117.29 0.07%
SUMITOMO HEAVY INDS Heavy Engineering & Shipbuilding 2,117.27 0.07%
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
DAIMARU Retail -- Department Stores 2,100.38 0.07%
WACOAL Clothing 2,091.64 0.07%
HITACHI CHEMICAL Y50 Chemicals, Fibres, Paints & Gases 2,077.21 0.07%
SNOW BRAND MILK Food Processors 2,073.65 0.07%
ALPS ELECTRIC Electronics 2,066.51 0.07%
BANK OF KYOTO Commercial Banks & Other Banks 2,055.91 0.07%
HOUSE FOOD INDS Food Processors 2,054.57 0.07%
TAKARA SHUZO Beverages -- Distillers 2,020.41 0.07%
NICHIREI Storage, Warehousing & Supporting Transport
Services 2,018.97 0.07%
CSK CORP Computer Software & Services 2,008.15 0.07%
CHIYODA FIRE & MAR Insurance -- Property & Casualty 2,003.56 0.07%
MOCHIDA PHARM Drugs 2,004.52 0.07%
TOKYU LAND Real Estate 1,994.72 0.07%
NIPPON HODO Construction 1,986.16 0.07%
MITSUI MIN & SMELT Non-Ferrous Metals 1,966.63 0.07%
MITSUBISHI PAPER Paper & Paper Products 1,963.02 0.07%
ORIENT FINANCE Financial Services 1,948.67 0.07%
A T & T GLOBAL INFO Communications Equipment 1,932.24 0.07%
CHIYODA CHEMICAL ENG Heavy Engineering & Shipbuilding 1,930.38 0.07%
NIPPON SHOKUBAI Chemicals, Fibres, Paints & Gases 1,927.68 0.07%
YORK-BENIMARU Retail -- Grocery Chains 1,923.42 0.07%
YOKOHAMA RUBBER Tyre & Rubber Goods 1,918.95 0.07%
NIPPON SHEET GLASS Diversified Industrials 1,912.83 0.07%
BEST DENKI Office Equipment 1,875.78 0.07%
DOWA FIRE & MARINE Insurance -- Property & Casualty 1,869.86 0.07%
JGC CORP Heavy Engineering & Shipbuilding 1,863.86 0.07%
KAWASAKI KISEN Sea Transport 1,861.71 0.07%
SKYLARK Restaurants & Hotels 1,837.08 0.06%
TOKYU DEPT STORE Retail -- Department Stores 1,828.18 0.06%
SUMITOMO BAKELITE Chemicals, Fibres, Paints & Gases 1,802.59 0.06%
TOKUYAMA CORP Chemicals (Diversified) 1,801.90 0.06%
TEIKOKU OIL Non-Oil Energy Sources 1,796.09 0.06%
KOYO SEIKO Auto Parts -- Original Equipment 1,787.53 0.06%
AOKI CONSTRUCTION Construction 1,783.03 0.06%
MARUICHI STEEL TUBE Iron & Steel 1,780.15 0.06%
MEIJI MILK Food Processors 1,777.22 0.06%
HITACHI MAXELL Entertainment & Leisure Time 1,767.48 0.06%
TOKYO STYLE Clothing 1,754.86 0.06%
MAEDA CORP Construction 1,751.15 0.06%
TANABE SEIYAKU Drugs 1,742.55 0.06%
TERUMO CORP Drugs 1,741.95 0.06%
HASEKO Homebuilding 1,735.40 0.06%
IZUMIYA Retail -- Grocery Chains 1,729.71 0.06%
ITOHAM FOODS Food Processors 1,727.53 0.06%
SANWA SHUTTER Building Materials 1,719.14 0.06%
DAISHOWA PAPER MFG Paper & Paper Products 1,704.53 0.06%
DAITO TRUST CONSTUCT Homebuilding 1,680.63 0.06%
LION Soaps 1,673.33 0.06%
ZEXEL CORPN Auto Parts -- Original Equipment 1,673.71 0.06%
SHIMACHU Retail -- General Merchandise 1,647.76 0.06%
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
TOYOTA TSUSHO Y50 Fabricated Metal Products 1,634.81 0.06%
MINOLTA CAMERA Office Equipment 1,631.98 0.06%
HANWA Wholesale -- Durables 1,617.45 0.06%
DAIFUKU Machinery -- Farm Equipment 1,608.83 0.06%
SATO KOGYO CO Y50 Construction 1,609.69 0.06%
DAINIPPON PHARM Drugs 1,599.35 0.06%
KISSEI PHARMACUTICAL Drugs 1,596.71 0.06%
JAPAN SYNTH RUBBER Tyre & Rubber Goods 1,579.65 0.06%
KOKUSAI ELECTRIC Communications Equipment 1,518.30 0.05%
GREEN CROSS Drugs 1,495.83 0.05%
JAPAN RADIO Communications Equipment 1,471.32 0.05%
BROTHER INDS Office Equipment 1,461.41 0.05%
NIPPON SANSO Chemicals, Fibres, Paints & Gases 1,459.96 0.05%
KIKKOMAN Food Processors 1,452.90 0.05%
UNITIKA Chemicals, Fibres, Paints & Gases 1,448.83 0.05%
FUJI FIRE & MARINE Insurance -- Property & Casualty 1,443.58 0.05%
TOYO INK Chemicals, Fibres, Paints & Gases 1,442.24 0.05%
NISSAN FIRE & MARINE Insurance -- Property & Casualty 1,433.05 0.05%
TOA Construction 1,431.78 0.05%
FUDO CONSTRUCTION Construction 1,427.89 0.05%
NIPPON SHARYO Auto Trucks & Parts 1,415.48 0.05%
DAIKYO Homebuilding 1,383.28 0.05%
NORITAKE Household Durables & Appliances 1,371.30 0.05%
HAZAMA-GUMI Construction 1,369.53 0.05%
NIPPON PAINT Chemicals, Fibres, Paints & Gases 1,363.61 0.05%
NISSEI SANGYO Wholesale -- Durables 1,360.18 0.05%
IWATANI Wholesale -- Nondurables 1,340.22 0.05%
GUNZE Clothing 1,307.52 0.05%
NAGASE Wholesale -- Durables 1,303.56 0.05%
NIPPON ZEON Chemicals, Fibres, Paints & Gases 1,302.43 0.05%
YAMATAKE HONEYWELL Instrumentation & Control Equipment 1,302.89 0.05%
KANSAI PAINT Chemicals, Fibres, Paints & Gases 1,298.83 0.05%
YOSHITOMI PHARM Drugs 1,296.99 0.05%
TOSHOKU Wholesale -- Nondurables 1,291.09 0.05%
ANRITSU Communications Equipment 1,285.20 0.05%
MATSUSHITA REFRIGER Household Durables & Appliances 1,283.87 0.05%
HANSHIN ELECT RAIL Rail & Road Transport 1,282.06 0.05%
EZAKI GLICO Food -- Sugar & Confectionary 1,273.73 0.04%
KANEBO Textile Products 1,272.71 0.04%
ATSUGI NYLON Clothing 1,265.25 0.04%
OKUMA MACHINERY Machine Tools 1,258.80 0.04%
DOWA MINING Non-Ferrous Metals 1,243.31 0.04%
MITSUMI ELECTRIC Electronics 1,240.43 0.04%
JAPAN STORAGE BATTRY Auto Parts -- Original Equipment 1,236.23 0.04%
NHK SPRING Auto Parts -- Original Equipment 1,230.33 0.04%
NIPPON SUISAN Food Processors 1,230.27 0.04%
NOK Auto Parts -- Original Equipment 1,225.38 0.04%
NIPPON KAYAKU Drugs 1,204.80 0.04%
TOYO CONSTRUCTION Construction 1,203.82 0.04%
AMANO CORP Instrumentation & Control Equipment 1,199.35 0.04%
MIZUNO Entertainment & Leisure Time 1,187.57 0.04%
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
TEKKEN CONSTRUCTION Construction 1,187.12 0.04%
MORINAGA MILK Food Processors 1,177.73 0.04%
SANKYU Rail & Road Transport 1,170.82 0.04%
TSUBAKIMOTO CHAIN Machinery -- Industrial & Speciality 1,158.12 0.04%
NAVIX LINE LTD Sea Transport 1,155.19 0.04%
SANYO CHEMICAL Chemicals, Fibres, Paints & Gases 1,138.51 0.04%
STANLEY ELECTRIC Auto Parts -- Original Equipment 1,137.70 0.04%
KANEMATSU CORPN Wholesale -- Durables 1,135.66 0.04%
MISAWA HOMES Homebuilding 1,125.28 0.04%
KDD Telephone Companies 1,121.51 0.04%
MITSUI-SOKO Storage, Warehousing & Supporting Transport
Services 1,119.05 0.04%
HITACHI KOKI Electrical Equipment 1,116.72 0.04%
TOKYU CONSTRUCTION Construction 1,109.81 0.04%
NISSHIN OIL MILLS Food Processors 1,107.14 0.04%
NISSAN DIESEL MOTOR Automobiles 1,102.61 0.04%
KOITO MFG Auto Parts -- Original Equipment 1,090.37 0.04%
YASKAWA ELECTRIC Electrical Equipment 1,085.08 0.04%
TOKAI CARBON Ceramic & Glass 1,074.85 0.04%
MERCIAN CORPN. Beverages -- Distillers 1,066.06 0.04%
JAPAN STEEL WORKS Machinery -- Industrial & Speciality 1,062.30 0.04%
NIIGATA ENG Machinery 1,055.48 0.04%
KUREHA CHEMICAL Chemicals, Fibres, Paints & Gases 1,041.90 0.04%
SHOWA ELEC WIRE Fabricated Metal Products 1,034.89 0.04%
ISEKI & CO Machinery -- Farm Equipment 1,034.58 0.04%
KURABO INDS Textile Products 1,033.61 0.04%
ISHIHARA SANGYO Chemicals, Fibres, Paints & Gases 1,029.88 0.04%
YUASA CORP Auto Parts -- Original Equipment 1,018.57 0.04%
MARUHA CORP Food Processors 1,014.98 0.04%
SUMITOMO LT METAL Non-Ferrous Metals 1,012.50 0.04%
DENNY'S JAPAN CO Restaurants & Hotels 983.78 0.03%
TOSHIBA MACHINERY Machinery -- Industrial & Speciality 982.44 0.03%
SHOWA SANGYO Food Processors 974.71 0.03%
CALSONIC CORPORATION Auto Parts -- Original Equipment 966.83 0.03%
SHOWA ALUMINIUM Non-Ferrous Metals 968.75 0.03%
NITSUKO Communications Equipment 965.48 0.03%
RENOWN Clothing 965.61 0.03%
MARUDAI FOOD Food Processors 949.70 0.03%
TOBISHIMA Construction 949.10 0.03%
NIPPON FLOUR MILLS Food Processors 941.00 0.03%
HATTORI SEIKO Instrumentation & Control Equipment 936.69 0.03%
SANDEN Auto Parts -- Original Equipment 926.25 0.03%
YAMATO KOGYO Iron & Steel 925.23 0.03%
