<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1996
REGISTRATION NO. 33-97598
811-9102
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. 2 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 2 /X/
(CHECK APPROPRIATE BOX OR BOXES)
FOREIGN FUND, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
C/O PFPC INC. 19809
400 BELLEVUE PARKWAY (Zip Code)
WILMINGTON, DELAWARE
(Address of Principal Executive
Offices)
</TABLE>
Registrant's Telephone Number, including Area Code: (302) 791-1700
JOHN E. PELLETIER
PRESIDENT
FOREIGN FUND, INC.
C/O PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DELAWARE 19809
(Name and Address of Agent for Service)
COPIES TO:
Donald R. Crawshaw Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- ------------------------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page...................................... Cover Page
Item 2. Synopsis........................................ Summary Expenses
Item 3. Condensed Financial Information................. Not Applicable
Item 4. General Description of Registrant............... Cover Page; Foreign Fund, Inc. and Its
Investment Objective; Investment Policies;
General Information
Item 5. Management of the Fund.......................... Summary Expenses; Management of the Fund
Item 5A. Management's Discussion of Fund Performance..... Not Applicable
Item 6. Capital Stock and Other Securities.............. World Equity Benchmark Shares: "WEBS"; Dividends
and Capital Gains Distributions; General
Information
Item 7. Purchase of Securities Being Offered............ Management of the Fund; Exchange Listing and
Trading of WEBS; Purchase and Issuance of WEBS
in Creation Units
Item 8. Redemption or Repurchase........................ Redemption of WEBS in Creation Units
Item 9. Pending Legal Proceedings....................... Not Applicable
PART B
Item 10. Cover Page...................................... Cover Page
Item 11. Table of Contents............................... Table of Contents
Item 12. General Information and History................. General Description of the Fund
Item 13. Investment Objectives and Policies.............. Investment Policies and Restrictions; Brokerage
Transactions
Item 14. Management of the Fund.......................... Management of the Fund; Investment Advisory,
Management, Administrative and Distribution
Services
Item 15. Control Persons and Principal Holders of
Securities..................................... Management of the Fund; Investment Advisory,
Management, Administrative and Distribution
Services
Item 16. Investment Advisory and Other Services.......... Management of the Fund; Investment Advisory,
Management, Administrative and Distribution
Services; Counsel and Independent Accountants
Item 17. Brokerage Allocation............................ Brokerage Transactions
Item 18. Capital Stock and Other Securities.............. Capital Stock and Shareholder Reports; Taxes
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered.................................. Purchase and Issuance of WEBS in Creation Units;
Redemption of WEBS in Creation Units;
Determining Net Asset Value
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
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<S> <C> <C>
Item 20. Tax Status...................................... Dividends and Distributions; Taxes
Item 21. Underwriters.................................... Investment Advisory, Management, Administrative
and Distribution Services; Purchase and
Issuance of WEBS in Creation Units
Item 22. Calculations of Performance Data................ Not Applicable
Item 23. Financial Statements............................ Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate Item, so numbered in Part C of
this Registration Statement.
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY PROSPECTUS
[LOGO]
SUBJECT TO COMPLETION, DATED MARCH 1, 1996
WORLD EQUITY BENCHMARK SHARES-SM-
FOREIGN FUND, INC.
Foreign Fund, Inc. (the "Fund") is an "index" fund consisting of separate
series (each, an "Index Series"), each of which invests primarily in common
stocks in an effort to track the performance of a specified foreign equity
market index. The initial seventeen Index Series offered by this Prospectus are
the Australia Index Series, the Austria Index Series, the Belgium Index Series,
the Canada Index Series, the France Index Series, the Germany Index Series, the
Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the
Malaysia Index Series, the Mexico (Free) Index Series, the Netherlands Index
Series, the Singapore (Free) Index Series, the Spain Index Series, the Sweden
Index Series, the Switzerland Index Series and the United Kingdom Index Series.
The investment objective of each of the initial seventeen Index Series is to
seek to provide investment results that correspond generally to the price and
yield performance of publicly traded securities in the aggregate in particular
markets, as represented by a particular foreign equity securities index compiled
by Morgan Stanley Capital International ("MSCI"). THE MSCI INDICES UTILIZED BY
THE FUND REFLECT THE REINVESTMENT OF NET DIVIDENDS (EXCEPT FOR THE MSCI MEXICO
(FREE) INDEX UTILIZED BY THE MEXICO (FREE) INDEX SERIES, WHICH REFLECTS THE
REINVESTMENT OF GROSS DIVIDENDS).
The shares of common stock of each Index Series are sometimes referred to as
"World Equity Benchmark Shares-SM-" or "WEBS-SM-". Application has been made to
list the WEBS for trading on the American Stock Exchange, Inc. (the "AMEX"). It
is expected that the non-redeemable WEBS will trade on the AMEX during the day
at prices that differ to some degree from their net asset value. There can be no
assurance that an active trading market will develop for the WEBS. See
"Investment Considerations and Risks" for a discussion of certain investment
considerations and risks that should be considered by potential investors.
The Fund will issue and redeem WEBS of each Index Series only in
aggregations of a specified number of shares (each, a "Creation Unit") at net
asset value. EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE
SECURITIES OF THE FUND.
The Fund will be managed and advised by BZW Barclays Global Fund Advisors
(the "Adviser"). PFPC Inc. (the "Administrator") will provide certain
administrative services to each Index Series of the Fund. Funds Distributor,
Inc. (the "Distributor") will serve as the principal underwriter and distributor
of the Fund's shares. The Distributor will not maintain a secondary market in
WEBS.
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.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus sets forth 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 , 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 (the
"SEC") and is incorporated herein by reference. The Statement of Additional
Information may be obtained without charge by writing to the Fund or the
Distributor. The Fund's and each Index Series' address is Foreign Fund, Inc.,
c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809.
DISTRIBUTOR:
FUNDS DISTRIBUTOR, INC.
INVESTOR INFORMATION: 1-800-XXX-XXXX
PROSPECTUS DATED , 1996
NOT FOR DISTRIBUTION--FOR INFORMATION ONLY
<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.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary......................................................................................... 3
Summary of Fund Expenses................................................................................... 5
The Fund and its Index Series.............................................................................. 11
Foreign Fund, Inc. and its Investment Objective.......................................................... 11
World Equity Benchmark Shares: "WEBS".................................................................... 11
Who Should Invest?....................................................................................... 11
Investment Policies...................................................................................... 12
Implementation of Policies............................................................................... 13
Investment Limitations................................................................................... 15
The Benchmark MSCI Indices Utilized by the Index Series.................................................. 16
Management of the Fund................................................................................... 23
Exchange Listing and Trading of WEBS..................................................................... 25
Investment Considerations and Risks...................................................................... 26
Determination of Net Asset Value......................................................................... 28
Creation Units........................................................................................... 29
Purchase and Issuance of WEBS in Creation Units.......................................................... 29
Redemption of WEBS in Creation Units..................................................................... 30
Dividends and Capital Gains Distributions................................................................ 30
Tax Matters.............................................................................................. 31
Book-Entry Only System................................................................................... 32
Performance.............................................................................................. 33
General Information...................................................................................... 33
Available Information.................................................................................... 34
</TABLE>
------------------------
"World Equity Benchmark Shares" and "WEBS" are service marks of Morgan
Stanley Group Inc. "MSCI" and "MSCI Indices" are service marks of Morgan Stanley
& Co. Incorporated used under license by the Fund.
2
<PAGE>
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
The Fund and its Index Series......... Foreign Fund, Inc. (the "Fund") is an "index" fund consisting
of separate series (each, an "Index Series"), the Australia
Index Series, the Austria Index Series, the Belgium Index
Series, the Canada Index Series, the France Index Series, the
Germany Index Series, the Hong Kong Index Series, the Italy
Index Series, the Japan Index Series, the Malaysia Index
Series, the Mexico (Free) Index Series, the Netherlands Index
Series, the Singapore (Free) Index Series, the Spain Index
Series, the Sweden Index Series, the Switzerland Index Series
and the United Kingdom Index Series.
Investment Objective of the
Index Series......................... The investment objective of each of the Index Series is to
seek to provide investment results that correspond generally
to the price and yield performance of publicly traded
securities in the aggregate in particular markets, as
represented by a particular foreign equity securities index
compiled by Morgan Stanley Capital International ("MSCI"). THE
MSCI INDICES UTILIZED BY THE FUND REFLECT THE REINVESTMENT OF
NET DIVIDENDS (EXCEPT FOR THE MSCI MEXICO (FREE) INDEX
UTILIZED BY THE MEXICO (FREE) INDEX SERIES, WHICH REFLECTS THE
REINVESTMENT OF GROSS DIVIDENDS).
WEBS.................................. The shares issued in respect of each Index Series are referred
to as "World Equity Benchmark Shares" or "WEBS". WEBS of an
Index Series are issued by the Fund only in large aggregations
of WEBS called "Creation Units" on a continuous basis through
the Distributor at their net asset value next determined after
receipt of an order. WEBS are not offered by the Fund in less
than Creation Unit aggregations, but shares of WEBS may be
bought or sold in the secondary market. EXCEPT WHEN AGGREGATED
IN CREATION UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF THE
FUND.
Exchange Listing and Trading of WEBS.. Application has been made to list the WEBS for secondary
market trading on the American Stock Exchange. A "round lot"
of WEBS is 100 shares. The initial price per share of the WEBS
of each Index Series is expected to be between $10 and $20,
although there can be no assurance of this price range or that
an active trading market will develop for WEBS of a particular
Index Series.
Who Should Invest?.................... WEBS are designed for investors who seek a relatively low-cost
"passive" approach for investing in a portfolio of equity
securities of companies located in the country of the subject
MSCI Index. Unlike equity mutual funds that seek to "beat"
market averages with unpredictable results, the Index Series
seek to provide investment results that correspond generally
to the price and yield performance of their respective
benchmark indices. See "Investment Considerations and Risks"
for a discussion of certain investment considerations and
risks that should be considered by potential investors.
Fund Management....................... ADVISER. BZW Barclays Global Fund Advisors is the Adviser to
the Fund and, subject to the supervision of the Board of
Directors of the Fund, will be responsible for the investment
management of each Index Series.
ADMINISTRATOR. PFPC Inc. is the Administrator of the Fund,
and will perform certain clerical, fund accounting,
recordkeeping and bookkeeping services in such capacity.
DISTRIBUTOR. Funds Distributor, Inc. is the Distributor of
WEBS in Creation Unit aggregations.
CUSTODIAN AND LENDING AGENT. Morgan Stanley Trust Company
serves as the Custodian for the cash and portfolio securities
of each Index Series, as well as Lending Agent of the
portfolio securities of each Index Series.
</TABLE>
3
<PAGE>
THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED
("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF
MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY FOREIGN FUND, INC. THE MSCI
INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY CAPITAL INTERNATIONAL
PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL INTERNATIONAL S.A.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY INDEX SERIES OR ANY MEMBER OF THE
PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE
WEBS OF ANY INDEX SERIES PARTICULARLY OR THE ABILITY OF THE INDICES IDENTIFIED
HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS THE LICENSOR
OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN STANLEY,
INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK ("MSCI") WHICH
MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO MORGAN STANLEY.
THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND CALCULATED
WITHOUT REGARD TO THE WEBS OF ANY INDEX SERIES OR THE ISSUER THEREOF. NEITHER
MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OF
THE WEBS OF ANY INDEX SERIES OR THE OWNERS OF THE WEBS OF ANY INDEX SERIES INTO
CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING, IN THE CASE OF CIPSA, OR
DISSEMINATING, IN THE CASE OF MORGAN STANLEY, THE RESPECTIVE MSCI INDICES.
NEITHER MORGAN STANLEY NOR CIPSA IS RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED
IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE WEBS OF
ANY INDEX SERIES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE
EQUATION BY WHICH THE WEBS OF ANY INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN
STANLEY NOR CIPSA HAS ANY OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY
INDEX SERIES IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE
WEBS OF ANY INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE
CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES,
OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MSCI
INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
HEREUNDER OR FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY
EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO THE MSCI INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR CIPSA HAVE ANY LIABILITY FOR ANY
DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES
(INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
------------------------
The information contained herein regarding MSCI, the MSCI Indices, local
securities markets and DTC was obtained from publicly available sources.
4
<PAGE>
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 Index Series of the Fund. The tables show all expenses and fees
the Fund is expected to incur. "Other Expenses" are based on estimated amounts
for the current fiscal year expressed as a percent of average net assets. The
examples set forth below are presented for an investment of $1,000 (see next
paragraph) as required by rules of the SEC. THE EXAMPLES IN THE TABLES SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR PERFORMANCE.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The notes to the tables
and the information under "Explanation of Tables" should be carefully reviewed
when reading the tables.
As of February 22, 1996, the approximate minimum value of a portfolio of
index securities comprising a deposit of a designated portfolio of equity
securities constituting an optimized representation of the subject MSCI Index
("Deposit Securities") for an in-kind purchase or redemption of a Creation Unit
of WEBS of each Index Series would have been as follows: the Australia Index
Series, $1,945,445; the Austria Index Series, $1,106,474; the Belgium Index
Series, $592,238; the Canada Index Series, $1,007,589; the France Index Series,
$2,515,209; the Germany Index Series, $4,016,230; the Hong Kong Index Series,
$1,046,255; the Italy Index Series, $2,050,122; the Japan Index Series,
$8,922,139; the Malaysia Index Series, $1,002,350; the Mexico (Free) Index
Series, $984,512; the Netherlands Index Series, $793,960; the Singapore (Free)
Index Series, $1,312,727; the Spain Index Series, $1,063,685; the Sweden Index
Series, $1,026,640; the Switzerland Index Series, $1,619,444; and the United
Kingdom Index Series, $2,499,129. The foregoing values are estimates based on
information available on February 22, 1996, 1996. The actual dollar value on any
particular day will fluctuate and may be greater or less than such values.
5
<PAGE>
<TABLE>
<CAPTION>
AUSTRALIA AUSTRIA BELGIUM CANADA INDEX FRANCE INDEX
INDEX SERIES INDEX SERIES INDEX SERIES SERIES SERIES
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases of Creation Units of
WEBS (as a percentage of amount
of investment).................. None None None None None
Maximum Transaction Fee (a) for
Purchase of one Creation Unit of
WEBS:
In-kind and Cash Purchases
(b)........................... $3,830 $1,750 $1,500 $4,000 $4,200
Additional Variable Charge for
Cash Purchases (NOTE - The
Fund will not ordinarily
permit cash purchases.)(b).... .60% .67% .30% .18% .22%
Deferred Sales Load.............. None None None None None
Maximum Redemption Transaction
Fee (a) for Redemption of one
Creation Unit of WEBS:
In-kind and Cash Redemptions
(c)........................... $3,830 $1,750 $1,500 $4,000 $4,200
Additional Variable Charge for
Cash Redemptions (NOTE - The
Fund will not ordinarily
permit cash
redemptions.)(c).............. .60% .67% .30% .18% .22%
B. Annual Series Operating
Expenses (as a percentage of
average net assets)
Management Fees.................. .27% .27% .27% .27% .27%
12b-1 Fees (d)................... .25% .25% .25% .25% .25%
Other Expenses*.................. .35% .35% .35% .32% .35%
Total Operating Expenses......... .87% .87% .87% .84% .87%
<CAPTION>
GERMANY HONG KONG ITALY JAPAN INDEX
INDEX SERIES INDEX SERIES INDEX SERIES SERIES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases of Creation Units of
WEBS (as a percentage of amount
of investment).................. None None None None
Maximum Transaction Fee (a) for
Purchase of one Creation Unit of
WEBS:
In-kind and Cash Purchases
(b)........................... $2,800 $4,650 $2,400 $ 8,000
Additional Variable Charge for
Cash Purchases (NOTE - The
Fund will not ordinarily
permit cash purchases.)(b).... .19% .60% .30% .11%
Deferred Sales Load.............. None None None None
Maximum Redemption Transaction
Fee (a) for Redemption of one
Creation Unit of WEBS:
In-kind and Cash Redemptions
(c)........................... $2,800 $4,650 $2,400 $ 8,000
Additional Variable Charge for
Cash Redemptions (NOTE - The
Fund will not ordinarily
permit cash
redemptions.)(c).............. .19% .60% .30% .11%
B. Annual Series Operating
Expenses (as a percentage of
average net assets)
Management Fees.................. .27% .27% .27% .27%
12b-1 Fees (d)................... .25% .25% .25% .25%
Other Expenses*.................. .35% .37% .34% .31%
Total Operating Expenses......... .87% .89% .86% .83%
</TABLE>
* Other Expenses are estimates only.
NOTE: ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE AMOUNTS SHOWN.
6
<PAGE>
<TABLE>
<CAPTION>
MEXICO SINGAPORE
MALAYSIA (FREE) INDEX NETHERLANDS (FREE) INDEX
INDEX SERIES SERIES INDEX SERIES SERIES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases of Creation Units of
WEBS (as a percentage of amount
of investment).................. None None None None
Maximum Transaction Fee (a) for
Purchase of one Creation Unit of
WEBS:
In-kind and Cash Purchases
(b)........................... $8,120 $2,750 $1,900 $5,200
Additional Variable Charge for
Cash Purchases (NOTE - The
Fund will not ordinarily
permit cash purchases.) (b)... 1.07% .24% .25% 1.30%
Deferred Sales Load.............. None None None None
Maximum Redemption Transaction
Fee (a) for Redemption of one
Creation Unit of WEBS:
In-kind and Cash Redemptions
(c)........................... $5,200 $2,750 $1,900 $2,100
Additional Variable Charge for
Cash Redemptions (NOTE - The
Fund will not ordinarily
permit cash redemptions.)
(c)........................... 1.07% .24% .25% 1.30%
B. Annual Series Operating Expenses
(as a percentage of average net
assets)
Management Fees.................. .27% .27% .27% .27%
12b-1 Fees (d)................... .25% .25% .25% .25%
Other Expenses*.................. .37% .50% .35% .35%
Total Operating Expenses......... .89% 1.02% .87% .87%
<CAPTION>
UNITED
SPAIN INDEX SWEDEN INDEX SWITZERLAND KINGDOM
SERIES SERIES INDEX SERIES INDEX SERIES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases of Creation Units of
WEBS (as a percentage of amount
of investment).................. None None None None
Maximum Transaction Fee (a) for
Purchase of one Creation Unit of
WEBS:
In-kind and Cash Purchases
(b)........................... $4,300 $2,150 $4,030 $6,000
Additional Variable Charge for
Cash Purchases (NOTE - The
Fund will not ordinarily
permit cash purchases.) (b)... .25% .25% .33% .25%
Deferred Sales Load.............. None None None None
Maximum Redemption Transaction
Fee (a) for Redemption of one
Creation Unit of WEBS:
In-kind and Cash Redemptions
(c)........................... $2,400 $2,150 $4,030 $6,000
Additional Variable Charge for
Cash Redemptions (NOTE - The
Fund will not ordinarily
permit cash redemptions.)
(c)........................... .45% .25% .33% .75%
B. Annual Series Operating Expenses
(as a percentage of average net
assets)
Management Fees.................. .27% .27% .27% .27%
12b-1 Fees (d)................... .25% .25% .25% .25%
Other Expenses*.................. .35% .35% .35% .32%
Total Operating Expenses......... .87% .87% .87% .84%
</TABLE>
* Other Expenses are estimates only.
NOTE: ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE AMOUNTS SHOWN.
7
<PAGE>
- ------------------------
(a) In addition to Transaction Fees shown, an investor purchasing a Creation
Unit of WEBS will bear the costs of transferring the securities in the
Portfolio Deposit (defined herein) to the Fund and an investor redeeming
Creation Units will bear the costs of transferring securities in the
Portfolio Deposit from the Fund to the investor. In each case, such costs
will include settlement and custody charges, registration costs, transfer
taxes and similar charges. As some of such costs are fixed, the cost of
transferring Deposit Securities relating to multiple Creation Units of WEBS
of the same Index Series may be proportionally less than the cost of
transferring Deposit Securities relating to one Creation Unit. See "Purchase
and Issuance of WEBS in Creation Units" and "Redemption of WEBS in Creation
Units".
(b) Paid to the Fund to offset transaction costs incurred by each Index Series
in connection with the issuance of a Creation Unit. The purchase transaction
fee is not a sales charge. The purchase transaction fees listed are the fees
expected to be imposed in connection with the purchase of Creation Units of
a given Index Series. The basic purchase transaction fees for in-kind and
cash purchases are the same no matter how many Creation Units of a given
Index Series are being purchased pursuant to any one purchase order except
in the case of the Malaysia, Singapore (Free) and Spain Index Series where
the amount shown reflects inclusion of a variable charge based on the total
market value of one Creation Unit of the relevant Index Series. The variable
charge represents stamp duty or "put through" fees imposed when securities
are delivered in the local market. The charges are calculated as follows:
Malaysia - .30% of market value; Singapore - .20% of market value; and Spain
- .10% of market value. The Fund may adjust such fees from time to time
based upon actual experience. Cash purchases of Creation Units, when
available, are also subject to an Additional Variable Charge, expressed as a
percentage of the value of the Portfolio Deposit. The Fund will not
ordinarily permit cash purchases. See "Purchase and Issuance of WEBS in
Creation Units".
(c) Paid to the Fund to offset transaction costs incurred by each Index Series
in connection with the redemption of a Creation Unit. The redemption
transaction fees listed are the fees expected to be imposed in connection
with the redemption of Creation Units of a given Index Series. The basic
redemption transaction fees are the same no matter how many Creations Units
of a given Index Series are being redeemed pursuant to any one redemption
request. The Fund may adjust such fees from time to time based upon actual
experience. Cash redemptions of Creation Units, when available, are also
subject to an Additional Variable Charge, expressed as a percentage of the
value of the Creation Unit(s) being redeemed. The Fund will not ordinarily
permit cash redemptions. See "Redemption of WEBS in Creation Units".
(d) All payments to the Distributor of the Fund to compensate the Distributor
will be made pursuant to the Fund's 12b-1 Plan. All amounts payable under
the 12b-1 Plan will not exceed, on an annualized basis, .25% of the Fund's
average daily net assets. See "Management of the Fund -- Distributor". A
long-term shareholder of an Index Series may pay more in total sales charges
than the economic equivalent of the maximum front-end sales charges
otherwise permitted by the rules of the National Association of Securities
Dealers, Inc.
C. Examples of Expenses
(a) WEBS in less than Creation Units are not redeemable. The Fund expects to
redeem Creation Units principally on an in-kind basis for Deposit
Securities. See "Redemption of WEBS in Creation Units" herein and in the
SAI. If an investor were permitted to purchase and redeem less than a
Creation Unit of WEBS on an in-kind basis, such investor would pay the
following
8
<PAGE>
expenses on a $1,000 investment (payment with a deposit of Deposit
Securities), assuming (1) a 5% annual return and (2) redemption
(delivery of Deposit Securities), at the end of each indicated time
period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
($) ($)
----------- -----------
<S> <C> <C>
Australia Index Series................................................................. 10 30
Austria Index Series................................................................... 11 30
Belgium Index Series................................................................... 12 31
Canada Index Series.................................................................... 13 32
France Index Series.................................................................... 11 30
Germany Index Series................................................................... 10 29
Hong Kong Index Series................................................................. 12 32
Italy Index Series..................................................................... 10 29
Japan Index Series..................................................................... 10 28
Malaysia Index Series.................................................................. 15 35
Mexico (Free) Index Series............................................................. 14 36
Netherlands Index Series............................................................... 12 31
Singapore (Free) Index Series.......................................................... 11 30
Spain Index Series..................................................................... 11 31
Sweden Index Series.................................................................... 11 31
Switzerland Index Series............................................................... 11 30
United Kingdom Index Series............................................................ 11 30
</TABLE>
(b) Such an investor would pay the following expenses on the same
investment, assuming no redemptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
($) ($)
----------- -----------
<S> <C> <C>
Australia Index Series................................................................. 9 29
Austria Index Series................................................................... 9 29
Belgium Index Series................................................................... 9 28
Canada Index Series.................................................................... 9 28
France Index Series.................................................................... 9 29
Germany Index Series................................................................... 9 29
Hong Kong Index Series................................................................. 9 29
Italy Index Series..................................................................... 9 28
Japan Index Series..................................................................... 9 27
Malaysia Index Series.................................................................. 9 29
Mexico (Free) Index Series............................................................. 11 33
Netherlands Index Series............................................................... 9 29
Singapore (Free) Index Series.......................................................... 9 29
Spain Index Series..................................................................... 9 29
Sweden Index Series.................................................................... 9 29
Switzerland Index Series............................................................... 9 29
United Kingdom Index Series............................................................ 9 28
</TABLE>
EXPLANATION OF TABLES
A. Shareholder Transaction Expenses are charges that investors pay to buy or
sell Creation Units of the Fund. The figures in the table are estimates and
actual shareholder transaction expenses may vary from such estimates. See
"Purchase and Issuance of WEBS in Creation Units" and "Redemption of WEBS in
Creation Units" in this Prospectus and "Purchase and Issuance of WEBS in
Creation Units" and "Redemption of WEBS in Creation Units" in the Statement
of Additional Information for an explanation of how these charges apply.
9
<PAGE>
B. Annual Series Operating Expenses are based on estimated expenses. Actual
expenses may vary from these estimates and will be affected by, among other
things, the levels of average net assets of an Index Series and the Fund.
Management fees are paid to the Adviser to provide each Index Series with
investment advisory, management and certain administrative services. Fees
paid to PFPC Inc. to provide the Fund with administrative and fund
accounting services are included in "Other Expenses", and are estimated on
average daily net assets of each Index Series of $100 million. Distribution
fees are paid to the Distributor, to compensate the Distributor and/or
reimburse it for certain expenses and for payments made to dealers and other
persons providing distribution, marketing and shareholder services to the
Fund. See "Management of the Fund" for additional information.
C. Examples of Expenses. The examples illustrate the estimated expenses
associated with a $1,000 investment in a Creation Unit of WEBS on an in-kind
basis over periods of 1 and 3 years, based on the expenses in the table and
an assumed annual rate of return of 5%. The presentation of a $1,000
investment in a Creation Unit is for illustration purposes only, as WEBS may
only be purchased from the Fund or redeemed by the Fund in Creation Units.
Further, the return of 5% and estimated expenses are for illustration
purposes only and should not be considered indications of expected Index
Series expenses or performance, both of which may vary. The expenses
associated with a $1,000 investment in WEBS include a pro rata portion of
shareholder transaction expenses associated with the purchase or sale of a
Creation Unit, which would have been valued as of February 22, 1996 at
between $592,000 and $8,923,000, depending on the Index Series, assuming for
this purpose that the net asset value of a Creation Unit was the same as the
value of the Deposit Securities as of such date. See the second paragraph
under Summary of Fund Expenses.
10
<PAGE>
THE FUND AND
ITS INDEX SERIES
FOREIGN FUND, INC. AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"), organized as a series fund.
Initially, seventeen Index Series of the Fund will issue shares: the Australia
Index Series, the Austria Index Series, the Belgium Index Series, the Canada
Index Series, the France Index Series, the Germany Index Series, the Hong Kong
Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index
Series, the Mexico (Free) Index Series, the Netherlands Index Series, the
Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series,
the Switzerland Index Series and the United Kingdom Index Series. Each of the
Canada Index Series, the France Index Series, the Japan Index Series and the
United Kingdom Index Series is classified as a "diversified" investment company
under the 1940 Act. Each of the other Index Series offered hereby is classified
as a "non-diversified" investment company under the 1940 Act. The Board of
Directors of the Fund may authorize additional Index Series in the future.
The investment objective of each of the initial seventeen Index Series is to
seek to provide investment results that correspond generally to the price and
yield performance of publicly traded securities in the aggregate in particular
markets, as represented by a particular foreign equity securities index. Each of
the Index Series utilizes an MSCI Index that reflects the reinvestment of net
dividends as its benchmark index (except for the MSCI Mexico (Free) Index
utilized by the Mexico (Free) Index Series, which reflects the reinvestment of
gross dividends). See "The Benchmark MSCI Indices Utilized by the Index Series"
below. Each MSCI Index is a market capital weighted index of equity securities
traded on the principal securities exchange(s) and, in some cases, the over-the-
counter market, of the respective country. The investment objective of each
Index Series is a fundamental policy and cannot be changed without the approval
of the holders of a majority of the respective Index Series' voting securities
(as defined in the 1940 Act).
There can be no assurance that the investment objective of any Index Series
will be achieved. In this regard, it should be noted that the benchmark indices
are unmanaged and bear no management, administration, distribution, transaction
or other expenses or taxes, while each Index Series must bear these expenses and
are also subject to a number of limitations on their investment flexibility. In
addition, certain Index Series are subject to foreign tax withholding at rates
different than those assumed by the relevant benchmark index. See "The Benchmark
MSCI Indices Utilized by the Index Series". Investing in WEBS of an Index Series
involves special risks of investing in securities of the relevant foreign
country. For a discussion of certain special considerations and risk factors
relevant to an investment in WEBS, see "Investment Considerations and Risks".
WORLD EQUITY BENCHMARK SHARES: "WEBS"
The shares of common stock, par value $.001 per share, of each Index Series
are referred to herein as "World Equity Benchmark Shares" or "WEBS". EXCEPT WHEN
AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF THE FUND.
Application has been made to list the WEBS for trading on the American Stock
Exchange, Inc. (the "AMEX"). It is expected that the non-redeemable WEBS will
trade on the AMEX during the day at prices that differ to some degree from their
net asset value. See "Determination of Net Asset Value", "Exchange Listing and
Trading", "Investment Considerations and Risks" and "Redemption of WEBS in
Creation Units".
WHO SHOULD INVEST?
The WEBS of each Index Series of the Fund are designed for investors who
seek a relatively low-cost "passive" approach for investing in a portfolio of
equity securities of companies located in the country of the subject MSCI Index.
Unlike equity mutual funds that seek to "beat" market averages with
unpredictable results, the Index Series seek to provide investment results that
correspond generally to the price and yield performance of their respective
benchmark indices.
11
<PAGE>
It is generally recognized that international diversification of an
investment portfolio reduces risk. Many of the foreign equity securities held by
the Index Series are difficult to purchase or hold, or are, as a practical
matter, not available to retail investors. The Fund offers investors a
convenient way to obtain indexed exposure to the equity markets of specific
foreign countries. It should be noted, however, that the prices of WEBS of a
particular Index Series are expected to be volatile, and investors should be
able to tolerate sudden, sometimes substantial fluctuations in the value of
their investment. No assurance can be given that any Index Series will achieve
its stated objective and shareholders should understand that they will be
exposed to the risks inherent in international equity investing. Because of the
risks associated with international equity investments, an Index Series is
intended to be a long-term investment vehicle and is not designed to provide
investors with a means of speculating on short-term market movements. See
"Investment Considerations and Risks".
INVESTMENT POLICIES
The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
each Index Series of the Fund, utilizing a "passive" or indexing investment
approach, attempts to approximate the investment performance of its benchmark
index through quantitative analytical procedures. Stocks are selected for
inclusion in an Index Series in order to have aggregate investment
characteristics (based on market capitalization and industry weightings),
fundamental characteristics (such as return variability, earnings valuation and
yield) and liquidity measures similar to those of the subject MSCI Index taken
in its entirety. Index Series generally will not hold all of the stocks in their
respective benchmark indices but will typically hold a representative subset of
such stocks selected through the Adviser's application of portfolio sampling
techniques. However, each Index Series reserves the right to invest in all of
the stocks in its benchmark index and where an Index Series benchmark index is
comprised of relatively few securities it may do so on a regular basis.
Each Index Series has the policy to remain as fully invested as practicable
in a pool of equity securities the performance of which will approximate the
performance of the subject MSCI Index taken in its entirety. An Index Series
will normally invest at least 95% of its total assets in stocks that are
represented in the relevant MSCI Index and will at all times invest at least 90%
of its total assets in such stocks. An Index Series may invest its remaining
assets in Short-Term Investments (defined below) and/or in combinations of
certain stock index futures contracts, options on such futures contracts, stock
index options, stock index swaps, forward currency exchange contracts and Short-
Term Investments (defined below) that are intended to provide the Index Series
with exposure to such stocks (the Index Series will not use such instruments to
leverage their investment portfolios). "Short-Term Investments" are short-term
high quality debt securities that include: obligations of the United States
Government and its agencies or instrumentalities; commercial paper (rated
Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's
Corporation), bank certificates of deposit and bankers' acceptances; repurchase
agreements collateralized by the foregoing securities; participation interests
in such securities; shares of money market funds (subject to applicable limits
under the Investment Company Act).
An Index Series will not invest in cash reserves or Short-Term Investments
or utilize futures contracts, options or swap agreements as part of a temporary
defensive strategy to protect against potential stock market declines. An Index
Series may enter into forward currency exchange contracts in order to facilitate
settlements in local markets, in connection with positions in stock index
futures, and to protect against currency exposure in connection with its
distributions to shareholders, but not as part of a defensive strategy to
protect against fluctuations in exchange rates. See "Implementation of Policies"
for a description of these and other investment practices of the Fund.
Each Index Series has a policy to concentrate its investments in an industry
or industries if, and to the extent that, its benchmark index concentrates in
such industry or industries, except where the concentration of the relevant
index is the result of a single stock. As a result of this policy, an Index
12
<PAGE>
Series will maintain at least 25% of the value of its assets in securities of
issuers in each industry for which its benchmark index has a concentration of
more than 25% (except where the concentration of the index is the result of a
single stock). No Index Series will concentrate its investments otherwise. If
the benchmark index for an Index Series has a concentration of more than 25%
because of a single stock (i.e., if one stock in the benchmark index accounts
for more than 25% of the index and it is the only stock in the index in its
industry), the Index Series will invest less than 25% of its assets in such
stock and will reallocate the excess to stocks in other industries. Changes in
an Index Series' concentration (if any) and non-concentration would be made
"passively" -- that is, any such changes would be made solely as a result of
changes in the concentrations of the benchmark index's constituents. At the date
of this Prospectus, as a result of this policy, the Austria Index Series
concentrates in the Banking industry, the Hong Kong Index Series concentrates in
the Real Estate industry, the Singapore (Free) Index Series concentrates in the
Banking industry, the Spain Index Series concentrates in the Utilities
(Electrical & Gas) and Banking industries, and the Switzerland Index Series
concentrates in the Health & Personal Care industry. Since the concentration of
each Index Series is based on that of its benchmark index, changes in the market
values of the Index Series' portfolio securities will not necessarily trigger
changes in the portfolio of such Index Series.
The concentration policy of each Index Series is a fundamental policy that
may be changed only with shareholder approval. Each of the other investment
policies of each Index Series is a nonfundamental policy that may be changed by
the Board of Directors without shareholder approval. However, shareholders would
be notified prior to any material change in these policies. See "Investment
Limitations" herein and "Investment Policies and Restrictions" in the Statement
of Additional Information for a listing of limitations on investment practices
that may only be changed with shareholder approval.
IMPLEMENTATION OF POLICIES
An Index Series generally will not hold all of the issues that comprise the
subject MSCI Index, due in part to the costs involved and, in certain instances,
the potential illiquidity of certain securities. Instead, each Index Series will
attempt to hold a representative sample of the securities in the Index, which
will be selected by the Adviser utilizing quantitative analytical models in a
technique known as "portfolio sampling". Under this technique, each stock is
considered for inclusion in the Index Series based on its contribution to
certain capitalization, industry and fundamental investment characteristics. The
Adviser will seek to construct the portfolio of each Index Series so that, in
the aggregate, its capitalization, industry and fundamental investment
characteristics perform like those of the subject MSCI Index. Over time, the
portfolio composition of an Index Series may be altered (or "rebalanced") to
reflect changes in the characteristics of the subject MSCI Index or with a view
to bringing the performance and characteristics of the Index Series more in line
with that of the relevant MSCI Index. Such rebalancings will require the Index
Series to incur transaction costs and other expenses. As noted above, each Index
Series reserves the right to invest in all of the securities in the benchmark
index, and Index Series with benchmark indices comprised of relatively few
stocks may do so on a regular basis.
Due to the use of this portfolio sampling technique, an Index Series is not
expected to track its benchmark index with the same degree of accuracy as would
an investment vehicle that invested in every component security of the subject
index. The Adviser expects that, over time, the "expected tracking error" of an
Index Series relative to the performance of its benchmark index will be less
than 5% and that the tracking error will generally be greater for Index Series
that have benchmark indices with fewer rather than greater numbers of component
stocks. An expected tracking error of 5% means that there is a 68% probability
that the net asset value of the Index Series will be between 95% and 105% of the
subject MSCI Index level after one year, without rebalancing the portfolio
composition. A tracking error of 0% would indicate perfect tracking, which would
be achieved when the net asset value of the Index Series increases or decreases
in exact proportion to changes in its benchmark index. Factors such as expenses
of the Fund, taxes, the need to comply with the diversification and other
13
<PAGE>
requirements of the Internal Revenue Code of 1986 (the "Internal Revenue Code")
and other requirements may adversely impact the tracking of the performance of
an Index Series to that of its benchmark index. The Adviser will monitor the
tracking error of each Index Series on an ongoing basis and will seek to
minimize tracking error to the maximum extent possible. See also the discussion
of portfolio sampling in the preceding paragraph. There can be no assurance that
any Index Series will achieve any particular level of tracking error relative to
the performance of the relevant benchmark index. Semiannual and annual reports
of the Fund will disclose tracking error over the previous six month periods,
and in the event that tracking error exceeds 5%, the Board of Directors of the
Fund will consider what action might be appropriate.
Although the policy of each Index Series of the Fund is to remain
substantially fully invested in equity securities, an Index Series may also
invest in combinations of certain stock index futures contracts, options on such
futures contracts, stock index options, stock index swaps and cash and
Short-Term Investments that are intended to provide the Index Series with
exposure to such equity securities, and in certain Short-Term Investments that
are not associated with related positions in stock index futures contracts,
options on such futures contracts, stock index options or stock index swaps.
Such investments may be made to invest uncommitted cash balances or, in limited
circumstances, to assist in meeting shareholder redemptions of Creation Units of
WEBS.
An Index Series may purchase stock index futures contracts, options on such
futures contracts and stock index options and may enter into stock index swaps
to simulate full investment in the underlying index to a limited extent. This
may be done to facilitate trading (e.g., to rapidly gain exposure to a market in
anticipation of purchasing the underlying equities over time), to reduce
transaction costs or because the Adviser has determined that the use of such
instruments permits the Index Series to gain exposure to the underlying equities
at a lower cost than by making direct investments in the cash market. While each
of these instruments can be used to leverage an investment portfolio, no Index
Series may use them to leverage its net assets.
An Index Series may enter into foreign currency forward and foreign currency
futures contracts to facilitate settlements in local markets, in connection with
stock index futures positions, and to protect against currency exposure in
connection with its distributions to shareholders, but may not enter into such
contracts for speculative purposes or as a way of protecting against anticipated
adverse changes in exchange rates between foreign currencies and the U.S.
dollar. A foreign currency forward contract is an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract.
The Fund may lend securities from the portfolio of an Index Series to
brokers, dealers and other financial institutions desiring to borrow securities
to complete transactions and for other purposes. Because the cash, government
securities or other assets that are pledged as collateral to the Fund in
connection with these loans generate income, securities lending enables an Index
Series to earn income that may partially offset the expenses of the Index
Series, and thereby reduce the effect that expenses have on an Index Series'
ability to provide investment results that correspond generally to the price and
yield performance of its benchmark index. These loans may not exceed 33% of an
Index Series' total assets. The documentation for these loans will provide that
the Index Series will receive collateral equal to at least 100% of the current
market value of the loaned securities, as marked to market each day that the net
asset value of the Index Series is determined, consisting of cash, government
securities or other assets permitted by applicable regulations and
interpretations. An Index Series will pay reasonable administrative and
custodial fees in connection with the loan of securities. The Index Series will
invest cash collateral in Short-Term Investments, and the Index Series will bear
the risk of loss of the invested collateral. Morgan Stanley Trust Company serves
as Lending Agent of the Fund and, in such capacity, will share equally with the
respective Index Series any net income earned on invested collateral. An Index
Series' share of income from the loan collateral will be included in the Index
Series' gross investment income. The Fund will comply with the conditions for
securities lending established by the SEC staff.
14
<PAGE>
Although each Index Series generally seeks to invest for the long term, the
Index Series retain the right to sell securities irrespective of how long they
have been held. However, because of the "passive" investment management approach
of the Fund, the portfolio turnover rate for each Index Series is expected to be
under 50%, a generally lower turnover rate than for many other investment
companies. A portfolio turnover rate of 50% would occur if one half of an Index
Series' securities were sold within one year. (For purposes of calculating
portfolio turnover rate, the Fund does not take into account "sales" of
securities by means of in-kind redemptions, since such transactions do not
impact an Index Series' portfolio composition or weighting.) Ordinarily,
securities will be sold from an Index Series only to reflect certain
administrative changes in an Index (including mergers or changes in the
composition of the Index) or to accommodate cash flows out of the Index Series
while seeking to keep the performance of the Index Series in line with that of
its benchmark index. In addition, securities may be sold from an Index Series in
certain circumstances to ensure the Index Series' compliance with the
diversification and other requirements of the Internal Revenue Code and with
other requirements, which would tend to raise the portfolio turnover rate of
such Index Series. Purchases and sales of securities in connection with such
compliance will involve transaction costs which will be borne by the respective
Index Series.
An Index Series may borrow money from a bank up to a limit of 33% of the
market value of its assets, but only for temporary or emergency purposes (e.g.,
to facilitate distributions to shareholders or to meet redemption requests (in
connection with Creation Units of WEBS that the Fund agrees to redeem for cash)
prior to the settlement of securities already sold or in the process of being
sold by the Index Series). To the extent that an Index Series borrows money
prior to receiving distributions on its portfolio securities or prior to selling
securities in connection with a redemption, it may be leveraged; at such times,
the Index Series may appreciate or depreciate in value more rapidly than its
benchmark index. An Index Series will not make cash purchases of securities when
the amount of money borrowed exceeds 5% of the market value of its total assets.
INVESTMENT LIMITATIONS
Each Index Series of the Fund intends to observe certain limitations on its
investment practices. Specifically, an Index Series may not:
(i) lend any funds or other assets except through the purchase of all or
a portion of an issue of securities or obligations of the type in which it
is permitted to invest (including participation interests in such securities
or obligations) and except that an Index Series may lend its portfolio
securities in an amount not to exceed 33% of the value of its total assets;
(ii) issue senior securities or borrow money, except borrowings from
banks for temporary or emergency purposes in an amount up to 33% of the
value of the Index Series' total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not including the
amount borrowed) valued at the time the borrowing is made, and the Index
Series will not purchase securities while borrowings in excess of 5% of the
Index Series' total assets are outstanding, provided, that for purposes of
this restriction, short-term credits necessary for the clearance of
transactions are not considered borrowings;
(iii) pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings; or
(iv) purchase a security (other than obligations of the United States
Government, its agencies or instrumentalities) if as a result 25% or more of
its total assets would be invested in a single issuer.
Except with regard to an Index Series' borrowing policy and illiquid securities
policy, all percentage limitations apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in total or net assets
15
<PAGE>
does not require elimination of any security from the Index Series' portfolio.
The investment limitations described in (i) through (iv) above and the preceding
paragraph, and certain additional limitations described in the Statement of
Additional Information, may be changed with respect to an Index Series only with
the approval of the holders of a majority of the outstanding voting securities
(as defined in the 1940 Act) of such Index Series.
THE BENCHMARK MSCI INDICES UTILIZED BY THE INDEX SERIES
Each Index Series uses the corresponding MSCI Index listed below as its
benchmark (the Australia Index Series uses the MSCI Australia Index, etc.). MSCI
publishes several versions of each stock index that it compiles. With the
exception of the MSCI Mexico (Free) Index, the MSCI Indices used by Index Series
as benchmarks reflect the reinvestment of net dividends. "Net dividends" means
dividends after reduction for taxes withheld at source at the rate applicable to
holders of the underlying stocks that are resident in Luxembourg. Such
withholding rate currently differs from that applicable to the Australia,
Malaysia and Singapore (Free) Index Series. Australian companies generally
withhold tax on dividends paid to U.S. persons (such as the Fund) at a 15% rate
(as opposed to 25% for Luxembourg persons). The rate of withholding on dividends
paid to U.S. persons is currently 30% for Malaysia and 27% for Singapore,
whereas the withholding rate in such countries on payments to persons in
Luxembourg is 25%. The Mexico (Free) Index Series' benchmark index, the MSCI
Mexico (Free) Index, reflects the reinvestment of gross dividends. "Gross
dividends" means dividends before reduction for taxes withheld at source.
Mexican companies do not withhold tax to U.S. investors.
The stocks included in an MSCI Index are chosen by Morgan Stanley Capital
International on a statistical basis. Each stock in an MSCI Index is weighted
according to its market value as a percentage of the total market value of all
stocks in the Index. (A stock's market value equals the number of shares
outstanding times the most recent price of the security.) The inclusion of a
stock in an MSCI Index in no way implies that Morgan Stanley Capital
International believes the stock to be an attractive investment.
IN GENERAL
The Indices were founded in 1969 by Capital International S.A. as the first
international performance benchmarks constructed to facilitate accurate
comparison of world markets. Morgan Stanley acquired rights to the Indices in
1986. The MSCI Indices have covered the world's developed markets since 1969,
and in 1988, MSCI commenced coverage of the emerging markets.
Although local stock exchanges have traditionally calculated their own
indices, these are generally not comparable with one another, due to differences
in the representation of the local market, mathematical formulas, base dates and
methods of adjusting for capital changes. MSCI applies the same criteria and
calculation methodology across all markets for all indices, developed and
emerging.
MSCI Indices are notable for the depth and breadth of their coverage. MSCI
generally seeks to have 60% of the capitalization of a country's stock market
reflected in the MSCI index for such country. Thus, the MSCI Indices balance the
inclusiveness of an "all share" index against the replicability of a "blue chip"
index.
WEIGHTING
All single-country MSCI Indices are market capitalization weighted, i.e.,
companies are included in the indices at their full market value (total number
of shares issued and paid up, multiplied by price). MSCI believes full market
capitalization weighting is preferable to other weighting schemes for both
theoretical and practical reasons.
MSCI calculates two indices in some countries in order to address the issue
of restrictions on foreign ownership in such countries. The additional indices
are called "Free" indices, and they exclude companies and share classes not
purchasable by foreigners. Free indices are currently calculated for Singapore,
Mexico, the Philippines and Venezuela, and for those regional and international
indices which include such markets.
16
<PAGE>
Market capitalization weighting, combined with a consistent target of 60% of
market capitalization, helps ensure that each country's weight in regional and
international indices approximates its weight in the total universe of
developing and emerging markets. Maintaining consistent policy among MSCI
developed and emerging market indices is also critical to the calculation of
certain combined developed and emerging market indices published by MSCI.
THE MSCI AUSTRALIA INDEX ("MSCI AUSTRALIA"). The MSCI Australia consists
primarily of stocks that are traded on the Australian Stock Exchange. On January
31, 1996, the MSCI Australia consisted of 49 stocks. The three largest
constituents of the MSCI Australia and the respective approximate percentages of
the MSCI Australia represented thereby were Broken Hill Proprietary Company Ltd.
(19.8%), News Corp. (11.1%) and National Australia Bank (9.9%), for a total of
approximately 40.8% of the MSCI Australia. As of January 31, 1996, the ten
largest constituents comprised approximately 67.4% of the market capitalization
of the MSCI Australia. As of January 31, 1996, the three most highly represented
industry sectors in the MSCI Australia, and the approximate percentages of the
MSCI Australia represented thereby, were Energy Sources (22.6%), Banking (16.5%)
and Metals -- Non-Ferrous (12.0%), for a total of approximately 51.1% of the
MSCI Australia. The MSCI Australia represented approximately 55.1% of the
aggregate capitalization of the Australian equity markets at January 31, 1996.
THE MSCI AUSTRIA INDEX ("MSCI AUSTRIA"). The MSCI Austria consists
primarily of stocks that are traded on the Vienna Stock Exchange. On January 31,
1996, the MSCI Austria consisted of 24 stocks. The three largest constituents of
the MSCI Austria and the respective approximate percentages of the MSCI Austria
represented thereby were Bank of Austria (19.1%), Creditanstalt, (11.3%), and
EA-Generali (10.7%) for a total of approximately 41.3% of the MSCI Austria. As
of January 31, 1996, the ten largest constituents comprised approximately 87.0%
of the market capitalization of the MSCI Austria. As of January 31, 1996, the
three most highly represented industry sectors in the MSCI Austria, and the
approximate percentages of the MSCI Austria represented thereby, were Banking
(30.4%), Insurance (10.9%) and Energy Sources (10.7%), for a total of
approximately 52.0% of the MSCI Austria. The MSCI Austria represented
approximately 61.5% of the aggregate capitalization of the Austrian equity
markets at January 31, 1996.
THE MSCI BELGIUM INDEX ("MSCI BELGIUM"). The MSCI Belgium consists
primarily of stocks that are traded on the Brussels Stock Exchange. On January
31, 1996, the MSCI Belgium consisted of 20 stocks. As of January 31, 1996, the
three largest constituents of the MSCI Belgium and the respective approximate
percentages of the MSCI Belgium represented thereby were Electrabel (21.4%),
Petrofina (11.2%) and Tractebel (9.7%), for a total of approximately 42.3% of
the MSCI Belgium. As of January 31, 1996, the ten largest constituents comprised
approximately 87.1% of the market capitalization of the MSCI Belgium. As of
January 31, 1996, the three most highly represented industry sectors in the MSCI
Belgium, and the approximate percentages of the MSCI Belgium represented
thereby, were Utilities -- Electrical & Gas (21.4%), Multi-Industry (17.5%) and
Banking (15.9%), for a total of approximately 54.8% of the MSCI Belgium. The
MSCI Belgium represented approximately 59.9% of the aggregate capitalization of
the Belgian equity markets at January 31, 1996.
THE MSCI CANADA INDEX ("MSCI CANADA"). The MSCI Canada consists primarily
of stocks that are traded on the Toronto Stock Exchange. On January 31, 1996,
the MSCI Canada consisted of 84 stocks. The three largest constituents of the
MSCI Canada and the respective approximate percentages of the MSCI Canada
represented thereby were Seagram (6.4%), Northern Telecom (5.4%) and BCE Inc.
(5.4%), for a total of approximately 17.2% of the MSCI Canada. As of January 31,
1996, the ten largest constituents comprised approximately 43.0% of the market
capitalization of the MSCI Canada. As of January 31, 1996, the three most highly
represented industry sectors in the MSCI Canada, and the approximate percentages
of the MSCI Canada represented thereby, were Banking (13.0%), Energy Sources
(11.5%) and Metals -- Non-Ferrous (11.0%), for a total of approximately 35.5% of
the MSCI Canada. The MSCI Canada represented approximately 60.4% of the
aggregate capitalization of the Canadian equity markets at January 31, 1996.
17
<PAGE>
THE MSCI FRANCE INDEX ("MSCI FRANCE"). The MSCI France consists primarily
of stocks that are traded on the Paris Stock Exchange. On January 31, 1996, the
MSCI France consisted of 74 stocks. The three largest constituents of the MSCI
France and the respective approximate percentages of the MSCI France represented
thereby were Elf Aquitaine (6.0%), LVMH (Moet Vuitton) (5.7%) and L'Oreal
(5.1%), for a total of approximately 16.8% of the MSCI France. As of January 31,
1996, the ten largest constituents comprised approximately 44.3% of the market
capitalization of the MSCI France. As of January 31, 1996, the three most highly
represented industry sectors in the MSCI France, and the approximate percentages
of the MSCI France represented thereby, were Energy Sources (10.7%),
Merchandising (9.6%) and Banking (9.5%), for a total of approximately 29.8% of
the MSCI France. The MSCI France represented approximately 65.1% of the
aggregate capitalization of the French equity markets at January 31, 1996.
THE MSCI GERMANY INDEX ("MSCI GERMANY"). The MSCI Germany consists
primarily of stocks that are traded on the Frankfurt Stock Exchange. On January
31, 1996, the MSCI Germany consisted of 69 stocks. The three largest
constituents of the MSCI Germany and the respective approximate percentages of
the MSCI Germany represented thereby were Allianz Holding (11.5%), Siemens
(8.4%) and Daimler-Benz (7.5%), for a total of approximately 27.5% of the MSCI
Germany. As of January 31, 1996, the ten largest constituents comprised
approximately 63.1% of the market capitalization of the MSCI Germany. As of
January 31, 1996, the three most highly represented industry sectors in the MSCI
Germany, and the approximate percentages of the MSCI Germany represented
thereby, were Insurance (17.9%), Banking (13.7%) and Utilities -- Electrical &
Gas (10.8%), for a total of approximately 42.4% of the MSCI Germany. The MSCI
Germany represented approximately 62.7% of the aggregate capitalization of the
German equity markets at January 31, 1996.
THE MSCI HONG KONG INDEX ("MSCI HONG KONG"). The MSCI Hong Kong consists
primarily of stocks that are traded on The Stock Exchange of Hong Kong Limited
(SEHK). On January 31, 1996, the MSCI Hong Kong consisted of 38 stocks. The
three largest constituents of the MSCI Hong Kong and the respective approximate
percentages of the MSCI Hong Kong represented thereby were Hutchison Whampoa
(12.8%), Sun Hung Kai Properties (12.4%) and Hong Kong Telecom (11.5%), for a
total of approximately 36.7% of the MSCI Hong Kong. As of January 31, 1996, the
ten largest constituents comprised approximately 80.7% of the market
capitalization of the MSCI Hong Kong. As of January 31, 1996, the three most
highly represented industry sectors in the MSCI Hong Kong, and the approximate
percentages of the MSCI Hong Kong represented thereby, were Real Estate (37.0%),
Multi-Industry (20.4%) and Banking (12.8%), for a total of approximately 70.2%
of the MSCI Hong Kong. The MSCI Hong Kong represented approximately 59.2% of the
aggregate capitalization of the Hong Kong equity markets at January 31, 1996.
THE MSCI ITALY INDEX ("MSCI ITALY"). The MSCI Italy consists primarily of
stocks that are traded on the Milan Stock Exchange. On January 31, 1996, the
MSCI Italy consisted of 55 stocks. The three largest constituents of the MSCI
Italy and the respective approximate percentages of the MSCI Italy represented
thereby were Assicurazioni Generali (16.3%), Fiat (11.5%) and Telecom Italia
Mobile (11.2%), for a total of approximately 39.0% of the MSCI Italy. As of
January 31, 1996, the ten largest constituents comprised approximately 71.7% of
the market capitalization of the MSCI Italy. As of January 31, 1996, the three
most highly represented industry sectors in the MSCI Italy, and the approximate
percentages of the MSCI Italy represented thereby, were Insurance (26.1%),
Telecommunications (22.0%) and Banking (17.9%), for a total of approximately
66.0% of the MSCI Italy. The MSCI Italy represented approximately 65.4% of the
aggregate capitalization of the Italian equity markets at January 31, 1996.
THE MSCI JAPAN INDEX ("MSCI JAPAN"). The MSCI Japan consists primarily of
stocks that are traded on the Tokyo Stock Exchange. On January 31, 1996, the
MSCI Japan consisted of 317 stocks. The three largest constituents of the MSCI
Japan and the respective approximate percentages of the MSCI Japan represented
thereby were Toyota Motor Corp. (3.8%), Fuji Bank (3.1%) and Industrial Bank of
Japan (3.1%), for a total of approximately 10.0% of the MSCI Japan. As of
January 31, 1996, the ten largest constituents comprised approximately 24.3% of
the market capitalization of the MSCI
18
<PAGE>
Japan. As of January 31, 1996, the three most highly represented industry
sectors in the MSCI Japan, and the approximate percentages of the MSCI Japan
represented thereby, were Banking (22.3%),
Automobiles (5.7%) and Merchandising (4.7%), for a total of approximately 32.7%
of the MSCI Japan. The MSCI Japan represented approximately 60.1% of the
aggregate capitalization of the Japanese equity markets at January 31, 1996.
THE MSCI MALAYSIA INDEX ("MSCI MALAYSIA"). The MSCI Malaysia consists
primarily of stocks that are traded on the Kuala Lumpur Stock Exchange. On
January 31, 1996, the MSCI Malaysia consisted of 76 stocks. As of January 31,
1996, the three largest constituents of the MSCI Malaysia and the respective
approximate percentages of the MSCI Malaysia represented thereby were Telekom
Malaysia (13.9%), Tenaga Nasional (9.5%) and Malayan Banking (8.5%), for a total
of approximately 31.9% of the MSCI Malaysia. As of January 31, 1996, the ten
largest constituents comprised approximately 52.5% of the market capitalization
of the MSCI Malaysia. As of January 31, 1996, the three most highly represented
industry sectors in the MSCI Malaysia, and the approximate percentages of the
MSCI Malaysia represented thereby, were Telecommunications (15.6%), Banking
(13.1%) and Utilities -- Electrical & Gas (9.5%), for a total of approximately
38.2% of the MSCI Malaysia. The MSCI Malaysia represented approximately 56.3% of
the aggregate capitalization of the Malaysian equity markets at January 31,
1996.
THE MSCI MEXICO (FREE) INDEX ("MSCI MEXICO (FREE)"). The MSCI Mexico (Free)
consists primarily of stocks that are traded on the Mexican Stock Exchange. On
January 31, 1996, the MSCI Mexico (Free) consisted of 41 stocks. As of January
31, 1996, the three largest constituents of the MSCI Mexico (Free) and the
respective approximate percentages of the MSCI Mexico (Free) represented thereby
were Telmex Telefonos Mex (28.2%), Cemex (7.3%) and Grupo Televisa (6.90%), for
a total of approximately 42.44% of the MSCI Mexico (Free). As of January 31,
1996, the ten largest constituents comprised approximately 74.3% of the market
capitalization of the MSCI Mexico (Free). As of January 31, 1996, the three most
highly represented industry sectors in the MSCI Mexico (Free), and the
approximate percentages of the MSCI Mexico (Free) represented thereby, were
Telecommunications (28.2%), Beverages & Tobacco (12.4%) and Building Materials
(9.6%), for a total of approximately 50.2% of the MSCI Mexico (Free). The MSCI
Mexico (Free) represented approximately 59.4% of the aggregate capitalization of
the Mexican equity markets at January 31, 1996.
THE MSCI NETHERLANDS INDEX ("MSCI NETHERLANDS"). The MSCI Netherlands
consists primarily of stocks that are traded on the Amsterdam Stock Exchange. On
January 31, 1996, the MSCI Netherlands consisted of 22 stocks. The three largest
constituents of the MSCI Netherlands and the respective approximate percentages
of the MSCI Netherlands represented thereby were Royal Dutch Petroleum (35.1%),
Unilever NV (10.9%) and ING GROEP (9.0%), for a total of approximately 54.9% of
the MSCI Netherlands. As of January 31, 1996, the ten largest constituents
comprised approximately 91.5% of the market capitalization of the MSCI
Netherlands. As of January 31, 1996, the three most highly represented industry
sectors in the MSCI Netherlands, and the approximate percentages of the MSCI
Netherlands represented thereby, were Energy Sources (35.1%), Food & Household
Products (10.9%) and Financial Services (9.0%), for a total of approximately
54.9% of the MSCI Netherlands. The MSCI Netherlands represented approximately
71.7% of the aggregate capitalization of the Dutch equity markets at January 31,
1996.
THE MSCI SINGAPORE (FREE) INDEX ("MSCI SINGAPORE (FREE)"). The MSCI
Singapore (Free) consists primarily of stocks that are traded on the Singapore
Stock Exchange. On January 31, 1996, the MSCI Singapore (Free) consisted of 32
stocks. The three largest constituents of the MSCI Singapore (Free) and the
respective approximate percentages of the MSCI Singapore (Free) represented
thereby were Singapore Airlines (15.4%), Oversea-Chinese Banking Corp. (14.2%)
and United Overseas Bank (11.2%), for a total of approximately 40.8% of the MSCI
Singapore (Free). As of January 31, 1996, the ten largest constituents comprised
approximately 83.0% of the market capitalization of the MSCI Singapore (Free).
As of January 31, 1996, the three most highly represented industry sectors in
the MSCI Singapore (Free), and the approximate percentages of the MSCI Singapore
(Free) represented thereby, were Banking (36.4%), Real Estate (18.5%) and
Transportation -- Airlines (15.4%),
19
<PAGE>
for a total of approximately 70.3% of the MSCI Singapore (Free). The MSCI
Singapore (Free) represented approximately 56.0% of the aggregate capitalization
of the Singaporean equity markets at January 31, 1996.
THE MSCI SPAIN INDEX ("MSCI SPAIN"). The MSCI Spain consists primarily of
stocks that are traded on the Madrid Stock Exchange. On January 31, 1996, the
MSCI Spain consisted of 31 stocks. The three largest constituents of the MSCI
Spain and the respective approximate percentages of the MSCI Spain represented
thereby were Endesa (15.1%), Telefonica de Espana (14.5%) and Repsol (11.0%),
for a total of approximately 40.5% of the MSCI Spain. As of January 31, 1996,
the ten largest constituents comprised approximately 83.6% of the market
capitalization of the MSCI Spain. As of January 31, 1996, the three most highly
represented industry sectors in the MSCI Spain, and the approximate percentages
of the MSCI Spain represented thereby, were Utilities -- Electrical & Gas
(31.6%), Banking (25.8%) and Telecommunications (14.5%), for a total of
approximately 71.9% of the MSCI Spain. The MSCI Spain represented approximately
62.0% of the aggregate capitalization of the Spanish equity markets at January
31, 1996.
THE MSCI SWEDEN INDEX ("MSCI SWEDEN"). The MSCI Sweden consists primarily
of stocks that are traded on the Stockholm Stock Exchange. On January 31, 1996,
the MSCI Sweden consisted of 30 stocks. As of January 31, 1996, the three
largest constituents of the MSCI Sweden and the respective approximate
percentages of the MSCI Sweden represented thereby were Astra (24.0%), Ericsson
(LM) (18.5%) and Volvo (8.4%), for a total of approximately 50.8% of the MSCI
Sweden. As of January 31, 1996, the ten largest constituents comprised
approximately 79.9% of the market capitalization of the MSCI Sweden. As of
January 31, 1996, the three most highly represented industry sectors in the MSCI
Sweden, and the approximate percentages of the MSCI Sweden represented thereby,
were Electrical & Electronics (26.8%), Health & Personal Care (24.0%) and
Automobiles (8.4%), for a total of approximately 59.2% of the MSCI Sweden. The
MSCI Sweden represented approximately 60.6% of the aggregate capitalization of
the Swedish equity markets at January 31, 1996.
THE MSCI SWITZERLAND INDEX ("MSCI SWITZERLAND"). The MSCI Switzerland
consists primarily of stocks that are traded on the Zurich Stock Exchange. On
January 31, 1996, the MSCI Switzerland consisted of 43 stocks. The three largest
constituents of the MSCI Switzerland and the respective approximate percentages
of the MSCI Switzerland represented thereby were Roche Holding (24.8%), Nestle
(14.1%) and Sandoz Ltd. (11.2%), for a total of approximately 50.1% of the MSCI
Switzerland. As of January 31, 1996, the ten largest constituents comprised
approximately 90.3% of the market capitalization of the MSCI Switzerland. As of
January 31, 1996, the three most highly represented industry sectors in the MSCI
Switzerland, and the approximate percentages of the MSCI Switzerland represented
thereby, were Health & Personal Care (36.0%), Banking (19.7%) and Food &
Household Products (14.1%), for a total of approximately 69.7% of the MSCI
Switzerland. The MSCI Switzerland represented approximately 78.2% of the
aggregate capitalization of the Swiss equity markets at January 31, 1996.
THE MSCI UNITED KINGDOM INDEX ("MSCI UK"). The MSCI UK consists primarily
of stocks that are traded on the London Stock Exchange. On January 31, 1996, the
MSCI UK consisted of 144 stocks. The three largest constituents of the MSCI UK
and the respective approximate percentages of the MSCI UK represented thereby
were Glaxo Wellcome (5.7%), British Petroleum (5.0%) and HSBC Holdings (5.0%),
for a total of approximately 15.7% of the MSCI UK. As of January 31, 1996, the
ten largest constituents comprised approximately 35.4% of the market
capitalization of the MSCI UK. As of January 31, 1996, the three most highly
represented industry sectors in the MSCI UK, and the approximate percentages of
the MSCI UK represented thereby, were Banking (12.1%), Health & Personal Care
(11.2%) and Merchandising (8.7%), or a total of approximately 32.0% of the MSCI
UK. The MSCI UK represented approximately 64.8% of the aggregate capitalization
of the United Kingdom equity markets at January 31, 1996.
20
<PAGE>
The graphs below present certain historical performance information, as
calculated by MSCI, for the MSCI Indices that will be the benchmark indices for
each of the seventeen Index Series of the Fund. This information should not be
considered to be a representation of how the Index Series might have performed
during the relevant time periods had the Fund been in operation at such times.
The MSCI Indices are unmanaged securities indices and do not bear transactional
or operating costs and expenses, whereas the Index Series will bear fees and
expenses as described herein. See "Summary of Fund Expenses". Such fees and
expenses will reduce the return of each Index Series in comparison with its
benchmark index. In addition, because each Index Series will not invest in all
the securities in its benchmark index, the investment results will not
necessarily correspond to those of its benchmark index. Moreover, the Index
Series are subject to various limitations on their investment flexibility and
these limits will adversely affect their ability to meet their investment
objective. See "Investment Policies" and "Implementation of Policies". The
graphs measure total return based on the period's change in price, dividends
paid on stocks in the index, and the effect of reinvesting dividends with
adjustments for dividend withholding by foreign governments (except for the
graph relating to the MSCI Mexico (Free), which reflects the reinvestment of
dividends without adjustments for dividend withholding). The withholding tax
rates applicable to the Australia, Malaysia and Singapore (Free) Index Series
vary from the rates utilized by MSCI in computing the benchmark indices for such
Index Series. See the first paragraph of this section.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI AUSTRALIA INDEX
<S> <C>
1984 (13.69%)
1985 19.56%
1986 42.28%
1987 9.25%
1988 36.40%
1989 9.30%
1990 (17.54%)
1991 33.64%
1992 (10.82%)
1993 35.17%
1994 5.40%
1995 11.19%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI AUSTRIA INDEX
<S> <C>
1984 (4.91%)
1985 176.26%
1986 34.74%
1987 2.23%
1988 0.57%
1989 103.91%
1990 6.33%
1991 (12.23%)
1992 (10.65%)
1993 28.09%
1994 (6.28%)
1995 (4.72%)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI BELGIUM INDEX
<S> <C>
1984 11.36%
1985 76.61%
1986 78.37%
1987 7.88%
1988 53.63%
1989 17.29%
1990 (10.98%)
1991 13.77%
1992 (1.47%)
1993 23.51%
1994 8.24%
1995 25.88%
</TABLE>
21
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI CANADA INDEX
<S> <C>
1984 (8.43%)
1985 15.05%
1986 9.94%
1987 13.91%
1988 17.07%
1989 24.30%
1990 (13.00%)
1991 11.08%
1992 (12.15%)
1993 17.58%
1994 (3.04%)
1995 18.31%
</TABLE>
22
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI FRANCE INDEX
<S> <C>
1984 4.33%
1985 82.01%
1986 78.35%
1987 (13.81%)
1988 37.87%
1989 36.15%
1990 (13.83%)
1991 17.83%
1992 2.81%
1993 20.91%
1994 (5.18%)
1995 14.12%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI GERMANY INDEX
<S> <C>
1984 (5.71%)
1985 135.19%
1986 35.29%
1987 (24.75%)
1988 20.60%
1989 46.26%
1990 (9.36%)
1991 8.16%
1992 (10.27%)
1993 35.64%
1994 4.66%
1995 16.41%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI HONG KONG INDEX
<S> <C>
1984 46.99%
1985 51.69%
1986 56.11%
1987 (4.11%)
1988 28.12%
1989 8.39%
1990 9.17%
1991 49.52%
1992 32.29%
1993 116.70%
1994 (28.90%)
1995 22.57%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI ITALY INDEX
<S> <C>
1984 8.12%
1985 131.74%
1986 108.28%
1987 (21.30%)
1988 11.46%
1989 19.42%
1990 (19.19%)
1991 (1.82%)
1992 (22.22%)
1993 28.53%
1994 11.56%
1995 1.05%
</TABLE>
23
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI JAPAN INDEX
<S> <C>
1984 16.85%
1985 43.07%
1986 99.41%
1987 43.03%
1988 35.39%
1989 1.71%
1990 (36.10%)
1991 8.92%
1992 (21.45%)
1993 25.48%
1994 21.44%
1995 0.69%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI MALAYSIA INDEX
<S> <C>
1988 26.54%
1989 55.76%
1990 (7.91%)
1991 4.95%
1992 17.76%
1993 110.00%
1994 (19.94%)
1995 5.16%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI MEXICO (FREE) INDEX
<S> <C>
1988 71.98%
1989 89.20%
1990 62.65%
1991 126.04%
1992 24.98%
1993 49.35%
1994 (40.55%)
1995 (20.37%)
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI NETHERLANDS INDEX
<S> <C>
1984 10.23%
1985 59.62%
1986 40.74%
1987 7.07%
1988 14.19%
1989 35.79%
1990 (3.19%)
1991 17.80%
1992 2.30%
1993 35.28%
1994 11.70%
1995 27.71%
</TABLE>
24
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI SINGAPORE (FREE) INDEX
<S> <C>
1988 34.18%
1989 44.88%
1990 (14.59%)
1991 43.61%
1992 4.49%
1993 73.41%
1994 5.81%
1995 12.19%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI SPAIN INDEX
<S> <C>
1984 39.05%
1985 54.75%
1986 121.24%
1987 36.91%
1988 13.53%
1989 9.76%
1990 (13.85%)
1991 15.63%
1992 (21.87%)
1993 29.78%
1994 (4.80%)
1995 29.83%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI SWEDEN INDEX
<S> <C>
1984 (21.71%)
1985 56.96%
1986 65.59%
1987 1.99%
1988 48.33%
1989 31.79%
1990 (20.99%)
1991 14.42%
1992 (14.41%)
1993 36.99%
1994 18.34%
1995 33.36%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI SWITZERLAND INDEX
<S> <C>
1984 (11.95%)
1985 105.72%
1986 33.37%
1987 (9.45%)
1988 6.18%
1989 26.21%
1990 (6.23%)
1991 15.77%
1992 17.23%
1993 45.79%
1994 3.54%
1995 44.12%
</TABLE>
25
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI UNITED KINGDOM INDEX
<S> <C>
1984 5.31%
1985 53.02%
1986 26.95%
1987 35.09%
1988 5.95%
1989 21.87%
1990 10.29%
1991 16.02%
1992 (3.65%)
1993 24.44%
1994 (1.63%)
1995 21.27%
</TABLE>
MANAGEMENT OF THE FUND
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".
ADVISER. BZW Barclays Global Fund Advisors is the Adviser to the Fund and,
subject to the supervision of the Board of Directors of the Fund, will be
responsible for the investment management of each Index Series, which will
include application of portfolio optimization techniques. It is located at 45
Fremont Street, San Francisco, California 94105. The Adviser is a California
Corporation indirectly owned by Barclays Bank PLC and is registered as an
investment adviser under the Investment Advisers Act of 1940. The Adviser and
its parent, BZW Barclays Global Investors, N.A., are responsible for managing or
providing investment advice for assets aggregating in excess of $220 billion as
of December 31, 1995. For its investment management services to each Index
Series, the Adviser will be paid management fees equal to each Index Series'
allocable portion of: .27% per annum of the aggregate net assets of the Fund
less than or equal to $1.7 billion, plus .15% per annum of the aggregate net
assets of the Fund between $1.7 billion and $7 billion, plus .12% per annum of
the aggregate net assets of the Fund between $7 billion and $10 billion, plus
.08% per annum of the aggregate net assets of the Fund in excess of $10 billion.
The management fees will be accrued daily and paid by the Fund as soon as
practical after the last day of each calendar quarter. From time to time, an
Index Series, to the extent consistent with its investment objective, policies
and restrictions, may invest in the securities of companies with which the
Adviser has a lending relationship.
Effective January 1, 1996, through the reorganization of Wells Fargo Nikko
Investment Advisors with and into an affiliate of BZW Barclays Global Investors,
N.A., the Adviser became an indirect wholly owned subsidiary of Barclays Bank
PLC.
ADMINISTRATOR. PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of
PNC Bank Corp., is the Administrator of the Fund, and will be responsible for
certain clerical, recordkeeping and bookkeeping services, except those to be
performed by the Adviser, by Morgan Stanley Trust Company in its capacity as
Custodian, or by PNC Bank, N.A. in its capacity as Transfer Agent. PFPC, as
Administrator, has no role in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund. For the administrative
and fund accounting services PFPC provides to the Fund, PFPC will be paid
aggregate fees equal to each Index Series' allocable portion of: .10% per annum
of the aggregate net assets of the Fund less than $3 billion, plus .09% per
annum of the aggregate net assets of the Fund between $3 billion and $5 billion,
plus .08% per annum of the aggregate net assets of the Fund between $5 billion
and $7.5 billion, plus .065% per annum of the aggregate net assets of the Fund
between $7.5 billion and $10 billion, plus .05% per annum of the aggregate net
assets of the Fund in excess of $10 billion. From time to time PFPC may waive
all or a portion of its fees. For the first year of the Fund's operations, PFPC
has agreed to waive a portion of its fees. During the first year of the Fund's
operations. PFPC will charge the Fund an administrative and accounting service
fee equal to $4,167 per month for each Index Series, plus .05% of aggregate
average daily net assets of all Index Series in excess of $850 million per
annum. However, if during the first
26
<PAGE>
three years of the Fund's operations the Fund removes PFPC as the administrator,
the Fund will pay the cost of deconversion and PFPC will be entitled to recoup
100% of the fees waived during the first year. The principal business address of
PFPC is 400 Bellevue Parkway, Wilmington, Delaware 19809.
DISTRIBUTOR. Funds Distributor, Inc. (the "Distributor") is the distributor
of WEBS. Its address is One Exchange Place, 10th Floor, Boston, MA 02109.
Investor information can be obtained by calling 1-800-xxx-xxxx. WEBS will be
sold by the Fund and distributed only in Creation Units, as described below
under "Purchase and Issuance of WEBS in Creation Units." WEBS in less than
Creation Units will not be distributed by the Distributor. The Distributor is a
registered broker-dealer under the Securities Exchange Act of 1934 and a member
of the National Association of Securities Dealers, Inc. (the "NASD"). The Fund
has a distribution plan pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1
Plan"). Each Index Series intends to operate the Rule 12b-1 Plan in accordance
with its terms and the NASD Rules concerning maximum sales charges. Under the
Rule 12b-1 Plan, the Distributor is paid an annual fee as compensation in
connection with the offering and sale of shares of each Index Series. The fees
to be paid to the Distributor under the Rule 12b-1 Plan are calculated and paid
monthly with respect to each Index Series at an annual rate of up to .25% of the
average daily net assets of such Index Series. From time to time the Distributor
may waive all or a portion of the fees. These fees may be used to cover the
expenses of the Distributor primarily intended to result in the sale of shares
of each Index Series including payments for any activities or expenses primarily
intended to result in or required for the sale of the Index Series' shares,
including promotional and marketing activities related to the sale of shares of
the Index Series, expenses related to the preparation, printing and distribution
of prospectuses and sales literature, certain communications to and with
shareholders, advertisements, and payments made to representatives or others for
selling shares of Index Series or for providing ongoing shareholder services
and/or maintenance of shareholder accounts. The Distributor may retain any
amount of its fee that is not so expended. The amount of such fee is not
dependent upon the distribution expenses actually incurred by the Distributor.
Funds Distributor, Inc., as Distributor, has no role in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. See "Investment Advisory, Management, Administrative and
Distribution Services" in the Statement of Additional Information.
CUSTODIAN AND LENDING AGENT. Morgan Stanley Trust Company ("MSTC") serves
as the Custodian for the cash and portfolio securities of each Index Series of
the Fund. MSTC also serves as Lending Agent of the portfolio securities of each
Index Series. As Lending Agent, MSTC will cause the delivery of loaned
securities from the Fund to borrowers, arrange for the return of loaned
securities to the Fund at the termination of the loans, request deposit of
collateral, monitor daily the value of the loaned securities and collateral,
request that borrowers add to the collateral when required by the loan
agreements, and provide recordkeeping and accounting services necessary for the
operation of the program. For its services as Lending Agent, the Fund will pay
MSTC, in respect of each Index Series, 50% of the net investment income earned
on the collateral for securities loaned. MSTC, as Custodian and Lending 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 MSTC is One Pierrepont Plaza, Brooklyn, New York 11201.
TRANSFER AGENT. PNC Bank, N.A. ("PNC"), an indirect wholly owned subsidiary
of PNC Bank Corp., provides transfer agency services to the Fund. PNC, as
transfer agent (the "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 PNC is Broad and Chestnut Streets,
Philadelphia, PA 19110.
The Glass-Steagall Act and other applicable laws may limit the ability of a
bank or other depositary institution to become an underwriter or distributor of
securities. However, in the opinion of the Fund, these laws do not prohibit such
depository institutions from providing services for investment companies such as
the administrative, accounting and other services. In the event that a change in
these laws prevented a bank from providing such services, it is expected that
other services arrangements would be made and that shareholders would not be
adversely affected.
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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 the Administrator, exchange listing fees,
brokerage and other costs (including costs incurred by an Index Series in
connection with any rebalancing of its portfolio), legal and audit fees, and
litigation and extraordinary expenses.
EXCHANGE LISTING AND TRADING OF WEBS
Application has been made to list the WEBS of each Index Series for trading
on the AMEX. WEBS are expected to trade on the AMEX at prices that differ to
some degree from their net asset value. See "Investment Considerations and
Risks" and "Determination of Net Asset Value". However, given that WEBS can be
created or redeemed in Creation Unit aggregations, the Fund believes that large
discounts or premiums to the net asset value of WEBS should not be sustainable.
There can be no assurance that the requirements of the AMEX necessary to
maintain the listing of WEBS will continue to be met or will remain unchanged or
that an active trading market will develop for the WEBS of any particular Index
Series. The AMEX may remove the WEBS of an Index Series from listing if (1)
following the initial twelve-month period beginning upon the commencement of
trading of an Index Series, there are fewer than 50 beneficial holders of the
WEBS of such Index Series for 30 or more consecutive trading days, (2) the value
of the underlying index or portfolio of securities on which such Index Series is
based is no longer calculated or available or (3) such other event occurs or
condition exists that, in the opinion of the AMEX, makes further dealings on the
AMEX inadvisable. In addition, the AMEX will remove the WEBS from listing and
trading upon termination of the Fund.