SUMITOMO WAREHOUSE Storage, Warehousing & Supporting Transport
Services 915.78 0.03%
NACHI-FUJIKOSHI Machinery -- Industrial & Speciality 909.61 0.03%
MITSUBISHI PLASTICS Building Materials 909.19 0.03%
TOYO TIRE Tyre & Rubber Goods 908.92 0.03%
SANRIO Entertainment & Leisure Time 906.10 0.03%
TOEI Entertainment & Leisure Time 901.98 0.03%
SHOCHIKU Entertainment & Leisure Time 882.72 0.03%
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
RYOBI Machinery -- Industrial & Speciality 880.97 0.03%
HEIWA REAL ESTATE Real Estate 873.17 0.03%
MIKUNI COCA COLA Beverages -- Soft Drinks 836.58 0.03%
KAKEN PHARMACEUTICAL Drugs 827.62 0.03%
TOKYO ROPE Fabricated Metal Products 829.54 0.03%
NITTO BOSEKI Textile Products 825.95 0.03%
NIPPON ROAD Construction 823.29 0.03%
MAKINO MILLING MACHINE CO Machine Tools 807.43 0.03%
NISSIN ELECTRIC Electrical Equipment 801.78 0.03%
NIPPON YAKIN KOGYO Iron & Steel 772.27 0.03%
MITSUBISHI STEEL Iron & Steel 753.82 0.03%
CENTRAL GLASS Ceramic & Glass 750.86 0.03%
JAPAN METALS & CHEM Iron & Steel 748.85 0.03%
JAPAN WOOL Textile Products 748.33 0.03%
KAGOME Beverages -- Soft Drinks 719.26 0.03%
YAMAMURA GLASS Containers 720.49 0.03%
TOYO KANETSU Energy Equipment & Services 716.07 0.03%
SEIYO FOOD SYSTEMS Restaurants & Hotels 713.30 0.03%
ROYAL CO Restaurants & Hotels 689.46 0.02%
SETTSU Paper & Paper Products 689.91 0.02%
NIPPON TV Broadcasting Media 678.00 0.02%
GAKKEN Publishing 671.03 0.02%
ASICS CORP Footwear 655.44 0.02%
TOKICO Auto Parts -- Original Equipment 639.53 0.02%
NAGASAKIYA Retail -- Department Stores 637.30 0.02%
YOMIURI LAND Entertainment & Leisure Time 633.87 0.02%
IWATSU ELECTRIC Communications Equipment 633.23 0.02%
MITSUBOSHI BELTING Tyre & Rubber Goods 612.94 0.02%
GUN-EI CHEMICAL Chemicals, Fibres, Paints & Gases 604.44 0.02%
PRIMA MEAT PACKERS Food Processors 604.02 0.02%
TOSHIBA ENG & CONSTR Heavy Engineering & Shipbuilding 601.17 0.02%
TOKYU CAR Fabricated Metal Products 594.38 0.02%
NICHIRO GYOGYO Food Processors 590.01 0.02%
ASAHI OPTICAL Photography 583.47 0.02%
TOKYO BROADCASTING Broadcasting Media 576.31 0.02%
TAKAOKA ELECTRIC Electrical Equipment 573.09 0.02%
CENTRAL FINANCE Financial Services 564.94 0.02%
CALPIS FOOD INDS Beverages -- Soft Drinks 525.23 0.02%
FUJIYA Food -- Sugar & Confectionary 525.44 0.02%
NIHON NOSAN KOGYO Agriculture & Fishing 527.31 0.02%
SHOKUSAN JUTAKU SOGO Construction 528.03 0.02%
NIPPON SIGNAL Machinery -- Industrial & Speciality 511.55 0.02%
HYOGO BANK Commercial Banks & Other Banks 3.24 0.00%
FT-JAPAN 2,846,585.17
</TABLE>
F-10
<PAGE>
APPENDIX G
FT/S&P-Actuaries World Indices
South Africa Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
ANGLO AMER CORP Precious Metals & Minerals 14,081.27 10.05%
DE BEERS/CENTENARY Precious Metals & Minerals 11,524.54 8.23%
SA BREWERIES Beverages -- Brewers 10,786.24 7.70%
LIBERTY LIFE ASSOC. Insurance -- Life & Agents & Brokers 7,560.42 5.40%
STANDARD BK. INV. Commercial Banks & Other Banks 5,748.81 4.10%
REMBRANDT GP Tobacco Manufacturers 5,011.66 3.58%
SASOL Oil -- Crude Producers 4,876.15 3.48%
GENCOR Precious Metals & Minerals 4,832.76 3.45%
LIBERTY HLDGS. Insurance -- Life & Agents & Brokers 4,008.55 2.86%
FIRST NATL. BANK Commercial Banks & Other Banks 4,000.46 2.86%
NEDCOR Commercial Banks & Other Banks 3,669.83 2.62%
SMITH (CG) LTD. Diversified Holding Companies 3,617.44 2.58%
ANGLO AMERICAN IND Diversified Holding Companies 3,033.61 2.17%
GFSA Precious Metals & Minerals 2,896.25 2.07%
Barlow Limited Diversified Holding Companies 2,874.03 2.05%
NAMPAK Paper & Paper Products 2,805.17 2.00%
TIGER OATS Food Processors 2,604.21 1.86%
DRIEFONTEIN CONSOL Precious Metals & Minerals 2,588.12 1.85%
REMBRANDT CONTROLLING INV. Diversified Holding Companies 2,468.80 1.76%
ANGLOVAAL INDS. Diversified Holding Companies 2,394.10 1.71%
SAMANCOR Mining & Extractive Industries 2,384.46 1.70%
SAPPI Paper & Paper Products 2,367.47 1.69%
MURRAY & ROBERTS Construction 2,330.78 1.66%
JOHNNIC Diversified Industrials 2,272.21 1.62%
ISCOR Iron & Steel 2,126.49 1.52%
SOUTHERN LIFE ASSOC Insurance -- Life & Agents & Brokers 2,113.92 1.51%
RUSTENBURG PLATINUM Precious Metals & Minerals 2,103.88 1.50%
SAFREN Sea Transport 2,020.13 1.44%
AMGOLD Precious Metals & Minerals 1,967.28 1.40%
ANGLOVAAL LTD. (N.) Diversified Holding Companies 1,865.32 1.33%
TONGAAT-HULETT GP Food -- Sugar & Confectionary 1,584.04 1.13%
PREMIER GROUP HLDG Food Processors 1,380.91 0.99%
GENBEL Investment Companies 1,336.38 0.95%
KLOOF GOLD MINING Precious Metals & Minerals 1,330.68 0.95%
REUNERT Electrical Equipment 1,313.28 0.94%
MID WITS Precious Metals & Minerals 1,279.33 0.91%
VAAL REEFS EXP & MNG Precious Metals & Minerals 1,237.43 0.88%
JCI Precious Metals & Minerals 1,177.35 0.84%
IMPALA PLATINUM Precious Metals & Minerals 1,134.63 0.81%
WOOLTRU A Retail -- General Merchandise 1,101.86 0.79%
AMPLATS Precious Metals & Minerals 971.46 0.69%
WESTERN DEEP LEVEL Precious Metals & Minerals 927.44 0.66%
WOOLTRU LTD Retail -- General Merchandise 893.50 0.64%
FREEGOLD Precious Metals & Minerals 889.40 0.63%
HIGHVELD STEEL Iron & Steel 623.99 0.45%
FT-SOUTH AFRICA 140,116.03
</TABLE>
G-1
<PAGE>
APPENDIX H
FT/S&P-Actuaries World Indices
United Kingdom Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
GLAXO WELLCOME Drugs 49,765.54 4.56%
BRITISH PETROLEUM Oil Internationals 46,629.75 4.27%
SHELL TRANS & TRAD Oil Internationals 43,824.29 4.02%
BRITISH TELECOM Telephone Companies 34,569.22 3.17%
BAT INDUSTRIES Tobacco Manufacturers 27,221.05 2.49%
HSBC HOLDINGS (HK$10) Commercial Banks & Other Banks 27,041.66 2.48%
LLOYDS TSB GROUP Commercial Banks & Other Banks 26,149.85 2.40%
MARKS & SPENCER Retail -- General Merchandise 19,626.18 1.80%
BTR Diversified Industrials 19,263.47 1.77%
BARCLAYS Commercial Banks & Other Banks 18,611.26 1.71%
ZENECA Drugs 18,304.05 1.68%
NATL WESTMINSTER BANK Commercial Banks & Other Banks 17,805.59 1.63%
BRITISH GAS Natural Gas Utilities 17,268.42 1.58%
UNILEVER Food Processors 16,734.70 1.53%
CABLE & WIRELESS Telephone Companies 15,787.56 1.45%
RTZ (REG) Non-Ferrous Metals 15,527.00 1.42%
HANSON Diversified Holding Companies 15,506.06 1.42%
SMITHKLINE BEECHAM A Drugs 15,408.00 1.41%
REUTERS HOLDINGS Publishing 15,345.00 1.41%
GENERAL ELECTRIC Electronics 15,180.47 1.39%
GRAND METROPOLITAN Beverages -- Brewers 15,062.16 1.38%
GUINNESS Beverages -- Distillers 14,886.67 1.36%
SMITHKLINE BEECH/SMITH BECK Drugs 14,277.63 1.31%
UNIT
HSBC HOLDINGS (ORD 75P) Commercial Banks & Other Banks 13,427.60 1.23%
ABBEY NATIONAL Commercial Banks & Other Banks 13,036.86 1.19%
PRUDENTIAL CORP Insurance -- Life & Agents & Brokers 12,304.73 1.13%
SAINSBURY (J) Retail -- Grocery Chains 11,143.00 1.02%
VODAFONE GROUP Telephone Companies 10,929.68 1.00%
BRIT SKY BROADCASTNG Broadcasting Media 10,823.93 0.99%
GREAT UNIVERSAL STORES Retail -- Miscellaneous & Speciality 10,688.53 0.98%
THORN-EMI Entertainment & Leisure Time 10,127.22 0.93%
TESCO Retail -- Grocery Chains 9,914.00 0.91%
BASS Beverages -- Brewers 9,801.65 0.90%
BOOTS Retail -- General Merchandise 8,657.77 0.79%
REED INTL Publishing 8,612.29 0.79%
I.C.I Chemicals (Diversified) 8,580.61 0.79%
ALLIED DOMECQ Beverages -- Brewers 8,427.89 0.77%
STANDARD CHARTERED Commercial Banks & Other Banks 8,249.79 0.76%
CADBURY SCHWEPPES Food Processors 8,173.51 0.75%
NATIONAL POWER Electric Utilities & Water Works Supply 7,945.48 0.73%
BAA Storage, Warehousing & Supporting Transport
Services 7,765.09 0.71%
ROYAL BANK SCOTLAND Commercial Banks & Other Banks 7,348.96 0.67%