INVESTMENT CONSIDERATIONS AND RISKS
An investment in the WEBS of an Index Series involves risks similar to those
of investing in a broadly-based portfolio of equity securities traded on
exchanges in the relevant foreign securities market, such as market fluctuations
caused by such factors as economic and political developments, changes in
interest rates and perceived trends in stock prices. Investing in WEBS generally
involves certain risks and considerations not typically associated with
investing in a fund that invests in the securities of U.S. issuers. These risks
could include generally less liquid and less efficient securities markets;
generally greater price volatility; exchange rate fluctuations and exchange
controls; less publicly available information about issuers; the imposition of
withholding or other taxes; restrictions on the expatriation of funds or other
assets of an Index Series; higher transaction and custody costs; delays
attendant in settlement procedures; difficulties in enforcing contractual
obligations; lesser liquidity and the significantly smaller market
capitalization of most non-U.S. securities markets; lesser levels of regulation
of the securities markets; different accounting, disclosure and reporting
requirements; more substantial government involvement in the economy; higher
rates of inflation; greater social, economic, and political uncertainty and the
risk of nationalization or expropriation of assets and risk of war. Certain
Index Series-specific considerations are set forth in the Statement of
Additional Information.
VOLATILITY OF FOREIGN EQUITY MARKETS
The U.S. dollar performance of foreign equity markets, particularly emerging
markets, has generally been substantially more volatile than that of U.S.
markets. For example, from 1991-1995, the average price volatility of the
Standard and Poor's 500 Index, a broad measure of the U.S. equity market, was
9.9%. In contrast, during the same period, the average price volatility of the
respective MSCI Indices was as follows: the MSCI Australia (15.7%), the MSCI
Austria (18.5%), the MSCI Belgium (14.4%), the MSCI Canada (10.6%), the MSCI
France (17.0%), the MSCI Germany (17.4%), the MSCI Hong Kong (22.9%), the MSCI
Italy (24.5%), the MSCI Japan (21.7%), the MSCI Malaysia (19.9%), the MSCI
Mexico (Free) (38.4%), the MSCI Netherlands (12.4%), the MSCI Singapore (Free)
(14.0%), the MSCI Spain (18.4%), the MSCI Sweden (21.1%), the MSCI Switzerland
(15.4%), and the MSCI United Kingdom (14.8%). Short-term volatility in these
markets can be significantly greater.
28
<PAGE>
FOREIGN CURRENCY FLUCTUATIONS
Because each Index Series' assets will generally be invested in non-U.S.
securities, and because a substantial portion of the revenues and income of each
Index Series will be received in a foreign currency, while Index Series
dividends and other distributions are paid in US dollars, the dollar value of an
Index Series' net assets will be adversely affected by reductions in the value
of subject foreign currency relative to the dollar and would be positively
affected by increases in the value of such currency relative to the dollar.
Also, government or monetary authorities have imposed and may in the future
impose exchange controls that could adversely affect exchange rates. Any such
currency fluctuations will affect the net asset value of an Index Series
irrespective of the performance of its underlying portfolio. Other than to
facilitate settlements in local markets or to protect against currency exposure
in connection with its distributions to shareholders or borrowings, the Fund
does not expect to engage in currency transactions for the purpose of hedging
against the decline in value of any foreign currencies.
CONCENTRATION AND LACK OF DIVERSIFICATION OF CERTAIN INDEX SERIES
Each Index Series of the Fund (except for the Canada Index Series, the
France Index Series, the Japan Index Series and the United Kingdom Index Series)
is classified as "non-diversified" for purposes of the 1940 Act, which means
each of those Index Series is not limited by the 1940 Act with regard to the
portion of its assets that may be invested in the securities of a single issuer.
In addition, a number of Index Series concentrate their investments in
particular industries. See "Investment Policies" herein. However, each Index
Series, regardless of whether classified as non-diversified, intends to maintain
the required level of diversification and otherwise conduct its operations so as
to qualify as a "regulated investment company" for purposes of the Internal
Revenue Code, in order to
29
<PAGE>
relieve the Index Series of any liability for Federal income tax to the extent
that its earnings are distributed to shareholders. See "Dividends and Capital
Gains Distributions" and "Tax Matters" in this Prospectus. Compliance with the
diversification requirements of the Internal Revenue Code will severely limit
the investment flexibility of certain Index Series and will make it less likely
that such Index Series will meet their investment objectives.
The stocks of particular issuers, or of issuers in particular industries,
may dominate the benchmark indices of certain Index Series and, consequently,
the investment portfolios of such Index Series, which may adversely affect the
performance of such Index Series or subject such Index Series to greater price
volatility than that experienced by more diversified investment companies. The
WEBS of an Index Series may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of an
investment company that is more broadly invested than the subject Index Series
in the equity securities of the relevant market. Information concerning the
companies and industry sectors that represent the largest components of the
various benchmark indices is set forth above under "The Benchmark MSCI Indices
Utilized by the Index Series".
ABSENCE OF PRIOR ACTIVE MARKET
The Fund is a newly organized investment company with no previous operating
history. As indicated above, application has been made to list WEBS on the AMEX.
There can be no assurance that active trading markets for the WEBS will develop.
The Distributor will not maintain a secondary market in WEBS. Trading in WEBS on
the AMEX may be halted due to market conditions or for reasons that, in the view
of the AMEX, make trading in WEBS inadvisable. In addition, trading in WEBS on
the AMEX will be subject to trading halts caused by extraordinary market
volatility pursuant to AMEX "circuit breaker" rules that require trading in
securities on the AMEX to be halted in the event of specified market moves.
There can be no assurance that the requirements of the AMEX necessary to
maintain the listing of WEBS of any Series will continue to be met or will
remain unchanged. See "Exchange Listing and Trading".
The net asset value of the WEBS of an Index Series will fluctuate with
changes in the market value of the portfolio securities of the Index Series and
changes in the market rate of exchange between the US dollar and the subject
foreign currency. The market prices of WEBS are expected to fluctuate in
accordance with changes in net asset value and supply and demand on the AMEX.
The Fund cannot predict whether WEBS will trade below, at or above their net
asset value. Price differences may be due, in large part, to the fact that
supply and demand forces at work in the secondary trading market for WEBS will
be closely related to, but not identical to, the same forces influencing the
prices of the stocks of the subject MSCI Index trading individually or in the
aggregate at any point in time. However, given that WEBS can be created and
redeemed in Creation Unit aggregations (unlike shares of many closed-end funds,
which frequently trade at appreciable discounts from, and sometimes at premiums
to, their net asset value), the Fund believes that large discounts or premiums
to the net asset value of WEBS should not be sustainable.
USE OF CERTAIN INSTRUMENTS
The risk of loss associated with futures contracts is potentially unlimited
due both to the low margin deposits required and the extremely high degree of
leverage involved in futures pricing. As a result, a relatively small price
movement in a futures contract may result in an immediate and substantial loss
or gain. However, no Index Series will use futures contracts, options or swap
agreements for speculative purposes or to leverage its net assets and each Index
Series will comply with applicable SEC requirements regarding the segregation of
assets in connection with futures positions. Accordingly, the primary risks
associated with the use of futures contracts, options and swap agreements by an
Index Series are: (i) imperfect correlation between the change in market value
of the stocks in the benchmark index or held by the Index Series and the prices
of futures contracts, options and swap agreements; (ii) possible lack of a
liquid secondary market for a futures contract or listed option and the
resulting inability to close futures or listed option positions prior to their
maturity date; and (iii) the risk of the counterparty or guaranteeing agent
defaulting. Over-the-counter options
27
<PAGE>
and swap agreements are generally less liquid than exchange traded securities
and the SEC staff considers most over-the-counter options to be illiquid. The
Fund will treat such options as illiquid to the extent required by applicable
SEC staff positions. Illiquid assets may not represent more than 15% of the net
assets of an Index Series.
Since there are generally no futures traded on the MSCI Indices, it may be
necessary for an Index Series to utilize other futures contracts or combinations
thereof to simulate the performance of the relevant MSCI Index. This process may
magnify the "tracking error" of the Index Series' performance compared to that
of the MSCI Index, due to the lower correlation of the selected futures with the
MSCI Index. The Adviser will attempt to reduce this tracking error by investing
in futures contracts whose behavior is expected to represent the market
performance of the Index Series' underlying securities, although there can be no
assurance that these selected futures will in fact correlate with the
performance of the relevant MSCI Index. Certain foreign stock index futures
contracts and options thereon are not currently available to U.S. persons such
as the Fund under applicable law.
See also "Special Considerations and Risks" in the Statement of Additional
Information.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for each Index Series of the Fund is computed by
dividing the value of the net assets of such Index Series (i.e., the value of
its total assets less total liabilities) by the total number of WEBS
outstanding, rounded to the nearest cent. Expenses and fees, including the
management, administration and distribution fees, are accrued daily and taken
into account for purposes of determining net asset value. The net asset value of
each Index Series is determined as of the close of the regular trading session
on the New York Stock Exchange, Inc. (ordinarily 4:00 p.m., New York City time)
on each day that such exchange is open.
In computing an Index Series' net asset value, the Index Series' portfolio
securities are valued based on their last quoted current price. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Securities regularly traded in the over-the-counter market
are valued at the latest quoted bid price. Other portfolio securities and assets
for which market quotations are not readily available are valued based on fair
value as determined in good faith by the Adviser in accordance with procedures
adopted by the Board of Directors of the Fund. The values of portfolio
securities are converted into US dollars at the relevant foreign exchange rate
for each Index Series in effect as of the time that the foreign currency values
of the securities are determined.
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<PAGE>
CREATION UNITS
The Fund will issue and redeem WEBS of each Index Series only in
aggregations of WEBS specified for each Index Series. The following table sets
forth the number of WEBS of an Index Series that constitute a Creation Unit for
such Index Series and the estimated value of such Creation Unit at February 22,
1996:
<TABLE>
<CAPTION>
ESTIMATED VALUE PER
INDEX SERIES WEBS PER CREATION UNIT CREATION UNIT
- ------------------------------------------------------------ ---------------------- -------------------
<S> <C> <C>
(IN DOLLARS)
Australia Index Series...................................... 200,000 1,945,000
Austria Index Series........................................ 100,000 1,106,000
Belgium Index Series........................................ 40,000 592,000
Canada Index Series......................................... 100,000 1,008,000
France Index Series......................................... 200,000 2,515,000
Germany Index Series........................................ 300,000 4,016,000
Hong Kong Index Series...................................... 75,000 1,046,000
Italy Index Series.......................................... 150,000 2,050,000
Japan Index Series.......................................... 600,000 8,922,000
Malaysia Index Series....................................... 75,000 1,002,000
Mexico (Free) Index Series.................................. 100,000 985,000
Netherlands Index Series.................................... 50,000 794,000
Singapore (Free) Index Series............................... 100,000 1,313,000
Spain Index Series.......................................... 75,000 1,064,000
Sweden Index Series......................................... 75,000 1,027,000
Switzerland Index Series.................................... 125,000 1,619,000
United Kingdom Index Series................................. 200,000 2,499,000
</TABLE>
See "Purchase and Issuance of WEBS in Creation Units" and "Redemption of
WEBS in Creation Units". The Board of Directors of the Fund reserves the right
to declare a split in the number of WEBS outstanding of any Index Series of the
Fund, and to make a corresponding change in the number of WEBS constituting a
Creation Unit, in the event that the per WEBS price in the secondary market
rises to an amount that exceeds the range deemed desirable by the Board. The
estimated value per Creation Unit shown above is based on the Adviser's view of
what a Creation Unit would consist of had the particular Index Series been in
existence on February 22, 1996.
PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS
THE FUND WILL ISSUE AND SELL WEBS OF AN INDEX SERIES ONLY IN CREATION UNITS
ON A CONTINUOUS BASIS THROUGH THE DISTRIBUTOR AT THEIR NET ASSET VALUE NEXT
DETERMINED AFTER RECEIPT OF AN ORDER IN PROPER FORM, WITHOUT AN INITIAL SALES
LOAD. The consideration for purchase of a Creation Unit of WEBS of an Index
Series will be the in-kind deposit of a designated portfolio of equity
securities constituting an optimized representation of the corresponding MSCI
Index (the "Deposit Securities") and an amount of cash computed as described
below (the "Cash Component"). The Cash Component is a balancing amount to cover
accrued dividends and to equalize any difference between the value of the
Deposit Securities and the net asset value of a Creation Unit of WEBS as
determined on the date on which WEBS are to be purchased and issued. Together,
the Deposit Securities and the Cash Component constitute the "Portfolio Deposit"
which represents the minimum initial and subsequent investment amount for shares
of any Index Series from the Fund. Tendered securities in the Portfolio Deposit
will be valued in the same manner as the relevant Index Series values its
portfolio securities. WEBS may also be issued and sold in Creation Units for
cash in certain circumstances; however, the Fund will not ordinarily permit cash
purchases of Creation Units and any Index Series that permits cash sales
reserves the right to suspend such sales at any time.
The Deposit Securities for each Index Series will generally change with
changes in the corresponding MSCI Index. 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 portfolio
29
<PAGE>
constituting the Deposit Securities which may not be available in sufficient
quantity for delivery or for other similar reasons. The Deposit Securities must
be delivered for receipt in an account of the Fund maintained at the applicable
local subcustodian.
A purchase transaction fee payable to the Fund is imposed to compensate the
Fund for the transaction costs of each Index Series associated with issuance of
Creation Units of WEBS. The purchase transaction fees for in-kind purchases and
cash purchases (when available) are listed in the Shareholder Transaction
Expenses table in "Summary of Fund Expenses". Investors are also responsible for
payment of the costs of transferring the Deposit Securities to the Fund.
The foregoing description of the issuance of Creation Units of WEBS is only
a summary. Investors interested in purchasing Creations Units of WEBS from the
Fund will need to refer to "Purchase and Issuance of WEBS in Creation Units" in
the Statement of Additional Information for additional details.
REDEMPTION OF WEBS IN CREATION UNITS
WEBS OF AN INDEX SERIES MAY BE REDEEMED BY THE FUND ONLY IN CREATION UNITS
AT THEIR NET ASSET VALUE NEXT DETERMINED AFTER RECEIPT OF A REDEMPTION REQUEST
IN PROPER FORM BY THE DISTRIBUTOR. WEBS IN AMOUNTS LESS THAN CREATION UNITS ARE
NOT REDEEMABLE. The Fund generally will redeem a Creation Unit of WEBS
principally on an in-kind basis for Deposit Securities as announced by the
Distributor, plus cash in an amount equal to the difference between the net
asset value of the WEBS being redeemed, as next determined after receipt of a
request in proper form, and the value of the Deposit Securities, less the
redemption transaction fee described below. An Index Series may also redeem
Creation Units for cash in certain circumstances; however, the Fund will not
ordinarily permit cash redemptions and any Index Series that permits cash
redemptions reserves the right to suspend such redemptions at any time.
Investors may purchase WEBS 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 of WEBS. Investors should expect to
incur brokerage and other costs in connection with assembling a sufficient
number of WEBS to constitute a redeemable Creation Unit. The approximate cost of
a Creation Unit of each Index Series, based on estimated values at February 22,
1996, is indicated under the heading "Creation Units".
A redemption transaction fee payable to the Fund is imposed to offset
transaction costs that may be incurred by an Index Series in connection with
redemption of Creation Units of WEBS. The redemption transaction fee for
redemptions in kind and for cash (when available) are listed in the Shareholder
Transaction Expenses table in "Summary of Fund Expenses". Investors will also
bear the costs of transferring the Portfolio Deposit from the Fund to their
account or on their order.
Because the portfolio securities of an Index Series may trade on the
relevant exchange(s) on days that the AMEX is closed, shareholders may not be
able to redeem their Creation Units of such Index Series, or to purchase or sell
WEBS on the AMEX, on days when the net asset value of such Index Series could be
significantly affected by events in the relevant foreign markets.
The foregoing description of the redemption of Creation Units of WEBS is
only a summary. Investors interested in redeeming Creation Units of WEBS will
need to refer to "Redemption of WEBS in Creation Units" in the Statement of
Additional Information for additional details.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Dividends from net investment income, including net foreign currency gains,
if any, will be declared and paid at least annually and net realized securities
gains, if any, will be distributed at least annually. Dividends may be declared
and paid more frequently than annually for certain Index Series to improve
tracking error or to comply with the distribution requirements of the Internal
Revenue Code. In addition, the Fund intends to distribute at least annually
amounts representing the full dividend yield on the underlying portfolio
securities of each Index Series, as if such Index Series owned
30
<PAGE>
such underlying portfolio securities for the entire dividend period. As a
result, some portion of each distribution may result in a return of capital. See
"Tax Matters". Dividends and securities gains distributions will be distributed
in US dollars and cannot be automatically reinvested in additional WEBS. The
Fund will inform shareholders within 60 days after the close of the Index
Series' taxable year of the amount and nature of all distributions made to them.
TAX MATTERS
A person other than a tax-exempt entity who exchanges securities for
Creation Units of WEBS generally will recognize gain and generally should
recognize 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. It is possible, however, that the Internal Revenue Service
may assert that a loss realized upon an exchange of securities for Creation
Units cannot be deducted currently under the rules governing "wash sales", and
persons exchanging securities should consult their own tax advisors with respect
to when such a loss might be deductible.
Each Index Series of the Fund intends to qualify for and to elect treatment
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code. As a regulated investment company, an Index Series will not be subject to
U.S. federal income tax on its income and gains that it distributes to
shareholders, provided that it distributes annually at least 90% of its
investment company taxable income. Investment company taxable income generally
includes income from dividends and interest and gains and losses from currency
transactions net of operating expenses plus the Index Series' net short-term
capital gains in excess of its net long-term capital losses. Each Index Series
intends to distribute to its shareholders at least annually all of its
investment company taxable income and any realized net long-term capital gains.
Dividends paid out of an Index Series' investment company taxable income 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 WEBS. Dividends paid by an Index Series generally will not qualify
for the deduction for dividends received by corporations. Distributions in
excess of an Index Series' current and accumulated earnings and profits will be
treated as a tax-free return of capital to each of the Index Series' investors
to the extent of the investor's basis in its WEBS, and as capital gain
thereafter. Any dividend declared by an Index Series in October, November or
December of any calendar year and payable to investors of record on a specified
date in such a month shall be deemed to have been received by each investor on
December 31 of such calendar year and to have been paid by the Index Series not
later than such December 31 so long as the dividend is actually paid by the
Index Series during January of the following calendar year. A distribution by an
Index Series will reduce its net asset value per share and may be taxable to the
investor as ordinary income or net capital gain as described above even though,
from an investment standpoint, it may constitute a return of capital and this
phenomenon may be more pronounced given the Index Series' policy of making
distributions in excess of the sum of its investment company taxable income and
its net long-term capital gains.
Any gain or loss realized upon a sale or redemption of WEBS by a shareholder
that is not a dealer in securities will generally be treated as a long-term
capital gain or loss if the WEBS have been held for more than one year, and
otherwise as a short-term capital gain or loss. However, if WEBS on which a
long-term capital gain distribution has been received are subsequently sold or
redeemed and such WEBS have been held for six months or less, any loss realized
will be treated as a long-term capital loss to the extent that it offsets the
long-term capital gain distribution. Moreover, any loss realized on a sale or
exchange of WEBS 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 which case the basis of the shares
acquired will be adjusted upward to reflect the disallowed loss.
Each Index Series may be subject to foreign income taxes withheld at source.
As more than 50% of the value of the total assets of each Index Series at the
close of its taxable year will consist of stock or securities of foreign
corporations, an Index Series will be eligible (and intends) to file an election
with
31
<PAGE>
the Internal Revenue Service to "pass through" to its investors the amount of
foreign income taxes (including withholding taxes) paid by the Index Series.
Subject to certain limitations, the foreign income taxes passed through may
qualify as a deduction in calculating U.S. taxable income or as a credit in
calculating U.S. federal income tax. Each investor will be notified of the
investor's portion of the foreign income taxes paid to each country and the
portion of dividends that represents income derived from sources within each
country.
The 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.
BOOK-ENTRY ONLY SYSTEM
The Depository Trust Company ("DTC") will act as securities depositary for
the WEBS. WEBS 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.
DTC has advised the Fund as follows: 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. 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 New York Stock Exchange, Inc., 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").
Beneficial ownership of WEBS will be limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Ownership of beneficial interests in WEBS (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
WEBS. 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 WEBS. Beneficial Owners of WEBS will not be entitled to have WEBS 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 registered
holders 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
WEBS.
WEBS distributions will be made to DTC or its nominee, Cede & Co., as the
registered holder of all WEBS. The Fund expects that DTC or its nominee, upon
receipt of any such distributions, will immediately credit DTC Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in WEBS 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 WEBS
32
<PAGE>
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 a "street name," and will be the
responsibility of such DTC Participants.
See "Book-Entry Only System" in the Statement of Additional Information for
additional details.
PERFORMANCE
The performance of the Index Series may be quoted in advertisements, sales
literature or reports to shareholders in terms of average annual total return,
cumulative total return and yield.
Quotations of average annual total return will be expressed in terms of
average annual rate of return of a hypothetical investment in an Index Series
over periods of 1, 5 and 10 years (or the life of the Index Series, if shorter).
Such total return figures will reflect the deduction of a proportional share of
such Index Series' expenses on an annual basis, and will assume that all
dividends and distributions are reinvested when paid.
Quotations of a cumulative total return will be calculated for any specified
period by assuming a hypothetical investment in an Index Series on the date of
the commencement of the period and will assume that all dividends and
distributions are reinvested when paid. The net increase or decrease in the
value of the investment over the period will be divided by its beginning value
to arrive at cumulative total return. Total return calculated in this manner
will differ from the calculation of average annual total return in that it is
not expressed in terms of an average rate of return.
The yield of an Index Series refers to income generated by an investment in
such Index Series over a specified 30-day (one month) period. Yields for the
Index Series are expressed as annualized percentages.
Quotations of average annual total return, cumulative total return or yield
reflect only the performance of a hypothetical investment in an Index Series
during the particular time period on which the calculations are based. Such
quotations for an Index Series will vary based on changes in market conditions
and the level of such Index Series' expenses, and no reported performance figure
should be considered an indication of performance which may be expected in the
future.
GENERAL INFORMATION
The Fund is organized as a Maryland corporation. The Articles of
Incorporation currently permit the Fund to issue 6 billion shares of common
stock with a par value of $.001 per share. Fractional shares will not be issued.
In addition to the seventeen Index Series described herein, 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.
Any such additional series may seek to track the investment results represented
by an equity securities index compiled by MSCI or by another index compiler.
The shares of each series are fully paid and non-assessable; have no
preference as to conversion, exchange, dividends, retirement or other features;
and have no pre-emptive rights. Each share has one vote with respect to matters
upon which a shareholder vote is required; shareholders have no cumulative
voting rights with respect to their shares. Shares of all series vote together
as a single class except that if the matter being voted on affects only a
particular Index Series it will be voted on only by that Index Series and if a
matter affects a particular Index Series differently from other Index Series,
that Index Series will vote separately on such matter. Annual meetings of
shareholders will not be held except as required by the 1940 Act and other
applicable law.
The Fund expects that, immediately prior to the commencement of trading of
the WEBS, each Index Series will have a shareholder or shareholders holding more
than 5% of the outstanding shares of such Index Series in Creation Units. The
Fund cannot predict the length of time that such person(s) will remain control
persons of each Index Series. As of the date of this Prospectus, the sole
shareholder of each Index Series is Funds Distributor, Inc. and Funds
Distributor, Inc. is accordingly a "control" person of the Fund and each Index
Series as of such date.
33
<PAGE>
Absent an applicable exemption, beneficial owners of 10% of the WEBS of an
Index Series will be subject to the insider reporting, short-swing profit and
short sale provisions under the Securities Exchange Act of 1934 (the "1934
Act"). The 1934 Act provides that, with certain exceptions, any gain realized by
any such beneficial owner from any purchase and sale or sale and purchase of
WEBS within any period of less than six months is recoverable by the Index
Series. Additionally, every such beneficial owner must file with the SEC a
statement showing ownership and change in ownership of WEBS within ten days
after the end of any calendar month in which there has been a change in such
beneficial owner's ownership of WEBS.
Ernst & Young, LLP serves as independent accountants for the Fund and will
audit its financial statements annually.
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 offices 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 American Stock Exchange, Inc., 86 Trinity Place, New York, New York
10006.
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.
Shareholder inquiries may be directed to the Fund in writing, to c/o PFPC
Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809.
34
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[LOGO]
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH , 1996
FOREIGN FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
, 1996
This Statement of Additional Information is not a Prospectus, and should be
read in conjunction with the Prospectus dated , 1996 (the
"Prospectus") for Foreign 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 by writing to the Fund or the Distributor. The Fund's address is Foreign
Fund, Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
General Description of the Fund............................................................................ 1
Investment Policies and Restrictions....................................................................... 1
Special Considerations and Risks........................................................................... 15
The MSCI Indices........................................................................................... 27
Exchange Listing and Trading............................................................................... 45
Management of the Fund..................................................................................... 46
Investment Advisory, Management, Administrative and Distribution Services.................................. 47
Brokerage Transactions..................................................................................... 50
Book Entry Only System..................................................................................... 50
Purchase and Issuance of WEBS in Creation Units............................................................ 52
Redemption of WEBS in Creation Units....................................................................... 56
Determining Net Asset Value................................................................................ 58
Dividends and Distributions................................................................................ 59
Taxes...................................................................................................... 59
Capital Stock and Shareholder Reports...................................................................... 61
Performance Information.................................................................................... 62
Counsel and Independent Accountants........................................................................ 62
Financial Statements....................................................................................... 64
Report of Independent Accountants.......................................................................... 63
APPENDICES................................................................................................. A-1
</TABLE>
------------------------
THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED
("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF
MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY FOREIGN FUND, INC. THE MSCI
INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY CAPITAL INTERNATIONAL
PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL INTERNATIONAL S.A.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY INDEX SERIES OR ANY MEMBER OF THE
PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE
WEBS OF ANY INDEX SERIES PARTICULARLY OR THE ABILITY OF THE INDICES IDENTIFIED
HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS THE LICENSOR
OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN STANLEY,
INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK ("MSCI") WHICH
MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO MORGAN STANLEY.
THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND CALCULATED
WITHOUT REGARD TO THE WEBS OF ANY INDEX SERIES OR THE ISSUER THEREOF. NEITHER
MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OF
THE WEBS OF ANY INDEX SERIES OR THE OWNERS OF THE WEBS OF ANY INDEX SERIES INTO
CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING, IN THE CASE OF CIPSA, OR
DISSEMINATING, IN THE CASE OF MORGAN STANLEY, THE RESPECTIVE MSCI INDICES.
NEITHER MORGAN STANLEY NOR CIPSA IS RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED
IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE WEBS OF
ANY INDEX SERIES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE
EQUATION BY WHICH THE WEBS OF ANY INDEX SERIES ARE
i
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REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION OR LIABILITY TO
OWNERS OF THE WEBS OF ANY INDEX SERIES IN CONNECTION WITH THE ADMINISTRATION,
MARKETING OR TRADING OF THE WEBS OF ANY INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE
CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES,
OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MSCI
INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
HEREUNDER OR FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY
EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO THE MSCI INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR CIPSA HAVE ANY LIABILITY FOR ANY
DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES
(INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The information contained herein regarding MSCI, the MSCI Indices, local
securities markets and DTC was obtained from publicly available sources.
Unless otherwise specified, all references in this Statement of Additional
Information to "dollars", "USD", "US$" or "$" are to United States Dollars, all
references to "AUD", or "A$" are to Australian Dollars, all references to "ATS"
are to Austrian Schillings, all references to "BEF" are to Belgian Francs, all
references to "CAD" or "CA$" are to Canadian Dollars, all references to "FRF" or
"FF" are to French Francs, all references to "DEM" or "DM" are to the German
Deutsche Mark, all references to "HKD" or "HK$" are to Hong Kong Dollars, all
references to "ITL" or "LL" are to Italian Lira, all references to "JPY" or "Y"
are to Japanese Yen, all references to "MYR" are to Malaysian Ringgits, all
references to "MXN" are to Mexican Nuevo Pesos, all references to "NLG" are to
Netherlands Guilders, all references to "SGD" are to Singapore Dollars, all
references to "ESP" are to Spanish Pesetas, all references to "SEK" are to
Swedish Krona, all references to "CHF" are to Swiss Francs, and all references
to "GBP", "L" or "L" are to British Pounds Sterling. On February 29, 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: AUD 0.7643, ATS 10.34, BEF 30.22, CAD
1.37285, FRF 5.0425, DEM 1.4703, HKD 7.7315, ITL 1558.50, JPY 105.13, MYR 2.549,
MXN 7.635, NLG 1.6458, SGD 1.4122, ESP 123.75, SEK 6.754, CHF 1.199 and GBP
1.532. Some numbers in this Statement of Additional Information have been
rounded. All US Dollar equivalents provided in this Statement of Additional
Information are calculated at the exchange rate prevailing on the date to which
the corresponding foreign currency amount refers.
ii
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GENERAL DESCRIPTION OF THE FUND
Foreign Fund, Inc. (the "Fund") is a management investment company organized
as a series fund. The Fund initially consists of seventeen series (each, an
"Index Series"), each of which invests in a portfolio of common stocks (the
"Portfolio Securities") consisting of some or all of the component securities of
a specified foreign securities index, selected to reflect the performance
thereof. The Fund was incorporated under the laws of the State of Maryland on
September 1, 1994. The shares of each Index Series are referred to herein as
"World Equity Benchmark Shares-SM-" or "WEBS-SM-". The seventeen Index Series
offered by the Fund are the Australia Index Series, the Austria Index Series,
the Belgium Index Series, the Canada Index Series, the France Index Series, the
Germany Index Series, the Hong Kong Index Series, the Italy Index Series, the
Japan Index Series, the Malaysia Index Series, the Mexico (Free) Index Series,
the Netherlands Index Series, the Singapore (Free) Index Series, the Spain Index
Series, the Sweden Index Series, the Switzerland Index Series and the United
Kingdom Index Series.
Each Index Series will offer and issue WEBS at their net asset value only in
aggregations of a specified number of shares (each, a "Creation Unit"), usually
in exchange for a basket of Portfolio Securities (together with the deposit of a
specified cash payment). Such Creation Units of WEBS are separable upon issue
into identical shares which will be listed and traded on the American Stock
Exchange (the "AMEX"). WEBS will also be redeemable only in Creation Units, also
usually in exchange for Portfolio Securities and a specified cash payment. The
Fund reserves the right to offer a "cash" option for sales and redemptions of
WEBS (subject to applicable legal requirements), as well as the option to offer
WEBS on a "cash only" basis. In each instance of such cash sales or redemptions,
the Fund will impose transaction fees based on transaction expenses in the
particular country that will be higher than the transaction fees associated with
in-kind purchases or redemptions. In all cases, such fees will be limited in
accordance with requirements of the Securities and Exchange Commission
applicable to management investment companies offering redeemable securities.
INVESTMENT POLICIES AND RESTRICTIONS
The following information supplements and should be read in conjunction with
the sections entitled "Investment Policies" and "Investment Restrictions of the
Fund" in the Prospectus.
Each of the seventeen Index Series has the policy to remain as fully
invested as practicable in a pool of equity securities the performance of which
will approximate the performance of the subject MSCI Index taken in its
entirety. An Index Series will normally invest at least 95% of its total assets
in stocks that are represented in the relevant MSCI Index and will at all times
invest at least 90% of its total assets in such stocks. An Index Series may
invest its remaining assets in Short-Term Investments (defined below) and/or in
combinations of certain stock index futures contracts, options on such futures
contracts, stock index options, stock index swaps, cash, forward currency
exchange contracts and Short-Term Investments that are intended to provide the
Index Series with exposure to such stocks (the Index Series will not use such
instruments to leverage their investment portfolios). "Short-Term Investments"
are short-term high quality debt securities that include: obligations of the
United States Government and its agencies or instrumentalities; commercial paper
(rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's
Corporation), bank certificates of deposit and bankers' acceptances; repurchase
agreements collateralized by the foregoing securities; and participation
interests in such securities; and shares of money market funds (subject to
applicable limits under the Investment Company Act).
An Index Series will not invest in cash reserves or Short-Term Investments,
or utilize futures contracts, options on futures contracts, options or swap
agreements as part of a temporary defensive strategy to protect against
potential stock market declines. An Index Series may enter into forward currency
exchange contracts and foreign currency futures contracts in order to facilitate
settlements
1
<PAGE>
in local markets in connection with stock index futures, and to protect against
currency exposure in connection with its distributions to shareholders, but not
as part of a defensive strategy to protect against fluctuations in exchange
rates.
INVESTMENTS IN SUBJECT EQUITY MARKETS
Brief descriptions of the equity markets in which the respective Index
Series will be invested are provided below.
THE AUSTRALIAN EQUITY MARKETS
GENERAL BACKGROUND. Trading shares has taken place in Australia since 1828,
but did not become significant until the latter half of the nineteenth century
when there was strong demand for equity capital to support the growth of mining
activities. A stock market was first formed in Melbourne in 1865. In 1885, the
Melbourne market became the stock exchange of Melbourne, in which form it has
remained until recently. Other stock exchanges were also established in Sydney
(1871), Brisbane (1884), Adelaide (1887), Hobart (1891) and Perth (1891). In
1937, the six capital city stock exchanges established the Australian Associated
Stock Exchanges (AASE) to represent them at a national level. In 1987, the
regional exchanges merged to create the single entity -- The Australian Stock
Exchange (ASX). Trading is done via a computer link-up called "SEATS". SEATS
enables all exchanges to quote uniform prices. All the exchanges are members of
the ASX and are subject to the Securities Industry Act, which regulates the
major aspects of stock exchange operations. Although there are stock exchanges
in all six states, the Melbourne and Sydney Stock Exchanges are the major
centers, covering 90% of all trades.
REPORTING, ACCOUNTING AND AUDITING. Australian reporting accounting and
auditing standards differ substantially from U.S. standards. In general
Australian corporations do not provide all of the disclosure required by U.S.
law and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Australian equity markets was approximately AUD 338.6
billion or US$252.2 billion.
THE AUSTRIAN EQUITY MARKETS
GENERAL BACKGROUND. Relative to international standards, the Vienna stock
market is small in terms of total capitalization and yearly turnover. The Vienna
Stock Exchange (VSE) is one of the oldest in the world and was founded in 1771
as a state institution to provide a market for state-issued bonds, as well as
for exchange transactions. The Stock Exchange Act of 1875 established the VSE as
an autonomous institution. The Act is still in force, placing control and
administration of the exchange in the hands of the Borsekammer (Board of
Governors), chosen from among the members of the exchange. The Borsekammer
consists of 25 individuals with the title of Borserat (stock exchange
councillor). Some are elected by members and some are designated by
organizations of the securities industry for a period of five years. The
councillors must be members of the exchange and they elect from amongst
themselves a President and three Vice Presidents. Shares account for about 80%
and investment fund certificate for about 20% of total listed securities on the
VSE. Business of the exchange can be transacted only by members. Almost all the
credit institutions in Vienna, some in the Austrian provinces and the joint
stock banks are represented on the stock exchange, as well as the private banks,
savings banks and other credit institutions. Certain securities which do not
have an official listing may be dealt in on the floor of the stock exchange with
permission of the management. This unlisted trading is the main activity of the
free brokers (Frei Makeler), of whom there are three.
REPORTING, ACCOUNTING AND AUDITING. Austrian reporting, accounting and
auditing standards differ from U.S. standards. In general, Austrian corporations
do not provide all of the disclosure required by U.S. law and accounting
practice, and such disclosure may be less timely and less frequent than that
required of U.S. corporations.
2
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SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Austrian equity markets was approximately ATS 405.9
billion or US$38.8 billion.
THE BELGIAN EQUITY MARKETS
GENERAL BACKGROUND. The Brussels Stock Exchange (BSE) was founded by
Napoleanic decree in 1801. Since January 1, 1991 the BSE has been officially
organized as the "Societe de la Bourse de Valeurs Mobileres de Bruxelles" (SBVM)
the shareholders of which are Belgian securities houses. The law of December 4,
1990 on financial operations and markets terminated the monopoly of the
individual brokers. Now only securities houses are allowed to carry out stock
exchange orders. Brokers, banks, brokerage firms and insurance companies can
participate in the capital of a securities house. Its management is composed of
a majority of qualified people bearing the title of stockbroker. The Banking and
Finance Commission was granted the power to approve securities houses by this
law. The Board of Directors of the SBVM, the Stock Exchange Committee (the
"SEC") organizes and supervises the different markets and ensures market
transparency. The SEC also admits or dismisses brokerage firms and ensures
compliance with all regulations. It is also in charge of the admission to
listing and suspension of listing. On the Brussels Stock Exchange equities are
traded on three different markets: the Official Market, which includes a Cash
and a Forward Market, the Second Market and an "Over the Counter Market".
REPORTING, ACCOUNTING AND AUDITING. Belgian reporting accounting and
auditing standards differ substantially from U.S. standards. In general Belgian
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Belgian equity markets was approximately BEF 3,135.5
billion or US$102.5 billion.
THE CANADIAN EQUITY MARKETS
GENERAL BACKGROUND. The first Canadian stock exchange appeared in the
1870's. Today, Canada is the world's fourth largest public equity market by
trading volume and the fifth largest by market capitalization. There are five
stock exchanges across Canada, located in Toronto, Montreal, Vancouver, Calgary
and Winnipeg. Of these, the Toronto Stock Exchange is the largest, accounting
for almost 80% of Canadian trading volumes. Measured by the value of shares
traded, the Toronto Stock Exchange is the second largest in North America and
among the ten largest in the world.
REPORTING, ACCOUNTING AND AUDITING. As recognized by the Securities and
Exchange Commission in one of the proposing releases relating to the
Multijurisdictional Disclosure System, Canadian reporting, accounting and
auditing practices are closer to U.S. standards than those of any other foreign
jurisdiction. Every issuer that qualifies an offering of securities for
distribution in Canada becomes subject to periodic disclosure requirements.
Authoritative accounting and auditing standards, which are uniform across
Canada, are developed by a national body, the Canadian Institute of Chartered
Accountants ("CICA"). Although promulgated auditing standards in Canada differ
from U.S. standards in some respects, generally accepted practices in Canada
routinely encompasses all significant auditing procedures required by U.S.
standards. Further, CICA periodically evaluates new auditing standards adopted
by the American Institute of Certified Public Accountants, CICA's U.S.
counterpart, to determine whether similar guidelines may be appropriate for
Canadian auditors. Canadian GAAP are similar to their U.S. counterparts,
although there are some differences in measurement and disclosure.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Canadian markets was approximately CAD 480.8 billion or
US$349.4 billion.
THE FRENCH EQUITY MARKETS
GENERAL BACKGROUND. Trading of securities in France is subject to the
monopoly of the Societe de Bourse, which replaced the individual agents de
change in 1991 in order to increase the cohesion of the
3
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French equity market. All purchases or sales of equity securities in listed
companies on any one of the French exchanges must be executed through the
Societe de Bourse. There are three different markets on which French securities
may be listed: (1) the official list (La Cote Officielle), comprised of equity
securities of large French and foreign companies and most bond issues; (2) the
second market (Le Second Marche), designed for the trading of equity securities
of smaller companies; and (3) the "Hors-Cote" Market. Securities may only be
traded on the official list and the second market after they have been admitted
for the listing by the Conseil des Bourses de Valeurs (the "CBV"). By contrast,
the Hors-Cote Market has no prerequisites to listing, and shares of otherwise
unlisted companies may be freely traded there, once they have been introduced on
the market by the Societe De Bourse. Although the Hors-Cote Market is frequently
referred to as an over-the-counter market, this term is inaccurate in that, like
the official list and the second market, it is supervised by Societes des
Bourses Francaises and regulated by the CBV.
Although there are seven stock exchanges in France (located in Paris,
Bordeaux, Lille, Lyon, Marseille, Nancy and Nantes), the Paris Stock Exchange
handles more than 95% of transactions in the country. All bonds and shares,
whether listed or unlisted, must be traded on one of the seven exchanges.
Trading in most of the Paris exchange-listed stocks takes place through the
computer order-driven trading system CAC, launched in 1988. French market
capitalization constitutes approximately 30% of the French Gross Domestic
Product. Securities are denominated in the official unit of currency, the French
Franc. Unless otherwise provided by a double tax treaty, dividends on French
shares are subject to a withholding tax of 25%.
REPORTING, ACCOUNTING AND AUDITING. Although French reporting, accounting
and auditing standards are considered rather rigorous by European standards,
they differ from U.S. standards in certain material 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 less
frequent than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the French equity markets was approximately FF 2,679.0 billion
or US$524.5 billion.
THE GERMAN EQUITY MARKETS
GENERAL BACKGROUND. The history of Frankfurt as a financial center can be
traced back to the early Middle Ages. Frankfurt had the right to issue coins as
early as 1180; the first exchange office was opened in 1402. Germany has been
without a central stock exchange, the position formerly held by the Berlin
exchange, since 1945. Today there are eight independent stock exchanges, of
which Dusseldorf and Frankfurt account for over three-quarters of the total
volume. Frankfurt is the main exchange in Germany. Exchange securities are
denominated in German Marks, the official currency of Germany. Equities may be
traded in Germany in one of three markets: (i) the official market, comprised of
trading in shares which have been formally admitted to official listing by the
admissions committee of the relevant stock exchange, based on disclosure in the
listing application; (ii) the "semi-official" unlisted market, comprised of
trading in shares not in the official listing; and (iii) the unofficial, over-
the-counter market, which is governed by the provisions of the Civil Code and
the Merchant Code and not by the provisions of any stock exchange. There is no
stamp duty in Germany, but a nonresident capital gains tax may apply in certain
circumstances.
REPORTING, ACCOUNTING AND AUDITING. German reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, German
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Germany equity markets was approximately DM 894.8 billion
or US$601.4 billion.
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THE HONG KONG EQUITY MARKETS
GENERAL BACKGROUND. Trading in equity securities in Hong Kong began in 1891
with the formation of the Association of Stockbrokers, which was changed in 1914
to the Hong Kong Stock Exchange. In 1921, a second stock exchange, The Hong Kong
Stockbrokers' Association, was established. In 1947, these two exchanges were
merged under the name The Hong Kong Stock Exchange Limited. Three additional
exchanges, the Far East Exchange Limited (1969), The Kam Ngan Stock Exchange
Limited (1971) and The Kowloon Stock Exchange (1972) also commenced trading
activities. These four exchanges were unified in 1986 to form The Stock Exchange
of Hong Kong Limited (the "SEHK"). The value of the SEHK constitutes more than
100% of Hong Kong's Gross Domestic Product. Trading on the SEHK is conducted in
the post trading method, matching buyers and sellers through public outcry.
Securities are denominated in the official unit of currency, the Hong Kong
Dollar. Foreign investment in Hong Kong is generally unrestricted. All investors
are subject to a small stamp duty and a stock exchange levy, but capital gains
are tax-exempt.
REPORTING, ACCOUNTING AND AUDITING. Hong Kong has significantly upgraded
the required presentation of financial information in the past decade.
Nevertheless, reporting, accounting and auditing practices remain significantly
less rigorous than U.S. standards. In general, Hong Kong 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 less frequent than that
required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Hong Kong equity markets was approximately HKD 2,400.8
billion or US$310.5 billion.
THE ITALIAN EQUITY MARKETS
GENERAL BACKGROUND. The first formal exchange was created in Italy in 1808
with the establishment of the Milan Stock Exchange. Since then nine other
exchanges have been founded. Milan is the most important exchange, accounting
for 90% of total equity volume and about 80% of turnover in fixed income
securities. After the Milan Stock Exchange the other exchanges, in order of
importance are: Rome, Turin, Genoa, Bologna, Florence, Naples, Palermo, Trieste
and Venice. By law the only persons allowed to trade in the official posts of
the stock exchange are the stockbrokers, who must act as brokers and not trade
for their own account. Banks and intermediaries are allowed to enter the trading
post as observers. In 1991, the Parliament passed legislation creating Societa
di intermediazone mobiliare (SIMs). SIMs were created to regulate brokerage
activities in the securities market and are allowed to trade on their own and
for customers' accounts. In 1986, the Centro Elaboraizione Dati (C.E.D. Borsa),
a subsidiary of the Milan Stock Exchange, developed a supporting service called
Borsamat. The Borsamat records all trading floor orders, links all Italian
exchanges, checks transaction details and issues confirmations. Italy has the
world's largest government securities market after the United States and Japan.
At the end of 1993, issues of treasury bills, notes and bonds outstanding
totalled US$1,133 billion.
REPORTING, ACCOUNTING AND AUDITING. Italian reporting, accounting and
auditing practices are regulated by Italy's National Control Commission. These
practices bear some similarities to United States standards, but differ
significantly in many important respects. In general, Italian corporations do
not provide all of the disclosure required by U.S. law and accounting practice,
and such disclosure may be less timely, less frequent and less consistent than
that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Italian markets was approximately ITL 299,512.6 billion or
US$187.9 billion.
THE JAPANESE EQUITY MARKETS
GENERAL BACKGROUND. The Japanese stock market has a history of over 100
years beginning with the establishment of the Tokyo Stock Exchange Company Ltd.
in 1878. Stock exchanges are located in eight cities in Japan (Tokyo, Osaka,
Nagoya, Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo). There is also an
over-the-counter market. There are three distinct sections on the main Japanese
stock exchanges. The First Section trades in over 1,100 of the largest and most
active stocks, which
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account for over 95% of total market capitalization. The Second Section consists
of over 400 issues with lower turnover than the First Section, which are newly
quoted on the exchange or which are not listed and would otherwise be traded
over-the-counter. The Third Section consists of foreign stocks which are traded
over-the-counter. The main activity of the regular exchange members is the
buying and selling of securities on the floor of an exchange, both for their
customers and for their own account. Japan is second only to the United States
in aggregate stock market capitalization. Securities are denominated in the
official unit of currency, the Japanese Yen. Takeover activity is negligible in
Tokyo, and although foreign investors play a significant role, the trend of the
market is set by the domestic investor. The statutory at-source withholding is
20% on dividends. There also is a transaction tax on share trades and a small
stamp duty.
REPORTING, ACCOUNTING AND AUDITING. Although some Japanese reporting,
accounting and auditing practices are based substantially on U.S. principles,
they are not identical to U.S. standards in some important respects,
particularly with regard to unconsolidated subsidiaries and related structures.
In general, Japanese 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 less frequent than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Japanese equity markets was approximately JPY 377,880.4
billion or US$3,534.4 billion.
THE MALAYSIAN EQUITY MARKETS
GENERAL BACKGROUND. The securities industry in Malaysia dates back to the
early 1930's. Kuala Lumpur and Singapore were a single exchange until 1973 when
they separated and the Kuala Lumpur Stock Exchange (KLSE) was formed. The KLSE
operated under a provisional set of rules until 1983 when a new Securities
Industry Act came into force. As of April 30, 1993, 320 companies were listed on
the KLSE main board. A Second Board, established in 1988, allows smaller
companies to tap additional capital. Fifty-seven companies were listed on the
Second Board as of April 30, 1993. Over the years, the KLSE's close links with
the Stock Exchange of Singapore (SES) has rendered it very vulnerable to
developments in Singapore. Consequently, the Government decided, as a matter of
national policy, on a delisting of Malaysian incorporated companies from the
SES. This was effected on January 1, 1990. A similar move was made by Singapore,
resulting in the delisting of all Singapore companies on the KLSE on January 1,
1990. There are two main stock indices in Malaysia. The wider ranging KLSE
Composite represents 80 counters. The New Straits Times Industrial Index is an
average of 30 industrial stocks.
REPORTING, ACCOUNTING AND AUDITING. Malaysian reporting, accounting and
auditing standards differ substantially from U.S. standards. In general,
Malaysian corporations do not provide all of the disclosure required by U.S. law
and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Malaysian equity markets was approximately MYR 543.5
billion or US$212.3 billion.
THE MEXICAN EQUITY MARKETS
GENERAL BACKGROUND. There is only one stock exchange in Mexico, the Bolsa
Mexicana de Valores (BMV), which was established in 1894 and is located in
Mexico City. The stock exchange is a private corporation whose shares are owned
solely by its authorized members and operates under the stock market laws passed
by the government. The National Securities Commission (CNV) supervises the stock
exchange. The Mexican exchange operates primarily via the open outcry method.
However, firm orders in writing can supersede this system, provided there is a
perfect match of the details of a buy and sell order. Executions on the exchange
can be done by members only. Membership of the stock exchange is restricted to
"Casas de Bolsa" ("brokerage houses") and "Especialistas Bursatiles" (stock
exchange specialists).
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REPORTING, ACCOUNTING AND AUDITING. Mexican reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Mexican
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Mexican equity markets was approximately MXN 791.5 billion
or US$107.4 billion.
THE NETHERLANDS EQUITY MARKETS
GENERAL BACKGROUND. Trading securities on the Amsterdam Stock Exchange
(ASE) started at the beginning of the seventeenth century. The United East India
Company was the first company in the world financed by an issue of shares, and
such issue was effected through the exchange. The Netherlands claims the honor
of having the oldest established stock exchange in existence. In 1611 a stock
market began trading in the coffee houses along the Dam Square. A more formal
establishment, the Amsterdam Stock Exchange Association, began trading
industrial stocks in 1876 and until World War II, Amsterdam ranked after New
York and London as the third most important stock market in the world. After the
war, the Amsterdam Stock Exchange only gradually began to resume its activities,
as members felt threatened by what they saw as an impending socialist order
which would leave little of the stock market intact. Since the end of the war,
the Dutch market has remained relatively neglected, as local companies have
found it more favorable to use bank financing to meet their capital
requirements. Trading in shares on the ASE may take place on the official market
or on the parallel market, which is available to medium-sized and smaller
companies that cannot yet meet the requirements demanded for the official
market.
REPORTING, ACCOUNTING AND AUDITING. Dutch reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Dutch
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Dutch equity markets was approximately NLG 492.8 billion
or US$295.8 billion.
THE SINGAPOREAN EQUITY MARKETS
GENERAL BACKGROUND. The Stock Exchange of Singapore (SES) was formed in
1973 with the separation of the joint stock exchange with Malaysia, which had
been in existence since 1938. The linkage between the SES and the Kuala Lumpur
Stock Exchange (KLSE) remained strong as many companies in Singapore and
Malaysia jointly listed on both exchanges, until December 1989 when the dual
listing was terminated. SES has a tiered market, with the formation of the
second securities market, SESDAQ (Stock Exchange of Singapore Dealing and
Automated Quotation System) in 1987. SESDAQ was designed to provide an avenue
for small and medium-sized companies to raise funds for expansion. In 1990, SES
introduced an over-the-counter (OTC) market known as CLOB International, to
allow investors access to international securities listed on foreign exchanges.
SES also has a direct link with the National Association of Securities Dealers
Automated Quotation (NASDAQ) system, which was set up in March 1988 to allow
traders in the Asian time zone access to selected securities on the U.S. OTC
markets. This is made possible through a daily exchange of trading prices and
volumes of the stocks quoted on NASDAQ. The Singapore Stock Exchange is one of
the most developed in Asia and has a strong international orientation.
REPORTING, ACCOUNTING AND AUDITING. Singaporean reporting, accounting and
auditing standards differ substantially from U.S. standards. In general,
Singaporean corporations do not provide all of the disclosure required by U.S.
law and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Singaporean markets was approximately SGD 222.1 billion or
US$156.5 billion.
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THE SPANISH EQUITY MARKETS
GENERAL BACKGROUND. The trading of shares in Spain dates back to 1831 when
the Madrid Stock Exchange was founded. Since that time other exchanges have been
established in Barcelona, Bilbao and Valencia, although the latter remains
purely a local market. Madrid is by far the most active and the most
international market exchange, accounting for nearly 50% of total market
capitalization of both bonds and stocks. The next largest exchange is Barcelona,
founded in 1915. Membership at each stock exchange in Spain is restricted to
stockbrokers nominated by the Ministry of Finance. In order to practice their
profession, a broker must belong to the Association of Brokers. In November
1986, the Madrid Stock Exchange opened the new second market, or unlisted
securities market, as part of an effort to expand the range of Spanish companies
whose shares are publicly quoted. The second market provides small and
medium-sized companies with access to the trading market of the Madrid Stock
Exchange.
REPORTING, ACCOUNTING AND AUDITING. Spanish reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Spanish
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Spanish equity markets was approximately ESP 19,230.2
billion or US$153.4 billion.
THE SWEDISH EQUITY MARKETS
GENERAL BACKGROUND. Organized trading of securities in Sweden can be traced
back to 1776. Although the Stockholm Stock Exchange was founded in 1864, the
real formation of a stock exchange in an international sense took place in 1901.
The statutes of the stock exchange were modified in 1906 and, from the beginning
of 1907, commercial banks were admitted as members. During the 1970's the
Stockholm market was characterized by limited turnover and dull trading
conditions. In 1980 the market started to climb and for several years Stockholm
was one of the best performing stock markets in both price and volume growth.
This regeneration of a market for risk capital was reflected in the large number
of companies introduced in the early 1980's. The Stockholm Stock Exchange is
structured on a membership basis, with the Bank Inspection Board being the
supervising authority. The board consists of 11 directors and one chief
executive. The directors of the board are elected by the Swedish government, and
the Association of the Swedish Chamber of Commerce, the Federation of Swedish
Industries and the member companies of the Stock Exchange. There are three
different markets for trading shares in Sweden. The dominant market is the A1
list, for the largest and most heavily traded companies. The second distinct
market is the Over-the-Counter Market, which is more loosely regulated than the
official market and caters to small and medium sized companies. The other market
is the unofficial parallel market which deals in unlisted shares, both on and
off the exchange floor. The shares most frequently traded on this market are
those which have been delisted from the other markets and those which are only
occasionally available for trading.
There are also two independent markets for options -- the Swedish Options
Market (OM) and the Swedish Options and Futures Exchange (SOFE). They offer
calls, puts and forwards on Swedish stocks and stock market index.
REPORTING, ACCOUNTING AND AUDITING. Swedish reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Swedish
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Swedish equity markets was approximately SEK 1,192.9
billion or US$171.7 billion.
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THE SWISS EQUITY MARKETS
GENERAL BACKGROUND. There are three principal stock exchanges in
Switzerland, the largest of which is Zurich, followed by Geneva and Basle. The
Geneva exchange is the oldest and was formally organized in 1850. The Basle and
the Zurich exchanges were founded in 1876 and 1877, respectively. The Geneva
Exchange is a corporation under public law and in Zurich and Basle the exchanges
are institutions under public law. There are three different market segments for
the trading of equities in Switzerland. The first is the official market, the
second is the semi-official market, and the third is the unofficial market. On
the official market, trading takes place among members of the exchange on the
official trading floors. Trading in the semi-official market also takes place on
the floors of the exchanges, but this market has traditionally been reserved for
smaller companies not yet officially accepted on the exchange. Unofficial market
trading is conducted by members and non-members alike. Typical trading on this
market involves shares with small turnover. Both listed and unlisted securities
can, however, be traded on this market.
REPORTING, ACCOUNTING AND AUDITING. Swiss reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Swiss
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market
capitalization of the Swiss equity markets was approximately CHF 454.0 billion
or US$375.2 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. There are 14 stock exchanges in
the United Kingdom and Ireland which comprise the Associated Stock Exchange. The
most important exchange and the one that has the major share of the business is
the London Stock Exchange. The London Stock Exchange has the largest volume of
trading in international equities in the world.
REPORTING, ACCOUNTING AND AUDITING. Although UK reporting, accounting and
auditing standards are among the most stringent outside the United States, such
standards are not identical to U.S. standards in important respects. Some UK
corporations are not required to provide all of the 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.
SIZE OF EQUITY MARKETS. As of January 31, 1996, the aggregate
capitalization of the United Kingdom equity markets was approximately L898.9
billion or US$1,358.2 billion.
OTHER FUND INVESTMENTS
Although the policy of each Index Series of the Fund is to remain
substantially fully invested in equity securities, an Index Series may also
invest in combinations of certain stock index futures contracts, options on such
futures contracts, stock index options, stock index swaps and cash and
Short-Term Investments that are intended to provide the Index Series with
exposure to such equity securities, an Index Series may invest temporarily in
certain Short-Term Investments. Such securities may be used to invest
uncommitted cash balances or, in limited circumstances, to assist in meeting
shareholder redemptions of Creation Units of WEBS.
Although each Index Series generally seeks to invest for the long term, the
Index Series retain the right to sell securities irrespective of how long they
have been held. However, because of the "passive" investment management approach
of the Fund, the portfolio turnover rate for each Index Series is expected to be
under 50%, a generally lower turnover rate than for many other investment
companies. A portfolio turnover rate of 50% would occur if one half of an Index
Series' securities were sold within one year. (For purposes of calculating
portfolio turnover rate, the Fund does not take into account "sales" of
securities by means of in-kind redemptions, since such transactions do not
impact an Index
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Series' portfolio composition or weighting.) Ordinarily, securities will be sold
from an Index Series only to reflect certain administrative changes in an Index
(including mergers or changes in the composition of the Index) or to accommodate
cash flows out of the Index Series while seeking to keep the performance of the
Index Series in line with that of its benchmark index. In addition, securities
may be sold from an Index Series in certain circumstances to ensure the Index
Series' compliance with the diversification and other requirements of the
Internal Revenue Code of 1986 (the "Internal Revenue Code") and with other
requirements, which would tend to raise the portfolio turnover rate of such
Index Series. Purchases and sales of securities will involve transaction costs
which will be borne by the respective Index Series.
An Index Series may borrow money from a bank up to a limit of 33% of the
market value of its assets, but only for temporary or emergency purposes. An
Index Series may borrow money only to facilitate distributions to shareholders
or meet redemption requests (in connection with Creation Units of WEBS that the
Fund agrees to redeem for cash) prior to the settlement of securities already
sold or in the process of being sold by such Index Series. To the extent that an
Index Series borrows money prior to receiving distributions on its portfolio
securities or prior to selling securities in connection with a redemption, it
may be leveraged; at such times, the Index Series may appreciate or depreciate
in value more rapidly than its benchmark index. An Index Series will not make
cash purchases of securities when the amount of money borrowed exceeds 5% of the
market value of its total assets.
LENDING PORTFOLIO SECURITIES
The Fund may lend portfolio securities to brokers, dealers and other
financial institutions needing to borrow securities to complete transactions and
for other purposes. Because the cash, government securities or other assets that
are pledged as collateral to the Fund in connection with these loans generate
income, securities lending enables an Index Series to earn additional income
that may partially offset the expenses of such Index Series, and thereby reduce
the effect that expenses have on such Index Series' ability to provide
investment results that substantially correspond to the price and yield
performance of its respective MSCI Index. These loans may not exceed 33% of an
Index Series' total assets. The documentation for these loans will provide that
the Index Series will receive collateral equal to at least 100% of the current
market value of the loaned securities, as marked to market each day that the net
asset value of the Index Series is determined, consisting of cash, government
securities or other assets permitted by applicable regulations and
interpretations. An Index Series will pay reasonable administrative and
custodial fees in connection with the loan of securities. The Index Series will
invest cash collateral in Short-Term Investments. Morgan Stanley Trust Company
("MSTC") serves as Lending Agent of the Fund and, in such capacity, will share
equally with the respective Index Series any net income earned on invested
collateral. An Index Series' share of income from the loan collateral is
included in the Index Series' gross investment income.
The Fund will comply with the conditions for lending established by the
Securities and Exchange Commission (the "Commission"). The Commission currently
requires that the following conditions be met whenever portfolio securities are
loaned: (1) the Index Series must receive at least 100% collateral from the
borrower; (2) the borrower must increase such collateral whenever the market
value of the securities lent rises above the level of the collateral; (3) the
Index Series must be able to terminate the loan at any time; (4) the Index
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 Index Series may pay only reasonable custodian fees in
connection with the loan and will pay no finders 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.
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CURRENCY TRANSACTIONS
The investment policy of each Index Series is to remain as fully invested as
practicable in the equity securities of the relevant MSCI Index. Hence, no Index
Series of the Fund expects to engage in currency transactions for the purpose of
hedging against declines in the value of the Index Series' currency. An Index
Series may enter into foreign currency forward and foreign currency futures
contracts to facilitate local securities settlement to protect against currency
exposure in connection with its distributions to shareholders, but may not enter
into such contracts for speculative purposes or as a way of protecting against
anticipated adverse changes in exchange rates between foreign currencies and the
U.S. dollar.
A forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. 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 time. Futures contracts may be settled on a net cash payment
basis rather than by the sale and delivery of the underlying currency.
REPURCHASE AGREEMENTS
Each Index Series may invest in repurchase agreements with commercial banks,
brokers or dealers to generate income from its excess cash balances. A
repurchase agreement is an agreement under which an Index Series acquires a
money market instrument (generally a security issued by the U.S. Government or
an agency thereof, a banker's acceptance or a certificate of deposit) from a
seller, subject to resale to the seller at an agreed upon price and date
(normally, the next business day). A repurchase agreement may be considered a
loan collateralized by securities. The resale price reflects an agreed upon
interest rate effective for the period the instrument is held by an Index Series
and is unrelated to the interest rate on the underlying instrument. In these
transactions, the securities acquired by an Index Series (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement and are held by the Fund's custodian bank until
repurchased. In addition, the Fund's Board of Directors will monitor the Fund's
repurchase agreement transactions generally and will establish guidelines and
standards for review of the creditworthiness of any bank, broker or dealer
counterparty to a repurchase agreement with an Index Series. No more than an
aggregate of 15% of the Index Series' net assets will be invested in repurchase
agreements having maturities longer than seven days and securities subject to
legal or contractual restrictions on resale, or for which there are no readily
available market quotations. An Index Series will enter into repurchase
agreements only with Federal Reserve member banks with minimum assets of at
least $2 billion or registered securities dealers.
The use of repurchase agreements involves certain risks. For example, if the
other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by an Index Series not within the
control of the Index Series and therefore the Index Series may not be able to
substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Fund's
management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
Each Index Series may utilize futures contracts, options and swap agreements
to the extent described in the Prospectus. Futures contracts generally provide
for the future sale by one party and purchase by another party of a specified
commodity at a specified future time and at a specified price. Stock index
futures contracts are settled by the payment by one party to the other of a cash
amount based on the difference between the level of the stock index specified in
the contract and at maturity of the contract. Futures contracts are standardized
as to maturity date and underlying commodity and
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are traded on futures exchanges. At the present time, there are no liquid
futures contracts traded on most of the benchmark indices of the Index Series.
In such circumstances an Index Series may use futures contracts, and options on
futures contracts, based on other local market indices or may utilize futures
contracts, and options on such contracts, on other indices or combinations of
indices that the Adviser believes to be representative of the relevant benchmark
index.
Although futures contracts (other than cash settled futures contracts
including most stock index futures contracts) by their terms call for actual
delivery or acceptance of the underlying commodity, in most cases the contracts
are closed out before the settlement date without the making or taking of
delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold", or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract position is
opened or closed.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying commodity
or payment of the cash settlement amount) if it is not terminated prior to the
specified delivery date. Relatively low initial margin requirements are
established by the futures exchanges and may be changed. Brokers may establish
deposit requirements which are higher than the exchange minimums. Futures
contracts are customarily purchased and sold on margin deposits which may range
upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.
Each Index Series may use futures contracts and options thereon, together
with positions in cash and Short-Term Investments, to simulate full investment
in the underlying index. As noted above, liquid futures contracts are not
currently available for the benchmark indices of many Index Series. In addition,
the Fund is not permitted to utilize certain stock index futures under
applicable law. Under such circumstances, the Adviser may seek to utilize other
instruments that it believes to be correlated to the underlying index.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
An Index Series will not enter into futures contract transactions for
purposes other than hedging to the extent that, immediately thereafter, the sum
of its initial margin deposits on open contracts exceeds 5% of the market value
of an Index Series' total assets. Assets committed to initial margin deposits
for futures and options on futures will be held in a segregated account at the
Fund's custodian bank. Each Index Series will take steps to prevent its futures
positions from "leveraging" its portfolio. When it has a long futures position,
it will maintain in a segregated account with its custodian bank, cash or high
quality debt securities having a value equal to the purchase price of the
contract (less any margin deposited in connection with the position). When it
has a short futures position, it will maintain in a segregated account with its
custodian bank assets substantially identical to those underlying the contract
or cash and high quality debt securities (or a combination of the foregoing)
having a value equal to its obligations under the contract (less the value of
any margin deposits in connection with the position).
SWAP AGREEMENTS
Swap agreements are contracts between parties in which one party agrees to
make payments to the other party based on the change in market value or level of
a specified index or asset. In return, the other party agrees to make payments
to the first party based on the return of a different specified
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index or asset. Although swap agreements entail the risk that a party will
default on its payment obligations thereunder, each Index Series would seek to
reduce this risk by entering into agreements that involve payments no less
frequently than quarterly. The net amount of the excess, if any, of an Index
Series' obligations over its entitlements with respect to each swap will be
accrued on a daily basis and an amount of cash or high quality debt securities
having an aggregate value at least equal to the accrued excess will be
maintained in a segregated account at the Fund's custodian bank.
FUTURE DEVELOPMENTS
Each Index Series may take advantage of opportunities in the area of
options, and futures contracts, options on futures contracts, warrants, swaps
and any other investments which are not presently contemplated for use by such
Index Series or which are not currently available but which may be developed, to
the extent such opportunities are both consistent with an Index Series'
investment objective and legally permissible for the Index Series. Before
entering into such transactions or making any such investment, the Index Series
will provide appropriate disclosure.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions as fundamental
policies with respect to each Index Series. These restrictions cannot be changed
with respect to an Index Series without the approval of the holders of a
majority of such Index 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 an Index 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 Index Series present at such
meeting, if the holders of more than 50% of the outstanding voting securities of
such Index Series are present or represented by proxy, or (2) more than 50% of
the outstanding voting securities of the Index Series. An Index Series may not:
1. Change its investment objective;
2. Lend any funds or other assets except through the purchase of all or
a portion of an issue of securities or obligations of the type in which it
is permitted to invest (including participation interests in such securities
or obligations) and except that an Index Series may lend its portfolio
securities in an amount not to exceed 33% 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% of the
value of the Index Series' total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not including the
amount borrowed) valued at the time the borrowing is made, and the Index
Series will not purchase securities while borrowings in excess of 5% of the
Index Series' total assets are outstanding, provided, that for purposes of
this restriction, short-term credits necessary for the clearance of
transactions are not considered borrowings;
4. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings. (The deposit of underlying securities
and other assets in escrow and collateral arrangements with respect to
initial or variation margin for currency transactions and futures contracts
will not be deemed to be pledges of the Index Series' assets);
5. Purchase a security (other than obligations of the United States
Government, its agencies or instrumentalities) if as a result 25% or more of
its total assets would be invested in a single issuer;
6. Purchase, hold or deal in real estate, or oil, gas or mineral
interests or leases, but an Index 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 Index Series may be deemed an underwriter in connection with the
sale of securities in its portfolio;
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8. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, except that an Index Series
may make margin deposits in connection with transactions in currencies,
options, futures and options on futures;
9. Sell securities short; or
10. Invest in commodities or commodity contracts, except that an Index
Series may buy and sell currencies and forward contracts with respect
thereto, and may transact in futures contracts on securities, stock indices
and currencies and options on such futures contracts and make margin
deposits in connection with such contracts.
In addition to the investment restrictions adopted as fundamental policies
as set forth above, each Index Series will observe the following restrictions,
which may be changed by the Board without a shareholder vote. An Index 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 Index Series in accordance with its
views; or
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
Index Series has valued the investment.
For purposes of the percentage limitation on each Index Series' investments
in illiquid securities, with respect to each Index Series, foreign equity
securities, though not registered under the Securities Act of 1933 (the
"Securities Act"), will not be deemed illiquid if they are otherwise readily
marketable. Such securities will ordinarily be considered "readily marketable"
if they are traded on an exchange or other organized market and are not legally
restricted from sale by the Index Series. The Adviser will monitor the liquidity
of restricted securities in each Index Series' portfolio under the supervision
of the Fund's Board of Directors. In reaching liquidity decisions, the Adviser
will consider, inter alia, the following factors:
(1) the frequency of trades and quotes for the security;
(2) the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers;
(3) dealer undertakings to make a market in the security; and
(4) the nature of the security and the nature of the marketplace in
which it trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer).
If a percentage limitation is adhered to at the time of investment or
contract, a later increase or decrease in percentage resulting from any change
in value or total or net assets will not result in a violation of such
restriction, except that the percentage limitations with respect to the
borrowing of money and illiquid securities will be observed continuously.
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SPECIAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an investment in the Fund is
contained in the Prospectus under the heading "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
An investment in WEBS involves risks similar to those of investing in a
broadly-based portfolio of equity securities traded on exchanges in the
respective countries covered by the individual Index Series. These risks include
market fluctuations caused by such factors as economic and political
developments, changes in interest rates and perceived trends in stock prices.
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. Investing in an Index Series whose portfolios
contain 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 less liquid and less efficient securities markets; generally 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 an Index Series; higher transaction and custody costs;
delays attendant in settlement procedures; difficulties in enforcing contractual
obligations; lesser liquidity and significantly smaller market capitalization of
most non-U.S. securities markets; lesser levels of regulation of the 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.
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. If
the Adviser utilizes foreign exchange transactions at an inappropriate time or
judges market conditions, trends or correlations incorrectly, foreign exchange
transactions may not serve their intended purpose of improving the correlation
of an Index Series' return with the performance of the corresponding MSCI Index
and may lower the Index Series' return. The Index 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 Index Series will
incur transaction costs, including trading commissions, in connection with
certain of its foreign currency transactions.
FUTURES TRANSACTIONS
Positions in futures contracts and options thereon may be closed out only on
an exchange which provides a secondary market for such futures. However, there
can be no assurance that a liquid secondary market will exist for any particular
futures contract or option at any specific time. Thus, it may not be possible to
close a futures or options position. In the event of adverse price movements, an
Index Series would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if an Index Series has
insufficient cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, an
Index Series may be required to make delivery of the instruments underlying
futures contracts it holds.
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An Index Series will minimize the risks that it will be unable to close out
a futures or options contract by only entering into futures and options for
which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies is
potentially unlimited, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, entering into long or short futures positions may result
in losses well in excess of the amount initially paid. However, given the
limited purposes for which future contracts will be used, and the fact that
steps will be taken to eliminate the leverage of any futures positions, an Index
Series would presumably have sustained comparable losses if, instead of the
futures contracts, it had invested in the underlying financial instrument and
sold it after the decline.
Utilization of futures transactions by an Index Series involves the risk of
imperfect or no correlation to the benchmark index where the index underlying
the futures contracts being used differs from the benchmark index. There is also
the risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom an Index Series has an open position in the futures contract or
related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Each Index Series is required for federal income tax purposes to recognize
as income for each taxable year its net unrealized gains and losses on certain
futures contracts as of the end of the year as well as those actually realized
during the year. In most cases, any gain or loss recognized with respect to the
futures contract is considered to be 60% long-term capital gain or loss and 40%
short-term capital gain or loss, without regard to the holding period of the
contract. Furthermore, sales of futures contracts which hedge against a change
in the value of securities held by an Index Series may affect the holding period
of such securities and, consequently, the nature of the gain or loss on such
securities upon disposition. An Index Series may be required to defer the
recognition of losses on futures contracts to the extent of any unrecognized
gains on related positions held by the Index Series.
In order for an Index Series to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, gains from the sale of
securities or of foreign currencies or other income derived with respect to the
Index Series' business of investing in securities. In addition, gains realized
on the sale or other disposition of securities held for less than three months
must be limited to less than 30% of the Index Series' annual gross income. It is
anticipated that any net gain realized from the closing out of futures contracts
will be considered gain from the sale of securities and therefore be qualifying
income for purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities held less than three months, an Index Series may
be required to defer the closing out of futures contracts beyond the time when
it would
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otherwise be advantageous to do so. It is anticipated that unrealized gains on
futures contracts, which have been open for less than three months as of the end
of the Index Series' fiscal year and which are recognized for tax purposes, will
not be considered gains on sales of securities held less than three months for
the purpose of the 30% test.
Each Index Series will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Index Series' fiscal year) on futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the Index Series' other investments and shareholders will be
advised on the nature of the distributions.
CONTINUOUS OFFERING
The proposed method by which Creation Units of WEBS will be created and
traded may raise certain issues under applicable securities laws. Because new
Creation Units of WEBS may be issued and sold by the Fund on an ongoing basis,
at any point a "distribution", as such term is used in the Securities Act, may
occur. 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 Units after
placing an order with the Distributor, breaks them down into constituent WEBS,
and sells such WEBS directly to customers, or if it chooses to couple the
creation of a supply of new WEBS with an active selling effort involving
solicitation of secondary market demand for WEBS. A determination of whether one
is an underwriter for the purposes of the Securities Act must take into account
all the facts and circumstances pertaining to the activities of the
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 a categorization as an underwriter. In any event, broker-dealer
firms should also note that dealers who are not "underwriters" but are effecting
transactions in WEBS, whether or not participating in the distribution of WEBS,
are generally required to deliver a prospectus. This is because the prospectus
delivery exemption in Section 4(3) of the Securities Act is not available in
respect of such transactions as a result of Section 24(d) of the 1940 Act. Firms
that incur a prospectus-delivery obligation with respect to WEBS are reminded
that under Securities Act Rule 153 a prospectus delivery obligation under
Section 5(b)(2) of the Securities Act owed to an exchange member in connection
with a sale on the exchange is satisfied by the fact that the Index Series'
prospectus is available at the exchange (i.e., the AMEX) upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange and not with respect to "upstairs"
transactions.
REGIONAL AND COUNTRY-SPECIFIC ECONOMIC CONSIDERATIONS
EUROPE
In 1986, the member states of the European Community (the "Member States")
signed the "Single European Act", an agreement to establish a free market. Since
September 1992, however, Europe's monetary policy has been affected by
fluctuating currencies. In addition, although developing a unified common
European market has promoted the free flow of goods and services, in 1993 tight
monetary policies and high inflation caused Europe's economies to ebb into
recession.
The 1995 General Agreement on Trade and Tariffs (GATT) has attempted to
resist protectionism and Europe's economies improved fueled by increased
exports. This recovery was aided by the U.S. dollar's recovery in the spring of
1995. While interest rates have continued to decline, some countries' tight
monetary conditions remain an obstacle to stronger growth and a threat to
exchange market stability.
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The Maastricht Treaty on economic and monetary union (the "EMU") is intended
to provide its members with a stable monetary framework. Until the EMU takes
effect sometime between 1997 and 1999, however, the community will be challenged
to enforce monetary cooperation and reduce conflicts between domestic and
external policies among the European countries.
AUSTRIA. Austria's small population and limited domestic market is
insufficient to support single large industrial sectors. Also, raw materials are
limited and the terrain supports only a small agricultural sector. With its
skilled labor force, however, Austria has focused on special niche industries
for export, with high value added through technological applications. In
addition, a vibrant services sector, based initially on tourism, has emerged and
accounts for 64% of Gross Domestic Product ("GDP").
As a result of the second world war, much of the Austrian industrial sector
was converted to public ownership. Austria had established the Austrian
Industrial Administration Company ("OIAG") to function as a holding company for
these nationalized industries. With the global recession and the troublesome
state of public finance in Austria, the government, attempting to reduce the
drain of the OIAG on the country's budget, reduced the OIAG's labor force and
reorganized the OIAG into seven separate holding companies. The reorganization
of the OIAG, along with public asset sales, helped to reduce the budget deficit
from 5.1% of GDP in 1986 to 3.3% of GDP in 1992. Losses in 1993, however, caused
the government to begin selling the group to the private sector. Along with the
steady trend toward privatizations, the importance of foreign capital has
increased.
BELGIUM. Rising new industries in Belgium include light engineering,
chemicals and food processing and services, with the service industry sector
accounting for approximately 70% of GDP. Although the agricultural sector is
small, accounting for only 2% of GDP, its importance is reflected in Belgium's
thriving food processing business. Some of Belgium's traditional industries have
experienced a steep decline over the past two decades, such as coal, steel,
textiles and heavy engineering, but this decline has, in part, been offset by
the rising new industries. Company ownership is held by a few large private
sector groups through a web of holding and operating companies.
Belgium's open trade policy has resulted in record surpluses in each of the
four years from 1991 to 1994. Exports are running at approximately 77% of GDP
and imports at 74%.
High unemployment and a large government deficit continue to occupy the
government's attention. Through a series of expenditure reductions and tax
increases, the government was able to reduce the deficit to 5.9% of GDP in 1990,
but this trend reversed itself in 1991. The rise in the deficit was fueled by
economic slowdown followed by a recession in 1993, while social security and
interest payments continued to rise. By 1993, the recessive economy coupled with
rising social security and interest payments caused the deficit to increase to
7.2% of GDP. However, with the return to economic growth in 1994 and the
corresponding rise of tax receipts, the deficit was reduced to 5.4% of GDP.
FRANCE. France is a leading industrial and agricultural country. Its large
service sector, accounting for approximately two-thirds of GDP, includes
tourism, transportation and computer consultancy. The once dominant iron and
steel and textiles and clothing industries have given way to the fast growing
aerospace, chemicals and pharmaceuticals, plastics and telecommunications
industries. The automobile industry, however, is still the most important
industry in France, accounting for one-twelfth of the labor force and one-sixth
of exports.
The two economic concerns that have plagued France for the past decade are a
large budget deficit and high unemployment (currently approximately 12%). In May
1993, the government, in an effort to correct these problems, imposed excise
duties and implemented government expenditure cuts. Soon thereafter, the
government imposed additional measures to foster employment creation and
conducted the largest government bond issue to date. In addition, in 1993, the
government restarted privatizing state-owned enterprises.
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In 1995, the government attempted to strike a balance between reducing the
budget deficit and stimulating growth. In May 1995, the government imposed tax
increases to reduce the budget deficit consisting of a 2% increase in
value-added tax and a 10% surcharge on corporate income tax. These measures,
while termed temporary, will remain in effect until at least 1997.
The economic challenges facing the government for the next few years include
reducing the budget deficit to a level acceptable under the EMU, curbing high
unemployment and controlling social security spending.
GERMANY. Germany, the third largest economy in the world, has faced
substantial economic challenges from the reunification of East and West Germany.
The former East Germany had been insulated from any real competition, was
under-invested in housing and infrastructure and, generally, was not geared to
handle full economic and political union with West Germany. In addition, while
the West German government intended to finance the costs of reunification with
increased taxes, the costs proved to be much greater than anticipated due to the
high cost of social security transfers, extensive environmental damage and a
generally worse economic condition than expected. As a result, in 1993, the
public sector deficit rose from 0% to 7.5% and the Bundesbank (central bank)
sharply raised interest rates, which, in turn, caused the economy to recess.