</TABLE>
H-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
BOC GROUP Chemicals, Fibres, Paints & Gases 6,724.65 0.62%
COMMERCIAL UNION Insurance -- Multiline 6,488.93 0.59%
RANK ORGANISATION Entertainment & Leisure Time 6,021.48 0.55%
POWERGEN Electric Utilities & Water Works Supply 6,014.72 0.55%
ARGYLL GROUP Retail -- Grocery Chains 6,014.56 0.55%
GRANADA GROUP Entertainment & Leisure Time 5,856.56 0.54%
SCOT & NEWCASTLE Beverages -- Brewers 5,834.10 0.53%
KINGFISHER Retail -- General Merchandise 5,630.66 0.52%
SCOTTISH POWER Electric Utilities & Water Works Supply 5,394.38 0.49%
PEARSON Publishing 5,383.10 0.49%
SIEBE Diversified Industrials 5,284.70 0.48%
TOMKINS Fabricated Metal Products 5,188.00 0.48%
ASSD BRITISH FOODS Food Processors 5,153.91 0.47%
BRITISH STEEL Iron & Steel 5,142.87 0.47%
BANK OF SCOTLAND Commercial Banks & Other Banks 5,132.03 0.47%
RENTOKIL GP Chemicals, Fibres, Paints & Gases 5,129.87 0.47%
LEGAL & GENERAL GROUP Insurance -- Life & Agents & Brokers 5,126.56 0.47%
WHITBREAD (ORD.) Beverages -- Brewers 5,093.62 0.47%
ASDA GROUP Retail -- Grocery Chains 5,013.85 0.46%
NORTH WEST WATER Electric Utilities & Water Works Supply 4,964.81 0.46%
LAND SECURITIES Real Estate 4,886.90 0.45%
LLOYDS ABBEY LIFE Insurance -- Life & Agents & Brokers 4,866.22 0.45%
FORTE Restaurants & Hotels 4,862.19 0.45%
GENERAL ACCIDENT Insurance -- Multiline 4,842.05 0.44%
SUN ALLIANCE GROUP Insurance -- Multiline 4,726.94 0.43%
RECKITT & COLMAN Health Care 4,693.76 0.43%
P. & O. DEFD STOCK Sea Transport 4,468.91 0.41%
GKN Auto Parts -- Original Equipment 4,219.07 0.39%
SEVERN TRENT WATER Electric Utilities & Water Works Supply 3,912.54 0.36%
ROYAL INSURANCE HDGS Insurance -- Multiline 3,903.90 0.36%
BLUE CIRCLE INDS Building Materials 3,897.16 0.36%
WOLSELEY Building Materials 3,865.61 0.35%
SOUTHERN ELECTRIC Electric Utilities & Water Works Supply 3,842.04 0.35%
GUARDIAN ROYAL EXCHANGE Insurance -- Multiline 3,823.63 0.35%
3I GROUP Investment Trusts 3,809.36 0.35%
RMC GP Building Materials 3,809.55 0.35%
THAMES WATER Electric Utilities & Water Works Supply 3,510.07 0.32%
CARLTON COMMS Broadcasting Media 3,467.48 0.32%
TI GROUP Machinery -- Industrial & Speciality 3,343.00 0.31%
COOKSON GROUP Chemicals, Fibres, Paints & Gases 3,224.63 0.30%
SCHRODERS Financial Institutions 3,199.15 0.29%
SMITH & NEPHEW Health Care 3,193.47 0.29%
VENDOME UNITS Diversified Consumer Goods & Services 3,168.31 0.29%
</TABLE>
H-2
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
PILKINGTON Building Materials 3,143.11 0.29%
REDLAND Building Materials 3,131.57 0.29%
ENTERPRISE OIL Oil -- Crude Producers 3,041.81 0.28%
SMITHS INDUSTRIES Aircraft Manufacturers 2,982.77 0.27%
BURTON GROUP Retail -- Miscellaneous & Speciality 2,970.30 0.27%
WILLIAMS HLDGS. Diversified Industrials 2,947.18 0.27%
BURMAH CASTROL Petroleum Products & Refineries 2,913.71 0.27%
TATE & LYLE Food Processors 2,909.35 0.27%
ARGOS Retail -- Department Stores 2,815.89 0.26%
DIXONS GROUP Retail -- Miscellaneous & Speciality 2,776.87 0.25%
REXAM Forestry Products 2,768.00 0.25%
GREENALLS GROUP Beverages -- Brewers 2,699.07 0.25%
LADBROKE GROUP Entertainment & Leisure Time 2,652.73 0.24%
NEXT Retail -- Miscellaneous & Speciality 2,650.58 0.24%
FOR & COL IT Investment Trusts 2,643.53 0.24%
LASMO Oil -- Crude Producers 2,623.16 0.24%
COURTAULDS Chemicals, Fibres, Paints & Gases 2,557.57 0.23%
BRITISH LAND Real Estate 2,549.31 0.23%
ANGLIAN WATER Electric Utilities & Water Works Supply 2,522.25 0.23%
MEPC Real Estate 2,492.91 0.23%
MERCURY ASSET MANAGE Financial Institutions 2,464.20 0.23%
LUCAS INDS Auto Parts -- Original Equipment 2,460.92 0.23%
SEARS Retail -- General Merchandise 2,456.07 0.23%
BPB INDS Building Materials 2,360.30 0.22%
ELECTROCOMPONENTS Electronics 2,360.08 0.22%
DE LA RUE Printing 2,258.18 0.21%
MIDLANDS ELECTRICITY Electric Utilities & Water Works Supply 2,250.55 0.21%
TELEWEST PLC Telephone Companies 2,213.85 0.20%
STOREHOUSE Retail -- General Merchandise 2,158.03 0.20%
SCOT HYDRO-ELECTRIC Electric Utilities & Water Works Supply 2,144.63 0.20%
LONRHO Diversified Holding Companies 2,122.76 0.19%
UNITED NEWS & MEDIA Publishing -- Newspapers 2,115.91 0.19%
UNITED BISCUITS Food Processors 2,097.28 0.19%
ARJO WIGGINS APPLETON Paper & Paper Products 2,096.39 0.19%
EAST MIDLAND ELECT Electric Utilities & Water Works Supply 2,052.81 0.19%
INCHCAPE Wholesale -- Durables 2,040.69 0.19%
LAPORTE Chemicals (Diversified) 2,020.72 0.19%
YORKSHIRE ELECT Electric Utilities & Water Works Supply 1,910.53 0.18%
COATS VIYELLA Textile Products 1,895.02 0.17%
BET Diversified Holding Companies 1,872.39 0.17%
BBA GROUP Auto Parts -- Original Equipment 1,860.41 0.17%
SMITH (W H) Retail -- Miscellaneous & Speciality 1,847.90 0.17%
HILLSDOWN Food Processors 1,826.72 0.17%
CARADON Building Materials 1,819.82 0.17%
DALGETY Food Processors 1,817.76 0.17%
</TABLE>
H-3
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
LONDON ELECTRICITY Electric Utilities & Water Works Supply 1,768.01 0.16%
HARRISONS & CROSFIELD Wholesale -- Nondurables 1,765.10 0.16%
IMI Fabricated Metal Products 1,753.05 0.16%
JOHNSON MATTHEY Precious Metals & Minerals 1,752.42 0.16%
BRITISH AIRWAYS Airlines 1,735.31 0.16%
PROVIDENT FINANCIAL Financial Institutions 1,717.39 0.16%
ASSD BRITISH PORTS Sea Transport 1,707.82 0.16%
BRITISH AEROSPACE Aircraft Manufacturers 1,561.58 0.14%
MAI Financial Services 1,553.36 0.14%
HAMMERSON PLC Real Estate 1,551.15 0.14%
WITAN INV Investment Trusts 1,544.08 0.14%
NORTHERN FOODS Food Processors 1,533.16 0.14%
NFC Storage, Warehousing & Supporting Transport
Services 1,531.55 0.14%
FARNELL ELECTRONICS Electronics 1,521.75 0.14%
BICC Electrical Equipment 1,517.20 0.14%
ENGLISH CHINA CLAYS Building Materials 1,505.42 0.14%
UNIGATE Food Processors 1,501.23 0.14%
EDINBURGH INV TRUST Investment Trusts 1,500.70 0.14%
TARMAC Construction 1,479.55 0.14%
M & G GROUP Financial Services 1,457.85 0.13%
FKI Machinery 1,443.86 0.13%
BUNZL Paper & Paper Products 1,372.56 0.13%
T & N Diversified Industrials 1,335.80 0.12%
SLOUGH ESTATES Real Estate 1,327.90 0.12%
MORGAN CRUCIBLE Diversified Industrials 1,315.45 0.12%
VICKERS Machinery -- Industrial & Speciality 1,307.82 0.12%
ROLLS-ROYCE Aerospace & Defence 1,264.09 0.12%
BOWTHORPE Electronics 1,261.51 0.12%
BOOKER Food Processors 1,254.19 0.11%
KWIK SAVE GROUP Retail -- Grocery Chains 1,217.12 0.11%
GLYNWED INTL Machinery -- Industrial & Speciality 1,209.04 0.11%
HEPWORTH Building Materials 1,207.54 0.11%
CHARTER Building Materials 1,163.02 0.11%
ALLIED COLLOIDS Chemicals, Fibres, Paints & Gases 1,111.91 0.10%
RUGBY GROUP Building Materials 1,089.20 0.10%
INVESCO Financial Services 1,035.03 0.09%
SEDGWICK GP Insurance -- Agents & Brokers 1,026.51 0.09%
ELECTRA INV TRUST Investment Trusts 982.23 0.09%
FIRST LEISURE CORP Entertainment & Leisure Time 967.80 0.09%
WILLIS CORROON GROUP Insurance -- Agents & Brokers 917.88 0.08%
GREAT PORTLAND EST Real Estate 874.07 0.08%
SCAPA GP Diversified Industrials 821.91 0.08%
WIMPEY (G) Construction 807.53 0.07%
SCHRODERS NON/VTG Financial Institutions 768.72 0.07%
MEYER INTL Building Materials 757.28 0.07%
HALMA Machinery 730.05 0.07%
SPIRAX-SARCO ENG Machinery -- Industrial & Speciality 722.85 0.07%
BARRATT DEVELOPMENTS Homebuilding 705.97 0.06%
</TABLE>
H-4
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
TAYLOR WOODROW Construction 703.64 0.06%
HIGHLAND DISTILLERIES Beverages -- Distillers 666.96 0.06%
FLEMING MERCANTILE INV TRUST Investment Trusts 644.99 0.06%