In 1994, Germany began to recover from recession, but rising interest rates
restricted market advances. Eastern Germany has also experienced an upturn in
its economy with GDP rates running in excess of 7%, which has enhanced cost
competitiveness. Much of Germany's fiscal health and prosperity over the next
few years will depend on the continued growth of capitalism in eastern Germany.
In addition, to comply with the Maastricht Treaty, Germany must cut government
debt from a projected 64% of GDP next year to less than 60%. The failure, either
political or economic, of Germany's ability to cut spending while also funding
the restoration of the east to fiscal health could negatively impact the German
stock market.
ITALY. Italy is a net importer of agricultural products and imports most of
its energy products. Aside from tourism and design, Italy is not very
competitive in the service sector. Through networks of small and medium-sized
companies, Italy's strengths lie in its manufacturing sector, particularly
machine tools and consumer goods. In the early 1990s, industry began to struggle
to compete as a result of wage increases and an exchange rate policy designed to
limit the effect of government borrowing on the inflation rate. Since the
collapse of the lira in September 1992, however, exports have recovered.
The Bank of Italy, operating autonomously, has historically followed a tough
monetary policy in an effort to prevent government borrowing from causing
inflation. Since May 1994, the Bank of Italy has raised the official discount
rate twice to defend the lira's exchange rate and curb rising inflation. By May
1995, the nominal effective rate of exchange of the lira depreciated over 6%
compared to December 1994 and 31% compared to August 1992.
From 1992 through 1995 the government has sought to implement a fiscal
policy that would reduce government borrowings through tax measures and
government spending cuts. The 1993 budget included provisions for structural
reforms of the pension system, public sector employment, local government
finance and health services. In addition, the 1993 budget introduced new revenue
enhancement measures, including certain tax increases. However, high interest
rates and a shortfall in revenue resulted in a severe recession. The 1994 budget
was based on expenditure cuts, including reductions in the health, welfare and
education budgets, but lower than expected tax receipts were received due to the
recession. The 1995 budget included some temporary revenue raising measures and
cuts to the pension system, health service, local government and defense.
In 1992, Italy also began a privatization program by transferring major
state holdings to joint-stock companies as an intermediate step to total or, at
least partial, floatation on the stock exchange. Although the privatization
program was somewhat curbed in 1994, the government in 1995 has expressed an
interest in revitalizing the program.
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THE NETHERLANDS. The Netherlands boasts one of the highest GDP per capita
at $20,244. Although its most important sector is industrial, the Netherlands
also benefits from agricultural and natural gas resources.
Foreign trade is vital to the Netherlands, accounting for over 50% of GDP.
The recovery of exports by the end of the 1980s was fueled by government
policies on wage moderation, although such policies resulted in increased
unemployment. In addition, the reunification of Germany resulted in a surge in
demand for exports.
Public spending has exceeded 50% of GDP, including transfer payments. The
public-sector deficit has been a political and economic problem and has received
heightened government attention. While the deficit has been reduced recently,
further reduction remains a key government objective.
SPAIN. Spain's entry into the European Community in 1986 was followed by a
period of rapid economic growth. Economic growth did not continue, however, and
the government's restrictive monetary policy and the overvalued peseta
contributed to a downturn in investment and a rise in unemployment in the early
1990s. Currently, the government faces the challenges of addressing the domestic
concerns of controlling inflation, reducing a large government deficit and
effecting labor reform against the competing interests of maintaining a monetary
policy suitable for Spain's participation in the EMU.
In June 1989, Spain joined the Exchange Rate Mechanism of the European
Monetary System with the aim of maintaining a stable currency. The resulting
huge inflows of foreign capital caused the Spanish economy to lose some of its
competitiveness. With the devaluation of the peseta and the easing of monetary
policy in 1993, Spain slipped into its worst recession in 30 years. The
resulting falling tax receipts coupled with greater social spending caused the
deficit to increase to 7.5 % of GDP. Although a large increase in exports and a
substantial decrease in imports somewhat mitigated the effect of the 1993
recession, inflation had risen to 4.7% due to the peseta devaluation. The rise
in inflation has caused higher interest rates, which threaten to slow economic
recovery.
The government has also displayed an inability to control government
spending, particularly in the area of social spending, and prospects for future
spending cuts are limited. The pension system, perhaps the biggest challenge
facing the government in this area, now accounts for 23% of public-sector
spending, which will continue to grow by 10% annually in the absence of
structural reform.
In June of 1994, Spain experienced a general strike by the trade unions. The
strike, while unsuccessful, has led to reforms in the labor market to ease rigid
regulations that govern permanent job contracts.
SWEDEN. Sweden has a highly developed and successful industrial sector. The
chief industries, most of which are under private ownership, include textiles,
furniture, electronics, dairy, metals, ship building, clothing, engineering,
chemicals, food processing, fishing, paper, oil and gas, automobiles, and
shipping. Productivity, as measured by GDP per capita, is well above the
European average, although two-thirds of GDP passes through the public sector.
Sweden recently suffered a severe recession with a total fall in GDP of 5%
from 1990 to 1993. However, economic recovery in 1994 resulted in a 2% increase
in GDP. Real GDP in Sweden is expected to increase by 2.5% for 1995. The result
of the recession and the slow growth of GDP thereafter has been a drop in the
standard of living in Sweden.
The government has traditionally afforded its citizens generous benefits for
unemployment, sick leave, child care, elder care, and general public welfare,
along with state-provided medical care. This extensive social welfare system,
however, has proved to be extremely costly during recent decades, resulting in
growing government deficits. In addition, Sweden has a history of supporting an
inefficient agricultural sector with subsidies ranging up to 75% (the recent
average for Europe has been approximately 35%-45%). Also, unemployment has
remained fairly high and, because the income scale
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tends to be flat, little income advantage results from career advancement.
Almost half of personal disposable income received by Swedes was the result of
transfer payments, a system for redistributing wealth.
Sweden, which recently agreed to join the European Community, will be under
strong pressure to reduce government spending, especially when the full terms of
the EMU and other union agreements are implemented. National debts, which are
high in Sweden, will also need to be reduced. How well these goals can be
accomplished without reversing the long-awaited growth trends that are now
emerging remains to be seen.
SWITZERLAND. Swizterland's lack of raw materials has caused it to base
economic growth on its highly skilled labor market and technological expertise
in manufacturing. Swizterland's strengths lie in chemicals and pharmaceuticals,
watches and precision instruments, engineering, food, financial services and
tourism. In addition, its small domestic market has caused substantial reliance
on exports, which accounted for 36% of GDP in 1994.
With a heavy dependence on foreign labor to supplement its labor force,
Switzerland has historically experienced low unemployment levels. From 1990
through the first half of 1995, however, unemployment rose substantially,
peaking at 5% in 1994. In addition, high labor costs tend to reduce price
competitiveness, although this has been partially offset by low inflation and
moves to higher value-added products and services.
UNITED KINGDOM. Following a long recession that ended in 1992, the United
Kingdom saw 2% growth in GDP in 1993 amidst the global recession. The reduced
demand from foreign markets stemming from the global recession of 1993-94 hurt
the United Kingdom's economy. In addition, foreign investment is crucial to the
continued economic recovery, but the United Kingdom is facing heavy competition
for foreign investment from its European neighbors.
The Conservative Party has lost a great deal of its power and a strong
possibility exists that it will lose control of the government to the Labor
Party in the next election. Accordingly, a shift may occur in current government
policies, particularly concerning certain social employment policies of the
European Community which had been rejected by the Conservative Party.
Anti-union sentiment exists in the United Kingdom and the failed attempt to
tie the pound to the European Currency Unit has resulted in higher inflation.
Accordingly, the United Kingdom has not been as active a participant in
formulating European Community policies as it might have been. In addition, like
other European countries, inflation continues to remain high, which tends to
hinder economic growth. It is expected that high inflation will continue in the
United Kingdom.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
----- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
Austria............................................... 2.8 -0.1 1.8 3.0 4.2
Belgium............................................... 2.3 -1.7 1.9 2.3 3.2
France................................................ 2.5 -1.0 1.2 0.8 2.5
Germany............................................... 2.9 -1.1 2.2 2.8 --
Italy................................................. 2.5 -0.7 0.7 1.2 2.1
Netherlands........................................... 2.4 0.4 1.3 2.3 4.1
Spain................................................. 1.9 -1.0 0.8 2.2 3.6
Sweden................................................ 2.2 -2.1 -1.9 -1.1 1.4
Switzerland........................................... 2.0 -0.9 -0.3 -- 2.3
United Kingdom........................................ 3.8 2.2 -0.5 -2.0 0.4
</TABLE>
Source:World Economic Outlook, May 1995 (International Monetary Fund)
21
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JAPAN, THE PACIFIC BASIN, AND SOUTHEAST ASIA
Many Asian countries may be subject to a greater degree of social, political
and economic instability than is the case in the United States and Western
European countries. Such instability may result from (i) authoritarian
governments or military involvement in political and economic decision-making;
(ii) popular unrest associated with demands for improved political, economic,
and social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious, and racial disaffection.
The economies of most of the Asian countries continue to depend heavily upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of projectionist trade legislation,
reduction of foreign investment in the local economies, and general declines in
the international securities markets could have a significant adverse effect
upon the economies and securities markets of the Asian countries.
The success of market reforms and a surge in infrastructure spending have
fueled rapid growth in many developing countries in Asia. Rapidly rising
household incomes have fostered large middle classes and new waves of consumer
spending. Increases in infrastructure spending and consumer spending have made
domestic demand the growth engine for these countries. Thus their growth now
depends less upon exports. While exports may no longer be the sole source of
growth for developing economies, improved competitiveness in export markets has
contributed to growth in many of these nations. The increased productivity of
many Asian countries has enabled them to achieve, or continue, their status as
top exporters while improving their national living standards.
AUSTRALIA. Australia has a prosperous Western-style capitalist economy,
with a per capita GDP comparable to levels in industrialized Western European
countries. Economic growth accelerated markedly in 1994 as robust domestic
spending boosted activity. Australia is rich in natural resources and is the
world's largest exporter of beef and wool, the second-largest exporter of
mutton, and among the top wheat exporters. Australia is also a major exporter of
minerals, metals and fossil fuels. Due to the nature of Australia's exports, a
downturn in world commodity prices may have a big impact on its economy. The
government is in the process of developing policies to promote foreign
investment, expand research and development, increase funding for national
landcare and reform public housing policy. Also, the government is supportive of
continuing privatization of state-owned enterprises.
While economic data suggest an easing from the unsustainable rates of growth
reached during 1994, the outlook is for continued, but moderate economic growth.
GDP is forecast to grow by 4.75% in 1994-95 and 3.75% in 1995-96, but debt is
also expected to continue to rise.
Notwithstanding the intensification of the severe drought in eastern
Australia, economic growth was strong in 1994-95 with improvements made in
reducing unemployment, which is currently in excess of 8%. The drought also
contributed to inflation by causing food prices to rise in 1995. In addition,
the government's increased taxes on tobacco and motor vehicles contributed to an
inflation rate that reached 5.1% in 1995.
HONG KONG. Hong Kong's impending return to Chinese dominion in 1997 has not
initially had a positive effect on its economic growth, which was vigorous in
the 1980s. Although China has committed by treaty to preserve Hong Kong's
economic and social freedoms, the continuation of the current form of the
economic system in Hong Kong will depend on the actions of the Chinese
government. Business confidence in Hong Kong, therefore, can be significantly
affected by such developments, which in turn can affect markets and business
performance. In preparation for 1997, Hong Kong has continued to develop trade
with China, where it is the largest foreign investor, while also maintaining its
long-standing export relationship with the United States. Spending on
infrastructure improvements is a significant priority of the colonial government
while the private sector continues to
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diversify abroad based on its position as an established international trade
center in the Far East. It is important to note that a substantial portion of
the companies listed on the Hong Kong Stock Exchange are involved in real estate
related business.
Much speculation centers around what China will do when it comes back into
possession of Hong Kong. The answer will depend in large part on who is in power
in China at that time, which is unknown. However, tensions that have arisen
between the current governor, Chris Patten, and the Chinese government have led
to speculation that China may try to punish Hong Kong by sabotaging it
economically, an option which is considered a real possibility even though it
would not necessarily be to China's economic advantage to do so. The Hong Kong
market's growth over the past decade has not come without much volatility, and
there is no doubt that volatility will continue to characterize the market, not
only because of political uncertainties but because the market has traditionally
been dominated by the actions of a few large trading blocs.
JAPAN. Japan's economy, amounting to the second-largest GDP in the world,
has grown substantially over the last three decades. However, in 1994, the
growth rate in Japan slowed to 0.6% and its budget showed a deficit of 7.8% of
GDP. The boom in Japan's equity and property markets during the expansion of the
late 1980's supported high rates of investment and consumer spending on durable
goods, but both of these components of demand have now retreated sharply
following the decline in asset prices. It is suffering through its worst
recession in two decades. Profits have fallen sharply, unemployment has reached
a historical high of 3.2% and consumer confidence is low. The banking sector
continues to suffer from non-performing loans. Nine discount-rate cuts since its
6% peak in 1991, a succession of fiscal stimulus packages, support plans for the
debt-burdened financial system and spending for reconstruction following the
Kobe earthquake may help to contain the recessionary forces, but substantial
uncertainties remain.
In addition to a cyclical downturn, Japan is suffering through structural
adjustments. Like the Europeans, the Japanese have seen a deterioration of their
competitiveness due to high wages, a strong currency and structural rigidities.
Japan has also become a mature industrial economy and, as a result, will see its
long-term growth rate slow down over the next ten years. Finally, Japan is
reforming its political process and deregulating its economy. This has brought
about turmoil, uncertainty and a crisis of confidence.
While the Japanese governmental system itself seems stable, the dynamics of
the country's politics have been unpredictable in recent years. The economic
crisis of 1990-92 brought the downfall of the conservative Liberal Democratic
Party, which had ruled since 1955. Since then, the country has seen a series of
unstable multi-party coalitions and several prime ministers come and go, because
of politics as well as personal scandals. While there appears to be no reason
for anticipating civic unrest, it is impossible to know when the political
instability will end and what trade and fiscal policies might be pursued by the
government that emerges.
Japan's heavy dependence on international trade has been adversely affected
by trade barriers and other protectionist measures as well as the economic
condition of its trading partners. While Japan subsidizes its agricultural
industry, only 19% of its land is suitable for cultivation and it is only 50%
self-sufficient in food production. Accordingly, it is highly dependent on large
imports of wheat, sorghum and soybeans. In addition, industry, its most
important economic sector, depends on imported raw materials and fuels,
including iron ore, copper, oil and many forest products. Japan's high volume of
exports, such as automobiles, machine tools and semiconductors, have caused
trade tensions, particularly with the United States. Some trade agreements,
however, have been implemented to reduce these tensions. The relaxing of
official and de facto barriers to imports, or hardships created by any pressures
brought by trading partners, could adversely affect Japan's economy. A
substantial rise in world oil or commodity prices could also have a negative
affect. The strength of the yen itself may prove an impediment to strong
continued exports and economic recovery, because it makes
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<PAGE>
Japanese goods sold in other countries more expensive and reduces the value of
foreign earnings repatriated to Japan. Because the Japanese economy is so
dependent on exports, any fall-off in exports may be seen as a sign of economic
weakness, which may adversely affect the market.
Geologically, Japan is located in a volatile area of the world, and has
historically been vulnerable to earthquakes, volcanoes and other natural
disasters. As demonstrated by the Kobe earthquake in January of 1995, in which
5,000 people were killed and billions of dollars of damage was sustained, these
natural disasters can be significant enough to affect the country's economy.
MALAYSIA. Over the last two decades, Malaysia has experienced rapid
industrialization transposing a once commodity driven economy to one dominated
by the manufacturing sector. Although commodities remain important to the
Malaysian economy, where the country has played a leading role in tin, rubber,
palm oil, timber, oil and gas, the electronics sector is now, by far, the
fastest growing and most important segment. In fact, Malaysia has become the
world's third-largest producer of semiconductor devices (after the U.S. and
Japan) and the world's largest exporter of semiconductor devices.
The high rates of investment that have been required to sustain Malaysia's
rapid growth have been met with high rates of domestic savings and significant
inflows of foreign direct investment. This combination has been instrumental in
maintaining fast growth while simultaneously limiting inflationary pressures.
Although free repatriation of profits are allowed, Malaysia has experienced a
high rate of reinvestment of profits on foreign direct investment.
The Bank Negara Malaysia (central bank) has followed a strict monetary
policy in an effort to restrain inflationary pressures. There has been limited
intervention, however, as the ringgit has remained strong. Inflationary
pressures include increasing demands on natural resources and speculative
international funds. The central bank took measures in 1994 to discourage
speculative investment from abroad, including segregation of non-resident funds
and strict limits on banks' activities across frontiers. As a result, share
prices on the national exchange fell and the value of the ringgit dropped.
Although these monetary policies were subsequently rescinded, the threat of such
future action may deter capital inflows.
While inflation has been kept in check, in part through government
intervention to control prices, inflationary pressures still exist. Rapid
economic growth has led to shortages, some inefficiencies and rising imports.
The government, however, has been reluctant to take certain deflationary steps
because of the fear of endangering the private investment needed for economic
growth.
Malaysia's rapid development has not been without costs. The potential now
exists for repatriation of profits from foreign direct investment and the
resulting vulnerability to changes in the relative attractions of different
countries as locations for investment. In addition, the high import content of
its exports, which increases its vulnerability to world commodity pricing, may
lead to trade imbalances and impact on economic performance. Also, its high
export dependence leaves it vulnerable to recessions abroad.
SINGAPORE. Singapore has become highly industrialized with rapid growth in
its manufacturing sector due in large part to significant foreign investment. Of
particular importance is the electronics industry where Singapore is the leading
producer of disk drives. The financial and business services sector has also
experienced recent growth, while mining and agriculture are of minimal
importance. The oil refining and chemicals industry has long been important and
a significant pharmaceuticals sector has emerged. Since 1987, annual growth has
been high, ultimately reaching 10% in 1993 and 1994. This sustained annual
growth can be attributable to the continuing expansion in investments and
exports, coupled with the relatively small increase in personal consumption.
The government has followed an interventionist economic policy with respect
to its individual industries. To instill faith in its interventionist policies,
the government has sought to maintain economic stability. It has done this by,
among other measures, allowing the singapore dollar to appreciate to reduce
imported inflation and setting taxes relatively high, but keeping rates stable.
On the other hand, there has been little attempt to use monetary policy to
modify economic growth. The
24
<PAGE>
government has instead focused on regulating the supply of foreign labor by
setting limits on the percentage of foreign labor employed and applying levies
on employers of foreign labor. In addition, the government, recognizing that
land use is a constraint on growth, has sought to make existing land use more
efficient.
The government directly holds stakes in individual companies across the
board from high-tech defence contractors to low-tech service businesses. The
government also holds indirect stakes in firms through a number of agencies.
Such government ownership interests may discourage the development of private
firms due to fears that the government entities may be given certain advantages
not available to private entities. Some privatization of state-owned businesses
is ongoing, however, such as the telephone business and certain other utilities.
Singapore is heavily dependent on foreign trade with the total value of
trade goods and services reaching 278% of GDP in 1994. The country has also seen
a large volume of re-export trade. The industrial base is dominated by foreign
multinationals, with only a few large domestic firms. While foreign investment
is a key to the continued prosperity of Singapore, several factors raise
concerns about future prospects. Productivity growth has not been consistent
over the years. In addition, business costs remain high reflective in part of
the expense of labor. Also, the appreciating currency, while countering domestic
pressures, does not afford advantages to exporters.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C>
Australia............................................... 4.7 3.7 2.1 -1.3 1.3
Hong Kong............................................... 5.7 5.8 6.0 5.1 3.4
Japan................................................... 0.6 -0.2 1.1 4.3 4.8
Malaysia................................................ 8.5 8.3 7.8 8.7 9.7
Singapore............................................... 7.0 9.9 6.0 6.7 8.8
</TABLE>
Source:World Economic Outlook, May 1995 (International Monetary Fund)
CANADA
Due to its vast geographic area, ranking second in the world only to Russia,
Canada has successfully developed into a modern industrial country supplemented
by significant agricultural activities and natural resource exploitation, such
as oil, gas and timber. With exports amounting to over 25% of Canadian
production, Canada is highly dependent on the U.S. market as a source of demand
for manufacturing, agricultural, energy and other raw material products.
Approximately 75% of Canada's external trade is with the U.S. and close ties
exists between U.S. and Canadian manufacturers. Both the Free Trade Agreement
with the U.S. and the North American Free Trade Agreement significantly
increased Canada's market and should solidify these ties.
In late 1990, due to reduced domestic demand and problems with the U.S.
market, the economy ebbed into recession. The recession hit the manufacturing
sector the hardest, but real investment in machinery and equipment indicated
that important restructuring steps were underway with a view toward improving
productivity. As a result of the recession, tax receipts dwindled and government
deficits mushroomed. In addition, the poor export performance during the
recession displayed a perhaps reduced competitiveness internationally. The
economy showed signs of a modest recovery in 1992 that continued into 1993 due
to lower interest rates and an upswing in U.S. demand. The continued strength in
investment in machinery and equipment along with a lower Canadian dollar
indicate that Canada may have brighter prospects in the short run. The
government will be challenged to maintain advances it makes in competitiveness
over the long run. Other problems faced by the Canadian economy include
persistent high budget deficits at the Federal level and in some provinces
(notably Ontario and Quebec) and the drag on the economy caused by the ongoing
uncertainty caused by the separatist movement in Quebec, Canada's second largest
and second most populous province.
25
<PAGE>
CANADIAN REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<S> <C>
1994 4.5
1993 2.2
1992 0.6
1991 -1.8
1990 -0.2
</TABLE>
Source:World Economic Outlook, May 1995 (International Marketing Fund)
MEXICO
During the period from 1982 through 1994, Mexico pursued far-reaching and
comprehensive adjustment policies designed to reform its economy and achieve a
return to sustained economic growth. These policies included fiscal discipline,
tax reform, trade liberalization, opening the economy to foreign investment,
reform of certain public sector prices to conform to market conditions,
deregulation, privatization of certain non-strategic public sector enterprises
and an exchange rate and monetary policy aimed at slowing the rate of inflation
in Mexico to levels approximating those of its major trading partners.
While successful in reducing inflation from 159.2% in 1987 to 7.1% in 1994
and achieving real GDP growth averaging 3.0% over the 1990-1994 period, the
Mexican economy had certain weaknesses by 1994 that made it unable to withstand
the severe internal and external political and economic shocks that occurred in
1994, resulting in the destabilization of the Mexican economy at the end of
1994, a crisis of confidence on the part of foreign portfolio investors and the
economic and financial crisis facing the government since the beginning of 1995.
Weaknesses of the economy that became apparent in 1994 included a reduced level
of domestic savings and a government exchange rate policy that over time
resulted in the progressive overvaluation of the new peso.
During 1994, internal and external events combined to complicate the
management of the Mexican economy. Progressive increases in interest rates in
the United States, and prospects of further such increases, made Mexican
investments relatively less attractive to foreign portfolio investors. In
addition, a series of internal disruptions and political events, including the
insurgents' attack in the southern state of Chiapas, the assassinations of
certain political leaders and the resulting uncertainty regarding the fairness
of elections and the kidnapping of several prominent businessmen, caused some
investors to believe that the Mexican political system was less stable than had
been believed.
In December 1994, after the government allowed the new peso to float freely
against the dollar, a sharp and rapid devaluation of the new peso ensued. The
new peso's devaluation, which increased the cost of imported goods and services,
caused the inflation rate in Mexico to rise (the government expects the
inflation rate for the period from December 1994 to December 1995 to be 51.45).
In addition, the devaluation raised concerns about Mexico's ability to repay its
short-term obligations and the stability of the Mexican banking system. These
concerns have led to sharply higher interest rates on Mexican public and private
sector debt and sharply reduced opportunities for refinancing or refunding debt
issues. Throughout 1995, however, the government, through various initiatives
and programs, has sought to restore stability to Mexico's financial and foreign
exchange markets, lower inflation rates, enahance international competitiveness,
protect the solvency of the banking system and stimulate economic recovery and
job creation. It is unclear whether these initiatives will be successful in
dealing with Mexico's severe economic problems.
26
<PAGE>
MEXICO REAL GDP RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<S> <C>
1994 3.5
1993 0.6
1992 2.8
1991 3.6
1990 4.4
</TABLE>
Source:World Economic Outlook, May 1995 (International Marketing Fund)
THE MSCI INDICES
IN GENERAL
The Indices were founded in 1969 by Capital International S.A. as the first
international performance benchmarks constructed to facilitate accurate
comparison of world markets. Morgan Stanley acquired rights to the Indices in
1986. The MSCI Indices have covered the world's developed markets since 1969,
and in 1988, MSCI commenced coverage of the emerging markets.
Although local stock exchanges have traditionally calculated their own
indices, these are generally not comparable with one another, due to differences
in the representation of the local market, mathematical formulas, base dates and
methods of adjusting for capital changes. MSCI applies the same criteria and
calculation methodology across all markets for all indices, developed and
emerging.
MSCI Indices are notable for the depth and breadth of their coverage. MSCI
generally seeks to have 60% of the capitalization of a country's stock market
reflected in the MSCI index for such country. Thus, the MSCI Indices balance the
inclusiveness of an "all share" index against the replicability of a "blue chip"
index.
WEIGHTING
All single-country MSCI Indices are market capitalization weighted, i.e.,
companies are included in the indices at their full market value (total number
of shares issued and paid up, multiplied by price). MSCI believes full market
capitalization weighting is preferable to other weighting schemes for both
theoretical and practical reasons.
MSCI calculates two indices in some countries in order to address the issue
of restrictions on foreign ownership in such countries. The additional indices
are called "free" indices, and they exclude companies and share classes not
purchasable by foreigners. Free indices are currently calculated for Singapore,
Mexico, the Philippines and Venezuela, and for those regional and international
indices which include such markets.
REGIONAL WEIGHTS. Market capitalization weighting, combined with a
consistent target of 60% of market capitalization, helps ensure that each
country's weight in regional and international indices approximates its weight
in the total universe of developing and emerging markets. Maintaining consistent
policy among MSCI developed and emerging market indices is also critical to the
calculation of certain combined developed and emerging market indices published
by MSCI.
SELECTION CRITERIA
THE UNIVERSE OF SECURITIES. The constituents of a country index are
selected from the full range of securities available in the market, excluding
issues which are either small or highly illiquid. Non-domiciled companies and
investment trusts are also excluded from consideration. After the index
constituents are chosen, they are reclassified using MSCI's schema of 38
industries and 8 economic sectors in order to facilitate cross-country
comparisons.
THE OPTIMIZATION PROCESS. The process of choosing index constituents from
the universe of available securities is consistent among indices. Determining
the constituents of an index is an
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<PAGE>
optimization process which involves maximizing float and liquidity, reflecting
accurately the market's size and industry profiles, and minimizing
cross-ownership. The optimization variables and their targets are:
<TABLE>
<S> <C>
Market Coverage TARGET 60% OF MARKET
Industry Representation MIRROR THE LOCAL MARKET
Liquidity MAXIMIZE
Float MAXIMIZE
Cross-Ownership AVOID/MINIMIZE
Size SAMPLE WITH SIZE CHARACTERISTICS OF
UNIVERSE
</TABLE>
COVERAGE. To reflect accurately country-wide performance as well as the
performance of industry groups, MSCI aims to capture 60% of total market
capitalization at both the country and industry level. To reflect local market
performance, an index should contain a percentage of the market's overall
capitalization sufficient to achieve a high level of tracking. The greater the
coverage, however, the greater the risk of including securities which are
illiquid or have restricted float. MSCI's 60% coverage target reflects a balance
of these considerations.
INDUSTRY REPRESENTATION. Within the overall target of 60% market coverage,
MSCI aims to capture 60% of the capitalization of each industry group, as
defined by local practice. MSCI believes this target assures that the index
reflects the industry characteristics of the overall market and permits the
construction of accurate industry indices.
MSCI may exceed the 60% of market capitalization target in the index for a
particular country because, E.G., one or two large companies dominate an
industry. Similarly, MSCI may underweight an industry in an index if, E.G., the
companies in such industry lack good liquidity and float, or because of
extensive cross-ownership.
LIQUIDITY. Liquidity is measured by trading value, as reported by the local
exchanges. Trading value is monitored over time in order to determine "normal"
levels exclusive of short-term peaks and troughs. A stock's liquidity is
significant not only in absolute terms (i.e., a determination of the market's
most actively traded stocks), but also relative to its market capitalization and
to average liquidity for the country as a whole.
FLOAT. Float, or the percentage of shares freely tradeable, is one measure
of potential short-term supply. Low float raises the risk of insufficient
liquidity. MSCI monitors float for every security in its coverage, and low float
may exclude a stock from consideration. However, float can be difficult to
determine. In some markets good sources are generally not available. In other
markets, information on smaller and less prominent issues can be subject to
error and time lags. Government ownership and cross-ownership positions can
change over time, and are not always made public. Float also tends to be defined
differently depending on the source. MSCI seeks to maximize float. As with
liquidity, float is an important determinant, but not a hard-and-fast screen for
inclusion of a stock in, or exclusion of a stock from, a particular index.
CROSS-OWNERSHIP. Cross-ownership occurs when one company has an ownership
position in another. In situations where cross-ownership is substantial,
including both companies in an index can skew industry weights, distort
country-level valuations and over-represent buyable opportunities. An integral
part of MSCI's country research is identifying cross-ownerships in order to
avoid or minimize them. Cross-ownership cannot always be avoided, especially in
markets where it is prevalent. When MSCI makes exceptions, it strives to select
situations where the constituents operate in different economic sectors, or
where the subsidiary company makes only a minor contribution to the parent
company's results.
SIZE. MSCI attempts to meet its 60% coverage target by including a
representative sample of large, medium and small capitalization stocks, in order
to capture the sometimes disparate performance of these sectors. In the emerging
markets, the liquidity of smaller issues can be a constraint. At
28
<PAGE>
the same time, properly representing the lower capitalization end of the market
risks overwhelming the index with names. Within these constraints, MSCI strives
to include smaller capitalization stocks, provided they exhibit sufficient
liquidity.
CALCULATION METHODOLOGY
All MSCI Indices are calculated daily using Laspeyres' concept of a weighted
arithmetic average together with the concept of "chain-linking," a classical
method of calculating stock market indices. The Laspeyres method weights stocks
in an index by their beginning-of-period market capitalization. Share prices are
"swept clean" daily and adjusted for any rights issues, stock dividends or
splits. Most MSCI Indices are currently calculated in local currency and in U.S.
dollars, without dividends , with gross dividends reinvested and with net
dividends reinvested. With the exception of the Mexico (Free) Index Series, the
Fund's Index Series utilize MSCI Indices calculated with net dividends
reinvested. "Net dividends" means dividends after reduction for taxes withheld
at source at the rate applicable to holders of the underlying stock that are
resident in Luxembourg. With respect to the Australia, Malaysia and Singapore
(Free) Index Series, such withholding rate currently differs from that
applicable to United States residents. Australian companies generally withhold
tax on dividends paid to U.S. persons at a 15% rate (as opposed to 25% for
Luxembourg persons). The rate of withholding on dividends paid to U.S. persons
is 30% for Malaysia and 27% for Singapore, whereas the withholding rate in such
countries on payments to persons in Luxembourg is 25%. The Mexico (Free) Index
Series' benchmark Index, the MSCI Mexico (Free) Index, reflects the reinvestment
of gross dividends. "Gross dividends" means dividends before reduction for taxes
withheld at source.
DIVIDEND TREATMENT
In respect of developed markets, MSCI Indices with dividends reinvested
constitute an estimate of total return arrived at by reinvesting one twelfth of
the month end yield at every month end.
In respect of emerging markets, MSCI has constructed its indices with
dividends reinvested as follows:
- In the period between the ex date and the date of dividend reinvestment, a
dividend receivable is a component of the index return.
- Dividends are deemed received on the payment date.
- To determine the payment date, a fixed time lag is assumed to exist
between the ex date and the payment date. This time lag varies by country,
and is determined in accordance with general practice within that market.
- Reinvestment of dividends occurs at the end of the month in which the
payment date falls.
PRICE AND EXCHANGE RATES
PRICES. Prices used to calculate the MSCI Indices are the official exchange
closing prices. All prices are taken from the dominant exchange in each market.
In countries where there are foreign ownership limits, MSCI uses the price
quoted on the official exchange, regardless of whether the limit has been
reached.
EXCHANGE RATES. MSCI uses WM/Reuters Closing Spot Rates for all developed
and emerging markets except those in Latin America. The WM/Reuters Closing Spot
Rates were established by a committee of investment managers and data providers,
including MSCI, whose object was to standardize exchange rates used by the
investment community. Exchange rates are taken daily at 4 PM London time by the
WM Company and are sourced whenever possible from multi-contributor quotes on
Reuters. Representative rates are selected for each currency based on a number
of "snapshots" of the latest contributed quotations taken from the Reuters
service at short intervals around 4 PM. WM/ Reuters provides closing bid and
offer rates. MSCI uses these to calculate the mid-point to 5 decimal places.
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MSCI continues to monitor exchange rates independently and may, under
exceptional circumstances, elect to use an alternative exchange rate if the
WM/Reuters rate is believed not to be representative for a given currency on a
particular day. Because of the high volatility of currencies in some Latin
American countries, MSCI continues to use its own timing and sources for these
markets.
CHANGES TO THE INDICES
In changing the constituents of the indices, MSCI attempts to balance
representativeness versus undue turnover. An index must represent the current
state of an evolving marketplace, yet at the same time minimize turnover, which
is costly as well as inconvenient for managers.
There are two broad categories of changes to the MSCI Indices. The first
consists of market-driven changes such as mergers, acquisitions, bankruptcies,
etc. These are announced and implemented as they occur. The second category
consists of structural changes to reflect the evolution of a market, for example
due to changes in industry composition or regulations. In the emerging markets,
index restructurings generally take place every one year to eighteen months.
Structural changes may occur only on four dates throughout the year: the first
business day of March, June, September and December. They are preannounced at
least two weeks in advance.
ADDITIONS. Restructuring an index involves a balancing of additions and
deletions. To maintain continuity and minimize turnover, MSCI is reluctant to
delete index constituents, and its approach to additions is correspondingly
stringent. As markets grow because of privatizations, investor interest, or the
relaxation of regulations, index additions (with or without corresponding
deletions) may be needed to bring industry representations up to the 60% target.
Companies are considered not only with respect to their broad industry, but also
with respect to their sub-sector, in order to achieve if possible a broader
range of economic activity. Beyond industry representativeness, new constituents
are selected based on the criteria discussed above, i.e. float, liquidity,
cross-ownership, etc.
NEW ISSUES. In general, new issues are not eligible for immediate inclusion
in the MSCI Indices because their liquidity remains unproven. Usually, new
issues undergo a "seasoning" period of one year to eighteen months between index
restructurings until a trading pattern and volume are established. After that
time, they are eligible for inclusion, subject to the criteria discussed above
(industry representation, float, cross-ownership, etc.).
In the emerging markets, however, it is not uncommon that a large new issue,
usually a privatization, comes to market and substantially changes the country's
industry profile. In exceptional circumstances, where the issue's size,
visibility and investor interest assure high liquidity, and where excluding it
would distort the characteristics of the market, MSCI may decide to include it
immediately in the indices.
In other cases, MSCI may decide not to include a large new issue even in the
normal process of restructuring, and in spite of substantial size and liquidity.
DELETIONS. MSCI's primary concern when considering deletions is the
continuity of the indices. Of secondary concern are the turnover costs
associated with deletions. The indices must represent the full investment cycle,
including bear as well as bull markets. Out-of-favor stocks may exhibit
declining price, market capitalization or liquidity, and yet continue to be good
representatives of their industry.
Companies may be deleted because they have diversified away from their
industry classification, because the industry has evolved in a different
direction from the company's thrust, or because a better industry representative
exists (either a new issue or an existing company). In addition, in order not to
exceed the 60% target coverage of industries and countries, adding new index
companies may entail corresponding deletions. Usually such deletions take place
within the same industry, but there are occasional exceptions.
Each of the MSCI Indices utilized as the benchmark for an Index Series of
the Fund is calculated reflecting dividends reinvested. With the exception of
the Mexico (Free) Index Series, the Fund's
30
<PAGE>
Index Series utilize MSCI Indices calculated with net dividends reinvested. MSCI
refers to each of its Indices calculated reflecting net dividends reinvested as
the "MSCI [relevant country] Index (with net dividends reinvested)".
THE MSCI AUSTRALIA INDEX
On January 31, 1996, the MSCI Australia Index (with net dividends
reinvested) (the "MSCI Australia") consisted of 49 stocks with an aggregate
market capitalization of approximately AUD186.4 billion or US$138.8 billion. In
percentage terms, the MSCI Australia represented approximately 55.1% of the
total market capitalization of Australia.
The ten largest constituents of the MSCI Australia and the respective
approximate percentages of the MSCI Australia represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Broken Hill Prop. Co...................................... 19.78%
2. News Corp................................................. 11.14%
3. National Bank Australia................................... 9.92%
4. Westpac Banking........................................... 6.54%
5. Western Mining............................................ 4.91%
6. CRA....................................................... 3.36%
7. Coca-Cola Amatil.......................................... 3.33%
8. Amcor..................................................... 3.33%
9. Lend Lease................................................ 2.57%
10. Coles Myer................................................ 2.49%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 52.29% of the market capitalization of the MSCI Australia; the
largest ten constituents comprised approximately 67.37% of the market
capitalization of the MSCI Australia and the largest 20 constituents comprised
approximately 85.41% of the market capitalization of the MSCI Australia.
The ten most highly represented industry sectors in the MSCI Australia, and
the approximate percentages of the MSCI Australia represented thereby as of
January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Energy Sources.............................................. 22.6%
2. Banking..................................................... 16.5%
3. Metals -- Non Ferrous....................................... 12.0%
4. Broadcasting & Publishing................................... 11.1%
5. Multi-Industry.............................................. 6.2%
6. Beverages & Tobacco......................................... 6.1%
7. Real Estate................................................. 5.8%
8. Building Materials & Components............................. 4.4%
9. Forest Products & Paper..................................... 3.3%
10. Merchandising............................................... 2.5%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Australia Index as of January 31, 1996.
THE MSCI AUSTRIA INDEX
On January 31, 1996, the MSCI Austria Index (with net dividends reinvested)
(the "MSCI Austria") consisted of 24 stocks with an aggregate market
capitalization of approximately ATS250.0 billion or US$23.9 billion. In
percentage terms, the MSCI Austria represented approximately 61.5% of the total
market capitalization of Austria.
31
<PAGE>
The ten largest constituents of the MSCI Austria and the respective
approximate percentages of the MSCI Austria represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Bank of Austria........................................... 19.08%
2. Creditanstalt............................................. 11.33%
3. EA-Generali............................................... 10.87%
4. OMV AG.................................................... 10.70%
5. Verbund................................................... 8.32%
6. VA Technologie............................................ 8.24%
7. Wienerberger Baustoff..................................... 6.57%
8. Flughafen Wien............................................ 5.74%
9. Boehler-Uddeholm.......................................... 3.63%
10. Mayr Melnhof.............................................. 2.50%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 60.30% of the market capitalization of the MSCI Austria; and the
largest ten constituents comprised approximately 86.98% of the market
capitalization of the MSCI.
The ten most highly represented industry sectors in the MSCI Austria, and
the approximate percentages of the MSCI Austria represented thereby as of
January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Banking..................................................... 30.4%
2. Insurance................................................... 10.9%
3. Energy Sources.............................................. 10.7%
4. Machinery & Engineering..................................... 9.7%
5. Utilities -- Electrical & Gas............................... 8.3%
6. Building Materials & Components............................. 6.6%
7. Business & Public Services.................................. 5.7%
8. Misc. Materials & Commodities............................... 4.5%
9. Metals -- Steel............................................. 3.6%
10. Construction & Housing...................................... 2.3%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Austria
Index as of January 31, 1996.
THE MSCI BELGIUM INDEX
On January 31, 1996, the MSCI Belgium Index (with net dividends reinvested)
(the "MSCI Belgium") consisted of 20 stocks with an aggregate market
capitalization of approximately BEF1,878.2 billion or US$61.4 billion. In
percentage terms, the MSCI Belgium represented approximately 59.9% of the total
market capitalization of Belgium.
On January 31, 1996, the ten largest constituents of the MSCI Belgium and
the respective approximate percentages of the MSCI Belgium represented by such
constituents were, in order:
<TABLE>
<C> <S> <C>
1. Electrabel................................................ 21.42%
2. Petrofina................................................. 11.15%
3. Tractebel................................................. 9.72%
4. Generale Banque Groupe.................................... 9.10%
5. Solvay.................................................... 7.55%
6. Fortis AG................................................. 7.24%
7. Kredietbank............................................... 6.77%
8. Royale Belge.............................................. 5.47%
9. Groupe Bruxelles Lambert.................................. 5.16%
10. Delhaize-Le Lioh.......................................... 3.52%
</TABLE>
32
<PAGE>
As of January 31, 1996, the largest five constituents together comprised
approximately 58.94% of the market capitalization of the MSCI Belgium; the
largest ten constituents comprised approximately 87.10% of the market
capitalization of the MSCI Belgium and the largest 15 constituents comprised
approximately 100.0% of the market capitalization of the MSCI Belgium.
The ten most highly represented industry sectors in the MSCI Belgium, and
the approximate percentages of the MSCI Belgium represented thereby as of
January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Utilities -- Electrical & Gas............................... 21.4%
2. Multi-Industry.............................................. 17.5%
3. Banking..................................................... 15.9%
4. Insurance................................................... 12.7%
5. Energy Sources.............................................. 11.1%
6. Chemicals................................................... 7.6%
7. Merchandising............................................... 3.5%
8. Industrial Components....................................... 3.3%
9. Metals -- Non Ferrous....................................... 3.0%
10. Building Materials & Components............................. 2.9%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Belgium
Index as of January 31, 1996.
THE MSCI CANADA INDEX
On January 31, 1996, the MSCI Canada Index (with net dividends reinvested)
(the "MSCI Canada") consisted of 84 stocks with an aggregate market
capitalization of approximately CAD290.6 billion or US$211.2 billion. In
percentage terms, the MSCI Canada represented approximately 60.4% of the total
market capitalization in Canada.
The ten largest constituents of the MSCI Canada and the respective
approximate percentages of the MSCI Canada represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Seagram................................................... 6.40%
2. Northern Telecom.......................................... 5.40%
3. BCE Inc................................................... 5.35%
4. Barrick Gold Corp......................................... 4.94%
5. Thomson Corp.............................................. 4.26%
6. Royal Bank of Canada...................................... 3.69%
7. Alcan Aluminum............................................ 3.39%
8. Imperial Oil.............................................. 3.25%
9. Placer Dome............................................... 3.18%
10. Canadian Pacific Ltd...................................... 3.17%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 26.35% of the market capitalization of the MSCI Canada; the
largest ten constituents comprised approximately 43.03% of the market
capitalization of the MSCI Canada; and the largest 20 constituents comprised
approximately 65.88% of the market capitalization of the MSCI Canada.
33
<PAGE>
The ten most highly represented industry sectors in the MSCI Canada, and the
approximate percentages of the MSCI Canada represented thereby as of January 31,
1996 were:
<TABLE>
<C> <S> <C>
1. Banking..................................................... 13.0%
2. Energy Sources.............................................. 11.5%
3. Metals -- Non-Ferrous....................................... 11.0%
4. Gold Mines.................................................. 9.8%
5. Beverages & Tobacco......................................... 7.1%
6. Multi-Industry.............................................. 6.5%
7. Telecommunications.......................................... 6.2%
8. Broadcasting & Publishing................................... 6.1%
9. Electrical & Electronics.................................... 5.4%
10. Utilities -- Electrical & Gas............................... 4.9%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Canada
Index as of January 31, 1996.
THE MSCI FRANCE INDEX
On January 31, 1996, the MSCI France Index (with net dividends reinvested)
(the "MSCI France") consisted of 74 stocks with an aggregate market
capitalization of approximately FRF1,744.3 billion or US$341.5 billion. In
percentage terms, the MSCI France represented approximately 65.1% of the total
market capitalization in France.
The ten largest constituents of the MSCI France and the respective
approximate percentages of the MSCI France represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Elf Aquitaine............................................. 5.95%
2. LVMH (Moet Vuitton)....................................... 5.70%
3. L'Oreal................................................... 5.10%
4. Carrefour................................................. 4.83%
5. Total SA.................................................. 4.71%
6. Alcatel Alsthom........................................... 4.02%
7. Generale Eaux (CIE)....................................... 3.68%
8. Air Liquide............................................... 3.50%
9. AXA....................................................... 3.45%
10. Danone (Groupe)........................................... 3.31%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 26.29% of the market capitalization of the MSCI France; the
largest ten constituents comprised approximately 44.25% of the market
capitalization of the MSCI France; and the largest 20 constituents comprised
approximately 66.58% of the market capitalization of MSCI France.
The ten most highly represented industry sectors in the MSCI France, and the
approximate percentages of the MSCI France represented thereby as of January 31,
1996 were:
<TABLE>
<C> <S> <C>
1. Energy Sources.............................................. 10.7%
2. Merchandising............................................... 9.6%
3. Banking..................................................... 9.5%
4. Health & Personal Care...................................... 7.7%
5. Electrical & Electronics.................................... 7.6%
6. Beverages & Tobacco......................................... 7.3%
7. Business & Public Services.................................. 6.4%
8. Chemicals................................................... 5.7%
9. Insurance................................................... 5.6%
10. Food & Household Products................................... 5.0%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI France
Index as of January 31, 1996.
34
<PAGE>
THE MSCI GERMANY INDEX
On January 31, 1996, the MSCI Germany Index (with net dividends reinvested)
(the "MSCI Germany") consisted of 69 stocks with an aggregate market
capitalization of approximately DEM561.1 billion or US$377.1 billion. In
percentage terms, the MSCI Germany represented approximately 62.7% of the total
market capitalization in Germany.
The ten largest constituents of the MSCI Germany and the respective
approximate percentages of the MSCI Germany represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Allianz Holding............... 11.51%
2. Siemens....................... 8.44%
3. Daimler-Benz.................. 7.51%
4. Deutsche Bank................. 6.61%
5. Veba.......................... 5.73%
6. Bayer......................... 5.48%
7. RWE........................... 5.08%
8. Munchener Ruck................ 4.75%
9. SAP........................... 4.13%
10. BASF.......................... 3.86%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 39.80% of the market capitalization of the MSCI Germany; the
largest ten constituents comprised approximately 63.10% of the market
capitalization of the MSCI Germany; and the largest 20 constituents comprised
approximately 85.28% of the market capitalization of MSCI Germany.
The ten most highly represented industry sectors in the MSCI Germany, and
the approximate percentages of the MSCI Germany represented thereby as of
January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Insurance..................... 17.9%
2. Banking....................... 13.7%
3. Utilities -- Electrical & 10.8%
Gas...........................
4. Automobiles................... 10.7%
5. Chemicals..................... 9.3%
6. Electrical & Electronics...... 8.4%
7. Machinery & Engineering....... 6.2%
8. Business & Public Services.... 4.3%
9. Health & Personal Care........ 3.9%
10. Multi-Industry................ 3.7%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Germany
Index as of January 31, 1996.
THE MSCI HONG KONG INDEX
On January 31, 1996, the MSCI Hong Kong Index (with net dividends
reinvested) (the "MSCI Hong Kong") consisted of 38 stocks with an aggregate
market capitalization of approximately HKD1,421.1 billion or US$183.8 billion.
In percentage terms, the MSCI Hong Kong represented approximately 59.2% of the
total market capitalization in Hong Kong.
35
<PAGE>
The ten largest constituents of the MSCI Hong Kong and the respective
approximate percentages of the MSCI Hong Kong represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Hutchison Whampoa............. 12.78%
2. Sun Hung Kai Properties....... 12.36%
3. Hong Kong Telecom............. 11.54%
4. Hang Seng Bank................ 10.16%
5. Cheung Kong................... 8.89%
6. Swire Pacific A............... 7.53%
7. China Light & Power........... 5.25%
8. Wharf (Holdings).............. 4.66%
9. New World Development......... 4.61%
10. Cathay Pacific Airways........ 2.89%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 55.73% of the market capitalization of the MSCI Hong Kong; the
largest ten constituents comprised approximately 80.67% of the market
capitalization of the MSCI Hong Kong; and the largest 20 constituents comprised
approximately 94.27% of the market capitalization of MSCI Hong Kong.
The ten most highly represented industry sectors in the MSCI Hong Kong, and
the approximate percentages of the MSCI Hong Kong represented thereby as of
January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Real Estate................... 37.0%
2. Multi-Industry................ 20.4%
3. Banking....................... 12.8%
4. Telecommunications............ 11.5%
5. Utilities -- Electrical & 7.7%
Gas...........................
6. Transportation -- Airlines.... 2.9%
7. Leisure & Tourism............. 2.5%
8. Broadcasting & Publishing..... 1.7%
9. Merchandising................. 0.8%
10. Transportation -- Shipping.... 0.6%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Hong
Kong Index as of January 31, 1996.
THE MSCI ITALY INDEX
On January 31, 1996, the MSCI Italy Index (with net dividends reinvested)
(the "MSCI Italy") consisted of 55 stocks with an aggregate market
capitalization of approximately ITL196,062.0 billion or US$123.0 billion. In
percentage terms, the MSCI Italy represented approximately 65.4% of the total
market capitalization of Italy.
The ten largest constituents of the MSCI Italy and the respective
approximate percentages of the MSCI Italy represented by such constituents were,
in order:
<TABLE>
<C> <S> <C>
1. Assicurazioni Generali........ 16.31%
2. Fiat.......................... 11.53%
3. Telecom Italia Mobile......... 11.15%
4. Telecom Italia................ 10.81%
5. INA........................... 4.65%
6. San Paolo de Torino........... 4.08%
7. RAS........................... 3.50%
8. IMI Istituto Mobiliare........ 3.33%
9. Banca Comerciale.............. 3.31%
10. Montedison.................... 3.03%
</TABLE>
36
<PAGE>
As of January 31, 1996, the largest five constituents together comprised
approximately 54.45% of the market capitalization of the MSCI Italy; the largest
ten constituents comprised approximately 71.70% of the market capitalization of
the MSCI Italy; and the largest 20 constituents comprised approximately 90.05%
of the market capitalization of MSCI Italy.
The ten most highly represented industry sectors in the MSCI Italy, and the
approximate percentages of the MSCI Italy represented thereby as of January 31,
1996 were:
<TABLE>
<C> <S> <C>
1. Insurance..................... 26.1%
2. Telecommunications............ 22.0%
3. Banking....................... 17.9%
4. Automobiles................... 11.5%
5. Multi-Industry................ 4.5%
6. Utilities -- Electrical & 4.3%
Gas...........................
7. Industrial Components......... 2.2%
8. Textiles & Apparel............ 2.0%
9. Data Processing & 1.8%
Reproduction..................
10. Construction & Housing........ 1.4%
</TABLE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Italy Index as of January 31, 1996.
THE MSCI JAPAN INDEX
On January 31, 1996, the MSCI Japan Index (with net dividends reinvested)
(the "MSCI Japan") consisted of 317 stocks with an aggregate market
capitalization of approximately JPY227,098.2 billion or US$2,124.1 billion. In
percentage terms, the MSCI Japan represented approximately 60.1% of the total
market capitalization in Japan.
The ten largest constituents of the MSCI Japan and the respective
approximate percentages of the MSCI Japan represented by such constituents were,
in order:
<TABLE>
<C> <S> <C>
1. Toyota Motor Corp......................................... 3.79%
2. Fuji Bank................................................. 3.10%
3. Industrial Bank of Japan.................................. 3.08%
4. Sumitomo Bank............................................. 2.84%
5. Dai-Ichi Kangyo Bank...................................... 2.76%
6. Nomura Securities Co...................................... 2.01%
7. Sakura Bank............................................... 1.88%
8. Matsushita Electric Ind'l................................. 1.64%
9. Tokyo Electric Power Co................................... 1.62%
10. Hitachi................................................... 1.58%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 15.57% of the market capitalization of the MSCI Japan; the largest
ten constituents comprised approximately 24.30% of the market capitalization of
the MSCI Japan; and the largest 20 constituents comprised approximately 36.34%
of the market capitalization of the MSCI Japan.
37
<PAGE>
The ten most highly represented industry sectors in the MSCI Japan, and the
approximate percentages of the MSCI Japan represented thereby as of January 31,
1996 were:
<TABLE>
<C> <S> <C>
1. Banking................................................... 22.3%
2. Automobiles............................................... 5.7%
3. Merchandising............................................. 4.7%
4. Appliances & Household Durables........................... 4.4%
5. Utilities -- Electrical & Gas............................. 4.2%
6. Machinery & Engineering................................... 4.0%
7. Chemicals................................................. 4.0%
8. Construction & Housing.................................... 4.0%
9. Financial Services........................................ 3.9%
10. Electrical & Electronics.................................. 3.6%
</TABLE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Japan Index as of January 31, 1996.
THE MSCI MALAYSIA INDEX
On January 31, 1996, the MSCI Malaysia Index (with net dividends reinvested)
(the "MSCI Malaysia") consisted of 76 stocks with an aggregate market
capitalization of approximately MYR306.2 billion or US$119.6 billion. In
percentage terms, the MSCI Malaysia represented approximately 56.3% of the total
market capitalization of Malaysia.
The ten largest constituents of the MSCI Malaysia and the respective
approximate percentages of the MSCI Malaysia represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Telekom Malaysia.......................................... 13.85%
2. Tenaga Nasional........................................... 9.54%
3. Malayan Banking........................................... 8.54%
4. Resorts World............................................. 4.85%
5. Sime Darby................................................ 4.73%
6. United Engineers (Malaysia)............................... 2.98%
7. Malaysia Int'l Shipping................................... 2.24%
8. Rothmans Pall Mall (Mal).................................. 1.97%
9. DCB Holdings.............................................. 1.93%
10. YTL Corp.................................................. 1.88%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 41.51% of the market capitalization of the MSCI Malaysia; the
largest ten constituents comprised approximately 52.51% of the market
capitalization of the MSCI Malaysia and the largest 20 constituents comprised
approximately 68.08% of the market capitalization of the MSCI Malaysia.
The ten most highly represented industry sectors in the MSCI Malaysia, and
the approximate percentages of the MSCI Malaysia represented thereby as of
January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Telecommunications........................................ 15.6%
2. Banking................................................... 13.1%
3. Utilities -- Electrical & Gas............................. 9.5%
4. Multi-Industry............................................ 9.1%
5. Leisure & Tourism......................................... 7.4%
6. Miscellaneous Materials & Commodities..................... 5.9%
7. Financial Services........................................ 4.4%
8. Automobiles............................................... 4.4%
9. Machinery & Engineering................................... 4.1%
10. Real Estate............................................... 3.6%
</TABLE>
38
<PAGE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Malaysia Index as of January 31, 1996.
THE MSCI MEXICO (FREE) INDEX
On January 31, 1996, the MSCI Mexico (Free) Index (with gross dividends
reinvested) (the "MSCI Mexico (Free)") consisted of 41 stocks with an aggregate
market capitalization of approximately MXN470.2 billion or US$63.8 billion. In
percentage terms, the MSCI Mexico (Free) represented approximately 59.4% of the
total market capitalization of Mexico.
On January 31, 1996, the ten largest constituents of the MSCI Mexico (Free)
and the respective approximate percentages of the MSCI Mexico (Free) represented
by such constituents were, in order:
<TABLE>
<C> <S> <C>
1. Telmex Telefonos Mex...................................... 28.24%
2. Cemex..................................................... 7.30%
3. Grupo Televisa............................................ 6.90%
4. Cifra..................................................... 6.48%
5. Grupo Medelo.............................................. 5.96%
6. Kimberly Clark Mexico..................................... 5.25%
7. Grupo Mexico.............................................. 4.42%
8. Alfa...................................................... 3.67%
9. Empresas Moderna.......................................... 3.30%
10. Industrias Penoles........................................ 2.79%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 54.88% of the market capitalization of the MSCI Mexico (Free); the
largest ten constituents comprised approximately 74.33% of the market
capitalization of the MSCI Mexico (Free) and the largest 20 constituents
comprised approximately 93.16% of the market capitalization of the MSCI Mexico
(Free).
The ten most highly represented industry sectors in the MSCI Mexico (Free),
and the approximate percentages of the MSCI Mexico (Free) represented thereby as
of January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Telecommunications........................................ 28.2%
2. Beverages & Tobacco....................................... 12.4%
3. Building Materials & Components........................... 9.6%
4. Merchandising............................................. 9.5%
5. Metals -- Non Ferrous..................................... 7.2%
6. Broadcasting & Publishing................................. 6.9%
7. Multi-Industry............................................ 5.4%
8. Health & Personal......................................... 5.3%
9. Banking................................................... 4.5%
10. Food and Household Products............................... 3.4%
</TABLE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Mexico (Free) Index as of January 31, 1996.
THE MSCI NETHERLANDS INDEX
On January 31, 1996, the MSCI Netherlands Index (with net dividends
reinvested) (the "MSCI Netherlands") consisted of 22 stocks with an aggregate
market capitalization of approximately NLG353.2 billion or US$212.0 billion. In
percentage terms, the MSCI Netherlands represented approximately 71.7% of the
total market capitalization of the Netherlands.
39
<PAGE>
The ten largest constituents of the MSCI Netherlands and the respective
approximate percentages of the MSCI Netherlands represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Royal Dutch Petroleum..................................... 35.05%
2. Unilever NV............................................... 10.88%
3. Internationale Nederlanden Groep.......................... 9.01%
4. Koninklijke PTT Nederland................................. 8.38%
5. ABN Amro Holdings......................................... 6.51%
6. Phillips Electronics...................................... 6.49%
7. Elsevier NV............................................... 4.34%
8. Heineken NV............................................... 4.21%
9. Akzo Nobel NV............................................. 3.56%
10. Wolters Kluwer............................................ 3.10%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 69.83% of the market capitalization of the MSCI Netherlands; the
largest ten constituents comprised approximately 91.53% of the market
capitalization of the MSCI Netherlands; and the largest 20 constituents
comprised approximately 99.56% of the market capitalization of MSCI Netherlands.
The ten most highly represented industry sectors in the MSCI Netherlands,
and the approximate percentages of the MSCI Netherlands represented thereby as
of January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Energy Sources............................................ 35.0%
2. Food & Household Products................................. 10.9%
3. Financial Services........................................ 9.0%
4. Telecommunications........................................ 8.4%
5. Broadcasting & Publishing................................. 7.4%
6. Banking................................................... 6.5%
7. Appliances & Household Durables........................... 6.5%
8. Beverages & Tobacco....................................... 4.2%
9. Chemicals................................................. 3.6%
10. Merchandising............................................. 2.4%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Netherlands as of January 31, 1996.
THE MSCI SINGAPORE (FREE) INDEX
The MSCI Singapore (Free) Index (with net dividends reinvested) (the "MSCI
Singapore (Free)") is a "free" index in that excludes companies and share
classes that are not purchasable by foreigners. On January 31, 1996, the MSCI
Singapore (Free) consisted of 32 stocks with an aggregate market capitalization
of approximately SGD124.3 billion or US$87.6 billion. In percentage terms, the
MSCI Singapore (Free) represented approximately 56.0% of the total market
capitalization of Singapore.
The ten largest constituents of the MSCI Singapore (Free) and the respective
approximate percentages of the MSCI Singapore (Free) represented by such
constituents were, in order:
<TABLE>
<C> <S> <C>
1. Singapore Airlines........................................ 15.37%
2. OCBC Bank................................................. 14.22%
3. United Overseas Bank...................................... 11.22%
4. Development Bank of Singapore............................. 10.92%
5. Singapore Press Holdings.................................. 7.50%
6. City Developments......................................... 7.26%
7. Keppel Corp............................................... 5.53%
8. DBS Land.................................................. 4.14%
9. Fraser & Neave............................................ 3.81%
10. Cycle & Carriage.......................................... 3.04%
</TABLE>
40
<PAGE>
As of January 31, 1996, the largest five constituents together comprised
approximately 59.23% of the market capitalization of the MSCI Singapore (Free);
the largest ten constituents comprised approximately 83.01% of the market
capitalization of the MSCI Singapore (Free); and the largest 20 constituents
comprised approximately 94.75% of the market capitalization of the MSCI
Singapore (Free).
The ten most highly represented industry sectors in the MSCI Singapore
(Free), and the approximate percentages of the MSCI Singapore (Free) represented
thereby as of January 31, 1996 were:
<TABLE>
<C> <S> <C>
1. Banking................................................... 36.4%
2. Real Estate............................................... 18.5%
3. Transportation -- Airlines................................ 15.4%
4. Broadcasting & Publishing................................. 7.5%
5. Machinery & Engineering................................... 6.5%
6. Beverages & Tobacco....................................... 3.8%
7. Automobiles............................................... 3.0%
8. Leisure & Tourism......................................... 2.2%
9. Multi-Industry............................................ 1.5%
10. Transportation -- Shipping................................ 1.3%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Singapore (Free) as of January 31, 1996.
THE MSCI SPAIN INDEX
On January 31, 1996, the MSCI Spain Index (with net dividends reinvested)
(the "MSCI Spain") consisted of 31 stocks with an aggregate market
capitalization of approximately ESP11,921.7 billion or US$95.1 billion. In
percentage terms, the MSCI Spain represented approximately 62.0% of the total
market capitalization of Spain
The ten largest constituents of the MSCI Spain and the respective
approximate percentages of the MSCI Spain represented by such constituents were,
in order:
<TABLE>
<C> <S> <C>
1. Endesa.................................................... 15.05%
2. Telefonica de Espana...................................... 14.50%
3. Repsol.................................................... 10.97%
4. Iberdrola................................................. 9.15%
5. Banco Bilbao Vizcaya...................................... 8.66%
6. Banco Santander........................................... 8.08%
7. Gas Natural SGD........................................... 5.68%
8. Argentaria Corp Bancaria.................................. 5.54%
9. Banco Central Hispanoamericano............................ 3.57%
10. Autopistas Cesa........................................... 2.40%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 58.33% of the market capitalization of the MSCI Spain; the largest
ten constituents comprised approximately 83.60% of the market capitalization of
the MSCI Spain and the largest 20 constituents comprised approximately 96.04% of
the market capitalization of MSCI Spain.
41
<PAGE>
The ten most highly represented industry sectors in the MSCI Spain and the
approximate percentages of the MSCI Spain represented thereby as of January 31,
1996 were:
<TABLE>
<C> <S> <C>
1. Utilities -- Electrical & Gas............................. 31.6%
2. Banking................................................... 25.8%
3. Telecommunications........................................ 14.5%
4. Energy Sources............................................ 11.0%
5. Business & Public Services................................ 4.2%
6. Construction & Housing.................................... 2.1%
7. Real Estate............................................... 1.8%
8. Beverages & Tobacco....................................... 1.6%
9. Insurance................................................. 1.6%
10. Metals -- Steel........................................... 1.2%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Spain
as of January 31, 1996.
THE MSCI SWEDEN INDEX
On January 31, 1996, the MSCI Sweden Index (with net dividends reinvested)
(the "MSCI Sweden") consisted of 30 stocks with an aggregate market
capitalization of approximately SEK722.5 billion or US$104.0 billion. In
percentage terms, the MSCI Sweden represented approximately 60.6% of the total
market capitalization of Sweden.
The ten largest constituents of the MSCI Sweden and the respective
approximate percentages of the MSCI Sweden represented by such constituents
were, in order:
<TABLE>
<C> <S> <C>
1. Astra..................................................... 24.00%
2. Ericsson (LM)............................................. 18.48%
3. Volvo..................................................... 8.36%
4. Asea...................................................... 8.32%
5. Svenska Handelsbk......................................... 4.12%
6. Skand. Enskilda........................................... 3.79%
7. Skanska................................................... 3.75%
8. Stora Kopparberg.......................................... 3.32%
9. AGA....................................................... 3.23%
10. Electrolux................................................ 2.97%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 63.28% of the market capitalization of the MSCI Sweden; the
largest ten constituents comprised approximately 80.34% of the market
capitalization of the MSCI Sweden.
The ten most highly represented industry sectors in the MSCI Sweden, and the
approximate percentages of the MSCI Sweden represented thereby as of January 31,
1996 were:
<TABLE>
<C> <S> <C>
1. Electrical & Electronics.................................. 26.8%
2. Health & Personal Care.................................... 24.0%
3. Automobiles............................................... 8.4%
4. Banking................................................... 7.9%
5. Forest Products & Paper................................... 6.1%
6. Construction & Housing.................................... 3.7%
7. Industrial Components..................................... 3.3%
8. Chemicals................................................. 3.2%
9. Appliances & Household Durables........................... 3.0%
10. Machinery & Engineering................................... 2.6%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Sweden
as of January 31, 1996.
42
<PAGE>
THE MSCI SWITZERLAND INDEX
On January 31, 1996, the MSCI Switzerland Index (with net dividends
reinvested) (the "MSCI Switzerland") consisted of 43 stocks with an aggregate
market capitalization of approximately CHF355.0 billion or US$293.4 billion. In
percentage terms, the MSCI Switzerland represented approximately 78.2% of the
total market capitalization in Switzerland.
The ten largest constituents of the MSCI Switzerland and the respective
approximate percentages of the MSCI Switzerland represented by such constituents
were, in order:
<TABLE>
<S> <C> <C>
1. Roche Holding............................................. 24.80%
2. Nestle.................................................... 14.05%
3. Sandoz Ltd................................................ 11.21%
4. Schweiz Bankgesell........................................ 9.10%
5. Ciba-Geigy................................................ 8.01%
6. CS Holdings............................................... 5.91%
7. Schweiz Reuckvers......................................... 4.92%
8. Schweiz Bankverein........................................ 4.66%
9. Zuerich Versicherung...................................... 4.22%
10. BBC Brown Boveri.......................................... 3.45%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 67.17% of the market capitalization of the MSCI Switzerland; the
largest ten constituents comprised approximately 90.33% of the market
capitalization of the MSCI Switzerland; and the largest 20 constituents
comprised approximately 98.95% of the market capitalization of the MSCI
Switzerland.
The ten most highly represented industry sectors in the MSCI Switzerland,
and the approximate percentages of the MSCI Switzerland represented thereby as
of January 31, 1996 were:
<TABLE>
<S> <C> <C>
1. Health & Personal Care.................................... 36.0%
2. Banking................................................... 19.7%
3. Food & Household Products................................. 14.0%
4. Insurance................................................. 9.1%
5. Chemicals................................................. 8.0%
6. Electrical & Electronics.................................. 3.5%
7. Building Materials & Components........................... 2.1%
8. Business & Public Services................................ 1.7%
9. Multi-Industry............................................ 1.6%
10. Machinery & Engineering................................... 1.5%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Switzerland as of January 31, 1996.
THE MSCI UK INDEX
On January 31, 1996, the MSCI United Kingdom Index (with net dividends
reinvested) (the "MSCI UK") consisted of 144 stocks with an aggregate market
capitalization of approximately L582.8 billion or US$880.6 billion. In
percentage terms, the MSCI UK represented approximately 64.8% of the aggregate
capitalization of the United Kingdom markets.
43
<PAGE>
The ten largest constituents of the MSCI UK and the respective approximate
percentages of the MSCI UK represented by such constituents were, in order:
<TABLE>
<S> <C> <C>
1. Glaxo Wellcome............................................ 5.72%
2. British Petroleum......................................... 5.04%
3. HSBC Holdings............................................. 4.98%
4. British Telecom........................................... 3.81%
5. Smithkline Beecham........................................ 3.37%
6. BAT Industries............................................ 3.10%
7. Lloyds TSB Group.......................................... 2.84%
8. BTR....................................................... 2.21%
9. Barclays.................................................. 2.20%
10. Zeneca Group.............................................. 2.09%
</TABLE>
As of January 31, 1996, the largest five constituents together comprised
approximately 22.92% of the market capitalization of the MSCI UK; the largest
ten constituents comprised approximately 35.35% of the market capitalization of
the MSCI UK; and the largest 20 constituents comprised approximately 52.93% of
the market capitalization of MSCI UK.
The ten most highly represented industry sectors in the MSCI UK, and the
approximate percentages of the MSCI UK represented thereby as of January 31,
1996 were:
<TABLE>
<S> <C> <C>
1. Banking..................................................... 12.1%
2. Health & Personal Care...................................... 11.2%
3. Merchandising............................................... 8.7%
4. Multi-Industry.............................................. 8.4%
5. Telecommunications.......................................... 6.7%
6. Energy Sources.............................................. 5.7%
7. Food & Household Products................................... 5.7%
8. Utilities -- Electrical & Gas............................... 4.6%
9. Insurance................................................... 4.3%
10. Business & Public Services.................................. 3.7%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI UK as
of January 31, 1996.
REGIONAL INDEX REPLICATIONS
The MSCI single-country indices effectively serve as components of various
MSCI regional and international (i.e., multi-country) indices. For example the
MSCI EAFE Index -- covering European, Australasian and the Far Eastern markets
- -- is comprised of a weighted allocation of the MSCI indices for Japan (40.3%),
the United Kingdom (16.7%), Germany (7.2%), France (6.5%), Switzerland (5.6%),
Netherlands (4.0%), Hong Kong (3.5%), Singapore (1.2%), Belgium (1.2%), Malaysia
(2.3%), Australia (2.6%), Spain (1.8%), Italy (2.3%), Sweden (2.0%), Denmark
(0.8%), Finland (0.5%), Norway (0.4%), New Zealand (0.4%), Austria (0.5%) and
Ireland (0.3%). The weightings shown parenthetically are based on the EAFE Index
as of January 31, 1996.
Investors may purchase WEBS of different Index Series of the Fund in various
proportions for the purpose of achieving regional or international market
exposure approximating that of certain of the MSCI regional and international
indices. For example, assuming the estimated values per Creation
44
<PAGE>
Unit listed in the Fund's prospectus under the heading "Creation Units", an
investor might approximate the representation and weighting of the MSCI EAFE
Index by investing in the numbers of Creation Units specified for the following
14 Index Series, in order to achieve the basket weightings listed below:
<TABLE>
<CAPTION>
NUMBER OF % OF VALUE OF
INDEX SERIES CREATION UNITS BASKET
- -------------------------- -------------- -------------
<S> <C> <C>
Japan 5 41.1
United Kingdom 7 17.0
Germany 2 7.3
France 2 6.6
Switzerland 3 5.6
Netherlands 5 4.1
Hong Kong 1 3.6
Australia 2 2.7
Malaysia 1 2.4
Italy 1 2.4
Sweden 2 2.0
Spain 2 1.8
Singapore (Free) 2 1.7
Belgium 2 1.2
Austria 1 0.5
</TABLE>
The total cost of the above basket of Creation Units of WEBS, again using
the estimated values per Creation Unit in the Prospectus, would be $99,751,000.
It should be noted that the WEBS basket set forth above does not include
representation of six countries included in the MSCI EAFE Index, representing
2.4% of the value of such index on January 31, 1996.
EXCHANGE LISTING AND TRADING
Application has been made to list the WEBS of each Index Series for trading
on the AMEX. The AMEX has approved modifications to its Rules to permit the
listing of WEBS. The non-redeemable WEBS are expected to trade on the AMEX 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 AMEX necessary to maintain the listing of
WEBS of any Index Series will continue to be met. The AMEX may remove the WEBS
of an Index Series from listing if (1) following the initial twelve-month period
beginning upon the commencement of trading of an Index Series of WEBS, there are
fewer than 50 beneficial holders of the WEBS for 30 or more consecutive trading
days, (2) the value of the underlying index or portfolio of securities on which
such Index 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 AMEX,
makes further dealings on the AMEX inadvisable. In addition, the AMEX will
remove the shares from listing and trading upon termination of the Fund.
The size of Creation Units for each Index Series and the related number of
WEBS per Creation Unit is designed to provide an initial net asset value per
WEBS, depending on the Index Series, of between $10 and $20. Because of the
range of initial net asset values, it is expected that initial trading of WEBS
of the various Index Series on the AMEX will commence at market prices also
within this range. The Adviser anticipates that the movements in the price of
WEBS will track with the value of the respective MSCI Index. As in the case of
other stocks traded on the AMEX, the brokers commission 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.
45
<PAGE>
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS OF THE FUND
The Board of Directors of the Fund has responsibility for the overall
management and operations of the Fund, including general supervision of the
duties performed by the Adviser and other service providers. The Board of
Directors currently consists of one Director.
[Election of officers; addresses, principal occupations, present positions,
affiliations with Adviser and Administrator; ownership of shares; interested
persons as defined in the 1940 Act.]
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
</TABLE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the remuneration of Directors and officers of
the Fund.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION FROM
BENEFITS ACCRUED ESTIMATED ANNUAL REGISTRANT AND FUND
NAME OF PERSON, AGGREGATE COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID TO
POSITION FROM REGISTRANT EXPENSES RETIREMENT DIRECTORS
- ----------------------- ----------------------- ------------------ ---------------- -----------------------
<S> <C> <C> <C> <C>
, $ per $ per
Director [and annum $ per annum $ per
[President] [Chairman Directors' meeting Director's meeting
of the Board]] attended NONE NONE attended
, $ per $ per
Director annum $ per annum $ per
Directors' meeting Director's meeting
attended NONE NONE attended
, $ per $ per
Director annum $ per annum $ per
Directors' meeting Director's meeting
attended NONE NONE attended
, $ per $ per
Director annum $ per annum $ per
Directors' meeting Director's meeting
attended NONE NONE attended
, $ per $ per
Director annum $ per annum $ per
Directors' meeting Director's meeting
attended NONE NONE attended
,
[President] NONE NONE NONE NONE
,
[Treasurer] NONE NONE NONE NONE
,
[Secretary] NONE NONE NONE NONE
</TABLE>
46
<PAGE>
CERTAIN AFFILIATED RELATIONSHIPS
[Disclose, as necessary, affiliations of officers/directors with service
providers.]
INVESTMENT ADVISORY, MANAGEMENT,
ADMINISTRATIVE AND DISTRIBUTION SERVICES
The following information supplements and should be read in conjunction with
the sections in the Prospectus entitled "Management of the Fund".
THE INVESTMENT ADVISER
BZW Barclays Global Fund Advisors (the "Adviser") 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 the investment management of each Index
Series. The Adviser is a California corporation indirectly owned by Barclays
Bank PLC, and is registered as an investment adviser under the Investment
Advisers Act of 1940. The Adviser and its parent, BZW Barclays Global Investors,
N.A., are responsible for managing or providing investment advice for assets
aggregating in excess of $220 billion as of December 30, 1995.
The Adviser serves as investment adviser to each Index Series pursuant to an
Investment Management Agreement (the "Management Agreement") between the Fund
and the Adviser. 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 Index Series, will manage the investment of each
Index Series' assets. The Adviser may enter into subadvisory agreements with
additional investment advisers to act as subadvisers with respect to particular
Index Series. The Adviser will pay subadvisers, if any, out of the fees received
by the Adviser. The Adviser will be responsible for placing purchase and sale
orders and providing continuous supervision of the investment portfolio of each
Index Series. For its investment management services to each Index Series the
Adviser will be paid management fees equal to each Index Series' allocable
portion of: .27% per annum of the aggregate net assets of the Fund less than or
equal to $1.7 billion, plus .15% of the aggregate net assets of the Fund between
$1.7 billion and $7 billion, plus .12% per annum of the aggregate net assets of
the Fund between $7 billion and $10 billion, plus .08% per annum of the
aggregate net assets of the Fund in excess of $10 billion. The management fees
will be accrued daily and paid by the Fund as soon as practical after the last
day of each calendar quarter. The Fund's management fees, like those paid by
most index funds, are lower than those paid by many actively managed funds. One
reason for the difference in fee levels is that passive management requires
fewer investment, research and trading decisions, thereby justifying lower fees.
Pursuant to the Management Agreement, the Adviser will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund, and
the Fund has agreed to indemnify the Adviser for certain liabilities, including
certain liabilities arising under the federal securities laws, unless such loss
or liability results from willful misfeasance, bad faith or gross negligence in
the performance of its duties or the reckless disregard of its obligations and
duties. The Management Agreement will continue in effect for two years from its
effective date, and thereafter will be subject to annual approval by (1) the
Fund's Board 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 the Adviser and will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
THE ADMINISTRATOR
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.
(the "Administrator") will act as administration and accounting agent of the
Fund pursuant to an Administration and
47
<PAGE>
Accounting Services Agreement with the Fund and will be responsible for certain
clerical, recordkeeping and bookkeeping services, except those to be performed
by the Adviser, by Morgan Stanley Trust Company in its capacity as Custodian, or
by PNC Bank, N.A. ("PNC") in its capacity as Transfer Agent. PFPC, as
Administrator, 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 PFPC is 400 Bellevue Parkway, Wilmington, DE 19809.
For the administrative and fund accounting services PFPC provides to the
Fund, PFPC will be paid aggregate fees equal to each Index Series' allocable
portion of: .10% per annum of the aggregate net assets of the Fund less than $3
billion, plus .09% per annum of the aggregate net assets of the Fund between $3
billion and $5 billion, plus .08% per annum of the aggregate net assets of the
Fund between $5 billion and $7.5 billion, plus .065% per annum of the aggregate
net assets of the Fund between $7.5 billion and $10 billion, plus .05% per annum
of the aggregate net assets of the Fund in excess of $10 billion. PFPC may from
time to time waive all or a portion of its fees. For the first year of the
Fund's operations, PFPC has agreed to waive a portion of its fees. During the
first year of the Fund's operations, PFPC will charge the Fund an administrative
and accounting service fee equal to $4,167 per month for each Index Series, plus
.05% of aggregate average daily net assets of all Index Series in excess of $850
million per annum. However, if during the first three years of the Fund's
operations the Fund removes PFPC as the administrator, the Fund will pay the
cost of deconversion and PFPC will be entitled to recoup 100% of the fees waived
during the first year. Pursuant to the Administration Agreement, the
Administrator will be liable for damages arising of its failure to perform its
duties due to willful misfeasance, bad faith, gross negligence or reckless
disregard of such duties. The Fund will indemnify the Administrator for certain
liabilities, including certain liabilities arising under federal securities
laws, except for liabilities arising out of the Administrator's willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties.
THE DISTRIBUTOR
Funds Distributor, Inc. (the "Distributor") is the principal underwriter and
distributor of WEBS. Its address is One Exchange Place, 10th Floor, Boston, MA
02109, and investor information can be obtained by calling 1-800-xxx-xxxx. The
Distributor has entered into an agreement with the Fund which will continue
until , and which is renewable annually thereafter (the
"Distribution Agreement"), pursuant to which it will distribute Fund shares.
WEBS will be continuously offered for sale by the Fund through the Distributor
only in Creation Units, as described below under "Purchase and Issuance of WEBS
in Creation Units." WEBS in less than Creation Units will not be distributed by
the Distributor. The Distributor will also act as agent for the Fund. The
Distributor will deliver a prospectus to persons purchasing WEBS in Creation
Units and will maintain records of both orders placed with it and confirmations
of acceptance furnished by it. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of
the National Association of Securities Dealers, Inc. Funds Distributor, Inc., as
Distributor, has no role in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund.
To compensate the Distributor for the distribution-related services it
provides, and broker-dealers authorized by the Distributor for distribution
services they provide, the Fund has adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act. Under the Fund's Plan,
for each Index Series the Distributor will be entitled to receive a distribution
fee, accrued daily and paid monthly, calculated with respect to each Index
Series at the annual rate of up to .25% of the average daily net assets of such
Index Series. From time to time the Distributor may waive all or a portion of
these fees.
The Plan is designed to enable the Distributor to be compensated by the Fund
for distribution services provided by it with respect to each Index Series.
Payments under the Plan are not tied exclusively to the distribution expenses
actually incurred by the Distributor. The Board of Directors, including a
majority of the Directors who are not interested persons of the Fund and who
have no
48
<PAGE>
direct or indirect financial interest in the operation of the Plan ("Independent
Directors"), will evaluate the appropriateness of the Plan and its payment terms
on a continuing basis and in doing so will consider all relevant factors,
including expenses borne by the Distributor in the current year and in prior
years and amounts received under the Plan.
Under its terms, the Plan remains in effect from year to year, provided such
continuance is approved annually by vote of the Board of Directors, including a
majority of the Independent Directors. The Plan may not be amended to increase
materially the amount to be spent for the services provided by the Distributor
without approval by the shareholders of the Index Series of the Fund to which
the Plan applies, and all material amendments of the Plan also require Board
approval. The Plan may be terminated at any time, without penalty, by vote of a
majority of the Independent Directors, or, with respect to any Index Series of
the Fund, by a vote of a majority of the outstanding voting securities of such
Index Series of the Fund (as such vote is defined in the Investment Company
Act). If a Plan is terminated (or not renewed) with respect to any one or more
Index Series of the Fund, it may continue in effect with respect to any Index
Series of the Fund as to which it has not been terminated (or has been renewed).
Pursuant to the Distribution Agreement, the Distributor will provide the Board
of Directors periodic reports of any amounts expended under the Plan and the
purpose for which such expenditures were made.
The Distribution Agreement will provide that it may be terminated at any
time, without the payment of any penalty, (i) by vote of a majority of the
Directors who are not interested persons of the Fund (as defined under the 1940
Act) or (ii) by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the relevant Index Series, on at least 60 days'
written notice to the Distributor. The Distribution 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).
THE CUSTODIAN AND LENDING AGENT
Morgan Stanley Trust Company serves as the Custodian for the cash and
portfolio securities of each Index Series of the Fund pursuant to a Custodian
Agreement between Morgan Stanley Trust Company and the Fund. MSTC also serves as
Lending Agent of the portfolio securities of each Index Series. As Lending
Agent, MSTC will cause the delivery of loaned securities from the Fund to
borrowers, arrange for the return of loaned securities to the Fund at the
termination of the loans, request deposit of collateral, monitor daily the value
of the loaned securities and collateral, request that borrowers add to the
collateral when required by the loan agreements, and provide recordkeeping and
accounting services necessary for the operation of the program. MSTC, as
Custodian and Lending 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 MSTC is One Pierrepont Plaza, Brooklyn, New York.
For its custody services to each Index Series, MSTC will be paid per annum
fees based on the aggregate net assets of the Index Series as follows: Australia
Index Series (.10%); Austria Index Series (.10%); Belgium Index Series (.10%);
Canada Index Series (.07%); France Index Series (.11%); Germany Index Series
(.10%); Hong Kong Index Series (.12%); Italy Index Series (.09%); Japan Index
Series (.07%); Malaysia Index Series (.13%); Mexico (Free) Index Series (.25%);
Netherlands Index Series (.10%); Singapore (Free) Index Series (.10%); Spain
Index Series (.10%); Sweden Index Series (.10%); Switzerland Index Series
(.10%); and United Kingdom Index Series (.08%). As remuneration for its services
in connection with lending portfolio securities of the Index Series, MSTC will
be paid by the Fund, in respect of each Index Series, 50% of the net investment
income earned on the collateral for securities loaned.
TRANSFER AGENT
PNC (the "Transfer Agent"), an indirect wholly owned subsidiary of PNC Bank
Corp., provides transfer agency services pursuant to an agreement with the Fund.
PNC, as Transfer Agent, has no
49
<PAGE>
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 PNC is
Broad and Chestnut Streets, Philadelphia, PA 19110.
ADDITIONAL EXPENSES
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 the Administrator, exchange listing fees,
license fees, brokerage costs, legal and audit fees, and litigation and
extraordinary expenses. For the use of the relevant MSCI index, each Index
Series will pay a license fee to Morgan Stanley & Co. Incorporated equal to .03%
per annum of the aggregate net assets of the Index Series.
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 Index 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.
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 an Index Series, to reduce expenses of the
Index 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 year. High turnover rates are likely to result in
comparatively greater brokerage expenses. The portfolio turnover rate for each
Index Series is expected to be under 50%. See "Investment Policies" 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.
BOOK ENTRY ONLY SYSTEM
DTC will act as securities depositary for the WEBS. WEBS 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 WEBS.
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 Securities Exchange Act of 1934. 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
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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 New York Stock Exchange, Inc., 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 WEBS will be limited to DTC Participants, Indirect
Participants and persons holding interests through DTC Participants and Indirect
Participants. Ownership of beneficial interests in WEBS (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
WEBS. 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 WEBS.
Beneficial Owners of WEBS will not be entitled to have WEBS 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 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 WEBS. The Fund
understands that under existing industry practice, in the event the Fund
requests any action of holders of WEBS, or a Beneficial Owner desires to take
any action that DTC, as the record owner of all outstanding WEBS, is entitled to
take, DTC would authorize the DTC Participants to take such action and that the
DTC Participants would authorize the Indirect Participants and Beneficial Owners
acting through such DTC Participants to take such action and would otherwise act
upon the instructions of Beneficial Owners owning through them. As described
above, the Fund recognizes DTC or its nominee as the owner of all WEBS for all
purposes. Conveyance of all notices, statements and other communications to
Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement
between the Fund 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 WEBS holdings
of each DTC Participant. The Fund shall inquire of each such DTC Participant as
to the number of Beneficial Owners holding WEBS, 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.
WEBS distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all WEBS. 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 WEBS 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 WEBS 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 a
"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
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payments made on account of beneficial ownership interests in such WEBS, 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 WEBS
at any time by giving reasonable 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
WEBS, unless the Fund makes other arrangements with respect thereto satisfactory
to the AMEX (or such other exchange on which WEBS may be listed).
PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE SECTION IN THE PROSPECTUS ENTITLED "PURCHASE AND ISSUANCE OF WEBS IN
CREATION UNITS".
GENERAL
The Fund will issue and sell WEBS only in Creation Units on a continuous
basis through the Distributor, without an initial sales load, at their net asset
value next determined after receipt, on any Business Day (as defined herein), of
an order in proper form. The value of a Creation Unit will vary from one Index
Series to another, and is expected to range initially from approximately
$450,000 to $10,000,000.
A "Business Day" with respect to each Index Series is any day on which (i)
the New York Stock Exchange ("NYSE") and (ii) the stock exchange(s) and Fund
subcustodian(s) relevant to such Index Series 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
stock exchange and/or subcustodian holidays relevant to each Index Series are
set forth in Appendix B to this Statement of Additional Information.
PORTFOLIO DEPOSIT
The consideration for purchase of a Creation Unit of WEBS of an Index Series
generally will be the in-kind deposit of a designated portfolio of equity
securities (the "Deposit Securities") constituting an optimized representation
of the Index Series' benchmark foreign securities index and an amount of cash
computed as described below (the "Cash Component"). Together, the Deposit
Securities and the Cash Component constitute the "Portfolio Deposit", which
represents the minimum initial and subsequent investment amount for shares of
any Index Series of the Fund. The Cash Component is an amount equal to the
Dividend Equivalent Payment (as defined below), plus or minus, as the case may
be, a Balancing Amount (as defined below). The "Dividend Equivalent Payment"
will enable the Fund to make a complete distribution of dividends on the next
dividend payment date, and is an amount equal, on a per Creation Unit basis, to
the dividends on all the Portfolio Securities with ex-dividend dates within the
accumulation period for such distribution (the "Accumulation Period"), net of
expenses and liabilities for such period, as if all of the Portfolio Securities
had been held by the Fund for the entire Accumulation Period. The "Balancing
Amount" is an amount equal to the difference between (x) the net asset value
(per Creation Unit) of the Index Series and (y) the sum of (i) the Dividend
Equivalent Payment and (ii) the market value (per Creation Unit) of the
securities deposited with the Fund (the sum of (i) and (ii) is referred to as
the "Deposit Amount"). The Balancing Amount serves the function of compensating
for any differences between the net asset value per Creation Unit and the
Deposit Amount.
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The Adviser will make available through the Distributor on each Business
Day, immediately prior to the opening of business on the AMEX (currently 9:30
a.m., New York time), the list of the names and the required number of shares of
each Deposit Security to be included in the current Portfolio Deposit (based on
information at the end of the previous Business Day) for each Index Series. Such
Portfolio Deposit will be applicable, subject to any adjustments as described
below, in order to effect purchases of Creation Units of WEBS of a given Index
Series until such time as the next-announced Portfolio Deposit composition is
made available.
The identity and number of shares of the Deposit Securities required for a
Portfolio Deposit for each Index Series will change as rebalancing adjustments
and corporate action events are reflected from time to time by the Adviser with
a view to the investment objective of the Index Series. The composition of the
Deposit Securities may also change in response to adjustments to the weighting
or composition of the securities constituting the relevant securities index. In
addition, the Fund reserves the right to permit or require the substitution of
an amount of cash (i.e., a "cash in lieu" amount) to be added to the Cash
Component to replace any Deposit Security which may not be available in
sufficient quantity for delivery or for other similar reasons. The adjustments
described above will reflect changes, known to the Adviser on the date of
announcement to be in effect by the time of delivery of the Portfolio Deposit,
in the composition of the subject index being tracked by the relevant Index
Series, or resulting from stock splits and other corporate actions.
In addition to the list of names and numbers of securities constituting the
current Deposit Securities of a Portfolio Deposit, the Distributor also will
make available (i) on each Business Day, the Dividend Equivalent Payment
effective through and including the previous Business Day, per outstanding WEBS
of each Index Series, and (ii) on a continuous basis throughout the day, the sum
of the Dividend Equivalent Payment effective through and including the close of
the previous trading session in the relevant foreign market, plus the current
value of the requisite Deposit Securities as in effect on such day.
ROLE OF THE AUTHORIZED PARTICIPANT
Creation Units of WEBS may be purchased only by or through a DTC Participant
that has entered into an Authorized Participant Agreement with the Fund and the
Distributor ("Authorized Participant"). Such Authorized Participant will agree
pursuant to the terms of such Authorized Participant Agreement on behalf of
itself or any investor on whose behalf it will act, as the case may be, to
certain conditions, including that such Authorized Participant will make
available in advance of each purchase of WEBS 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
transaction fee described below. The Authorized Participant may require the
investor to enter into an agreement with such Authorized Participant with
respect to certain matters, including payment of the Cash Component. Investors
who are not Authorized Participants must make appropriate arrangements with an
Authorized Participant. 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 Units 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 does not
expect to enter into an Authorized Participant Agreement with more than a small
number of DTC Participants that have international capabilities. A list of the
Authorized DTC Participants may be obtained from the Distributor.
PURCHASE ORDER
To initiate an order for a Creation Unit of WEBS, the Authorized Participant
must give notice to the Distributor of its intent to submit an order to purchase
WEBS not later than 4:00 p.m., New York time on the relevant Business Day. The
Distributor shall cause the Adviser and the Custodian to be informed of such
advice. The Custodian will then provide such information to the appropriate
subcustodian. For each Index Series, the Custodian shall cause the subcustodian
of the Index Series to
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maintain an account into which the Authorized Participant shall deliver, on
behalf of itself or the party on whose behalf it is acting, the securities
included in the designated Portfolio Deposit (or the cash value of all or a part
of such securities, in the case of a permitted or required cash purchase or
"cash in lieu" amount), with any appropriate adjustments as advised by the Fund.
DEPOSIT SECURITIES MUST BE DELIVERED TO AN ACCOUNT MAINTAINED AT THE
APPLICABLE LOCAL SUBCUSTODIAN.
Following the notice of intention, an irrevocable order to purchase Creation
Units, in the form required by the Fund, must be received 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 AMEX (currently 4:00 p.m.,
New York time) on the relevant Business Day. (The required form of an order to
purchase is available on request from the Distributor.) 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 by the cut-off time on such Business Day. Orders must be transmitted
by the Authorized Participant to the Distributor by facsimile or electronic
transmission as provided in the Authorized Participant Agreement.
The Authorized Participant must also make available on or before the
contractual settlement date, by means satisfactory to the Fund, immediately
available or same day funds estimated by the Fund to be sufficient to pay the
Cash Component next determined after acceptance of the purchase order, together
with the applicable purchase transaction fee. Any excess funds will be returned
following settlement of the issue of the Creation Unit of WEBS. 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 AMEX.
Investors should be aware that an Authorized Participant may require orders
for purchases of WEBS placed with it 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.
ACCEPTANCE OF PURCHASE ORDER
Subject to the conditions that (I) a properly completed irrevocable purchase
order has been submitted by the Authorized Participant (either on its own or
another investor's behalf) not later than the closing time of the regular
trading session on the AMEX, and (II) arrangements satisfactory to the Fund are
in place for payment of the Cash Component and any other cash amounts which may
be due, the Fund will accept the order, subject to its right (and the right of
the Distributor and the Adviser) to reject any order until acceptance.
Once the Fund has accepted an order, upon next determination of the net
asset value of the shares, the Fund will confirm the issuance, against receipt
of payment, of a Creation Unit of WEBS of the Index Series at such net asset
value. The Distributor will then transmit a confirmation of acceptance to the
Authorized Participant that placed the order.
The Fund reserves the absolute right to reject a purchase order transmitted
to it by the Distributor in respect of any Index Series if (a) the purchaser or
group of purchasers, upon obtaining the shares ordered, would own 80% or more of
the currently outstanding shares of any Index Series; (b) the Deposit Securities
delivered are not as specified by the Adviser, as described above; (c)
acceptance of the Deposit Securities would have certain adverse tax consequences
to the Index Series; (d) the acceptance of the Portfolio Deposit would, in the
opinion of counsel, be unlawful; (e) the acceptance of the Portfolio 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 shall notify a prospective purchaser of its rejection of
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the order of such person. The Fund and the Distributor are under no duty,
however, to give notification of any defects or irregularities in the delivery
of Portfolio Deposits nor shall either of them incur any liability for the
failure to give any such notification.
ISSUANCE OF A CREATION UNIT
A Creation Unit of WEBS of an Index Series will not be issued until the
transfer of good title to the Fund of the Deposit Securities and the payment of
the Cash Component have been completed. When the subcustodian has confirmed to
the Custodian that the required securities included in the Portfolio Deposit (or
the cash value thereof) have been delivered to the account of the relevant
subcustodian, the Custodian shall notify the Distributor and the Adviser, and
the Fund will issue and cause the delivery of the Creation Unit of WEBS.
The Authorized Participant Agreement provides that in the event that a
Portfolio Deposit is incomplete on the settlement date for a Creation Unit of
WEBS because certain Deposit Securities are missing, the Fund may, in its sole
discretion, issue the Creation Unit of WEBS notwithstanding such deficiency in
reliance on the undertaking of the Authorized Participant to deliver the missing
Deposit Securities as soon as possible, which undertaking shall be secured by
such Authorized Participant's delivery and maintenance of collateral consisting
of cash or Short-Term Investments having a value at least equal to 105% of the
value of the missing Deposit Securities. The Authorized Participant Agreement
will permit the Fund to buy the missing Deposit Securities at any time and will
subject the Authorized Participant to liability for any shortfall between the
cost to the Fund of purchasing such securities and the value of the collateral.
All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Fund, and the Fund's
determination shall be final and binding.
CASH PURCHASE METHOD
Although the Fund does not ordinarily intend to permit cash purchases of
Creation Units, when cash purchases of Creation Units of WEBS are available or
specified for an Index Series, they will be effected in essentially the same
manner as in-kind purchases thereof. In the case of a cash purchase, the
investor must pay the cash equivalent of the Deposit Securities it would
otherwise be required to provide through an in-kind purchase, plus the same Cash
Component required to be paid by an in-kind purchaser. In addition, to offset
the Fund's brokerage and other transaction costs associated with using the cash
to purchase the requisite Deposit Securities, the investor will be required to
pay a fixed purchase transaction fee, plus an additional variable charge for
cash purchases, which is expressed as a percentage of the value of the Deposit
Securities. The transaction fees for in-kind and cash purchases of Creation
Units of WEBS are described below.
PURCHASE TRANSACTION FEE
A purchase transaction fee payable to the Fund is imposed to compensate the
Fund for the transfer and other transaction costs of an Index Series. THE
PURCHASE TRANSACTION FEE FOR IN-KIND AND CASH PURCHASES AND THE ADDITIONAL
VARIABLE CHARGE FOR CASH PURCHASES (WHEN CASH PURCHASES ARE AVAILABLE OR
SPECIFIED) ARE LISTED FOR THE RELEVANT INDEX SERIES IN THE SHAREHOLDER
TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND EXPENSES". Where the Fund permits
an in-kind purchaser to substitute cash in lieu of depositing a portion of the
Deposit Securities, the purchaser will be assessed the additional variable
charge for cash purchases on the "cash in lieu" portion of its investment.
Purchasers of WEBS in Creation Units are responsible for the costs of
transferring the securities constituting the Deposit Securities to the account
of the Fund. See "Summary of Fund Expenses" in the Prospectus.
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EXAMPLE
A hypothetical example of the costs of creating a Creation Unit of WEBS of
the Japan Index Series is set forth below for illustrative purposes only. The
exchange rate reflected in the table is Y101.5 per US$1.
<TABLE>
<CAPTION>
UNIT CREATION UNIT CREATION DAILY NAV
CALCULATION CALCULATION CALCULATION
---------------- ------------- -------------
<S> <C> <C> <C>
Execution............................................... Y856,438,324 $ 8,437,816 $ 8,437,816
Commissions............................................. 856,438 8,438 N/A
Stamp Taxes............................................. 0 0 N/A
Risk Premium............................................ 0 0 N/A
Accued Income........................................... 2,911,890 28,689 28,689
Creation Charge......................................... 812,000 8,000 N/A
WEBS Unit Value......................................... 861,018,652 8,482,943 8,466,505
Per WEBS................................................ 16.97 16.93
Shares.................................................. 500,000
</TABLE>
See "Management of the Fund", in the Prospectus, and "Investment Advisory,
Management, Administrative and Distribution Services" herein, for additional
information concerning the distribution arrangements for WEBS.
REDEMPTION OF WEBS IN CREATION UNITS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH
THE SECTION IN THE PROSPECTUS ENTITLED "REDEMPTION OF WEBS IN CREATION UNITS".
WEBS may be redeemed only in Creation Units at their net asset value next
determined after receipt of a redemption request in proper form by the
Distributor and only on a day on which the AMEX is open for trading. THE FUND
WILL NOT REDEEM WEBS IN AMOUNTS LESS THAN CREATION UNITS. Beneficial Owners also
may sell WEBS in the secondary market, but must accumulate enough WEBS to
constitute a Creation Unit in order to have such shares redeemed by the Fund.
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 of
WEBS. Investors should expect to incur brokerage and other costs in connection
with assembling a sufficient number of WEBS to constitute a redeemable Creation
Unit. See "Investment Considerations and Risks" in the Prospectus.
With respect to each Index Series, the Adviser will make available through
the Distributor immediately prior to the opening of business on the AMEX
(currently 9:30 am, New York time) on each day that the AMEX is open for
business the Portfolio Securities that will be applicable (subject to possible
amendment or correction) to redemptions requests received in proper form (as
defined below) on that day. Unless cash redemptions are available or specified
for an Index Series, the redemption proceeds for a Creation Unit generally will
consist of Deposit Securities as announced by the Distributor on the Business
Day of 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
Deposit Securities, less the redemption transaction fee described below. The
redemption transaction fee described below will be deducted from such redemption
proceeds. In the case of a resident Australian holder, notwithstanding the
foregoing, such holder is only entitled to receive cash, upon its redemption of
Creation Units of WEBS.
A redemption transaction fee payable to the Fund is imposed to offset
transfer and other transaction costs that may be incurred by the relevant Index
Series. THE REDEMPTION TRANSACTION FEE FOR REDEMPTIONS IN KIND AND FOR CASH AND
THE ADDITIONAL VARIABLE CHARGE FOR CASH REDEMPTIONS (WHEN CASH REDEMPTIONS ARE
AVAILABLE OR SPECIFIED) ARE LISTED FOR THE RELEVANT INDEX SERIES IN THE
SHAREHOLDER TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND EXPENSES". Investors
will also bear the costs of transferring the Portfolio Deposit from the Fund to
their account or on their order. Investors who use the services of a broker or
other such intermediary may be charged a fee for such services.
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<PAGE>
Redemption requests in respect of Creation Units of any Index Series must be
submitted to the Distributor by or through an Authorized Participant on a day
that the AMEX is open for business. Investors other than through Authorized
Participants are responsible for making arrangements for a redemption request to
be made through an Authorized Participant. The Distributor will provide a list
of current Authorized Participants upon request.
The Authorized Participant must transmit the request for redemption, in the
form required by the Fund, to the Distributor in accordance with procedures set
forth in the Authorized Participant Agreement. Investors should be aware that
their particular broker may not have executed an Authorized Participant
Agreement, and that, therefore, requests to redeem Creation Units 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 broker-dealers that have executed an Authorized
Participant Agreement. Investors making a redemption request should be aware
that such request be in the form specified by such Authorized Participant.
Investors making a request to redeem Creation Units should afford sufficient
time to permit proper submission of the request by an Authorized Participant and
transfer of the WEBS to the Fund's Transfer Agent; 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.
A redemption request will be considered to be in "proper form" if (i) an
Authorized Participant has transferred or caused to be transferred to the Fund's
Transfer Agent the Creation Unit of WEBS being redeemed through the book-entry
system of DTC so as to be effective by the AMEX closing time New York time on a
day on which the AMEX is open for business and (ii) a duly completed request
form is received by the Distributor from the Authorized Participant on behalf of
itself or another redeeming investor by the AMEX closing time New York time on
such day. If the Transfer Agent does not receive the investor's WEBS through DTC
facilities by the AMEX closing time on the same day that the redemption request
is received, the redemption request shall be rejected and may be resubmitted the
next day that the AMEX is open for business. Investors should be aware that the
deadline for such transfers of shares through the DTC system may be
significantly earlier than the close of business on the AMEX. 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 WEBS.
Upon receiving a redemption request, the Distributor shall notify the Fund
and the Fund's Transfer Agent of such redemption request. The tender of an
investor's WEBS for redemption and 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 WEBS, as the case may be, or by such other means specified by the
Authorized Participant submitting the redemption request. See "Book-Entry System
Only".
IN CONNECTION WITH TAKING DELIVERY OF SHARES OF DEPOSIT SECURITIES UPON
REDEMPTION OF WEBS, A REDEEMING BENEFICIAL OWNER OR AUTHORIZED PARTICIPANT
ACTING ON BEHALF OF SUCH BENEFICIAL OWNER MUST MAINTAIN APPROPRIATE SECURITIES
BROKER-DEALER, BANK OR OTHER CUSTODY ARRANGEMENTS IN EACH JURISDICTION IN WHICH
ANY OF THE PORTFOLIO SECURITIES ARE CUSTOMARILY TRADED, TO WHICH ACCOUNT SUCH
PORTFOLIO SECURITIES WILL BE DELIVERED.
Deliveries of redemption proceeds by the Index Series relating to those
countries generally will be made within three business days. Due to the schedule
of holidays in certain countries, however, the delivery of in-kind redemption
proceeds may take longer than three business days after the day on which the
redemption request is received in proper form. For each country relating to an
Index Series, Appendix B hereto identifies the instances where more than seven
days would be needed to deliver redemption proceeds. PURSUANT TO AN ORDER OF THE
SECURITIES AND EXCHANGE COMMISSION, IN RESPECT OF EACH INDEX SERIES, THE FUND
WILL MAKE DELIVERY OF IN-KIND REDEMPTION PROCEEDS WITHIN THE NUMBER OF DAYS
STATED IN APPENDIX B TO BE THE MAXIMUM NUMBER OF DAYS NECESSARY TO DELIVER
REDEMPTION PROCEEDS.
57
<PAGE>
If neither the redeeming Beneficial Owner nor the Authorized Participant
acting on behalf of such redeeming Beneficial Owner has appropriate arrangements
to take delivery of the Portfolio Securities in the applicable foreign
jurisdiction and it is not possible to make other such arrangements, or if it is
not possible to effect deliveries of the Portfolio Securities in such
jurisdiction, the Fund may in its discretion exercise its option to redeem such
shares in cash, and the redeeming Beneficial Owner will be required to receive
its redemption proceeds in cash. In such case, the investor will receive a cash
payment equal to the net asset value of its Shares based on the net asset value
of WEBS of the relevant Index Series next determined after the redemption
request is received in proper form (minus a redemption transaction fee and
additional variable charge for cash redemptions specified above, to offset the
Fund's brokerage and other transaction costs associated with the disposition of
Portfolio Securities of the Index Series). Redemptions of WEBS for Deposit
Securities will be subject to compliance with applicable United States federal
and state securities laws and each Index Series (whether or not it otherwise
permits cash redemptions) reserves the right to redeem Creation Units for cash
to the extent that the Index Series could not lawfully deliver specific Deposit
Securities upon redemptions or could not do so without first registering the
Deposit Securities under such laws.
Although the Fund does not ordinarily intend to permit cash redemptions of
Creation Units (except that, as noted above, resident Australian holders may
redeem solely for cash), in the event that cash redemptions are permitted or
required by the Fund, proceeds will be paid to the Authorized Participant
redeeming shares on behalf of the redeeming investor as soon as practicable
after the date of redemption (within seven calendar days thereafter, except for
the instances listed in Appendix B hereto where more than seven calendar days
would be needed).
Because the Portfolio Securities of an Index Series may trade on the
relevant exchange(s) on days that the AMEX is closed or are otherwise not
Business Days for such Index Series, stockholders may not be able to redeem
their shares of such Index Series, or to purchase or sell WEBS on the AMEX, on
days when the net asset value of such Index Series could be significantly
affected by events in the relevant foreign markets.
The right of redemption may be suspended or the date of payment postponed
with respect to any Index Series (1) for any period during which the New York
Stock Exchange is closed (other than customary weekend and holiday closings);
(2) for any period during which trading on the New York Stock Exchange is
suspended or restricted; (3) for any period during which an emergency exists as
a result of which disposal of the shares of the Index Series' portfolio
securities or determination of its net asset value is not reasonably
practicable; or (4) in such other circumstance as is permitted by the Securities
and Exchange Commission.
DETERMINING NET ASSET VALUE
The following information supplements and should be read in conjunction with
the section in the Prospectus entitled "Determination of Net Asset Value".
Net asset value per share for each Index Series of the Fund is computed by
dividing the value of the net assets of such Index Series (i.e., the value of
its total assets less total liabilities) by the total number of WEBS
outstanding, rounded to the nearest cent. Expenses and fees, including the
management, administration and distribution fees, are accrued daily and taken
into account for purposes of determining net asset value. The net asset value of
each Index Series is determined as of the close of the regular trading session
on the New York Stock Exchange, Inc. (ordinarily 4:00 p.m., New York City time)
on each day that such exchange is open.
58
<PAGE>
In computing an Index Series' net asset value, the Index Series' portfolio
securities are valued based on their last quoted current price. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Securities regularly traded in an over-the-counter market
are valued at the latest quoted bid price in such market. Other portfolio
securities and assets for which market quotations are not readily available are
valued based on fair value as determined in good faith by the Adviser in
accordance with procedures adopted by the Board of Directors of the Fund. The
values of portfolio securities are converted into US dollars at the relevant
foreign exchange rate for each Index Series in effect as of the time that the
foreign-currency values of the securities are determined.
DIVIDENDS AND DISTRIBUTIONS
The following information supplements and should be read in conjunction with
the section in the Prospectus entitled "Dividends and Capital Gains
Distributions".
Dividends from net investment income will be declared and paid at least
annually by each Index Series. Distributions of net realized securities gains,
if any, generally will be declared and paid once a year, but the Fund may make
distributions on a more frequent basis for certain Index Series to improve
tracking error or to comply with the distribution requirements of the Internal
Revenue Code, in all events in a manner consistent with the provisions of the
Act. In addition, the Fund intends to distribute at least annually amounts
representing the full dividend yield on the underlying portfolio securities of
each Index Series, as if such Index Series owned such underlying portfolio
securities for the entire dividend period. As a result, some portion of each
distribution may result in a return of capital. See "Tax Matters."
Dividends and other distributions on WEBS will be distributed, as described
below, on a pro rata basis to Beneficial Owners of such WEBS. Dividend payments
will be made through the Depository and the Authorized Participants to
Beneficial Owners then of record with proceeds received from the Fund.
The Fund will make additional distributions to the minimum extent necessary
(i) to distribute the entire annual investment company taxable income of the
Fund, plus any net capital gains and (ii) to avoid imposition of the excise tax
imposed by Section 4982 of the Internal Revenue Code. Management of the Fund
reserves the right to declare special dividends if, in its reasonable
discretion, such action is necessary or advisable to preserve the status of each
Index Series as a RIC or to avoid imposition of income or excise taxes on
undistributed income.
TAXES
The following information supplements and should be read in conjunction with
the sections in the Prospectus entitled "Dividends and Capital Gains
Distributions" and "Tax Matters".
The Fund on behalf of each Index Series has the right to reject an order for
a purchase of WEBS if the purchaser (or group of purchasers) would, upon
obtaining the WEBS so ordered, own 80% or more of the outstanding WEBS of a
given Index Series and if, pursuant to section 351 of the Internal Revenue Code,
the respective Index Series would have a basis in the securities different from
the market value of such securities on the date of deposit. The Fund also has
the right to require information necessary to determine beneficial share
ownership for purposes of the 80% determination. See "Purchase and Issuance of
WEBS in Creation Units".
Each Index Series intends to qualify for and to elect treatment as a
separate "regulated investment company" under Subchapter M of the Internal
Revenue Code. 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
59
<PAGE>
company's taxable year, (a) at least 50 percent of the market value of the
company's total assets must be represented by cash and cash items, U.S.
government securities, securities of other regulated investment companies 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 Internal Revenue Code) and 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 regulated investment
companies); and (3) the company must derive less than 30 percent of its annual
gross income from the sale or other disposition, after a holding period of less
than three months, of (i) stock or securities, (ii) options, futures or forward
contracts (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 or securities (or options and futures with
respect to stocks and securities).
Each Index Series may be subject to foreign income taxes withheld at source.
Each Index Series will elect to "pass through" to its investors the amount of
foreign income taxes paid by the Index Series, with the result that each
investor will (i) include in gross income, even though not actually received,
the investor's pro rata share of the Index Series' foreign income taxes, and
(ii) either deduct (in calculating U.S. taxable income) or credit (in
calculating U.S. federal income tax) the investor's pro rata share of the Index
Series' foreign income taxes. A foreign tax credit may not exceed the investor's
U.S. federal income tax otherwise payable with respect to the investor's foreign
source income. For this purpose, each shareholder must treat as foreign source
gross income (i) his proportionate share of foreign taxes paid by the Index
Series and (ii) the portion of any dividend paid by the Index Series which
represents income derived from foreign sources; the Index Series' gain from the
sale of securities will generally be treated as U.S. source income. This foreign
tax credit limitation is applied separately to separate categories of income;
dividends from the Index Series will be treated as "passive" or "financial
services" income for this purpose. The effect of this limitation may be to
prevent investors from claiming as a credit the full amount of their pro rata
share of the Index Series' foreign income taxes.
If any Index Series owns shares in certain foreign investment entities,
referred to as "passive foreign investment companies", the Index Series will be
subject to one of the following special tax regimes: (i) the Index Series is
liable for U.S. federal income tax, and an additional charge in the nature of
interest, on a portion of any "excess distribution" from such foreign entity or
any gain from the disposition of such shares, even if the entire distribution or
gain is paid out by the Index Series as a dividend to its shareholders; (ii) if
the Index Series were able and elected to treat a passive foreign investment
company as a "qualified electing fund", the Index Series would be required each
year to include in income, and distribute to shareholders in accordance with the
distribution requirements set forth above, the Index Series' pro rata share of
the ordinary earnings and net capital gains of the passive foreign investment
company, whether or not such earnings or gains are distributed to the Index
Series or (iii) under certain proposed regulations not yet effective, the Index
Series would be entitled to mark-to-market annually the shares of the passive
foreign investment company, and would be required to distribute to shareholders
any such mark-to-market gains in accordance with the distribution requirements
set forth above.
An Index Series will be subject to a 4 percent excise tax on certain
undistributed income if it does not distribute to its shareholders in each
calendar year at least 98 percent of its ordinary income for the calendar year
plus 98 percent of its capital gain net income for the twelve months ended
October 31 of such year. Each Index Series intends to declare and distribute
dividends and distributions in the amounts and at the times necessary to avoid
the application of this 4 percent excise tax.
An investor in an Index Series that is a foreign corporation or an
individual who is a nonresident alien for U.S. tax purposes will be subject to
significant adverse U.S. tax consequences. For example, dividends paid out of an
Index Series' investment company taxable income will generally be subject to
60
<PAGE>
U.S. federal withholding tax at a rate of 30% (or lower treaty rate if the
foreign investor is eligible for the benefits of an income tax treaty). Foreign
investors are urged to consult their own tax advisors regarding the U.S. tax
treatment, in their particular circumstances, of ownership of shares in an Index
Series.
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 advisors 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 Internal Revenue 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 SHAREHOLDER REPORTS
The Fund currently is comprised of seventeen series of shares of common
stock, par value $.001 per share, referred to herein as WEBS: the Australia
Index Series, the Austria Index Series, the Belgium Index Series, the Canada
Index Series, the France Index Series, the Germany Index Series, the Hong Kong
Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index
Series, the Mexico (Free) Index Series, the Netherlands Index Series, the
Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series,
the Switzerland Index Series, and the United Kingdom Index Series. Each Index
Series has been issued a separate class of capital stock. 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 WEBS issued by the Fund will have a pro rata interest in the assets of
the corresponding Index Series. The Fund is currently authorized to issue 6
billion shares of common stock. The following number of shares is currently
authorized for each Index Series: the Australia Index Series, 127.8 million
shares; the Austria Index Series, 19.8 million shares; the Belgium Index Series,
136.2 million shares; the Canada Index Series, 340.2 million shares; the France
Index Series, 340.2 million shares; the Germany Index Series, 382.2 million
shares; the Hong Kong Index Series, 191.4 million shares; the Italy Index
Series, 63.6 million shares; the Japan Index Series, 2,124.6 million shares; the
Malaysia Index Series, 127.8 million shares; the Mexico (Free) Index Series, 255
million shares; the Netherlands Index Series, 255 million shares, the Singapore
(Free) Index Series, 191.4 million shares; the Spain Index Series, 127.8 million
shares; the Sweden Index Series, 63.6 million shares; the Switzerland Index
Series, 318.625 million shares; and the United Kingdom Index Series, 934.2
million shares. Fractional shares will not be issued. Shares have no preemptive,
exchange, subscription or conversion rights and are freely transferable. Each
share is entitled to participate equally in dividends and distributions declared
by the Board with respect to the relevant Index Series, and in the net
distributable assets of such Index Series on liquidation. Shareholders are
entitled to require the Fund to redeem Creation Units of their shares.
Each WEBS has one vote with respect to matters upon which a stockholder vote
is required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder and the Maryland General Corporation Law; 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 Index Series it will be voted on only by that Index
Series and if a matter affects a particular Index Series differently from other
Index Series, that Index 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 Index 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 expects that, immediately prior to the commencement of trading of
the WEBS, each Index Series will have one stockholder, Funds Distributor, Inc.,
who will hold more than 5% of the outstanding shares of each Index Series in
Creation Units. The Fund cannot predict the length of time that such person will
remain a control person of each Index Series.
61
<PAGE>
The Fund will issue through the Authorized Participants 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 and such
other information as may be required by applicable laws, rules and regulations.
Beneficial Owners also will receive annually notification as to the tax status
of the Fund's distributions.
Stockholder inquiries may be made by writing to the Fund, c/o PFPC Inc., 400
Bellevue Parkway, Wilmington, DE 19809.
PERFORMANCE INFORMATION
The performance of the Index Series may be quoted in advertisements, sales
literature or reports to shareholders in terms of average annual total return,
cumulative total return and yield.
Quotations of average annual total return will be expressed in terms of the
average annual rate of return of a hypothetical investment in an Index Series
over periods of 1, 5 and 10 years (or the life of an Index Series, if shorter).
Such total return figures will reflect the deduction of a proportional share of
such Index Series' expenses on an annual basis, and will assume that all
dividends and distributions are reinvested when paid.
Total return is calculated according to the following formula: P(1 + T)n =
ERV (where P = a hypothetical initial payment of $1000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1000 payment made at the beginning of the 1, 5 or 10 year
period).
Quotations of a cumulative total return will be calculated for any specified
period by assuming a hypothetical investment in an Index Series on the date of
the commencement of the period and will assume that all dividends and
distributions are reinvested when paid. The net increase or decrease in the
value of the investment over the period will be divided by its beginning value
to arrive at cumulative total return. Total return calculated in this manner
will differ from the calculation of average annual total return in that it is
not expressed in terms of an average rate of return.
The yield of an Index Series is the net annualized yield based on a
specified 30-day (or one month) period assuming a semiannual compounding of
income. Included in net investment income is the amortization of market premium
or accretion of market and original issue discount. Yield is calculated by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula: YIELD =
2[(a-b/cd + 1)(6) - 1] (where a = dividends and interest earned during the
period, b = expenses accrued for the period (net of reimbursements), c = the
average daily number of shares outstanding during the period that were entitled
to receive dividends, and d = the maximum offering price per share on the last
day of the period).
Quotations of cumulative total return, average annual total return or yield
reflect only the performance of a hypothetical investment in an Index Series
during the particular time period on which the calculations are based. Such
quotations for an Index Series will vary based on changes in market conditions
and the level of such Index Series' expenses, and no reported performance figure
should be considered an indication of performance which may be expected in the
future.
The cumulative and average total returns and yields do not take into account
federal or state income taxes which may be payable; total returns and yields
would, of course, be lower if such charges were taken into account.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, are counsel
to the Fund and have passed upon the validity of the Fund shares.
Ernst & Young, LLP, , serves as the independent
accountants of the Fund.
62
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[To be completed by amendment]
63
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
FOREIGN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
, 1995
<TABLE>
<CAPTION>
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY HONG KONG ITALY JAPAN
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>
Assets
Cash................
Deferred organiza-
tion expenses......
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Total Assets..........
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Liabilities
Organization ex-
penses payable.....
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Total Liabilities.....
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Net Assets............
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Shares outstanding
($.001 par value)....
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Net Asset Value per
share................
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Composition of net as-
sets
Capital stock.......
Paid-in capital.....
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
Net Assets, ,
1995.................
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
----------- ----------- ----------- ----------- --------- ----------- --------- --------- ---------
<CAPTION>
MEXICO SINGAPORE UNITED
MALAYSIA (FREE) (FREE) SPAIN SWEDEN KINGDOM
INDEX INDEX NETHERLANDS INDEX INDEX INDEX SWITZERLAND INDEX
SERIES SERIES INDEX SERIES SERIES SERIES SERIES INDEX SERIES SERIES
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash................
Deferred organiza-
tion expenses......
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Total Assets..........
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Liabilities
Organization ex-
penses payable.....
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Total Liabilities.....
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Net Assets............
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Shares outstanding
($.001 par value)....
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Net Asset Value per
share................
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Composition of net as-
sets
Capital stock.......
Paid-in capital.....
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
Net Assets, ,
1995.................
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
</TABLE>
See Notes to financial statements.
64
<PAGE>
FOREIGN FUND, INC.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
, 1996
1. GENERAL
Foreign Fund, Inc. (the "Fund") was incorporated under the laws of the State
of Maryland on September 1, 1994. The Fund is registered under the Investment
Company Act of 1940 (the "Act") as a management investment company. The Fund
currently has seventeen common stock series: the Australia Index Series; the
Austria Index Series; the Belgium Index Series; the Canada Index Series; the
France Index Series; the Germany Index Series; the Hong Kong Index Series; the
Italy Index Series; the Japan Index Series; the Malaysia Index Series; the
Mexico (Free) Index Series; the Netherlands Index Series; the Singapore (Free)
Index Series; the Spain Index Series; the Sweden Index Series; the Switzerland
Index Series; and the United Kingdom Index Series (each, an "Index Series").
Wells Fargo Nikko Investment Advisors serves as investment adviser (the
"Adviser") to the Fund. Funds Distributor, Inc. is the Distributor of the WEBS.
PFPC Inc. serves as Administrator to the Fund.
The Index Series have had no operations other than the sale of the following
Index Series shares to for the noted amounts: Australia Index Series
( shares for proceeds of $ ); Austria Index Series ( ) shares for
proceeds of $ ); Belgium Index Series ( ) shares for proceeds of
$ ); Canada Index Series ( ) shares for proceeds of $ ); France
Index Series ( shares for proceeds of $ ); Germany Index Series (
shares for proceeds of $ ); Hong Kong Index Series ( shares for proceeds
of $ ); Italy Index Series ( shares for proceeds of $ ); Japan Index
Series ( shares for proceeds of $ ); Malaysia Index Series ( shares
for proceeds of $ ); Mexico (Free) Index Series ( shares for proceeds of
$ ); Netherlands Index Series ( shares for proceeds of $ );
Singapore (Free) Index Series ( shares for proceeds of $ ); Spain Index
Series ( shares for proceeds of $ ); Sweden Index Series ( shares
for proceeds of $ ); Switzerland Index Series ( shares for proceeds of
$ ); and United Kingdom Index Series ( shares for proceeds of $ ).
The costs of organizing the Fund and registering its shares will be paid
initially by and reimbursed by the Fund. These costs in turn will be
allocated to each Index Series by the Fund's Board based on the expected net
assets of each Index Series. Such organization costs have been deferred and will
be amortized ratably on the straightline method over a period of sixty months
from the commencement of operations of the Index Series. If any of the shares
initially issued to Funds Distributor, Inc. 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. The pro rata share by which
the proceeds are reduced is derived by dividing the number of original shares
redeemed by the total number of original shares outstanding at the time of
redemption.
2. AGREEMENTS
The Fund has an Investment Management Agreement (the "Management Agreement")
with the Adviser. As investment adviser, the Adviser manages the investments of
each of the Index Series. For its services to each Index Series, the Adviser is
entitled to receive fees equal to: .50% per annum of the aggregate net assets of
the Index Series up to aggregate net assets of $10 million, plus .30% per annum
of the aggregate net assets of the Index Series in excess of $10 million up to
$25 million, plus .20% per annum of the aggregate net assets of the Index Series
in excess of $25 million up to $50 million, plus .05% per annum of the aggregate
net assets of the Index Series in excess of $50 million.
The Fund has an Administration and Accounting Services Agreement with PFPC
Inc. Under the Administration and Accounting Services Agreement, PFPC Inc.
assists in supervising the operations
65
<PAGE>
2. AGREEMENTS (CONTINUED)
of the Index Series. For its administrative services and fund accounting
services, PFPC Inc. will be paid aggregate fees equal to each Index Series'
allocable portion of: .10% per annum of the aggregate net assets of the Fund
less than $3 billion, plus .09% per annum of the aggregate net assets of the
Fund $3 billion and $5 billion, plus .08% per annum of the aggregate net assets
of the Fund between $5 billion and $7.5 billion, plus .065% per annum of the
aggregate net assets of the Fund between $7.5 billion and $10 billion, plus .05%
per annum of the aggregate net assets of the Fund in excess of $10 billion. For
the first year of the Fund's operations, PFPC has agreed to waive a portion of
its fees. During the first year of the Fund's operations, PFPC will charge the
Fund an administrative and accounting service fee equal to $4,167 per month for
each Index Series, plus .05% of aggregate average daily net assets of all Index
Series in excess of $850 million per annum. However, if during the first three
years of the Fund's operations the Fund removes PFPC as the administrator, the
Fund will pay the cost of deconversion and PFPC will be entitled to recoup 100%
of the fees waived during the first year. From time to time PFPC may waive all
or a portion of the fees.
Each Index Series of the Fund has a distribution plan, pursuant to Rule
12b-1 Plan under the 1940 Act ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan,
the Distributor is paid an annual fee as compensation in connection with the
offering and sale of shares of each Index Series. The fees to be paid to the
Distributor under Rule 12b-1 Plan are calculated and paid monthly with respect
to each Index Series at an annual rate to .25% of the average daily net assets
of such Index Series. From time to time the Distributor may waive all or a
portion of the fees.
3. CAPITAL SHARES
The Fund is currently authorized to issue 6 billion shares of common stock.
The Board has created seventeen Index Series of stock and allocated the
following number of shares to each Index Series: Australia Index Series (127.8
million shares); Austria Index Series (19.8 million shares); Belgium Index
Series (136.2 million shares); Canada Index Series (340.2 million shares);
France Index Series (340.2 million shares); Germany Index Series (382.2 million
shares); Hong Kong Index Series (191.4 million shares); Italy Index Series (63.6
million shares); Japan Index Series (2,124.6 million shares); Malaysia Index
Series (127.8 million shares); Mexico (Free) Index Series (255 million shares);
Netherlands Index Series (255 million shares); Singapore (Free) Index Series
(191.4 million shares); Spain Index Series (127.8 million shares); Sweden Index
Series (63.6 million shares); Switzerland Index Series (318.625 million shares);
and United Kingdom Index Series (934.2 million shares). Shares of each Index
Series are offered at net asset value without an initial sales load, 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 Index Series are made in portfolio securities, plus or minus a specified
amount of cash, and minus a specified redemption transaction fee.
66
<PAGE>
APPENDIX A-1
MSCI AUSTRALIA INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
BROKEN HILL PROP CO Energy 27,471.38 19.78
NEWS CORP Services 15,465.41 7.77
NEWS CORP PLVO Services 15,465.41 3.37
NATIONAL AUSTRALIA BANK Finance 13,769.99 9.92
WESTPAC BANKING Finance 9,074.35 6.54
WMC (WESTERN MINING CORP) Materials 6,822.58 4.91
CRA Materials 4,670.19 3.36
COCA-COLA AMATIL Consumer Goods 4,630.46 3.33
AMCOR Materials 4,619.52 3.33
LEND LEASE Finance 3,570.48 2.57
COLES MYER Services 3,454.47 2.49
FOSTERS BREWING GROUP Consumer Goods 3,284.42 2.37
CSR Multi-Industry 3,126.16 2.25
BORAL Materials 2,800.27 2.02
PACIFIC DUNLOP Multi-Industry 2,617.49 1.89
BRAMBLES INDUSTRIES Services 2,600.47 1.87
PIONEER INTERNATIONAL Materials 2,489.23 1.79
ICI AUSTRALIA Materials 2,357.09 1.70
MIM HOLDINGS Materials 1,985.96 1.43
NORTH Materials 1,923.28 1.39
WESTFIELD TRUST Finance 1,842.42 1.33
SANTOS Energy 1,576.66 1.14
SOUTHCORP HOLDINGS Multi-Industry 1,403.69 1.01
GENERAL PROPERTY TRUST Finance 1,297.64 0.93
GOODMAN FIELDER Consumer Goods 1,203.39 0.87
BURNS, PHILP & CO Services 1,126.91 0.81
GOLD MINES OF KALGOORLIE Gold 1,066.72 0.77
NEWCREST MINING Gold 1,043.38 0.75
RGC (RENISON GOLDFIELDS) Materials 1,010.88 0.73
SMITH (HOWARD) Multi-Industry 880.47 0.63
TUBEMAKERS OF AUSTRALIA Capital Equipment 874.77 0.63
QCT RESOURCES Energy 782.57 0.56
CALTEX AUSTRALIA Energy 750.71 0.54
STOCKLAND TRUST Finance 750.62 0.54
AMPOLEX Energy 704.88 0.51
EMAIL Consumer Goods 696.40 0.50
HARDIE (JAMES) IND Materials 692.69 0.50
TNT Services 679.93 0.49
SCHRODERS PROPERTY FUND Finance 658.32 0.47
AUSTRALIAN NATIONAL IND Multi-Industry 573.58 0.41
ROTHMANS (AUSTRALIA) Consumer Goods 522.00 0.38
SONS OF GWALIA Gold 448.80 0.32
ASHTON MINING Materials 427.60 0.31
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
ABERFOYLE Materials 253.68 0.18
OPSM PROTECTOR Consumer Goods 229.25 0.17
FAI INSURANCES Finance 171.02 0.12
EMPEROR MINES Gold 170.95 0.12
ADELAIDE BRIGHTON Materials 154.43 0.11
CRUSADER Energy 123.16 0.09
</TABLE>
A-2
<PAGE>
APPENDIX A-2
MSCI AUSTRIA INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------------------------------- ----------------- ----------------- ----------
<S> <C> <C> <C>
BANK AUSTRIA STAMM Finance 4,555.69 16.52
BANK AUSTRIA VORZUG Finance 4,555.69 1.45
BANK AUSTRIA PART Finance 4,555.69 1.11
CREDITANSTALT STAMM Finance 2,703.99 7.45
CREDITANSTALT VORZUG Finance 2,703.99 3.88
EA-GENERALI STAMM Finance 2,596.08 10.37
EA-GENERALI VORZUG Finance 2,596.08 0.50
OMV AG Energy 2,554.97 10.70
VERBUND (OSTERR ELEK) A Energy 1,985.55 8.32
VA TECHNOLOGIE Capital Equipment 1,967.13 8.24
WIENERBERGER BAUSTOFF Materials 1,567.58 6.57
FLUGHAFEN WIEN Services 1,368.96 5.74
BOEHLER-UDDEHOLM Materials 867.43 3.63
MAYR MELNHOF KARTON Materials 597.59 2.50
AUSTRIA MIKRO SYSTEME Capital Equipment 484.61 2.03
AUSTRIAN AIRLINES Services 484.61 2.03
RADEX-HERAKLITH INDUSTR. Materials 477.66 2.00
BBAG OESTERR BRAU STAMM Consumer Goods 449.38 1.88
BAU HOLDING STAMM Capital Equipment 335.06 1.09
BAU HOLDING VORZUG Capital Equipment 335.06 0.31
LENZING Materials 318.60 1.33
UNIVERSALE-BAU Capital Equipment 203.88 0.85
BWT STAMM Capital Equipment 186.10 0.78
STEYR-DAIMLER-PUCH Capital Equipment 164.41 0.69
</TABLE>
A-3
<PAGE>
APPENDIX A-3
MSCI BELGIUM INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------------------------------- ----------------- ----------------- ----------
<S> <C> <C> <C>
ELECTRABEL Energy 13,142.51 17.60
ELECTRABEL VVPR Energy 13,142.51 3.82
PETROFINA Energy 6,841.19 11.15
TRACTEBEL Multi-Industry 5,967.38 8.19
TRACTEBEL VVPR Multi-Industry 5,967.38 1.53
GENERALE BANQUE GROUPE Finance 5,585.50 9.10
SOLVAY Materials 4,635.32 7.55
FORTIS AG Finance 4,439.59 7.24
KREDIETBANK Finance 4,154.10 6.03
KREDIETBANK VVPR Finance 4,154.10 0.74
ROYALE BELGE Finance 3,359.75 4.54
ROYALE BELGE VVPR Finance 3,359.75 0.93
GROUPE BRUXELLES LAMBERT Multi-Industry 3,166.24 5.16
DELHAIZE-LE LION Services 2,157.26 3.52
BEKAERT Capital Equipment 1,998.69 3.26
UNION MINIERE Materials 1,816.00 2.96
CBR (CIMENTERIES) Materials 1,770.97 2.40
CBR (CIMENTERIES) VVPR Materials 1,770.97 0.49
GEVAERT Multi-Industry 1,618.07 2.64
GLAVERBEL (GROUPE) Materials 708.19 1.15
</TABLE>
A-4
<PAGE>
APPENDIX A-4
MSCI CANADA INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
SEAGRAM CO Consumer Goods 13,513.74 6.40
NORTHERN TELECOM Capital Equipment 11,402.84 5.40
BCE INC Services 11,297.27 5.35
BARRICK GOLD CORP Gold 10,439.35 4.94
THOMSON CORP Services 8,998.51 4.26
ROYAL BANK OF CANADA Finance 7,803.80 3.69
ALCAN ALUMINIUM Materials 7,158.38 3.39
IMPERIAL OIL Energy 6,872.48 3.25
PLACER DOME Gold 6,711.24 3.18
CANADIAN PACIFIC LTD Multi-Industry 6,684.59 3.17
CANADIAN IMPERIAL BANK Finance 6,572.33 3.11
BANK MONTREAL Finance 6,378.49 3.02
BANK NOVA SCOTIA Finance 5,317.11 2.52
BOMBARDIER B Capital Equipment 4,853.30 1.68
BOMBARDIER A Capital Equipment 4,853.30 0.62
NORANDA INC Materials 4,825.04 2.28
IMASCO Multi-Industry 4,583.67 2.17
NOVA CORP Energy 4,271.77 2.02
NEWBRIDGE NETWORKS CORP Capital Equipment 4,148.80 1.96
INCO Materials 4,107.55 1.94
POTASH CORP SASKATCHEWAN Materials 3,236.03 1.53
LAIDLAW B Services 3,065.18 1.22
LAIDLAW A Services 3,065.18 0.23
TRANSCANADA PIPELINES Energy 2,902.18 1.37
RENAISSANCE ENERGY Energy 2,629.89 1.25
CAMECO CORP Materials 2,591.72 1.23
MAGNA INTERNATIONAL A Capital Equipment 2,550.60 1.21
CANADIAN OCCIDENTAL Energy 2,149.99 1.02
TALISMAN ENERGY Energy 2,028.85 0.96
MOORE CORP Services 1,968.93 0.93
SUNCOR Energy 1,966.20 0.93
ROGERS COMMUNICATIONS B Services 1,895.95 0.90
TECK CORP B Materials 1,884.03 0.89
DUPONT CANADA Materials 1,752.26 0.83
POWER CORP OF CANADA Finance 1,745.23 0.83
COMINCO Materials 1,720.35 0.81
TRANSALTA CORP Energy 1,717.55 0.81
TELUS CORP Services 1,717.43 0.81
ECHO BAY MINES Gold 1,665.21 0.79
WESTON (GEORGE) Services 1,663.74 0.79
ALBERTA ENERGY CO Energy 1,647.34 0.78
MACMILLAN BLOEDEL Materials 1,637.88 0.78
BRASCAN A Multi-Industry 1,616.06 0.77
IPL ENERGY Energy 1,471.31 0.70
WESTCOAST ENERGY Energy 1,358.64 0.64
LOEWEN GROUP Services 1,345.17 0.64
</TABLE>
A-5
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
NATIONAL BANK OF CANADA Finance 1,330.67 0.63
AVENOR Materials 1,243.98 0.59
DOFASCO Materials 1,220.65 0.58
NORCEN ENERGY RESOURCES Energy 1,213.48 0.57
ANDERSON EXPLORATION Energy 1,150.24 0.54
CANADIAN NAT RESOURCES Energy 1,109.26 0.53
QUEBECOR B Services 1,097.84 0.52
MOLSON COS A Consumer Goods 1,008.38 0.36
MOLSON COS B Consumer Goods 1,008.38 0.12
GULF CANADA RESOURCES Energy 955.42 0.45
RIO ALGOM Materials 950.75 0.45
DOMTAR Materials 949.67 0.45
CANADIAN TIRE A Services 947.67 0.45
SHERRITT Materials 874.72 0.41
EXTENDICARE COMMON Multi-Industry 832.93 0.39
CAE Capital Equipment 823.16 0.39
SOUTHAM Services 814.04 0.39
CAMBIOR Gold 708.42 0.34
PEGASUS GOLD Gold 650.24 0.31
OSHAWA GROUP A Services 635.16 0.30
RANGER OIL Energy 627.07 0.30
AGNICO-EAGLE MINES Gold 599.63 0.28
COREL CORP Services 555.36 0.26
AIR CANADA COMMON Services 552.26 0.26
REPAP ENTERPRISES Materials 531.73 0.25
CO-STEEL Materials 527.72 0.25
PROVIGO Services 496.07 0.23
STELCO A Materials 458.20 0.22
NUMAC ENERGY Energy 407.28 0.19
COTT CORP Consumer Goods 406.84 0.19
SCOTT'S HOSPITALITY SV Services 358.10 0.17
INT'L FOREST PRODUCTS A Materials 295.95 0.14
CCL INDUSTRIES B Materials 282.30 0.13
DOMINION TEXTILE Consumer Goods 212.42 0.10
SPAR AEROSPACE Capital Equipment 207.36 0.10
NOMA INDUSTRIES A Consumer Goods 139.70 0.07
TELE-METROPOLE B Services 114.75 0.05
INTER-CITY PRODUCTS CORP Capital Equipment 42.35 0.02
</TABLE>
A-6
<PAGE>
APPENDIX A-5
MSCI FRANCE INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION
(MILLIONS OF WEIGHT IN
CONSTITUENT NAME INDUSTRY SECTOR US$) MSCI INDEX (%)
- ----------------------------------------- ---------------------- ---------------- ---------------
<S> <C> <C> <C>
ELF AQUITAINE Energy 20,316.87 5.95
LVMH Consumer Goods 19,454.55 5.70
L'OREAL Consumer Goods 17,423.40 5.10
CARREFOUR Services 16,495.72 4.83
TOTAL SA Energy 16,092.82 4.71
ALCATEL ALSTHOM Capital Equipment 13,746.86 4.02
GENERALE EAUX (CIE) Services 12,559.65 3.68
AIR LIQUIDE Materials 11,964.06 3.50
AXA Finance 11,772.12 3.45
DANONE (GROUPE) Consumer Goods 11,306.19 3.31
SAINT-GOBAIN Materials 10,451.29 3.06
SOCIETE GENERALE Finance 10,246.72 3.00
BNP ORD Finance 8,123.44 2.38
RHONE-POULENC ORD A Materials 7,479.81 2.19
PEUGEOT SA Consumer Goods 7,316.60 2.14
UAP (COMPAGNIE) Finance 7,199.60 2.11
SANOFI Consumer Goods 6,811.46 1.99
PARIBAS(CIE FINANCIERE)A Finance 6,324.95 1.85
LAFARGE (FRANCE) Materials 6,194.35 1.81
SUEZ (COMPAGNIE DE) Finance 6,146.83 1.80
LYONNAISE DES EAUX Multi-Industry 5,438.76 1.59
HAVAS Services 5,218.52 1.53
SCHNEIDER Capital Equipment 5,208.26 1.52
PINAULT-PRINT.-REDOUTE Services 5,136.44 1.50
LEGRAND Capital Equipment 4,955.85 1.45
PROMODES Services 4,801.83 1.41
MICHELIN B Capital Equipment 4,595.71 1.35
ERIDANIA BEGHIN-SAY Consumer Goods 4,542.75 1.33
CANAL + Services 4,456.20 1.30
ACCOR Services 3,775.98 1.11
USINOR SACILOR Materials 3,566.55 1.04
VALEO Capital Equipment 3,510.88 1.03
PERNOD RICARD Consumer Goods 3,438.78 1.01
BIC Consumer Goods 3,085.38 0.90
THOMSON-CSF Capital Equipment 2,953.59 0.86
COMPAGNIE BANCAIRE Finance 2,778.01 0.81
CASINO ORD Services 2,372.06 0.57
CASINO ADP Services 2,372.06 0.12
SAINT LOUIS Multi-Industry 2,334.63 0.68
BOUYGUES Capital Equipment 2,330.86 0.68
SODEXHO Services 2,268.26 0.66
DOCKS DE FRANCE Services 2,215.91 0.65
SAGEM Capital Equipment 2,128.76 0.62
SIDEL Capital Equipment 2,069.10 0.61
SEITA Consumer Goods 1,990.97 0.58
IMETAL Materials 1,978.94 0.58
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION
(MILLIONS OF WEIGHT IN
CONSTITUENT NAME INDUSTRY SECTOR US$) MSCI INDEX (%)
- ----------------------------------------- ---------------------- ---------------- ---------------
LAGARDERE GROUPE Multi-Industry 1,956.22 0.57
<S> <C> <C> <C>
ESSILOR INTERNATIONAL Consumer Goods 1,945.94 0.57
COMPTOIRS MODERNES Services 1,770.63 0.52
PRIMAGAZ Energy 1,765.96 0.52
CHARGEURS Multi-Industry 1,764.19 0.52
ECCO Services 1,743.97 0.51
SIMCO Finance 1,347.89 0.39
EURAFRANCE Finance 1,308.08 0.38
TECHNIP Capital Equipment 1,222.90 0.36
CLUB MEDITERRANEE Services 1,210.75 0.35
BONGRAIN Consumer Goods 1,103.60 0.32
SEFIMEG Finance 1,036.73 0.30
GTM-ENTREPOSE Capital Equipment 1,001.31 0.29
CREDIT NATIONAL Finance 998.40 0.29
UNIBAIL Finance 938.79 0.27
SALOMON SA Consumer Goods 878.44 0.26
CPR(CIE PARIS.REESCOMPTE Finance 805.08 0.24
UNION IMMOBILIERE FRANCE Finance 734.79 0.22
SOMMER-ALLIBERT Materials 644.33 0.19
CREDIT FONCIER DE FRANCE Finance 516.80 0.15
MOULINEX Consumer Goods 478.71 0.14
EUROPE 1 Services 374.58 0.11
NORD-EST Materials 356.87 0.10
SKIS ROSSIGNOL Consumer Goods 332.53 0.10
DMC DOLLFUS MIEG & CIE Consumer Goods 294.69 0.09
FINEXTEL Finance 165.00 0.05
GENERALE GEOPHYSIQUE Capital Equipment 140.93 0.04
RADIOTECHNIQUE Consumer Goods 133.37 0.04
</TABLE>
A-8
<PAGE>
APPENDIX A-6
MSCI GERMANY INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ---------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
ALLIANZ HOLDING AKTIE Finance 43,422.58 11.51
SIEMENS STAMM Capital Equipment 31,816.37 8.44
DAIMLER-BENZ Consumer Goods 28,324.70 7.51
DEUTSCHE BANK Finance 24,919.16 6.61
VEBA Energy 21,623.95 5.73
BAYER Materials 20,671.00 5.48
RWE STAMM Energy 19,185.70 3.51
RWE VORZUG Energy 19,185.70 1.57
MUENCHENER RUECK NAM Finance 17,926.69 4.60
MUENCHENER RUECK INH Finance 17,926.69 0.15
SAP STAMM Services 15,569.85 2.49
SAP VORZUG Services 15,569.85 1.64
BASF Materials 14,544.88 3.86
MANNESMANN Capital Equipment 12,748.33 3.38
VOLKSWAGEN STAMM Consumer Goods 11,906.56 2.69
VOLKSWAGEN VORZUG Consumer Goods 11,906.56 0.47
DRESDNER BANK Finance 11,894.43 3.15
VIAG Multi-Industry 8,859.34 2.35
BAYER VEREINSBANK STAMM Finance 7,962.68 2.11
BAYER HYPOTHEKEN BANK Finance 6,763.87 1.79
MERCK KGAA Consumer Goods 6,720.44 1.78
THYSSEN Materials 6,037.64 1.60
LUFTHANSA STAMM Services 5,673.84 1.41
LUFTHANSA VORZUG Services 5,673.84 0.10
LINDE Capital Equipment 5,080.97 1.35
SCHERING Consumer Goods 4,947.03 1.31
PREUSSAG Multi-Industry 4,514.64 1.20
MAN STAMM Capital Equipment 4,253.14 0.86
MAN VORZUG Capital Equipment 4,253.14 0.26
AACHEN & MUNCH BET NAMEN Finance 3,621.66 0.81
AACHEN & MUNCH BET INH Finance 3,621.66 0.15
KARSTADT Services 3,339.45 0.89
BEIERSDORF Consumer Goods 3,215.07 0.85
KAUFHOF HOLDING STAMM Services 3,170.63 0.70
KAUFHOF HOLDING VORZUG Services 3,170.63 0.14
DEGUSSA Materials 3,139.46 0.83
HOCHTIEF Capital Equipment 3,133.38 0.83
HEIDELBERGER ZEMENT STAM Materials 2,794.64 0.74
ADIDAS Consumer Goods 2,590.77 0.69
ASKO DT KAUFHAUS STAMM Services 2,448.50 0.62
ASKO DT KAUFHAUS VORZUG Services 2,448.50 0.03
CKAG COLONIA KONZ STAMM Finance 2,431.90 0.56
CKAG COLONIA KONZ VORZUG Finance 2,431.90 0.08
</TABLE>
A-9
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ---------------------------------------- ---------------------- ---------------- -------------
CONTINENTAL GUMMI-WERKE Capital Equipment 1,546.73 0.41
<S> <C> <C> <C>
BILFINGER + BERGER Capital Equipment 1,427.56 0.38
PWA PAPIERWERKE WALDHOF Materials 1,024.82 0.27
DOUGLAS HOLDING Services 996.25 0.26
DYCKERHOFF STAMM Materials 823.91 0.14
DYCKERHOFF VORZUG Materials 823.91 0.08
AGIV AG IND & VERKEHR Multi-Industry 760.83 0.20
BRAU & BRUNNEN Consumer Goods 654.73 0.17
FAG KUGELFISCHER STAMM Capital Equipment 650.39 0.13
FAG KUGELFISCHER VORZUG Capital Equipment 650.39 0.04
HERLITZ STAMM Services 553.95 0.08
HERLITZ VORZUG Services 553.95 0.07
IWKA Capital Equipment 421.55 0.11
STRABAG STAMM Capital Equipment 401.57 0.10
STRABAG VORZUG Capital Equipment 401.57 0.01
KLOECKNER-HUMBOLDT-DEUT Capital Equipment 390.73 0.10
RHEINMETALL STAMM Capital Equipment 384.71 0.07
RHEINMETALL VORZUG Capital Equipment 384.71 0.03
ESCADA STAMM Consumer Goods 304.57 0.04
ESCADA VORZUG Consumer Goods 304.57 0.04
SALAMANDER Consumer Goods 303.24 0.08
BREMER VULKAN VERBUND Capital Equipment 297.16 0.08
LINOTYPE-HELL Capital Equipment 273.41 0.07
HOLSTEN-BRAUEREI Consumer Goods 249.15 0.07
DIDIER-WERKE Capital Equipment 209.91 0.06
DLW Materials 200.91 0.05
</TABLE>
A-10
<PAGE>
APPENDIX A-7
MSCI HONG KONG INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
HUTCHISON WHAMPOA Multi-Industry 23,492.05 12.78
SUN HUNG KAI PROPERTIES Finance 22,714.85 12.36
HONGKONG TELECOM Services 21,203.56 11.54
HANG SENG BANK Finance 18,673.01 10.16
CHEUNG KONG Finance 16,342.41 8.89
SWIRE PACIFIC A Multi-Industry 13,840.04 7.53
CHINA LIGHT & POWER CO Energy 9,654.63 5.25
WHARF HOLDINGS Finance 8,557.20 4.66
NEW WORLD DEVELOPMENT Finance 8,474.30 4.61
CATHAY PACIFIC AIRWAYS Services 5,316.31 2.89
HONGKONG CHINA GAS Energy 4,472.33 2.43
BANK EAST ASIA Finance 3,836.36 2.09
HYSAN DEVELOPMENT Finance 3,088.31 1.68
HOPEWELL HOLDINGS Finance 2,940.58 1.60
HANG LUNG DEVELOPMENT CO Finance 2,650.16 1.44
SHANGRI-LA ASIA Services 2,012.52 1.09
HONGKONG SHANGHAI HOTEL Services 1,737.23 0.95
CHINESE ESTATES HOLDINGS Finance 1,510.59 0.82
TELEVISION BROADCASTS Services 1,510.10 0.82
MIRAMAR HOTEL & INVEST. Finance 1,254.20 0.68
SHUN TAK HOLDINGS Services 1,097.96 0.60
PEREGRINE INVESTMENTS Finance 1,071.89 0.58
SOUTH CHINA MORNING POST Services 1,057.29 0.58
WING LUNG BANK Finance 1,038.53 0.57
JOHNSON ELECTRIC HLDGS Capital Equipment 818.41 0.45
REGAL HOTELS INT'L Services 816.27 0.44
DICKSON CONCEPTS INT'L Services 716.19 0.39
GIORDANO INTERNATIONAL Services 680.75 0.37
ORIENTAL PRESS GROUP Services 634.31 0.35
HONGKONG AIRCRAFT HAECO Capital Equipment 577.23 0.31
TAI CHEUNG HOLDINGS Finance 551.08 0.30
KUMAGAI GUMI (HK) Capital Equipment 328.06 0.18
LAI SUN GARMENT INT'L Consumer Goods 274.85 0.15
WINSOR INDUSTRIAL CORP Consumer Goods 253.57 0.14
STELUX HOLDINGS INT'L Multi-Industry 225.19 0.12
ELEC & ELTEK INT'L HLDGS Capital Equipment 196.56 0.11
PLAYMATES TOYS HOLDINGS Consumer Goods 115.44 0.06
APPLIED INT'L HOLDINGS Capital Equipment 68.22 0.04
</TABLE>
A-11
<PAGE>
APPENDIX A-8
MSCI ITALY INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
ASSICURAZIONI GENERALI Finance 20,059.23 16.31
FIAT ORD Consumer Goods 14,176.41 8.94
FIAT PRIV Consumer Goods 14,176.41 1.49
FIAT RNC Consumer Goods 14,176.41 1.10
TELECOM ITALIA MOB. ORD Services 13,710.14 9.72
TELECOM ITALIA MOB. RNC Services 13,710.14 1.43
TELECOM ITALIA ORD Services 13,293.59 9.07
TELECOM ITALIA RNC Services 13,293.59 1.74
INA Finance 5,716.44 4.65
SAN PAOLO DI TORINO ORD Finance 5,016.48 4.08
RAS ORD Finance 4,310.65 2.95
RAS RNC Finance 4,310.65 0.55
IMI ISTITUTO MOBILIARE Finance 4,088.96 3.33
BANCA COMMERCIALE ORD Finance 4,068.05 3.31
MONTEDISON ORD Multi-Industry 3,735.08 2.73
MONTEDISON RNC Multi-Industry 3,735.08 0.30
MEDIOBANCA Finance 3,329.91 2.71
EDISON ORD Energy 3,147.98 2.56
CREDITO ITALIANO ORD Finance 2,774.60 2.26
OLIVETTI ORD Capital Equipment 2,262.27 1.84
ITALGAS Energy 2,183.02 1.78
PIRELLI SPA ORD Capital Equipment 2,073.81 1.61
PIRELLI SPA RNC Capital Equipment 2,073.81 0.07
BENETTON Consumer Goods 2,040.33 1.66
BANCO AMBROSIANO VEN ORD Finance 1,791.86 1.19
BANCO AMBROSIANO VEN RNC Finance 1,791.86 0.27
SAI ORD Finance 1,600.12 1.09