BRIXTON ESTATE Real Estate 638.23 0.06%
EUROTUNNEL UNITS ORD Rail & Road Transport 621.12 0.06%
VAUX GROUP Beverages -- Brewers 615.74 0.06%
MCKECHNIE Fabricated Metal Products 606.85 0.06%
MARLEY Building Materials 578.06 0.05%
COURTAULDS TEXTILES Textile Products 571.81 0.05%
HAMBROS Financial Institutions 564.09 0.05%
TR SMALLER COMPANIES INV. TST. Investment Trusts 562.32 0.05%
TR CITY OF LON (DFD) Investment Trusts 547.83 0.05%
CHRISTIES INTL Retail -- Miscellaneous & Speciality 535.93 0.05%
ALBERT FISHER Wholesale -- Nondurables 530.55 0.05%
WILSON (CONNOLLY) Construction 514.05 0.05%
BRYANT GROUP Homebuilding 486.12 0.04%
BRADFORD PROPERTY TRUST Real Estate 469.45 0.04%
TRAFALGAR HOUSE Diversified Holding Companies 464.19 0.04%
MERCHANTS TRUST Investment Trusts 454.37 0.04%
AMSTRAD Electronics 354.70 0.03%
DIPLOMA Electronics 338.70 0.03%
APV Machinery 335.44 0.03%
DAWSON INTL Clothing 326.29 0.03%
BAIRD (WILLIAM) Textile Products 313.37 0.03%
BILTON Real Estate 284.45 0.03%
LAING (JOHN) Construction 197.20 0.02%
LAING (JOHN) 'A' Construction 192.34 0.02%
FT-UK 1,091,274.35
</TABLE>
H-5
<PAGE>
APPENDIX I
FT/S&P-Actuaries World Indices
US Component as of 29 December 1995
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
GENERAL ELECTRIC CO Electrical Equipment 121,134.74 2.45%
AMER TEL & TEL Telephone Companies 102,715.97 2.08%
EXXON CORP Oil Internationals 99,489.45 2.02%
COCA-COLA Beverages -- Soft Drinks 93,136.38 1.89%
MERCK & CO Drugs 80,959.16 1.64%
PHILIP MORRIS Tobacco Manufacturers 75,543.61 1.53%
PROCTER & GAMBLE Soaps 56,985.64 1.15%
JOHNSON & JOHNSON Health Care 55,453.00 1.12%
IBM Computers 52,180.34 1.06%
MICROSOFT CORP Computer Software & Services 51,974.85 1.05%
WAL-MART STORES Retail--General Merchandise 51,340.44 1.04%
INTEL Electronics 46,603.10 0.94%
MOBIL CORP Oil Internationals 44,181.00 0.90%
PEPSICO Beverages -- Soft Drinks 44,025.31 0.89%
AMER INTL GROUP Insurance -- Multiline 43,853.51 0.89%
BRISTOL MYERS SQUIBB CO Health Care 43,329.69 0.88%
BELLSOUTH CORP Telephone Companies 43,199.00 0.88%
HEWLETT-PACKARD Computers 42,863.25 0.87%
GTE CORP Telephone Companies 42,619.28 0.86%
PFIZER Drugs 40,077.70 0.81%
GENERAL MOTORS Automobiles 39,624.47 0.80%
DU PONT E I DE NEMOURS Chemicals (Diversified) 38,803.19 0.79%
BERKSHIRE HATHAWAY INC DEL Diversified Holding Companies 38,327.40 0.78%
AMOCO Petroleum Products & Refineries 35,285.66 0.71%
SBC COMMUNICATIONS Telephone Companies 35,066.95 0.71%
CHEVRON CORP Oil Internationals 34,242.29 0.69%
FED NATL MORTGAGE Financial Institutions 33,861.55 0.69%
MOTOROLA Electronics 33,684.89 0.68%
ABBOTT LABS Health Care 33,130.25 0.67%
AMERITECH Telephone Companies 32,698.16 0.66%
MCDONALD'S CORP Restaurants & Hotels 31,419.59 0.64%
FORD MOTOR Automobiles 31,148.58 0.63%
LILLY (ELI) Drugs 31,023.56 0.63%
DISNEY (WALT) PRODS Entertainment & Leisure Time 30,843.67 0.62%
AMER HOME PRODUCTS Drugs 30,059.14 0.61%
BELL ATLANTIC Telephone Companies 29,197.56 0.59%
CITICORP Commercial Banks & Other Banks 28,585.42 0.58%
MINNESOTA MINING Diversified Consumer Goods & Services 27,839.05 0.56%
BOEING Aircraft Manufacturers 26,839.05 0.54%
BANKAMERICA Commercial Banks & Other Banks 24,108.76 0.49%
NYNEX CORP Telephone Companies 23,219.51 0.47%
GILLETTE Cosmetics 23,113.58 0.47%
KIMBERLY-CLARK Paper & Paper Products 23,045.46 0.47%
EASTMAN KODAK Photography 22,921.17 0.46%
HOME DEPOT INC Retail -- General Merchandise 22,827.66 0.46%
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
GENERAL MOTORS 'E' Computer Software & Services 22,822.90 0.46%
COLUMBIA HEALTHCARE CORP Hospital Supply & Management 22,515.54 0.46%
CHRYSLER Automobiles 21,184.32 0.43%
TEXACO Oil Internationals 20,732.64 0.42%
CISCO SYSTEMS Communications Equipment 20,615.31 0.42%
SCHERING-PLOUGH Drugs 20,385.34 0.41%
AMERICAN EXPRESS Financial Institutions 20,042.26 0.41%
TRAVELERS GROUP Financial Institutions 19,889.88 0.40%
PHARMACIA & UPJOHN Drugs 19,529.58 0.40%
CAP CITIES / ABC Broadcasting Media 18,986.43 0.38%
NATIONSBANK CORP Commercial Banks & Other Banks 18,862.94 0.38%
DOW CHEMICAL Chemicals (Diversified) 18,423.05 0.37%
ORACLE SYSTEMS CORP Computer Software & Services 18,416.77 0.37%
ALLSTATE CORP Insurance -- Property & Casualty 18,408.17 0.37%
EMERSON ELECTRIC Electrical Equipment 18,352.88 0.37%
ATLANTIC RICHFIELD Petroleum Products & Refineries 17,810.59 0.36%
MCI COMMS Telephone Companies 17,798.31 0.36%
ANHEUSER-BUSCH Beverages -- Brewers 17,083.82 0.35%
U S WEST COMMUNICATIONS Telephone Companies 16,831.46 0.34%
KELLOGG Food Processors 16,796.24 0.34%
SCHLUMBERGER Energy Equipment & Services 16,750.33 0.34%
SOUTHERN CO Electric Utilities & Water Works Supply 16,404.12 0.33%
LOCKHEED MARTIN CORP Aerospace & Defence 15,733.00 0.32%
AMGEN INC Drugs 15,644.00 0.32%
SARA LEE Food Processors 15,423.07 0.31%
SEARS ROEBUCK & CO Retail -- General Merchandise 15,189.88 0.31%
FEDERAL HOME LN MTG CORP Financial Institutions 15,093.63 0.31%
VIACOM CLASS B Broadcasting Media 15,065.30 0.31%
MORGAN (J.P) Commercial Banks & Other Banks 15,050.41 0.30%
CAMPBELL SOUP Food Processors 14,948.28 0.30%
FIRST DATA Business Services 14,909.58 0.30%
XEROX CORP Office Equipment 14,775.72 0.30%
BANC ONE CORP Commercial Banks & Other Banks 14,771.00 0.30%
CHEMICAL BANKING CORP. Commercial Banks & Other Banks 14,689.73 0.30%
TIME WARNER INC Publishing 14,675.31 0.30%
WASTE MANAGEMENT Engineering Services & Pollution Control 14,536.22 0.29%
PACIFIC TELESIS Telephone Companies 14,406.13 0.29%
MONSANTO Chemicals (Diversified) 14,244.06 0.29%
AIRTOUCH COMMUNICATIONS Telephone Companies 13,995.42 0.28%
SPRINT CORP Telephone Companies 13,908.04 0.28%
COMPUTER ASSOC INTL INC Computer Software & Services 13,743.67 0.28%
UNION PACIFIC Rail & Road Transport 13,553.69 0.27%
ALLIED SIGNAL Diversified Industrials 13,450.10 0.27%
WARNER-LAMBERT Health Care 13,149.37 0.27%
MEDTRONIC Health Care 12,980.15 0.26%
FIRST CHICAGO NBD CORP Commercial Banks & Other Banks 12,760.77 0.26%
GENERAL RE CORP Insurance -- Property & Casualty 12,714.34 0.26%
COMPAQ COMPUTER CORPORATION Computers 12,681.60 0.26%
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
TELECOM CORP 'A' Broadcasting Media 12,573.80 0.25%
HEINZ (H.J) Food Processors 12,245.00 0.25%
PACIFIC GAS & ELECTRIC Electric Utilities & Water Works Supply 11,889.89 0.24%
NORWEST CORP Commercial Banks & Other Banks 11,650.75 0.24%
CATERPILLAR TRACTOR Machinery -- Construction 11,604.24 0.24%
UNITED TECHNOLOGIES Diversified Industrials 11,575.51 0.23%
ROCKWELL INTL CORP Aerospace & Defence 11,479.59 0.23%
RAYTHEON Aerospace & Defence 11,452.08 0.23%
UNITED HEALTHCARE Health Care 11,442.59 0.23%
BAXTER INTL INC Health Care 11,368.77 0.23%
BURLINGTON NORTHERN Rail & Road Transport 11,076.00 0.22%
DUN & BRADSTREET Publishing 10,972.79 0.22%
CHASE MANHATTAN Commercial Banks & Other Banks 10,849.21 0.22%
AUTO DATA PROCESS Computer Software & Services 10,682.20 0.22%
PENNEY (J.C) Retail -- General Merchandise 10,652.38 0.22%
MAY DEPT STORES Retail -- Department Stores 10,519.00 0.21%
NORFOLK STHN CORP Rail & Road Transport 10,400.19 0.21%
FIRST INTERSTATE BK Commercial Banks & Other Banks 10,339.06 0.21%
MCDONNELL DOUGLAS Aircraft Manufacturers 10,306.21 0.21%
COLGATE-PALMOLIVE Soaps 10,227.21 0.21%
WELLS FARGO & CO DEL Commercial Banks & Other Banks 10,144.87 0.21%
FLEET FINANCIAL GROUP Commercial Banks & Other Banks 10,016.35 0.20%
CPC INTL Food Processors 10,002.09 0.20%
NIKE, INC CL 'B' Footwear 9,954.15 0.20%