SAI RNC Finance 1,600.12 0.21
ITALCEMENTI ORD Materials 1,359.24 0.88
ITALCEMENTI RNC Materials 1,359.24 0.22
SIRTI Capital Equipment 1,320.41 1.07
RINASCENTE ORD Services 1,255.48 0.82
RINASCENTE RNC Services 1,255.48 0.12
RINASCENTE PRIV Services 1,255.48 0.08
PARMALAT FINANZIARIA Consumer Goods 1,096.85 0.89
MONDADORI ORD Services 1,059.60 0.86
SAIPEM ORD Capital Equipment 997.74 0.81
BANCA POPOLARE MILANO Finance 910.52 0.74
FIDIS FIN. DI SVILUPPO Multi-Industry 843.16 0.69
SNIA BPD ORD Multi-Industry 653.51 0.49
SNIA BPD RNC Multi-Industry 653.51 0.04
MAGNETI MARELLI ORD Capital Equipment 642.07 0.52
CARTIERE BURGO ORD Materials 639.35 0.52
SASIB ORD Capital Equipment 503.75 0.29
SASIB RNC Capital Equipment 503.75 0.12
</TABLE>
A-12
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------- ---------------------- ---------------- -------------
LANE G.MARZOTTO ORD Consumer Goods 456.12 0.29
<S> <C> <C> <C>
LANE G.MARZOTTO RISP Consumer Goods 456.12 0.08
IMPREGILO ORD Capital Equipment 424.06 0.34
PREVIDENTE (LA) Finance 374.63 0.30
DANIELI ORD Capital Equipment 351.23 0.19
DANIELI RNC Capital Equipment 351.23 0.09
CEMENTIR Materials 205.09 0.17
FALCK ORD Materials 200.03 0.16
FRANCO TOSI Multi-Industry 165.69 0.13
SAFFA A ORD Materials 131.00 0.11
</TABLE>
A-13
<PAGE>
APPENDIX A-9
MSCI JAPAN INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION
(MILLIONS OF WEIGHT IN MSCI
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%)
- ----------------------------------------- ---------------------- ---------------- ---------------
<S> <C> <C> <C>
TOYOTA MOTOR CORP Consumer Goods 80,472.42 3.79
FUJI BANK Finance 65,850.97 3.10
INDUSTRIAL BANK OF JAPAN Finance 65,321.44 3.08
SUMITOMO BANK Finance 60,227.07 2.84
DAI-ICHI KANGYO BANK Finance 58,669.16 2.76
NOMURA SECURITIES CO Finance 42,595.58 2.01
SAKURA BANK Finance 39,953.55 1.88
MATSUSHITA ELECT IND'L Consumer Goods 34,916.79 1.64
TOKYO ELECTRIC POWER CO Energy 34,417.97 1.62
HITACHI Capital Equipment 33,655.63 1.58
BANK TOKYO Finance 33,012.17 1.55
ASAHI BANK Finance 27,798.51 1.31
TOKAI BANK Finance 27,707.17 1.30
MITSUBISHI HEAVY IND Capital Equipment 26,759.08 1.26
SEVEN-ELEVEN JAPAN CO Services 26,167.99 1.23
NIPPON STEEL CORP Materials 23,714.95 1.12
ITO-YOKADO CO Services 23,642.57 1.11
KANSAI ELECTRIC POWER CO Energy 22,975.07 1.08
SONY CORP Consumer Goods 22,909.71 1.08
HONDA MOTOR CO Consumer Goods 21,321.43 1.00
MITSUBISHI TRUST Finance 20,220.00 0.95
DAIWA SECURITIES CO Finance 20,118.76 0.95
NISSAN MOTOR CO Consumer Goods 19,859.25 0.93
FUJITSU Capital Equipment 19,804.49 0.93
TOKIO MARINE & FIRE Finance 19,409.16 0.91
MITSUBISHI CORP Services 19,346.48 0.91
NEC CORP Capital Equipment 18,799.73 0.89
SHARP CORP Consumer Goods 17,210.79 0.81
NIPPONDENSO CO Capital Equipment 16,832.02 0.79
CANON INC Capital Equipment 15,799.55 0.74
MITSUBISHI ESTATE CO Finance 15,797.04 0.74
MITSUBISHI ELECTRIC CORP Capital Equipment 15,562.78 0.73
FUJI PHOTO FILM CO Consumer Goods 14,536.48 0.68
TAKEDA CHEMICAL IND Consumer Goods 13,842.43 0.65
ASAHI GLASS CO Materials 13,520.37 0.64
MITSUI & CO Services 13,494.89 0.64
KYOCERA CORP Capital Equipment 13,271.83 0.62
MITSUI TRUST & BANK CO Finance 13,001.20 0.61
DAI NIPPON PRINTING CO Services 12,838.79 0.60
KIRIN BREWERY CO Consumer Goods 12,797.32 0.60
BRIDGESTONE CORP Capital Equipment 12,248.09 0.58
TOHOKU ELECTRIC POWER CO Energy 12,041.14 0.57
KINKI NIPPON RAILWAY CO Services 11,916.21 0.56
JAPAN AIRLINES CO Services 11,880.14 0.56
KAWASAKI STEEL CORP Materials 11,526.35 0.54
SANYO ELECTRIC CO Consumer Goods 11,496.07 0.54
MITSUBISHI CHEMICAL CORP Materials 11,270.52 0.53
</TABLE>
A-14
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION
(MILLIONS OF WEIGHT IN MSCI
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%)
- ----------------------------------------- ---------------------- ---------------- ---------------
SUMITOMO CORP Services 11,050.82 0.52
<S> <C> <C> <C>
SANKYO CO Consumer Goods 10,606.88 0.50
ASAHI CHEMICAL IND CO Materials 10,484.14 0.49
FANUC Capital Equipment 10,453.83 0.49
SUMITOMO METAL IND Materials 10,267.46 0.48
KAJIMA CORP Capital Equipment 10,160.24 0.48
NKK CORP Materials 10,051.84 0.47
NIPPON EXPRESS CO Services 10,048.16 0.47
TOKYO GAS CO Energy 9,961.04 0.47
SHIZUOKA BANK Finance 9,783.30 0.46
MITSUI FUDOSAN CO Finance 9,650.19 0.45
ITOCHU CORP Services 9,518.77 0.45
TOPPAN PRINTING CO Services 9,352.97 0.44
YAMAICHI SECURITIES CO Finance 9,326.51 0.44
TORAY INDUSTRIES Materials 9,123.42 0.43
OSAKA GAS CO Energy 9,032.95 0.43
KUBOTA CORP Capital Equipment 8,952.49 0.42
KOBE STEEL Materials 8,884.36 0.42
SUMITOMO ELECTRIC IND Capital Equipment 8,843.63 0.42
SEKISUI HOUSE Capital Equipment 8,809.91 0.41
BANK YOKOHAMA Finance 8,715.86 0.41
DAIEI Services 8,477.71 0.40
KOMATSU Capital Equipment 8,469.69 0.40
SHIMIZU CORP Capital Equipment 8,333.45 0.39
MURATA MANUFACTURING CO Capital Equipment 8,283.31 0.39
JUSCO CO Services 7,936.97 0.37
MARUBENI CORP Services 7,891.55 0.37
SUMITOMO CHEMICAL CO Materials 7,887.32 0.37
DAIWA HOUSE IND CO Capital Equipment 7,654.67 0.36
AJINOMOTO CO Consumer Goods 7,586.75 0.36
KAO CORP Consumer Goods 7,583.76 0.36
TOKYU CORP Services 7,447.89 0.35
SEKISUI CHEMICAL CO Materials 7,433.72 0.35
SECOM CO Services 7,432.22 0.35
NIPPON OIL CO Energy 7,235.81 0.34
TOSTEM CORP Materials 7,201.62 0.34
MARUI CO Services 7,200.20 0.34
YAMANOUCHI PHARM. Consumer Goods 7,076.73 0.33
RICOH CO Capital Equipment 6,949.77 0.33
TAISEI CORP Capital Equipment 6,905.11 0.33
NEW OJI PAPER CO Materials 6,789.21 0.32
NIPPON PAPER IND CO Materials 6,742.39 0.32
TAISHO PHARMACEUTICAL CO Consumer Goods 6,635.67 0.31
CHIBA BANK Finance 6,591.76 0.31
NIPPON YUSEN K.K Services 6,578.35 0.31
SHIN-ETSU CHEMICAL CO Materials 6,559.32 0.31
YASUDA TRUST & BANK CO Finance 6,397.91 0.30
TOYO SEIKAN KAISHA Materials 6,396.02 0.30
JOYO BANK Finance 6,362.70 0.30
ROHM CO Capital Equipment 6,227.70 0.29
</TABLE>
A-15
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION
(MILLIONS OF WEIGHT IN MSCI
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%)
- ----------------------------------------- ---------------------- ---------------- ---------------
MITSUBISHI MATERIALS Materials 6,099.21 0.29
<S> <C> <C> <C>
OBAYASHI CORP Capital Equipment 6,049.64 0.28
OMRON CORP Capital Equipment 5,785.49 0.27
SUMITOMO MARINE & FIRE Finance 5,624.91 0.26
TOKYO ELECTRON Capital Equipment 5,544.93 0.26
MITSUI MARINE & FIRE Finance 5,353.17 0.25
TOYODA AUTOMATIC LOOM Capital Equipment 5,276.77 0.25
GUNMA BANK Finance 5,266.28 0.25
SUMITOMO METAL MINING CO Materials 5,257.03 0.25
SEGA ENTREPRISES Consumer Goods 5,195.66 0.24
TOBU RAILWAY CO Services 5,180.22 0.24
TEIJIN Materials 5,122.28 0.24
ASAHI BREWERIES Consumer Goods 4,886.73 0.23
HANKYU CORP Services 4,808.94 0.23
ODAKYU ELECTRIC RAILWAY Services 4,782.22 0.23
TOTO Materials 4,676.16 0.22
EISAI CO Consumer Goods 4,643.16 0.22
TAKASHIMAYA CO Services 4,361.74 0.21
SHISEIDO CO Consumer Goods 4,342.23 0.20
MITSUKOSHI Services 4,301.10 0.20
YAMATO TRANSPORT CO Services 4,190.87 0.20
KINDEN CORP Capital Equipment 4,183.39 0.20
KYOWA HAKKO KOGYO CO Consumer Goods 4,149.70 0.20
EBARA CORP Capital Equipment 4,138.59 0.19
NSK Capital Equipment 4,104.02 0.19
NAGOYA RAILROAD CO Services 4,036.73 0.19
HOKURIKU BANK Finance 4,010.81 0.19
YAMAZAKI BAKING CO Consumer Goods 3,976.47 0.19
DAIICHI PHARMACEUTICAL Consumer Goods 3,942.53 0.19
MITSUBISHI OIL CO Energy 3,874.39 0.18
HOYA CORP Consumer Goods 3,801.47 0.18
DAINIPPON INK Materials 3,774.70 0.18
ASHIKAGA BANK Finance 3,735.10 0.18
NICHII CO Services 3,689.47 0.17
NIPPON FIRE & MARINE Finance 3,666.12 0.17
PIONEER ELECTRONIC CORP Consumer Goods 3,661.48 0.17
MITSUI OSK LINES Services 3,644.39 0.17
ADVANTEST CORP Capital Equipment 3,643.81 0.17
NGK INSULATORS Capital Equipment 3,590.73 0.17
YAMAHA CORP Consumer Goods 3,485.33 0.16
SEVENTY-SEVEN BANK Finance 3,482.24 0.16
JAPAN ENERGY CORP Energy 3,468.57 0.16
NIPPON MEAT PACKERS Consumer Goods 3,387.53 0.16
MINEBEA CO Capital Equipment 3,379.14 0.16
YAMAGUCHI BANK Finance 3,367.16 0.16
NICHIDO FIRE & MARINE Finance 3,365.95 0.16
SHOWA DENKO K.K Materials 3,349.60 0.16
CHICHIBU ONODA CEMENT Materials 3,319.15 0.16
KURARAY CO Materials 3,289.73 0.15
UBE INDUSTRIES Materials 3,275.72 0.15
</TABLE>
A-16
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION
(MILLIONS OF WEIGHT IN MSCI
CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%)
- ----------------------------------------- ---------------------- ---------------- ---------------
NIPPON LIGHT METAL CO Materials 3,273.71 0.15
<S> <C> <C> <C>
KOKUYO CO Services 3,264.09 0.15
COSMO OIL CO Energy 3,231.94 0.15
FURUKAWA ELECTRIC CO Capital Equipment 3,228.52 0.15
NISSIN FOOD PRODUCTS CO Consumer Goods 3,222.34 0.15
NISHIMATSU CONSTRUCTION Capital Equipment 3,204.03 0.15
MITSUI TOATSU CHEMICALS Materials 3,164.79 0.15
KURITA WATER INDUSTRIES Capital Equipment 3,127.85 0.15
NTN CORP Capital Equipment 3,105.37 0.15
SAPPORO BREWERIES Consumer Goods 3,103.49 0.15
NANKAI ELECTRIC RAILWAY Services 3,102.19 0.15
AMADA CO Capital Equipment 3,092.03 0.15
BANYU PHARMACEUTICAL CO Consumer Goods 3,086.47 0.15
KEIHIN ELECTRIC EXPRESS Services 3,004.95 0.14
SHIONOGI & CO Consumer Goods 2,998.52 0.14
CREDIT SAISON CO Finance 2,994.02 0.14
TOKYO DOME CORP Services 2,991.20 0.14
ISETAN CO Services 2,905.93 0.14
TBS TOKYO BROADCASTING Services 2,878.34 0.14
SUMITOMO FORESTRY CO Materials 2,854.03 0.13
SEIYU Services 2,846.90 0.13
MITSUBISHI WAREHOUSE Services 2,801.22 0.13
TOHO CO Services 2,772.22 0.13
KUMAGAI GUMI CO Capital Equipment 2,744.17 0.13
CASIO COMPUTER CO Consumer Goods 2,737.00 0.13
ORIX CORP Finance 2,730.35 0.13
TOSOH CORP Materials 2,691.10 0.13
OLYMPUS OPTICAL CO Consumer Goods 2,669.09 0.13
SHIMANO Consumer Goods 2,653.49 0.12
MAKITA CORP Capital Equipment 2,635.34 0.12
HANKYU DEPARTMENT STORES Services 2,627.04 0.12
TAKARA SHUZO CO Consumer Goods 2,626.79 0.12
KONICA CORP Consumer Goods 2,599.24 0.12
CITIZEN WATCH CO Consumer Goods 2,580.71 0.12
PENTA-OCEAN CONSTRUCTION Capital Equipment 2,573.53 0.12
FUJITA KANKO Services 2,569.02 0.12
DAIKIN INDUSTRIES Capital Equipment 2,566.20 0.12
NGK SPARK PLUG CO Capital Equipment 2,558.15 0.12
KAMIGUMI CO Services 2,554.57 0.12
TOYOBO CO Consumer Goods 2,539.99 0.12
SEINO TRANSPORTATION CO Services 2,526.39 0.12
YOKOGAWA ELECTRIC CORP Capital Equipment 2,449.60 0.12
ONWARD KASHIYAMA CO Consumer Goods 2,415.54 0.11
KANDENKO CO Capital Equipment 2,373.94 0.11
CHUGAI PHARMACEUTICAL CO Consumer Goods 2,351.29 0.11
MEIJI SEIKA KAISHA Consumer Goods 2,331.16 0.11
FUJITA CORP Capital Equipment 2,330.62 0.11
</TABLE>
A-17
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
NIPPON SHINPAN CO Finance 2,310.72 0.11
MITSUI ENGINEERING & SHIP. Capital Equipment 2,285.09 0.11
MITSUBISHI GAS CHEMICAL Materials 2,280.22 0.11
SNOW BRAND MILK PRODUCTS Consumer Goods 2,273.54 0.11
KANEKA CORP Materials 2,271.69 0.11
OKUMURA CORP Capital Equipment 2,270.43 0.11
INAX CORP Materials 2,267.27 0.11
HONSHU PAPER CO Materials 2,249.69 0.11
ARABIAN OIL CO Energy 2,231.54 0.11
FUJIKURA Capital Equipment 2,230.75 0.11
NIHON CEMENT CO Materials 2,221.03 0.10
SUMITOMO HEAVY IND Capital Equipment 2,219.00 0.10
NISSHINBO INDUSTRIES Consumer Goods 2,211.47 0.10
NITTO DENKO CORP Materials 2,196.83 0.10
SUMITOMO OSAKA CEMENT CO Materials 2,193.70 0.10
MORI SEIKI CO Capital Equipment 2,182.48 0.10
HIROSE ELECTRIC CO Capital Equipment 2,144.50 0.10
AOYAMA TRADING CO Services 2,143.49 0.10
DAIDO STEEL CO Materials 2,137.43 0.10
CHIYODA CORP Capital Equipment 2,136.39 0.10
DAIMARU Services 2,127.83 0.10
NIPPON SHOKUBAI CO Materials 2,099.28 0.10
DAICEL CHEMICAL IND Materials 2,098.61 0.10
MITSUI MINING & SMELTING Materials 2,097.34 0.10
NIPPON SHEET GLASS CO Materials 2,096.30 0.10
KOMORI CORP Capital Equipment 2,088.84 0.10
NICHIREI CORP Consumer Goods 2,061.35 0.10
KAWASAKI KISEN KAISHA Services 2,053.62 0.10
MITSUBISHI PAPER MILLS Materials 2,046.49 0.10
JGC CORP Capital Equipment 2,045.78 0.10
HIGO BANK Finance 2,042.02 0.10
ORIENT CORP Finance 1,982.87 0.09
ALPS ELECTRIC CO Capital Equipment 1,977.08 0.09
MOCHIDA PHARMACEUTICAL Consumer Goods 1,961.06 0.09
HOUSE FOODS (HOUSE FD IND) Consumer Goods 1,939.69 0.09
SANWA SHUTTER CORP Materials 1,893.43 0.09
KOYO SEIKO CO Capital Equipment 1,871.43 0.09
MAEDA ROAD CONSTRUCTION Capital Equipment 1,854.13 0.09
CSK CORP Services 1,853.54 0.09
DENKI KAGAKU KOGYO K.K Materials 1,831.77 0.09
MEIJI MILK PRODUCTS CO Consumer Goods 1,803.50 0.08
AOKI CORP Capital Equipment 1,799.78 0.08
DAISHOWA PAPER MFG CO Materials 1,796.70 0.08
SKYLARK CO Services 1,763.15 0.08
SAGAMI RAILWAY CO Services 1,741.84 0.08
TANABE SEIYAKU CO Consumer Goods 1,731.04 0.08
LION CORP Consumer Goods 1,719.34 0.08
ITOHAM FOODS Consumer Goods 1,709.52 0.08
KISSEI PHARMACEUTICAL CO Consumer Goods 1,708.72 0.08
HASEKO CORP Capital Equipment 1,682.40 0.08
</TABLE>
A-18
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------------------- ---------------------- ---------------- -------------
TEIKOKU OIL CO Energy 1,668.19 0.08
<S> <C> <C> <C>
TOKYO STYLE CO Consumer Goods 1,645.32 0.08
DAITO TRUST CONSTRUCTION Capital Equipment 1,621.52 0.08
DAIWA KOSHO LEASE CO Finance 1,611.65 0.08
SHIMACHU CO Services 1,599.42 0.08
KIKKOMAN CORP Consumer Goods 1,567.80 0.07
DAIFUKU CO Capital Equipment 1,562.88 0.07
TAKARA STANDARD CO Consumer Goods 1,511.52 0.07
JACCS CO Finance 1,498.71 0.07
SANKYO ALUMINIUM IND CO Materials 1,490.24 0.07
UNI-CHARM CORP Consumer Goods 1,489.88 0.07
BROTHER INDUSTRIES Consumer Goods 1,475.36 0.07
DAINIPPON SCREEN MFG CO Capital Equipment 1,417.09 0.07
Q. P. CORP Consumer Goods 1,415.41 0.07
NORITAKE CO Consumer Goods 1,407.36 0.07
NAGASE & CO Materials 1,392.26 0.07
TOA CORP Capital Equipment 1,388.70 0.07
KANSAI PAINT CO Materials 1,381.08 0.07
UNITIKA Materials 1,380.07 0.06
NIPPON SHARYO Capital Equipment 1,345.12 0.06
IWATANI INTERNATIONAL Energy 1,344.81 0.06
OKUMA CORP Capital Equipment 1,334.08 0.06
HAZAMA CORP Capital Equipment 1,324.37 0.06
GUNZE Consumer Goods 1,312.00 0.06
KANEBO Consumer Goods 1,299.90 0.06
AMANO CORP Capital Equipment 1,299.59 0.06
DAIKYO Finance 1,277.43 0.06
NOF CORP Materials 1,265.89 0.06
TOYO EXTERIOR CO Materials 1,254.32 0.06
NIPPON SUISAN KAISHA Consumer Goods 1,239.82 0.06
TOKYOTOKEIBA CO Services 1,210.70 0.06
KATOKICHI CO Consumer Goods 1,193.36 0.06
EZAKI GLICO CO Consumer Goods 1,188.29 0.06
NIPPON COMSYS CORP Capital Equipment 1,184.40 0.06
JAPAN STEEL WORKS Capital Equipment 1,174.34 0.06
TAKUMA CO Capital Equipment 1,152.44 0.05
NIIGATA ENGINEERING CO Capital Equipment 1,149.55 0.05
KYUDENKO CORP Capital Equipment 1,144.87 0.05
TOYO ENGINEERING CORP Capital Equipment 1,133.87 0.05
TSUBAKIMOTO CHAIN CO Capital Equipment 1,129.99 0.05
KUREHA CHEMICAL IND CO Materials 1,129.61 0.05
KURABO INDUSTRIES Consumer Goods 1,128.54 0.05
TOKYO TATEMONO CO Finance 1,116.01 0.05
HOKKAIDO BANK Finance 1,109.95 0.05
MITSUI-SOKO CO Services 1,101.86 0.05
RENOWN Consumer Goods 1,089.95 0.05
MISAWA HOMES CO Capital Equipment 1,088.09 0.05
ISHIHARA SANGYO KAISHA Materials 1,082.65 0.05
TAIYO YUDEN CO Capital Equipment 1,076.04 0.05
OKAMOTO INDUSTRIES Multi-Industry 1,020.59 0.05
</TABLE>
A-19
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------------------- ---------------------- ---------------- -------------
MARUHA CORP Consumer Goods 1,001.73 0.05
<S> <C> <C> <C>
MARUDAI FOOD CO Consumer Goods 988.11 0.05
UNIDEN CORP Capital Equipment 977.13 0.05
SHOCHIKU CO Services 949.66 0.04
SANDEN CORP Capital Equipment 942.27 0.04
SEIKO CORP Consumer Goods 869.18 0.04
KONAMI CO Services 848.41 0.04
MAKINO MILLING MACHINE Capital Equipment 846.01 0.04
SANRIO CO Services 844.85 0.04
MITSUBISHI STEEL MFG Materials 824.28 0.04
SETTSU CORP Materials 792.63 0.04
KAKEN PHARMACEUTICAL CO Consumer Goods 789.93 0.04
AIDA ENGINEERING Capital Equipment 789.69 0.04
JAPAN METALS & CHEMICALS Materials 782.30 0.04
NIPPON BEET SUGAR MFG CO Consumer Goods 774.06 0.04
TOYO KANETSU K.K Capital Equipment 724.84 0.03
ASICS CORP Consumer Goods 678.42 0.03
GAKKEN CO Services 635.05 0.03
ASAHI OPTICAL CO Consumer Goods 605.37 0.03
SHOKUSAN JUTAKU SOGO CO Capital Equipment 513.50 0.02
JEOL Capital Equipment 512.75 0.02
TSUGAMI CORP Capital Equipment 504.25 0.02
NIPPON DENKO CO Materials 455.89 0.02
</TABLE>
A-20
<PAGE>
APPENDIX A-10
MSCI MALAYSIA INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
TELEKOM MALAYSIA Services 16,569.32 13.85
TENAGA NASIONAL Energy 11,410.18 9.54
MALAYAN BANKING Finance 10,209.23 8.54
RESORTS WORLD Services 5,799.96 4.85
SIME DARBY Multi-Industry 5,653.41 4.73
UNITED ENGINEERS (MAL) Capital Equipment 3,564.43 2.98
MALAYSIA INT'L SHIPPING Services 2,675.57 2.24
ROTHMANS PALL MALL (MAL) Consumer Goods 2,353.21 1.97
DCB HOLDINGS Finance 2,304.40 1.93
YTL CORP Capital Equipment 2,248.12 1.88
MALAYSIAN AIRLINE SYSTEM Services 2,228.34 1.86
AMMB HOLDINGS Finance 2,209.33 1.85
TECHNOLOGY RESOURCES IND Services 2,074.41 1.73
MAGNUM CORP Services 2,021.95 1.69
PROTON Consumer Goods 1,910.94 1.60
PUBLIC BANK Finance 1,839.14 1.54
EDARAN OTOMOBIL NASIONAL Consumer Goods 1,731.65 1.45
NESTLE (MALAYSIA) Consumer Goods 1,667.02 1.39
GOLDEN HOPE PLANTATIONS Materials 1,573.45 1.32
COMMERCE ASSET-HOLDING Finance 1,359.16 1.14
KUALA LUMPUR KEPONG Materials 1,345.68 1.13
HUME INDUSTRIES (MAL) Materials 1,171.06 0.98
MULTI-PURPOSE HOLDINGS Multi-Industry 1,161.75 0.97
MALAYSIAN RESOURCES CORP Finance 1,145.31 0.96
JAYA TIASA HOLDINGS Materials 1,119.93 0.94
MALAYAN UNITED IND Multi-Industry 1,073.89 0.90
RASHID HUSSAIN Finance 1,057.23 0.88
LEADER UNIVERSAL HLDGS Capital Equipment 1,013.44 0.85
AMSTEEL CORP Materials 984.18 0.82
PERLIS PLANTATIONS Materials 948.59 0.79
LAND & GENERAL Multi-Industry 921.25 0.77
HIGHLANDS & LOWLANDS Materials 906.43 0.76
SHELL REFINING CO (FOM) Energy 902.27 0.75
TA ENTERPRISE Finance 892.57 0.75
IOI CORP Materials 882.32 0.74
NEW STRAITS TIMES PRESS Services 875.37 0.73
MBF CAPITAL Finance 864.50 0.72
PAN MALAYSIA CEMENT WRKS Materials 860.76 0.72
TAN CHONG MOTOR HOLDINGS Consumer Goods 855.68 0.72
</TABLE>
A-21
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------- ---------------------- ---------------- -------------
HONG LEONG PROPERTIES Finance 848.14 0.71
<S> <C> <C> <C>
IDRIS HYDRAULIC (MAL) Finance 835.51 0.70
MULPHA INTERNATIONAL Multi-Industry 807.28 0.67
UMW HOLDINGS Capital Equipment 790.19 0.66
TIME ENGINEERING Capital Equipment 768.09 0.64
ORIENTAL HOLDINGS Consumer Goods 732.66 0.61
HONG LEONG INDUSTRIES Multi-Industry 723.54 0.60
METROPLEX Finance 721.61 0.60
MALAYSIAN PACIFIC IND Capital Equipment 704.46 0.59
MALAYAN CEMENT Materials 703.98 0.59
EKRAN Capital Equipment 693.03 0.58
SUNGEI WAY HOLDINGS Materials 655.17 0.55
RJ REYNOLDS Consumer Goods 618.03 0.52
MALAYSIA MINING CORP Materials 610.73 0.51
LANDMARKS Services 598.63 0.50
BERJAYA GROUP Multi-Industry 592.82 0.50
GUINNESS ANCHOR Consumer Goods 589.99 0.49
MALAYSIAN OXYGEN Materials 578.48 0.48
PROMET Capital Equipment 562.91 0.47
KEDAH CEMENT HOLDINGS Materials 540.48 0.45
KIAN JOO CAN FACTORY Materials 524.13 0.44
KEMAYAN CORP Materials 478.70 0.40
BERJAYA LEISURE Services 433.73 0.36
IGB CORP Finance 395.51 0.33
GOLDEN PLUS HOLDINGS Materials 389.55 0.33
MYCOM Finance 388.22 0.32
MALAYSIAN MOSAICS Services 371.85 0.31
AOKAM PERDANA Materials 355.98 0.30
SELANGOR PROPERTIES Finance 354.33 0.30
JOHAN HOLDINGS Capital Equipment 284.14 0.24
ANTAH HOLDINGS Finance 267.19 0.22
PALMCO HOLDINGS Finance 250.90 0.21
PILECON ENGINEERING Capital Equipment 233.43 0.20
MALAYAWATA STEEL Materials 219.42 0.18
PETALING GARDEN Finance 213.76 0.18
ALUMINIUM COMPANY OF MAL Materials 191.57 0.16
KELANAMAS INDUSTRIES Materials 190.45 0.16
</TABLE>
A-22
<PAGE>
APPENDIX A-11
MSCI MEXICO (FREE) INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- --------------------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
TELMEX TELEFONOS MEX L Services 18,020.20 21.41
TELMEX TELEFONOS MEX A Services 18,020.20 6.83
CEMEX A Materials 4,662.11 3.41
CEMEX B Materials 4,662.11 2.78
CEMEX CPO Materials 4,662.11 1.11
GRUPO TELEVISA CPO Services 4,402.31 6.90
CIFRA B Services 4,133.51 4.89
CIFRA C Services 4,133.51 1.59
GRUPO MODELO C Consumer Goods 3,805.49 5.96
KIMBERLY-CLARK MEXICO A Consumer Goods 3,352.40 5.25
GRUPO MEXICO B Materials 2,818.25 4.42
ALFA Multi-Industry 2,341.48 3.67
EMPRESAS MODERNA ACP Consumer Goods 2,104.43 3.30
INDUSTRIAS PENOLES CP Materials 1,782.77 2.79
GRUPO FIN BANACCI B Finance 1,747.17 2.25
GRUPO FIN BANACCI L Finance 1,747.17 0.49
FOMENTO ECONOMICO MEX. Consumer Goods 1,520.57 2.38
APASCO Materials 1,446.74 2.27
GRUPO ICA Capital Equipment 1,415.45 2.22
BIMBO ACP Consumer Goods 1,400.00 2.19
LIVERPOOL (EL PUERTO) 1 Services 1,254.11 1.81
LIVERPOOL (EL PUERTO) C1 Services 1,254.11 0.16
DESC B Multi-Industry 1,104.22 1.73
VITRO Materials 740.52 1.16
GRUPO FIN BANCOMER B Finance 707.68 1.11
CONTROL. COMERCIAL MEX B Services 678.43 1.06
MASECA B2 Consumer Goods 661.34 1.04
TAMSA Capital Equipment 553.26 0.87
TRANSPORTACION MARIT. L Services 523.89 0.82
GRUPO CONTINENTAL Consumer Goods 488.47 0.77
GRUPO FIN SERFIN B Finance 425.26 0.40
GRUPO FIN SERFIN LCP Finance 425.26 0.27
GRUPO FIN PROBURSA B Finance 393.12 0.62
CYDSA Materials 297.96 0.47
GRUPO SITUR B Services 290.44 0.46
GRUPO MEX DESARROLLO L Capital Equipment 167.62 0.26
CONSORCIO G GRUPO DINA Capital Equipment 157.46 0.25
GRUPO SIMEC B Materials 154.03 0.24
EMPAQUES PONDEROSA Materials 152.60 0.24
GRUPO HERDEZ A Consumer Goods 97.32 0.08
GRUPO HERDEZ B Consumer Goods 97.32 0.07
</TABLE>
A-23
<PAGE>
APPENDIX A-12
MSCI NETHERLANDS INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ----------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
ROYAL DUTCH PETROLEUM
CO Energy 74,304.11 35.05
UNILEVER NV CERT Consumer Goods 23,076.45 10.88
ING GROEP (INT'LE) NEDER Finance 19,091.36 9.01
KON. PTT NEDERLAND Services 17,757.60 8.38
ABN AMRO HOLDING Finance 13,792.75 6.51
PHILIPS ELECTRONICS Consumer Goods 13,752.29 6.49
ELSEVIER Services 9,204.96 4.34
HEINEKEN NV Consumer Goods 8,930.22 4.21
AKZO NOBEL Materials 7,556.64 3.56
WOLTERS KLUWER Services 6,578.45 3.10
AHOLD (KON.) Services 5,107.39 2.41
KLM Services 2,792.81 1.32
KONINKLIJKE KNP BT Materials 2,566.83 1.21
HOOGOVENS (KON.) Materials 1,125.92 0.53
GETRONICS Capital Equipment 1,117.71 0.53
OCE-VAN DER GRINTEN Capital Equipment 1,117.51 0.53
STAD ROTTERDAM Finance 916.86 0.43
IHC CALAND Capital Equipment 847.20 0.40
STORK (VER MACHINE.) Capital Equipment 723.63 0.34
PAKHOED (KON.) Capital Equipment 708.20 0.33
HOLLANDSCHE BETON GROEP Capital Equipment 499.86 0.24
NEDLLOYD (KON.) Services 434.12 0.20
</TABLE>
A-24
<PAGE>
APPENDIX A-13
MSCI SINGAPORE (FREE) INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ----------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
SINGAPORE AIRLINES FGN Services 13,464.34 15.37
OCBC BANK FGN Finance 12,454.98 14.22
UNITED OVERSEAS BANK FGN Finance 9,825.44 11.22
DEVELOPMENT BK SING FGN Finance 9,561.03 10.92
SINGAPORE PRESS HLDG FGN Services 6,572.17 7.50
CITY DEVELOPMENTS Finance 6,359.58 7.26
KEPPEL CORP Capital Equipment 4,841.40 5.53
DBS LAND Finance 3,623.03 4.14
FRASER & NEAVE Consumer Goods 3,336.42 3.81
CYCLE & CARRIAGE Consumer Goods 2,664.62 3.04
STRAITS STEAMSHIP LAND Finance 2,117.10 2.42
UIC UNITED INDUSTRIAL Finance 1,466.58 1.67
UNITED OVERSEAS LAND Finance 1,092.15 1.25
AMCOL HOLDINGS Consumer Goods 887.87 1.01
JURONG SHIPYARD Capital Equipment 854.09 0.98
NEPTUNE ORIENT LINES NOL Services 844.59 0.96
PARKWAY HOLDINGS Finance 787.26 0.90
FIRST CAPITAL CORP Finance 760.57 0.87
STRAITS TRADING Materials 749.14 0.86
HOTEL PROPERTIES Services 716.11 0.82
OVERSEAS UNION ENT. Services 706.43 0.81
NATSTEEL Materials 661.68 0.76
INCHCAPE BERHAD Multi-Industry 574.44 0.66
SHANGRI-LA HOTEL Services 526.32 0.60
METRO HOLDINGS Services 437.02 0.50
HAW PAR BROTHERS INT'L Multi-Industry 403.24 0.46
LUM CHANG HOLDINGS Multi-Industry 312.80 0.36
HAI SUN HUP GROUP Services 308.19 0.35
ROBINSON AND CO Services 252.29 0.29
CHUAN HUP HOLDINGS Capital Equipment 203.80 0.23
PRIMA Consumer Goods 145.32 0.17
LOW KENG HUAT(SINGAPORE) Capital Equipment 66.37 0.08
</TABLE>
A-25
<PAGE>
APPENDIX A-14
MSCI SPAIN INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ---------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
ENDESA Energy 14,311.09 15.05
TELEFONICA DE ESPANA Services 13,789.30 14.50
REPSOL Energy 10,433.95 10.97
IBERDROLA Energy 8,702.51 9.15
BANCO BILBAO VIZCAYA Finance 8,237.35 8.66
BANCO SANTANDER Finance 7,682.54 8.08
GAS NATURAL SDG Energy 5,402.53 5.68
ARGENTARIA CORP
BANCARIA Finance 5,265.87 5.54
BANCO CENTRAL HISPANO Finance 3,397.67 3.57
AUTOPISTAS CESA (ACESA) Services 2,278.03 2.40
UNION ELECTRICA FENOSA Energy 1,594.91 1.68
MAPFRE (CORPORACION) Finance 1,510.59 1.59
TABACALERA Consumer Goods 1,431.99 1.51
AGUAS DE BARCELONA Services 1,323.22 1.39
FOMENTO CONST Y CONTR Capital Equipment 1,245.47 1.31
ACERINOX Materials 1,187.68 1.25
ALBA (CORP FINANCIERA) Multi-Industry 1,013.41 1.07
ZARDOYA OTIS Capital Equipment 916.84 0.96
VALLEHERMOSO Finance 816.77 0.86
DRAGADOS Y CONSTRUCCION Capital Equipment 779.08 0.82
METROVACESA Finance 726.06 0.76
EBRO AGRICOLAS Consumer Goods 537.35 0.56
URALITA Materials 474.35 0.50
PORTLAND VALDERRIVAS Materials 451.14 0.47
PROSEGUR Services 347.00 0.36
ENCE EMPR NAC CELULOSAS Materials 319.17 0.34
VISCOFAN Materials 250.43 0.26
SARRIO Materials 231.80 0.24
URBIS (INMOBILIARIA) Finance 181.48 0.19
AGUILA (EL) Consumer Goods 134.90 0.14
ERCROS Materials 133.76 0.14
</TABLE>
A-26
<PAGE>
APPENDIX A-15
MSCI SWEDEN AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ---------------------------------------- ---------------------- ---------------- -------------
<S> <C> <C> <C>
ASTRA A Consumer Goods 24,954.23 19.58
ASTRA B Consumer Goods 24,954.23 4.42
ERICSSON (LM) B Capital Equipment 19,217.84 18.48
VOLVO B Consumer Goods 8,694.63 5.78
VOLVO A Consumer Goods 8,694.63 2.58
ASEA A Capital Equipment 8,660.46 6.10
ASEA B Capital Equipment 8,660.46 2.22
SVENSKA HANDELSBK A Finance 4,282.32 3.76
SVENSKA HANDELSBK B Finance 4,282.32 0.36
SKAND.ENSKILDA BANKEN A Finance 3,944.28 3.79
SKANSKA B Capital Equipment 3,896.87 3.75
STORA KOPPARBERG A Materials 3,447.59 2.70
STORA KOPPARBERG B Materials 3,447.59 0.62
AGA A Materials 3,350.42 1.76
AGA B Materials 3,350.42 1.47
ELECTROLUX B Consumer Goods 3,088.53 2.97
SCA SV CELLULOSA B Materials 2,940.75 2.83
ATLAS COPCO A Capital Equipment 2,703.11 1.74
ATLAS COPCO B Capital Equipment 2,703.11 0.86
SKANDIA FORSAKRING Finance 2,585.56 2.49
HENNES & MAURITZ B Services 2,388.21 2.30
STADSHYPOTEK A Finance 2,309.18 2.22
SKF B Capital Equipment 2,092.53 1.13
SKF A Capital Equipment 2,092.53 0.88
AUTOLIV Capital Equipment 1,329.97 1.28
TRELLEBORG B Multi-Industry 1,266.73 1.22
EUROC A Materials 1,226.42 1.18
SECURITAS B Services 1,044.84 1.00
ESSELTE A Services 556.90 0.30
ESSELTE B Services 556.90 0.24
</TABLE>
A-27
<PAGE>
APPENDIX A-16
MSCI SWITZERLAND INDEX AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
ROCHE HOLDING GENUSS Consumer Goods 72,760.15 17.53%
ROCHE HOLDING INHABER Consumer Goods 72,760.15 7.27
NESTLE Consumer Goods 41,221.33 14.05
SANDOZ NAMEN Consumer Goods 32,911.66 10.37
SANDOZ INHABER Consumer Goods 32,911.66 0.84
SCHWEIZ BANKGESELL INH Finance 26,729.35 7.42
SCHWEIZ BANKGESELL NAMEN Finance 26,729.35 1.68
CIBA-GEIGY NAMEN Materials 23,495.56 6.95
CIBA-GEIGY INHABER Materials 23,495.56 1.06
CS HOLDING Finance 17,336.66 5.91
SCHWEIZ RUECKVERS Finance 14,444.30 4.92
SCHWEIZ BANKVEREIN INH Finance 13,657.07 2.96
SCHWEIZ BANKVEREIN NAMEN Finance 13,657.07 1.70
ZUERICH VERSICHERUNG Finance 12,371.79 4.22
BBC BROWN BOVERI INH Capital Equipment 10,138.16 3.04
BBC BROWN BOVERI NAMEN Capital Equipment 10,138.16 0.41
HOLDERBANK INHABER Materials 4,897.61 1.18
HOLDERBANK NAMEN Materials 4,897.61 0.49
ALUSUISSE-LONZA HLDG NAM Multi-Industry 4,762.32 1.09
ALUSUISSE-LONZA HLDG INH Multi-Industry 4,762.32 0.54
SMH PORTEUR Consumer Goods 3,972.78 0.71
SMH NOM Consumer Goods 3,972.78 0.65
SGS SURVEILLANCE PORT Services 3,351.12 0.75
SGS SURVEILLANCE NOM Services 3,351.12 0.39
SULZER NAMEN Capital Equipment 2,152.35 0.50
SULZER PART Capital Equipment 2,152.35 0.23
SWISSAIR NAMEN Services 1,899.27 0.65
SCHINDLER NAMEN Capital Equipment 1,454.63 0.27
SCHINDLER PART Capital Equipment 1,454.63 0.22
ADIA PORTEUR Services 1,174.14 0.40
MERKUR HOLDING NAMEN Services 863.82 0.29
FISCHER (GEORG) INHABER Capital Equipment 783.46 0.22
FISCHER (GEORG) NAMEN Capital Equipment 783.46 0.04
FORBO HOLDING Materials 599.38 0.20
SIKA FINANZ INHABER Materials 543.55 0.19
KUONI REISEN NAMEN B Services 527.56 0.18
DANZAS HOLDING NAMEN Services 504.56 0.14
DANZAS HOLDING PART Services 504.56 0.03
MOEVENPICK INHABER Services 372.37 0.07
MOEVENPICK PART Services 372.37 0.05
JELMOLI HOLDING INHABER Services 325.85 0.07
JELMOLI HOLDING NAMEN Services 325.85 0.04
INTERDISCOUNT HLDG PORT Services 192.88 0.07
</TABLE>
A-28
<PAGE>
APPENDIX A-17
MSCI UK AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
GLAXO WELLCOME Consumer Goods 50,339.71 5.72
BRITISH PETROLEUM Energy 44,384.77 5.04
HSBC HOLDINGS (HKD 10) Finance 43,855.31 3.34
HSBC HOLDINGS (GBP 0.75) Finance 43,855.31 1.64
BRITISH TELECOM Services 33,585.90 3.81
SMITHKLINE BEECHAM A Consumer Goods 29,635.73 1.73
SMITHKLINE BEECHAM UNIT Consumer Goods 29,635.73 1.64
BAT INDUSTRIES Multi-Industry 27,259.85 3.10
LLOYDS TSB GROUP Finance 24,983.16 2.84
BTR Multi-Industry 19,493.64 2.21
BARCLAYS Finance 19,361.14 2.20
ZENECA GROUP Consumer Goods 18,424.69 2.09
MARKS & SPENCER Services 18,382.63 2.09
UNILEVER PLC Consumer Goods 16,629.80 1.89
HANSON Multi-Industry 15,869.08 1.80
BRITISH GAS Energy 15,634.24 1.78
REUTERS HOLDINGS Services 15,614.57 1.77
GENERAL ELECTRIC PLC Capital Equipment 15,055.18 1.71
RTZ CORP REG Materials 14,786.56 1.68
CABLE & WIRELESS Services 14,783.50 1.68
GRAND METROPOLITAN Consumer Goods 14,133.95 1.60
GUINNESS Consumer Goods 13,910.21 1.58
PRUDENTIAL CORP Finance 12,373.15 1.41
ABBEY NATIONAL Finance 11,950.07 1.36
BRITISH SKY BROADCASTING Services 11,091.45 1.26
VODAFONE GROUP Services 10,939.90 1.24
THORN EMI Consumer Goods 10,918.86 1.24
SAINSBURY (J) Services 10,773.91 1.22
GREAT UNIVERSAL STORES Services 10,493.69 1.19
BASS Consumer Goods 9,944.81 1.13
TESCO Services 9,303.37 1.06
IMPERIAL CHEMICAL ICI Materials 9,040.38 1.03
BOOTS CO Services 8,930.96 1.01
REED INTERNATIONAL Services 8,782.83 1.00
CADBURY SCHWEPPES Consumer Goods 8,119.94 0.92
BRITISH AIRWAYS Services 7,737.43 0.88
NATIONAL POWER Energy 7,439.00 0.84
ROYAL BANK OF SCOTLAND Finance 6,778.86 0.77
BOC GROUP Materials 6,654.15 0.76
COMMERCIAL UNION Finance 6,166.15 0.70
SCOTTISH & NEWCASTLE Consumer Goods 5,857.60 0.67
RANK ORGANISATION Services 5,746.04 0.65
BRITISH AEROSPACE Capital Equipment 5,732.62 0.65
ARGYLL GROUP Services 5,708.36 0.65
PEARSON Services 5,571.14 0.63
KINGFISHER Services 5,402.44 0.61
</TABLE>
A-29
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
LEGAL & GENERAL GROUP Finance 5,296.97 0.60
BRITISH STEEL Materials 5,237.77 0.59
NATIONAL GRID GROUP Energy 5,136.42 0.58
ASSOCIATED BRITISH FOODS Consumer Goods 5,124.73 0.58
PEN & ORIENTAL STEAM Services 4,994.37 0.57
FORTE Services 4,939.75 0.56
LAND SECURITIES Finance 4,810.89 0.55
SCOTTISH POWER Energy 4,754.85 0.54
GENERAL ACCIDENT Finance 4,673.00 0.53
ROLLS-ROYCE Capital Equipment 4,480.47 0.51
GKN Capital Equipment 4,337.01 0.49
UNITED UTIL. (NORTH WEST Services 4,297.96 0.49
WOLSELEY Materials 3,851.52 0.44
RMC GROUP Materials 3,833.76 0.44
ROYAL INSURANCE HLDGS Finance 3,808.37 0.43
BLUE CIRCLE INDUSTRIES Materials 3,794.26 0.43
SCHRODERS Finance 3,776.92 0.43
CARLTON COMMUNICATIONS Services 3,623.79 0.41
GUARDIAN ROYAL EXCHANGE Finance 3,494.96 0.40
TI GROUP Multi-Industry 3,445.56 0.39
THAMES WATER Services 3,306.24 0.38
SOUTHERN ELECTRIC Energy 3,180.06 0.36
REDLAND Materials 3,124.21 0.35
LADBROKE GROUP Services 3,029.63 0.34
PILKINGTON Materials 2,995.70 0.34
SMITHS INDUSTRIES Capital Equipment 2,983.42 0.34
WILLIAMS HOLDINGS Materials 2,980.46 0.34
BURMAH CASTROL Energy 2,968.62 0.34
REXAM Materials 2,871.29 0.33
TATE & LYLE Consumer Goods 2,825.34 0.32
ARGOS Services 2,665.82 0.30
COURTAULDS PLC Materials 2,628.65 0.30
LUCAS INDUSTRIES Capital Equipment 2,618.61 0.30
BRITISH LAND Finance 2,617.28 0.30
NEXT Services 2,590.97 0.29
MEPC Finance 2,466.23 0.28
MERCURY ASSET MGMT GROUP Finance 2,457.46 0.28
LONRHO Multi-Industry 2,450.14 0.28
DE LA RUE Services 2,412.30 0.27
LASMO Energy 2,406.93 0.27
BPB INDUSTRIES Materials 2,341.98 0.27
ARJO WIGGINS APPLETON Materials 2,324.38 0.26
ANGLIAN WATER Services 2,289.25 0.26
ELECTROCOMPONENTS Capital Equipment 2,195.20 0.25
SEARS PLC Services 2,187.30 0.25
EAST MIDLANDS ELEC Energy 2,035.58 0.23
CARADON Materials 2,026.61 0.23
COATS VIYELLA Consumer Goods 1,986.46 0.23
UNITED BISCUITS Consumer Goods 1,955.02 0.22
BET Multi-Industry 1,893.03 0.21
</TABLE>
A-30
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET
CAPITALIZATION WEIGHT IN
(MILLIONS OF MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR US$) (%)
- ------------------------------------------ ---------------------- ---------------- -------------
<S> <C> <C> <C>
LONDON ELECTRICITY Energy 1,867.40 0.21
BBA GROUP Capital Equipment 1,845.37 0.21
JOHNSON MATTHEY Multi-Industry 1,763.62 0.20
TARMAC Materials 1,711.68 0.19
HARRISONS & CROSFIELD Materials 1,650.86 0.19
IMI Materials 1,623.06 0.18
PROVIDENT FINANCIAL Finance 1,610.60 0.18
SOUTHERN WATER Services 1,586.82 0.18
BICC Capital Equipment 1,543.73 0.18
UNIGATE Consumer Goods 1,536.93 0.17
ENGLISH CHINA CLAYS Materials 1,492.83 0.17
HAMMERSON Finance 1,447.12 0.16
CHUBB SECURITY Services 1,412.65 0.16
WELSH WATER Services 1,378.47 0.16
RACAL ELECTRONICS Multi-Industry 1,311.51 0.15
T & N Capital Equipment 1,306.59 0.15
FKI Capital Equipment 1,300.02 0.15
VICKERS Capital Equipment 1,270.44 0.14
SLOUGH ESTATES Finance 1,265.44 0.14
BOWTHORPE Capital Equipment 1,188.42 0.13
HEPWORTH Materials 1,139.75 0.13
RUGBY GROUP Materials 1,079.45 0.12
SEDGWICK GROUP Finance 1,016.25 0.12
WILLIS CORROON GROUP Finance 975.79 0.11
OCEAN GROUP Services 906.51 0.10
NORTHERN ELECTRIC Energy 881.49 0.10
DELTA PLC Capital Equipment 875.40 0.10
GREAT PORTLAND ESTATES Finance 850.67 0.10
LAIRD GROUP Capital Equipment 842.60 0.10
TAYLOR WOODROW Capital Equipment 820.64 0.09
WIMPEY (GEORGE) Capital Equipment 790.78 0.09
MEYER INTERNATIONAL Materials 734.82 0.08
COBHAM Capital Equipment 712.92 0.08
BARRATT DEVELOPMENTS Capital Equipment 680.55 0.08
COURTAULDS TEXTILES Consumer Goods 643.24 0.07
CALOR GROUP Energy 634.13 0.07
MARLEY Materials 632.88 0.07
LEX SERVICE Services 549.43 0.06
TRAFALGAR HOUSE Multi-Industry 537.24 0.06
WILSON (CONNOLLY) HLDGS Capital Equipment 534.91 0.06
TRANSPORT DEVELOPMENT Services 459.31 0.05
ST JAMES'S PLACE CAPITAL Finance 447.16 0.05
LAING (JOHN) ORD Capital Equipment 350.24 0.04
DAWSON INTERNATIONAL Consumer Goods 327.88 0.04
AMSTRAD Capital Equipment 319.25 0.04
OXFORD INSTRUMENTS Capital Equipment 308.40 0.04
AMEC Capital Equipment 305.04 0.03
COSTAIN GROUP Capital Equipment 56.34 0.01
</TABLE>
A-31
<PAGE>
APPENDIX B
The Fund intends to effect deliveries of Portfolio Securities on a basis of
"T" plus three New York business days (i.e., days on which the New York Stock
Exchange is open) in the relevant foreign market of each Index Series, except as
discussed below. The ability of the Fund to effect in-kind redemptions within
three New York business days of receipt of a redemption request is subject,
among other things, to the condition that, within the time period from the date
of the request to the date of delivery of the securities, there are no days that
are local market holidays but "good" New York business days. For every
occurrence of one or more intervening holidays in the local market that are not
holidays observed in New York, the redemption settlement cycle will be extended
by the number of such intervening local holidays. In addition to holidays, other
unforeseeable closings in a foreign market due to emergencies may also prevent
the Fund from delivering securities within three New York business days.
The securities delivery cycles currently practicable for transferring
Portfolio Securities to redeeming investors, coupled with local market holiday
schedules, will require a delivery process longer than seven calendar days for
some Index Series, in certain circumstances, during 1996. The holidays
applicable to each Index Series during 1996 are listed below, as are instances
where more than seven days will be needed to deliver redemption proceeds.
Although certain holidays may occur on different dates in subsequent years, the
number of days required to deliver redemption proceeds in any given year is not
expected to exceed the maximum number of days listed below for each Index
Series. The proclamation of new holidays, or the elimination of existing
holidays, and changes in local securities delivery practices, could affect the
information set forth herein at some time in the future.
THE AUSTRALIA INDEX SERIES
REGULAR HOLIDAYS. The regular Australian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Australia Day -- January 26, 1996
Labor Day
(Victoria only) -- March 11, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Anzac Day -- April 25, 1996
Queens Birthday
(except Western Australia) -- June 10, 1996
Bank Holiday
(New South Wales only) -- August 5, 1996
Labour Day
(New South Wales only) -- October 7, 1996
Melbourne Cup Day
(Victoria only) -- November 5, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any
Australian holiday that would result in a settlement period that will exceed 7
calendar days in 1996.
B-1
<PAGE>
THE AUSTRIA INDEX SERIES
REGULAR HOLIDAYS. The regular Austrian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Epiphany Day -- January 6, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Labor Day -- May 1, 1996
Ascension Day -- May 16, 1996
Whit Monday -- May 27, 1996
Corpus Christi -- June 6, 1996
Assumption Day -- August 15, 1996
National Holiday -- October 26, 1996
All Saints Day -- November 1, 1996
Immaculate Conception -- December 8, 1996
Christmas Eve -- December 24, 1996
Christmas Day -- December 25, 1996
St. Stephen's Day -- December 26, 1996
New Year's Eve -- December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following Austrian holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- --------------------- ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8
12/25/96 Christmas Day 12/20/96 12/30/96 R + 10
12/26/96 St. Stephen's Day
12/24/96 Christmas Eve 12/23/96 1/2/97 R + 10
12/25/96 Christmas Day 12/24/96 1/2/97 R + 9
12/16/96 St. Stephen's Day
12/31/96 New Year's Eve
1/1/97 New Year's Day
</TABLE>
In 1996, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Austria Index Series.
B-2
<PAGE>
THE BELGIUM INDEX SERIES
REGULAR HOLIDAYS. The regular Belgian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Good Friday -- -- --
(Stock Exchange only closed) -- -- -- April 5, 1996
Easter Monday -- -- -- April 8, 1996
Labour Day -- -- -- May 1, 1996
Ascension -- May 16, 1996
Bank Holiday May 17, 1996
Whit Monday May 27, 1996
Assumption August 15, 1996
Bank Holiday August 16, 1996
All Saint's Day November 1, 1996
Remembrance Day November 11, 1996
Christmas Day December 25, 1996
Bank Holiday December 26, 1996
New Year's Eve December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following Belgian holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- --------------------- ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
12/25/96 Christmas Day 12/24/96 1/2/97 R + 9
12/29/96 Bank Holiday
12/31/96 New Year's Eve
</TABLE>
In 1996, R+9 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Belgium Index Series.
B-3
<PAGE>
THE CANADA INDEX SERIES
REGULAR HOLIDAYS. The regular Canadian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
New Year's Day (observed)
(Montreal Only) -- January 2, 1996
Good Friday
(Toronto only) -- April 5, 1996
Easter Monday
(Montreal only) -- April 8, 1986
Victoria Day -- May 20, 1996
St. Jean-Baptist
(Montreal only) -- June 24, 1996
Canada Day -- July 1, 1996
Civic Holiday
(Toronto only) -- August 5, 1996
Labor Day -- September 2, 1996
Thanksgiving Day -- October 14, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any Canadian
holiday that would result in a settlement period that will exceed 7 calendar
days in 1996.
THE FRANCE INDEX SERIES
REGULAR HOLIDAYS. The regular French holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Labor Day -- May 1, 1996
Victory Day -- May 8, 1996
Ascension Day -- May 16, 1996
Pentecost -- May 27, 1996
Assumption Day -- August 15, 1996
Assumption Day -- August 16, 1996
All Saints Day -- November 1, 1996
Armistice Day -- November 11, 1996
Christmas Day -- December 25, 1996
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any French
holiday that would result in a settlement period that will exceed 7 calendar
days in 1996.
B-4
<PAGE>
THE GERMANY INDEX SERIES
REGULAR HOLIDAYS. The regular German holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Epiphany Day -- January 6, 1996
Carnival -- February 19, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Labor Day -- May 1, 1996
Ascension Day -- May 16, 1996
Whit Monday -- May 27, 1996
Corpus Christi -- June 6, 1996
Assumption Day -- August 15, 1996
German Unity Day -- October 3, 1996
Reformation Day -- October 31, 1996
All Saints Day -- November 1, 1996
Christmas Eve -- December 24, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
New Year's Eve -- December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following German holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- ------------------- ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8
12/25/96 Christmas Day 12/20/96 12/30/96 R + 10
12/26/96 Boxing Day
12/24/96 Christmas Eve 12/23/96 1/2/97 R + 10
12/25/96 Christmas Day 12/24/96 1/2/97 R + 9
12/26/96 Boxing Day
12/31/96 New Year's Eve
1/1/97 New Year's Day
</TABLE>
In 1996, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Germany Index Series.
B-5
<PAGE>
THE HONG KONG INDEX SERIES
REGULAR HOLIDAYS. The regular Hong Kong holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Lunar New Year's Day -- February 19, 1996
Second Day of Lunar New Year's
Day -- February 20, 1996
Third Day of Lunar New Year's
Day -- February 21, 1996
Ching Ming Festival -- April 4, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Monday after Queen's Birthday -- June 17, 1996
Tueng Ng Festival -- June 20, 1996
Liberation Day -- August 26, 1996
Mid-Autumn Festival -- September 28, 1996
Chung Yeung Festival -- October 21, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
</TABLE>
REDEMPTION. A redemption request over the following Hong Kong holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- ------------------------ ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
2/19/96 Lunar New Year 2/14/96 2/22/96 R + 8
2/20/96 Lunar New Year 2/15/96 2/23/96 R + 8
2/21/96 Lunar New Year 2/16/96 2/24/96 R + 10
4/4/96 Ching Ming Festival 4/1/96 4/9/96 R + 8
4/5/96 Good Friday 4/2/96 4/10/96 R + 8
4/8/96 Easter Monday 4/3/96 4/11/96 R + 8
</TABLE>
In 1996, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Hong Kong Index Series.
B-6
<PAGE>
THE ITALY INDEX SERIES
REGULAR HOLIDAYS. The regular Italian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Easter Monday -- April 8, 1996
Liberation Day -- April 25, 1996
Labor Day -- May 1, 1996
Bank Holiday (early close) -- August 14, 1996
Assumption Day -- August 15, 1996
All Saints Day -- November 1, 1996
Christmas Eve (early close) -- December 24, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
New Year's Eve (early close) -- December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following Italian holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- ------------------- ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8
12/25/96 Christmas Day 12/20/96 12/30/96 R + 10
12/26/96 Boxing Day
12/24/96 Christmas Eve 12/23/96 1/2/97 R + 10
12/25/96 Christmas Day 12/24/96 1/2/97 R + 9
12/26/96 Boxing Day
12/31/96 New Year's Eve
1/1/97 New Year's Day
</TABLE>
In 1996, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Italy Index Series.
B-7
<PAGE>
THE JAPAN INDEX SERIES
REGULAR HOLIDAYS. The regular Japanese holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
First weekday after New Year's
Day -- January 2, 1996
Bank Holiday -- January 3, 1996
Coming of Age Day -- January 15, 1996
National Foundation Day
(observed) -- February 12, 1996
Vernal Equinox Day -- March 20, 1996
Greenery Day -- April 29, 1996
Constitutional Memorial Day -- May 3, 1996
Children's Day (observed) -- May 6, 1996
Respect for Aged Day -- September 16, 1996
Autumnal Equinox Day -- September 23, 1996
Sports Day -- October 10, 1996
Culture Day (observed) -- November 4, 1996
Labor Thanksgiving Day -- November 23, 1996
The Emperor's Birthday -- December 23, 1996
Exchange Holiday (early close) -- December 30, 1996
New Year's Eve -- December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following Japanese holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- ------------------------ ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
12/23/96 Emperor's Birthday 12/24/96 1/6/97 R + 13
12/30/96 Exchange Holiday 12/26/96 1/7/97 R + 12
12/31/96 New Year's Eve 12/27/96 1/8/97 R + 12
1/1/97 New Year's Day 12/30/96 1/8/97 R + 9
1/2/97 First Weekday After New
1/3/97 Year's Day 12/31/96 1/8/97 R + 8
Bank Holiday
</TABLE>
In 1996, R+13 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Japan Index Series.
B-8
<PAGE>
THE MALAYSIA INDEX SERIES
REGULAR HOLIDAYS. The regular Malaysian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Federal Territory Day -- February 1, 1996
Chinese New Year -- February 19, 1996
Chinese New Year -- February 20, 1996
Hari Raya Puasa (subject to
change) -- February 21, 1996
Hari Raya Haji (subject to
change) -- April 28, 1996
Labor Day -- May 1, 1996
Awal Muharam -- May 19, 1996
Wesak Day -- May 31, 1996
Birthday of DYMM SPB Yang
Di-Pertuon Ajong -- June 1, 1996
Prophet Mohammed's Birthday -- July 28, 1996
National Day -- August 31, 1996
Deepavali Day (observed) -- November 10, 1996
Christmas Day -- December 25, 1996
</TABLE>
REDEMPTION. A redemption request over the following Malaysian holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- ------------------------ ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
2/19/96 Chinese New Year 2/24/96 2/23/96 R + 9
2/20/96 Chinese New Year 2/15/96 2/26/96 R + 11
2/21/96 Hari Raya Puasa 2/16/96 2/27/96 R + 11
</TABLE>
In 1996, R+11 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Malaysia Index Series.
B-9
<PAGE>
THE MEXICO (FREE) INDEX SERIES
REGULAR HOLIDAYS. The regular Mexican holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Constitution Day -- February 5, 1996
Benito Juarez Ivarez Day -- March 21, 1996
Holy Wednesday (half day) -- April 3, 1996
Holy Thursday -- April 4, 1996
Good Friday -- April 5, 1996
Labor Day -- May 1, 1996
Puebla Battle -- May 5, 1996
Presidential Report -- September 1, 1996
Independence Day -- September 16, 1996
Columbus Day -- October 12, 1996
All Saint's Day -- November 2, 1996
Mexican Revolution -- November 20, 1996
Our Lady of Guadalupe Day -- December 12, 1996
Christmas Eve -- December 24, 1996
Christmas Day -- December 25, 1996
New Year's Eve -- December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following Mexican holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- ------------------------ ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
4/3/96 Holy Wednesday 3/29/96 4/8/96 R + 10
4/4/96 Holy Thursday 4/1/96 4/9/96 R + 8
4/5/96 Good Friday 4/2/96 4/10/96 R + 8
</TABLE>
In 1996, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Mexico (Free) Index
Series.
B-10
<PAGE>
THE NETHERLANDS INDEX SERIES
REGULAR HOLIDAYS. The regular Netherlands holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Liberation Day -- April 30, 1996
Ascension Day -- May 16, 1996
Whit Monday -- May 27, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
New Year's Eve -- December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following Netherlands holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- --------------------- ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
12/15/96 Christmas Day 12/24/96 1/2/97 R + 9
12/26/96 Boxing Day
12/31/96 New Year's Eve
1/1/97 New Year's Day
</TABLE>
In 1996, R+9 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Netherlands Index Series.
THE SINGAPORE (FREE) INDEX SERIES
REGULAR HOLIDAYS. The regular Singaporean holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Chinese New Year -- February 19, 1996
Hari Raya Puasa -- February 20, 1996
Hari Raya Puasa -- February 21, 1996
Good Friday -- April 5, 1996
Hari Raya Haji (observed) -- April 29, 1996
Labor Day -- May 1, 1996
Vesak Day -- May 31, 1996
National Day -- August 9, 1996
Deepavali (observed) -- November 11, 1996
Christmas Day -- December 25, 1996
</TABLE>
REDEMPTION. A redemption request over the following Singaporean holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- ------------------------ ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
2/19/96 Chinese New Year 2/14/96 2/22/96 R + 8
2/20/96 Hari Raya Puasa 2/15/96 2/23/96 R + 8
2/21/96 Hari Raya Puasa 2/16/96 2/26/96 R + 10
</TABLE>
In 1996, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Singapore (Free) Index
Series.
B-11
<PAGE>
THE SPAIN INDEX SERIES
REGULAR HOLIDAYS. The regular Spanish holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Epiphany Day -- January 6, 1996
St. Vincent -- January 22, 1996
St. Joseph -- March 19, 1996
Holy Thursday -- April 4, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Labor Day -- May 1, 1996
Independence Day -- May 2, 1996
St. Isidro -- May 15, 1996
St. James -- July 25, 1996
St. Loyola -- July 31, 1996
Assumption -- August 15, 1996
Hispanity -- October 12, 1996
All Saints Day -- November 1, 1996
Our Lady of Almudena -- November 9, 1996
Constitution Day -- December 6, 1996
Immaculate Conception -- December 8, 1996
Christmas Day -- December 25, 1996
</TABLE>
REDEMPTION. A redemption request over the following Spanish holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- --------------------- ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
4/4/96 Holy Thursday 4/1/96 4/9/96 R + 8
4/5/96 Good Friday 4/2/96 4/10/96 R + 8
4/8/96 Easter Monday 4/3/96 4/11/96 R + 8
</TABLE>
In 1996, R+8 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Spain Index Series.
B-12
<PAGE>
THE SWEDEN INDEX SERIES
REGULAR HOLIDAYS. The regular Swedish holidays affecting the relevant
securities markets (and their respective dates in calendar year 1996) are as
follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Twelfth Night (Early Closing) -- January 5, 1996
Epiphany -- January 6, 1996
Holy Thursday (Early Closing) -- April 4, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Labour Day -- May 1, 1996
Eve of Ascension
(Early Closing) -- May 15, 1996
Ascension Day -- May 16, 1996
Whit Monday -- May 27, 1996
Midsummer Eve -- June 21, 1996
Eve of All Saints Day
(Early Closing) -- November 1, 1996
All Saints Day -- November 2, 1996
Christmas Eve -- December 24, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
New Year's Eve -- December 31, 1996
</TABLE>
REDEMPTION. A redemption request over the following Swedish holidays would
result in a settlement period that will exceed 7 calendar days (examples are
based on the days particular holidays fall in 1996):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION SETTLEMENT
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD
- ---------- --------------------- ---------------- --------------- ----------------
<C> <S> <C> <C> <C>
4/4/96 Holy Thursday 4/1/96 4/9/96 R + 8
4/5/96 Good Friday 4/2/96 4/10/96 R + 8
4/8/96 Easter Monday 4/3/96 4/11/96 R + 8
12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8
12/25/96 Christmas Day 12/20/96 12/30/96 R + 10
12/26/96 Boxing Day 12/23/96 1/2/97 R + 10
12/24/96 Christmas Eve 12/24/96 1/2/97 R + 9
12/25/96 Christmas Day 12/30/96 1/7/97 R + 8
12/26/96 Boxing Day
12/31/96 New Year's Eve
1/1/97 New Year's Day
</TABLE>
In 1996, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Sweden Index Series.
B-13
<PAGE>
THE SWITZERLAND INDEX SERIES
REGULAR HOLIDAYS. The regular Swiss (Zurich) holidays affecting the
relevant securities markets (and their respective dates in calendar year 1996)
are as follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Berchtoldstag -- January 2, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
Sechselauten (Zurich) -- April 15, 1996
Labor Day -- May 1, 1996
Ascension Day -- May 16, 1996
Whit Monday -- May 27, 1996
National Day -- August 1, 1996
Knabeaschiessea -- September 9, 1996
Christmas Day -- December 25, 1996
St. Stephen's Day -- December 26, 1996
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any Swiss
(Zurich) holiday that would result in a settlement period that will exceed 7
calendar days in 1996.
THE UNITED KINGDOM INDEX SERIES
REGULAR HOLIDAYS. The regular United Kingdom holidays affecting the
relevant securities markets (and their respective dates in calendar year 1996)
are as follows:
<TABLE>
<S> <C> <C>
New Year's Day -- January 1, 1996
Good Friday -- April 5, 1996
Easter Monday -- April 8, 1996
May Day -- May 6, 1996
Spring Bank Holiday -- May 27, 1996
Summer Bank Holiday -- August 26, 1996
Christmas Day -- December 25, 1996
Boxing Day -- December 26, 1996
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any United
Kingdom holiday that would result in a settlement period that will exceed 7
calendar days in 1996.
B-14
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Part B -- Foreign Fund, Inc. Financial Statements: Statement of Assets
and Liabilities, at [ ], 1996.
(b) Exhibits:
<TABLE>
<C> <S> <C> <C> <C>
(1) -- Articles of Amendment and Restatement of the Fund
(2) -- Amended Bylaws of the Fund
(3) -- Not applicable
(4) -- Form of global certificate evidencing shares of the Common Stock, $.001 par
value, of each Index Series of the Fund
(5) -- Investment Management Agreement between the Fund and BZW Barclays Global Fund
Advisors
(6) (A) -- Distribution Agreement between the Fund and Funds Distributor, Inc.
(6) (B) -- Form of Authorized Participant Agreement
(6) (C) -- Form of Sales and Investor Services Agreement
(7) -- Not applicable
(8) (A) -- Custodian Agreement between the Fund and Morgan Stanley Trust Company
(8) (B) -- Form of Lending Agreement
(9) (A) -- Administration and Accounting Services Agreement Between the Fund and PFPC
Inc.
(9) (B) -- Transfer Agency Services Agreement between the Fund and PFPC Inc.
(9) (C) -- License Agreement between the Fund and Morgan Stanley Capital International
* (10) -- Opinion and consent of Sullivan & Cromwell
* (11) -- Opinion and consent of Ernst & Young, LLP
(12) -- Not applicable
* (13) (A) -- Subscription Agreement(s) between the Fund and Funds Distributor, Inc. with
respect to the Fund's initial capitalization
(13) (B) -- Letter of Representations among the Depository Trust Company, the Fund and
Morgan Stanley Trust Company
(14) -- Not applicable
(15) -- Form of 12b-1 Plan
(16) -- Not applicable
(17) -- Not applicable
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Immediately prior to the contemplated public offering of the shares of the
Fund, the following persons may be deemed individually to control each Index
Series of the Fund:
[To be completed by amendment]
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of , 1996, the stockholders of Common Stock, par value $.001
per share, of each of the initial seventeen Index Series of the Fund were:
[To be completed by amendment]
ITEM 27. INDEMNIFICATION
It is the Fund's policy to indemnify officers, directors, employees and
other agents to the maximum extent permitted by Section 2-418 of the Maryland
General Corporation Law, Article EIGHTH of the Fund's Articles of Incorporation,
and Article VI of the Fund's Bylaws (each set forth below).
Section 2-418 of the Maryland General Corporation Law reads as follows:
"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
(a) In this section the following words have the meaning indicated.
(1) "Director" means any person who is or was a director of a corporation
and any person who, while a director of a corporation, is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign predecessor entity of a
corporation in a merger, consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the office of director in the
corporation; and
(ii) When used with respect to a person other than a director as
contemplated in subsection (j), the elective or appointive office in the
corporation held by the officer, or the employment or agency relationship
undertaken by the employee or agent in behalf of the corporation.
(iii) "Official capacity" does not include service for any other foreign
or domestic corporation or any partnership, joint venture, trust, other
enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative.
(b) (1) A Corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established that:
(i) the act or omission of the director was material to the matter
giving rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal benefit in
money, property, or services; or
2
<PAGE>
(iii) In the case of any criminal proceeding, the director had reasonable
cause to believe that the act or omission was unlawful.
(2) (i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding in
which the director shall have been adjudged to be liable to the corporation.
(3) (i) The termination of any proceeding by judgment, order, or settlement
does not create a presumption that the director did not meet the requisite
standard of conduct set forth in this subsection.
(ii) The termination of any proceeding by conviction, or a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the director did not meet that
standard of conduct.
(c) A director may not be indemnified under subsection (B) of this section
in respect of any proceeding charging improper personal benefit to the director,
whether or not involving action in the director's official capacity, in which
the director was adjudged to be liable on the basis that personal benefit was
improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise, in
the defense of any proceeding referred to in subsection (B) of this section
shall be indemnified against reasonable expenses incurred by the director in
connection with the proceeding.
(2) A court of appropriate jurisdiction upon application of a director
and such notice as the court shall require, may order indemnification in the
following circumstances:
(i) If it determines a director is entitled to reimbursement under
paragraph (1) of this subsection, the court shall order indemnification,
in which case the director shall be entitled to recover the expenses of
securing such reimbursement; or
(ii) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director has met the standards of conduct set forth in
subsection (b) of this section or has been adjudged liable under the
circumstances described in subsection (c) of this section, the court may
order such indemnification as the court shall deem proper. However,
indemnification with respect to any proceeding by or in the right of the
corporation or in which liability shall have been adjudged in the
circumstances described in subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the same court in which
the proceeding involving the director's liability took place.
(e) (1) Indemnification under subsection (b) of this section may not be made
by the corporation unless authorized for a specific proceeding after a
determination has been made that indemnification of the director is permissible
in the circumstances because the director has met the standard of conduct set
forth in subsection (b) of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum consisting
of directors not, at the time, parties to the proceeding, or, if such a
quorum cannot be obtained, then by a majority vote of a committee of the
board consisting solely of two or more directors not, at the time, parties
to such proceeding and who were duly designated to act in the matter by a
majority vote of the full board in which the designated directors who are
parties may participate;
3
<PAGE>
(ii) By special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in subparagraph (I) of this
paragraph, or, if the requisite quorum of the full board cannot be obtained
therefor and the committee cannot be established, by a majority vote of the
full board in which director (sic) who are parties may participate; or
(iii) By the shareholders.
(3) Authorization of indemnification and determination as to reasonableness
of expenses shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified in subparagraph (ii) of paragraph (2) of this
subsection for selection of such counsel.
(4) Shares held by directors who are parties to the proceeding may not be
voted on the subject matter under this subsection.
(f) (1) Reasonable expenses incurred by a director who is a party to a
proceeding may be paid or reimbursed by the corporation in advance of the final
disposition of the proceeding upon receipt by the corporation of:
(i) A written affirmation by the director of the director's good faith
belief that the standard of conduct necessary for indemnification by the
corporation as authorized in this section has been met; and
(ii) A written undertaking by or on behalf of the director to repay the
amount if it shall ultimately be determined that the standard of conduct has
not been met.
(2) The undertaking required by subparagraph (ii) of paragraph (1) of this
subsection shall be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability to make
the repayment.
(3) Payments under this subsection shall be made as provided by the charter,
bylaws, or contract or as specified in subsection (e) of this section.
(g) The indemnification and advancement of expenses provided or authorized
by this section may not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of shareholders or directors, an agreement or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office.
(h) This section does not limit the corporation's power to pay or reimburse
expenses incurred by a director in connection with an appearance as a witness in
a proceeding at a time when the director has not been made a named defendant or
respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have requested a director to
serve an employee benefit plan where the performance of the director's
duties to the corporation also imposes duties on, or otherwise involves
services by, the director to the plan or participants or beneficiaries of
the plan;
(2) Excise taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law shall be deemed fines; and
(3) Action taken or omitted by the director with respect to an employee
benefit plan in the performance of the director's duties for a purpose
reasonably believed by the director to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the corporation.
4
<PAGE>
(j) Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and to the
extent provided in subsection (d) of this section for a director and shall
be entitled, to the same extent as a director, to seek indemnification
pursuant to the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that it may
indemnify directors under this section; and
(3) A corporation, in addition, may indemnify and advance expenses to an
officer, employee, or agent who is not a director to such further extent,
consistent with law, as may be provided by its charter, bylaws, general or
specific action of its board of directors or contract.
(k) (1) A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation,
or who, while a director, officer, employee, or agent of the corporation, is or
was serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
corporation would have the power to indemnify against liability under the
provisions of this section.
(2) A corporation may provide similar protection, including a trust fund,
letter of credit, or surety bond, not inconsistent with this section.
(3) The insurance or similar protection may be provided by a subsidiary or
an affiliate of the corporation.
(l) Any indemnification of, or advance of expenses to, a director in
accordance with this section, if arising out of a proceeding by or in the right
of the corporation, shall be reported in writing to the shareholders with the
notice of the next stockholders' meeting or prior to the meeting."
Article EIGHTH of the Fund's Articles of Amendment and Restatement provides:
"The Corporation shall indemnify to the fullest extent permitted by law
(including the Investment Company Act of 1940) any person made or threatened to
be made a party to any action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that such person or such
person's testator or intestate is or was a director, officer or employee of the
Corporation or serves or served at the request of the Corporation any other
enterprise as a director, officer or employee. To the fullest extent permitted
by law (including the Investment Company Act of 1940), expenses incurred by any
such person in defending any such action, suit or proceeding shall be paid or
reimbursed by the Corporation promptly upon receipt by it of an undertaking of
such person to repay such expenses if it shall ultimately be determined that
such person is not entitled to be indemnified by the Corporation. The rights
provided to any person by Article EIGHTH shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director, officer or employee as provided
above. No amendment of Article EIGHTH shall impair the rights of any person
arising at any time with respect to events occurring prior to such amendment.
For purposes of Article EIGHTH, the term "Corporation" shall include any
predecessor of the Corporation any constituent corporation (including any
constituent of a constituent) absorbed by the Corporation in a consolidation or
merger; the term "other enterprise" shall include any corporation, partnership,
joint venture, trust or employee benefit plan; service "at the request of the
Corporation" shall include service as a director, officer or employee of the
Corporation which imposes duties on, or involves services by, such director,
officer or employee with respect to an employee benefit plan, its participants
or beneficiaries; any excise taxes assessed on a person with respect to an
employee benefit plan shall be deemed to be indemnifiable expenses; and action
by a person with
5
<PAGE>
respect to any employee benefit plan which such person reasonably believes to be
in the interest of the participants and beneficiaries of such plan shall be
deemed to be action not opposed to the best interests of the Corporation.
Nothing in Article SEVENTH or in this Article EIGHTH protects or purports to
protect any director or officer against any liability to the Corporation or its
security holders to which he or she would otherwise be subject by reason of
willful malfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office."
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER. See "Management
of the Fund" in the Statement of Additional Information. Information as to the
directors and officers of the Adviser is included in its form ADV filed with the
Commission and is incorporated herein by reference thereto.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Funds Distributor, Inc. is the Fund's principal underwriter. Funds
Distributor, Inc. also acts as a principal underwriter, depositor, or investment
adviser for the following other investment companies:
BEA Investment Funds, Inc.
Fremont Mutual Funds, Inc.
HT Insight Funds, Inc., d/b/a Harris Insight Funds
The Munder Funds Trust
The Munder Funds, Inc.
The Panagora Institutional Funds
BJB Investment Funds
Sierra Trust Funds (Class B shares only)
The Skyline Fund
Waterhouse Investors Cash Management Fund, Inc.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT
- ----------------------------- --------------------------------------------- -----------------------------------
<S> <C> <C>
- -- Marie E. Connolly* President, Chief Executive Officer and
Director None
- -- John E. Pelletier* Senior Vice President, General Counsel,
Secretary and Clerk Director, President and Treasurer
- -- Richard W. Healey* Senior Vice President None
- -- Rui M. Moura* Senior Vice President None
- -- Donald R. Roberson* Senior Vice President None
- -- Joseph F. Tower, III* Senior Vice President, Treasurer and Chief
Financial Officer None
- -- Dick Ingram* Senior Vice President None
- -- Mary A. Nelson* Assistant Treasurer None
- -- Eric B. Fischman** Vice President and Associate General Counsel None
- -- Frederick C. Dey* Vice President None
- -- Dennis S. Gallant* Vice President None
- -- Hannah S. Grove* Vice President None
- -- Richard S. Joseph* Vice President None
- -- Dale F. Lampe* Vice President None
- -- Paul M. Prescott* Vice President None
- -- Linda C. Raftery* Vice President None
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT
- ----------------------------- --------------------------------------------- -----------------------------------
<S> <C> <C>
- -- Joseph A. Vignone* Vice President None
- -- Maureen Walsh* Vice President None
- -- John Pyburn** Vice President None
- -- Elizabeth Bachman** Assistant Vice President and Counsel None
- -- William Nutt* Director None
- -- John W. Gomez* Director None
</TABLE>
- ------------------------
* The principal business address of this individual is One Exchange Place,
Boston, Massachusetts 02109.
** The principal business address of this individual is 200 Park Avenue, New
York, New York 10166.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder will be maintained at the offices
of PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
The Fund hereby undertakes that it will file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from the date the shares of the Fund's Index Series are first sold to the
public (subject to an extension of up to an additional 60 days under certain
circumstances prescribed by the staff of the Securities and Exchange
Commission).
The Fund hereby undertakes to call a meeting of the shareholders for the
purpose of voting upon the question of removal of any Director when requested in
writing to do so by the holders of at least 10% of the Fund's outstanding shares
of common stock and, in connection with such meeting, to comply with the
provisions of Section 16(c) of the 1940 Act relating to shareholder
communications.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") Act may be permitted to directors, officers and controlling
persons of the Fund pursuant to the foregoing provisions, or otherwise, the Fund
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Fund of expenses incurred or
paid by a director, officer or controlling person of the Fund in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Fund will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York on the
29th day of February, 1996:
FOREIGN FUND, INC.
(The Registrant)
By: /s/ JOHN E. PELLETIER
-----------------------------------
John E. Pelletier
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registrant's Registration Statement has been signed below by the
following persons in the capacities indicated on the day of February, 1996:
Director, President and
/s/ JOHN E. PELLETIER Treasurer (Principal
- ----------------------------------- Executive Officer and
(John E. Pelletier) Principal Financial and
Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- --------------- ----------------------------------------------------------------------------------- ---------------
<C> <S> <C> <C> <C>
(1) -- Articles of Amendment and Restatement of the Fund
(2) -- Amended Bylaws of the Fund
(3) -- Not applicable
(4) -- Form of global certificate evidencing shares of the Common Stock, $.001 par
value, of each Index Series of the Fund
(5) -- Investment Management Agreement between the Fund and BZW Barclays Global Fund
Advisors
(6) (A) -- Distribution Agreement between the Fund and Funds Distributor, Inc.
(6) (B) -- Form of Authorized Participant Agreement
(6) (C) -- Form of Sales and Investor Services Agreement
(7) -- Not applicable
(8) (A) -- Custodian Agreement between the Fund and Morgan Stanley Trust Company
(8) (B) -- Form of Lending Agreement
(9) (A) -- Administration and Accounting Services Agreement Between the Fund and PFPC Inc.
(9) (B) -- Transfer Agency Services Agreement between the Fund and PFPC Inc.
(9) (C) -- License Agreement between the Fund and Morgan Stanley Capital International
* (10) -- Opinion and consent of Sullivan & Cromwell
* (11) -- Opinion and consent of Ernst & Young, LLP
(12) -- Not applicable
* (13) (A) -- Subscription Agreement(s) between the Fund and Funds Distributor, Inc. with
respect to the Fund's initial capitalization
(13) (B) -- Letter of Representations among the Depository Trust Company, the Fund and
Morgan Stanley Trust Company
(14) -- Not applicable
(15) -- Form of 12b-1 Plan
(16) -- Not applicable
(17) -- Not applicable
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
<PAGE>
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
FOREIGN FUND, INC.
Pursuant to Section 2-609 of the General Corporation Law of the State
of Maryland, Foreign Fund, Inc., a Maryland corporation (the "Corporation"),
hereby certifies that:
First: The name of the Corporation is Foreign Fund, Inc. The
Corporation's original Articles of Incorporation were filed with the State
Department of Assessments and Taxation on September 1, 1994 and the name under
which it was originally incorporated was Foreign Fund, Inc.
Second: The current address of the principal office of the
Corporation in this State is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202.
Third: The Corporation's current resident agent in the State of
Maryland is The Corporation Trust Incorporated and the agent's current address
is 32 South Street, Baltimore, Maryland 21202.
Fourth: The Corporation has one director, John E. Pelletier.
Fifth: The Corporation desires to restate its Articles of
Incorporation as currently in effect and to integrate the amendments made
hereby.
Sixth: The Articles of Incorporation of the Corporation are hereby
amended to increase the total number
<PAGE>
of shares of Common Stock of all series that the Corporation shall have
authority to issue; to designate seventeen series of Common Stock and the number
of shares of Common Stock initially classified and allocated to each such
Series; to restrict the stockholders' right of redemption of shares of Common
Stock of each series to redemptions in aggregations of a number of shares to be
determined by the Board of Directors; to permit the Corporation to pay the
redemption or repurchase price of shares within such time period after surrender
of such shares as may be permitted by any applicable rule, regulation or order
of the Securities and Exchange Commission; and to make certain other
modifications, all as set forth in these Articles of Amendment and Restatement.
Seventh: Immediately prior to the amendments to the Articles of
Incorporation set forth herein, the Corporation had the authority to issue
1,000,000,000 shares, par value $.001 per share, of Common Stock of all series
and classes, none of which shares were classified or allocated to any series;
and the aggregate par value of all of the authorized shares was $1,000,000.
Eighth: Immediately after giving effect to the amendments to the
Articles of Incorporation set forth herein, the Corporation will have the
authority to issue 6,000,000,000 shares, par value $.001 per share, of Common
Stock of all series and classes, of which 5,999,425,000
-2-
<PAGE>
shares (sometimes referred to as "World Equity Benchmark Shares" or "WEBS") will
be classified and allocated to each of the seventeen series of Common Stock as
follows:
Number of Shares of Common Stock
Initially Classified and Name of
Series Allocated
Australia Index Series............... 127,800,000
Austria Index Series................. 19,800,000
Belgium Index Series................. 136,200,000
Canada Index Series.................. 340,200,000
France Index Series.................. 340,200,000
Germany Index Series................. 382,200,000
Hong Kong Index Series............... 191,400,000
Italy Index Series................... 63,600,000
Japan Index Series................... 2,124,600,000
Malaysia Index Series................ 127,800,000
Mexico (Free) Index Series........... 255,000,000
Netherlands Index Series............. 255,000,000
Singapore (Free) Index Series........ 191,400,000
Spain Index Series................... 127,800,000
Sweden Index Series.................. 63,600,000
Switzerland Index Series............. 318,625,000
United Kingdom Index Series.......... 934,200,000
The remaining 575,000 shares of Common Stock shall be undesignated as to series
until the Board of Directors shall have designated such shares. The aggregate
par value of all the authorized shares will be $6,000,000.