INTERNATIONAL PAPER Paper & Paper Products 9,876.21 0.20%
CONAGRA Food Processors 9,836.97 0.20%
TEXAS INSTRUMENTS Electronics 9,771.00 0.20%
DUKE POWER Electric Utilities & Water Works Supply 9,705.20 0.20%
DIGITAL EQUIPMENT Computers 9,670.76 0.20%
CSX Rail & Road Transport 9,603.33 0.19%
ENRON CORP Oil -- Crude Producers 9,593.20 0.19%
ARCHER-DANIELS Food Processors 9,543.04 0.19%
FIRST UNION Commercial Banks & Other Banks 9,479.06 0.19%
ALUMINIUM CO AMER Non-Ferrous Metals 9,437.92 0.19%
BANK OF NEW YORK Commercial Banks & Other Banks 9,363.90 0.19%
TEXAS UTILITIES Electric Utilities & Water Works Supply 9,287.71 0.19%
PPG INDUSTRIES Chemicals (Diversified) 9,280.00 0.19%
DEERE & CO Machinery -- Farm Equipment 9,232.50 0.19%
LOEW'S CORP Diversified Holding Companies 9,235.08 0.19%
GENERAL MILLS Food Processors 9,159.00 0.19%
MERRILL LYNCH Financial Institutions 8,961.57 0.18%
PHILLIPS PETROLEUM Petroleum Products & Refineries 8,943.07 0.18%
U S WEST MEDIA Broadcasting Media 8,945.39 0.18%
TENNECO Diversified Industrials 8,799.75 0.18%
WEYERHAEUSER Forestry Products 8,723.96 0.18%
SUN MICROSYSTEMS Computers 8,666.65 0.18%
GANNETT Publishing -- Newspapers 8,605.14 0.17%
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
FPL GROUP Electric Utilities & Water Works Supply 8,584.01 0.17%
KEYCORP Commercial Banks & Other Banks 8,582.44 0.17%
CHUBB Insurance -- Property & Casualty 8,437.66 0.17%
RJR NABISCO HOLDINGS CORP Tobacco Manufacturers 8,419.43 0.17%
AMP Electrical Equipment 8,349.94 0.17%
ALBERTSONS Retail -- Grocery Chains 8,312.64 0.17%
AMERICAN BRANDS Tobacco Manufacturers 8,292.13 0.17%
MICRON TECHNOLOGY Electronics 8,180.11 0.17%
DEAN WITTER DISCOVER & CO Financial Institutions 8,012.28 0.16%
AETNA LIFE & CAS Insurance -- Multiline 7,916.31 0.16%
SCECORP Electric Utilities & Water Works Supply 7,903.88 0.16%
CIGNA CORP Insurance -- Multiline 7,840.70 0.16%
WACHOVIA CORP Commercial Banks & Other Banks 7,792.42 0.16%
SUNTRUST BANKS Commercial Banks & Other Banks 7,751.46 0.16%
MELLON BK CORP Commercial Banks & Other Banks 7,595.36 0.15%
3COM CORP Communications Equipment 7,562.25 0.15%
AMER ELEC POWER Electric Utilities & Water Works Supply 7,530.37 0.15%
CONS EDISON Electric Utilities & Water Works Supply 7,518.43 0.15%
PUBLIC SVC ENTERPRISE GROUP Electric Utilities & Water Works Supply 7,493.88 0.15%
BAY NETWORKS Communications Equipment 7,486.97 0.15%
BOSTON SCIENTIFIC Hospital Supply & Management 7,435.55 0.15%
PNC BANK CORP Commercial Banks & Other Banks 7,419.47 0.15%
WALGREEN Retail -- Drug Chains 7,353.46 0.15%
CORNING INC Building Materials 7,336.16 0.15%
UNOCAL Petroleum Products & Refineries 7,173.95 0.15%
DOMINION RESOURCES Electric Utilities & Water Works Supply 7,157.33 0.15%
RHONE POULENC RORER INC Health Care 7,150.36 0.14%
AMER GENERAL CORP Insurance -- Multiline 7,144.49 0.14%
U.S. HEALTHCARE Health Care 7,139.19 0.14%
PITNEY BOWES Office Equipment 7,125.01 0.14%
UNICOM CORP Electric Utilities & Water Works Supply 7,035.39 0.14%
APPLIED MATERIALS Machinery -- Industrial & Speciality 7,022.22 0.14%
CARNIVAL CORP 'A' Entertainment & Leisure Time 6,941.71 0.14%
GOODYEAR TIRE Tyre & Rubber Goods 6,912.34 0.14%
WESTINGHOUSE ELEC Electrical Equipment 6,851.81 0.14%
OCCIDENTAL PETROL Petroleum Products & Refineries 6,806.85 0.14%
WORLDCOM INC Telephone Companies 6,807.76 0.14%
MATTEL INC Toys 6,791.11 0.14%
ILLINOIS TOOL Diversified Industrials 6,735.15 0.14%
PECO ENERGY CO Electric Utilities & Water Works Supply 6,687.03 0.14%
ENTERGY CORP. Electric Utilities & Water Works Supply 6,661.86 0.14%
RALSTON PURINA Agriculture & Fishing 6,606.26 0.13%
</TABLE>
I-4
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
FIRST BANK SYSTEM Commercial Banks & Other Banks 6,590.90 0.13%
UST INC Tobacco Manufacturers 6,516.40 0.13%
MARSH & MCLENNAN Insurance -- Agents & Brokers 6,492.86 0.13%
HOUSTON INDUSTRIES Electric Utilities & Water Works Supply 6,369.80 0.13%
ITT CORPORATION Restaurants & Hotels 6,307.00 0.13%
GEORGIA-PACIFIC Forestry Products 6,300.94 0.13%
BROWNING-FERRIS Engineering Services & Pollution Control 6,271.76 0.13%
GENENTECH INC Drugs 6,266.72 0.13%
MORGAN STANLEY GROUP INC Financial Institutions 6,260.29 0.13%
LIMITED Retail -- Miscellaneous & Speciality 6,223.38 0.13%
CUC INTL Business Services 6,220.78 0.13%
HERCULES Chemicals, Fibres, Paints & Gases 6,199.62 0.13%
HONEYWELL Instrumentation & Control Equipment 6,174.31 0.13%
FIRST FIDELITY BANCORP Commercial Banks & Other Banks 6,163.57 0.12%
LORAL CORP Defence Electronics 6,095.86 0.12%
WRIGLEY, (WM) JR Food -- Sugar & Confectionary 6,097.93 0.12%
DURACELL INTL Electrical Equipment 6,090.98 0.12%
DONNELLEY (RR) Printing 6,049.10 0.12%
SYSCO US$1 Wholesale -- Nondurables 6,045.00 0.12%
GAP INC DEL Retail -- Miscellaneous & Speciality 6,042.08 0.12%
PACIFICORP Electric Utilities & Water Works Supply 6,040.89 0.12%
TOYS (R) Retail -- Miscellaneous & Speciality 5,939.62 0.12%
AIR PRODUCTS & CHEM Chemicals, Fibres, Paints & Gases 5,891.28 0.12%
CABLETRON SYSTEMS Communications Equipment 5,829.08 0.12%
HOUSEHOLD INTL Financial Services 5,801.05 0.12%
HALLIBURTON Energy Equipment & Services 5,790.84 0.12%
GRACE (WR) Chemicals (Diversified) 5,752.80 0.12%
TEXTRON Diversified Industrials 5,725.42 0.12%
BARNETT BANKS INC Commercial Banks & Other Banks 5,722.41 0.12%
FREEP'T MCMORAN COPPER&GO Precious Metals & Minerals 5,681.50 0.12%
AMR CORP Airlines 5,669.14 0.11%
ITT HARTFORD GROUP Insurance -- Property & Casualty 5,645.36 0.11%
USX-MARATHON GROUP Petroleum Products & Refineries 5,604.26 0.11%
LINCOLN NAT CORP Insurance -- Life & Agents & Brokers 5,587.90 0.11%
ALLTEL CORP Telephone Companies 5,572.17 0.11%
FEDERATED DEPT STORES Retail -- Department Stores 5,571.36 0.11%
WINN-DIXIE STORES Retail -- Grocery Chains 5,553.74 0.11%
SAFEWAY INC Retail -- Grocery Chains 5,489.54 0.11%
CONRAIL Rail & Road Transport 5,482.82 0.11%
FLUOR CORP Heavy Engineering & Shipbuilding 5,479.58 0.11%
MBNA CORP Commercial Banks & Other Banks 5,475.94 0.11%
TYCO INTERNATIONAL Diversified Industrials 5,442.82 0.11%
DAYTON-HUDSON Retail -- Department Stores 5,392.58 0.11%
LOWE'S COS. Retail -- Miscellaneous & Speciality 5,387.10 0.11%
CAROLINA PWR & LIGHT Electric Utilities & Water Works Supply 5,362.37 0.11%
</TABLE>
I-5
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
CENTRAL & SOUTH WEST Electric Utilities & Water Works Supply 5,343.64 0.11%
AON CORP Insurance -- Multiline 5,340.62 0.11%
INTERNATIONAL FLAVORS & FRAGRA Cosmetics 5,341.54 0.11%
MORTON INTL INC Chemicals (Diversified) 5,322.42 0.11%
BOATMEN'S BANCSHARES Commercial Banks & Other Banks 5,288.08 0.11%
NOVELL INC Computer Software & Services 5,278.02 0.11%
CORESTATES FINL Commercial Banks & Other Banks 5,266.59 0.11%
BANKERS TRUST Commercial Banks & Other Banks 5,232.75 0.11%
BANK OF BOSTON Commercial Banks & Other Banks 5,189.48 0.11%
UNION CARBIDE Chemicals (Diversified) 5,147.29 0.10%
AVON PRODUCTS Cosmetics 5,132.59 0.10%
TRW Auto Parts -- Original Equipment 5,120.43 0.10%
ALCO STANDARD Paper & Paper Products 5,077.33 0.10%
HERSHEY FOODS Food -- Sugar & Confectionary 5,047.90 0.10%
MASCO CORP Fabricated Metal Products 5,038.57 0.10%
GENUINE PARTS CO Auto Parts -- After Market 5,036.24 0.10%
EASTMAN CHEMICAL Chemicals (Diversified) 5,030.42 0.10%
DETROIT EDISON Electric Utilities & Water Works Supply 5,006.64 0.10%
SERVICE CORP INTL Diversified Consumer Goods & Services 5,006.63 0.10%
NUCOR CORP Iron & Steel 4,994.84 0.10%
TRANSAMERICA CORP Diversified Holding Companies 4,982.46 0.10%