Ninth: Each series of Common Stock and, if and when authorized (as
hereinafter contemplated), each class of that series shall have such
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of redemption
and other characteristics as the Board of Directors may determine in the absence
of a contrary
-3-
<PAGE>
provision set forth in these Articles of Amendment and Restatement.
Tenth: The provisions set forth in these Articles of Amendment and
Restatement are all the provisions of the Articles of Incorporation currently in
effect, as so amended and incorporating the provisions of previously filed
Articles of Amendment.
Eleventh: The Articles of Incorporation of the Corporation are
restated in their entirety as follows:
FIRST: INCORPORATOR. I, THE UNDERSIGNED, J. Michael Locke, whose post
office address is 1701 Pennsylvania Avenue, N.W., Suite 800, Washington, D.C.
20006, being at least twenty-one years of age, do under and by virtue of the
General Laws of the State of Maryland authorizing the formation of corporations,
associate myself as incorporator with the intention of forming a corporation
(hereinafter called the "Corporation").
SECOND: NAME. The name of the Corporation is Foreign Fund, Inc.
THIRD: PURPOSES AND POWERS. The purpose for which the Corporation is
formed is to act as an open-end management investment company under the
Investment Company Act of 1940, as currently in effect or as hereafter may be
amended and the rules and regulations from time to time promulgated and
effective thereunder (referred to herein collectively as the "Investment Company
Act of 1940") and to
-4-
<PAGE>
exercise and enjoy all of the powers, rights and privileges granted to, or
conferred upon, corporations by the General Laws of the State of Maryland now or
hereafter in force.
FOURTH: PRINCIPAL OFFICE. The post office address of the principal
office of the Corporation in this State is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the
Corporation's resident agent is The Corporation Trust Incorporated, and its post
office address is 32 South Street, Baltimore, Maryland 21202. Said resident
agent is a corporation of the State of Maryland.
FIFTH: CAPITAL STOCK. 1. The total number of shares of capital stock
of all series and classes that the Corporation initially shall have authority to
issue is 6,000,000,000 shares, with a par value of one-tenth of one cent ($.001)
per share, to be known and designated as Common Stock, such shares of Common
Stock having an aggregate par value of six million dollars ($6,000,000). The
Board of Directors shall have power and authority to increase or decrease, from
time to time, the aggregate number of shares of stock, or of any series or class
of stock, that the Corporation shall have the authority to issue.
2. Subject to the provisions of these Articles of Incorporation, the
Board of Directors shall have the power to issue shares of Common Stock of the
Corporation from time to time, at prices not less than the net asset value or
par
-5-
<PAGE>
value thereof, whichever is greater, for such consideration (which may consist
of, among other things, cash and/or securities) as may be fixed from time to
time pursuant to the direction of the Board of Directors. All stock, upon
issuance against receipt of the consideration specified by the Board of
Directors, shall be fully paid and non-assessable. The Board of Directors may,
by resolution, determine that shares of any Series or Class (each as defined
below) of the Corporation may be issued only in specified aggregations of
shares.
3. Pursuant to Section 2-105 of the Maryland General Corporation Law,
the Board of Directors of the Corporation shall have the power to designate one
or more series of shares of Common Stock, to fix the number of shares in any
such series and to classify or reclassify any unissued shares with respect to
such series. Any series of Common Stock shall be referred to herein individually
as a "Series" and collectively, together with any further series from time to
time established, as the "Series". Any such Series (subject to any applicable
rule, regulation or order of the Securities and Exchange Commission or other
applicable law or regulation) shall have such preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board of Directors may determine in the absence of a
-6-
<PAGE>
contrary provision set forth herein. The aforesaid power shall include the power
to create, by classifying or reclassifying unissued shares in the aforesaid
manner, one or more Series in addition to those initially designated as named
below and to increase the aggregate number of shares of a Series. Subject to
such aforesaid power, the Board of Directors has initially designated seventeen
Series (sometimes referred to as "Index Series") of shares of Common Stock of
the Corporation (which shares are sometimes referred to as "World Equity
Benchmark Shares" or "WEBS"). The names of such Series and the number of shares
of Common Stock initially classified and allocated to these Series are as
follows:
Number of Shares of Common Stock
Initially Classified and Name of
Series Allocated
Australia Index Series............... 127,800,000
Austria Index Series................. 19,800,000
Belgium Index Series................. 136,200,000
Canada Index Series.................. 340,200,000
France Index Series.................. 340,200,000
Germany Index Series................. 382,200,000
Hong Kong Index Series............... 191,400,000
Italy Index Series................... 63,600,000
Japan Index Series................... 2,124,600,000
Malaysia Index Series................ 127,800,000
Mexico (Free) Index Series........... 255,000,000
Netherlands Index Series............. 255,000,000
Singapore (Free) Index Series........ 191,400,000
Spain Index Series................... 127,800,000
Sweden Index Series.................. 63,600,000
Switzerland Index Series............. 318,625,000
United Kingdom Index Series.......... 934,200,000
The remaining 575,000 shares of Common Stock shall be undesignated as to Series
until the Board of Directors shall have made such designation pursuant to this
Section 3.
-7-
<PAGE>
4. The Board of Directors may, from time to time and without
stockholder action, classify shares of a particular Series into one or more
additional classes of that Series, the voting, dividend, liquidation and other
rights of which shall differ from the classes of Common Stock of that Series to
the extent provided in Articles Supplementary for such additional class, such
Articles Supplementary to be filed for record with the appropriate authorities
of the State of Maryland. Each class so created shall consist, until further
changed, of the lesser of (x) the number of shares classified in Section 3 of
this Article FIFTH or (y) the number of shares that could be issued by issuing
all of the shares of that Series currently or hereafter classified less the
total number of shares of all classes of such Series then issued and
outstanding. Any class of a Series of Common Stock shall be referred to herein
individually as a "Class" and collectively, together with any further class or
classes of such Series from time to time established, as the "Classes".
5. All Classes of a particular Series of Common Stock of the
Corporation shall represent the same interest in the Corporation and have
identical voting, dividend, liquidation and other rights with any other shares
of Common Stock of that Series; PROVIDED, however, that notwithstanding anything
in the Articles of Incorporation of the Corporation to the contrary:
-8-
<PAGE>
(i) Any Class of shares may be subject to such sales loads, contingent
deferred sales charges, Rule 12b-1 fees, administrative fees, service fees
or other fees, however designated, in such amounts as may be established by
the Board of Directors from time to time in accordance with the Investment
Company Act of 1940 and the applicable rules and regulations of the
National Association of Securities Dealers, Inc.
(ii) Expenses related solely to a particular Class of a Series
(including, without limitation, distribution expenses under a Rule 12b-1
plan and administrative expenses under an administration or service
agreement, plan or other arrangement, however designated) shall be borne by
that Class and shall be appropriately reflected (in the manner determined
by the Board of Directors) in the net asset value, dividends, distributions
and liquidation rights of the shares of that Class.
(iii) As to any matter with respect to which a separate vote of any
Class of a Series is required by the Investment Company Act of 1940 or by
the Maryland General Corporation Law (including, without limitation,
approval of any plan, agreement or other arrangement referred to in
subsection (ii) above), such requirement as to a separate vote by that
Class shall apply in lieu of single class voting (as defined in Section 7
of this
-9-
<PAGE>
Article FIFTH), and if permitted by the Investment Company Act of 1940 or
the Maryland General Corporation Law, the Classes of more than one Series
shall vote together as a single Class on any such matter that shall have
the same effect on each such Class. As to any matter that does not affect
the interest of a particular Class of a Series, only the holders of shares
of the affected Classes of that Series shall be entitled to vote.
6. Subject to the foregoing, each share of a Series or Class shall
have equal rights with each other share of that Series or Class with respect to
the assets of the Corporation pertaining to that Series or Class. The dividends
payable to the holders of any Series or Class (subject to any applicable rule,
regulation or order of the Securities and Exchange Commission or any other
applicable law or regulation) shall be determined by the Board of Directors and
need not be individually declared, but may be declared and paid in accordance
with a formula adopted by the Board of Directors (whether or not the amount of
dividend or distribution so declared can be calculated at the time of such
declaration).
7. The holder of each share of Common Stock of the Corporation shall
be entitled to one vote for each full share, and a fractional vote for each
fractional share, irrespective of the Series or Class, then standing in his or
-10-
<PAGE>
her name in the books of the Corporation. On any matter submitted to a vote of
stockholders, all shares of Common Stock of the Corporation then issued and
outstanding and entitled to vote, irrespective of the Series or Class, shall be
voted in the aggregate and not by Series or Class ("single class voting") except
(1) when otherwise expressly provided by the Maryland General Corporation Law,
or when required by the Investment Company Act of 1940, shares shall be voted by
individual Series or Class; and (2) when the matter does not affect any interest
of a particular Series or Class, then only stockholders of such other Series or
Class or Series or Classes whose interests may be affected shall be entitled to
vote thereon. Holders of shares of Common Stock of the Corporation shall not be
entitled to cumulative voting in the election of Directors or on any other
matter.
8. All consideration received by the Corporation for the issuance or
sale of stock of each Series or Class, together with all transaction fees
charged by the Corporation and all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall belong to the Series or Class
of shares of stock with respect to which such assets, payments or funds were
received by the Corporation for all purposes,
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subject only to the rights of creditors, and shall be so handled upon the books
of account of the Corporation. Such assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" such Series or Class.
9. The Board of Directors may from time to time declare and pay
dividends or distributions in stock, property (including securities) or in cash
on any or all Series or Classes of stock and to the stockholders of record as of
such date as the Board of Directors may determine; PROVIDED that such dividends
or distributions on shares of any Series or Class of stock shall be paid only
out of earnings, surplus, or other lawfully available assets belonging to such
Series or Class. Subject to the foregoing proviso, the amount of any dividends
or distributions and the payment thereof shall be wholly in the discretion of
the Board of Directors.
10. In the event of the liquidation or dissolution of the
Corporation, stockholders of each Series and Class therein shall be entitled to
receive, as a Series or Class, out of the assets of the Corporation available
for distribution to stockholders, but other than general assets, the assets
belonging to such Series or Class and the assets
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so distributable to the stockholders of any Series or Class shall be distributed
among such stockholders in proportion to the number of shares of such Series or
Class held by them and recorded on the books of the Corporation. In the event
that there are any general assets not belonging to any particular Series or
Class of stock and available for distribution, such distribution shall be made
to the holders of stock of all Series and Classes in proportion to the net asset
value of the respective Series or Class determined as hereinafter provided.
11. The assets belonging to any Series or Class of stock shall be
charged with the liabilities in respect to such Series or Class and shall also
be charged with such Series' or Classes' proportionate share of the general
liabilities of the Corporation, based upon the ratio of the net asset value,
determined as hereinafter provided, of the shares of such Series or Class then
outstanding to the net asset value of all shares of Common Stock of the
Corporation then outstanding. The determination of the Board of Directors shall
be conclusive with respect to the amount of liabilities, including accrued
expenses and reserves, the allocation of such liabilities to a given Series or
Class, and whether the same or general assets of the Corporation are allocable
to one or more Series or Classes.
12. The Board of Directors may provide for a holder of any Series or
Class of stock of the Corporation,
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who surrenders his certificate in good form for transfer to the Corporation or,
if the shares in question are not represented by certificates, who delivers to
the Corporation a written request in good order signed by the stockholder, to
convert the shares in question on such basis as the Board of Directors may
provide, into shares of stock of any other Series or Class of the Corporation.
13. Subject to Section 14 below, the net asset value per share of the
Corporation's Common Stock shall be determined by adding the value of all
securities, cash and other assets of the Corporation pertaining to that Series
or Class, subtracting the liabilities applicable to that Series or Class,
proportionally allocating any general assets and general liabilities to that
Series or Class, and dividing the net result by the number of shares of that
Series or Class outstanding. Subject to Section 14 below, the value of the
securities, cash and other assets, and the amount and nature of liabilities, and
the allocation thereof to any particular Series or Class, shall be determined
pursuant to the direction of, or procedures or methods prescribed by or approved
by, the Board of Directors in its sole discretion and shall be so determined at
the time or times prescribed or approved by the Board of Directors in its sole
discretion.
14. The net asset value per share of a Series or Class of the
Corporation's Common Stock for the purpose of
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issuance, redemption or repurchase of shares, shall be determined in accordance
with the Investment Company Act of 1940 and any other applicable Federal
securities law or rule or regulation.
15. All shares of Common Stock now or hereafter authorized shall be
subject to redemption and redeemable at the option of the stockholder in
accordance with and pursuant to procedures or methods prescribed or approved by
the Board of Directors and, in the case of any Series now or hereafter
authorized, if so determined by the Board of Directors, shall be redeemable only
in aggregations of such number of shares and on such days as may be determined
by, or determined pursuant to procedures or methods prescribed by or approved
by, the Board of Directors from time to time with respect to such Series. The
number of shares comprising an aggregation for purposes of redemption or
repurchase so determined from time to time with respect to any Series shall be
referred to herein as a "Creation Unit" and collectively, as "Creation Units".
Initially, the number of shares of Common Stock that will comprise a Creation
Unit for each Series shall be as follows:
Index Series Shares per Creation Unit
- ------------ ------------------------
Australia Index Series 200,000
Austria Index Series 100,000
Belgium Index Series 40,000
Canada Index Series 100,000
France Index Series 200,000
Germany Index Series 300,000
Hong Kong Index Series 75,000
Italy Index Series 150,000
Japan Index Series 600,000
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ndex Series 75,000
Mexico (Free) Index Series 100,000
Netherlands Index Series 50,000
Singapore (Free) Index Series 100,000
Spain Index Series 75,000
Sweden Index Series 75,000
Switzerland Index Series 125,000
United Kingdom Index Series 200,000
The Board of Directors shall have the unrestricted power to alter the
number of shares constituting a Creation Unit by resolutions adopted by the
Board of Directors at any time, including prior to the time the Corporation
commences operations. Each holder of a Creation Unit aggregation of shares of a
Series, upon request to the Corporation accompanied by surrender of the
appropriate stock certificate or certificates in proper form for transfer if
certificates have been issued to such holder, or in accordance with such other
procedures as may from time to time be in effect if certificates have not been
issued, shall be entitled to require the Corporation to redeem all or any number
of such holder's shares of Common Stock standing in the name of such holder on
the books of the Corporation, but in the case of shares of any Series as to
which the Board of Directors has determined that such shares shall be redeemable
only in Creation Unit aggregations, only in such Creation Unit aggregations of
shares of such Series as the Board of Directors may determine from time to time
in accordance with this Section 15, at a redemption price per share equal to an
amount determined by the Board of Directors in accordance with any applicable
laws and
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s; PROVIDED that (i) such amount shall not exceed the net asset value per share
determined in accordance with this Article, and (ii) if so authorized by the
Board of Directors, the Corporation may, at any time from time to time, charge
fees for effecting such redemption or repurchase, at such rate or rates as the
Board of Directors may establish, as and to the extent permitted under the
Investment Company Act of 1940. Such rates may vary depending on the type of
redemption or repurchase in question (E.G., a redemption or repurchase for cash
as opposed to a redemption or repurchase for portfolio securities). The
redemption price may be payable in cash, securities or a combination thereof, as
determined by or pursuant to the direction of the Board of Directors from time
to time.
16. Notwithstanding Section 15 above (or any other provision of these
Articles of Incorporation), the Board of Directors of the Corporation may
suspend the right of the holders of Creation Unit size aggregations of shares of
any Series to require the Corporation to redeem such shares (or may suspend any
voluntary purchase of such shares pursuant to the provisions of these Articles
of Incorporation) or postpone the date of payment of satisfaction upon
redemption of such shares during any Financial Emergency.
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For the purpose of these Articles of Incorporation, a "Financial
Emergency" is defined as the whole or part of any period (i) during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which disposal
by the Corporation of securities owned by such Series is not reasonably
practicable or it is not reasonably practicable for the Corporation fairly to
determine the value of the net assets of such Series, or (iv) during any other
period when the Securities and Exchange Commission (or any succeeding
governmental authority) may for the protection of security holders of the
Corporation by order permit suspension of the right of redemption or
postponement of the date of payment on redemption.
17. The Board of Directors may by resolution from time to time
authorize the repurchase by the Corporation, either directly or through an
agent, of shares upon such terms and conditions and for such consideration as
the Board of Directors shall deem advisable, out of funds legally available
therefor and at prices per share not in excess of the net asset value per share,
determined in accordance with this Article and to take all other steps deemed
necessary or advisable in connection therewith.
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18. Except as otherwise permitted by the Investment Company Act of
1940 or any applicable rule, regulation or order of the Securities and Exchange
Commission, payment of the redemption or repurchase price of shares surrendered
to the Corporation for redemption pursuant to the provisions of Section 15 or 20
of this Article FIFTH or for repurchase by the Corporation pursuant to the
provisions of Section 17 of this Article FIFTH shall be made by the Corporation
within seven (7) days after surrender of such shares to the Corporation for such
purpose. Any such payment may be made in whole or in part in portfolio
securities or in cash, as the Board of Directors shall deem advisable, and no
stockholder shall have the right, other than as determined by the Board of
Directors, to have shares redeemed or repurchased in portfolio securities or in
cash or in any particular combination thereof.
19. In the absence of any specification of the purpose for which the
Corporation redeems or repurchases any shares of its Common Stock, all redeemed
or repurchased shares shall be deemed to be acquired for retirement in the sense
contemplated by the General Corporation Law of the State of Maryland. Shares of
any Series retired by redemption or repurchase shall thereafter have the status
of authorized but unissued shares of any Series.
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20. All shares now or hereafter authorized shall be subject to
redemption and be redeemable at the option of the Corporation. From time to time
the Board of Directors may by resolution, without the vote or consent of
stockholders, authorize the redemption of all or any part of any outstanding
shares (including through the establishment of uniform standards with respect to
the minimum net asset value of a stockholder account) upon the sending of
written notice thereof to each stockholder any of whose shares are to be so
redeemed and upon such terms and conditions as the Board of Directors shall deem
advisable, out of funds legally available therefor, at net asset value per share
determined in accordance with the provisions of this Article and may take all
other steps deemed necessary or advisable in connection therewith. The Board of
Directors may authorize the closing and redemption of all shares of any accounts
not meeting the specified minimum standards of net asset value.
21. The holders of shares of Common Stock or other securities of the
Corporation shall have no preemptive rights to subscribe for new or additional
shares of its Common Stock or other securities.
SIXTH: DIRECTORS. The initial number of directors of the Corporation
shall be three (3); PROVIDED that the minimum number of directors for so long as
there is only one or fewer stockholders shall be one (1). The names of the
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directors who shall act until the first annual meeting or until their respective
successors are duly chosen and qualified are R. Sheldon Johnson, Vikram S.
Pandit and W. Thomas Clark. Upon such time as the Corporation has issued two or
more shares of its capital stock, the minimum number of directors shall be
increased in accordance with the provisions of Section 2-402 of the Maryland
General Corporation Law. The number of Directors may be changed from time to
time in such lawful manner as is provided in the Bylaws of the Corporation.
Unless otherwise provided by the Bylaws of the Corporation, directors of the
Corporation need not be stockholders.
SEVENTH: LIABILITIES OF DIRECTORS AND OFFICERS. A director or officer
of the Corporation shall not be liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director or officer,
except to the extent such exemption from liability or limitation thereof is not
permitted by law (including the Investment Company Act of 1940) as currently in
effect or as the same may hereafter be amended.
No amendment, modification or repeal of this Article SEVENTH shall
adversely affect any right or protection of a director or officer that exists at
the time of such amendment, modification or repeal.
EIGHTH: INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The
Corporation shall indemnify to the fullest
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extent permitted by law (including the Investment Company Act of 1940) any
person made or threatened to be made a party to any action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was a director,
officer or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. To the
fullest extent permitted by law (including the Investment Company Act of 1940),
expenses incurred by any such person in defending any such action, suit or
proceeding shall be paid or reimbursed by the Corporation promptly upon receipt
by it of an undertaking of such person to repay such expenses if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Corporation. The rights provided to any person by this Article EIGHTH shall
be enforceable against the Corporation by such person who shall be presumed to
have relied upon it in serving or continuing to serve as a director, officer or
employee as provided above. No amendment of this Article EIGHTH shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment. For purposes of this Article EIGHTH, the term
"Corporation" shall include any predecessor of the Corporation and any
constituent corporation (including any constituent of a constituent) absorbed by
the Corporation in a consolidation
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or merger; the term "other enterprise" shall include any corporation,
partnership, joint venture, trust or employee benefit plan; service "at the
request of the Corporation" shall include service as a director, officer or
employee of the Corporation which imposes duties on, or involves services by,
such director, officer or employee with respect to an employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to any employee benefit plan which
such person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
Nothing in Article SEVENTH or in this Article EIGHTH protects or
purports to protect any director or officer against any liability to the
Corporation or its security holders to which he or she would otherwise be
subject by reason of willful malfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
NINTH: MANAGEMENT OF THE AFFAIRS OF THE CORPORATION. The Board of
Directors shall have the management and control of the property, business and
affairs of the Corporation and is hereby vested with all the powers possessed by
the Corporation itself so far as is not
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inconsistent with law or these Articles of Incorporation. In furtherance and
without limitation of the foregoing provisions, it is expressly declared that,
subject to these Articles of Incorporation, the Board of Directors shall have
power:
(i) To make, alter, amend or repeal from time to time the Bylaws of
the Corporation except as such power may otherwise be limited in the
Bylaws.
(ii) To authorize the repurchase of shares in the open market or
otherwise, at prices not in excess of the net asset value of such shares
determined in accordance with Article FIFTH hereof, PROVIDED that the
Corporation has assets legally available for such purpose and to pay for
such shares in cash, securities or other assets then held or owned by the
Corporation.
iii) To fix an offering price for the shares of any Series or Class
that shall yield to the Corporation not less than the par value thereof, at
which price the shares of the Common Stock of the Corporation shall be
offered for sale, and to determine from time to time thereafter the
offering price that will yield to the Corporation not less than the par
value thereof from sales of the shares of its Common Stock.
(iv) From time to time to determine whether, to what extent, at what
times and places and under what conditions and regulations the books and
accounts of
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the Corporation, or any of them other than the stock ledger, shall be open
to the inspection of the stockholders, and no stockholder shall have any
right to inspect any account or book or document of the Corporation, except
as conferred by law or authorized by resolution of the Board of Directors
or of the stockholders.
(v) In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of Directors is authorized
to exercise all such powers and do all acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of
Maryland law, of these Articles of Incorporation and of the Bylaws of the
Corporation.
TENTH: CORPORATE BOOKS. The books of the Corporation may be kept
(subject to any provisions contained in applicable statutes) outside the State
of Maryland at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the Corporation. Election of
directors need not be by ballot unless the Bylaws of the Corporation shall so
provide.
ELEVENTH: AMENDMENTS. The Corporation reserves the right from time to
time to amend, alter, or repeal any of the provisions of these Articles of
Incorporation (including any amendment that changes the terms of any of the
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outstanding shares by classification, reclassification or otherwise), and any
contract rights, as expressly set forth in these Articles of Incorporation, of
any outstanding shares, and to add or insert any other provisions that may,
under the statutes of the State of Maryland at the time in force, be lawfully
contained in articles of incorporation, and all rights at any time conferred
upon the stockholders of the Corporation by these Articles of Incorporation are
subject to the provisions of this Article ELEVENTH.
TWELFTH: QUORUM; MAJORITY VOTE. 1. The presence in person or by proxy
of the holders of record of one-third of the shares issued and outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of any
business at all meetings of the stockholders except as otherwise provided by law
(including the Investment Company Act of 1940) or in these Articles of
Incorporation.
2. On any given matter, the presence in any meeting, in person or by
proxy, of holders of record of less than one-third of the shares issued and
outstanding and entitled to vote thereat shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if there shall be present thereat, in person or by proxy, holders of
record of the number of shares required for action in respect of such other
matter or matters.
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Notwithstanding any provision of Maryland law requiring more than a
majority vote of the Common Stock, or any Series or Class thereof, in connection
with any corporation action (including, but not limited to, the amendment of
these Articles of Incorporation), unless otherwise provided in these Articles of
Incorporation, the Corporation may take or authorize such action upon the
favorable vote of the holders of a majority of the outstanding shares of Common
Stock entitled to vote thereon.
THIRTEENTH: ACQUISITION SUBJECT TO ARTICLES OF INCORPORATION. All
persons who shall acquire shares in the Corporation shall acquire the same
subject to the provisions of these Articles of Incorporation.
FOURTEENTH: DURATION. The duration of the Corporation shall be
perpetual.
FIFTEENTH: AMENDMENT AND RESTATEMENT. This Amendment and Restatement
of the Articles of Incorporation of the Corporation as hereinabove set forth was
approved by the Corporation's Directors and no stock entitled to be voted on the
matter was outstanding or subscribed for at the time of approval.
IN WITNESS WHEREOF, FOREIGN FUND, INC., has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by the sole
Director and President, and attested to by its Secretary, and each said officer
of the Corporation has also acknowledged these
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Articles of Amendment and Restatement to be the act of the Corporation and has
stated under penalty of perjury that to the best of his knowledge, information
and belief the matters and facts set forth herein are true in all material
respects, all on February , 1996.
FOREIGN FUND, INC.
By: __________________
John E. Pelletier
Attest:
___________________
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AMENDED BYLAWS OF
FOREIGN FUND, INC.
ARTICLE I
FISCAL YEAR AND OFFICES
SECTION 1. FISCAL YEAR. Unless otherwise provided by resolution of the
Board of Directors the fiscal year of FOREIGN FUND, INC. (the "Corporation")
shall begin on November 1 and end on the last day of October.
SECTION 2. REGISTERED OFFICE. The registered office of the Corporation in
Maryland shall be located at 32 South Street, Baltimore, Maryland 21202, and the
name and address of its Resident Agent is The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202.
SECTION 3. OTHER OFFICES. The Corporation shall have additional places of
business, either within or outside the State of Maryland as the Board of
Directors may from time to time designate.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of the Stockholders for the
election of Directors shall be held in such place as shall be fixed by
resolution of the Board of Directors and stated in the notice of the Meeting.
SECTION 2. ANNUAL MEETINGS. Annual Meetings of Stockholders shall be held
at such time and on such dates as may be fixed by the Board of Directors by
resolution; PROVIDED, that Annual Meetings of Stockholders will not be held if
none of the following is required to be acted on by Stockholders under the
INVESTMENT COMPANY ACT OF 1940:
(a) election of directors;
(b) approval of the investment advisory agreement;
(c) ratification of selection of independent accountants; and
(d) approval of a distribution agreement.
SECTION 3. SPECIAL MEETINGS. Special Meetings of the Stockholders may be
called at any time by the Chairman of the Board or the President,
<PAGE>
or by a majority of the Board of Directors, and shall be called by the Chairman
of the Board, President or Secretary upon written request of the holders of
shares entitled to cast not less than twenty-five percent of all the votes
entitled to be cast at such meeting provided that (a) such request shall state
the purposes of such meeting and the matters proposed to be acted on, and (b)
the Stockholders requesting such meeting shall have paid to the Corporation the
reasonably estimated cost of preparing and mailing the notice thereof, which the
Secretary shall determine and specify to such Stockholders. No Special Meeting
need be called upon the request of holders of common stock entitled to cast less
than a majority of all votes entitled to be cast at such meeting to consider any
matter which is substantially the same as a matter voted on at any meeting of
the Stockholders held during the preceding twelve months.
SECTION 4. NOTICE. Not less than ten nor more than ninety days before the
date of every Annual or Special Stockholders' Meeting, the Secretary shall cause
to be mailed to each Stockholder entitled to vote at such meeting at his (her)
address (as it appears on the records of the Corporation at the time of mailing)
written notice stating the time and place of the meeting and, in the case of a
Special Meeting of Stockholders, shall be limited to the purposes stated in the
notice. Notice of adjournment of a Stockholders' meeting to another time or
place need not be given, if such time and place are announced at the meeting.
SECTION 5. RECORD DATE FOR MEETINGS. Subject to the provisions of
Maryland law, the Board of Directors may fix in advance a date not more than
ninety days, nor less than ten days, prior to the date of any Annual or Special
Meeting of the Stockholders as a record date for the determination of the
Stockholders entitled to receive notice of, and to vote at any meeting and any
adjournment thereof; and in such case such Stockholders and only such
Stockholders as shall be Stockholders of record on the date so fixed shall be
entitled to receive notice of and to vote at such meeting and any adjournment
thereof as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
SECTION 6. QUORUM. At any meeting of Stockholders, the presence in person
or by proxy of the holders of a majority of all the votes entitled to be cast
without regard to series at the meeting shall constitute a quorum for the
transaction of business at the meeting, except that where any provision of law
or the Articles of Incorporation require that the holders of any class or series
of shares shall vote as a class or series, then a majority of the aggregate
number of shares of such class or series, as the case may be, at the time
outstanding shall be necessary to constitute a quorum for the transaction of
such business. If, however, such quorum shall not be present or represented at
any meeting of the Stockholders, the holders of a majority of the stock present
or in person or by proxy shall have the power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented to a date not more than 120 days after
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the original record date. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 7. VOTING. Each Stockholder shall have one vote for each full
share and a fractional vote for each fractional share of stock having voting
power held by such Stockholder on the record date set pursuant to Section 5 on
each matter submitted to a vote at a meeting of Stockholders. Such vote may be
made in person or by proxy. At all meetings of the Stockholders, a quorum being
present, all matters shall be decided by majority vote of the shares of stock
entitled to vote held by Stockholders present in person or by proxy, unless the
question is one which by express provision of the laws of the State of Maryland,
the Investment Company Act of 1940, as from time to time amended, or the
Articles of Incorporation, a different vote is required, in which case such
express provision shall control the decision of such question. At all meetings
of Stockholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the Chairman of the
meeting.
SECTION 8. VOTING - PROXIES. The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been executed in
writing by the Stockholder himself or by his attorney thereunto duly authorized
in writing. No proxy shall be voted on after eleven months from its date unless
it provides for a longer period.
SECTION 9. INSPECTORS. At any election of Directors, the Board of
Directors prior thereto may, or, if they have not so acted, the Chairman of the
meeting may, appoint one or more inspectors of election who shall first
subscribe an oath of affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken.
SECTION 10. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be the duty
of the Secretary or Assistant Secretary of the Corporation to cause an original
or duplicate stock ledger to be maintained at the office of the Corporation's
transfer agent. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection.
SECTION 11. ACTION WITHOUT MEETING. Any action to be taken by
Stockholders may be taken without a meeting if (a) all Stockholders entitled to
vote on the matter consent to the action in writing, and (b) all Stockholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent and
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(c) the written consents are filed with the records of the meetings of
Stockholders. Such consent shall be treated for all purposes as a vote at a
meeting.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the Corporation shall be under
the direction of its Board of Directors, which may exercise all powers of the
Corporation, except such as are by statute, or the Articles of Incorporation, or
by these ByLaws conferred upon or reserved to the Stockholders.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of Directors which shall
constitute the whole Board shall be determined from time to time by the Board of
Directors, but shall not be fewer than three nor more than fifteen; provided
that the number of Directors shall not be fewer than one for so long as there is
only one or fewer Stockholders. Each Director elected shall hold office until
his successor is elected and qualified. Directors need not be Stockholders.
SECTION 3. ELECTION. Initially the Directors shall be those persons named
as such in the Articles of Incorporation. The Directors shall be elected by the
vote of a majority of the shares present in person or by proxy at a meeting of
the Stockholders called for such purpose, except that any vacancy in the Board
of Directors may be filled by a majority vote of the Board of Directors,
although less than a quorum, except that a newly-created directorship may be
filled only by a vote of the entire Board of Directors.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall
be chosen, shall perform and execute such executive duties and administrative
powers as the Board of Directors shall from time to time prescribe. The
Chairman of the Board shall not be considered an officer of the Corporation.
SECTION 5. PLACE OF MEETING. Meetings of the Board of Directors, regular
or special, may be held at any place in or out of the State of Maryland as the
Board may from time to time determine.
SECTION 6. QUORUM. At all meetings of the Board of Directors one-third of
the entire Board of Directors shall constitute a quorum for the transaction of
business provided that in no case may a quorum be less than two persons. The
action of a majority of the Directors present at any meeting at which a quorum
is present shall be the action of the Board of Directors unless the concurrence
of a greater proportion is required for such action by the laws of Maryland, the
Investment Company Act of
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1940, these ByLaws or the Articles of Incorporation. If a quorum shall not be
present at any meeting of Directors, the Directors present thereat may by a
majority vote adjourn the meeting from time to time without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without additional notice at such time and place as shall
from time to time be determined by the Board of Directors provided that notice
of any change in the time or place of such meetings shall be sent promptly to
each Director not present at the meeting at which such change was made in the
manner provided for notice of special meetings.
SECTION 8. SPECIAL MEETINGS. Special Meetings of the Board of
Directors may be called by the Chairman of the Board or the President on one
day's notice to each Director. Special Meetings shall be called by the Chairman
of the Board, President or Secretary in like manner and on like notice on the
written request of two Directors.
SECTION 9. TELEPHONE MEETINGS. Members of the Board of Directors or
a committee of the Board of Directors may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Participation in a meeting by these means constitutes, subject to the provisions
of the INVESTMENT COMPANY ACT OF 1940, presence in person at the meeting.
SECTION 10. INFORMAL ACTIONS. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if a written consent to such action is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
SECTION 11. COMMITTEES. The Board of Directors may by resolution
passed by a majority of the entire Board appoint from among its members an
Executive Committee and other committees composed of two or more Directors, and
may delegate to such committees, in the intervals between meetings of the Board
of Directors, any or all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation.
SECTION 12. ACTION OF COMMITTEES. In the absence of an appropriate
resolution of the Board of Directors each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that the quorum shall not be less than two
Directors. The committees shall keep minutes of their proceedings and shall
report the same to the Board of Directors at the meeting next succeeding, and
any action by the committee
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<PAGE>
shall be subject to revision and alteration by the Board of Directors, provided
that no rights of third persons shall be affected by any such revision or
alteration. In the absence of any member of such committee the members thereof
present at any meeting, whether or not they constitute a quorum, may appoint a
member of the Board of Directors to act in the place of such absent member.
SECTION 13. COMPENSATION. Any Director, whether or not he is a
salaried officer or employee of the Corporation, may be compensated for his
services as Director or as a member of a committee of Directors, or as Chairman
of the Board or chairman of a committee by fixed periodic payments or by fees
for attendance at meetings or by both, and in addition may be reimbursed for
transportation and other expenses, and in such manner and amounts as the Board
of Directors may from time to time determine.
ARTICLE IV
NOTICES
SECTION 1. FORM. Notices to Stockholders shall be in writing and
delivered personally or mailed to the Stockholders at their addresses appearing
on the books of the Corporation. Notices to Directors shall be oral or by
telephone or telegram or in writing delivered personally or mailed to the
Directors at their addresses appearing on the books of the Corporation. Notice
by mail shall be deemed to be given at the time when the same shall be mailed.
Subject to the provisions of the INVESTMENT COMPANY ACT OF 1940, notice to
Directors need not state the purpose of a Regular or Special Meeting.
SECTION 2. WAIVER. Whenever any notice of the time, place or purpose
of any meeting of Stockholders, Directors or a committee is required to be given
under the provisions of Maryland law or under the provisions of the Articles of
Incorporation or these ByLaws, a waiver thereof in writing, signed by the person
or persons entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof or actual attendance at the meeting
of Stockholders in person or by proxy, or at the meeting of Directors of
committee in person, shall be deemed equivalent to the giving of such notice to
such persons.
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<PAGE>
ARTICLE V
OFFICERS
SECTION 1. EXECUTIVE OFFICERS. The officers of the Corporation shall
be chosen by the Board of Directors and shall include a President, a Secretary
and a Treasurer. The Board of Directors may, from time to time, elect or
appoint a Controller, one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers. The same person may hold two or more offices, except that
no person shall be both President and Vice-President and no officer shall
execute, acknowledge or verify any investment in more than one capacity, if such
instrument is required by law, the Articles of Incorporation or these ByLaws to
be executed, acknowledged or verified by two or more officers.
SECTION 2. ELECTION. The Board of Directors shall choose a
President, a Secretary and a Treasurer at its first meeting or by unanimous
consent pursuant to Section 2-408(c) of the Maryland General Corporation Law.
SECTION 3. OTHER OFFICERS. The Board of Directors from time to time
may appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise powers and perform such
duties as shall be determined from time to time by the Board. The Board of
Directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
SECTION 4. COMPENSATION. The salaries or other compensation of all
officers and agents of the Corporation shall be fixed by the Board of Directors,
except that the Board of Directors may delegate to any person or group of
persons the power to fix the salary or other compensation of any subordinate
officers or agents appointed pursuant to Section 3 of this Article V.
SECTION 5. TENURE. The officers of the Corporation shall serve for
one year and until their successors are chosen and qualify. Any officer or
agent may be removed by the affirmative vote of a majority of the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby. In addition, any officer or agent appointed pursuant to
Section 3 may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Board of Directors. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors, unless pursuant
to Section 3 the power of appointment has been conferred by the Board of
Directors on any other officer.
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<PAGE>
SECTION 6. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation; shall see that all orders and resolutions of the
Board are carried into effect. The President shall also be the chief
administrative officer of the Corporation and shall perform such other duties
and have such other powers as the Board of Directors may from time to time
prescribe.
SECTION 7. VICE-PRESIDENT. The Vice-Presidents, in order of their
seniority, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties as the Board of Directors or the Chief Executive Officer may from time to
time prescribe.
SECTION 8. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the Stockholders and record all the
proceedings thereof and shall perform like duties for any committee when
required. He (she) shall give, or cause to be given, notice of meetings of the
Stockholders and of the Board of Directors, shall have charge of the records of
the Corporation, including the stock books, and shall perform such other duties
as may be prescribed by the Board of Directors or Chief Executive Officer, under
whose supervision he (she) shall be. He (she) shall keep in safe custody the
seal of the Corporation and, when authorized by the Board of Directors, shall
affix and attest the same to any instrument requiring it. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest to the affixing by his (her) signature.
SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretaries in order
of their seniority, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties as the Board of Directors shall prescribe.
SECTION 10. TREASURER. The Treasurer, unless another officer has
been so designated, shall be the Chief Financial Officer of the Corporation. He
(she) shall have general charge of the finances and books of account of the
Corporation. Except as otherwise provided by the Board of Directors, he (she)
shall have general supervision of the funds and property of the Corporation and
of the funds and property of the Corporation and of the performance by the
custodian of its duties with respect thereto. He (she) shall render to the
Board of Directors, whenever directed by the Board, an account of the financial
condition of the Corporation and of all his (her) transactions as Treasurer, and
as soon as possible after the close of each financial year he (she) shall make
and submit to the Board of Directors a like report for such financial year. He
(she) shall cause to be prepared annually a full and correct statement of the
affairs of the Corporation, including a balance sheet and a financial statement
of operations for the preceding fiscal year, which shall be submitted at the
Annual Meeting of Stockholders and filed within twenty days thereafter at the
principal office of the Corporation. He (she) shall perform all the
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<PAGE>
acts incidental to the office of Treasurer, subject to the control of the Board
of Directors.
SECTION 11. ASSISTANT TREASURER. The Assistant Treasurers, in the
order of their seniority, shall in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties as the Board of Directors may from time to time presume.
SECTION 12. SURETY BONDS. The Board of Directors may require any
officer or agent of the Corporation to execute a bond (including, without
limitation, any bond required by the INVESTMENT COMPANY ACT OF 1940, as amended,
and the rules and regulations of the SECURITIES AND EXCHANGE COMMISSION) to the
Corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his (her)
duties of the Corporation, including responsibility for negligence and for the
accounting of any Corporation's property, funds or securities that may come into
his (her) hands.
ARTICLE VI
INSURANCE
Subject to the provisions of the INVESTMENT COMPANY ACT OF 1940,
the Corporation, directly, through third parties or through affiliates of the
Corporation, may purchase, or provide through a trust fund, letter of credit or
surety bond insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or who, while a Director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a Director, officer, employee, partner, trustee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have the power to indemnify such person against such
liability.
ARTICLE VIII
STOCK
SECTION 1. CERTIFICATES. Stockholders are not entitled to receive
certificates evidencing their share ownership unless the Directors shall, by
resolution, otherwise determine.
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<PAGE>
SECTION 2. TRANSFER OF CAPITAL STOCK. Transfers of shares of the
stock of the Corporation shall be made on the books of the Corporation by the
holder of record thereof (in person or by his attorney thereunto duly authorized
by a power of attorney duly executed in writing and filed with the Secretary of
the Corporation) (i) if a certificate or certificates have been issued, upon the
surrender of the certificate or certificates, properly endorsed or accompanied
by proper instruments of transfer, representing such shares, or (ii) as
otherwise prescribed by the Board of Directors. Every certificate exchanged,
surrendered for redemption or otherwise returned to the Corporation shall be
marked "Canceled" with the date of cancellation.
SECTION 3. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such shares or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the General Laws of the State of Maryland.
SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may, from time to time, appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the
same person shall be both transfer agent and registrar, only one
countersignature by such person shall be required.
SECTION 5. STOCK LEDGER. The Corporation shall maintain an original
stock ledger containing the names and addresses of all Stockholders and the
number and class or series of shares held by each Stockholder. Such stock
ledger may be in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
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<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. CUSTODIANSHIP.
(a) The Corporation shall place and at all times maintain in the
custody of a custodian (including any subcustodian for the custodian) all funds,
securities and similar investments owned by the Corporation. Subject to the
approval of the Board of Directors the custodian may enter into arrangements
with securities depositories, as long as such arrangements comply with the
provisions of the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder.
SECTION 2. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation and the year of its organization. The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
SECTION 3. EXECUTION OF INSTRUMENTS. All deeds, documents,
transfers, contracts, agreements and other instruments requiring execution by
the Corporation shall be signed by any officer thereof.
ARTICLE IX
AMENDMENTS
The Board of Directors shall have the power to make, alter and repeal
the bylaws of the Corporation.
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<PAGE>
[Form of the Face of Global Certificate]
COMMON STOCK COMMON STOCK
FOREIGN FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THE _________________ INDEX SERIES
Unless this Certificate is presented by an authorized representative of the
Depository Trust Company (55 Water Street, New York, New York) to the
issuer or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of The Depository
Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
since the registered owner hereof, Cede & Co., has an interest herein.
CUSIP ____________________
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS IS TO CERTIFY THAT
CEDE & CO.
is the owner and registered Holder of the number of fully paid and nonassessable
shares of the common stock, par value $.001 per share (the "World Equity
Benchmark Shares" or "WEBS"), of the ________________Index Series of Foreign
Fund, Inc., a Maryland corporation (the "Corporation"), shown from time to time
on the records of the Transfer Agent thereof as represented by this Certificate
which shall be all of the outstanding WEBS of the ______ Index Series of the
Corporation. This Certificate and the WEBS represented hereby are issued and
shall be held subject to the provisions of the General Corporation Law of the
State of Maryland and the Articles of Incorporation and By-laws of the
Corporation, as they may be amended from time to time.
<PAGE>
2
This certificate is not valid unless manually countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated
_________________________ _________________________
SECRETARY PRESIDENT
__________________________
TRANSFER AGENT
By___________________________________
Authorized Officer
<PAGE>
3
[Reverse of Form of Global Certificate]
FOREIGN FUND, INC.
Incorporated Under the Laws of the State of Maryland
__________ Index Series
This Certificate represents all shares of common stock, par value
$.001 per share ("World Equity Benchmark Shares" or "WEBS"), of the _____ Index
Series of Foreign Fund, Inc. (the "Corporation") recorded from time to time on
the books of PFPC Inc., as transfer agent (the "Transfer Agent"), located in
Wilmington, Delaware. The registered Holder is entitled to all the rights,
interests and privileges of a stockholder as provided in the Articles of
Incorporation and By-Laws of the Corporation, as amended, which are incorporated
by reference herein.
This Certificate shall be transferable by Cede & Co. as the registered
Holder hereof by presentation and surrender hereof at the office of the Transfer
Agent, properly endorsed or accompanied by an instrument of transfer, in form
satisfactory to the Transfer Agent, and executed in blank by the registered
Holder hereof or his authorized attorney. WEBS represented hereby may be
redeemed by the Corporation only in aggregations of a specified number of shares
(each, a "Creation Unit") at their net asset value next determined after receipt
of a redemption request in proper form by the Distributor thereof in kind, in
cash or a combination thereof pursuant to Article _____ of the Articles of
Incorporation, as amended in accordance with the requirements thereof, by the
registered Holder when tendered together with an instrument of assignment and
transfer duly endorsed or executed in blank, together with an irrevocable
instruction in writing to redeem the same, and the Corporation will thereafter
redeem said WEBS at net asset value next determined after receipt of a
redemption request in proper form by the Distributor, provided that the WEBS to
be redeemed represented by this Certificate shall equal one or more Creation
Units of WEBS as provided in the Articles of Incorporation, as amended from time
to time.
The Corporation has authority to issue stock of more than one index
series (each, an "Index Series"). The Corporation will furnish without charge
to the registered Holder hereof a full statement of: (1) the designations and
<PAGE>
4
any preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the stock of each Index Series which the Corporation is authorized
to issue; (2) the differences in the relative rights and preferences between the
WEBS of each Index Series which the Corporation is authorized to issue to the
extent such rights and preferences have been set; and (3) the authority of the
Board of Directors to set the relative rights and preferences of subsequent
Index Series.
The registered Holder hereof may be required to pay taxes or other
governmental charges that may be imposed in connection with the transfer,
redemption or other surrender of this Certificate.
The Transfer Agent, notwithstanding any notice to the contrary, may
treat the person in whose name this Certificate is registered upon the books of
the Transfer Agent as the absolute owner hereof for all purposes.
[SEE CURRENT PROSPECTUS FOR FURTHER INFORMATION
CONCERNING REDEMPTION OF WEBS]
__________
<PAGE>
5
[FORM OF ASSIGNMENT]
For value received _______________________ hereby sells, assigns and
transfers unto ____________________ [________] (please insert Social Security
Number or other identifying number of the Assignee) all WEBS of the ______ Index
Series of Foreign Fund, Inc. represented by the within Certificate, and does
hereby irrevocably constitute and appoint _____________________________ Attorney
to transfer the said WEBS on the books of the Transfer Agent for such
___________ with full power of substitution in the premises.
Dated:_______________ _______________________________
(Signature)
SIGNATURE GUARANTEED BY:_________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular
without alteration or enlargement or any change whatever.
<PAGE>
FORM OF
ADVISORY AGREEMENT
AGREEMENT made as of the _____ day of _____________, 1996 between BZW
Barclays Global Fund Advisors, a corporation organized under the laws of the
State of California (the "Adviser"), and Foreign Fund, Inc., a Maryland
corporation (the "Company").
WHEREAS, the Adviser is engaged principally in the business of rendering
investment management services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Company proposes to engage in the business of an open-end
management investment company and is registered as such under the 1940 Act; and
WHEREAS, the Company is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Company intends initially to offer shares representing
interests in each of the separate portfolios identified on Schedule A hereto
(each, an "Initial Fund" and collectively, the "Initial Funds"); and
WHEREAS, the Company desires to appoint the Adviser to serve as the
investment adviser with respect to each of the Initial Funds; and
WHEREAS, the Company may, from time to time, offer shares representing
interests in one or more additional portfolios (each, an "Additional Fund" and
collectively, the "Additional Funds"); and
WHEREAS, the Company may desire to appoint the Adviser as the investment
adviser with respect to one or more of the "Additional Funds" (each such
Additional Fund and Initial Fund being referred to herein individually as a
"Fund" and collectively as the "Funds");
NOW THEREFORE, the parties hereto hereby agree as follows:
1. APPOINTMENT OF ADVISER
a. INITIAL FUNDS. The Company hereby appoints the Adviser to act as
investment adviser for the Initial Funds for the period and on the
terms herein set forth. The Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation
herein provided.
b. ADDITIONAL FUNDS. In the event the Company desires to retain the
Adviser to render investment advisory services hereunder with respect
to any Additional Fund, it shall so notify the Adviser in writing,
indicating the
<PAGE>
advisory fee to be payable with respect to the Additional Fund. If the
Adviser is willing to render such services for such fee and on the terms
provided for herein, it shall so notify the Company in writing, whereupon
such Additional Fund shall become a Fund hereunder.
2. DUTIES OF THE ADVISER
The Adviser, at its own expense (subject to the overall supervision and
review of the Board of Directors of the Company), shall (i) furnish
continuously an investment program for each Fund in compliance with that
Fund's investment objective and policies, as set forth in the then current
prospectus and statement of additional information for such Fund contained
in the Company's Registration Statement on Form N-1A, as such prospectus
and statement of additional information is amended or supplemented from
time to time, (ii) determine what investments shall be purchased, held,
sold or exchanged for each Fund and what portion, if any, of the assets of
each Fund shall be held uninvested, (iii) make changes on behalf of the
Company in the investments for each Fund and (iv) provide the Company with
records concerning the Adviser's activities that the Company is required to
maintain and render reports to the Company's officers and Board of
Directors concerning the Adviser's discharge of the foregoing
responsibilities. The Adviser shall furnish to the Company all office
facilities, equipment, services and executive and administrative personnel
necessary for managing the investment program of the Company for each Fund.
3. ALLOCATION OF EXPENSES
Except for expenses incurred by the Adviser in providing the services set
forth in Paragraph 2 above, the Company assumes and shall pay all expenses
for all other Company operations and activities. The expenses to be borne
by the Company shall include, without limitation:
(1) all expenses of organizing the Company or forming any series
thereof;
(2) all expenses (including information, materials and services other
than services of the Adviser) of preparing, printing and mailing
all annual, semiannual and periodic reports, proxy materials and
other communications (including registration statements,
prospectuses and amendments and revisions thereto) furnished to
existing shareholders of the Company and/or regulatory
authorities;
(3) fees involved in registering and maintaining registration of the
Company and its shares with the Securities and Exchange
Commission and state regulatory authorities;
(4) any other registration, filing or other fees in connection with
requirements of regulatory authorities;
(5) expenses, including the cost of printing of certificates relating
to the issuance of shares of the Company;
2
<PAGE>
(6) to the extent not paid by the Company's distributor, the expenses
of maintaining a shareholder account and furnishing, or causing
to be furnished, to each shareholder a statement of account,
including the expense of mailing such statements;
(7) taxes and similar fees payable by the Company;
(8) expenses related to the redemption of its shares;
(9) all issue and transfer taxes, brokers' commissions and other
costs chargeable to the Company in connection with securities
transactions to which the Company is a party, including any
portion of such commissions attributable to research and
brokerage services as defined by Section 28(e) of the Securities
Exchange Act of 1934, as amended from time to time (the "1934
Act");
(10) the charges and expenses of the custodian appointed by the
Company, or any depository utilized by such custodian, for the
safekeeping of its property;
(11) the charges and expenses of any lending agent appointed by the
Company and all borrowers' rebates and similar fees payable by
the Company in connection with any loan transaction;
(12) charges and expenses of any administrator and/or accounting and
recordkeeping agent appointed by the Company;
(13) charges and expenses of any shareholder servicing agent, transfer
agent and registrar appointed by the Company, including costs of
servicing shareholder investment accounts;
(14) charges and expenses of independent accountants retained by the
Company;
(15) legal fees and expenses in connection with the affairs of the
Company, including legal fees and expenses in connection with
registering and qualifying its shares with federal and state
regulatory authorities;
(16) compensation and expenses of Directors of the Company who are not
"affiliated persons" (as defined in the 1940 Act) of the Adviser;
(17) expenses of shareholders' and Directors' meetings;
(18) membership dues in, and assessments of, the Investment Company
Institute or similar organizations;
(19) insurance premiums on fidelity, errors and omissions and other
coverages;
3
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(20) expenses incurred in connection with any distribution plan
adopted by the Company in compliance with Rule 12b-1 of the 1940
Act; and
(21) such other non-recurring expenses of the Company as may arise,
including expenses of actions, suits, or proceedings to which the
Company is a party and the legal obligation which the Company may
have to indemnify its Directors or shareholders with respect
thereto.
4. ADVISORY FEE
For the services to be provided by the Adviser hereunder with respect to
each Fund, the Company shall pay to the Adviser an annual gross investment
advisory fee equal to the amount set forth on Schedule A attached hereto.
Schedule A shall be amended from time to time to reflect the addition
and/or termination of any Fund as a Fund hereunder and to reflect any
change in the advisory fees payable with respect to any Fund duly approved
in accordance with Section 7(b) hereunder. All fees payable hereunder
shall be accrued daily and paid as soon as practical after the last day of
each calendar quarter.
In the case of commencement or termination of this Agreement with respect
to any Fund during any calendar quarter, the fee with respect to such Fund
for that quarter shall be reduced proportionately based upon the number of
calendar days during which it is in effect, and the fee shall be computed
upon the average daily net assets of such Fund for the days during which it
is in effect.
5. PORTFOLIO TRANSACTIONS
In connection with the management of the investment and reinvestment of the
assets of the Company, the Adviser, acting by its own officers, directors
or employees, is authorized to select the brokers or dealers that will
execute purchase and sale transactions for the Company. In executing
portfolio transactions and selecting brokers or dealers, if any, the
Adviser will use its best efforts to seek on behalf of a Fund the best
overall terms available. In assessing the best overall terms available for
any transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in and the price of the security, the
financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any (for the specific transaction
and on a continuing basis). In evaluating the best overall terms
available, and in selecting the broker or dealer, if any, to execute a
particular transaction, the Adviser may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the 1934
Act) provided to any Fund of the Company. The Adviser may pay to a broker
or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and
research services provided. The Company acknowledges that any such
research may be useful to the Adviser in connection with other accounts
managed by it.
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<PAGE>
6. LIABILITY OF ADVISER
a. Neither the Adviser nor its officers, directors, employees, agents or
controlling persons or assigns shall be liable for any error of
judgment or mistake of law or for any loss suffered by the Company or
its shareholders in connection with the matters to which this
Agreement relates; provided that no provision of this Agreement shall
be deemed to protect the Adviser against any liability to the Company
or its shareholders to which it might otherwise be subject by reason
of any willful misfeasance, bad faith or gross negligence in the
performance of its duties or the reckless disregard of its obligations
and duties under this Agreement.
b. The Company, on behalf of each Fund, hereby agrees to indemnify and
hold harmless the Adviser, its directors, officers and employees and
each person, if any, who controls the Adviser (collectively, the
"Indemnified Parties") against any and all losses, claims, damages or
liabilities (including reasonable attorneys fees and expenses), joint
or several, relating to a Fund, to which any such Indemnified Party
may become subject under the Securities Act of 1933, as amended (the
1933 Act ), the 1934 Act, the Investment Advisers Act of 1940, as
amended, the 1940 Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission to
state a material fact required to be stated or necessary to make the
statements made not misleading in (x) the Registration Statement or
the prospectus, (y) any advertisement or sales literature authorized
by the Company for use in the offer and sale of shares of the Fund, or
(z) any application or other document filed in connection with the
qualification of the Company or shares of the Fund under the Blue Sky
or securities laws of any jurisdiction, except insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission (1) in a document prepared by the
Adviser, or (2) made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Adviser
pertaining to or originating with the Adviser for use in connection
with any document referred to in clauses (x), (y) or (z), or (ii)
subject in each case to clause (i) above, the Adviser acting as
investment adviser to the Company with respect to the Fund;
c. It is understood, however, that nothing in this paragraph 6 shall
protect any Indemnified Party against, or entitle any Indemnified
Party to, indemnification against any liability to the Company or its
shareholders to which such Indemnified Party is subject, by reason of
its willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of any reckless disregard of
its obligations and duties, under this Agreement or otherwise to an
extent or in a manner inconsistent with Section 17(i) of the 1940 Act.
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<PAGE>
7. DURATION AND TERMINATION OF THIS AGREEMENT
a. DURATION. This Agreement shall become effective with respect to
each Initial Fund on the date hereof and, with respect to any
Additional Fund, on the date specified in the written notice
received by the Company from the Adviser in accordance with
paragraph 1(b) hereof that the Adviser is willing to serve as
Adviser with respect to such Fund. Unless terminated as herein
provided, this Agreement shall remain in full force and effect
for two years from the date hereof with respect to each Initial
Fund and, with respect to each Additional Fund, for two years
from the date on which such Fund becomes a Fund hereunder.
Subsequent to such initial periods of effectiveness, this
Agreement shall continue in full force and effect for periods of
one year thereafter with respect to each Fund so long as such
continuance with respect to such Fund is approved at least
annually (i) by either the Directors of the Company or by vote of
a majority of the outstanding voting securities (as defined in
the 1940 Act) of such Fund, and (ii), in either event, by the
vote of a majority of the Directors of the Company who are not
parties to this Agreement or "interested persons" (as defined in
the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
b. AMENDMENT. Any amendment to this Agreement shall become
effective with respect to a Fund upon approval of the Adviser and
of a majority of directors who are not parties to this Agreement
or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of
voting such approval and a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Fund.
c. TERMINATION. This Agreement may be terminated with respect to
any Fund at any time, without payment of any penalty, by vote of
the Directors or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Fund, or by the
Adviser, in each case on sixty (60) days' prior written notice to
the other party; provided, that a shorter notice period shall be
permitted for a Fund in the event its shares are no longer listed
on a national securities exchange.
d. AUTOMATIC TERMINATION. This Agreement shall automatically and
immediately terminate in the event of its "assignment" (as
defined in the 1940 Act).
e. APPROVAL, AMENDMENT OR TERMINATION BY A FUND. Any approval,
amendment or termination of this Agreement by the holders of a
"majority of the outstanding voting securities" (as defined in
the 1940 Act) of any Fund shall be effective to continue, amend
or terminate this Agreement with respect to any such Fund
notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any
other Fund affected thereby, and (ii) that such action has not
been approved by the vote of a majority of the outstanding voting
securities of the Company, unless such action shall be required
by any applicable law or otherwise.
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<PAGE>
8. SERVICES NOT EXCLUSIVE
The services of the Adviser to the Company hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to
others so long as its services hereunder are not impaired thereby.
9. MISCELLANEOUS
a. NOTICE. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate in
writing for the receipt of such notices.
b. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise,
the remainder shall not be thereby affected.
c. APPLICABLE LAW. This Agreement shall be construed in accordance
with and governed by the laws of New York.
d. EXECUTION BY COUNTERPART. This Agreement may be executed in any
number of counterparts, all of which together shall constitute
one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
FOREIGN FUND, INC.
By:
--------------------------------
Name:
Title:
BZW BARCLAYS GLOBAL FUND ADVISORS
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
7
<PAGE>
SCHEDULE A
ADVISORY FEE FOR THE INITIAL FUNDS:
.27% per annum of the aggregate net assets of the Initial Funds up to aggregate
net assets of $1.7 billion, plus .15% per annum of the aggregate net assets of
the Initial Funds in excess of $1.7 billion.
INITIAL FUNDS:
Australia Index Series
Austria Index Series
Belgium Index Series
Canada Index Series
France Index Series
Germany Index Series
Hong Kong Index Series
Italy Index Series
Japan Index Series
Malaysia Index Series
Mexico (Free) Index Series
Netherlands Index Series
Singapore (Free) Index Series
Spain Index Series
Sweden Index Series
Switzerland Index Series
United Kingdom Index Series
8
<PAGE>
FORM OF
DISTRIBUTION AGREEMENT
FOREIGN FUND, INC.
c/o PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
, 1996
Funds Distributor, Inc.
One Exchange Place
Tenth Floor
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Fund") has agreed that you
shall be, for the period of this agreement, the distributor of shares of each
Index Series of the Fund set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, an "Index Series") . For purposes of this
agreement the term "Shares" shall mean the authorized shares of the relevant
Index Series.
1. Services as Distributor
1.1 You will act as agent of the Fund for the distribution of Shares in
Creation Units (as defined herein) covered by, and in accordance with, the
registration statement and prospectus then in effect under the Securities Act of
1933, as amended (the "1933 Act") and will transmit promptly any orders received
by you for purchase or redemption of Shares in Creation Units to the Transfer
and Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing. You shall deliver or cause the delivery of a prospectus to persons
purchasing Shares in Creation Units and shall maintain records of both orders
placed with you and confirmations of acceptance furnished by you. You represent
and warrant that you are a broker-dealer registered under the Securities
Exchange Act of 1934 (the "1934 Act") and a member of the National Association
of Securities Dealers, Inc. You agree to comply with all of the applicable
terms and provisions of the 1934 Act.
1
<PAGE>
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares in Creation Units on a continuous basis. It is contemplated that you may
enter into sales or servicing agreements with securities dealers, financial
institutions and other industry professionals, such as investment advisers,
accountants and estate planning firms, and in so doing you will act only on your
own behalf as principal.
1.3 You shall act as distributor of Shares in Creation Units in compliance
with all applicable laws, rules and regulations, including, without limitations,
all rules and regulations made or adopted pursuant to the Investment Company Act
of 1940, as amended, (the "1940 Act") by the Securities and Exchange Commission
or any securities association registered under the Securities Exchange Act of
1934, as amended (the "1934 Act).
1.4 Whenever the parties hereto, in their collective judgment, mutually
agree that such action is warranted by unusual market, economic or political
conditions, or by abnormal circumstances of any kind deemed by them to render
sales of a Fund's Shares in Creation Units not in the best interest of the Fund,
the parties hereto may agree to decline to accept any orders for, or make any
sales of, any Shares in Creation Units until such time as the parties deem it
advisable to accept such orders and to make such sales.
1.5 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the 1933 Act and all expenses in connection with
maintaining facilities for the issue and transfer of Shares in Creation Units
and for supplying information, prices and other data to be furnished by the Fund
hereunder, and all expenses in connection with the preparation and printing of
the Fund's prospectuses and statements of additional information for regulatory
purposes and for distribution to shareholders; provided however, that the Fund
shall not pay any of the costs of advertising or promotion for the sale of
Shares.
1.6 The Fund agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in Creation Units in such states as you may
designate to the Fund and the Fund may approve, and the Fund agrees to pay all
expenses which may be incurred in connection with such qualification. You shall
pay all expenses connected with your own qualification as a dealer under state
or Federal laws and, except as otherwise specifically provided in this
agreement, all other expenses incurred by you in connection with the sale of
Shares in Creation Units as contemplated in this agreement.
1.7 The Fund shall furnish you from time to time, for use in connection
with the sale of Shares in Creation Units, such information with respect to the
Fund or any relevant Index Series and the Shares as you may reasonably request,
all of which shall be signed by one or more of the Fund's duly authorized
officers; and the Fund warrants that the statements contained in any such
information, when so signed by the Fund's officers, shall be true and correct.
The Fund also shall furnish you upon request with: (a) semi-annual reports and
annual audited reports of the Fund's books and accounts made by independent
public accountants regularly retained by the Fund, (b) quarterly earnings
statements prepared by the Fund, (c) a monthly itemized list of the securities
in the Fund's or, if applicable, each Index Series' portfolio, (d) monthly
balance sheets as soon as practicable after the end of each month, and (e) from
time to time such additional information regarding the Fund's financial
condition as you may reasonably request.
2
<PAGE>
1.8 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the 1933 Act, and under the 1940 Act, with respect to the Shares have been
prepared in conformity with the requirements of said Acts and rules and
regulations of the Securities and Exchange Commission thereunder. As used in
this agreement the terms "registration statement" and "prospectus" shall mean
any registration statement and prospectus, including the statement of additional
information incorporated by reference therein, filed with the Securities and
Exchange Commission and any amendments and supplements thereto which at any time
shall have been filed with said Commission. The Fund represents and warrants to
you that any registration statement and prospectus, when such registration
statement becomes effective, will contain all statements required to be stated
therein in conformity with said Acts and the rules and regulations of said
Commission; that all statements of fact contained in any such registration
statement and prospectus will be true and correct when such registration
statement becomes effective; and that neither any registration statement nor any
prospectus when such registration statement becomes effective will include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
The Fund may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements to any prospectus as it may deem necessary or advisable. If the Fund
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Fund of a written request from you to
do so, you may, at your option, terminate this agreement or decline to make
offers of the Fund's securities until such amendments are made. The Fund will
give you reasonable notice in advance of its filing of any amendment to any
registration statement or supplement to any prospectus; provided, however, that
nothing contained in this agreement shall in any way limit the Fund's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
1.9 The Fund authorizes you and any dealers with whom you have entered
into dealer agreements to use any prospectus in the form most recently furnished
by the Fund in connection with the sale of Shares in Creation Units. The Fund
agrees to indemnify, defend and hold you, your several officers and directors,
and any person who controls you within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims, demands, liabilities
and expenses (including the cost of investigating or defending such claims,
demands or liabilities and any reasonable counsel fees incurred in connection
therewith) which you, your officers and directors, or any such controlling
persons, may incur under the 1933 Act, the 1940 Act or common law or otherwise,
arising out of or on the basis of any untrue statement, or alleged untrue
statement, of a material fact required to be stated in either any registration
statement or any prospectus or any statement of additional information, or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in any registration statement, any
prospectus or any statement of additional information or necessary to make the
statements in any of them not misleading, except that the Fund's agreement to
indemnify you, your officers or directors, and any such controlling person will
not be deemed to cover any such claim, demand, liability or expense to the
extent that it arises out of or is based upon any such untrue statement, alleged
untrue statement, omission or alleged omission made in any registration
statement, any prospectus or any statement of additional information in reliance
upon information furnished by you, your officers, directors or any such
controlling person to the Fund or its representatives for use in the preparation
thereof, and except that the Fund's agreement to
3
<PAGE>
indemnify you and the Fund's representations and warranties set out in paragraph
1.8 of this Agreement will not be deemed to cover any liability to the Funds or
their shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties under this
Agreement ("Disqualifying Conduct"). The Fund's agreement to indemnify you,
your officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any action brought
against you, your officers or directors, or any such controlling person, such
notification to be given by letter, by facsimile or by telegram addressed to the
Fund at its address set forth above within a reasonable period of time after the
summons or other first legal process shall have been served. The failure so to
notify the Fund of any such action shall not relieve the Fund from any liability
which the Fund may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Fund's indemnity agreement contained
in this paragraph 1.9. The Fund will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by the Fund
and approved by you. In the event the Fund elects to assume the defense of any
such suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Fund does not elect to assume
the defense of any such suit, the Fund will reimburse you, your officers and
directors, or the controlling person or persons named as defendant or defendants
in such suit, for the reasonable fees and expenses of any counsel retained by
you or them. The Fund's indemnification agreement contained in this paragraph
1.9 and the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of you, your officers and directors, or any controlling person, and
shall survive the delivery of any Shares. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your several officers and
directors, and their respective estates, and to the benefit of any controlling
persons and their successors. The Fund agrees promptly to notify you of the
commencement of any litigation or proceedings against the Fund or any of its
officers or Board members in connection with the issue and sale of Shares.
1.10 You agree to indemnify, defend and hold the Fund, its several officers
and Board members, and any person who controls the Fund within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Fund, its officers or Board members, or any
such controlling person, may incur under the 1933 Act, the 1940 Act, or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or Board members, or such controlling person
resulting from such claims or demands, (a) shall arise out of or be based upon
any unauthorized sales literature, advertisements, information, statements or
representations or any Disqualifying Conduct in connection with the offering and
sale of any Shares, or (b) shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by you to the Fund specifically for use in the Fund's registration
statement and used in the answers to any of the items of the registration
statement or in the corresponding statements made in the prospectus or statement
of additional information, or shall arise out of or be based upon any omission,
or alleged omission, to state a material fact in connection with such
information furnished in writing by you to the Fund and required to be stated in
such answers or necessary to make such information not
4
<PAGE>
misleading. Your agreement to indemnify the Fund, its officers and Board
members, and any such controlling person, as aforesaid, is expressly conditioned
upon your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to you at your address set forth
above within a reasonable period of time after the summons or other first legal
process shall have been served. The failure so to notify you of any such action
shall not relieve you from any liability which you may have to the Fund, its
officers or Board members, or to such controlling person by reason of any such
untrue, or alleged untrue, statement or omission, or alleged omission, otherwise
than on account of your indemnity agreement contained in this paragraph. You
will be entitled to assume the defense of such action, but, in such case, such
defense shall be conducted by counsel of good standing chosen by you and
approved by an executive officer of the Fund, if such action is based solely
upon such alleged misstatement or omission on your part, and in any other event
the Fund, its officers or Board members, or such controlling person shall each
have the right to participate in the defense or preparation of the defense of
any such action. This agreement of indemnity will inure exclusively to the
Fund's benefit, to the benefit of the Fund's officers and Board members, and
their respective estates, and to the benefit of any controlling persons and
their successors. You agree promptly to notify the Fund of the commencement of
any litigation or proceedings against you or any of your officers or directors
in connection with the issue and sale of Shares.
1.11 No Shares shall be offered by either you or the Fund under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10 of said
Act is not on file with the Securities and Exchange Commission; provided,
however, that nothing contained in this paragraph 1.11 shall in any way restrict
or have any application to or bearing upon the Fund's obligation to redeem or
repurchase any Shares from any shareholder in accordance with the provisions of
the Fund's prospectus or charter documents.
1.12. The Fund agrees to advise you immediately in writing of the
occurrence of any of the following events, as soon as any such event comes to
the attention of the Fund:
(a) any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
(b) the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
(c) the happening of any event which makes untrue any statement of a
material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) all actions of the Securities and Exchange Commission with respect
to any amendments to any registration statement or prospectus which may
from time to time be filed with the Securities and Exchange Commission.
5
<PAGE>
2. Offering Creation Units
Shares in Creation Units of each Index Series will be offered for sale by
you at a price per Creation Unit in the manner set forth in the then-current
prospectus, based on a net asset value determined in accordance with the Fund's
prospectus and charter documents. Any payments to dealers shall be governed by a
separate agreement between you and such dealer and the Fund's then-current
prospectus.
You will accept as compensation for the performance of your obligations
hereunder such compensation, if any, as may be provided for in any plan of
distribution adopted by the Fund with respect to the Fund or any Index Series
pursuant to Rule 12b-1 under the 1940 Act.
3. Term
This Agreement shall become effective with respect to each Index Series of
the Fund as of the date hereof and will continue for an initial two-year term
and is renewable annually thereafter so long as such continuance is specifically
approved (i) by the Fund's Board on behalf of each Index Series or (ii) by a
vote of a majority (as defined in the 1940 Act) of the Shares of the Fund or the
relevant Index Series, as the case may be, provided that in either event its
continuance also is approved by a majority of the Board members who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This agreement may be terminated in respect of an Index
Series at any time, without the payment of any penalty, (i) by vote of a
majority of the Directors who are not interested persons of the Fund (as defined
under the 1940 Act) or (ii) by vote of a majority (as defined under the 1940
Act) of the outstanding voting securities of the relevant Index Series, on at
least 60 days' written notice to you. This agreement may also be terminated at
any time by you, without the payment of any penalty, upon 60 days' notice by you
and will terminate automatically in the event of its assignment (as defined
under the 1940 Act).
4. Miscellaneous
4.1 The Fund recognizes that your directors, officers and employees may
from time to time serve as directors, trustees, officers and employees of
corporations and business trusts (including other investment companies), and
that you or your affiliates may enter into distribution or other agreements with
such other corporations and trusts.
4.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
4.3 This Agreement shall be governed by the laws of the State of New York,
without regard to principles of conflicts of laws.
4.4 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
6
<PAGE>
Please confirm that the foregoing is in accordance with your understanding
and indicate your acceptance hereof by signing below, whereupon it shall become
a binding agreement between us.
Very truly yours,
FOREIGN FUND, INC.
By: ____________________________
Accepted:
FUNDS DISTRIBUTOR, INC.
By: ________________________________
7
<PAGE>
EXHIBIT A
INDEX SERIES OF THE FUND
FOREIGN FUND, INC.
Australia Index Series
Austria Index Series
Belgium Index Series
Canada Index Series
France Index Series
Germany Index Series
Hong Kong Index Series
Italy Index Series
Japan Index Series
Malaysia Index Series
Mexico (Free) Index Series
Netherlands Index Series
Singapore (Free) Index Series
Spain Index Series
Sweden Index Series
Switzerland Index Series
United Kingdom Index Series
8
<PAGE>
FOREIGN FUND, INC.
FORM OF
- AUTHORIZED PARTICIPANT AGREEMENT -
This Authorized Participant Agreement (the "Agreement") is entered
into by and between FUNDS DISTRIBUTOR, INC. (the "Distributor"), and __________
(the "Participant"). The Distributor and the Participant acknowledge and agree
that Foreign Fund, Inc. (the "Fund"), BZW Barclays Global Fund Advisors as
Adviser, Morgan Stanley Trust Company as Custodian and Lending Agent, PFPC Inc.
as Administrator and Accounting Agent, and PNC Bank, N.A. as Transfer Agent
shall be third party beneficiaries of this Agreement, and shall receive the
benefits contemplated by this agreement, to the extent specified herein. The
Distributor has been retained to provide services as principal underwriter of
the Fund acting on an agency basis in connection with the sale and distribution
of shares of common stock, par value $.001 per share (sometimes referred to as
"World Equity Benchmark Shares-SM-" or "WEBS-SM-"), of the Index Series of the
Fund (each, an "Index Series") named on Annex I hereto. As specified in the
Fund's prospectus, including the statement of additional information
incorporated therein (the "Prospectus") included as part of its registration
statement, as amended, on Form N-1A (No. 33-97598), the WEBS of any Index Series
offered thereby may be purchased or redeemed only in aggregations of a specified
number of WEBS referred to therein and herein as a "Creation Unit". The number
of WEBS presently constituting a Creation Unit of each Index Series is set forth
in Annex I. Creation Units of WEBS may be purchased only by or through a
Participant that has entered into an Authorized Participant Agreement with the
Fund and the Distributor.
The Prospectus provides that Creation Units generally will be sold in
exchange for an in-kind deposit of a designated portfolio of equity securities
(the "Deposit Securities") and an amount of cash computed as described in the
Prospectus (the "Cash Component"), plus a purchase transaction fee as described
in the Prospectus, delivered to the Fund by the Participant for its own account
or acting on behalf of another party. Together, the Deposit Securities and the
Cash Component constitute the "Portfolio Deposit", which represents the minimum
initial and subsequent investment amount for WEBS of any Index Series of the
Fund. References to the Prospectus are to the then current Prospectus as it may
be supplemented or amended from time to
<PAGE>
time. Capitalized terms not otherwise defined herein are used herein as defined
in the Prospectus.
This Agreement is intended to set forth certain premises and the
procedures by which the Participant may purchase and/or redeem Creation Units of
WEBS through the facilities of The Depository Trust Company ("DTC"). The
procedures for processing an order to purchase WEBS (each a "Purchase Order")
and an order to redeem WEBS (each a "Redemption Order") are described in the
Fund's Prospectus and in Annex II to this agreement. All Purchase Orders must
be in writing in the form of Purchase Order approved by the Fund (see Annex III
hereto). All Redemption Orders must be in writing in the form of Redemption
Order approved by the Fund (see Annex IV hereto). All Purchase Orders and
Redemption Orders are irrevocable. The Participant may place Purchase Orders or
Redemption Orders for Creation Units of WEBS subject to the procedures for
purchase and redemption referred to in paragraph 2 of this Agreement.
The parties hereto in consideration of the premises and of the mutual
agreements contained herein agree as follows:
1. STATUS OF PARTICIPANT. The Participant hereby represents,
covenants and warrants that with respect to Purchase Orders or Redemption
Orders of Creation Units of WEBS of any Index Series, it is a DTC
participant. Any change in the foregoing status of the Participant shall
terminate this Agreement and the Participant shall give prompt written
notice to the Distributor and the Fund of such change.
The Participant hereby represents and warrants that unless the
following paragraph is applicable to it, it is registered as a broker-
dealer under the Securities Exchange Act of 1934, as amended, is qualified
to act as a broker or dealer in the states or other jurisdictions where it
transacts business, and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"), and the Participant
agrees that it will maintain such registrations, qualifications, and
membership in good standing and in full force and effect throughout the
term of this Agreement. The Participant agrees to comply with all
applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with
the Constitution, By-Laws and Rules of Fair Practice of the NASD, and that
it will not offer or sell WEBS of any Index Series of the Fund in any state
or
-2-
<PAGE>
jurisdiction where they may not lawfully be offered and/or sold.
If the Participant is offering and selling WEBS of any Index Series of
the Fund in jurisdictions outside the several states, territories, and
possessions of the United States and is not otherwise required to be
registered, qualified, or a member of the NASD as set forth above, the
Participant nevertheless agrees to observe the applicable laws of the
jurisdiction in which such offer and/or sale is made, to comply with the
full disclosure requirements of the Securities Act of 1933, as amended (the
"1933 Act") and the regulations promulgated thereunder and to conduct its
business in accordance with the spirit of the Rules of Fair Practice of the
NASD.
The Participant understands and acknowledges that the proposed method
by which Creation Units of WEBS will be created and traded may raise
certain issues under applicable securities laws. For example, because new
Creation Units of WEBS may be issued and sold by the Fund on an ongoing
basis, at any point a "distribution", as such term is used in the 1933 Act,
may occur. The Participant understands and acknowledges that some
activities on its part may, depending on the circumstances, result in its
being deemed a participant in a distribution in a manner which could render
it a statutory underwriter and subject it to the prospectus delivery and
liability provisions of the 1933 Act. The Participant also understands and
acknowledges that dealers who are not "underwriters" but are effecting
transactions in WEBS, whether or not participating in the distribution of
WEBS, are generally required to deliver a prospectus.
2. EXECUTION OF PURCHASE ORDERS AND REDEMPTION ORDERS. All Purchase
Orders or Redemption Orders shall be handled in accordance with the terms
of the Prospectus and the procedures described in Annex II to this
Agreement and shall require the timely execution and delivery of an
appropriate Purchase Order or Redemption Order, as the case may be,
substantially in the forms set forth in Annexes III and IV hereto,
respectively. Each party hereto agrees to comply with the provisions of
such documents to the extent applicable to it. It is contemplated that the
phone lines used by the WEBS telephone representatives will be recorded,
and the Participant hereby consents to the recording of all calls with the
WEBS telephone representatives. The Fund reserves the right to issue
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<PAGE>
additional or other procedures relating to the manner of purchasing or
redeeming Creation Units and the Participant agrees to comply with such
procedures as may be issued from time to time. The Participant
acknowledges and agrees on behalf of itself and any party for which it is
acting (whether as a customer or otherwise) that delivery of a Purchase
Order or Redemption Order shall be irrevocable, provided that the Fund and
the Distributor on behalf of the Fund reserves the right to reject any
Purchase Order until acceptance and any Redemption Order that is not in
"proper form" as defined in the Prospectus.