BURLINGTON RES INC Natural Gas Utilities 4,967.72 0.10%
BECTON DICKINSON Health Care 4,945.58 0.10%
AMERADA HESS Petroleum Products & Refineries 4,929.16 0.10%
READERS DIGEST ASSN INC Publishing 4,883.72 0.10%
NATIONAL CITY CORP Commercial Banks & Other Banks 4,877.92 0.10%
CINERGY CORP Electric Utilities & Water Works Supply 4,814.56 0.10%
MARRIOTT INTERNATIONAL Restaurants & Hotels 4,788.40 0.10%
FIFTH THIRD BANCORP Commercial Banks & Other Banks 4,778.61 0.10%
GENERAL MOTORS 'H' Aerospace & Defence 4,722.98 0.10%
GEICO CORP Insurance -- Property & Casualty 4,718.59 0.10%
ST PAUL COMPANIES Insurance -- Property & Casualty 4,702.09 0.10%
GREAT LAKES CHEM CORP Chemicals (Diversified) 4,660.34 0.09%
PRAXAIR INC Chemicals, Fibres, Paints & Gases 4,655.72 0.09%
PIONEER HI BRED Agriculture & Fishing 4,643.96 0.09%
KROGER Retail -- Grocery Chains 4,635.68 0.09%
QUAKER OATS Food Processors 4,633.70 0.09%
NORTHWEST AIRLINES 'A' Airlines 4,611.52 0.09%
COMERICA INC Commercial Banks & Other Banks 4,596.56 0.09%
CHIRON CORP Drugs 4,592.05 0.09%
WILLIAMS COS INC DEL Natural Gas Utilities 4,455.99 0.09%
DRESSER INDS Energy Equipment & Services 4,448.90 0.09%
SILICON GRAPHICS Computers 4,441.66 0.09%
EQUITABLE COS Insurance -- Life & Agents & Brokers 4,431.89 0.09%
HUMANA Hospital Supply & Management 4,431.68 0.09%
COMCAST CL'A'SPL(NON-VTG) Broadcasting Media 4,363.51 0.09%
</TABLE>
I-6
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
MCGRAW-HILL Publishing 4,350.24 0.09%
SAFECO CORP Insurance -- Property & Casualty 4,345.93 0.09%
PHELPS DODGE CORP Non-Ferrous Metals 4,336.27 0.09%
ROHM & HAAS CO Chemicals, Fibres, Paints & Gases 4,332.05 0.09%
THERMO ELECTRON Diversified Industrials 4,322.40 0.09%
UNION ELEC CO Electric Utilities & Water Works Supply 4,263.68 0.09%
NEWMONT MINING Precious Metals & Minerals 4,259.25 0.09%
CONS NATURAL GAS Natural Gas Utilities 4,236.89 0.09%
DSC COMMUNICATIONS Communications Equipment 4,230.41 0.09%
AUTOZONE INC Retail -- Miscellaneous & Speciality 4,227.50 0.09%
LSI LOGIC Electronics 4,225.70 0.09%
BLOCK (H&R) Business Services 4,208.44 0.09%
BALTIMORE GAS & ELEC Electric Utilities & Water Works Supply 4,202.10 0.09%
DOVER CORP Diversified Industrials 4,188.19 0.08%
PANHANDLE EAST'N Natural Gas Utilities 4,184.79 0.08%
AFLAC INC Insurance -- Life & Agents & Brokers 4,176.84 0.08%
FEDERAL EXPRESS Freight Forwarders 4,173.57 0.08%
EATON CORP Auto Parts -- Original Equipment 4,161.30 0.08%
TENET HEALTHCARE Hospital Supply & Management 4,148.36 0.08%
STUDENT LOAN MARKETING ASSN Financial Institutions 4,143.54 0.08%
NEWELL CO Household Durables & Appliances 4,102.61 0.08%
PARAMETRIC TECHNOLOGY Computer Software & Services 4,095.93 0.08%
FRANKLIN RESOURCES Financial Services 4,077.60 0.08%
GENERAL PUB UTILS CP Electric Utilities & Water Works Supply 4,077.31 0.08%
CHAMPION INTL Forestry Products 4,053.50 0.08%
INFORMIX CORP Computer Software & Services 4,037.01 0.08%
RUBBERMAID Household Durables & Appliances 4,031.45 0.08%
UNUM CORP Insurance -- Multiline 3,996.41 0.08%
P P & L RESOURCES Electric Utilities & Water Works Supply 3,976.53 0.08%
TRIBUNE Publishing -- Newspapers 3,979.36 0.08%
COOPER INDUSTRIES Electrical Equipment 3,964.41 0.08%
ADOBE SYSTEMS Computer Software & Services 3,956.78 0.08%
WHIRLPOOL CORP Household Durables & Appliances 3,940.87 0.08%
APPLE COMPUTER Computers 3,918.14 0.08%
AMER STORES Retail -- Drug Chains 3,915.34 0.08%
COASTAL CORP Petroleum Products & Refineries 3,911.81 0.08%
COMPUTER SCIENCES Computer Software & Services 3,908.85 0.08%
PROVIDIAN CORP Insurance -- Life & Agents & Brokers 3,879.89 0.08%
DOW JONES Publishing -- Newspapers 3,870.43 0.08%
INGERSOLL-RAND Machinery 3,825.32 0.08%
CROWN CORK & SEAL Fabricated Metal Products 3,783.01 0.08%
DELTA AIR LINES Airlines 3,779.22 0.08%
SALOMON Financial Institutions 3,776.74 0.08%
CLOROX Soaps 3,744.27 0.08%
SOUTHERN PACIFIC RAIL Rail & Road Transport 3,747.31 0.08%
GENERAL DYNAMICS Aerospace & Defence 3,723.69 0.08%
</TABLE>
I-7
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
STATE STR BOSTON Commercial Banks & Other Banks 3,719.66 0.08%
TIMES MIRROR CO Publishing -- Newspapers 3,679.57 0.07%
GREEN TREE FINL Financial Institutions 3,611.37 0.07%
REYNOLDS METALS Non-Ferrous Metals 3,600.61 0.07%
OHIO EDISON Electric Utilities & Water Works Supply 3,585.37 0.07%
TURNER BROADCAST 'B' Broadcasting Media 3,579.34 0.07%
U.S. ROBOTICS Communications Equipment 3,553.70 0.07%
PROGRESSIVE CORP, OHIO Insurance -- Property & Casualty 3,510.98 0.07%
SCHWAB(CHAS)CORP Financial Institutions 3,504.21 0.07%
REPUBLIC N Y CORP Commercial Banks & Other Banks 3,491.98 0.07%
GREAT WSTN FINANCIAL Commercial Banks & Other Banks 3,484.70 0.07%
CINCINNATI FINANCIAL Insurance -- Multiline 3,460.08 0.07%
SHERWIN-WILLIAMS Chemicals, Fibres, Paints & Gases 3,462.04 0.07%
BAKER HUGHES INC. Energy Equipment & Services 3,441.90 0.07%
MIDLANTIC CORP Commercial Banks & Other Banks 3,441.51 0.07%
VIACOM INC CL 'A' Broadcasting Media 3,438.70 0.07%
ALLEGHENY POWER Electric Utilities & Water Works Supply 3,436.35 0.07%
COCA-COLA ENTERPRISES Beverages -- Soft Drinks 3,437.19 0.07%
SEAGATE TECHNOLOGY Computers 3,419.53 0.07%
FLORIDA PROG CORP Electric Utilities & Water Works Supply 3,401.20 0.07%
INTERPUBLIC GROUP CO Advertising 3,386.11 0.07%
WISCONSIN ENERGY CORP Electric Utilities & Water Works Supply 3,382.65 0.07%
GRAINGER (W.W) Electrical Equipment 3,367.55 0.07%
VF CORP Clothing 3,363.08 0.07%
IVAX CORP Drugs 3,357.81 0.07%
EQUIFAX INC Business Services 3,350.62 0.07%
NTHN STATES POWER Electric Utilities & Water Works Supply 3,345.36 0.07%
SOUTHWEST AIRLINES Airlines 3,346.42 0.07%
UNION CAMP Paper & Paper Products 3,344.09 0.07%
K MART CORP Retail -- General Merchandise 3,330.38 0.07%
JEFFERSON-PILOT Insurance -- Life & Agents & Brokers 3,310.80 0.07%
EMC CORP Computers 3,300.21 0.07%
NORDSTROM BEST Retail -- Miscellaneous & Speciality 3,287.47 0.07%
KERR-MCGEE Petroleum Products & Refineries 3,276.60 0.07%
TELLABS, INC Communications Equipment 3,276.28 0.07%
U.S. BANCORP Commercial Banks & Other Banks 3,278.40 0.07%
CASE CORP Instrumentation & Control Equipment 3,251.27 0.07%
TORCHMARK Insurance -- Life & Agents & Brokers 3,242.43 0.07%
GOLDEN WEST FIN Commercial Banks & Other Banks 3,239.92 0.07%
MELVILLE CORP Retail -- Miscellaneous & Speciality 3,231.46 0.07%
DELL COMPUTER CORP Computers 3,222.93 0.07%
DILLARD DEPT STORE Retail -- Department Stores 3,221.81 0.07%
GENL INSTRUMENT Communications Equipment 3,216.89 0.07%
HUNTINGTON BANCSHARES Commercial Banks & Other Banks 3,207.41 0.07%
MOLEX INC Electronics 3,198.40 0.06%
ANADARKO PETROLEUM Oil -- Crude Producers 3,192.67 0.06%
</TABLE>
I-8
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
MGIC INVESTMENT Insurance -- Property & Casualty 3,179.86 0.06%
NORTHROP CORP Aircraft Manufacturers 3,159.94 0.06%
MIRAGE RESORTS Entertainment & Leisure Time 3,154.78 0.06%
SCRIPPS(E.W.) 'A' Publishing -- Newspapers 3,150.79 0.06%
MBIA INC Insurance -- Property & Casualty 3,143.33 0.06%
ENGLEHARD CORP Chemicals (Diversified) 3,133.11 0.06%
AHMANSON (H.F) Commercial Banks & Other Banks 3,113.27 0.06%
POTOMAC ELECTRIC Electric Utilities & Water Works Supply 3,110.44 0.06%
WILLAMETTE Forestry Products 3,109.16 0.06%
NORTHERN TRUST Commercial Banks & Other Banks 3,105.76 0.06%
WASHINGTON POST Publishing -- Newspapers 3,103.13 0.06%
PREMARK INTL Household Durables & Appliances 3,098.86 0.06%
WHEELABRATOR TECH Engineering Services & Pollution Control 3,094.56 0.06%