With respect to any Redemption Order, the Participant also
acknowledges and agrees on behalf of itself and any party for which it is
acting (whether as a customer or otherwise) to return to the Fund any
dividend, distribution or other corporate action paid to it or to the party
for which it is acting in respect of any Deposit Security that is
transferred to the Participant or any party for which it is acting that,
based on the valuation of such Deposit Security at the time of transfer,
should have been paid to the Index Series. With respect to any Redemption
Order, the Participant also acknowledges and agrees on behalf of itself and
any party for which it is acting (whether as a customer or otherwise) that
the Fund is entitled to reduce the amount of money or other proceeds due to
the Participant or any party for which it is acting by an amount equal to
any dividend, distribution or other corporate action to be paid to it or to
the party for which it is acting in respect of any Deposit Security that is
transferred to the Participant or any party for which it is acting that,
based on the valuation of such Deposit Security at the time of transfer,
should be paid to the Index Series. With respect to any Purchase Order,
the Fund acknowledges and agrees to return to the Participant or any party
for which it is acting any dividend, distribution or other corporate action
paid to the Fund in respect of any Deposit Security that is transferred to
the Fund that, based on the valuation of such Deposit Security at the time
of transfer, should have been paid to the Participant or any party for
which it is acting.
3. MARKETING MATERIALS AND REPRESENTATIONS. The Participant
represents, warrants and agrees that it will not make any representations
concerning WEBS other than those contained in the Fund's then current
Prospectus or in any promotional materials or sales literature furnished to
the Participant by the
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<PAGE>
Distributor. The Participant agrees not to furnish or cause to be
furnished to any person or display or publish any information or materials
relating to WEBS (including, without limitation, promotional materials and
sales literature, advertisements, press releases, announcements,
statements, posters, signs or other similar materials), except such
information and materials as may be furnished to the Participant by the
Distributor, and such other information and materials as may be approved in
writing by the Distributor. The Participant understands that the Fund will
not be advertised or marketed as an open-end investment company, i.e., as a
mutual fund, which offers redeemable securities, and that any advertising
materials will prominently disclose that the WEBS are not redeemable units
of beneficial interest in the Fund. In addition, the Participant
understands that any advertising material that addresses redemptions of
WEBS, including the Fund's Prospectus, will disclose that the owners of
WEBS may acquire WEBS and tender WEBS for redemption to the Fund in
Creation Unit aggregations only.
4. SUBCUSTODIAN ACCOUNT. The Participant understands and agrees that
in the case of each Index Series, the Fund has caused the Fund custodian
("Custodian") to maintain with the applicable subcustodian for such Index
Series an account in the relevant foreign jurisdiction to which the
Participant shall deliver or cause to be delivered in connection with the
purchase of a Creation Unit the securities and any other redemption
proceeds (or the cash value of all or a part of such securities, in the
case of a permitted or required cash purchase or "cash in lieu" amount) on
behalf of itself or any party for which it is acting (whether or not a
customer), with any appropriate adjustments as advised by the Fund, in
accordance with the terms and conditions applicable to such account in such
jurisdiction.
5. TITLE TO SECURITIES; RESTRICTED SHARES. The Participant
represents on behalf of itself and any party for which it acts that upon
delivery of a portfolio of Deposit Securities to the Custodian and/or the
relevant subcustodian in accordance with the terms of the Prospectus, the
Fund will acquire good and unencumbered title to such securities, free and
clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims, including, without limitation, any restriction upon
the sale or transfer of such securities imposed by (i) any
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<PAGE>
agreement or arrangement entered into by the Participant or any party for
which it is acting in connection with a Purchase Order or (ii) any
provision of the 1933 Act, and any regulations thereunder (except that
portfolio securities of issuers other than U.S. issuers shall not be
required to have been registered under the 1933 Act if exempt from such
registration), or of the applicable laws or regulations of any other
applicable jurisdiction and (iii) no such securities are "restricted
securities" as such term is used in Rule 144(a)(3)(i) promulgated under the
1933 Act.
6. CASH COMPONENT AND FEES. The Participant hereby agrees that as
between the Fund and itself or any party for which it acts in connection
with a Purchase Order, it will make available in same day funds for each
purchase of WEBS an amount of cash sufficient to pay the Cash Component and
any other amounts of cash due to the Fund in connection with the purchase
of any Creation Unit of WEBS (including the purchase transaction fee for
in-kind and cash purchases and the additional variable charge for cash
purchases (when, in the sole discretion of the Fund, cash purchases are
available or specified)) (the "Cash Amount"), which shall be made to an
account maintained by the Custodian at Chemical Bank, New York, providing
payment on or before the Contractual Settlement Date (as defined in Annex
II) in same day or immediately available funds. The Participant hereby
agrees to ensure that the Cash Amount will be received by the Fund on or
before the Contractual Settlement Date, and in the event payment of such
Cash Amount has not been made by such Contractual Settlement Date, the
Participant agrees on behalf of itself or any party for which it acts in
connection with a Purchase Order to pay the full cash amount, plus
interest. The Participant may require its customer to enter into an
agreement with the Participant with respect to such matters. The
Participant shall be liable to the Distributor for any amounts advanced by
the Distributor in its sole discretion to the Participant for payment of
the amounts due and owing for the Cash Component, the purchase transaction
fee and/or the additional variable charge for cash purchases (when, in the
sole discretion of the Fund, cash purchases are available or specified).
7. ROLE OF PARTICIPANT.
(a) The Participant acknowledges and agrees that for all purposes of
this Agreement, the Participant
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<PAGE>
will be deemed to be an independent contractor, and will have no authority
to act as agent for the Fund or the Distributor in any matter or in any
respect. The Participant agrees to make itself and its employees
available, upon request, during normal business hours to consult with the
Fund or the Distributor or their designees concerning the performance of
the Participant's responsibilities under this Agreement.
(b) In executing this Agreement, the Participant agrees in connection
with any purchase or redemption transactions in which it acts for a
customer or for any other DTC Participant or indirect participant, or any
other Beneficial Owner, that it shall extend to any such party all of the
rights, and shall be bound by all of the obligations, of a DTC Participant
in addition to any obligations that it undertakes hereunder or in
accordance with the Prospectus.
(c) The Participant agrees to maintain records of all sales of WEBS
made by or through it and to furnish copies of such records to the Fund or
the Distributor upon the request of the Fund or the Distributor.
8. AUTHORIZED PERSONS. Concurrently with the execution of this
Agreement and from time to time thereafter, the Participant shall deliver
to the Distributor and the Fund, with copies to the Custodian and the
Transfer Agent (referred to below) duly certified as appropriate by its
Secretary or other duly authorized official, a certificate in a form
approved by the Fund (see Annex V hereto) setting forth the names and
signatures of all persons authorized to give instructions relating to any
activity contemplated hereby or any other notice, request or instruction on
behalf of the Participant (each an "Authorized Person"). Such certificate
may be accepted and relied upon by the Distributor and the Fund as
conclusive evidence of the facts set forth therein and shall be considered
to be in full force and effect until delivery to the Distributor and the
Fund of a superseding certificate in a form approved by the Fund bearing a
subsequent date. The Distributor shall issue to each Authorized Person a
unique personal identification number ("PIN Number") by which such
Authorized Person and the Participant shall be identified and instructions
issued by the Participant hereunder shall be authenticated. The PIN Number
shall be kept confidential and only provided to Authorized Persons. Upon
the termination or revocation of authority of such Authorized Person by the
Participant,
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<PAGE>
the Participant shall give immediate written notice of such fact to the
Distributor and the Fund and such notice shall be effective upon receipt by
both the Distributor and the Fund.
9. REDEMPTION. The Participant understands and agrees that
Redemption Orders may be submitted only on days that the American Stock
Exchange, Inc. (the "AMEX") is open for trading.
(a) The Participant represents and warrants that it will not obtain a
Redemption Order Number (as defined in Annex II) from the Fund for the
purpose of redeeming any Creation Unit of WEBS of any Index Series unless
it first ascertains that it or its customer, as the case may be, owns
outright or has full legal authority and legal and beneficial right to
tender for redemption the requisite number of WEBS of the relevant Index
Series to be redeemed and to the entire proceeds of the redemption and that
such WEBS have not been loaned or pledged to another party and are not the
subject of a repurchase agreement, securities lending agreement or any
other arrangement that would preclude the delivery of such WEBS to the
Transfer Agent in accordance with the Prospectus or as otherwise required
by the Fund. The Participant understands that WEBS of any Index Series may
be redeemed only when one or more Creation Units of WEBS of a Beneficial
Owner are held in the account of a single Participant.
(b) In order to provide for the delivery of Deposit Securities and
any other redemption proceeds upon redemption of WEBS in Creation Units,
the Participant agrees for itself and on behalf of any Beneficial Owner for
which it is acting, to provide to the Distributor and the Fund on a form
approved by the Fund (see Annex VI hereto), with copies to the Custodian
and the Transfer Agent (referred to below), written instructions (the
"Standing Redemption Instructions") for delivery of Deposit Securities and
other redemption proceeds in the applicable jurisdiction(s) for each Index
Series with respect to which the Participant wishes to be authorized to
submit a Redemption Order to redeem Creation Units of WEBS. A Participant
is authorized to submit a Redemption Order only with respect to Creation
Units of WEBS of an Index Series for which Standing Redemption Instructions
have been received by the Fund and the Distributor. The Standing
Redemption Instructions shall include information (including the applicable
account name, account number and any other reference number)
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<PAGE>
identifying the account(s) into which the Deposit Securities and any other
redemption proceeds should be delivered pursuant to a Redemption Order.
The Participant may designate in its Standing Redemption Instructions a
U.S. dollar account into which the U.S. dollar denominated cash portion of
the redemption proceeds, if any, should be delivered pursuant to a
Redemption Order. An Authorized Person of the Participant may amend the
Standing Redemption Instructions from time to time before or concurrently
with submission of a Redemption Order in writing to the Distributor and the
Fund in a form approved by the Fund (see Annex VI hereto), with copies to
the Custodian and the Transfer Agent. A Redemption Order may include
alternative delivery instructions ("Alternative Delivery Instructions")
which supersede and replace the Participant's Standing Redemption
Instructions only with respect to the Redemption Order to which such
Alternative Delivery Instructions are attached. Alternative Delivery
Instructions do not constitute an amendment to the Participant's Standing
Redemption Instructions, and Alternative Delivery Instructions must
accompany a Redemption Order and be in a form approved by the Fund (see
Annex IV hereto). The Participant understands and agrees that the
Distributor will instruct the Custodian or subcustodian to deliver, and the
Custodian or subcustodian will deliver, Deposit Securities and any other
redemption proceeds into the account(s) identified in the Standing
Redemption Instructions or the Alternative Delivery Instructions, as the
case may be. If neither the redeeming Beneficial Owner, nor the
Participant acting on behalf of such redeeming Beneficial Owner, has
appropriate arrangements satisfactory to the Fund to take delivery of the
Deposit Securities in the applicable foreign jurisdiction, and it is not
possible to make other such arrangements (to which situation the
Participant shall reasonably agree), or if it is not possible to effect
deliveries of Deposit Securities in such jurisdiction, the Participant
understands and agrees that the Fund may, in its sole discretion, exercise
its option to redeem such shares in cash and the redeeming Beneficial Owner
will be required to receive its redemption proceeds in cash, less the
redemption transaction fee for in-kind and cash redemptions and the
additional variable charge for cash redemptions.
10. BENEFICIAL OWNERSHIP. The Participant represents and warrants to
the Distributor and the Fund that (based upon the number of outstanding
WEBS of such Index Series made publicly available by the Fund) it
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<PAGE>
does not, and will not in the future, hold for the account of any single
Beneficial Owner of WEBS of the relevant Index Series 80 percent or more of
the currently outstanding WEBS of such relevant Index Series, so as to
cause the Fund to have a basis in the portfolio securities deposited with
the Fund with respect to such Index Series different from the market value
of such portfolio securities on the date of such deposit, pursuant to
section 351 of the Internal Revenue Code of 1986, as amended. The
Participant agrees that the confirmation relating to any order for one or
more Creation Units of WEBS of an Index Series shall state as follows:
"Purchaser represents and warrants that, after giving effect to the
purchase of WEBS to which this confirmation relates, it will not hold 80
percent or more of the outstanding WEBS of the relevant Index Series of
Foreign Fund, Inc. and that it will not treat such purchase as eligible for
tax-free treatment under Section 351 of the Internal Revenue Code of 1986,
as amended. If purchaser is a dealer, it agrees to deliver similar written
confirmations to any person purchasing any of the WEBS to which this
confirmation relates from it." The Fund, and its Transfer Agent and
Distributor, shall have the right to require information from the
Participant regarding WEBS ownership of each Index Series and to rely
thereon to the extent necessary to make a determination regarding ownership
of 80 percent or more of the currently outstanding WEBS of any Index Series
by a Beneficial Owner as a condition to the acceptance of a deposit of
Deposit Securities.
11. INDEMNIFICATION. The Participant hereby agrees to indemnify and
hold harmless the Distributor, the Fund, BZW Barclays Global Fund Advisors
as Adviser, Morgan Stanley Trust Company as Custodian and Lending Agent,
PFPC Inc. as Administrator and Accounting Agent, and PNC Bank, N.A. as
Transfer Agent, their respective subsidiaries, affiliates, directors,
officers, employees and agents, and each person, if any, who controls such
persons within the meaning of Section 15 of the 1933 Act (each an
"Indemnified Party") from and against any loss, liability, cost and expense
(including attorneys' fees) incurred by such Indemnified Party as a result
of (i) a breach of any representation, warranty or covenant made by the
Participant in this Agreement; or (ii) failure of the Participant to
perform any obligations set forth in the Agreement; or (iii) any failure on
the part of the Participant to comply with applicable laws; or (iv) any
actions of such Indemnified Party in reliance upon any
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<PAGE>
instructions issued in accordance with Annexes II, III, IV, V and VI (as
each may be amended from time to time) believed by the Distributor and/or
the Fund to be genuine and to have been given by the Participant. The
Participant and the Distributor understand and agree that the Fund as a
third party beneficiary to this Agreement is entitled and intends to
proceed directly against the Participant in the event that the Participant
fails to honor any obligations pursuant to this Agreement that benefit the
Fund. This paragraph shall survive the termination of this Agreement. THE
DISTRIBUTOR SHALL NOT BE LIABLE TO THE PARTICIPANT FOR ANY DAMAGES ARISING
OUT OF MISTAKES OR ERRORS IN DATA PROVIDED TO THE DISTRIBUTOR, OR ARISING
OUT OF INTERRUPTIONS OR DELAYS OF COMMUNICATIONS WITH THE INDEMNIFIED
PARTIES WHO ARE SERVICE PROVIDERS TO THE FUND.
12. INFORMATION ABOUT PORTFOLIO DEPOSITS. The Participant
understands that the number and names of the designated portfolio of
Deposit Securities to be included in the current Portfolio Deposit for each
Index Series will be made available by the Distributor as such information
is supplied to the Distributor by the Adviser each day that the AMEX is
open for trading and will also be made available on each such day through
the facilities of the National Securities Clearing Corporation.
13. ACKNOWLEDGMENT. The Participant acknowledges receipt of the
Prospectus and represents it has reviewed such documents and understands
the terms thereof.
14. NOTICES. Except as otherwise specifically provided in this
Agreement, all notices required or permitted to be given pursuant to this
Agreement shall be given in writing and delivered by personal delivery or
by postage prepaid registered or certified United States first class mail,
return receipt requested, or by telex, telegram or facsimile or similar
means of same day delivery (with a confirming copy by mail). Unless
otherwise notified in writing, all notices to the Fund shall be at the
address or telephone, facsimile or telex numbers indicated below the Fund's
signature line, Attn.: Vice President, Operations, with a copy to Morgan
Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201,
Attn: WEBS.
All notices to the Participant and the Distributor shall be directed
to the address or telephone, fac-
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<PAGE>
simile or telex numbers indicated below the signature line of such party.
15. INITIAL CREATION BY PARTICIPANT. The Participant agrees that as
promptly after the date of this Agreement as is practicable, it will
purchase at least one Creation Unit of each Index Series of the Fund.
16. TERMINATION AND AMENDMENT. This Agreement shall become effective
in this form as of the date executed by the Fund and may be terminated at
any time by any party upon sixty days prior written notice to the other
parties and may be terminated earlier by the Fund at any time in the event
of a breach by the Participant of any provision of this Agreement or the
procedures described or incorporated herein. This Agreement supersedes any
prior such agreement between or among the parties. This Agreement may be
amended by the Fund from time to time without the consent of any Beneficial
Owner by the following procedure. The Fund will mail a copy of the
amendment to the Distributor and the Participant. If neither the
Distributor nor the Participant objects in writing to the amendment within
five days after its receipt, the amendment will become part of this
Agreement in accordance with its terms.
17. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York.
The parties irrevocably submit to the non-exclusive jurisdiction of
any New York State or United States Federal court sitting in New York City
over any suit, action or proceeding arising out of or relating to this
Agreement.
18. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year written below.
FUNDS DISTRIBUTOR, INC.
BY:____________________
TITLE:
ADDRESS:
Date: , 199
TELEPHONE:
FACSIMILE:
PARTICIPANT
BY:____________________
TITLE:
ADDRESS:
Date: , 199
TELEPHONE:
FACSIMILE:
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ANNEX I
FOREIGN FUND, INC.
INDEX SERIES AND WEBS PER CREATION UNIT
Index WEBS per
Series Creation Unit
- ------ -------------
The 200,000
Australia
Index
The 100,000
Austria
Index
The 40,000
Belgium
Index
The 100,000
Canada
Index
The 200,000
France
Index
The 300,000
Germany
Index
The 75,000
Hong Kong
Index
The 150,000
Italy
Index
The 600,000
Japan
Index
The 75,000
Malaysia
Index
The 100,000
Mexico (Free)
Index
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<PAGE>
The 50,000
Netherlands
Index
The 100,000
Singapore (Free)
Index
The 75,000
Spain
Index
The 75,000
Sweden
Index
The 125,000
Switzerland
Index
The 200,000
United Kingdom
Index
I-2
<PAGE>
ANNEX II
FOREIGN FUND, INC.
PROCEDURES FOR PROCESSING
PURCHASE ORDERS AND REDEMPTION ORDERS
This Annex II to the Authorized Participant Agreement supplements the
Prospectus with respect to the procedures to be used in processing a Purchase
Order for the purchase of WEBS in Creation Units of each Index Series and a
Redemption Order for the redemption of WEBS in Creation Units of each Index
Series. Capitalized terms, unless otherwise defined in this Annex II, have the
meanings attributed to them in the Authorized Participant Agreement or the
Prospectus.
A Participant is required to have signed the Authorized Participant
Agreement. Upon acceptance of the Agreement and execution thereof by the Fund
and in connection with the initial Purchase Order submitted by the Participant,
the Distributor will assign a PIN Number to each Authorized Person authorized to
act for a Participant. This will allow a Participant through its Authorized
Person(s) to place a Purchase Order or Redemption Order with respect to the
purchase or redemption of Creation Units of WEBS.
PART A
TO PLACE AN ORDER FOR PURCHASE OF CREATION UNIT(S) OF WEBS
1. CALL TO GIVE NOTICE OF INTENT TO SUBMIT PURCHASE ORDER AND TO
RECEIVE AN ORDER CONTROL NUMBER. To initiate an order for a Creation Unit of
WEBS, the Participant must give notice to the Distributor of its intent to
submit a Purchase Order to purchase WEBS. Giving notice to the Distributor of
an intent to submit a Purchase Order does not constitute a Purchase Order, which
must be completed subsequently.
An Authorized Person for the Participant must call the WEBS telephone
representative at 800-810-WEBS(9327) not later than the closing time of the
regular trading session on the American Stock Exchange (the "AMEX Closing
Time")(ordinarily 4:00 p.m. New York time) to receive a number with respect to
its contemplated Purchase Order (the "Order Control Number"). Each Order
Control Number can be used for ordering multiple Creation Units of a single
Index Series in one Purchase Order. Separate Order Control
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<PAGE>
Numbers are required for ordering Creation Units of different Index Series. A
creation charge will be assessed with respect to each Order Control Number.
Upon verifying the authenticity of the caller (as determined by the use of the
appropriate PIN Number) and the terms of the order, the WEBS telephone
representative will issue the appropriate unique Order Control Number(s).
Incoming telephone calls are queued and will be handled in the sequence
received. Calls placed before the AMEX Closing Time will be processed even if
the call is taken after this cut-off time. ACCORDINGLY, DO NOT HANG UP AND
REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE AMEX CLOSING TIME WILL
NOT BE ACCEPTED.
NOTE THAT THE TELEPHONE CALL IN WHICH THE ORDER CONTROL NUMBER(S)
IS/ARE ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE
PURCHASE ORDER. A PURCHASE ORDER IS ONLY COMPLETED AND PROCESSED UPON RECEIPT
OF A WRITTEN PURCHASE ORDER CONTAINING THE DESIGNATED ORDER CONTROL NUMBER(S)
AND PIN NUMBER AND TRANSMITTED BY FACSIMILE OR ELECTRONIC INTERFACE PROVIDED BY
THE DISTRIBUTOR TO (617)-248-6439. An Order Control Number is only valid for
the Business Day (as defined in the Prospectus) on which it is issued.
2. PLACE THE PURCHASE ORDER. All orders with respect to the creation
of Creation Units of WEBS of any Index Series are required to be in writing in
the form of Purchase Order approved by the Fund (see Annex III hereto) and
accompanied by the designated Order Control Number. One Order Control Number
may be used in a Purchase Order for multiple Creation Units of a single Index
Series. Separate Order Control Numbers are required for each Index Series from
which the Participant wishes to purchase WEBS. All Purchase Orders for Creation
Units of WEBS are irrevocable. The Purchase Order for creation of Creation
Units of WEBS must be sent by facsimile or Electronic Interface provided by the
Distributor and must be received by the WEBS telephone representative prior to
the AMEX Closing Time.
The Fund acknowledges its agreement to return to the Participant or
any party for which it is acting any dividend, distribution or other corporate
action paid to the Fund in respect of any Deposit Security that is transferred
to the Fund that, based on the valuation of such Deposit Security at the time of
transfer, should have been paid to the Participant or any party for which it is
acting.
3. AWAIT RECEIPT OF CONFIRMATION. Subject to the conditions that
(i) a properly completed irrevocable Purchase Order has been submitted by the
Participant (either on its own or another investor's behalf) not later than the
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<PAGE>
AMEX Closing Time, and (ii) arrangements satisfactory to the Fund are in place
for payment of the Cash Component and any other cash amounts which may be due,
the Distributor will accept the Purchase Order on behalf of the Fund and the
Distributor will inform the Participant that its Purchase Order has been
accepted by 6:00 p.m. New York time on the Business Day the Purchase Order is
received. In the event that the Participant does not receive a timely
confirmation from the Distributor, the Participant should contact the WEBS
telephone representative at the telephone number indicated.
4. AMBIGUOUS INSTRUCTIONS. In the event that a Purchase Order
contains ambiguous instructions or terms that differ from the information
provided in the telephone call at the time of issuance of the Order Control
Number(s), the WEBS telephone representative will attempt to contact the
Participant to request confirmation of the terms of the order. If an Authorized
Person confirms the terms as they appear in the Purchase Order then the order
will be processed. If an Authorized Person contradicts its terms, the Purchase
Order will be deemed invalid and a corrected Purchase Order must be received by
the WEBS telephone representative not later than the AMEX Closing Time. If the
WEBS telephone representative is not able to contact an Authorized Person, then
the Purchase Order shall be accepted and processed in accordance with its terms
notwithstanding any inconsistency with the telephone information. In the event
that a Purchase Order contains terms that are illegible, the Purchase Order will
be deemed invalid and the WEBS telephone representative will attempt to contact
the Participant to request retransmission of the Purchase Order. A corrected
Purchase Order must be received by the WEBS telephone representative not later
than the AMEX Closing Time.
5. PROCESSING A PURCHASE ORDER. The Distributor reserves the right
to suspend a Purchase Order in the event that its acceptance would appear to
result in the Participant or a Beneficial Owner owning 80 percent or more of all
outstanding WEBS of an Index Series. In such event, the WEBS telephone
representative will attempt to contact an Authorized Person for purposes of
confirmation of the fact that with respect to such Participant no Beneficial
Owner would own 80 percent or more of all outstanding WEBS of a given Index
Series upon execution of the Purchase Order. In the event that (i) the WEBS
telephone representative is unable to contact an Authorized Person or (ii) the
Participant fails to transmit an identical Purchase Order confirming the
representation and warranty as to such fact, then the Purchase Order shall be
deemed invalid.
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<PAGE>
The Fund and/or the Distributor also reserve the absolute right to
reject or suspend a Purchase Order if (i) the portfolio of Deposit Securities
delivered is not as specified by the Distributor; (ii) acceptance of the Deposit
Securities would have certain adverse tax consequences to the Index Series;
(iii) the acceptance of the Portfolio Deposit would, in the opinion of counsel,
be unlawful; (iv) the acceptance of the Portfolio 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 of WEBS; or (v) 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 shall notify
the Participant of its rejection of any Purchase Order. The Fund and the
Distributor are under no duty, however, to give notification of any defects or
irregularities in the delivery of Portfolio Deposits nor shall either of them
incur any liability for the failure to give any such notification.
6. CONTRACTUAL SETTLEMENT. Except as provided below, Deposit
Securities must be delivered to an account maintained at the applicable local
subcustodian of the Fund on or before the Contractual Settlement Date (defined
below). The Participant must also make available on or before the Contractual
Settlement Date, by means satisfactory to the Fund, immediately available or
same day funds estimated by the Fund to be sufficient to pay the Cash Component
next determined after acceptance of the Purchase Order, together with the
applicable purchase transaction fee (as described in the Prospectus). Any
excess funds will be returned following settlement of the issue of the Creation
Unit of WEBS. The "Contractual Settlement Date" is the earlier of (i) the date
upon which all of the required Deposit Securities, the Cash Component and any
other cash amounts which may be due are delivered to the Fund and (ii) the last
day for settlement on the customary settlement cycle in the jurisdiction where
the securities of the applicable Index Series are customarily traded.
Except as provided in the next two paragraphs, a Creation Unit of WEBS
of an Index Series will not be issued until the transfer of good title to the
Fund of the portfolio of Deposit Securities and the payment of the Cash
Component and the purchase transaction fee have been completed. When the
subcustodian confirms to the Custodian that the required securities included in
the Portfolio Deposit (or, when permitted in the sole discretion of the Fund,
the cash value thereof) have been delivered to the account of the relevant
subcustodian, the Custodian shall notify the Distributor and the Adviser, and
the Fund will
II-4
<PAGE>
issue and cause the delivery of the Creation Unit of WEBS. The Distributor will
then transmit a confirmation of acceptance to the Participant.
The Fund may in its sole discretion permit or require the substitution
of an amount of cash (i.e., a "cash in lieu" amount) to be added to the Cash
Component to replace any Deposit Security which may not be available in
sufficient quantity for delivery or for other similar reasons. If the Adviser
notifies the Distributor that a "cash in lieu" amount will be accepted, the
Distributor will notify the Participant and the Participant shall deliver, on
behalf of itself or the party on whose behalf it is acting, the "cash in lieu"
amount, with any appropriate adjustments as advised by the Fund. Any excess
funds will be returned following settlement of the issue of the Creation Unit of
WEBS.
In the event that a Portfolio Deposit is incomplete on the settlement
date for a Creation Unit of WEBS because certain Deposit Securities are missing,
the Fund may, in its sole discretion, issue a Creation Unit of WEBS
notwithstanding such deficiency in reliance on the undertaking of the
Participant to deliver the missing Deposit Securities as soon as possible, which
undertaking shall be secured by such Participant's delivery and maintenance of
collateral consisting of cash or Short-Term Investments (as defined in the
Prospectus) having a value at least equal to 105% of the value of the missing
Deposit Securities. The parties hereto agree that the Fund may purchase the
missing Deposit Securities at any time and the Participant agrees to accept
liability for any shortfall between the cost to the Fund of purchasing such
securities and the value of the collateral, which may be sold by the Fund at
such time, and in such manner, as the Fund may determine in its sole discretion.
7. CASH PURCHASES. When, in the sole discretion of the Fund, cash
purchases of Creation Units of WEBS are available or specified for an Index
Series, such purchases shall be effected in essentially the same manner as in-
kind purchases thereof. In the case of a cash purchase, the Participant must
pay the cash equivalent of the Deposit Securities it would otherwise be required
to provide through an in-kind purchase, plus the same Cash Component required to
be paid by an in-kind purchaser. In addition, to offset the Fund's brokerage
and other transaction costs associated with using the cash to purchase the
requisite Deposit Securities, the Participant must pay a fixed purchase
transaction fee, plus an additional variable charge for cash purchases, which is
expressed as a percentage of the value of the Deposit Securities. The
transaction fees for in-kind
II-5
<PAGE>
and cash purchases of Creation Units of WEBS are described in the Prospectus.
8. SUBCUSTODIAN ACCOUNTS. Annex VII hereto contains a list of the
subcustodian accounts of the Fund, into which the portfolio securities
constituting the portfolio of Deposit Securities of each Index Series are to be
delivered in connection with a Purchase Order.
II-6
<PAGE>
PART B
TO PLACE AN ORDER FOR REDEMPTION OF CREATION UNIT(S) OF WEBS
The Participant understands and agrees that Redemption
Orders may be submitted only on days that the American Stock
Exchange, Inc. (the "AMEX") is open for trading.
1. CALL TO RECEIVE A REDEMPTION ORDER NUMBER AND TO NOTIFY DELIVERY
OF WEBS.
(a) An Authorized Person of the Participant must call the WEBS
telephone representative at 800-810-WEBS(9327) not later than the AMEX Closing
Time to receive a number with respect to the contemplated Redemption Order (a
"Redemption Order Number"). Upon verifying the authenticity of the caller (as
determined by the use of the appropriate PIN Number) and the terms of the
Redemption Order, the WEBS telephone representative will issue a unique
Redemption Order Number. All Redemption Orders must be in the form of
Redemption Order approved by the Fund (see Annex IV hereto) and accompanied by
the designated Redemption Order Number. Incoming telephone calls are queued and
will be handled in the sequence received. Calls placed before the AMEX Closing
Time will be processed even if the call is taken after this cut-off time.
ACCORDINGLY, DO NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER
THAN THE AMEX CLOSING TIME WILL NOT BE ACCEPTED.
(b) An Authorized Person of the Participant must also inform the WEBS
telephone representative at 800-810-WEBS(9327) prior to delivering the
aggregated WEBS constituting a Creation Unit to notify the Transfer Agent of the
intention to redeem. A Participant planning to deliver WEBS for redemption on
such day should ascertain the deadlines applicable to DTC by contacting the
operations department of the broker or depository institution effectuating such
transfer of securities. These deadlines will vary and are likely to be
significantly earlier than the AMEX Closing Time.
NOTE THAT THE TELEPHONE CALL IN WHICH THE REDEMPTION ORDER NUMBER IS
ISSUED INITIATES THE REDEMPTION ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE
REDEMPTION ORDER. A REDEMPTION ORDER IS ONLY COMPLETED AND PROCESSED UPON
RECEIPT OF WRITTEN INSTRUCTIONS CONTAINING THE DESIGNATED REDEMPTION ORDER
NUMBER AND PIN NUMBER AND TRANSMITTED BY FACSIMILE OR ELECTRONIC INTERFACE
PROVIDED BY THE DISTRIBUTOR.
II-7
<PAGE>
2. PLACE THE REDEMPTION ORDER. A Redemption Order Number in only
valid for the Business Day on which it is issued. One Redemption Order Number
may be used in a Redemption Order for multiple Creation Units of a single Index
Series. Separate Redemption Order Numbers are required for each Index Series
from which the Participant wishes to redeem WEBS. All Redemption Orders of
Creation Units of WEBS are irrevocable. The Redemption Order for Creation Units
of WEBS must be sent by facsimile or Electronic Interface provided by the
Distributor and must be received by the WEBS telephone representative prior to
the AMEX Closing Time.
In the Redemption Order, the Participant will be required to
acknowledge its agreement on behalf of itself and any party for which it is
acting (whether as a customer or otherwise) to return to the Fund any dividend,
distribution or other corporate action paid to it or to the party for which it
is acting in respect of any Deposit Security that is transferred to the
Participant or any party for which it is acting that, based on the valuation of
such Deposit Security at the time of transfer, should be paid to the Index
Series to which the Redemption Order relates. In the Redemption Order, the
Participant will also be required to acknowledge its agreement on behalf of
itself and any party for which it is acting (whether as a customer or otherwise)
that the Fund is entitled to reduce the amount of money or other proceeds due to
the Participant or any party for which it is acting by an amount equal to any
dividend, distribution or other corporate action to be paid to it or to the
party for which it is acting in respect of any Deposit Security that is
transferred to the Participant or any party for which it is acting that, based
on the valuation of such Deposit Security at the time of transfer, should be
paid to the Index Series to which the Redemption Order relates.
3. AWAIT RECEIPT OF CONFIRMATION. Subject to the conditions that (i)
a duly completed Redemption Order is received by the Distributor from the
Participant on behalf of itself or another redeeming investor by the AMEX
Closing Time and (ii) the Participant has transferred or caused to be
transferred to the Fund's Transfer Agent the Creation Unit of WEBS being
redeemed through the book-entry system of DTC so as to be effective by 4:00 p.m.
New York time on a day on which the AMEX is open for business, the Distributor
will accept the Redemption Order on behalf of the Fund and the Distributor will
inform the Participant that its Redemption Order has been accepted by 6:00 p.m.
New York time on the Business Day the Redemption Order is received.
II-8
<PAGE>
4. AMBIGUOUS INSTRUCTIONS. In the event that a Redemption Order
contains terms that differ from the information provided in the telephone call
at the time of issuance of the Redemption Order Number(s), the WEBS telephone
representative will attempt to contact the Participant to request confirmation
of the terms of the Order. If an Authorized Person confirms the terms as they
appear in the Redemption Order then the Redemption Order will be accepted and
processed. If an Authorized Person contradicts its terms, the Order will be
deemed invalid and a corrected Redemption Order must be received by the WEBS
telephone representative not later than the AMEX Closing Time. If the WEBS
telephone representative is not able to contact an Authorized Person, then the
Redemption Order shall be accepted and processed in accordance with its terms
notwithstanding any inconsistency with the terms of the telephone information.
In the event that a Redemption Order contains terms that are illegible, the
Order will be deemed invalid and the WEBS telephone representative will attempt
to contact the Participant to request retransmission of the Redemption Order. A
corrected Redemption Order must be received by the WEBS telephone representative
not later than the AMEX Closing Time.
5. TAKING DELIVERY OF DEPOSIT SECURITIES. The Deposit Securities
constituting in-kind redemption proceeds will be delivered to the appropriate
foreign account which must be indicated in the Participant's Standing Redemption
Instructions or indicated on Alternative Delivery Instructions attached to a
Redemption Order. Alternative Delivery Instructions supersede and replace the
Participant's Standing Redemption Instructions only with respect to the
Redemption Order to which it is attached. An Authorized Person of the
Participant may amend the Participant's Standing Redemption Instructions from
time to time in writing to the Distributor and the Fund in a form approved by
the Fund (see Annex VI hereto). A redeeming Beneficial Owner or Participant
acting on behalf of such Beneficial Owner must maintain appropriate securities
broker-dealer, bank or other custody arrangements in each jurisdiction in which
any of the Deposit Securities are customarily traded, to which account such
Deposit Securities will be delivered. If neither the redeeming beneficial owner
nor the Participant acting on behalf of such redeeming Beneficial Owner has
appropriate arrangements to take delivery of the Deposit Securities in the
applicable foreign jurisdiction and it is not possible to make other such
arrangements, or if it is not possible to effect deliveries of the Deposit
Securities in such jurisdiction, the Beneficial Owner will be required to
receive its redemption proceeds in cash. In such case, the investor will
receive a cash payment equal to the net asset value of its shares
II-9
<PAGE>
based on the net asset value of WEBS of the relevant Index Series next
determined after the Redemption Order is received in proper form (minus a
redemption transaction fee and additional variable charge for cash redemptions
as specified in the Prospectus, to offset the Fund's brokerage and other
transaction costs associated with the disposition of Deposit Securities of the
Index Series). Redemptions of WEBS for Deposit Securities will be subject to
compliance with applicable United States federal and state securities laws and
each Index Series (whether or not it otherwise permits cash redemptions)
reserves the right to redeem Creation Units for cash to the extent that the
Index Series could not lawfully deliver specific Deposit Securities upon
redemptions or could not do so without first registering the Deposit Securities
under such laws.
6. CONTRACTUAL SETTLEMENT. Deliveries of redemption proceeds by the
Index Series relating to those countries generally will be made within three
Business Days. Due to the schedule of holidays in certain countries, however,
the delivery of in-kind redemption proceeds may take longer than three Business
Days after the day on which the Redemption Order is received in proper form.
See Appendix B of the statement of additional information for instances where
more than seven calendar days would be needed to deliver redemption proceeds.
7. CASH REDEMPTIONS. In the event that, in the sole discretion of
the Fund, cash redemptions are permitted or required by the Fund, proceeds will
be paid to the Participant redeeming shares on behalf of the redeeming investor
as soon as practicable after the date of redemption (within seven calendar days
thereafter, except for the instances listed in Appendix B of the statement of
additional information where more than seven calendar days would be needed).
8. STANDING REDEMPTION INSTRUCTIONS. Annex VI hereto contains the
Participant's Standing Redemption Instructions, which includes information
identifying the account(s) into which Deposit Securities of each Index Series
and any other redemption proceeds should be delivered by the Fund pursuant to a
Redemption Order.
II-10
<PAGE>
ANNEX III
FOREIGN FUND, INC.
FORM OF IRREVOCABLE PURCHASE ORDER
CONTACT INFORMATION FOR PURCHASE ORDER EXECUTION
Telephone Purchase Order Number: (800) 810-WEBS
Business Number: (617) 248-6009
Facsimile Number: (617) 248-6439
ALL ITEMS IN PART I MUST BE COMPLETED BY THE PARTICIPANT. THE DISTRIBUTOR, IN
ITS DISCRETION, MAY REJECT ANY PURCHASE ORDER NOT SUBMITTED IN PROPER FORM. SEE
THE FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION.
I. TO BE COMPLETED BY PARTICIPANT
Date: ______________ Time: ______________
Participant Name: _______________________________
Telephone Number: _____________________________
Facsimile Number: ______________________________
Authorized Person: ______________________________
PIN Number (assigned by Distributor): _______________
Standard Instructions For Delivering Custodian(s) YES NO (If 'NO'
attach listing)
ARRANGEMENTS FOR DELIVERY OF CASH COMPONENT:
The undersigned Participant has arranged for delivery to the Custodian of funds
equal, at a minimum, to the Cash Component, the purchase transaction fee and the
additional variable charge for cash purchases (when, in the sole discretion of
the Fund, cash purchases are available or specified) with respect to the above
Purchase Order. The delivery of the Cash Component and the applicable purchase
transaction fee to the Custodian are set forth on the following page:
III-1
<PAGE>
Wire Transfer: Other:
__________________
__________________
(Originating Bank)
_____________________
_____________________
(Account)
_____________________
_____________________
(Reference Number)
IRREVOCABILITY OF PURCHASE ORDER AND REPRESENTATIONS AND WARRANTIES REGARDING
BENEFICIAL OWNERSHIP.
The undersigned Participant understands and agrees that upon acceptance by the
Fund or the Distributor on behalf of the Fund of this Purchase Order and the
related portfolio of Deposit Securities, the purchase of Creation Units of WEBS
as specified herein shall be irrevocable. The Participant also represents and
warrants to the Distributor and the Fund that (i) it does not and will not,
after the consummation of the purchase contemplated by this Purchase Order, hold
for the account of any single Beneficial Owner of WEBS of the Index Series to
which this Purchase Order relates 80 percent or more of the outstanding shares
of such Index Series, and (ii) it has received a representation and warranty
from each Beneficial Owner purchasing WEBS by means of this Purchase Order that
(x) such Beneficial Owner will not own, after consummation of the purchase, 80
percent or more of the outstanding shares of the applicable Index Series, and
(y) such Beneficial Owner will not treat such purchase as eligible for tax-free
treatment under Section 351 of the Internal Revenue Code of 1986, as amended.
Signature of Authorized Person:
__________________________
Name:
THIS IRREVOCABLE PURCHASE ORDER MUST BE ACCOMPANIED BY A PURCHASE ORDER FORM.
III-2
<PAGE>
<TABLE>
<CAPTION>
(DTC PART #)
(NAME OF B/D)
SUBSCRIPTION / / DAILY TRADE SUMMARY REDEMPTION / /
FOREIGN FUND, INCORPORATED
TRADE DATE: 12/28/95 FUNDS DISTRIBUTOR, INC. TRADE DATE:
TRADING PHONE (800) 810-WEBS OPTION #2
FAX (617) 248-6439
- ------------------------------------------------------------------------------------------------------------------------------------
Creation Total Cash Sub/Red Control Settlement Confirmed By/or
Index: Units: WEBS: Component: Fee: Number: Date: Days Extended Detail:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA (02) 200K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRIA (04) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
BELGIUM (06) 40K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
CANADA (08) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE (10) 200K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY (12) 300K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
HONG KONG (14) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
ITALY (16) 150K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN (18) 600K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA (20) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO (22) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS (24) 50K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SINGAPORE (26) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SPAIN (28) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SWEDEN (30) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND (32) 125K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
U.K. (34) 200K -
(WEBS Cusip number
- ------------------------------------------------------------------------------------------------------------------------------------
-
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL: 0 0 $0.00 $0.00 - -
- ------------------------------------------------------------------------------------------------------------------------------------
-----------------------
PIN
-----------------------
</TABLE>
III-3
<PAGE>
II. TO BE COMPLETED BY DISTRIBUTOR
( ) Properly completed irrevocable purchase order, including Index
Series Order Sheet submitted before AMEX closing time.
( ) Arrangements satisfactory to the Fund are in place for payment of
the Cash Component and any other cash amounts which may be due.
This certifies that the attached Purchase Order has been:
( ) Accepted by the Fund-subject to timely and accurate delivery of
the attached listing of securities and cash per Index Series.
( ) Declined - Due to:
_________________________________________________
_________________________________________________
_________________________________________________
_______ _______ _______________________
Date Time Authorized Signature
Signature of Authorized Person:
_______________________________
Name:
Title:
III-4
<PAGE>
ANNEX IV
FOREIGN FUND, INC.
FORM OF IRREVOCABLE REDEMPTION ORDER
CONTACT INFORMATION FOR REDEMPTION ORDER EXECUTION
Telephone Redemption Order Number: (800) 810-WEBS
Business Number: (617) 248-6009
Facsimile Number: (617) 248-6439
ALL ITEMS IN PART I MUST BE COMPLETED BY THE PARTICIPANT. THE DISTRIBUTOR, IN
ITS DISCRETION, MAY REJECT ANY REDEMPTION ORDER NOT SUBMITTED IN PROPER FORM.
SEE THE FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION.
I. TO BE COMPLETED BY PARTICIPANT
Date: ______________ Time: ______________
Participant Name: _______________________________
Telephone Number: _____________________________
Facsimile Number: ______________________________
Authorized Person: ______________________________
PIN Number (assigned by Distributor): _______________
Standing Instructions For Receiving Custodian(s) YES NO
(If 'NO' complete Alternative Delivery Instructions attached hereto)
Alternate Cash Delivery Instructions YES NO
(If 'YES' complete Alternative Delivery Instructions attached hereto)
The Participant must deliver, on the redemption date, to the Transfer Agent
(Account Name) _______________________; (Account Number)_______________________
(Other Reference Number) __________________________ the Creation Units of WEBS
being redeemed.
The undersigned Participant represents and warrants to the Distributor and the
Fund that it has the right and authority
IV-1
<PAGE>
for itself or on behalf of its customer to redeem the WEBS contemplated by this
redemption.
REPRESENTATION, WARRANTY AND COVENANT REGARDING RETURN OF CERTAIN DISTRIBUTIONS
IN RESPECT OF PORTFOLIO SECURITIES
The undersigned Participant represents and warrants that it acknowledges and
agrees on behalf of itself and any party for which it is acting (whether as a
customer or otherwise) to return to the Fund any dividend, distribution or other
corporate action paid to it or to the party for which it is acting in respect of
any Deposit Security that is transferred to the Participant or any party for
which it is acting that, based on the valuation of such Deposit Security at the
time of transfer, should be paid to the Index Series to which this Redemption
Order relates. The undersigned Participant represents and warrants that it also
acknowledges and agrees on behalf of itself and any party for which it is acting
(whether as a customer or otherwise) that the Fund is entitled to reduce the
amount of money or other proceeds due to the Participant or any party for which
it is acting by an amount equal to any dividend, distribution or other corporate
action to be paid to it or to the party for which it is acting in respect of any
Deposit Security that is transferred to the Participant or any party for which
it is acting that, based on the valuation of such Deposit Security at the time
of transfer, should be paid to the Index Series to which this Redemption Order
relates.
Signature of Authorized Person:
__________________________
Name:
THIS IRREVOCABLE REDEMPTION ORDER MUST BE ACCOMPANIED BY A REDEMPTION ORDER
FORM.
IV-2
<PAGE>
<TABLE>
<CAPTION>
(DTC PART #)
(NAME OF B/D)
SUBSCRIPTION / / DAILY TRADE SUMMARY REDEMPTION / /
FOREIGN FUND, INCORPORATED
TRADE DATE: 12/28/95 FUNDS DISTRIBUTOR, INC. TRADE DATE:
TRADING PHONE (800) 810-WEBS OPTION #2
FAX (617) 248-6439
- ------------------------------------------------------------------------------------------------------------------------------------
Creation Total Cash Sub/Red Control Settlement Confirmed By/or
Index: Units: WEBS: Component: Fee: Number: Date: Days Extended Detail:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA (02) 200K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRIA (04) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
BELGIUM (06) 40K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
CANADA (08) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE (10) 200K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY (12) 300K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
HONG KONG (14) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
ITALY (16) 150K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN (18) 600K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA (20) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO (22) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS (24) 50K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SINGAPORE (26) 100K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SPAIN (28) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SWEDEN (30) 75K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND (32) 125K -
(WEBS Cusip number)
- ------------------------------------------------------------------------------------------------------------------------------------
U.K. (34) 200K -
(WEBS Cusip number
- ------------------------------------------------------------------------------------------------------------------------------------
-
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL: 0 0 $0.00 $0.00 - -
- ------------------------------------------------------------------------------------------------------------------------------------
-----------------------
PIN
-----------------------
</TABLE>
IV-3
<PAGE>
Alternative Delivery Instructions
THESE ALTERNATIVE DELIVERY INSTRUCTIONS SUPERSEDE AND REPLACE THE
PARTICIPANT'S STANDING REDEMPTION INSTRUCTIONS ONLY WITH RESPECT TO
THE ATTACHED REDEMPTION ORDER.
The Participant hereby instructs the Fund, the Distributor, the Custodian
and the relevant Subcustodian (if applicable) to deliver the Deposit Securities
and other redemption proceeds, if any, of the attached Redemption Order with
respect to each Index Series listed below into the account(s) in the applicable
jurisdiction(s) listed below.
Index Series: ________________
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
Index Series: ________________
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
The Participant hereby instructs the Fund, the Distributor and the
Custodian to deliver the U.S. dollar denominated cash portion of the redemption
proceeds, if any, of the attached Redemption Order into the following account:
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
The undersigned, [name], [title], [company], does hereby certify that the
information above constitutes the complete and accurate redemption instructions
for the attached Redemption Order. The Participant understands and agrees that
the Distributor will instruct the Custodian or relevant Subcustodian to deliver,
and the Custodian or relevant Subcustodian will deliver, Deposit Securities and
any other redemption proceeds with respect to the attached Redemption Order into
the relevant account(s) identified in these Alternative Delivery Instructions.
THESE ALTERNATIVE DELIVERY INSTRUCTIONS RELATE ONLY TO THE ATTACHED
PURCHASE ORDER AND DO NOT CONSTITUTE AN AMENDMENT TO THE PARTICIPANT'S STANDING
REDEMPTION INSTRUCTIONS. AN AUTHORIZED PERSON OF THE PARTICIPANT MAY AMEND THE
PARTICIPANT'S STANDING REDEMPTION INSTRUCTIONS
IV-4
<PAGE>
FROM TIME TO TIME IN WRITING TO THE DISTRIBUTOR AND THE FUND IN A FORM APPROVED
BY THE FUND (SEE ANNEX VI HERETO).
In Witness Whereof, the undersigned has hereby set his/her hand and the seal of
[company].
Date:_________________ ___________________
[name, title]
IV-5
<PAGE>
II. TO BE COMPLETED BY DISTRIBUTOR
( ) Properly completed irrevocable redemption order, including Index
Series Order Sheet submitted before AMEX closing time.
( ) WEBS have been received into Transfer Agent Account.
This certifies that the attached Redemption Order has been:
( ) Accepted by the Fund-delivery of the attached listing of
securities and cash per Index Series will occur per the
procedures outlined in the prospectus and
statement of additional information.
( ) Declined - Due to:
_________________________________________________
_________________________________________________
_________________________________________________
_______ _______ ____________________
Date Time Authorized Signature
IV-6
<PAGE>
ANNEX V
FOREIGN FUND, INC.
FORM OF CERTIFIED AUTHORIZED PERSONS OF PARTICIPANT
The following are the names, titles and signatures of all persons (each an
"Authorized Person") authorized to give instructions relating to any activity
contemplated by this Authorized Participant Agreement or any other notice,
request or instruction on behalf of the Participant pursuant to this Authorized
Participant Agreement.
Name: __________________
Title: __________________
Signature: __________________
Name: __________________
Title: __________________
Signature: __________________
Name: __________________
Title: __________________
Signature: __________________
Name: __________________
Title: __________________
Signature: __________________
The undersigned, [name], [title], [company], does hereby certify that the
persons listed above have been duly elected to the offices set forth beneath
their names, that they presently hold such offices, that they have been duly
authorized to act as Authorized Persons pursuant to the Authorized Participant
Agreement by and among Foreign Fund, Inc, Funds Distributor, Inc and [name of
Participant], dated [date] and that their signatures set forth above are their
own true and genuine signatures.
In Witness Whereof, the undersigned has hereby set his/her hand and the seal of
[company].
Date: _________________ ___________________
[name, title]
V-1
<PAGE>
ANNEX VI
FOREIGN FUND, INC.
FORM OF AUTHORIZED PARTICIPANT'S
STANDING REDEMPTION INSTRUCTIONS
DATED: _______________
The Participant hereby instructs the Fund, the Distributor, the Custodian
and the relevant Subcustodian (if applicable) to deliver the Deposit Securities
and other redemption proceeds, if any, of a Redemption Order with respect to
each Index Series listed below into the account(s) in the applicable
jurisdiction(s) listed below.
Index Series: ________________
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
Index Series: ________________
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
Index Series: ________________
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
Index Series: ________________
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
The Participant hereby instructs the Fund, the Distributor and the
Custodian to deliver the U.S. dollar denominated cash portion of the redemption
proceeds, if any, of a Redemption Order into the following account:
Account Name: ________________
Account Number: ________________
Other Reference Number: ________________
VI-1
<PAGE>
The undersigned, [name], [title], [company], does hereby certify that the
information above constitutes the complete and accurate Standing Redemption
Instructions for Redemption Orders relating to redemptions of Creation Units of
WEBS of the Index Series for which Standing Redemption Instructions have been
provided herein. The Participant acknowledges that it is authorized to submit a
Redemption Order to redeem Creation Units of WEBS only with respect to Index
Series in jurisdictions for which Standing Redemption Instructions have been
provided to the Fund in writing. The Participant understands and agrees that
the Distributor will instruct the Custodian or relevant Subcustodian to deliver,
and the Custodian or relevant Subcustodian will deliver, Deposit Securities and
any other redemption proceeds into the relevant account identified in these
Standing Redemption Instructions.
In Witness Whereof, the undersigned has hereby set his/her hand and the seal of
[company].
Date:_________________ ___________________
[name, title]
Pin Number:___________
VI-2
<PAGE>
ANNEX VII
FOREIGN FUND, INC.
FUND SUBCUSTODIAN ACCOUNTS
FOR DELIVERY OF DEPOSIT SECURITIES
The subcustodian accounts into which a Participant should deposit the
securities constituting the Deposit Securities of each Index Series are set
forth below:
Australia Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Austria Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Belgium Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Canada Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
France Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Germany Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Hong Kong Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
VII-1
<PAGE>
Italy Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Japan Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Malaysia Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Mexico (Free) Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Netherlands Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Singapore Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Spain Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Sweden Index Series:
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Switzerland Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
VII-2
<PAGE>
United Kingdom Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
VII-3
<PAGE>
FORM OF
FOREIGN FUND, INC.
SALES AND INVESTOR SERVICES AGREEMENT
Date: , 19__
_____________________
_____________________
_____________________
Ladies and Gentlemen:
Foreign Fund, Inc. (the "Fund") is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), organized as a series fund and formed as a corporation under the
laws of the State of Maryland. The Fund will consist initially of seventeen
series (each, an "Index Series"), and will issue shares of common stock, par
value $.001 per share, of each Index Series (such shares are referred to herein
as "World Equity Benchmark Shares-SM-" or "WEBS-SM-"). The Fund will only sell
and redeem WEBS in aggregations of a specified number of WEBS (each, a "Creation
Unit") depending on the Index Series as set forth in the Fund's Prospectus and
Statement of Additional Information, as they may be amended from time to time.
Pursuant to a Distribution Agreement between the Fund and us (the "Distribution
Agreement"), we will act as distributor (the "Distributor") and principal
underwriter of Creation Units of WEBS of the various Index Series as exclusive
agent on behalf of the Fund. Capitalized terms not defined herein shall have
the meanings attributed to them in the current Prospectus and Statement of
Additional Information of the Fund.
Creation Units of WEBS of each Index Series will generally be sold at
net asset value, without a sales charge, in exchange for Deposit Securities and
a balancing cash payment, all as described in the Fund's Prospectus and
Statement of Additional Information. Only Authorized Participants may directly
place orders for Creation Units of WEBS.
As Distributor and principal underwriter of the Fund, we wish to enter
into this Sales and Investor Services Agreement (this "Agreement") with you
concerning (i) your solicitation of purchase orders for Creation Units of WEBS,
<PAGE>
(ii) your provision of broker-dealer and shareholder support services to your
clients ("Clients") who may from time to time beneficially own WEBS of any Index
Series and (iii) your educational and promotional activities in the secondary
market for WEBS listed and traded on the American Stock Exchange (the "AMEX").
You understand and acknowledge that the proposed method by which
Creation Units of WEBS will be created and traded may raise certain issues under
applicable securities laws. For example, because new Creation Units of WEBS may
be issued and sold by the Fund on an ongoing basis, at any point a
"distribution", as such term is used in the 1933 Act, may occur. You understand
and acknowledge that some activities on your part may, depending on the
circumstances, result in your being deemed a participant in a distribution in a
manner which could render you a statutory underwriter and subject you to the
prospectus delivery and liability provisions of the 1933 Act. You also
understand and acknowledge that when you are not an "underwriter" but are
effecting transactions in WEBS, whether or not participating in the distribution
of WEBS, you are generally required to deliver a prospectus.
This Agreement is a related agreement as contemplated by Rule 12b-1
under the 1940 Act with respect to the Rule 12b-1 plan of the Fund ("12b-1
Plan"). Both you and we and the Fund expect that your services and educational
and promotional activities in connection with WEBS pursuant to this Agreement
will tend to increase investor interest in and the use and trading of WEBS in
the secondary market and thus further sales of WEBS of the Fund's Index Series.
In consideration of the mutual covenants contained herein, it is
hereby agreed that our respective rights and obligations shall be as follows:
1. ROLE OF DISTRIBUTOR. Pursuant to and in accordance with the
provisions of the Distribution Agreement, we will make arrangements for
securities dealers that can make the representations set forth in Section 4 of
this Agreement to solicit orders to purchase Creation Units of WEBS of each
Index Series. You are hereby invited to become one of the securities dealers
referred to herein as a "Soliciting Dealer". This will confirm our mutual
agreement as to the terms and conditions applicable to your participation as a
Soliciting Dealer, such agreement to be effective upon your confirmation hereof.
You understand that we are seeking to enter into this Agreement in counterparts
with you and other firms which also may act as
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<PAGE>
Soliciting Dealers. All purchases of Creation Units of WEBS from the Fund shall
be effected by us, through an Authorized Participant, in our capacity as
principal underwriter and distributor acting as agent on behalf of the Fund.
You understand that we shall have no obligation to you hereunder at such times
as we are not acting as distributor and principal underwriter for the sale of
WEBS in Creation Unit aggregations.
2. ROLE OF SOLICITING DEALERS.
(a) As a Soliciting Dealer, you shall offer and solicit purchase
orders for Creation Units of WEBS. As, when and if you generate a customer
request for the purchase of Creation Units of WEBS of any Index Series and you
determine to transmit such request to us, you shall comply with the procedures
for the purchase of Creation Units of WEBS set forth in the then current
Prospectus and Statement of Additional Information of the Fund. You shall be
responsible for opening, approving and monitoring customer accounts and for the
review and supervision of these accounts, all in accordance with the rules of
the Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers, Inc. (the "NASD"). You understand that all orders for the
purchase of Creation Units of WEBS of each Index Series must be placed with us
and may be placed only through an Authorized Participant that has entered into
an Authorized Participant Agreement with us and the Fund. During any period
that you are an Authorized Participant, you may submit purchase orders to us in
such capacity. Your duties and obligations as an Authorized Participant are
determined by the terms and conditions of the Authorized Participant Agreement
and not pursuant hereto. The procedures relating to orders and the handling
thereof will be subject to the terms of the Authorized Participant Agreement,
the then current Prospectus and Statement of Additional Information of the Fund
and instructions in writing received by you from us or the Fund's transfer agent
from time to time. No conditional orders will be accepted. No Creation Units
of WEBS shall be issued except upon receipt of the consideration therefor. If
payment for any purchase order is not received in accordance with the terms of
the then current Prospectus and Statement of Additional Information, we reserve
the right, without notice, to cancel the sale and to hold you responsible for
any loss sustained as a result thereof. Unless otherwise mutually agreed in
writing, each transaction shall be promptly confirmed by the Authorized
Participant in writing to the customer on a fully disclosed basis and a copy of
each confirmation shall be sent simultaneously to you by the Authorized
Participant. You
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<PAGE>
agree that upon receipt of duplicate confirmations you will examine the same and
promptly notify us of any errors or discrepancies which you discover and shall
promptly bring to our attention, the Authorized Participant's attention and the
Fund's attention any errors in such confirmations claimed by your customers.
(b) You agree to offer WEBS in Creation Unit size aggregations to the
public at the then current public offering price per Creation Unit of WEBS
(i.e., the next determined net asset value per WEBS) as set forth in the Fund's
then current Prospectus and Statement of Additional Information, as the same may
be amended or supplemented. All orders are subject to acceptance or rejection
by us or the Fund in our or its sole discretion.
(c) You agree to provide broker/dealer and shareholder support
services to Clients in connection with the outstanding and issued WEBS,
including one or more of the following: (i) distributing prospectuses and
shareholder reports to current shareholders; (ii) as applicable, complying with
federal and state securities laws pertaining to transactions in WEBS; (iii)
processing dividend payments on behalf of Clients; (iv) providing information
periodically to Clients showing their positions in WEBS; [(v) providing and
maintaining elective services such as check writing on the Client's account and
wire transfer services;] (vi) acting as nominee for Clients holding WEBS; (vii)
maintaining account records for Clients; (viii) issuing confirmations of
transactions; (ix) providing subaccounting with respect to WEBS beneficially
owned by Clients or the information necessary for subaccounting; (x) if required
by law, forwarding shareholder communications from us or on behalf of the Fund
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices); (xi) providing services
primarily intended to result in the sale of WEBS; (xii) assisting shareholders
who wish to aggregate sufficient WEBS of an Index Series to constitute a
Creation Unit for redemption; and (xiii) such other services analogous to the
foregoing as you customarily provide to clients with respect to holdings of
shares of open-end investment companies or exchange-listed stocks or as we or
the Fund may reasonably request to the extent you are permitted to do so under
applicable statutes, rules and regulations.
(d) You agree to provide educational and promotional services related
to the secondary market trading of WEBS, including the following: (i)
facilitating access for investor relations representatives for WEBS to
-4-
<PAGE>
designated branches or offices as set forth in Annex I for the purpose of broker
education, including through sales meetings, one-on-one broker contact and
broker luncheons; (ii) making your country allocation research available widely
through your internal systems and reformatting such allocation research to make
specific recommendations of WEBS of appropriate Index Series; (iii) working with
us and the Fund to facilitate the flow of WEBS data through your internal
information systems, which information shall include all available WEBS data
(i.e., real-time AMEX pricing on WEBS, spot foreign exchange rates, the per WEBS
value of the most recently published Portfolio Deposit and Cash Component of
each Index Series, adjusted to account for foreign exchange rates (the "Adjusted
Basket Value"), and, eventually, data on the underlying Morgan Stanley Capital
International bench-mark indices for the Index Series) and other research and
news; (iv) support of senior management for use of WEBS as a trading and hedging
tool; and [(v) during the first 180 days following the initial sale of Creation
Units, provide sales incentives to your brokers pursuant to arrangements set
forth in a letter from you to us.]
(e) You also agree to provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the services listed in clauses 2(c) and 2(d) above to Clients and as is
otherwise provided in this Section 2.
(f) Subject to the requirements of applicable law and regulations,
nothing in this Agreement shall be construed to prohibit or restrict you from
purchasing or selling for your own account Creation Unit aggregations of WEBS,
whether as agent or principal.
3. INFORMATION.
(a) We will furnish you, without charge, the Fund's current
Prospectus and Statement of Additional Information and copies of sales materials
relating to the offer and sale of Creation Units of WEBS approved and filed with
the NASD by us ("Fund Sales Materials") in such quantities as are reasonably
requested by you and made available to us by the Fund for use in connection with
the offer and sale of Creation Units of WEBS. Such Fund Sales Materials may
include materials suitable for institutional marketing efforts, including
conferences, road shows and institutional advertisements and/or "tombstones"
related to the initial public offering of Creation Units of WEBS.
-5-
<PAGE>
Under this Agreement you will not act for us, the Fund or BZW Barclays Global
Fund Advisors (the "Investment Adviser"), nor make any representation on our
behalf or the Fund's behalf, or as authorized by us, the Fund or the Investment
Adviser, and in offering and selling Creation Units of WEBS hereunder you may
rely only upon, the Fund's then current prospectus and statement of additional
information and the Fund Sales Materials, provided that you are authorized to
prepare and use at your own cost and expense other brochures, advertisements (in
print or other format) or similar materials in connection with your solicitation
of purchases of Creation Units of WEBS which may constitute "sales literature"
within the meaning of Section 24(b) of the 1940 Act ("Other Soliciting
Materials"), but only if such Other Soliciting Materials (i) are prepared in
compliance with all applicable NASD and SEC rules and regulations, (ii) provided
to us a reasonable time prior to their intended use and (iii) are not used until
approved by us and the Fund and filed by us with the NASD. You understand that
the Fund will not be advertised or marketed as an open-end investment company or
mutual fund, i.e., as a mutual fund, which offers redeemable securities. Any
advertising materials, including the Fund Prospectus, will prominently disclose
that WEBS that are not in Creation Unit aggregations are not redeemable units of
beneficial interest in the Fund. In addition, any advertising material that
addresses redemptions of WEBS, including the Fund prospectus, will disclose that
the owners of WEBS may acquire and tender WEBS for redemption to the Fund in
Creation Unit aggregations only.
(b) We intend to establish a world-wide internet site to provide
certain on-line MSCI analytical data ("MSCI WEBS Analitics"). If and when
available, you will be provided access to our site and the use of MSCI WEBS
Analitics.
4. REPRESENTATIONS.
(a) You represent to us as follows, and agree to abide by all of the
rules and regulations of the NASD, including, without limitation, the following
provisions of its Rules of Fair Practice, except as otherwise permitted by the
NASD as set forth in writing, a copy of which shall be provided to you by us:
(i) you will not withhold placing customers' orders for any Creation
Units of WEBS so as to profit yourself as a result of such withholding;
-6-
<PAGE>
(ii) you are familiar with Rule 15c2-8 under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), Section 4(3) of the Securities
Act of 1933, as amended (the "1933 Act"), and Section 24(d) of the 1940 Act
relating to the distribution and delivery of preliminary and final
prospectuses and agree that you will comply therewith;
(iii) you are a member in good standing of the NASD or, if you are not
such a member, you are a foreign bank, dealer or institution not eligible
for membership in the NASD which agrees to make no sale within the United
States, its territories or its possessions or to persons who are citizens
thereof or residents therein, and in making other sales to comply, as
though you were a member of NASD, with the provisions of Sections 8, 24 and
36 of Article III of the Rules of Fair Practice of the NASD and with
Section 25 thereof as that Section applies to a non-NASD member broker or
dealer in a foreign country.
(b) You agree that your expulsion from the NASD will automatically
terminate this Agreement.
(c) You agree to comply with any rules of the American Stock
Exchange, Inc. or such other secondary market or markets as has or have been
approved by an order of the SEC for the trading of WEBS. A copy of the
conditions of the SEC order in accordance with which WEBS are offered are
attached hereto as Annex II.
(d) We represent to you that we are a member in good standing of the
NASD and agree to abide by all of the NASD's rules and regulations.
5. INDEPENDENT CONTRACTOR. For all purposes of this Agreement, you
will be deemed to be an independent contractor, and will have no authority to
act as agent, partner, joint venture participant or in any similar capacity for
us in any matter or in any respect. You and your officers and employees will,
upon request, be available during normal business hours to consult with us or
our designees concerning the performance of your responsibilities under this
Agreement.
6. COMPENSATION; EXPENSES. In consideration of the services and
facilities provided by you hereunder, subject to the terms and conditions of the
12b-1 Plan, in our capacity as the Distributor implementing the 12b-1 Plan, we
will pay to you and you agree to accept as full payment therefor, the fees set
forth in Annex III attached hereto.
-7-
<PAGE>
You understand and agree that no amount shall be paid or payable to you
hereunder except from amounts paid to us by the Fund for disbursements to you
under this Agreement and pursuant to and in accordance with the 12b-1 Plan. You
understand and agree that the Distributor is obligated to make such payments to
you only after the Fund has paid such 12b-1 payments to the Distributor.
7. REPORTS. You will provide to us and the Fund's Board of
Directors, and we and the Fund's Directors will review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish us or our designees with
such information as we or they may reasonably request (including, without
limitation, periodic certifications confirming the provision to Clients by you
or your agents of the services described herein), and will otherwise cooperate
with us and our designees (including, without limitation, any auditors
designated by us or the Fund), in connection with preparation of reports to the
Fund's Board of Directors concerning this Agreement and the monies paid or
payable by us in connection the services you have agreed to provide hereunder,
as well as any other reports or filings that may be required by law.
8. RULE 12b-1 RELATED AGREEMENT. By your written acceptance of this
Agreement, you represent, warrant and agree that you understand that this
Agreement is a Rule 12b-1 related agreement under the 1940 Act, subject to the
provisions of such Rule, as well as any other applicable rules or regulations of
the SEC, and agree to conform to the applicable compliance standards adopted by
us for sale of WEBS, as in effect from time to time.
9. COMPLIANCE.
(a) You agree that your activities pursuant to this Agreement will be
at all times in conformity in all material respects with all applicable federal
and state laws, rules and regulations, including without limitation, the 1933
Act, the 1934 Act, the 1940 Act and the Rules of Fair Practice of the NASD (as
provided in Section 4 hereof). In connection with offers to sell and sales of
WEBS of each Index Series, you agree to deliver or cause to be delivered to each
person to whom any such offer of sale is made, at or prior to the time of such
offer or sale, a copy of the then current prospectus and the statement of
additional information of the Fund.
(b) We agree to inform you, as the Fund provides or causes to be
provided to us such information, as to the
-8-
<PAGE>
states in which we believe WEBS of the respective Index Series have been
qualified for sale under, or are exempt from the requirements of, the respective
securities laws thereof, but we shall have no obligation or responsibility to
make WEBS of any Index Series available for sale in any jurisdiction.
10. INITIAL PURCHASE BY SOLICITING DEALER. If applicable, the
soliciting dealer will be obligated to make an initial investment in WEBS as
detailed in Annex IV hereto.
11. BENEFICIAL OWNERSHIP. The Soliciting Dealer represents and
warrants to the Distributor and the Fund that (based upon the number of
outstanding WEBS of such Index Series made publicly available by the Fund) it
does not, and will not in the future, hold for the account of any single
beneficial owner of WEBS of the relevant Index Series 80 percent or more of the
currently outstanding WEBS of such relevant Index Series, so as to cause the
Fund to have a basis in the portfolio securities deposited with the Fund with
respect to such Index Series different from the market value of such portfolio
securities on the date of such deposit, pursuant to section 351 of the Internal
Revenue Code of 1986, as amended.
12. INDEMNIFICATION. The Soliciting Dealer hereby agrees to
indemnify and hold harmless the Distributor and the Fund, their respective
subsidiaries, affiliates, directors, officers, employees and agents, and each
person, if any, who controls such persons within the meaning of Section 15 of
the 1933 Act (each an "Indemnified Party") from and against any loss, liability,
cost and expense (including attorneys' fees) incurred by such Indemnified Party
as a result of (i) a breach of any representation, warranty or covenant made by
the Soliciting Dealer in this Agreement; or (ii) failure of the Soliciting
Dealer to perform any obligations set forth in the Agreement; or (iii) any
failure on the part of the Soliciting Dealer to comply with applicable laws.
The Soliciting Dealer and the Distributor understand and agree that the Fund as
a third party beneficiary to this Agreement is entitled and intends to proceed
directly against the Soliciting Dealer in the event that the Soliciting Dealer
fails to honor any obligations pursuant to this Agreement that benefit the Fund.
This paragraph shall survive the termination of this Agreement. THE DISTRIBUTOR
SHALL NOT BE LIABLE TO THE SOLICITING DEALER FOR ANY DAMAGES ARISING OUT OF
MISTAKES OR ERRORS IN DATA PROVIDED TO THE DISTRIBUTOR, OR ARISING OUT OF
INTERRUPTIONS OR DELAYS OF COMMUNICATIONS WITH THE INDEMNIFIED PARTIES WHO ARE
SERVICE PROVIDERS TO THE FUND.
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<PAGE>
13. TERM; TERMINATION; AMENDMENT.
(a) Unless sooner terminated, this Agreement will continue for one
year following the date of its adoption as provided in Section 16, and
thereafter will continue automatically for successive annual periods provided
such continuance is specifically approved at least annually by the Fund in the
manner described in Section 16 hereof. This Agreement is terminable, without
penalty, at any time by the Fund with respect to any Index Series (which
termination may be by a vote of a majority of the Disinterested Directors as
defined in Section 16 hereof or by vote of the holders of a majority of the
voting securities (as such term is defined in the 1940 Act) of such Index
Series) or by you upon 60 days' notice in writing to the other party hereto.
This Agreement will also terminate automatically in the event of its assignment
(within the meaning of the 1940 Act) or upon the termination of the Distribution
Agreement or Rule 12b-1 Plan between the Fund and us. The Distributor, with the
prior written consent of the Fund, may amend this agreement by mailing a copy of
the amendment to the Soliciting Dealer, which amendment will become part of this
Agreement if the Soliciting Dealer does not object in writing within 10 business
days after its receipt. This Agreement may also be amended in writing by the
parties hereto.
(b) In the event that the Board of Directors of the Fund establishes
any series of WEBS listed and traded on the AMEX or any other national
securities exchange in addition to the Index Series then subject to this
Agreement, adopts a 12b-1 Plan with respect to such additional series and
approves this Agreement with respect to such additional series in accordance
with Rule 12b-1, such additional series shall be made subject to this Agreement
and shall become an "Additional Series" hereunder effective immediately upon
such adoption and approval.
14. SUSPENSION. All sales will be made subject to receipt of WEBS
from the Fund. We and the Fund reserve the right, in our sole discretion,
without notice, to suspend sales or withdraw the offering of sales of Creation
Units of WEBS of any Index Series entirely, including the sale of such WEBS to
you for the account of any client or clients.
15. NO OTHER AGREEMENT. This Agreement shall supersede any prior
agreements between us regarding the sale of Creation Units of WEBS.
16. BOARD APPROVAL. This Agreement and the 12b-1 Plan is subject to
approval by vote of (i) the Fund's Board
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<PAGE>
of Directors and (ii) of a majority of those 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 adopted by the Fund
regarding the provision of support services to the beneficial owners of WEBS of
the respective Index Series or in any agreement related thereto ("Disinterested
Directors") cast in person at a meeting called for the purpose of voting on such
approval.
17. MISCELLANEOUS.
(a) Notice. Notice shall have been duly given if delivered by hand,
mail or facsimile transmission to you, at your address or facsimile number set
forth below and (b) if to us, to Funds Distributor, Inc., One Exchange Place,
10th Floor, Boston, MA 02109, facsimile no. (617) 248-6422, Attention:
President, with a copy to General Counsel, or in each case such other addresses
as may be notified to the other party.
(b) Successors. Subject to Section 8 hereof, this Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective legal successors and the Fund, and no other person will have any
right or obligation hereunder.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
principles of conflicts of law.
The parties irrevocably submit to the non-exclusive jurisdiction of
any New York State or United States Federal Court sitting in New York City over
any suit, action or proceeding arising out of or relating to this Agreement.
18. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
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<PAGE>
Please confirm your agreement by signing and returning to us the
enclosed duplicate copies of this Agreement. Upon our acceptance hereof, this
Agreement shall constitute a valid and binding contract between us. After our
acceptance, we will deliver to you one fully executed copy of this Agreement.
Very truly yours,
FUNDS DISTRIBUTOR INC.
By_________________________________
Name:
Title:
Confirmed: , 19__
(Name of Soliciting Dealer)
By___________________________
(sign name and print title)
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<PAGE>
Annex I
DESIGNATED BRANCHES OR OFFICES OF SOLICITING DEALER
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<PAGE>
Annex II
CONDITIONS OF SEC ORDER
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<PAGE>
Annex III
ANNUAL FEES
[Option 1 - At the annual rate of [.03] of 1% of the average aggregate daily net
assets of the outstanding WEBS of each Index Series, except WEBS held in your
name at the Depository Trust Company ("DTC"), computed daily and payable on a
quarterly basis, plus [.04] of 1% of the average daily net assets of the WEBS
held in your name DTC up to $250 million; 0.05 of 1% of the average daily net
assets of WEBS held in your name at DTC between $250 million and $750 million;
and 0.07 of 1% of the average daily net assets of WEBS held in your name at DTC
in excess of $750 million computed daily and payable on a quarterly basis.
[Option 2 - At the annual rate of [ ] of 1% of the average daily net assets
of WEBS held in your name at DTC computed daily and payable on a quarterly
basis.
ADDITION TERMS AND CONDITIONS
For purposes of determining the fees payable under this Annex III, the
average aggregate daily net assets of the Index Series will be computed in the
manner specified in the Fund's Registration Statement (as the same is in effect
from time to time) in connection with the computation of the net asset value of
WEBS for purposes of purchases and redemptions. Except as specifically provided
in this Annex III, you shall bear all of your own costs and expenses in
connection with your acting as a Soliciting Dealer, it being understood that we
and the Fund shall bear our and the Fund's respective costs and expenses. You
shall not be required to bear any of the costs or expenses assumed by us or any
other Soliciting Dealer except as provided for herein or as you may have agreed
with another Soliciting Dealer.
The Soliciting Dealer shall provide the Distributor with its DTC
account information in the form and manner as prescribed by the Distributor by
the 5th business day after the end of each calendar month. The Soliciting
Dealer understands and acknowledges that the Distributor shall, on a test basis,
independently verify the DTC account information provided by the Soliciting
Dealer, with the costs of such independent verification borne by the Soliciting
Dealer. Any discrepancies will be interpreted by the Distributor and the
Distributor's interpretation of such data shall be final.
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<PAGE>
Annex IV
INITIAL INVESTMENT IN WEBS
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<PAGE>
FORM OF
CUSTODY AGREEMENT
This Custody Agreement is dated ______________, 1996 between MORGAN
STANLEY TRUST COMPANY, a New York State chartered trust company (the
"Custodian"), and FOREIGN FUND, INC., a Maryland corporation registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "Client"). The Client issues its shares in different Index
Series (each, an "Index Series").
1. APPOINTMENT AND ACCEPTANCE; ACCOUNTS. (a) The Client, on behalf
of its Index Series (each an "Index Series") hereby appoints the Custodian as a
custodian of Property (as defined below) owned or under the control of the
Client's Index Series, that is delivered to the Custodian, or any Subcustodian
as appointed below, from time to time to be held in custody for the benefit of
the Client's Index Series. The Custodian agrees to act as such Custodian upon
the terms and conditions hereinafter provided.
(b) Prior to the delivery of any Property by the Client, on behalf of
its Index Series, to the Custodian, the Client shall deliver to the Custodian
each document and other item listed in Appendix 1. In addition, the Client
shall deliver to the Custodian any additional documents or items as the
Custodian may reasonably deem necessary for the performance of its duties under
this Agreement.
(c) The Client instructs the Custodian to establish on the books and
records of the Custodian the accounts listed in Appendix 2 (the "Accounts") in
the name of the Client, on behalf of its Index Series. Upon receipt of
Authorized Instructions (as defined below) and appropriate documentation, the
Custodian shall open additional Accounts for the Client. Upon the Custodian's
confirmation to the Client of the opening of such additional Accounts, or of the
closing of Accounts, Appendix 2 shall be deemed automatically amended or
supplemented accordingly. The Custodian shall record in the Accounts and shall
have general responsibility for the safekeeping of all securities
("Securities"), cash, cash equivalents and other property (all such Securities,
cash, cash equivalents and other property being collectively called the
"Property") of the Client's Index Series that are delivered to the Custodian for
custody.
(d) The procedures the Custodian and the Client will use in
performing activities in connection with this Agreement are set forth in a
client services guide provided to the Client by the Custodian, as such guide may
be amended from time to time by the Custodian by written notice to the Client
(the "Client Services Guide").