NORTH EAST UTILITES Electric Utilities & Water Works Supply 3,079.78 0.06%
PALL CORP Machinery -- Industrial & Speciality 3,080.25 0.06%
OFFICE DEPOT Retail -- Miscellaneous & Speciality 3,066.31 0.06%
SONAT Natural Gas Utilities 3,065.78 0.06%
HARCOURT GENERAL INC Retail -- Department Stores 3,049.46 0.06%
KNIGHT-RIDDER Publishing -- Newspapers 3,032.13 0.06%
BLACK & DECKER MFG Machine Tools 3,020.71 0.06%
ST. JUDE MEDICAL Hospital Supply & Management 3,008.73 0.06%
TECO ENERGY Electric Utilities & Water Works Supply 2,988.36 0.06%
PRICE/COSTCO INC Wholesale -- Nondurables 2,977.33 0.06%
FIRSTAR CORP Commercial Banks & Other Banks 2,971.60 0.06%
HILTON HOTELS CORP Restaurants & Hotels 2,970.57 0.06%
DANA CORP Auto Parts -- Original Equipment 2,965.54 0.06%
LINEAR TECHNOLOGY CORP Electronics 2,896.49 0.06%
CIRCUS CIRCUS ENTERP Entertainment & Leisure Time 2,868.09 0.06%
RITE AID Retail -- Drug Chains 2,868.71 0.06%
ITT INDUSTRIES Auto Trucks & Parts 2,856.00 0.06%
NEW YORK TIMES Publishing -- Newspapers 2,856.95 0.06%
JOHNSON CONTROLS Diversified Industrials 2,827.07 0.06%
MYLAN LABS Drugs 2,821.48 0.06%
FIRST OF AMERICA BK Commercial Banks & Other Banks 2,808.01 0.06%
MEAD Paper & Paper Products 2,810.21 0.06%
OMNICOM GROUP INC. Advertising 2,803.36 0.06%
WESTVACO CORP Paper & Paper Products 2,792.01 0.06%
DIAL CORP ARIZ Diversified Consumer Goods & Services 2,786.77 0.06%
MALLINCKRODT GROUP Drugs 2,783.78 0.06%
SAN DIEGO GAS & ELEC Electric Utilities & Water Works Supply 2,767.80 0.06%
NAT SEMICONDUCTOR Electronics 2,745.41 0.06%
CMS ENERGY CORP Electric Utilities & Water Works Supply 2,722.54 0.06%
HASBRO Toys 2,717.86 0.06%
SOUTHERN NATIONAL Commercial Banks & Other Banks 2,711.63 0.05%
</TABLE>
I-9
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
TANDY CORP Retail -- Miscellaneous & Speciality 2,705.68 0.05%
ANALOG DEVICES Instrumentation & Control Equipment 2,695.79 0.05%
CIRCUIT CITY STORES Retail -- Miscellaneous & Speciality 2,686.09 0.05%
WESTERN ATLAS INC Energy Equipment & Services 2,686.25 0.05%
AVERY DENNISON CORP Chemicals, Fibres, Paints & Gases 2,666.00 0.05%
MERIDIAN BANCORP Commercial Banks & Other Banks 2,666.17 0.05%
LOUISIANA PACIFIC Forestry Products 2,616.28 0.05%
SUNAMERICA INC Financial Institutions 2,584.86 0.05%
NEW ENGLAND ELECT Electric Utilities & Water Works Supply 2,572.65 0.05%
PARKER-HANNIFIN Machinery -- Industrial & Speciality 2,539.71 0.05%
USX-US STEEL Iron & Steel 2,544.29 0.05%
FIRST USA Financial Institutions 2,534.21 0.05%
PINNACLE WEST CAPITAL CORP. Electric Utilities & Water Works Supply 2,513.58 0.05%
RAYCHEM Electrical Equipment 2,509.21 0.05%
CONSOLIDATED PAPERS Paper & Paper Products 2,495.37 0.05%
HARRAH'S ENTERTAINMENT CORP Restaurants & Hotels 2,486.40 0.05%
FMC CORP Diversified Industrials 2,481.57 0.05%
TEMPLE INLAND Paper & Paper Products 2,475.24 0.05%
BENEFICIAL CORP Financial Institutions 2,469.96 0.05%
SIGMA-ALDRICH Chemicals (Diversified) 2,468.22 0.05%
MARSHALL & ILSLEY Commercial Banks & Other Banks 2,443.32 0.05%
WHITMAN CORP Food Processors 2,444.74 0.05%
IMC GLOBAL Fertilizers 2,431.90 0.05%
CYPRUS AMAX MINERALS Mining & Extractive Industries 2,428.21 0.05%
MERCANTILE BANCORP Commercial Banks & Other Banks 2,423.92 0.05%
HILLENBRAND INDUS Hospital Supply & Management 2,396.89 0.05%
DELUXE CORP Printing 2,396.15 0.05%
PACIFIC ENTERPRISES Natural Gas Utilities 2,392.44 0.05%
SONOCO PRODUCTS Paper & Paper Products 2,391.32 0.05%
DQE Electric Utilities & Water Works Supply 2,384.45 0.05%
AMSOUTH BANCORP Commercial Banks & Other Banks 2,358.10 0.05%
BEAR STEARNS COMPANIES INC Financial Institutions 2,360.73 0.05%
FREEP'T MCMORAN COPPER&GO Precious Metals & Minerals 2,354.80 0.05%
BRUNSWICK CORP Entertainment & Leisure Time 2,299.18 0.05%
MERCURY FINANCE Financial Institutions 2,295.38 0.05%
ADC TELECOMMUNICATIONS Communications Equipment 2,285.23 0.05%
ARMSTRONG WORLD IND Building Materials 2,284.02 0.05%
OWENS-CORNING FIBER Building Materials 2,283.24 0.05%
STANLEY WORKS Machine Tools 2,283.10 0.05%
BAUSCH & LOMB Health Care 2,269.13 0.05%
ILLINOVA CORP Electric Utilities & Water Works Supply 2,269.32 0.05%
UAL INC. Airlines 2,261.06 0.05%
MCKESSON CORP (NEW) Wholesale -- Nondurables 2,243.80 0.05%
ASHLAND INC Petroleum Products & Refineries 2,238.90 0.05%
SOUTHTRUST CORP Commercial Banks & Other Banks 2,240.91 0.05%
</TABLE>
I-10
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
CRESTAR FINANCIAL Commercial Banks & Other Banks 2,227.00 0.05%
COLUMBIA GAS SYSTEM Natural Gas Utilities 2,218.89 0.05%
LEHMAN BR HOLDINGS Financial Institutions 2,221.86 0.05%
COUNTRYWIDE CREDIT INDUS Financial Institutions 2,215.96 0.04%
SUNDSTRAND CORP Aerospace & Defence 2,204.08 0.04%
SYNOVUS FINANCIAL Commercial Banks & Other Banks 2,200.26 0.04%
WENDYS INTL Restaurants & Hotels 2,197.61 0.04%
MANOR CARE Health Care 2,185.75 0.04%
MAYTAG Household Durables & Appliances 2,185.97 0.04%
ECHLIN INC Auto Parts -- After Market 2,177.52 0.04%
ATMEL CORP Electronics 2,172.81 0.04%
XILINX INC Electronics 2,165.29 0.04%
HOMESTAKE MINING Precious Metals & Minerals 2,155.53 0.04%
POLAROID Photography 2,152.72 0.04%
HARRIS CORP Electronics 2,142.28 0.04%
SUPER VALU STORES Wholesale -- Nondurables 2,140.83 0.04%
REEBOK INTERNATIONAL Footwear 2,135.02 0.04%
MARRIOTT CORP Restaurants & Hotels 2,110.57 0.04%
DOLE FOOD INC Food Processors 2,094.16 0.04%
INTEGRA FINL CORP Commercial Banks & Other Banks 2,073.77 0.04%
TERADYNE INC Electronics 2,064.53 0.04%
UJB FINANCIAL Commercial Banks & Other Banks 2,061.60 0.04%
AMERICAN GREETINGS A Diversified Consumer Goods & Services 2,060.58 0.04%
LITTON INDUSTRIES Aerospace & Defence 2,057.81 0.04%
LIZ CLAIBORNE Clothing 2,054.58 0.04%
SUN CO Petroleum Products & Refineries 2,054.17 0.04%
JAMES RIVER CORP VA Paper & Paper Products 2,045.99 0.04%
CABOT CORP Chemicals, Fibres, Paints & Gases 2,044.34 0.04%
LEGGETT & PLATT INC Household Durables & Appliances 2,036.71 0.04%
FIRST TENN NATL Commercial Banks & Other Banks 2,031.29 0.04%
PREMIER INDUSTRIES Electrical Equipment 2,034.53 0.04%
NALCO CHEMICAL Chemicals (Diversified) 2,026.33 0.04%
VULCAN MATERIALS Building Materials 2,027.77 0.04%
ARROW ELECTRONICS Electronics 2,006.09 0.04%
SHAW INDUS Household Durables & Appliances 2,004.42 0.04%
CITIZENS UTIL 'A' Telephone Companies 1,979.63 0.04%
REGIONS FINANCIAL Commercial Banks & Other Banks 1,979.42 0.04%
TYSON FOODS CL 'A' Food Processors 1,978.60 0.04%
KANSAS CITY SO. IND Rail & Road Transport 1,957.92 0.04%
LONG ISLAND LIGHTING Electric Utilities & Water Works Supply 1,954.90 0.04%
PENNZOIL Petroleum Products & Refineries 1,956.98 0.04%
RYDER SYSTEM Rail & Road Transport 1,953.49 0.04%
PAINE WEBBER Financial Institutions 1,948.74 0.04%
AVNET Instrumentation & Control Equipment 1,937.09 0.04%
ECOLAB Diversified Consumer Goods & Services 1,932.45 0.04%
AMER RE CORP Insurance -- Property & Casualty 1,923.17 0.04%
FIRST SECURITY Commercial Banks & Other Banks 1,927.16 0.04%
WEST ONE BANCORP Commercial Banks & Other Banks 1,919.74 0.04%
</TABLE>
I-11
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
ROADWAY SERVICES Freight Forwarders 1,909.50 0.04%
UNITRIN INC Insurance -- Life & Agents & Brokers 1,912.37 0.04%
WASHINGTON MUTUAL Commercial Banks & Other Banks 1,902.95 0.04%
USF & G Insurance -- Property & Casualty 1,896.04 0.04%
WORTHINGTON INDUS Iron & Steel 1,888.67 0.04%
CERIDIAN CORP Computers 1,884.96 0.04%
DARDEN RESTAURANTS Restaurants & Hotels 1,882.71 0.04%