2. SUBCUSTODIANS. The Property may be held in custody and deposit
accounts that have been established by the Custodian with one or more domestic
or foreign banks or other institutions as listed on Exhibit A (the
"Subcustodians"), as such Exhibit may be amended from time to time by the
Custodian upon sixty (60) days prior written notice to the Client, or through
<PAGE>
the facilities of one or more securities depositories or clearing agencies. The
Custodian shall hold Property through a Subcustodian, securities depository or
clearing agency only if (a) such Subcustodian and any securities depository or
clearing agency in which such Subcustodian or the Custodian holds Property, or
any of their creditors, may not assert any right, charge, security interest,
lien, encumbrance or other claim of any kind to such Property except a claim of
payment for its safe custody or administration and (b) beneficial ownership of
such Property may be freely transferred without the payment of money or value
other than for safe custody or administration. Any Subcustodian may hold
Property in a securities depository and may utilize a clearing agency.
3. RECORDS. With respect to Property held by a Subcustodian:
(a) The Custodian may hold Property for all of its customers with a
Subcustodian in a single account identified as belonging to the Custodian
for the benefit of its customers;
(b) The Custodian shall identify on its books as belonging to the
Client's Index Series any Property held by a Subcustodian for the
Custodian's account;
(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any other property held by the
Subcustodian other than property of the Custodian's customers held solely
for the benefit of customers of the Custodian; and
(d) In the event the Subcustodian holds Property in a securities
depository or clearing agency, such Subcustodian shall be required by its
agreement with the Custodian to identify on its books such Property as
being held for the account of the Custodian as custodian for its customers
or in such other manner as is required by local law or market practice.
4. ACCESS TO RECORDS. The Custodian shall allow the Client's
accountants reasonable access to the Custodian's records relating to the
Property held by the Custodian as such accountants may reasonably require in
connection with their examination of the Client's affairs. The Custodian shall
also obtain from any Subcustodian (and shall require each Subcustodian to use
reasonable efforts to obtain from any securities depository or clearing agency
in which it deposits Property) an undertaking, to the extent consistent with
local practice and the laws of the jurisdiction or jurisdictions to which such
Subcustodian, securities depository or clearing agency is subject, to permit
independent public accountants such reasonable access to the records of such
Subcustodian, securities depository or clearing agency as may be reasonably
required in connection with the examination of the Client's affairs or to take
such other action as the Custodian in its judgment may deem sufficient to ensure
such reasonable access.
5. REPORTS. The Custodian shall provide such reports and other
information to the Client, on behalf of its Index Series, and to such persons as
the Client directs, as the Custodian and the Client may agree from time to time.
<PAGE>
6. PAYMENT OF MONIES. The Custodian shall make, or cause any
Subcustodian to make, payments from monies being held in the Accounts only in
accordance with Authorized Instructions or as provided in Sections 9, 13 and 17.
The Custodian may act as the Client's agent in foreign exchange
transactions at such rates as are agreed from time to time between the Client,
on behalf of its Index Series, and the Custodian.
7. TRANSFER OF SECURITIES. The Custodian shall make, or cause any
Subcustodian to make, transfers, exchanges or deliveries of Securities only in
accordance with Authorized Instructions or as provided in Sections 9, 13 and 17.
8. CORPORATE ACTIONS. (a) The Custodian shall notify the Client of
details of all corporate actions affecting the Securities of the Client's Index
Series promptly upon its receipt of such information.
(b) The Custodian shall take, or cause any Subcustodian to take, any
action in respect of such corporate actions only in accordance with Authorized
Instructions or as provided in this Section 8 or Section 9.
(c) In the event the Client, on behalf of its Index Series, does not
provide timely Authorized Instructions to the Custodian, the Custodian shall act
in accordance with the default option provided by local market practice and/or
the issuer of the Securities.
(d) Unless the Custodian receives Authorized Instructions to the
contrary, fractional shares resulting from corporate action activity shall be
treated in accordance with local market practices.
9. GENERAL AUTHORITY. In the absence of Authorized Instructions to
the contrary, the Custodian may, and may authorize any Subcustodian to:
(a) make payments to itself or others for expenses of handling
Property or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to the
Client;
(b) receive and collect all income and principal with respect to
Securities and to credit cash receipts to the Accounts;
(c) exchange Securities when the exchange is purely ministerial
(including, without limitation, the exchange of interim receipts or
temporary securities for securities in definitive form and the exchange of
warrants, or other documents of entitlement to securities, for the
securities themselves);
(d) surrender Securities at maturity or when called for redemption
upon receiving payment therefor;
<PAGE>
(e) execute in the Client's name such ownership and other
certificates as may be required to obtain the payment of income from
Securities;
(f) pay or cause to be paid, from the Accounts, any and all taxes and
levies in the nature of taxes imposed on Property by any governmental
authority in connection with custody of and transactions in such Property;
(g) endorse for collection, in the name of the Client, checks, drafts
and other negotiable instruments;
(h) take non-discretionary action on mandatory corporate actions; and
(i) in general, attend to all nondiscretionary details in connection
with the custody, sale, purchase, transfer and other dealings with the
Property.
10. AUTHORIZED INSTRUCTIONS; AUTHORIZED PERSONS. (a) Except as
otherwise provided in Sections 6 through 9, 13 and 17, all payments of monies,
all transfers, exchanges or deliveries of Property and all responses to
corporate actions shall be made or taken only upon receipt by the Custodian of
Authorized Instructions; PROVIDED that such Authorized Instructions are timely
received by the Custodian. "AUTHORIZED INSTRUCTIONS" of the Client means
instructions from an Authorized Person received by telecopy, tested telex,
electronic link or other electronic means or by such other means as may be
agreed in writing between the Client and the Custodian.
(b) "AUTHORIZED PERSON" means each of the persons or entities
identified on Appendix 3 as amended from time to time by written notice from the
Client, on behalf of its Index Series, to the Custodian. The Client represents
and warrants to the Custodian that each Authorized Person listed in Appendix 3,
as amended from time to time, is authorized to issue Authorized Instructions on
behalf of the Client's specific Index Series, as indicated on such Appendix 3.
Prior to the delivery of the Property to the Custodian, the Custodian shall
provide a list of designated system user ID numbers and passwords that the
Client shall be responsible for assigning to Authorized Persons. The Custodian
shall assume that an electronic transmission received and identified by a system
user ID number and password was sent by an Authorized Person. The Custodian
agrees to provide additional designated system user ID numbers and passwords as
needed by the Client. The Client authorizes the Custodian to issue new system
user ID numbers upon the request of a previously existing Authorized Person.
Upon the issuance of additional system user ID numbers by the Custodian to the
Client, Appendix 3 shall be deemed automatically amended accordingly. The
Client authorizes the Custodian to receive, act and rely upon any Authorized
Instructions received by the Custodian which have been issued, or which are
reasonably believed to have been issued, by an Authorized Person.
(c) Any Authorized Person may cancel/correct or otherwise amend any
Authorized Instruction received by the Custodian, but the Client agrees to
indemnify the Custodian for any liability, loss or expense incurred by the
Custodian and its Subcustodians as a result of their having relied upon or acted
on any prior Authorized Instruction. An amendment or
<PAGE>
cancellation of an Authorized Instruction to deliver or receive any security or
funds in connection with a trade will not be processed once the trade has
settled.
11. REGISTRATION OF SECURITIES. (a) In the absence of Authorized
Instructions to the contrary, Securities which must be held in registered form
shall be registered in the name of the Custodian or the Custodian's nominee or,
in the case of Securities in the custody of an entity other than the Custodian,
in the name of the Custodian, its Subcustodian or any such entity's nominee.
The Custodian may, without notice to the Client, cause any Securities to be
registered or re-registered in the name of the Client.
(b) Where the Custodian has been instructed by the Client, on behalf
of its Index Series, to hold any Securities in the name of any person or entity
other than the Custodian, its Subcustodian or any such entity's nominee, the
Custodian shall not be responsible for any failure to collect dividends or other
income or participate in any corporate action with respect to such Securities.
The foregoing shall not relieve the Custodian of its obligation to hold in
safekeeping all Property of the Client's Index Series delivered to the Custodian
or any Subcustodian in accordance with Section 1 hereof or to notify the Client
of any corporate action of which it receives notice as provided in Section 8
hereof.
12. DEPOSIT ACCOUNTS. Unless the Client and the Custodian otherwise
agree, all cash received by the Custodian for the Accounts shall be held by the
Custodian as a short-term credit balance in favor of the Client's Index Series
and if the Custodian and the Client have agreed in writing in advance that such
balances shall bear interest, the Client shall earn interest at the rates and
times as agreed between the Client and the Custodian. The Client acknowledges
that any such credit balances shall not be accompanied by the benefit of any
governmental insurance.
13. SHORT-TERM CREDIT EXTENSIONS. (a) From time to time, if agreed
between the Custodian and the Client, the Custodian may extend or arrange short-
term credit for the Client which is (i) necessary in connection with payment and
clearance of securities and foreign exchange transactions or (ii) pursuant to an
agreed schedule, as and if set forth in the Client Services Guide, of credits
for dividends and interest payments on Securities. All such extensions of
credit shall be repayable by the Client on demand.
(b) The Custodian shall be entitled to charge the Client interest for
any such credit extension at rates to be agreed upon from time to time or, if
such credit is arranged by the Custodian with a third party on behalf of the
Client, the Client shall reimburse the Custodian for any interest charge. In
addition to any other remedies available, the Custodian shall be entitled to a
right of set-off against the Property to satisfy the repayment of such credit
extensions and the payment of, or reimbursement for, accrued interest thereon.
14. REPRESENTATIONS AND WARRANTIES. (a) The Client, on behalf of
its Index Series, represents and warrants that (i) the execution, delivery and
performance of this Agreement (including, without limitation, the ability to
obtain the short-term extensions of credit in accordance with Section 13) are
within the Client's power and authority and have been duly
<PAGE>
authorized by all requisite action (corporate or otherwise) of the Client, on
behalf of its Index Series, and of the beneficial owner of the Property, if
other than the Client's Index Series, and (ii) this Agreement and each extension
of short-term credit extended to or arranged for the benefit of the Client in
accordance with Section 13 shall at all times constitute a legal, valid and
binding obligation of the Client enforceable against the Client in accordance
with its terms, except as may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in general and
subject to the effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
(b) The Custodian represents and warrants that (i) the execution,
delivery and performance of this Agreement are within the Custodian's power and
authority and have been duly authorized by all requisite action (corporate or
otherwise) of the Custodian and (ii) this Agreement constitutes the legal, valid
and binding obligation of the Custodian enforceable against the Custodian in
accordance with its terms, except as may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights in general and
subject to the effect of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
15. STANDARD OF CARE; INDEMNIFICATION. (a) The Custodian shall be
responsible for the performance of only such duties as are set forth in this
Agreement or contained in Authorized Instructions given to the Custodian which
are not contrary to the provisions of any relevant law or regulation. The
Custodian shall be liable to the Client for any loss, liability or expense
incurred by the Client's Index Series in connection with this Agreement to the
extent that any such loss, liability or expense results from the negligence or
willful misconduct of the Custodian or any Subcustodian.
(b) The Client acknowledges that the Property may be physically held
outside the United States. The Custodian shall not be liable for any loss,
liability or expense resulting from events beyond the reasonable control of the
Custodian, including, but not limited to, FORCE MAJEURE, provided the Custodian
or Subcustodian has otherwise fulfilled its obligations under this Agreement and
has acted in accordance with the standard of care set forth in this Section 15.
(c) In addition, the Client shall indemnify the Custodian and
Subcustodians and any nominee for such persons, and hold each of them harmless
from, any liability, loss or expense (including attorneys' fees and
disbursements) incurred in connection with this Agreement, including without
limitation, (i) as a result of the Custodian having acted or relied upon any
Authorized Instructions or (ii) arising out of any such person acting as a
nominee or holder of record of Securities, provided the Custodian or
Subcustodian has otherwise fulfilled its obligations under this Agreement and
has acted in accordance with the standard of care set forth in this Section 15.
16. FEES; LIENS. The Client, on behalf of its Index Series, shall
pay to the Custodian from time to time such compensation for its services
pursuant to this Agreement as may be mutually agreed upon as well as the
Custodian's out-of-pocket and incidental expenses. The Client shall hold the
Custodian harmless from any liability or loss resulting from any taxes
<PAGE>
or other governmental charges, and any expenses related thereto, which may be
imposed or assessed with respect to the Accounts or any Property held therein.
The Custodian is, and any Subcustodians are, authorized to charge the Accounts
for such items and the Custodian shall have a lien, charge and security interest
on any and all Property for any amount owing to the Custodian from time to time
under this Agreement.
17. TERMINATION. This Agreement may be terminated by the Client in
respect of any Index Series or the Custodian by 60 days written notice to the
other, sent by registered mail. If notice of termination is given, the Client
shall, within 30 days following the giving of such notice, deliver to the
Custodian a statement in writing specifying the successor custodian or other
person to whom the Custodian shall transfer the Property. In either event, the
Custodian, subject to the satisfaction of any lien it may have, shall transfer
the Property to the person so specified. If the Custodian does not receive such
statement the Custodian, at its election, may transfer the Property to a bank or
trust company established under the laws of the United States or any state
thereof to be held and disposed of pursuant to the provisions of this Agreement
or may continue to hold the Property until such a statement is delivered to the
Custodian. In such event the Custodian shall be entitled to fair compensation
for its services during such period as the Custodian remains in possession of
any Property and the provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and effect; provided,
however, that the Custodian shall have no obligation to settle any transactions
in Securities for the Accounts. The provisions of Sections 15 and 16 shall
survive termination of this Agreement.
18. INVESTMENT ADVICE. The Custodian shall not supervise,
recommend or advise the Client's Index Series relative to the investment,
purchase, sale, retention or other disposition of any Property held under this
Agreement.
19. CONFIDENTIALITY. (a) The Custodian, its agents and employees
shall maintain the confidentiality of information concerning the Property held
in the Client's account, including in dealings with affiliates of the Custodian.
In the event the Custodian or any Subcustodian is requested or required to
disclose any confidential information concerning the Property, the Custodian
shall, to the extent practicable and legally permissible, promptly notify the
Client of such request or requirement so that the Client, on behalf of its Index
Series, may seek a protective order or waive any objection to the Custodian's or
such Subcustodian's compliance with this Section 19. In the absence of such a
waiver, if the Custodian or such Subcustodian is compelled, in the opinion of
its counsel, to disclose any confidential information, the Custodian or such
Subcustodian may disclose such information to such persons as, in the opinion of
counsel, is so required.
(b) The Client shall maintain the confidentiality of, and not provide
to any third parties absent the written permission of the Custodian, any
computer software, hardware or communications facilities made available to the
Client or its agents by the Custodian.
20. NOTICES. Any notice or other communication from the Client to
the Custodian, unless otherwise provided by this Agreement or the Client
Services Guide, shall be sent by certified or registered mail to Morgan Stanley
Trust Company, One Pierrepont Plaza,
<PAGE>
Brooklyn, New York, 11201, Attention: President, and any notice from the
Custodian to the Client is to be mailed postage prepaid, addressed to the Client
at the address appearing below, or as it may hereafter be changed on the
Custodian's records in accordance with written notice from the Client.
21. ASSIGNMENT. This contract may not be assigned by either party
without the prior written approval of the other.
22. MISCELLANEOUS. (a) This Agreement shall bind the successors and
assigns of the Client and the Custodian.
(b) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York without regard to its conflicts
of law rules and to the extent not preempted by federal law. The Custodian and
the Client, on behalf of its Index Series, hereby irrevocably submit to the
exclusive jurisdiction of any New York State court or any United States District
Court located in the State of New York in any action or proceeding arising out
of this Agreement and hereby irrevocably waive any objection to the venue of any
such action or proceeding brought in any such court or any defense of an
inconvenient forum.
In witness whereof, the parties hereto have set their hands as of the
date first above written.
FOREIGN FUND, INC.
By______________________
Name:
Title:
Address for record: ______________________
______________________
______________________
Accepted:
MORGAN STANLEY TRUST COMPANY
By___________________________
Authorized Signature
<PAGE>
APPENDIX 1
Account Documentation
REQUIRED DOCUMENTATION FOR CORE CUSTODIAL SERVICES (INCLUDING TAX
RECLAIMS):
CUSTODY AGREEMENT
CLIENT SERVICES GUIDE (INCLUDING APPENDICES)
FEE SCHEDULE / BILLING GUIDE
GENERAL ACCOUNT INFORMATION
US TAX AUTHORITY DOCUMENTATION
LOCAL TAX OFFICE LETTER / APPLICATION LETTER
(NON-UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
FORM 6166 / REQUEST FOR FOREIGN CERTIFICATION FORM
(UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
CERTIFICATION OF BENEFICIAL OWNERSHIP, LEGAL NAME, LEGAL RESIDENCY, TAX
STATUS AND TAX IDS
TAX RECLAIM POWER OF ATTORNEY
PREVIOUS TAX RECLAIM FILING INFORMATION
(PREVIOUS FILERS, ONLY)
UK TAX AUTHORITY DOCUMENTATION
SOPHISTICATED INVESTOR (ACCREDITED INVESTOR) LETTER
(UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
DOCUMENTATION THAT IS REQUIRED FROM AN ENTITY CLASSIFIED AS TAX-EXEMPT BY
ITS LOCAL TAX AUTHORITY:
UK FORM 4338
(EXEMPT NON-UNITED KINGDOM-RESIDENT BENEFICIAL OWNERS, ONLY)
UK FORM 309A
(EXEMPT UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
<PAGE>
FOREIGN EXEMPTION LETTERS / APPLICATION FOR AUSTRALIAN EXEMPTION LETTER
(EXEMPT BENEFICIAL OWNERS, ONLY)
DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL USE THE PROXY VOTING
SERVICE:
VOTING POWER OF ATTORNEY
DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL DEAL IN CERTAIN SECURITIES:
JGB INDEMNIFICATION LETTER
KOREAN SECURITIES POWER OF ATTORNEY
NEW ZEALAND 'APPROVED ISSUER LEVY' LETTER
SPANISH POWER OF ATTORNEY WITH APOSTILE
<PAGE>
APPENDIX 2
Client Accounts
Account Name Account Number Account Mnemonic
------------ -------------- ----------------
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
<PAGE>
APPENDIX 3
Part I - Authorized Signatures
The Custodian is directed to accept and act upon Authorized Instructions
received from any of the following persons or entities:
Telephone/ Authorized
Name Organization Title Fax Signature
- ---- ------------ ----- ---------- ----------
Authorized by: ___________________________
<PAGE>
Part II - System User ID numbers
The Custodian is directed to accept and act upon Authorized Instructions
transmitted electronically and identified with the following mnemonics and
system user ID numbers for the following activities:
Work Station Account Workstation Sessions
User I.D. Mnemonic Number TE TCC SL FE CM MA TD
- --------- -------- ------ -- --- -- -- -- -- --
WORKSTATION SESSION CODES
TE Trade Entry
TCC Trade Cancel/Correct
SL Securities Lending
FE Foreign Exchange
CM Cash Movement
MA Mass Authorization
TD Time Deposit
<PAGE>
EXHIBIT A
Subcustodians
<PAGE>
LENDING ADDENDUM TO
CUSTODY AGREEMENT
DRAFT 2/12/96
ADDENDUM DATED AS OF FEBRUARY__, 1996
BETWEEN MORGAN STANLEY TRUST COMPANY (THE "CUSTODIAN")
AND FOREIGN FUNDS, INC. (THE "CLIENT")
WHEREAS, the Custodian and the Client have entered into a Custody Agreement
dated as of February __, 1996 (the "Agreement") for the safekeeping of
securities and cash received by the Custodian for the account of the Client's
Index Series;
WHEREAS, the Client wishes to appoint the Custodian to act as the Client's
agent for the purpose of lending Securities held for the Account of the Client's
Index Series;
WHEREAS, the Client and the Custodian have agreed to enter into this
Amendment in order to authorize the Custodian to take certain additional actions
on behalf of the Client;
NOW, THEREFORE, in consideration of the premises, the parties hereto agree
as follows:
1. Terms defined in the Agreement are used herein with their defined
meanings.
2. The Custodian agrees to act as agent for the Client with respect to
the lending of securities by the Client to the security brokers and other
borrowers listed in Attachment A, as such Attachment A may be amended from time
to time by the agreement of the Custodian and the Client, pursuant to a
securities loan agreement (a "Securities Loan Agreement") in a form
substantially similar to Exhibit A hereto. The Custodian will notify all
borrowers that the Client is prepared to lend Securities and that the Custodian
is acting as agent for the Client. The Client, on behalf of its Index Series,
will identify all Securities which are available for lending.
The procedures the Custodian and the Client will use in performing
activities in connection with this Amendment are set forth in a procedures
manual provided to the Client by the Custodian as such manual may be amended
from time to time by the Custodian by written notice to the Client.
3. All Collateral (as defined in the Securities Loan Agreement) pledged
by any borrower pursuant to a Securities Loan Agreement shall be invested and
reinvested in accordance with the terms and conditions set forth in Exhibit B
hereto. Unless otherwise agreed between the Custodian and the Client,
Collateral shall consist only of cash.
4. All decisions with respect to the investment and reinvestment of
Collateral will be made by the Client and the Custodian shall not be liable for
any such decision.
<PAGE>
5. The net earnings from securities lending activities (consisting of
interest earned on the investment and reinvestment of cash Collateral plus any
fees otherwise paid by borrowers, minus rebates paid to borrowers) will be
divided in half between the Client and the Custodian. In cases where Collateral
other than cash is pledged, a fee shall be payable as may be mutually agreed
upon by the parties.
6. The Client, on behalf of its Index Series, represents that (i) the
Custodian is duly authorized to execute and deliver the Securities Loan
Agreement on the Client's behalf, (ii) the Client has the power to so authorize
the Custodian, to enter into the loans contemplated by the Securities Loan
Agreement and to perform the obligations of Lender under such loans, and (iii)
the Client has taken all requisite action (corporate or otherwise) to authorize
such execution and delivery by the Custodian and such performance by it.
7. The Custodian represents that the execution, delivery and performance
of the Securities Loan Agreement and this Addendum are within the Custodian's
power and authority and have been duly authorized by all requisite action
(corporate or otherwise) of the Custodian.
8. Except as expressly amended hereby, all terms and provisions of the
Agreement are and shall continue to be in full force and effect. This Amendment
shall be construed in
accordance with the applicable laws of the State of New York. This Amendment
may be executed by one or both of the parties hereto on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective authorized officers as of the
day and year first above written.
MORGAN STANLEY TRUST COMPANY
By: ___________________________
Name:
Title:
FOREIGN FUND, INC.
By: ___________________________
Name:
Title:
<PAGE>
FORM OF
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of __________________________, 1996 by and
between FOREIGN FUND, INC., a Maryland corporation (the "Fund"), and PFPC INC.,
a Delaware corporation ("PFPC"), which is an indirect wholly owned subsidiary of
PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
issued in series and organized as a series fund; and
WHEREAS, the Fund wishes to retain PFPC to provide administration and
accounting services to its index series listed on Exhibit A attached hereto and
made a part hereof, as such Exhibit A may be amended from time to time (each, an
"Index Series"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS, AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
<PAGE>
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED AGENT" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "SECURITIES LAWS" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(h) "SHARES" mean the shares of beneficial interest of any series or
class of the Fund.
(i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instruc-
2
<PAGE>
tions may be delivered by hand, mail, tested telegram, cable, telex or facsimile
sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to provide administration
and accounting services to the Fund in accordance with the terms set forth in
this Agreement. PFPC accepts such appointment and agrees to furnish such
services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolu-
tions of the Fund's Board of Directors, approving
the appointment of PFPC or its affiliates to pro-
vide services to the Fund and approving this Agree-
ment;
(b) a copy of Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement;
(d) a copy of the distribution agreement with respect
to each class of Shares representing an interest in
the Fund;
(e) a copy of any shareholder servicing agreement
made in respect of the Fund; and
(f) copies (certified or authenticated, where applica-
ble) of any and all amendments or supplements to
the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of the
Securities Laws, and any laws, rules and regulations of
3
<PAGE>
governmental authorities having jurisdiction with respect to the duties to be
performed by PFPC hereunder. Except as specifically set forth herein, PFPC
assumes no responsibility for such compliance by the Fund.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Directors or of the Fund's shareholders,
unless and until PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given by
PFPC or its affiliates) so that PFPC receives the Written Instructions by the
close of business within a reasonable period of time. The fact that such
confirming Written
4
<PAGE>
Instructions are not received by PFPC shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions. Where Oral Instructions or Written Instructions reasonably appear
to have been received from an Authorized Person, PFPC shall incur no liability
to the Fund in acting upon such Oral Instructions or Written Instructions
provided that PFPC's actions comply with such Oral Instructions or Written
Instructions and the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any
question of law pertaining anyd to action it should or should not take, PFPC
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's investment adviser or PFPC, at the
option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice, Oral Instructions or Written Instructions PFPC receives from
the Fund and the advice PFPC receives from counsel, PFPC may rely upon and
follow the advice of counsel. In
5
<PAGE>
the event PFPC so relies on the advice of counsel, PFPC remains liable for any
action or omission on the part of PFPC which constitutes willful misfeasance,
bad faith, gross negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice, Oral Instructions or
Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice, Oral
Instructions or Written Instructions subject to the limitations set forth in
paragraph 6(c). Nothing in this section shall be construed so as to impose an
obligation upon PFPC (i) to seek such directions, advice, Oral Instructions or
Written Instructions, or (ii) to act in accordance with such directions, advice,
Oral Instructions or Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of PFPC's properly taking
or not taking such action. Nothing in this subsection shall excuse PFPC when an
action or omission on the part of PFPC constitutes willful misfeasance, bad
faith, gross negligence or reckless disregard by PFPC of any duties, obligations
or responsibilities set forth in this Agreement.
6
<PAGE>
7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund which are in the
possession or under the control of PFPC shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940 Act
and other applicable securities laws, rules and regulations. The Fund and
Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or to
an Authorized Person, at the Fund's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to the
Fund's books of account;
(ii) records of the Fund's securities transactions;
(iii) all other books and records as PFPC is re-
quired to maintain pursuant to Rule 31a-1 of
the 1940 Act in connection with the services
provided hereunder.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund agrees that such consent shall not be unreasonably withheld
and may not be withheld where PFPC may be exposed to civil or criminal contempt
7
<PAGE>
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to the Fund. PFPC
shall take all reasonable action in the performance of its duties under this
Agreement to assure that the necessary information is made available to such
accountants for the expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failure, PFPC shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC
8
<PAGE>
a fee or fees as may be agreed to in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless
PFPC and its affiliates from all taxes, charges, expenses, assessments, claims
and liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state or foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) attorneys'
fees and disbursements arising directly or indirectly from any action or
omission to act which PFPC takes (i) at the request or on the direction of or in
reliance on the advice of the Fund or (ii) upon Oral Instructions or Written
Instructions. Neither PFPC, nor any of its affiliates, shall be indemnified
against any liability (or any expenses incident to such liability) arising out
of PFPC's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement. Any amounts payable by the Fund hereunder shall be satisfied only
against the relevant Index Series' assets and not against the assets of any
other Index Series of the Fund.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed to
by PFPC in writing. PFPC shall be
9
<PAGE>
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this Agreement.
PFPC shall be liable for any damages arising out of PFPC's failure to perform
its duties under this Agreement to the extent such damages arise out of
PFPC's willful misfeasance, bad faith, gross negligence or reckless disregard
of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses beyond its
control, provided that PFPC has acted in accordance with the standard of care
set forth above; and (ii) PFPC shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to be
genuine; or (B) subject to Section 100, delays or errors or loss of data
occurring by reason of circumstances beyond PFPC's control, including acts of
civil or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
10
<PAGE>
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur or
suffer by or as a consequence of PFPC's or any affiliates' performance of the
services provided hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS. PFPC will
perform the following accounting services with respect to the Fund:
(i) Journalize investment, capital share and
income and expense activities;
(ii) Verify investment buy/sell trade tickets when
received from the investment adviser for the
Fund (the "Adviser") and transmit trades to
the Fund's custodian (the "Custodian") for
proper settlement;
(iii) Maintain individual ledgers for investment
securities;
(iv) Maintain historical tax lots for each
security;
(v) Reconcile cash and investment balances of the
Fund with the Custodian, and provide the
Adviser with the beginning cash balance avail-
able for investment purposes;
(vi) Update the cash availability throughout the
day as required by the Adviser;
11
<PAGE>
(vii) Post to and prepare the Statement of Assets and
Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses
(E.G., advisory and custody fees);
(ix) Monitor the expense accruals and notify
an officer of the Fund of any proposed
adjustments;
(x) Control all disbursements and authorize such
disbursements upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) Obtain security market quotes from
independent pricing services approved by the
Adviser, or if such quotes are unavailable, then
obtain such prices from the Adviser, and in
either case calculate the market value of the
Fund's investments;
(xiv) Transmit or mail a copy of the daily
valuation to the Adviser;
(xv) Compute net asset value;
(xvi) As appropriate, compute yields, total
return, expense ratios, portfolio turnover
rate, and, if required, portfolio average
dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement,
which will include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
12
<PAGE>
15. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services with respect
to the Fund:
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Fund statis-
tical data as requested on an ongoing basis;
(iv) Prepare for execution and file the Fund's Fed-
eral income, Federal excise and state tax re-
turns;
(v) Prepare and file with the SEC the Fund's Semi-
Annual Reports on Form N-SAR and the Fund's Rule
24f-2 Notices;
(vi) Assist in the preparation and coordinate the
production and filing of the Fund's annual,
semi-annual, and quarterly shareholder reports.
(vii) Assist in the preparation of registration state-
ments and other filings relating to the regis-
tration of Shares;
(viii) Monitor the Fund's status as a regulated invest-
ment company under Sub-Chapter M of the Internal
Revenue Code of 1986, as amended;
(ix) Coordinate contractual relationships and commu-
nications between the Fund and its contractual
service providers;
(x) Monitor the Fund's compliance with the amounts
and conditions of each state qualification; and
(xi) Prepare minutes of meetings of Board of Direc-
tors and shareholders.
13
<PAGE>
16. DESCRIPTION OF ADDITIONAL REGULATORY COMPLIANCE AND
ADMINISTRATION SERVICES.
PFPC will perform the following services with respect to the Fund.
(i) Assist the investment adviser in monitoring the
Fund's compliance with certain investment re-
strictions, limited to after-transactions test-
ing regarding the following procedures:
- Industry Diversification
- Issuer Diversification;
(ii) Assist in developing a response to the Securi-
ties and Exchange Commission staff's routine
examinations;
(iii) Assist in the preparation of Post Effective
Amendments to the Fund's Registration Statement
on Form N-1A;
(iv) Monitor various SEC and IRS regulatory devel-
opments affecting investment companies;
(v) Coordinate the preparations for the Fund's Board
Meetings, including the preparation of an agenda
and the administration report and coordination
of reports and related materials from the ad-
viser, distributor, transfer agent and custo-
dian, etc.;
(vi) Provide the Fund with officers which may be
authorized by the Fund to facilitate certain
required regulatory filings and the processing
of invoices;
(vii) Monitor the maintenance of directors' and offi-
cers' insurance and fidelity bond insurance
coverage on behalf of the Fund;
(viii) Coordinate the independent auditors and print-
ers for the preparation of shareholder reports;
14
<PAGE>
(ix) Prepare and distribute operational reports to
management by the tenth business day after
receiving all applicable reports from outside
vendors; and
(x) Maintain a "task list" calendar noting required
completion dates.
17. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PFPC on sixty (60) days' prior written notice to
the other party. However, this Agreement shall terminate immediately with
respect to any Index Series, the shares of which are no longer trading.
18. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to
the Fund, at C/O Mr. Nathan Most, P.O. Box 193, Burlingame, California 94011-
0193; or (c) if to neither of the foregoing, at such other address as shall have
been provided by like notice to the sender of any such notice or other
15
<PAGE>
communication by the other party.
19. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
20. DELEGATION; ASSIGNMENT. PFPC may not assign its rights and delegate
its duties hereunder to any wholly-owned direct or indirect subsidiary of PNC
Bank, National Association or PNC Bank Corp., without prior notice to and
consent of the Fund, which consent shall not be unreasonably withheld and
provided further that (i) the delegate (or assignee) agrees with PFPC and the
Fund to comply with all relevant provisions of the 1940 Act; and (ii) PFPC and
such delegate (or assignee) promptly provide such information as the Fund may
request, and respond to such questions as the Fund may ask, relative to the
delegation (or assignment), including (without limitation) the capabilities of
the delegate (or assignee).
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
23. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire
16
<PAGE>
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York, without regard to principles of conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:_________________________________
Title:_______________________________
FOREIGN FUND, INC.
By:___________________________________
Title:________________________________
18
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of ____________________________, 1996, is Exhibit
A to that certain Administration and Accounting Services Agreement dated as
of_______________________________, 1996 between PFPC Inc. and Foreign Fund,
Inc. This Exhibit A shall supersede all previous forms of Exhibit A.
INDEX SERIES
Australia Index Series
Austria Index Series
Belgium Index Series
Canada Index Series
France Index Series
Germany Index Series
Hong Kong Index Series
Italy Index Series
Japan Index Series
Malaysia Index Series
Mexico Index Series
Netherlands Index Series
Singapore (Free) Index Series
Spain Index Series
Sweden Index Series
Switzerland Index Series
United Kingdom Index Series
19
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
20
<PAGE>
TRANSFER AGENCY SALES AGREEMENT
THIS AGREEMENT is made as of ____________________________, 1996 by and
between PNC BANK, NATIONAL ASSOCIATION ("PNC Bank"), and FOREIGN FUND, INC., a
Maryland corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
issued in series and organized as a series fund; and
WHEREAS, the Fund wishes to retain PNC Bank to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to its
index series listed on Exhibit A attached hereto and made a part hereof, as such
Exhibit A may be amended from time to time (each, an "Index Series"), and PNC
Bank wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS, AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
-1-
<PAGE>
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED AGENT" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PNC Bank. An Authorized Person's scope
of authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PNC Bank
from an Authorized Person or from a person reasonably believed by PNC Bank to be
an Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(h) "SHARES" mean the shares of beneficial interest of any series or
class of the Fund.
(i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PNC Bank. The
-2-
<PAGE>
instructions may be delivered by hand, mail, tested telegram, cable, telex or
facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PNC Bank to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing agent to
the Fund in accordance with the terms set forth in this Agreement. PNC Bank
accepts such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PNC Bank with the following:
(a) Certified or authenticated copies of the
resolutions of the Fund's Board of Directors,
approving the appointment of PNC Bank or its
affiliates to provide services to the Fund and
approving this Agreement;
(b) A copy of the Fund's most recent effective
registration statement;
(c) A copy of the advisory agreement with respect to
the Fund;
(d) A copy of the distribution agreement with
respect to each class of Shares of the Fund;
(e) Copies of any shareholder servicing agreements
made in respect of the Fund; and
(f) Copies (certified or authenticated where
applicable) of any and all amendments or
supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PNC Bank undertakes to comply
with all applicable requirements of the
-3-
<PAGE>
Securities Laws, and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank shall act
only upon Oral Instructions and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PNC Bank to be an Authorized Person) pursuant to this
Agreement. PNC Bank may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Directors or of the Fund's shareholders,
unless and until PNC Bank receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PNC Bank Written Instructions
confirming Oral Instructions so that PNC Bank receives the Written Instructions
by the close of business within a
-4-
<PAGE>
reasonable period of time. The fact that such confirming Written Instructions
are not received by PNC Bank shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral Instructions or Written Instructions reasonably appear to have been
received from an Authorized Person, PNC Bank shall incur no liability to the
Fund in acting upon such Oral Instructions or Written Instructions provided that
PNC Bank's actions comply with such Oral Instructions or Written Instructions
and the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PNC Bank is in doubt as to any action it
should or should not take, PNC Bank may request directions or advice, including
Oral Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PNC Bank shall be in doubt as to any
question of law pertaining to any action it should or should not take, PNC
Bank may request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Fund, the Fund's investment adviser or PNC Bank,
at the option of PNC Bank).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice, Oral Instructions or Written Instructions PNC Bank receives
from the Fund, and the advice it
-5-
<PAGE>
receives from counsel, PNC Bank may rely upon and follow the advice of
counsel. In the event PNC Bank so relies on the advice of counsel, PNC Bank
remains liable for any action or omission on the part of PNC Bank which
constitutes willful misfeasance, bad faith, negligence or reckless disregard
by PNC Bank of any duties, obligations or responsibilities set forth in this
Agreement.
(d) PROTECTION OF PNC Bank. PNC Bank shall be protected in any
action it takes or does not take in reliance upon directions, advice, Oral
Instructions or Written Instructions it receives from the Fund or from counsel
and which PNC Bank believes, in good faith, to be consistent with those
directions, advice, Oral Instructions or Written Instructions subject to the
limitations set forth in paragraph 6(c). Nothing in this section shall be
construed so as to impose an obligation upon PNC Bank (i) to seek such
directions, advice, Oral Instructions or Written Instructions, or (ii) to act in
accordance with such directions, advice, Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PNC Bank's properly taking or not taking such action.
Nothing in this subsection shall excuse PNC Bank when an action or omission on
the part of PNC Bank constitutes willful misfeasance, bad faith, negligence or
reckless disregard by PNC Bank of any duties,
-6-
<PAGE>
obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund which
are in the possession or under the control of PNC Bank shall be the property of
the Fund. Such books and records shall be prepared and maintained as required by
the 1940 Act and other applicable securities laws, rules and regulations. The
Fund and Authorized Persons shall have access to such books and records at all
times during PNC Bank's normal business hours. Upon the reasonable request of
the Fund, copies of any such books and records shall be provided by PNC Bank to
the Fund or to an Authorized Person, at the Fund's expense.
8. CONFIDENTIALITY. PNC Bank agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), unless the release
of such records or information is otherwise consented to, in writing, by the
Fund. The Fund agrees that such consent shall not be unreasonably withheld and
may not be withheld where PNC Bank may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with the
Fund's independent public accountants and shall take all
-7-
<PAGE>
reasonable actions in the performance of its obligations under this Agreement
to ensure that the necessary information is made available to such
accountants for the expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failure,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure, provided
such loss or interruption is not caused by PNC Bank's own willful misfeasance,
bad faith, negligence or reckless disregard of its duties or obligations under
this Agreement.
11. COMPENSATION. As compensation for services rendered by PNC Bank
during the term of this Agreement, the Fund will pay to PNC Bank a fee or fees
as may be agreed to from time to time in writing by the Fund and PNC Bank.
12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PNC
Bank and its affiliates from all taxes, charges,
-8-
<PAGE>
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state and foreign
securities and blue sky laws, and amendments thereto), and expenses, including
(without limitation) attorneys' fees and disbursements, arising directly or
indirectly from any action or omission to act which PNC Bank takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral Instructions or Written Instructions. Neither PNC Bank, nor any of its
affiliates, shall be indemnified against any liability (or any expenses incident
to such liability) arising out of PNC Bank's or its affiliates' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on behalf of
the Fund except as specifically set forth herein or as may be specifically
agreed to by PNC Bank in writing. PNC Bank shall be obligated to exercise care
and diligence in the performance of its duties hereunder, to act in good faith
and to use its best efforts, within reasonable limits, in performing services
provided for under this Agreement. PNC Bank shall be liable for any damages
arising out of PNC Bank's failure to perform
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<PAGE>
its duties under this Agreement to the extent such damages arise out of PNC
Bank's willful misfeasance, bad faith, negligence or reckless disregard of such
duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PNC Bank, shall not be liable for losses beyond
its control, provided that PNC Bank has acted in accordance with the standard of
care set forth above; and (ii) PNC Bank shall not be under any duty or
obligation to inquire into and shall not be liable for (i) the validity or
invalidity or authority or lack thereof of any Oral Instruction, Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PNC Bank reasonably believes to be
genuine; or (ii) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PNC Bank's control, including acts
of civil or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PNC Bank nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or
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<PAGE>
damages which the Fund may incur or suffer by or as a consequence of PNC Bank's
or its affiliates' performance of the services provided hereunder, whether or
not the likelihood of such losses or damages was known by PNC Bank or its
affiliates.
14. DESCRIPTION OF SERVICES.
(a) SERVICES PROVIDED ON AN ONGOING BASIS, IF APPLICABLE.
(i) Maintain proper shareholder registrations;
(ii) Direct payment processing of checks or wires;
(iii) Prepare and certify stockholder lists in conjunction with
proxy solicitations;
(iv) Countersign share certificates;
(v) Prepare and mail to shareholders confirmation of activity;
(vi) Provide periodic shareholder lists and statistics to the
clients;
(vii) Provide detailed data for underwriter/broker confirmations;
(viii) Prepare periodic mailing of year-end tax and statement
information;
(ix) Notify on a timely basis the investment adviser, accounting
agent, and custodian of fund activity; and
(b) SERVICES PROVIDED BY PNC BANK UNDER ORAL INSTRUCTIONS OR WRITTEN
INSTRUCTIONS.
(i) Accept and post daily Fund purchases and redemptions;
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<PAGE>
(ii) Accept, post and perform shareholder transfers;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates (when requested in writing by
the shareholder).
(c) PURCHASE OF SHARES. PNC Bank shall issue and credit an account
of an investor, in the manner described in the Fund's prospectus, once it
receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder account; and
(iii) Confirmation of receipt or crediting of securities and funds
for such order to the Fund's custodian.
(d) REDEMPTION OF SHARES. PNC Bank shall redeem Shares only if that
function is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Directors. Shares shall be redeemed and
payment therefor shall be made in accordance with the Fund's prospectus and
statement of additional information when the recordholder tenders a redemption
request in "proper form" as described in the Fund's prospectus and statement of
additional information.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a
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<PAGE>
resolution of the Fund's Board of Directors authorizing the declaration and
payment of dividends and distributions, PNC Bank shall pay such dividends and
distributions in cash, as provided for in the Fund's prospectus and statement of
additional information. Such payment, as well as payments upon redemption as
described above, shall be made after deduction and payment of the required
amount of funds to be withheld in accordance with any applicable tax laws or
other laws, rules or regulations. PNC Bank shall mail to the Fund's shareholders
such tax forms and other information, or permissible substitute notice, relating
to dividends and distributions paid by the Fund as are required to be filed and
mailed by applicable law, rule or regulation. PNC Bank shall prepare, maintain
and file with the IRS and other appropriate taxing authorities reports relating
to all dividends above a stipulated amount paid by the Fund to its shareholders
as required by tax or other law, rule or regulation.
(f) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written
Instructions, PNC Bank shall mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
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<PAGE>
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
In addition, PNC Bank will receive and tabulate the proxy cards for
the meetings of the Fund's shareholders.
(g) RECORDS. PNC Bank shall maintain records of the accounts for
each shareholder showing the following information:
(i) Name, address and United States Tax Identification or Social
Security number;
(ii) Number and class of Shares held and number and class of
Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid and
the date and price for all transactions on a shareholder's
account;
(iv) Any stop or restraining order placed against a shareholder's
account;
(v) Any correspondence relating to the current maintenance of a
shareholders' account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(h) LOST OR STOLEN CERTIFICATES. PNC Bank shall place a stop notice
against any certificate reported to be lost or stolen
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<PAGE>
and comply with all applicable federal regulatory requirements for reporting
such loss or alleged misappropriation. A new certificate shall be registered and
issued only upon:
(i) The shareholder's pledge of a lost instrument bond or such
other appropriate indemnity bond issued by a surety company
approved by PNC Bank; and
(ii) Completion of a release and indemnification agreement signed
by the shareholder to protect PNC Bank and its affiliates.
(i) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from any
Fund shareholder to inspect stock records, PNC Bank will notify the Fund and the
Fund will issue instructions granting or denying each such request. Unless PNC
Bank has acted contrary to the Fund's instructions, the Fund agrees and does
hereby, release PNC Bank from any liability for refusal of permission for a
particular shareholder to inspect the Fund's stock records.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written
notice to the other party. However, this Agreement shall terminate
immediately with respect to any Index Series the shares of which are no
longer trading.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming
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<PAGE>
telegram, cable, telex or facsimile sending device. Notices shall be addressed
(a) if to PNC Bank, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if
to the Fund, at C/O Mr. Nathan Most, P.O. Box 193, Burlingame, California 94011-
0193; or (c) if to neither of the foregoing, at such other address as shall have
been given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered.
17. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PNC Bank may not assign its rights and
delegate its duties hereunder to any wholly-owned direct or indirect subsidiary
of PNC Bank, National Association or PNC Bank Corp. without prior notice to and
consent of the Fund, which consent shall not be unreasonably withheld, and
provided further that (i) the delegate (or assignee) agrees with PNC Bank and
the
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<PAGE>
Fund to comply with all relevant provisions of the 1940 Act; and (ii) PNC Bank
and such delegate (or assignee) promptly provide such information as the Fund
may request, and respond to such questions as the Fund may ask, relative to the
delegation (or assignment), including (without limitation) the capabilities of
the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their
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<PAGE>
construction or effect.
(c) GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York, without regard to principles of conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution by such party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PNC BANK, N.A.
By:_________________________________
Title:_______________________________
FOREIGN FUND, INC.
By:___________________________________
Title:________________________________
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<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of ____________________________, 1996, is
Exhibit A to that certain Transfer Agency Services Agreement dated as of
________________________, 1996 between PNC Bank, N.A. and Foreign Fund, Inc.
This Exhibit A shall supersede all previous forms of Exhibit A.
INDEX SERIES
Australia Index Series
Austria Index Series
Belgium Index Series
Canada Index Series
France Index Series
Germany Index Series
Hong Kong Index Series
Italy Index Series
Japan Index Series
Malaysia Index Series
Mexico Index Series
Netherlands Index Series
Singapore (Free) Index Series
Spain Index Series
Sweden Index Series
Switzerland Index Series
United Kingdom Index Series
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<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
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<PAGE>
MORGAN STANLEY CAPITAL INTERNATIONAL
FORM OF
INDEX LICENSE AGREEMENT
AGREEMENT, dated as of ________, 1996, by and between MORGAN STANLEY & CO.
INCORPORATED ("Morgan Stanley"), a Delaware corporation, having an office at
1251 Avenue of the Americas, New York, New York 10020, and FOREIGN FUND, INC.
("Licensee"), a Maryland corporation, having an office at 400 Bellevue Parkway,
Wilmington, Delaware 19809.
WHEREAS, Morgan Stanley is an international investment banking and
brokerage firm which owns rights in and to certain stock indices and the
proprietary data contained therein (and which, through its Morgan Stanley
Capital International ("MSCI") department, engages in a variety of business
activities in connection with such indices and data), among which are the
indices listed in Exhibit A, annexed hereto and made a part hereof (such indices
and data contained therein are hereinafter referred to as the "Indices");
WHEREAS, Morgan Stanley calculates, maintains and publishes the Indices;
WHEREAS, Morgan Stanley uses in commerce and owns trade name, trademark and
service mark rights to the designations "Morgan Stanley," "Morgan Stanley
Capital International," and "MSCI" (such rights are hereinafter individually and
collectively referred to as the "Marks");
WHEREAS, Licensee wishes to use the Indices as the basis of the products
described in Exhibit B, annexed hereto and made a part hereof (the "Products"),
to be issued and publicly traded pursuant to an effective registration statement
filed with the Securities and Exchange Commission;
WHEREAS, Licensee wishes to use the Indices and the Marks in connection
with writing, trading, marketing and promotion of the Products and in connection
with making disclosure about the Products under applicable laws, rules and
regulations in order to indicate that Morgan Stanley is the source of the
Indices; and
WHEREAS, Licensee wishes to obtain Morgan Stanley's authorization to use
the Indices and refer to the Indices
<PAGE>
and the Marks in connection with the Products pursuant to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT OF LICENSE AND AGREEMENT TO PROVIDE INFORMATION
(a) Subject to the terms and conditions of this Agreement, Morgan Stanley
grants to Licensee a non-transferable, non-exclusive, license (i) to use the
Indices as the basis of the Products (in accord with the restrictions set forth
in Exhibit B), and (ii) to use and refer to the Indices and the Marks in
connection with the writing, trading, marketing and promotion of the Products
(in accord with the restrictions set forth in Exhibit B) and in connection with
making such disclosure about the Products as Licensee deems necessary or
desirable under any applicable laws, rules or regulations in order to indicate
the source of the Indices. Licensee shall not disseminate electronically or in
any other fashion any quotations or other information relating to the Indices or
the Products.
(b) Morgan Stanley agrees to provide and update information to Licensee
concerning the Indices on an ongoing basis, and to assist in the preparation and
updating of Licensee's prospectus and statement of additional information as and
to the extent reasonably requested by Licensee.
2. TERM
The term of the license granted hereunder shall commence on ___, 199__ and
shall continue for one year thereafter. It is the intention of the parties to
renew this Agreement for successive one-year renewal terms pursuant to such
terms and conditions as the parties may agree upon.
3. LICENSEE FEES
Upon execution of this Agreement, Licensee shall pay to Morgan Stanley a
license fee at a rate of .03% per annum of the aggregate average daily net
assets of Licensee calculated and paid monthly in arrears with respect to an
unlimited number of Products issued by Licensee on each of the Indices listed in
Exhibit A.
4. TERMINATION
2
<PAGE>
(a) At any time during the term of this Agreement, either party may give
the other party thirty (30) days' prior written notice of termination if the
terminating party believes in good faith that material damage or harm is
occurring to the reputation or goodwill of the terminating party by reason of
its continued performance hereunder, and such notice shall be effective on the
date of such termination unless the other party shall correct the condition
causing such damage or harm within the notice period. In the event of
termination under this paragraph 4(a), no refund of any portion of the license
fees will be made.
(b) In the case of breach of any of the material terms and conditions of
this Agreement by either party, the other party may terminate this Agreement by
giving thirty (30) days' prior written notice of its intent to terminate, and
such notice shall be effective on the date of such termination unless the
breaching party shall correct such breach within the notice period. In the
event of termination under this paragraph 4(b) by Morgan Stanley, no refund of
any of the license fees will be made. In the event of termination under this
paragraph 4(b) by Licensee, Licensee shall be entitled to a pro rata refund of
the license fees.
(c) Morgan Stanley shall have the right, in its sole discretion, to cease
compilation and publication of any of the Indices and, in the event that any of
the Indices is discontinued, to terminate this Agreement if Morgan Stanley does
not offer a replacement or substitute index. In the event that Morgan Stanley
intends to discontinue any Index, Morgan Stanley shall give Licensee at least
ninety (90) days written notice prior to such discontinuance, which notice shall
specify whether a replacement or substitute index will be available. Licensee
shall have the option hereunder within sixty (60) days after receiving such
written notice from Morgan Stanley to notify Morgan Stanley in writing of its
intent to use the replacement index under the terms of this Agreement. In the
event that any of the Indices is discontinued and Licensee does not exercise
such option or that at least one substitute or replacement index is not made
available, Licensee shall be entitled to a pro rata refund of the license fee.
(d) Licensee may terminate this Agreement upon written notice to Morgan
Stanley if (i) Licensee is informed of the final adoption of any legislation or
regulation that materially impairs Licensee's ability to write, market or
promote the Products; or (ii) any material litigation or
3
<PAGE>
regulatory proceeding regarding the Products is threatened or commences. In the
event of termination under this paragraph 4(d), no refund of any portion of the
license fees will be made.
(e) Morgan Stanley may terminate this Agreement upon written notice to
Licensee if (i) Morgan Stanley is informed of the final adoption of any
legislation or regulation that materially impairs Morgan Stanley's ability to
license and provide the Indices under this Agreement; or (ii) any material
litigation or regulatory proceeding regarding the Products is threatened or
commenced. In the event that Morgan Stanley terminates this Agreement, Licensee
shall be entitled to a pro rata refund of the license fee.
5. RIGHTS UPON TERMINATION
Upon termination of this Agreement, Licensee shall cease to use the Indices
and cease referring to the Indices and the Marks with the Products except that
the Products outstanding at such time may thereafter continue to be outstanding
and terminate, expire, and mature in accordance with their respective terms, and
the Indices and reference to the Marks may continue to be used in connection
with such Products.
6. PRODUCT PROMOTION
(a) Licensee shall use its best efforts to protect the goodwill and
reputation of Morgan Stanley in connection with its use of the Indices and the
Marks under this Agreement. Licensee shall submit to Morgan Stanley for its
preview and approval all advertisements, brochures, and promotional and
information material ("Informational Materials") relating to or referring to
Morgan Stanley, the Indices, the Marks or the Products. Morgan Stanley's
approval shall be confined solely to the use of or description of Morgan
Stanley, the Marks, and the Indices and shall not be unreasonably withheld or
delayed by Morgan Stanley.
(b) Morgan Stanley is not obligated to engage in any marketing or
promotional activities in connection with the Products. Nevertheless, Morgan
Stanley agrees to make itself available and to respond in an informative and
factual manner to shareholder inquiries about the Indices and their composition,
as such inquiries are directed to Morgan Stanley by Licensee.
(c) Licensee acknowledges and agrees that Morgan Stanley, in granting the
permission contained in this
4
<PAGE>
agreement, does not express or imply any approval of the Products or of Licensee
and Licensee further agrees not to make any statement which expresses or implies
that Morgan Stanley approves, endorses or consents to the promotion, marketing,
and arrangement by Licensee of the Products or that Morgan Stanley makes any
judgment or expresses any opinion in respect of the Licensee.
7. PROTECTION OF VALUE OF LICENSEE
(a) Licensee shall cooperate reasonably with Morgan Stanley in the
maintenance of all Morgan Stanley common law and statutory rights in the Indices
and the Marks, including copyrights and other proprietary rights, and shall take
such acts and execute such instruments as are reasonably necessary and
appropriate to such purposes, including the use by the Licensee of the following
notice when referring to the Indices or the Marks in any advertisement, offering
circular, prospectus, brochure, or promotional or informational material
relating to the Products:
The MSCI Indices are the exclusive property of Morgan Stanley. Morgan
Stanley Capital International is a service mark of Morgan Stanley and has
been licensed for use by Foreign Fund, Inc.
or such similar language as may be approved in advance by Morgan Stanley.
(b) License shall not refer to the names of the Indices in any manner
which might cause confusion as to Morgan Stanley's responsibility for preparing
and disseminating the Indices or as to the identity of Licensee and its
relationship to the Products.
8. PROPRIETARY RIGHTS
(a) Licensee acknowledges that the Indices are selected, arranged and
prepared by Morgan Stanley through the application of methods and standards of
judgment used and developed through the expenditure of considerable work, time
and money by Morgan Stanley. Licensee also acknowledges that the Indices and
the Marks are the exclusive property of Morgan Stanley, and the Indices and
their compilation and composition and changes therein are in the control and
discretion of Morgan Stanley.
(b) Morgan Stanley reserves all rights with respect to the Indices and the
Marks except those expressly licensed to Licensee hereunder.
5
<PAGE>
(c) Each party shall treat as confidential and shall not disclose or
transmit to any third party any confidential and proprietary information of the
other party, including the terms of this Agreement, provided that the
documentation or other written materials containing such information are
designated as "Confidential" or "Proprietary" by the providing party and such
information is not available generally to the public or otherwise available to
the receiving party from a source other than the providing party. Not
withstanding the foregoing, if requested or required (by interrogatories,
requests for information or documents, subpoena, or other process) either party
may reveal such information if such information to be disclosed is (i) approved
in writing by the other party for disclosure or (ii) required by law (in the
opinion of counsel), regulatory agency or court order to be disclosed by a
party, provided prior written notice of such required disclosure is given to the
other party. Except with respect to disclosure made pursuant to (i) and (ii) in
the immediately preceding sentence, each party shall treat as confidential the
terms of this Agreement. The provisions of this paragraph shall survive any
termination of this Agreement for five (5) years from disclosure by either party
to the other party of the last such confidential and proprietary information.
9. WARRANTIES; DISCLAIMERS
(a) Morgan Stanley represents and warrants that Morgan Stanley is the
owner of rights granted to Licensee herein and that use of the Indices as
provided herein shall not infringe any trademark, copyright, other proprietary
right, or contractual right of any person not a party to this Agreement.
(b) Licensee agrees expressly to be bound itself by and furthermore to
include all of the following disclaimers and limitations in Informational
Materials and upon request to furnish a copy (copies) thereof to Morgan Stanley:
World Equity Benchmark Shares are not sponsored, endorsed, sold or
promoted by Morgan Stanley. Morgan Stanley makes no representation or
warranty, express or implied, to the owners of the WEBS of any Index Series
or any member of the public regarding the advisability of investing in
securities generally or in the WEBS of any Index Series particularly or the
ability of the respective MSCI Indices identified herein to track general
stock market performance. Morgan Stanley is the licensor of certain
trademarks, service marks and trade names of Morgan Stanley, including the
MSCI
6
<PAGE>
Indices identified herein, which are determined, composed and calculated by
Morgan Stanley without regard to the WEBS of any Index Series or the issuer
thereof. Morgan Stanley has no obligation to take the needs of the issuer
of the WEBS of any Index Series or the owners of the WEBS of any Index
Series into consideration in determining, composing or calculating the
respective MSCI Indices. Morgan Stanley is not responsible for and has not
participated in the determination of the timing of, prices at, or
quantities of the WEBS of any Index Series to be issued or in the
determination or calculation of the equation by which the WEBS of any Index
Series are redeemable. Morgan Stanley has no obligation or liability to
owners of the WEBS of any Index Series in connection with the
administration, marketing or trading of the WEBS of any Index Series.
ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR
FOR USE IN THE CALCULATION OF THE INDICES FROM SOURCES WHICH MORGAN STANLEY
CONSIDERS RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE ACCURACY AND/OR
THE COMPLETENESS OF THE INDICES OR ANY DATA INCLUDED THEREIN. MORGAN
STANLEY MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED
BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE
PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDICES OR ANY
DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR
FOR ANY OTHER USE. MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES,
AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDICES OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN
STANLEY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
(c) Each party represents and warrants to the other that it has the
authority to enter into this Agreement according to its terms and that its
performance does not violate any laws, regulations or agreements applicable to
it.
(d) Licensee represents and warrants to Morgan Stanley that the Products
shall not violate any applicable laws, including but not limited to banking,
commodities and securities laws.
7
<PAGE>
(e) Neither party shall have any liability for lost profits or
consequential damages arising out of this Agreement.
(f) The provisions of this Section 9 shall survive any termination of this
Agreement.
10. INDEMNIFICATION
Licensee shall indemnify and hold harmless Morgan Stanley, its parent,
subsidiaries, affiliates, and their officers, directors, employees and agents
against any and all judgments, damages, costs or losses of any kind (including
reasonable attorneys' and experts' fees) as a result of claims or actions
brought by third parties against Morgan Stanley which arise from all acts,
representations or omissions of Licensee under this Agreement or are in any
manner related to the Products; provided, however, that (a) Morgan Stanley
notifies Licensee promptly of any such claim or action, and (b) such judgments,
damages, costs or losses are not attributable to any negligent act or omission
by Morgan Stanley, its parent, affiliates, subsidiaries or any of their
employees or agents. Licensee shall bear all expenses in connection with the
defense and/or settlement of any such claim or action. Morgan Stanley shall
have the right, at its own expense, to participate in the defense of any claim
or action against which it is indemnified hereunder; provided, however, it shall
have no right to control the defense, consent to judgment, or agree to settle
any such claim or action, without the written consent of Licensee. Licensee, in
the defense of any such claim, except with the written consent of Morgan
Stanley, shall not consent to entry of any judgment or enter into any settlement
which (a) does not include, as an unconditional term, the grant by the claimant
to Morgan Stanley of a release of all liabilities in respect of such claims or
(b) otherwise adversely affects the rights of Morgan Stanley. This provision
shall survive the termination of this Agreement.
11. FORCE MAJEURE
Neither Morgan Stanley nor Licensee shall bear responsibility or liability
for any losses arising out of any delay in or interruptions of their respective
performance of their obligations under this Agreement due to any act of God, act
of governmental authority, act of the public enemy or due to war, riot, fire,
flood, civil commotion, insurrection, labor difficulty (including, without
limitation, any strike or other work stoppage or
8
<PAGE>
slowdown), severe or adverse weather conditions or other cause beyond the
reasonable control of the party so affected, provided that such party had
exercised due diligence as the circumstances reasonably required.
12. OTHER MATTERS
(a) This Agreement is solely and exclusively between the parties as now
constituted and, unless otherwise provided, shall not be assigned or transferred
by either party, without prior written consent of the other party, and any
attempt to so assign or transfer this Agreement without such written consent
shall be null and void. Notwithstanding the foregoing, this Agreement may be
assigned without such consent to Morgan Stanley's parent or any subsidiary or
affiliate of Morgan Stanley.
(b) This Agreement constitutes the entire agreement of the parties hereto
with respect to its subject matter and may be amended or modified only by a
writing signed by duly authorized officers of both parties. This Agreement
supersedes all previous Agreements between the parties with respect to the
subject matter of this Agreement. There are no oral or written collateral
representations, agreements, or understandings except as provided herein.
(c) No breach, default, or threatened breach of this Agreement by either
party shall relieve the other party of its obligations or liabilities under this
Agreement with respect to the protection of the property of proprietary nature
of any property which is the subject of this Agreement.
(d) All notices and other communications under this Agreement shall be (i)
in writing, (ii) delivered by hand or by registered or certified mail, return
receipt requested, to the addresses set forth below or such addresses as either
party shall specify by a written notice to the other and (iii) deemed given upon
receipt.
NOTICE TO MORGAN STANLEY: Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
ATTN: Cedric G. Foster
and
Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
9
<PAGE>
ATTN: General Counsel
NOTICE TO LICENSEE: Foreign Fund, Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
Attn: Secretary
(e) This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first set forth above.
MORGAN STANLEY & CO. FOREIGN FUND, INC.
INCORPORATED
By:______________________ BY:_______________________
Title:___________________ Title:____________________
Name:____________________ Name:_____________________
(Printed) (Printed)
Date:____________________ Date:______________________
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EXHIBIT A
List of the Indices
Australia Index Series
Austria Index Series
Belgium Index Series
Canada Index Series
France Index Series
Germany Index Series
Hong Kong Index Series
Italy Index Series
Japan Index Series
Malaysia Index Series
Mexico (Free) Index Series
Netherlands Index Series
Singapore (Free) Index Series
Spain Index Series
Sweden Index Series
Switzerland Index Series
United Kingdom Index Series
11
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EXHIBIT B
Description of the Products
The Products are to be issued and traded on a public basis, in accordance with
the U.S. federal securities laws and applicable laws of other jurisdictions.
The Products shall be limited to: shares of common stock issued by various
series of Licensee, a registered open-end management investment company, which
shares shall be listed and traded on the American Stock Exchange, Inc.
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WORLD EQUITY BENCHMARK SHARES
BOOK-ENTRY-ONLY
Letter of Representation
Foreign Fund, Inc.
Name of Issuer
PFPC Inc.
Name of Agent
(Date) 1995
The Depository Trust Company
55 Water Street, 49th Floor
New York, NY 10041
Attention: General Counsel's Office
Re: World Equity Benchmark Shares ("WEBS") of Foreign Fund, Inc.
(Issue Description)
The purpose of this letter is to set out certain matters relating to the above-
referenced WEBS. PFPC Inc. (the "Agent") is acting as Administrator, Accounting
and Transfer Agent, or other Agent with respect to the WEBS. WEBS are shares of
common stock of Foreign Fund, Inc. (the "Fund") issued by each of its initial
seventeen series (each an "Index Series"), including: the Australia Index
Series, the Austria Index Series; the Belgium Index Series, the Canada Index
Series, the France Index Series, the Germany Index Series, the Hong Kong Index
Series, the Italy Index Series, the Japan Index Series, the Malaysia Index
Series, the Mexico Index Series, the Netherlands Index Series, the Singapore
(Free) Index Series, the Spain Index Series, the Sweden Index Series, the
Switzerland Index Series and the United Kingdom Index Series pursuant to the
Fund's articles of incorporation and bylaws and its registration statement on
Form N-1A and related documents and instruments (the "Documents"). The Fund's
Board of Directors may authorize additional Index Series. Pursuant to offering
made in
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2
accordance with the Documents, the Fund will issue and redeem WEBS of each Index
Series only in aggregations of a specified number of WEBS ("Creation Units").
See Appendix A. WEBS will be listed on the American Stock Exchange. The
Depository Trust Company ("DTC") will act as securities depository for the WEBS,
and DTC or its nominee will be the record or registered owner of all outstanding
WEBS.
To induce DTC to accept the WEBS as eligible for deposit at DTC and act in
accordance with its Rules with respect to the WEBS, the Issuer and the Agent
make the following representations to DTC.
1. The WEBS of each Index Series are shares of common stock of an open-end
investment company registered or to be registered with the Securities and
Exchange Commission. Each Index Series of WEBS will have its own CUSIP
number. The Issuer shall cause to be delivered at the time of the initial
deposit a global certificate for each of the Index Series of WEBS (the
"Certificates") registered in the name of DTC's nominee, Cede & Co., to be
held in custody by the Agent on behalf of DTC, which will represent in each
case the total number of WEBS of each Index Series respectively issued by
the Fund, which number shall be adjusted as appropriate by the Agent.
Each Certificate shall bear the following legend:
Unless this Certificate is presented by an authorized representative
of The Depository Trust Company ("DTC"), a New York corporation, to
Issuer or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede
& Co., or in such other name as is required by an authorized
representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co. has an interest herein.
The Certificate shall remain in the Agent's possession as custodian for DTC
pursuant to arrangements between the Agent and DTC, except as provided
below.
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3
2. In the event of any solicitation of consents from or voting by holders of
WEBS, the Issuer shall establish a record date for such purposes and give
DTC notice of such record date not less than 15 calendar days in advance of
such record date to the extent possible. Notices to DTC pursuant to this
paragraph by telecopy shall be sent to DTC's Reorganization Department at
(212) 709-6896, or (212) 709-6897, and receipt of such notices shall be
confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to this
Paragraph by mail or by any other means shall be sent to the address set
forth below.
Each WEBS will have one vote. DTC shall make available to the Issuer and
Agent upon written request and for a customary fee from time to time a
listing of the WEBS holdings of each DTC Participant. Such request will be
addressed to DTC's Reorganization Department. Notices sent by telecopy
will be sent to (212) 709-1093 or (212) 709-1094. Notices sent by mail or
by any other means will be sent to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
The Issuer or Agent 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 the beneficial owners of WEBS.
3. All notices and payment advices sent to DTC shall contain the CUSIP number
of the WEBS of the respective Index Series.
4. Dividend or distribution payments by the Fund or any Index Series thereof
shall be received by Cede & Co., an nominee of DTC, or its registered
assignments in same-day funds on each payment date (or the equivalent in
accordance with existing arrangements between the Issuer or Agent and DTC).
Such payments shall be made payable to the order of Cede & Co.
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4
In the event that the Fund takes any action in respect of payment or
nonpayment of dividends or other distributions on WEBS of any Index Series,
the Agent shall promptly notify DTC of such action, and shall give DTC
notice of any applicable record date and the per WEBS amount to be paid.
Such notice shall be given by telephoning the Supervisor of DTC's Dividend
Announcement Section at (212) 709-1270 or by telecopy sent to (212) 709-
1723 on the date the dividend is declared. Such verbal or telecopy notice
shall be followed promptly by written confirmation sent by a secure means
to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
5. Other cash payments by the Fund or any Index Series thereof shall be
received by Cede & Co., as nominee of DTC, or its registered assigns, in
[same day] [next day] [note: after 2/96, same day will be required] funds
on each payment date (or in accordance with existing arrangements between
the Company or the Depositary and DTC). Such payments shall be made
payable to the order of Cede & Co., and, absent any other existing
arrangements, shall be addressed as follows:
[NDFS] [SDFS] Redemption Department
The Depository Trust Company
55 Water Street
50th Floor
New York, New York 10041-0099
6. DTC may direct the Issuer or Agent to use any other telephone number for
facsimile transmission, address or department of DTC as the number, address
or department to which notices may be sent.
7. Upon written request to DTC's Reorganization Department DTC shall release
security position listings only to authorized persons of the Issuer and
Agent.
8. In the event of issuance and redemption of WEBS in Creation Unit size
aggregations or any similar transactions necessitating an increase or
decrease in the number of outstanding WEBS of any Index Series,
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5
DTC's DWAC procedures will be followed. Agent recognizes that DTC accepts
such instructions up until 6:30 p.m. New York City time. Concurrently
therewith, the Agent shall make appropriate notation on an attachment to
each applicable Certificate indicating the amount of such decrease or
increase and the total number of WEBS outstanding. On each day on which
Agent is open for business and on which it receives an instruction
originated by a Participant through DTC's DWAC system to increase the
Participant's account by a specified number of WEBS (a "Deposit
Instruction"), Agent shall, before 6:30 p.m., New York City time, approve
or cancel the Deposit Instruction through the DWAC system. On each day on
which Agent is open for business and on which it receives an instruction
originated by a Participant through the DWAC system to decrease the
Participant's account by a specified number of WEBS (a "Withdrawal
Instruction"), Agent shall, before 6:30 p.m. New York City time either
approve or cancel the Withdrawal Instruction through the DWAC system.
Agent agrees that its approval of a Deposit or Withdrawal Instruction shall
be deemed to be the receipt by DTC of registration of transfer to the name
of Cede & Co. for the quantity of WEBS evidenced by the instruction after
the Deposit or Withdrawal Instruction is effected. All such transactions
shall be effected utilizing DTC's procedures as in effect until further
notice.
9. In the Event the Issuer determines pursuant to the Document(s) that
beneficial owners of the WEBS shall be able to obtain certificated WEBS,
the Issuer or Agent shall notify DTC of the availability of WEBS
certificates and shall issue, transfer and exchange WEBS certificates in
appropriate amounts as required by DTC and others.
10. (a) DTC may determine to discontinue providing its service as securities
depository with respect to the WEBS at any time by giving reasonable prior
written notice to the Issuer or Agent (with a copy to the Issuer) (at which
time DTC will confirm with the Issuer or Agent the aggregate number of WEBS
of each Index Series outstanding) and discharge its responsibilities with
respect thereto under applicable law.
(b) The Issuer may determine to discontinue the services of DTC thereunder
(at which time DTC will
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6
confirm with the Agent the aggregate number of WEBS of each Index Series
outstanding).
11. If applicable, publication of tax information and other like notification
will also be made to DTC.
12. Issuer (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
WEBS any information contained in the Certificate(s); and (b) acknowledges
that neither DTC's Participants nor any person having an interest in the
WEBS shall be deemed to have notice of the provisions of the Certificate(s)
by virtue of submission of such Certificates(s) to DTC.
13. Nothing herein shall be deemed to require the Agent to advance funds on
behalf of the Issuer.
Very truly yours,
FOREIGN FUND, INC.
(As Issuer)
By:
(Authorized Officer's Signature)
PFPC INC.
(As Agent)
By:
(Authorized Officer's Signature)
Address for Purposes of Notice:
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:
(Authorized Officer's Signature)
Dated: , 1995
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7
PRINCIPAL AND INCOME PAYMENTS RIDER
1. This Rider supersedes any contradictory language set forth in the Letter of
Representations to which it is appended.
2. With respect to principal and income payments in the Securities:
A. DTC shall receive all dividend and interest payments on payable date
in same-day funds by 2:30 p.m. ET (Eastern Time).
B. Issuer agrees that it or Agent shall provide dividend and interest
payment information to a standard announcement service subscribed to
by DTC. In the unlikely event that no such service exists, Issuer
agrees that it or Agent shall provide this information directly to DTC
in advance of the dividend or interest record date as soon as the
information is available.
This information should be conveyed directly to DTC electronically.
If electronic transmission is not possible, such information should be
conveyed by telephone or facsimile transmission to:
The Depository Trust Company
Manager, Announcements
Dividend Department
7 Hanover Square, 22nd Floor
New York, NY 10004
Phone: (212) 709-1270
Fax: (212) 709-1723, 1686
C. Issuer agrees that for dividend and interest payments, it or Agent
shall provide automated notification of CUSIP-level detail to the
depository no later than noon ET on the payment date.
D. DTC shall receive maturity and redemption payments and CUSIP-level
detail on the payable date in same-day funds by 2:30 p.m. ET. Absent
any other arrangements between Agent and DTC, such payments
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8
shall be wired according to the following instructions:
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Redemption Account 066-027306
In accordance with existing SDFS payment procedures in the manner set
forth in DTC's SDFS Paying Agent Operating Procedures a copy of which
has previously been furnished to Agent.
E. DTC shall receive all other payments and CUSIP-level detail resulting
from corporate actions (such as tender offers or mergers) on the first
payable date in same-day funds by 2:30 p.m. ET. Absent any other
arrangements between the Agent and DTC, such payments shall be wired
to the following address:
Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Reorganization Account 066-027608
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FORM OF PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF FOREIGN FUND, INC.
Foreign Fund, Inc. (the "Fund"), an open-end management investment company
that offers its shares in Index Series (the "Series") and which is registered
under the Investment Company Act of 1940, as amended (the "Act"), intends to
employ Funds Distributor, Inc. as the distributor (the "Distributor") of the
shares of each Series pursuant to a written distribution agreement and desires
to adopt a plan of distribution pursuant to Rule 12b-1 under the Act to assist
in the distribution of shares of the Series.
The Board of Directors (the "Board") of the Fund having determined that a
plan of distribution containing the terms set forth herein is reasonably likely
to benefit each Series and its shareholders, the Fund hereby adopts a
compensation-type plan of distribution (the "Plan") pursuant to Rule 12b-1 under
the Act on the following terms and conditions:
1. The Fund is hereby authorized to pay to the Distributor, as
compensation for its services, distribution payments (the "Payments") in
connection with the distribution of shares of each Series at an annual rate
of up to .25% of the average daily net assets of such Series. Such
Payments as shall be approved by the Board shall be accrued daily and paid
monthly in arrears.
2. Payments may be made by the Fund under this Plan for the purpose
of financing or assisting in the financing of any activity which is
primarily intended to result in the sale of shares of the Series. The
scope of the foregoing shall be interpreted by the Board from time to time,
including the selection of those activities for which payment can be made,
and the Board's interpretation shall be conclusive. Without in any way
limiting the discretion of the Board, the following activities are hereby
declared to be primarily intended to result in the sale of shares of the
Series: advertising the Series either alone or together with other series;
compensating underwriters, dealers, brokers, banks and other selling
entities and sales and marketing personnel or any of them for the sale of
shares of the Series, whether in a lump sum or on a continuous, periodic,
contingent, deferred or other basis; compensating underwriters, dealers,
brokers, banks and other servicing entities and servicing personnel or any
of them for providing services to shareholders of the Series relating to
their investment in the Series, including assistance in connection with
inquiries relating to shareholder accounts;
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producing and disseminating prospectuses (including statements of
additional information) of the Fund or the Series and preparing, producing
and disseminating sales, marketing and shareholder servicing materials;
third party consultancy or similar expenses relating to any activity for
which Payment is authorized by the Board; and financing any activity for
which Payment is authorized by the Board.
3. Amounts paid to the Distributor by the Fund in respect of a Series
under the Plan will not be used to pay the distribution expenses incurred
with respect to any other Series except that distribution expenses
attributable to the Fund as a whole will be allocated to the shares of the
Series according to the ratio of the net assets of the Series to the total
net assets of the Fund over the Fund's fiscal year or such other allocation
method approved by the Board.
4. The Fund is hereby authorized and directed to enter into
appropriate written agreements with the Distributor and each other person
to whom the Fund intends to make any Payment, and the Distributor is hereby
authorized and directed to enter into appropriate written agreements with
each person (a "Service Organization") to whom the Distributor intends to
make any payments in the nature of a Payment. The foregoing requirement is
not intended to apply to any agreement or arrangement with respect to which
the party to whom Payment is to be made does not have the purpose set forth
in Section 2 above (such as the printer in the case of the printing of a
prospectus or a newspaper in the case of an advertisement) unless the Board
determines that such an agreement or arrangement should be treated as a
"related" agreement for purposes of Rule 12b-1 under the Act.
5. The form of each agreement required to be in writing by Section 4
must contain the provisions required by Rule 12b-1 under the Act and must
be approved by a majority of the Board ("Board Approval") and by a majority
of the directors ("Disinterested Director Approval") who are not
"interested persons" of the Fund and have no direct or indirect financial
interest in the operation of the Plan or any such agreement, by vote cast
in person at a meeting called for the purposes of voting on such agreement,
and the identity of each Service Organization, if not previously approved,
shall be ratified by such a vote within 90 days of the execution of such
agreement.
6. The Distributor shall provide to the Board and the Board shall
review, at least quarterly, a written report of the amounts expended
pursuant to this Plan and the purposes
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for which such Payments were made. The Board shall evaluate the
appropriateness of the Plan on a continuing basis and, in doing so, shall
consider all relevant factors, including expenses borne by the Distributor
in the current year and in prior years and amounts received under the Plan.
7. To the extent any activity is covered by Section 2 and is also an
activity which the Fund may pay for on behalf of the Series without regard
to the existence or terms and conditions of a plan of distribution under
Rule 12b-1 of the Act (such as the printing of prospectuses for existing
Series shareholders), this Plan shall not be construed to prevent or
restrict the Fund from paying such amounts outside of this Plan and without
limitation hereby and without such payments being included in the
calculation of Payments subject to the limitation set forth in Section 1.
8. This Plan may not be amended in any material respect without Board
Approval and Disinterested Director Approval and may not be amended to
increase the maximum level of Payments permitted hereunder without such
approvals and further approval by a vote of a majority of the outstanding
voting securities of each Series that would be affected by such increase.
This Plan may continue in effect for longer than one year only as long as
such continuance is specifically approved at least annually by Board
Approval and by Disinterested Director Approval. In addition, a list of
then-current Service Organizations must be approved at least annually by
Board Approval and Disinterested Director Approval.
9. While the Plan is in effect, the selection and nomination of the
Directors who are not "interested persons" of the Fund will be committed to
the discretion of such disinterested Directors.
10. This Plan may be terminated in respect of a Series at any time,
without penalty, by a vote of the Directors who are not interested persons
of the Fund and have no direct or indirect financial interest in the
operation of the Plan or any agreement hereunder, cast in person at a
meeting called for the purposes of voting on such termination, or by a vote
of a majority of the outstanding voting securities of the Series. This
Plan will continue in effect with respect to a Series notwithstanding the
fact that it has been terminated with respect to another Series of the
Fund.
11. For purposes of this Plan the terms "interested person" and
"related agreement" shall have the meanings ascribed to them in the Act and
the rules adopted by the Securities and Exchange Commission thereunder and
the term
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"vote of a majority of the outstanding voting securities" of a Series shall
mean the vote, at the annual or a special meeting of the holders of shares
of the Series duly called, of the lesser of (a) 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 the Series are present or
represented by proxy or (b) more than 50% of the outstanding voting
securities of the Series.
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