BAYBANKS INC Commercial Banks & Other Banks 1,867.44 0.04%
OLD KENT FINL Commercial Banks & Other Banks 1,864.16 0.04%
OLD REPUBLIC INTL Insurance -- Property & Casualty 1,851.64 0.04%
MILLIPORE CORP Chemicals (Diversified) 1,832.28 0.04%
SNAP-ON-TOOLS Auto Parts -- After Market 1,830.36 0.04%
OLIN CORP Chemicals (Diversified) 1,828.33 0.04%
PROVIDENT LIFE AND ACCID' Insurance -- Life & Agents & Brokers 1,828.71 0.04%
TIG HOLDINGS Insurance -- Property & Casualty 1,827.28 0.04%
BANK SOUTH CORP Commercial Banks & Other Banks 1,785.62 0.04%
HUBBELL INC CL 'B' Electronics 1,783.14 0.04%
MEDITRUST SBI Real Estate 1,779.92 0.04%
STAR BANC CORP Commercial Banks & Other Banks 1,776.13 0.04%
LUBRIZOL CORP Chemicals, Fibres, Paints & Gases 1,771.23 0.04%
GOODRICH (BF) Chemicals (Diversified) 1,767.44 0.04%
AMER NATL INSURANCE Insurance -- Life & Agents & Brokers 1,760.85 0.04%
TAMBRANDS Health Care 1,751.76 0.04%
KEMPER CORP Insurance -- Life & Agents & Brokers 1,736.13 0.04%
WOOLWORTH CORP Retail -- General Merchandise 1,729.53 0.04%
ADVANCED MICRO DEV Electronics 1,720.46 0.03%
MERC STORES Retail -- Department Stores 1,704.03 0.03%
AMER FINL GROUP Insurance -- Property & Casualty 1,699.47 0.03%
DIEBOLD Business Services 1,690.49 0.03%
TRANSATLANTIC HOLDINGS Insurance -- Property & Casualty 1,683.74 0.03%
ST. JOE PAPER Paper & Paper Products 1,677.44 0.03%
BOISE CASCADE CORP Forestry Products 1,653.72 0.03%
LOCTITE CORP Chemicals (Diversified) 1,654.85 0.03%
ALLMERICA PROP & CAS COS Insurance -- Property & Casualty 1,651.02 0.03%
AMBAC INC Insurance -- Property & Casualty 1,647.42 0.03%
WITCO CORP Chemicals (Diversified) 1,650.69 0.03%
TEKTRONIX Instrumentation & Control Equipment 1,644.61 0.03%
PACCAR Auto Trucks & Parts 1,637.02 0.03%
HARNISCHFEGER Machinery -- Industrial & Speciality 1,615.72 0.03%
RELIASTAR FINANCIAL Insurance -- Life & Agents & Brokers 1,608.90 0.03%
PERKIN-ELMER Instrumentation & Control Equipment 1,595.62 0.03%
SANTA FE PACIFIC GOLD Precious Metals & Minerals 1,593.82 0.03%
PACIFICARE HEALTH SYS 'B' Health Care 1,591.39 0.03%
PMI GROUP Insurance -- Property & Casualty 1,583.75 0.03%
CAPITAL ONE FINANCIAL Financial Institutions 1,579.50 0.03%
ILLINOIS CENTRAL CORP Rail & Road Transport 1,581.70 0.03%
BETHLEHEM STEEL Iron & Steel 1,576.18 0.03%
NAT SERVICE Business Services 1,565.46 0.03%
MOLEX INC 'A' Electronics 1,551.13 0.03%
GENERAL SIGNAL CORP Instrumentation & Control Equipment 1,535.74 0.03%
FOSTER WHEELER CORP. Diversified Industrials 1,523.92 0.03%
</TABLE>
I-12
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
VARITY CORP Auto Parts -- Original Equipment 1,521.09 0.03%
EQUITY INCOME FUND Investment Trusts 1,517.46 0.03%
LEUCADIA NATL Diversified Holding Companies 1,503.07 0.03%
BANCORP HAWAII Commercial Banks & Other Banks 1,489.60 0.03%
EDWARDS(AG)INC Financial Institutions 1,490.09 0.03%
ANDREW CORP Communications Equipment 1,486.74 0.03%
AUTODESK Computer Software & Services 1,483.54 0.03%
CUMMINS ENGINE Machinery 1,483.70 0.03%
ETHYL CORP COM Chemicals, Fibres, Paints & Gases 1,480.42 0.03%
PUGET SOUND Electric Utilities & Water Works Supply 1,479.65 0.03%
BROWN-FORMAN 'B' Beverages -- Distillers 1,465.11 0.03%
TRI-CONTINENTAL CP Investment Trusts 1,452.34 0.03%
LOUISIANA LAND & EXP Oil -- Crude Producers 1,435.50 0.03%
GREENPOINT FINL Commercial Banks & Other Banks 1,430.19 0.03%
TELEDYNE Diversified Industrials 1,429.23 0.03%
BROOKLYN UNION GAS Natural Gas Utilities 1,427.05 0.03%
KING WORLD PRODUCTIONS Broadcasting Media 1,428.07 0.03%
SECURITY CAP PACIFIC TR Real Estate 1,426.17 0.03%
STONE CONTAINER Paper & Paper Products 1,425.05 0.03%
SIMON PROPERTY GROUP Real Estate 1,419.58 0.03%
FIRST VIRGINIA BANKS Commercial Banks & Other Banks 1,416.91 0.03%
BANDAG INC Tyre & Rubber Goods 1,413.91 0.03%
ORYX ENERGY COMPANY Oil -- Crude Producers 1,396.75 0.03%
SIGNET BANKING Commercial Banks & Other Banks 1,398.28 0.03%
BOWATER Paper & Paper Products 1,386.91 0.03%
NIAGARA MOHAWK POWER Electric Utilities & Water Works Supply 1,389.20 0.03%
DELMARVA POWER & LT Electric Utilities & Water Works Supply 1,381.38 0.03%
NICOR INC Natural Gas Utilities 1,383.75 0.03%
FOOD LION INC CLASS A Retail -- Grocery Chains 1,375.82 0.03%
FOOD LION INC CLASS B Retail -- Grocery Chains 1,371.01 0.03%
TJX COS INC Retail -- Miscellaneous & Speciality 1,367.12 0.03%
ASARCO Non-Ferrous Metals 1,357.63 0.03%
BELO (AH) CORP Publishing -- Newspapers 1,341.91 0.03%
CENTERIOR ENERGY COR Electric Utilities & Water Works Supply 1,313.78 0.03%
KLA INSTRUMENTS Instrumentation & Control Equipment 1,314.10 0.03%
TRINITY INDS Fabricated Metal Products 1,308.86 0.03%
PITTSTON SERVICES GROUP Freight Forwarders 1,304.38 0.03%
CENTRAL FIDELITY BANKS Commercial Banks & Other Banks 1,283.26 0.03%
EG & G Instrumentation & Control Equipment 1,272.96 0.03%
SENSORMATIC ELECT Instrumentation & Control Equipment 1,274.14 0.03%
CHRIS-CRAFT INDS Diversified Consumer Goods & Services 1,261.52 0.03%
SHARED MED SYS Health Care 1,263.40 0.03%
BRIGGS & STRATTON Machinery 1,254.71 0.03%
TANDEM COMPUTERS Computers 1,243.17 0.03%
INLAND STEEL Iron & Steel 1,225.40 0.02%
WEIS MARKETS INC Retail -- Grocery Chains 1,219.13 0.02%
</TABLE>
I-13
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT
CAPITALIZATION IN
(MILLIONS OF FT/S&P
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX
- ------------------------------ --------------------------------------------- --------------- --------
<S> <C> <C> <C>
MCDERMOTT INTL Heavy Engineering & Shipbuilding 1,195.72 0.02%
CONS FREIGHTWAYS Freight Forwarders 1,153.70 0.02%
SCIENTIFIC ATLANTA Communications Equipment 1,143.61 0.02%
ENSERCH CORP Natural Gas Utilities 1,112.61 0.02%
PEOPLES ENERGY CORP Natural Gas Utilities 1,108.49 0.02%
NORAM ENERGY CORP Natural Gas Utilities 1,105.24 0.02%
BROWN-FORMAN 'A' Beverages -- Distillers 1,083.43 0.02%
RUSSELL CORP Clothing 1,080.89 0.02%
CYPRESS SEMICONDUCTOR CORP. Electronics 1,068.81 0.02%
PACIFICARE HEALTH SYS 'A' Health Care 1,070.62 0.02%
ALEX & BALDWIN Sea Transport 1,046.82 0.02%
BEVERLY ENTERPRISES DEL Health Care 1,046.11 0.02%
USLIFE CORP Insurance -- Life & Agents & Brokers 1,026.79 0.02%
GAYLORD ENTERTAINMENT 'A' Entertainment & Leisure Time 1,023.81 0.02%
AMDAHL CORP Computers 1,010.44 0.02%
ROUSE Real Estate 976.39 0.02%
CCH INC CLASS A Publishing 962.34 0.02%
UNISYS CORP Computers 964.11 0.02%
MENTOR GRAPHICS Computers 951.99 0.02%
SAFETY-KLEEN Business Services 904.20 0.02%
CINCINNATI MILACRON Machine Tools 899.53 0.02%
CITIZENS UTIL 'B' Telephone Companies 897.83 0.02%
AMER POWER CONVERSION Electrical Equipment 883.80 0.02%
COMSAT CORP Telephone Companies 884.43 0.02%
GREAT ATLANTIC & PAC Retail -- Grocery Chains 879.06 0.02%
WASHINGTON GAS LT Natural Gas Utilities 877.07 0.02%
ADVANTA CORP CL 'B' Financial Institutions 866.34 0.02%
FREEPORT-MCMORAN Precious Metals & Minerals 847.67 0.02%
ALEX & ALEXANDER Insurance -- Agents & Brokers 844.40 0.02%
BALL CORP Containers 830.94 0.02%
USAIR GROUP Airlines 827.75 0.02%
TRINOVA CORP. Auto Parts -- Original Equipment 824.77 0.02%
NAVISTAR INTL CORP Auto Trucks & Parts 789.57 0.02%
ARCO CHEM CO Chemicals (Diversified) 782.80 0.02%
FLEMING Wholesale -- Nondurables 776.78 0.02%
COMCAST CORP. Broadcasting Media 689.19 0.01%
BATTLE MTN GOLD Precious Metals & Minerals 679.15 0.01%
ADVANTA CORP CL 'A' Financial Institutions 667.12 0.01%
NL INDUSTRIES Chemicals, Fibres, Paints & Gases 632.00 0.01%
ARMCO Iron & Steel 623.90 0.01%
FT-US 4,935,800.29
</TABLE>
I-14
